-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N2/RYXtxbgNuJnqJYRc2QeptLqnEypXGlJza2VNRQXSZBO4Mwbx68jgtRKuFMOBA K3Qg7wGfGsaX8Lb0u69KgQ== 0001013762-06-001265.txt : 20060621 0001013762-06-001265.hdr.sgml : 20060621 20060621161327 ACCESSION NUMBER: 0001013762-06-001265 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060621 DATE AS OF CHANGE: 20060621 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Medefile International, Inc. CENTRAL INDEX KEY: 0000842013 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 850368333 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 033-25126-D FILM NUMBER: 06917550 BUSINESS ADDRESS: STREET 1: 2 RIDGEDALE AVENUE STREET 2: SUITE 217 CITY: CEDAR KNOLLS STATE: NJ ZIP: 07927 BUSINESS PHONE: (973) 993-8001 MAIL ADDRESS: STREET 1: 2 RIDGEDALE AVENUE STREET 2: SUITE 217 CITY: CEDAR KNOLLS STATE: NJ ZIP: 07927 FORMER COMPANY: FORMER CONFORMED NAME: OMNIMED INTERNATIONAL, INC. DATE OF NAME CHANGE: 20051122 FORMER COMPANY: FORMER CONFORMED NAME: BIO SOLUTIONS INTERNATIONAL INC DATE OF NAME CHANGE: 20010214 FORMER COMPANY: FORMER CONFORMED NAME: SEPTIMA ENTERPRISES INC DATE OF NAME CHANGE: 19920703 10QSB/A 1 mar31200610qsba.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D. C. 20549 FORM 10-QSB/A [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2006 [ ] 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 (I.R.S. Employer incorporation or organization) Identification No.) 2 Ridgedale Avenue, Suite 217 Cedar Knolls, NJ 07927 (Address of principal executive offices) (973) 993-8001 (Issuer's telephone number) Copies to: Richard A. Friedman, Esq. Sichenzia Ross Friedman Ference LLP 1065 Avenue of the Americas New York, New York 10018 Phone: (212) 930-9700 Fax: (212) 930-9725 Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes [ ] No [X] The number of shares of the issuer's outstanding common stock on May 16, 2006 was 178,733,910. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] EXPLANATORY NOTE This amendment is being filed solely for the purpose of including as exhibits amendments to three employment agreements. The amended employment agreements are attached hereto as exhibits 10.1, 10.2 and 10.3. TABLE OF CONTENTS PAGE ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements........................................... F-1 Item 2. Management's Discussion and Analysis........................... 3 Item 3. Controls and Procedures........................................ 9 PART II - OTHER INFORMATION Item 1. Legal Proceedings.............................................. 10 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.... 10 Item 3. Defaults Upon Senior Securities................................ 10 Item 4. Submission of Matters to a Vote of Security Holders............ 10 Item 5. Other Information.............................................. 10 Item 6. Exhibits....................................................... 10 SIGNATURES 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Description Page No. -------- FINANCIAL INFORMATION: Financial Statements Consolidated Balance Sheets at March 31, 2006 (Unaudited)............... F-1 Consolidated Statement of Operations (Unaudited)........................ F-2 Consolidated Statements of Cash Flows (Unaudited) ...................... F-3 Notes to Consolidated Financial Statements (Unaudited).................. F-4 Medefile International, Inc. Condensed Consolidated Balance Sheet (Unaudited)
March 31, 2006 ------------- Assets Current assets Cash and cash equivalents 324,811 Marketable securities 1,280 Prepaid expenses (Note 2) 54,375 ------------- Total current assets 380,466 Deposits and other assets 2,785 Furniture and equipment, net of accumulated depreciation of $89,338(Note 3) 69,303 Total assets $ 452,554 Liabilities and Stockholders' Deficit Current liabilities Accounts payable and accrued liabilities 18,000 Deferred revenue 5,028 ------------- Total current liabilities 23,028 Loan payable - related party (Note 4) 1,204,135 Commitments and Contingencies 0 Stockholders' Deficiency: Common stock, $0.0001 par value; 300,000,000 shares authorized; 178,733,910 shares issued and outstanding as of March 31, 2006 (Note 5) 17,873 Additional paid-in capital 5,721,989 Deferred compensation (Note 6) (3,938,357) Accumulated deficit (2,577,028) Accumulated other comprehensive gain (loss) 914 ------------- Total stockholder's deficit (774,609) Total liabilities and stockholders' deficit $ 452,554
The accompanying notes are an integral part of these condensed consolidated financial statements. F-1 Medefile International, Inc. Condensed Statements of Operations (Unaudited)
For the Three For the Three Months Ended Months Ended March 31, March 31, 2006 2005 ----------------- ------------------ Revenue $ 6,033 $ 50 ----------------- ------------------ Operating expenses: Selling, general and administrative expenses 802,363 61,683 Impairment of intangible assets 0 97,063 Depreciation and amortization expense 7,260 35,662 Total operating expenses 809,623 194,408 ----------------- ------------------ Loss from operations (803,590) (194,358) Other expense: Interest and dividend expense, net (14,650) (464) ----------------- ------------------ Total other expense (14,650) (464) ----------------- ------------------ Loss before income taxes (818,240) (194,822) Provision for income taxes - - ----------------- ------------------ Net loss $ (818,240) $ (194,822) Other comprehensive gain : Unrealized gain on equity securities 914 - ----------------- ------------------ Comprehensive loss $ (817,326) $ (194,822) ================= ================== Net loss per share - basic and diluted $ (0.005) $ (0.993) ================= ================== Weighted average shares outstanding - basic and diluted 178,733,910 196,235 ================= ==================
The accompanying notes are an integral part of these condensed consolidated financial statements. F-2 Medefile International, Inc. Condensed Statements of Cash Flows (Unaudited)
For the Three For the Three Months Ended Months Ended March 31, March 31, 2006 2005 ----------- ----------- Cash flows from operating activities: Net loss $ (818,240) $ (194,822) Other comprehensive gain (loss) 914 0 Adjustments to reconcile net loss to net cash used in operating activities: Non-cash compensation 562,622 0 Depreciation and amortization 7,261 35,662 Impairment of intangible assets 0 97,063 Interest expense 21,032 489 Changes in operating assets and liabilities: Prepaid expenses (54,375) 0 Marketable securities (1,280) 0 Accounts payable and accrued expenses (10,000) 0 Deferred revenue 133 0 ----------- ----------- Net cash used in operating activities (291,933) (61,608) ----------- ----------- Cash flows used in investing activities: Purchase of equipment (3,762) 0 ----------- ----------- Net cash used in investing activities (3,762) 0 ----------- ----------- Cash flows provided by financing activities: Proceeds from loans by related parties 350,000 59,072 ----------- ----------- Net cash provided by financing activities 350,000 59,072 ----------- ----------- Net increase (decrease) in cash and cash equivalents 54,305 (2,536) Cash and cash equivalents at beginning of period 270,506 7,571 Cash and cash equivalents at end of period $ 324,811 $ 5,035 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ -- $ -- Taxes $ -- $ -- Interest capitalized on note payable to related party $ 21,032 $ 489 Value of options issued to employees $ 4,500,979 $ 0 Amortization of deferred compensation $ 562,622 $ 0
