MEDD Medical Imaging Corporation (CE)

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

Holders

As of May 7, 2018, we had 89 shareholders of record of our common stock, and the closing sales price on that date for our common stock was $0.013 per share. We believe that the number of beneficial owners of our common stock is greater than the number of record holders, because many shares of our common stock is held through brokerage firms in “street names.”

Our transfer agent is Olde Monmouth Stock Transfer Co., Inc., located at 200 Memorial Parkway, Atlantic Highlands, New Jersey 07716.

Dividends

We have not paid any dividends to date. We can give no assurance that our proposed operations will result in sufficient revenues to enable profitable operations or to generate positive cash flow. For the foreseeable future, we anticipate that we will use any funds available to finance the growth of our operations and that we will not pay cash dividends to stockholders. The payment of dividends, if any, in the future is within the discretion of the Board of Directors and will depend on our earnings, capital requirements, restrictions imposed by lenders and financial condition and other relevant factors.

Securities authorized for issuance under equity compensation plans

ITEM 6. SELECTED FINANCIAL DATA

A smaller reporting company is not required to provide disclosure pursuant to this Item.

7

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Operations

CTS

In 2017, CTS added a new client hospital.  Read volume for the year was very strong from all hospitals as Teleradiology is used more often to meet hospitals growing demand for more efficient emergency room care.

Over the course of 2018 a strong emphasis will be made to add additional hospital clients.

SMI

2017 provided continued strong patient scan volume for all modalities.  CT saw an increase of over 10% as we were seeing the results of marketing efforts.   Overall referral sources continued to increase as we established new relationships with medical specialists outside our county.

PIV, PIN, PIC, (Florida)

In 2017 resources were increased to expand marketing efforts in all three cities our centers are located.  Additionally, Ultrasound was added in Naples at the request of some of our referring offices.

The year was mixed with some positives in certain months of strong patient scan volume, but the year proved to be challenging.   Competition was very strong as two new magnets came online.  Additionally, the month of September was mostly lost to do hurricane Irma.

Marketing efforts will continue in 2018.

Overall Operating Results:

For the year ended December 31, 2017, revenues from teleradiology services was $2,728,845 compared to $2,269,708 for the year ended December 31, 2016, an increase of 20% or $459,137. The increase in revenue from teleradiology services is primarily related to the addition of a new client hospital. There was a small exchange rate decrease in revenue as the rate used to convert CTS revenues carried in Canadian dollars for the year ended December 31, 2017 and 2016 were $0.7708 and $0. 7575, respectively. The difference in exchange rates contributed to a 2% decrease, therefore, actual increase in revenues carried in Canadian dollars was approximately 22%. The increase is owing to increase in reading volume across CTS hospital clients, as a result of CTS client hospitals assigning more readings to CTS.

For the year ended December 31, 2017, revenues from medical scans services was $4,495,381 compared to $4,909,377 for the year ended December 31, 2016, a decrease of $413,996 or 8.4% the decrease in revenues was primarily related to a reduction in the volume of patients at our Florida centers.

For the year ended December 31, 2017, cost of sales incurred relating to teleradiology services was $2,226,826 as compared to $1,863,452 for the year ended December 31, 2016, an increase of 20% or $363,374. As a result of the increase in revenues, we incurred more cost of sales. As a percentage of revenues, our costs of sales incurred relating to radiology services remained constant at 82%.

For the year ended December 31, 2017 cost of sales from medical scans services was $2,040,443 compared to $1,983,235 for the year ended December 31, 2016; an increase of $57,208 or 3%. The increase is primarily related to inflationary pressures from suppliers and wages.

Operating expenses for the years ended December 31, 2017 and 2016 totalled $3,776,436 and $3,816,214, respectively, a decrease of $39,778 or 1%, due to the following:

During the year ended December 31, 2017, we incurred $703,782 in general and administrative costs as compared to $752,725 for the year ended December 31, 2016.  The decrease in general and administrative costs is due to cost reduction strategies and decreased patient volume.

During the year ended December 31, 2017, we incurred $580,151 in depreciation expense, as compared to $561,077 for the year ended December 31, 2016. The increase in depreciation expense is due to additional equipment purchased in 2017.