The accompanying notes are an integral part of these condensed consolidated financial statements. F-3 MEDEFILE INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS Basis Of Presentation The accompanying unaudited condensed consolidated financial statements of Medefile International Inc., a Nevada corporation ("Company"), have been prepared in accordance with the instructions to Form 10-QSB and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. These condensed consolidated financial statements and related notes should be read in conjunction with the Company's Form 10-KSB for the fiscal year ended December 31, 2005. In the opinion of management, these condensed consolidated financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly the financial position of the Company as of March 31, 2006, and the results of operations and cash flows for the three months ended March 31, 2006 and 2005. The results of operations for the three months ended March 31, 2006 are not necessarily indicative of the results that may be expected for the entire fiscal year. Certain amounts in the prior period on the Statements of Cash Flows have been changed to conform to the current period presentation. 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 tothe 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 revolutionize the medical industry by bringing 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 $818,240 for the three months ended March 31, 2006 and $463,197 for the short year (six months) ended December 31, 2005, and had an accumulated deficit of $2,577,028 as of March 31, 2006. The Company used $291,933 of cash for operating activities during the three months ended March 31, 2006. Cash provided by financing activities for the three months ended March 31, 2006 was $350,000, consisting of net proceeds from the related party loans. F-4 Our registered independent certified public accountants have stated in their report dated April 17, 2006, that we have incurred operating losses in the past years, and that we are dependent upon management's ability to develop profitable operations. These factors among others may raise substantial doubt about our ability to continue as a going concern. 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. 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 in accordance with Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition," which superseded SAB No. 101, "Revenue Recognition in Financial Statements." SAB No.101 requires that four basic criteria 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. SAB No. 104 incorporates Emerging Issues Task Force ("EITF") No. 00-21, "Multiple-Deliverable Revenue Arrangements." EITF No. 00-21 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing EITF No. 00-21 on the Company's consolidated financial position and results of operations was not significant. This issue addresses determination of whether an arrangement involving more than one deliverable contains more than one unit of accounting and how the arrangement consideration should be measured and allocated to the separate units of accounting. EITF No. 00-21 became effective for revenue arrangements entered into in periods beginning after June 15, 2003. For revenue arrangements occurring on or after August 1, 2003, the Company revised its revenue recognition policy to comply with the provisions of EITF No. 00-21. Investments The Company's investments in marketable securities are classified as "available for sale" securities, and are carried on the financial statements at market value. Realized gains and losses are included in earnings; unrealized gains and losses are reported as a separate component of stockholders' equity and as a component of "Other Comprehensive Income." Stock Based Compensation On January 1, 2006 the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004) "Share-Based Payment" ("SFAS 123 (R) which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to a Employee Stock Purchase Plan based on the estimated fair values. SFAS 123 (R) supersedes the Company's previous accounting under Accounting Principles Board Opinion No.25, "Accounting for Stock Issued to Employees" ("APB 25") for the periods beginning fiscal 2006. The Company adopted SFAS 123 (R) using the modified prospective transition method, which required the application of the accounting standard as of January 1, 2006. Medefile's Consolidated Financial Statements as of and for three months March 31, 2006 reflect the impact of SFAS 123(R). In accordance with the modified prospective transition method, the Company's Consolidated Financial Statements for the prior periods have not been restated to reflect, and do not include the impact of SFAS 123 (R). Stock based compensation expense recognized under SFAS 123 (R) for the three months ended March 31, 2006 was $562,622. Pro forma stock based compensation was $0 for the three months ended March 31, 2005. 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. F-5 A summary of option activity under the Plan as of March 31, 2006, and changes during the period then ended are presented below: Weighted- Average Exercise Options Price Outstanding at December 31, 2005 150,000 $ 1.17 Issued 5,640,000 0.80 Exercised -- -- Forfeited or expired (150,000) (1.17) Outstanding at March 31, 2006 5,640,000 $ 0.80 Non-vested at March 31, 2006 4,935,000 0.80 Exercisable at March 31, 2006 705,000 $ 0.80 The options outstanding as of March 31, 2006 have been segregated into three ranges for additional disclosure as follows:
Options Outstanding Options Exercisable ----------------------------------------------- ----------------------------- Weighted Weighted Average Weighted Average Remaining Average Number Exercise Contractual Number Exercise Range of Exercise Price Outstanding Price Life Exercisable Price -------------------------------- -------------- ------------- ----------- ------------ ------------- $0.80 5,640,000 $ 0.80 3.76 705,000 $ 0.80 Total 5,640,000 $ 0.80 3.76 705,000 $ 0.80 -------------------------------- -------------- ------------- ----------- ------------ -------------
Aggregate intrinsic value of options outstanding and options exercisable at March 31, 2006 was $15,961,200 and $1,995,150, respectively. Aggregate intrinsic value represents the difference between the Company's closing stock price on the last trading day of the fiscal period, which was $3.63 as of March 31, 2006, and the exercise price multiplied by the number of options outstanding. As of March 31, 2006, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $3,938,356, which is expected to be recognized over a weighted average period of approximately 20 months. The total fair value of options vested was $562,622 and $0 for the three-month periods ended March 31, 2006 and 2005, respectively. The modified transition method of SFAS 123 (R) requires the presentation of pro forma information for periods presented prior to the adoption of SFAS 123 (R) regarding net loss an net loss per share as if we had accounted for our stock plans under the fair value method of SFAS 123 (R). For pro forma purposes, the fair value of stock options was estimated using the Black-Scholes option valuation model and amortizing on a straight-line basis. The pro forma amounts are as follows: Three Months Ended March 31, 2005 ----------------- Net loss - as reported $ (194,822) Add: Stock-based employee compensation expense included in reported loss - Deduct: Total stock-based employee compensation expense determined under fair-value based method for all rewards - ----------------- Net loss - pro forma $ (194,822) ================= Basic & diluted loss per share - as reported $ (0.993) Basic & diluted loss per share - pro forma $ (0.993) F-6 The estimated value of the employee stock options granted during the three month period ended March 31, 2006 was determined using the Black-Scholes option pricing model and the following assumptions: expected option life of 2 years, a risk free interest rate of 4.50%, a dividend yield of 0% and volatility of 300.33%. Reclassifications Certain reclassifications have been made in prior year's financial statements to conform to classifications used in the current year. 2. PREPAID EXPENSES Prepaid expenses at March 31, 2006 consists of prepaid insurance. 3. FURNITURE AND EQUIPMENT Furniture and equipment consists of the following at March 31, 2006: Computers and office equipment $ 120,024 Furniture and fixtures 38,617 ----------- Subtotal $ 158,641 Less: Accumulated depreciation (89,338) ----------- Total $ 69,303 =========== 4. LOAN PAYABLE - RELATED PARTY The Company has a loan payable due to a major stockholder of the Company and an entity under this stockholder's control. During the three months ended March 31, 2006, the Company negotiated an extension of the due date of this loan to January 1, 2008. The loan bears interest at the rate of seven percent. During the three months ended March 31, 2006, the Company borrowed an additional $350,000 under the demand loan. At March 31, 2006, the Company had an outstanding loan payable totaling $1,204,135 including accrued interest of $37,635. 5. COMMON STOCK 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. 6. DEFERRED COMPENSATON During the three months ended March 31, 2006, the Company issued stock options to employees which vest ratably over a two-year period. The Company charged the fair value of these options of $4,500,979 to deferred compensation. The Company charged to operations the amount of $562,622 during the three months ended March 31, 2006, representing the portion of these options that vested during the period. The unvested portion, value at $3,938,357, remains in deferred compensation on the Company's balance sheet at March 31, 2006, and will be charged to operations at the rate of $562,622 per quarter for the succeeding seven quarters. F-7 Item 2. Management's Discussion and Analysis 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 the Company's dependence on weather-related factors, introduction and customer acceptance of new products, the impact of competition and price erosion, as well as supply and manufacturing restraints and 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" of our Annual Report on Form 10-KSB for the year ended December 31, 2005 filed with the Securities and Exchange Commission on May 2, 2006. The following discussion should be read in conjunction with our consolidated financial statements provided in this quarterly report on Form 10-QSB. OVERVIEW 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 has developed a system for gathering, digitizing, storing and distributing information for the healthcare field. Medefile's goal is to revolutionize the medical industry by bringing 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 has created a system for gathering and digitizing medical records so that individuals can have a comprehensive record of all of their medical visits. 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. 3 Industry Overview Since the beginning of modern medicine, information about a patient's history, testing, treatment and care have been key ingredients in the provision 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 2 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. Every patient visit generates a medical record. Today this information is typically 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 health care 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 able 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. 4 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. 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. One aspect of these plans may include OmniScan, a component of CIS, which would produce additional revenue by scanning existing paper-based medical records and converting them to a secure, more efficient digital format. Furthermore, 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. OmniScan Medefile's OmniScan service is designed to enable medical facilities to convert their paper based medical records into a digital format. Medefile CIS intends to license the software which allows for electronic records to be viewed at various facility locations. In addition, the OmniScan service is designed to provide the following advantages: high quality images, high-speed conversion, record keeping in a single location, simultaneous use of files, and simplified release of information. 5 SecurMed SecurMed is designed to serve as an authentication process that protects against any information being viewed by unauthorized persons. Members As of March 31, 2006, MedeFile had over 100 members. 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: 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 will be able to 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. 6 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 As of March 2006, Medefile had a total of five employees, including four full time and one part time employee. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2006 COMPARED TO THREE MONTHS ENDED MARCH 31, 2005 Revenues Revenues for the quarter ended March 31, 2006 totaled $6,033, an increase of $5,983 compared to revenues of $50 during the three months ended March 31, 2005. During the three months ended March 31, 2005, the Company had recognized minimal revenue as we emerged from the development stage. General and Administrative Expenses General and administrative expenses for the quarter ended March 31, 2006 totaled $802,363, consisting primarily of compensation, marketing costs and professional fees. This was an increase of $740,680 or 1201% compared to general and administrative expenses of $61,683 for the quarter ended March 31, 2005. The primary reason for the increase was an increase in non-cash compensation of $562,622 representing the cost of employee options vested during the period. Impairment of Intangible Assets There was no impairment of intangible assets during the three months ended March 31, 2006. During the three months ended March 31, 2005, the Company recorded an impairment of intangible assets in the amount of $97,063. 7 Depreciation Expenses Depreciation and amortization expense totaled $7,260 for the quarter ended March 31, 2006, an decrease of $28,402 compared to depreciation and amortization expense of $35,662 during the quarter ended March 31, 2005. Interest Expense Interest expense (net) for the quarter ended March 31, 2006 was $14,650, an increase of $14,186 or 3057% compared to interest expense (net) of $464 during the quarter ended March 31, 2005. In both periods, the interest expense was generated by the loan from related party. The reason for the increase was a result of an increase in the average amount of the related party loan outstanding during the quarter ended March 31, 2006. Net Loss For the reasons stated above, our net loss for quarter ended March 31, 2006 was $818,240 or $0.005 per share, an increase of $623,418 or 320% compared to a net loss of $194,822 or $0.99 per share during the three months ended March 31, 2005. Liquidity and Capital Resources As of March 31, 2006 we had cash and cash equivalents of $324,811. Our current liabilities as of March 31, 2006 aggregated $23,028. Additionally, we had an accumulated deficit of $2,577,028 and stockholders' deficiency of $774,069 at March 31, 2006. The Company used $291,933 of cash for operating activities during the quarter ended March 31, 2006. Cash used in investing activities for the quarter ended March 31, 2006 was $3,762. Cash provided by financing activities for the quarter ended March 31, 2006 was $350,000, consisting of $350,000 of proceeds from loans by related parties. Our registered independent certified public accountants have stated in their report dated April 7, 2006, that we have incurred operating losses in the past years, and that we are dependent upon management's ability to develop profitable operations. These factors among others may raise substantial doubt about our ability to continue as a going concern. 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 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 31,2005 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. 8 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: Stock-based Compensation On January 1, 2006 the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004) "Share-Based Payment" ("SFAS 123 (R) which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to a Employee Stock Purchase Plan based on the estimated fair values. SFAS 123 (R) supersedes the Company's previous accounting under Accounting Principles Board Opinion No.25, "Accounting for Stock Issued to Employees" ("APB 25") for the periods beginning fiscal 2006. The Company adopted SFAS 123 (R) using the modified prospective transition method, which required the application of the accounting standard as of January 1, 2006. Medefile's Consolidated Financial Statements as of and for three months March 31, 2006 reflect the impact of SFAS(R). In accordance with the modified prospective transition method, the Company's Consolidated Financial Statements for the prior periods have not been restated to reflect, and do not include the impact of SFAS 123 (R). Stock based compensation expense recognized under SFAS 123 (R) for the three months ended March 31, 2006 was $562,622. Pro forma stock based compensation was $0 for the three months ended March 31, 2005. Item 3. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures We maintain "disclosure controls and procedures," as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures 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. As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial 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 and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us 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 Commission's rules and forms. (b) Changes in Internal Controls over financial reporting There have been no changes in our internal controls over financial reporting during our last fiscal quarter, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. (c) Limitations on Effectiveness of Disclosure Controls and Procedures Disclosure controls and procedures cannot provide absolute assurance of achieving financial reporting objectives because of their inherent limitations. Disclosure controls and procedures is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Disclosure controls and procedures also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by disclosure controls and procedures. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. 9 PART II - OTHER INFORMATION Item 1. Legal Proceedings Medefile is not a party to any pending legal proceeding, nor is its property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of Medefile's business. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information Effective January 17, 2006, the Registrant changed its name from Omnimed International, Inc. to Medefile International, Inc. In addition, effective January 17, 2006, the Registrant's quotation symbol on the OTC Bulletin Board changed from OMDI.OB to MDFI.OB. 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. Item 6. Exhibits and Reports on Form 8-K a. Exhibit Index 10.1 Amendment No. 1 to Employment Agreement between Kevin Hauser and Medefile International, Inc. 10.2 Peter LoPrimo Amended and Restated Employment Agreement 10.3 Eric Rosenfeld Amended and Restated Employment Agreement 31.1 Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a- 14(a) or Rule 15d-14(a) of the Exchange Act, promulgated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, promulgated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 10 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. /s/ Milton Hauser ---------------------- Milton Hauser President, Chief Executive Officer, Acting Chief Financial Officer and Director (Chief Executive Officer and Chief Financial Officer) 11 EX-31 2 ex311.txt EXHIBIT 31.1 CERTIFICATIONS I, Milton Hauser, President, Chief Executive Officer, and Acting Chief Financial Officer of Medefile International, Inc., certify that: 1. I have reviewed this Quarterly Report on Form 10-QSB 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 small business issuer as of, and for, the periods presented in this report; 4. I am 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 small business issuer 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 small business issuer, 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) evaluated the effectiveness of the small business issuer'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 c) disclosed in this report any changes in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer'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 small business issuer'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 small business issuer's internal control over financial reporting. Date: June 21, 2006 /s/ Milton Hauser ----------------- Milton Hauser President, Chief Executive Officer, and Acting Chief Financial Officer EX-32 3 ex321.txt 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 Quarterly Report of Medefile International, Inc. (the "Company") on Form 10-QSB as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, in the capacities and on the date indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge: (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: June 21, 2006 /s/ Milton Hauser ------------------------------ Milton Hauser President, Chief Executive Officer, and Acting Chief Financial Officer EX-10 4 ex101.txt AMENDMENT NO. 1 TO EMPLOYEE EMPLOYMENT AGREEMENT This Amendment No. 1 to the Employment Agreement (the "Agreement") made and entered into as of the 1st day of January 2006, between Medefile International, Inc. (formerly known as Omnimed International, Inc.), a Nevada corporation (the "Company"), and Kevin Hauser ("Employee"). WITNESSETH: WHEREAS, on January 1, 2006, the Company and the Employee entered into an Agreement, a copy of which is annexed hereto as Exhibit 1; and WHEREAS, the parties now desire to amend Paragraph 5.7 of the Agreement as hereinafter set forth to correct a mistake of the parties; NOW, THEREFORE, in consideration of and for the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Employee Employment Agreement is hereby amended as follows: 1. Paragraph 5.7 of the Agreement is hereby amended to be and read as follows: "5.7 Expiration. In the event that an option holder ceases to be an employee of the Company or of any subsidiary for any reason other than permanent disability (as determined by the Board of Directors) or death, the Option, including any unexercised portion thereof, which was otherwise exercisable on the date of termination, shall expire unless exercised within a period of three months from the date on which the Employee ceased to be so employed, but in no event after the Expiration Date. In the event of the death of Employee during this three month period, the Option shall be exercisable by his or her personal representatives, heirs or legatees to the same extent that the Employee could have exercised the Option if he or she had not died, for the three months from the date of death, but in no event after the expiration of the four (4) year period from the Effective Date of this Agreement." 2. Miscellaneous. (A) This agreement shall be construed and interpreted in accordance with the laws of the State of New York without giving effect to the conflict of laws rules thereof or the actual domiciles of the parties. (B) Except as amended hereby, the terms and provisions of the Agreement shall remain in full force and effect, and the Agreement is in all respects ratified and confirmed. On and after the date of this agreement, each reference in the Agreement to the "Agreement", "hereinafter", "herein", "hereinafter", "hereunder", "hereof", or words of like import shall mean and be a reference to the Agreement as amended by this agreement. (C) This agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which taken together shall constitute a single Amendment. IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the date first stated above. "EMPLOYEE" By /s/ Kevin Hauser May 19, 2006 - ---------------------------- ---------------------------- Kevin Hauser Date "COMPANY" Medefile International, Inc. By /s/ Milton Hauser May 19, 2006 - ---------------------------- ----------------------------- Milton Hauser Date President EX-10 5 ex102.txt AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is made and entered into as of the 19th day of May 2006, by and between Medefile International, Inc. (formerly known as Omnimed International, Inc.), a Nevada corporation maintaining its principal offices at 2 Ridgedale Avenue, Suite 217, Cedar Knolls, NJ 07927 (the "Company") and Peter J. LoPrimo ("Employee"). W I T N E S S E T H: WHEREAS, the Company desires to employ Employee as Executive Vice President and Employee desires to gain employment as Executive Vice President of the Company; and WHEREAS, Employee is willing to accept such employment, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth, the parties hereto agree as follows: 1. Employment of Employee and Services to be Rendered. The Company hereby engages Employee as Executive Vice President and Employee agrees that he shall perform such duties as are customarily rendered by such an employee, as well as such duties described in Section 3 below. 2. Term. The Company hereby engages Employee, and Employee hereby accepts the engagement described hereunder, for a period of two years from the Effective Date of this Agreement (the "Expiration Date"), subject to prior termination by mutual agreement of the parties hereto or hereinafter provided. 3. Position and Duties. Employee shall serve as the Company's Executive Vice President on a full-time basis. In connection with his responsibilities as Executive Vice President, Employee shall: (i) build the national sales organization; (ii) develop and manage the sales budget; (iii) hire and manage the inside and field direct sales force; (iv) work with marketing and fellow management in developing the marketing plan; (v) manage resources to achieve the sales plan; (vi) identify, qualify and enlist new strategic partners; (vii) develop key partnerships with select customers; (viii) be accountable for market research and planning, product management, budgeting, strategic planning, new product development and introduction, and marketing communications. 1 In connection with these duties, Employee shall report directly to the Company's President. Employee shall also have such powers and duties as may from time to time be prescribed by the Board of Directors or bylaws of the Company. 4. Compensation. 4.1 Salary. For Employee's services hereunder, the Company's Board of Directors (the "Board") shall pay Employee an annual salary of $90,000 for the first year of the Term and $96,000 for the second year of the Term. The Company shall also grant to the Employee an option (the "Option") to purchase from the Company one million eight hundred thousand (1,800,000) shares of the Company's Common Stock, $0.0001 par value per share (the "Options"). Such Options shall vest over a period of two years on an equal monthly basis of seventy five thousand (75,000) Options per month, and shall be exercisable for a four (4) year period from the date hereof, provided that the Employee is employed by the Company, at a price of $0.80. Employee acknowledges that upon exercise of any Options, the shares issued thereunder will not be registered under the Securities Act of 1933, that the shares have been acquired for investment purposes and not with a view to distribution or resale, and that the shares may not be sold, assigned, pledged, hypothecated, or otherwise transferred without an effective registration statement for such shares under the Securities Act of 1933 and applicable state securities laws or an opinion of counsel satisfactory to the Company to the effect that registration is not required under such laws. The Options shall be issued pursuant to the terms and conditions of the Company's 2006 Incentive Stock Plan ("Plan") which is incorporated in this Option as though set forth in full, and shall be subject to the terms set forth in Section 5 hereto. Further, Employee acknowledges and agrees that the previous employment agreement between the Employee and the Company is terminated in all respects, and that no other compensation, other than what has previously been paid or is stated as payable hereunder, is due and owing to Employee, whether accrued or unpaid under any previous employment agreements or otherwise (it being expressly understood and agreed to that any and all claims for any prior compensation have been satisfied in full and/or waived by the Employee in their entirety). 4.2 Discretionary Bonus. From time to time during the Term, the Company may pay to the Employee additional compensation in an amount determined by the sole discretion of the board of directors. 4.3 401(k) Plan. Employee shall be entitled to participate in any 401(k) program that the Company may institute during the term specified in Section 2, herein. 4.4 Additional Compensation. As additional compensation, the Company agrees to pay the Employee three percent (3%) of net sales from the Medefile service. For purposes of this Agreement, the term net sales shall be defined as the final selling price of the membership, not including credit card processing or monthly payment processing fees. 2 4.5 Other Benefits. In addition to the salary and other compensation to be paid to Employee hereunder, Employee shall be entitled to health insurance benefits at such time as the y are made available to other employees of the Company. 5. Option Rights. 5.1 Number and Price. The number and price of the Shares subject to the Option shall be the number and price set forth in Section 4.1(ii) hereto, subject to any adjustments which may be made pursuant to Section 5.9 below. 5.2 Duration. Subject to the terms and conditions set forth herein, the Option may be exercised to purchase the Option Shares covered by the Option on or before expiration of the term of this Employment Agreement, as described in Section 2 herein (the "Expiration Date"). The Option shall terminate and no Shares may be purchased after the Expiration Date. 5.3 Employment Requirement. Except as provided in Section 5.7 herein, the Option may not be exercised unless the Employee is in the employ of the Company or one of its parent or subsidiary corporations (as within the meaning of Section 425(e) and (f) of the Code respectively) on the date of such exercise and shall have been such employee continuously since the Employment Date. 5.4 Exercise Procedure. Subject to the terms and conditions set forth herein, the Option is exercisable by a written notice signed by the Employee and delivered to the Company at its executive offices, signifying the Employee's election to exercise the Option. The notice must state the number of Shares as to which the Employee's Option is being exercised, must contain a statement by the Employee (in a form acceptable to the Company) that such Shares are being acquired by the Employee for investment and not with a view to their distribution or resale (unless a Registration Statement covering the Shares has been declared effective by the Securities and Exchange Commission) and must be accompanied by the full purchase price of the Shares being purchased. Payment shall be in cash, or by certified or bank cashier's check payable to the order of the Company, free from all collection charges. If notice of the exercise of the Option is given by the person or persons other than the Employee, the Company may require, as a condition to the exercise of the Option, the submission to the Company of appropriate proof of the right of such person or person to exercise the Option. Certificate for Shares so purchased will be issued as soon as practicable and shall bear a restrictive legend stating that the Shares have not been registered under the Securities Act of 1933, that the shares have been acquired for investment purposes and not with a view to distribution or resale, and that the Shares may not be sold, assigned, pledged, hypothecated, or otherwise transferred without an effective registration statement for such shares under the Securities Act of 1933 and applicable state securities laws or an opinion of counsel satisfactory to the Company to the effect that registration is not required under such laws. The Company, however, shall not be required to issue or deliver a certificate for any Shares until it has complied with all 3 requirements of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, any stock exchange on which the Company's Stock may then be listed and all applicable state laws in connection with the issuance or sale of such Shares or the listing of such Shares on such exchange. Until the issuance of the certificate for such Shares, the Employee or such other person as may be entitled to exercise the Option, shall have none of the rights of a stockholder with respect to Shares subject to the Option. 5.5 Delivery of Certificates. As soon as practicable after the Company receives payment for the Shares, it shall deliver a certificate or certificates representing the Shares so purchased to the Employee. 5.6 Transferability. The Option is personal to the Employee and during the Employee's lifetime may be exercised only by the Employee. The Option shall not be transferable other than by will or the laws of descent and distribution. 5.7 Expiration. In the event that an option holder ceases to be an employee of the Company or of any subsidiary for any reason other than permanent disability (as determined by the Board of Directors) or death, the Option, including any unexercised portion thereof, which was otherwise exercisable on the date of termination, shall expire unless exercised within a period of three months from the date on which the Employee ceased to be so employed, but in no event after the Expiration Date. In the event of the death of Employee during this three month period, the Option shall be exercisable by his or her personal representatives, heirs or legatees to the same extent that the Employee could have exercised the Option if he or she had not died, for the three months from the date of death, but in no event after the expiration of the four (4) year period from the Effective Date of this Agreement. 5.8 Employment Rights. The Option does not confer on the Employee any right to continue in the employ of the Company or interfere in any way with the right of the Company to determine the terms of the Employee's employment. 5.9 Change in Corporate Structure. In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, or any other change in the corporate structure or Stock of the Company, the Board shall make such adjustments, if any, as it deems appropriate in the number and kind of shares covered by the Option, or in the Option price, or both. Notwithstanding any provision to the contrary, the Committee or the Board may cancel, amend, alter or supplement any term or provision of the Option to avoid any penalty provisions of the Code. 5.10 Compliance with Legal Requirements. The Option shall be subject to the requirement that if at any time the Board shall determine that the registration, listing or qualification of the Shares covered hereby upon any securities exchange or under any federal or state law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the granting of the Option or the purchase of the Shares, the Option may not be exercised unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board. The Board may require that the person exercising the Option shall make such representations and agreements and furnish such information as it deems appropriate to assure compliance with the foregoing or any other applicable legal requirements. 4 5.11 Incentive Stock Option Treatment. The Option is intended to qualify for "incentive stock option" treatment under the provisions of Section 422A of the Internal Revenue Code of 1954, as amended. However, the Employee is urged to consult with his or her individual tax advisor prior to exercising the Option since the exercise of the Option may result in adverse tax consequences including the payment of additional federal and/or state income taxes. 5.12 Restrictions on Resale of Shares Acquired Upon Exercise of Options. Employee represents and agrees that if Employee exercises this Option in whole or in part, Employee will in each case hold the Shares acquired upon such exercise for a period of at least one year. Further, certificates for Shares so purchased shall bear a restrictive legend stating that the certificate and the securities represented by such certificate and all rights therein are subject to and transferable (including without limitation by way of pledge or other grant of a security interest therein) only in accordance with the provisions of a certain Employment Agreement effective as of January 1, 2006 and a certain Stock Option Agreement dated as of January 1, 2006, among the Company and the Employee, which restrict the transfer of these shares. A copy of such agreements, as may be amended from time to time, are on file and available for inspection at the principal office of the Company. 5.13 Change in Control. The option agreement will contain a provision that in the event there shall have been a Change in Control of the Company while the Employee is employed by the Company, all unvested stock options shall immediately and irrevocably vest and the exercise period of such options shall remain the same as originally provided in such options. For purposes of the option agreement, a "Change in Control" shall be deemed to have occurred if (i) there shall be consummated any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (ii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than the Company or any employee benefit plan sponsored by the Company, shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 50.1% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise. 5 6. Insurance. 6.1 Key Man Insurance. The Company shall have the right to apply for and take out, in the Company's own name or otherwise, at the Company's expense, life, health, accident, or other insurance covering Employee, in any amount the Company deems necessary to protect the Company's interest hereunder, and Employee shall have no right, title or interest in or to any such insurance. Employee shall assist the Company in obtaining such insurance by submitting to usual and customary medical and other examinations and by signing such applications, statements and other instruments as may be reasonably required by any insurance company. 7. Business Expenses. During the Term, Employee shall be entitled to receive reimbursement for all reasonable business expenses incurred by him (in accordance with the policies and procedures from time to time adopted by the Board of Directors of the Company for its senior executives and consultants) in performing services hereunder, provided that Employee properly accounts therefore in accordance with such policy and procedures and such expenses have been specifically approved in advance. Moreover, Employee expressly acknowledges and agrees that prior verbal approval must be obtained from the Chief Executive Officer of the Company by Employee for expense greater than one hundred dollars ($100), and prior written approval for expenses greater than three hundred dollars ($300). 8. Confidentiality. Employee recognizes and acknowledges that the technology, including but not limited to specifications, programs, documentation, methods and data which The Company owns, plans or develops, whether for its own use or for use by its clients, developments, designs, inventions and improvements, trade secrets and works of authorship are confidential and are the property of the Company. Employee also recognizes that the Company's customer lists, supplier lists, proposals and procedures are confidential and are the property of the Company. Employee further recognizes and acknowledges that in order to enable the Company to perform services for its clients, those clients may furnish to the Company confidential information concerning their business affairs, property, methods of operation or other data; that the goodwill afforded to the Company depends upon, among other things, the Company and its employees keeping such services and information confidential. All of these materials and information including that relating to the Company's systems and the Company's clients, will be referred to below as "Proprietary Information." 9. Non-Disclosure. Employee agrees that, except as directed by the Company, and in the ordinary course of the Company's business, Employee will not at any time, whether during or after Employee's employment with the Company, disclose to any person or use, directly or indirectly, for Employee's own benefit or the benefit of others, any Proprietary Information, or permit any person to examine or make copies of any documents which may contain or is derived from Proprietary Information, whether prepared by Employee or otherwise coming into Employee's possession or control. Employee agrees that the provisions of this paragraph shall survive the termination of this Agreement and Employee's employment by the Company. 6 10. Possession. Employee agrees that upon request by the Company, and in any event upon termination of Employee's employment, Employee shall then over to the Company all documents, papers or other material in Employee's possession or under Employee's control which may contain or be derived from Proprietary Information, together with all documents, notes or Employee's work products which are connected with or derived from Employee's services to the Company, shall be either returned to the Company or, as appropriate, permanently deleted. Upon termination of Employee's employment with the Company, Employee agrees to pay in full any amount owned the Company. 11. Ownership. Employee hereby assigns and agrees to assign to the Company or its subsidiaries or affiliates, as appropriate, its successors, assigns or nominees, Employee's entire right, title and interest in any developments, designs, patents, inventions and improvements, trade secrets, trademarks, copyrightable subject matter or proprietary information which Employee has made or conceived, or may make or conceive, either solely or jointly with others, while providing services to the Company, or with the use of the time, material or facilities of the Company or relating to any actual or anticipated business, research, development, product, service or activity of the Company known to Employee while employed at the Company, or suggested by or resulting from any task assigned to Employee or work performed by Employee for or on behalf of the Company, whether or not such work was performed prior to the date of this Agreement. 12. Injunctive Relief. Employee acknowledges that disclosure of any Proprietary Information by Employee or breach by Employee of any of the covenants not to compete will give rise to irreparable injury to the Company, or clients of the Company. Employee also agrees that this injury to the Company, or clients of the Company, would be inadequately compensated in money damages alone. Accordingly, the Company or, where appropriate the client of the Company, may seek and obtain injunctive relief against the breach, or threatened breach, of the disclosure of any Proprietary Information by Employee, or breach by Employee of any of the covenants not to compete, in addition to any other legal remedies which may be available. The Company further acknowledges that the enforcement of a remedy hereunder by way of injunction would not prevent Employee from earning a reasonable livelihood since Employee's experience and capabilities would be such that in the event that Employee's employment with the Company terminates for any reason, Employee will be able to obtain employment in business activities which are not restricted by this Agreement. 13. Non-Competition. 13.1 Definitions. For the purpose of this Section 13 and Section 14 hereof, the following terms shall have the meanings ascribed to them below: (a) "Covenant Term" shall mean a period beginning on the date hereof and ending on the date which is one year after the date on which this Agreement, or Employee's engagement hereunder, is terminated. 7 (b) "Covenant Territory" shall mean the United States of America and its properties. (c) "Business of the Company" shall mean the development of products or services which the Company currently pursues or intends to pursue in the future, as described in the Company's current business plan, which Employee hereby affirms receipt of, and as described in any future written memorialization which the Company may provide to Employee. 13.2 Covenant. Employee agrees that because of the confidential and sensitive nature of the Proprietary Information and because the use of, or even the appearance of the use of, the Proprietary Information in certain circumstances may cause irreparable damage to the Company and its reputation, or to clients of the Company, Employee shall not, without the prior written consent of the Company, own (except that Employee may own not more than one percent (1%) of the equity securities or securities convertible into equity securities of any corporation or other entity the securities of which are traded on a national stock exchange or listed on the National Association of Securities Dealers Automated Quotation System), manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected as a promoter, joint venturer, agent, director, officer, employee, partner, consultant or otherwise with, any profit or non-profit, business or organization which directly or indirectly, engages in the Business of the Company in the Covenant Territory or which otherwise, directly or indirectly, competes with the Business of the Company in the Covenant Territory. 13.3 Interpretation of Unenforceable Provision. The parties intend for the provisions of this Section 13 to be construed, interpreted, and enforced to the maximum extent permitted by law. The parties acknowledge and agree that they have both participated in the preparation of this Agreement and it shall not be construed or interpreted against either party on the basis that it was prepared by such party. In the event that any provision of this Section 13, or part thereof, shall be determined by any court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect for any reason, such provision shall be revised and/or interpreted to make it enforceable to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. 14. Non-Solicitation. Employee agrees that during the Covenant Term, he will not, directly or indirectly, (a) induce any customer of the Company or its successors to patronize any business similar to the Business of the Company; (b) request or advise any customer (including, without limitation, distributors) or supplier of the Company or its successors to withdraw, curtail or cancel such customer's or supplier's business with the Company or its successors; (c) except in the ordinary course of business, disclose to any other person or corporation the name or addresses of any of the customers of the Company or its successors; or (d) induce or encourage any Employee to terminate his relationship with the Company. 8 15. Termination. 15.1 Death. This Agreement shall terminate immediately upon Employee's death, unless sooner terminated hereunder. 15.2 No Termination by the Company Without Cause. The Company shall not have the right to terminate Employee's engagement hereunder without Cause. 15.3 Disability. If Employee shall be unable to perform his services hereunder by reason of illness or other incapacity, his failure so to perform his duties will not be grounds for terminating his engagement for Cause by the Company; provided, however, should the period of such incapacity exceed three months, or if on 50% or more of the normal working days throughout six (6) consecutive months Employee is unable to perform his duties fully due to such incapacity, then the Company may terminate his engagement hereunder. 15.4 Termination by the Company With Cause. The Company shall have the right to terminate Employee's engagement hereunder for Cause. For purposes of this Agreement, "Cause" means (a) subject to Section 13.3 hereof, the failure by Employee substantially to perform his duties or obligations hereunder, within 15 days after notice of such failure; (b) inadequate financing of the Company's operations to support Employee's continued employment, as determined solely by the Company's Board of Directors; (c) Employee engaging in misconduct which is materially injurious to the Company; (d) Employee engaging in any act that in any way has a direct, substantial, and adverse effect on the Company's reputation; (e) habitual drunkenness; (f) unlawful drug use; (g) Employee's conviction of a crime of moral turpitude; or (h) Employee's conviction of, or entry of a plea of guilty or nolo contendere in, a court of competent jurisdiction of a crime constituting a felony. 15.5 Effect of Termination. (a) Upon termination of this Agreement or Employee's engagement hereunder pursuant to Section 15.1 or 15.3 hereof, all compensation and benefits payable by the Company hereunder shall be immediately terminated; provided, however, Employee or his estate, as the case may be, shall be entitled to receive any payments under any applicable life or disability insurance plans. Such payments, if any, shall be made at the time and in accordance with the terms and conditions of such plans. (b) Upon a termination by Employee of his engagement, all compensation and benefits payable by the Company hereunder shall be immediately terminated. 16. No Prior Obligations. Employee hereby acknowledges and represents that, except as otherwise expressly provided by the terms of this Agreement, the Company has no liabilities or obligations (whether accrued, absolute, contingent, unliquidated or otherwise) to Employee. 9 17. General Provisions. 17.1 Notices. All notices required to be given under the terms of this Agreement shall be in writing and shall be deemed to have been duly given only if delivered to the addressee in person or mailed by certified mail, return receipt requested, to the address as included in the Company's records or to any such other address as the party to receive the notice shall advise by due notice given in accordance with this paragraph. Any party hereto may change its or his address for the purpose of receiving notices, demands and other communications as herein provided, by a written notice given in the manner aforesaid to the other party hereto. Copies of all correspondence should additionally be sent to the following: If to the Company: Medefile International, Inc. 2 Ridgedale Avenue Suite 217 Cedar Knolls, NJ 07927 with a copy to: Michael H. Ference, Esq. Sichenzia Ross Friedman Ference LLP 1065 Avenue of the Americas, 21st Floor New York, New York 10018 17.2 Benefit of Agreement and Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective executors, administrators, successors and assigns; provided, however, that Employee may not assign any of his rights or duties hereunder except upon the prior written consent of the Board of Directors of the Company. 17.3 Applicable Law. This Agreement is made in and is to be governed by and construed under the laws of the State of New York. 17.4 Captions. The captions appearing at the commencement of the sections hereof are descriptive only and for convenience of reference only and are not intended to be part of or to effect the meaning or interpretation of this Agreement. 17.5 Severability. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. 10 17.6 Entire Agreement. This Agreement contains the entire Agreement of the parties, and supersedes any and all other Agreements, either oral or in writing, between the parties hereto with respect to the subject matter hereof. Each party to this Agreement acknowledges that no representations, inducements, promises, or Agreements, oral or otherwise, have been made by either party, or anyone acting on behalf of either party, which are not embodied herein, and that no other Agreement, statement or promise not contained in this Agreement shall be valid or binding. 17.7 Amendments. This Agreement may be modified or amended only by an Agreement in writing signed by the Company and Employee. 17.8 Waiver. No waiver of any provision hereof shall be valid unless made in writing and signed by the party making the waiver. No waiver of any provision of this Agreement shall constitute a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. 17.9 Representations and Warranties. Each party hereto represents and warrants that it or he has the power and authority to execute and deliver this Agreement and to perform its or his obligations hereunder. 17.10 Compliance with Laws and Policies. Employee agrees that he will at all times comply with all applicable laws and all current and future lawful policies of the Company, not inconsistent with the intent of this agreement. 17.11 Arbitration. Any dispute or controversy arising under or in connection with this Agreement, other than matters pertaining to injunctive relief, including, without limitation, temporary restraining orders, preliminary injunctions and permanent injunctions, shall, upon the written demand of either party served upon the other party, be submitted to arbitration. Such arbitration shall be held in the City of New York, New York, and conducted in accordance with the Rules of the American Arbitration Association. 17.12 Representation. Each of the parties hereto represents that each has read and fully understands each of the provisions as contained herein, and has been afforded the opportunity to review same with his attorney of choice; and further that each of the parties hereto represents that each and every one of the provisions contained in this Agreement is fair and not unconscionable to either party. 11 IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first written above. MEDEFILE INTERNATIONAL, INC. EMPLOYEE By: /s/ Milton Hauser /s/ Peter J. LoPrimo --------------------- ---------------------- Milton Hauser Peter J. LoPrimo President EX-10 6 ex103.txt AMENDMENT NO. 1 TO EMPLOYEE EMPLOYMENT AGREEMENT This Amendment No. 1 to the Employment Agreement (the "Agreement") made and entered into as of the 1st day of January 2006, between Medefile International, Inc. (formerly known as Omnimed International, Inc.), a Nevada corporation (the "Company"), and Eric Rosenfeld ("Employee"). WITNESSETH: WHEREAS, on January 1, 2006, the Company and the Employee entered into an Agreement, a copy of which is annexed hereto as Exhibit 1; and WHEREAS, the parties now desire to amend certain provisions of the Agreement, and to add a new provision to the Agreement, as hereinafter set forth. NOW, THEREFORE, in consideration of and for the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Employee Employment Agreement is hereby amended as follows: 1. Paragraph 4.1(i) of the Agreement is hereby amended to be and read as follows: "4.1 Salary. For Employee's services hereunder, the Company's Board of Directors (the "Board") shall pay Employee an annual salary of $78,800 for the first year of the Term and $100,200 for the second year of the Term. The Company shall also issue to employee, upon the Commencement Date, options to purchase one million eight hundred thousand (1,800,000) shares of the Company's Common Stock, $0.0001 par value per share (the "Options"). Such Options shall vest over a period of two years on an equal monthly basis of seventy-five thousand (75,000) Options per month, and shall be exercisable for a four (4) year period from the Effective Date of this Agreement, provided that the Employee is employed by the Company, at a price of $0.80. Employee acknowledges that upon exercise of any Options, the shares issued thereunder will not be registered under the Securities Act of 1933, that the shares have been acquired for investment purposes and not with a view to distribution or resale, and that the shares may not be sold, assigned, pledged, hypothecated, or otherwise transferred without an effective registration statement for such shares under the Securities Act of 1933 and applicable state securities laws or an opinion of counsel satisfactory to the Company to the effect that registration is not required under such laws. 2. A new Paragraph 4.4 of the Agreement is hereby added to be and read as follows: "4.4 Other Benefits. In addition to the salary and other compensation to be paid to Employee hereunder, Employee shall be entitled to health insurance benefits at such time as they are made available to other employees of the Company." 3. Paragraph 5.7 of the Agreement is hereby amended to be and read as follows: "5.7 Expiration. In the event that an option holder ceases to be an employee of the Company or of any subsidiary for any reason other than permanent disability (as determined by the Board of Directors) or death, the Option, including any unexercised portion thereof, which was otherwise exercisable on the date of termination, shall expire unless exercised within a period of three months from the date on which the Employee ceased to be so employed, but in no event after the Expiration Date. In the event of the death of Employee during this three month period, the Option shall be exercisable by his or her personal representatives, heirs or legatees to the same extent that the Employee could have exercised the Option if he or she had not died, for the three months from the date of death, but in no event after the expiration of the four (4) year period from the Effective Date of this Agreement." 4. Miscellaneous. (A) This agreement shall be construed and interpreted in accordance with the laws of the State of New York without giving effect to the conflict of laws rules thereof or the actual domiciles of the parties. (B) Except as amended hereby, the terms and provisions of the Agreement shall remain in full force and effect, and the Agreement is in all respects ratified and confirmed. On and after the date of this agreement, each reference in the Agreement to the "Agreement", "hereinafter", "herein", "hereinafter", "hereunder", "hereof", or words of like import shall mean and be a reference to the Agreement as amended by this agreement. (C) This agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which taken together shall constitute a single Amendment. IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the date first stated above. "EMPLOYEE" By /s/ Eric Rosenfeld May 19, 2006 - --------------------- ------------ Eric Rosenfeld Date "COMPANY" Medefile International, Inc. By /s/ Milton Hauser May 19, 2006 - -------------------- ------------ Milton Hauser Date President -----END PRIVACY-ENHANCED MESSAGE-----