8

During the year ended December 31, 2017, we incurred $207,297 in legal and professional fees compared to $280,353 in 2016,

During the year ended December 31, 2017 we incurred $121,153 in bad debt expense compared to $146,047 for the year ended December 31, 2016.

During the year ended December 31, 2017, we incurred $128,949 in advertising and promotion, as compared to $82,946 for the year ended December 31, 2016. The increase was mainly due to increase in marketing efforts with referring doctors for increase in revenues.

During the year ended December 31, 2017, we incurred $586,617 for rent as compared to $550,241 for rent for the year ended December 31, 2016. The increase in rents was owing to general rate increases on our leases.

For the year ended December 31, 2017, net loss was $3,023,024 as compared to a net loss of $1,330,888 for the year ended December 31, 2016, the increase in net loss is primarily due to a $420,583 increase in Cost of Sales, a $555,000 impairment charge to Goodwill.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A smaller reporting company is not required to provide disclosure pursuant to this Item.

11

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

12

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Medical Imaging Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Medical Imaging Corp. (the “Company”) as of December 31, 2017 and the related consolidated statements of comprehensive income, stockholders’ deficit, and cash flows for the period ended December 31, 2017, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and the results of its operations and its cash flows for the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 11 to the financial statements, the Company has negative working capital at December 31, 2017, has incurred recurring losses, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 11. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ AMC Auditing

AMC Auditing
We have served as the Company’s auditor since 2018

Las Vegas, Nevada

May 10, 2018

F-1

Medical Imaging Corp.

Consolidated Balance Sheets

The accompanying notes are an integral part of these consolidated financial statements.

F-3

Medical Imaging Corp.

Consolidated Statement of Comprehensive Income

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Medical Imaging Corp.

Consolidated Statements of Changes in Stockholder’s Deficit

From December 31, 2016 through December 31, 2017

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

F-5

Medical Imaging Corp.

Consolidated Statements of Cash Flows

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

F-6

Notes to Consolidated Financial Statements

December 31, 2017

Note 1. Organization and Summary of Significant Accounting Policies

Organization and Basis of Presentation

Medical Imaging Corp., (“MIC” or the “Company”), a Nevada Corporation was incorporated in 2000. In 2005, the Company developed a business plan for private healthcare opportunities in Canada with the objective of owning and operating private diagnostic imaging clinics. In 2009, the Company purchased Canadian Teleradiology Services Inc., which operates as: Custom Teleradiology Services (“CTS”). CTS provides remote reading of medical diagnostic imaging scans for rural hospitals and clinics in Canada. In early 2010, the Company modified its business plan to grow its CTS subsidiary while commencing the acquisition of existing imaging clinics located in the United States and exploring the development of new diagnostic imaging technology. In 2012, the Company purchased Schuylkill Open MRI Inc., which operates as: Schuylkill Medical Imaging (“SMI”), an independent diagnostic imaging facility located in Pottsville, Pennsylvania. In 2014, the Company purchased Partners Imaging Center of Venice, LLC (“PIV”) located in Venice, Florida; Partners Imaging Center of Naples, LLC (“PIN”) located in Naples, Florida; and Partners Imaging Center of Charlotte, LLC (“PIC”) located in Port Charlotte, Florida.

Basis of Presentation

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars. The Company’s fiscal year-end is December 31.

Principle of Consolidation

The consolidated financial statements include the accounts of Medical Imaging, Corp., and its wholly-owned subsidiaries, CTS, SMI, PIV, PIN, and PIC. Intercompany accounts and transactions have been eliminated in the consolidated financial statements. CTS’, SMI’s, PIV’s, PIN’s, and PIC’s accumulated earnings prior to their acquisitions are not included in the consolidated balance sheet.

Use of Estimates and Assumptions

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the consolidated financial statements are published, and (iii) the reported amount of net sales, expenses and costs recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of consolidated financial statements; accordingly, actual results could differ from these estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  At December 31, 2017, and 2016, cash includes cash on hand and cash in the bank.

Accounts Receivable Credit Risk

The allowance for doubtful accounts is maintained at a level sufficient to provide for estimated credit losses based on evaluating known and inherent risks in the receivables portfolio.

Management evaluates various factors including expected losses and economic conditions to predict the estimated realization on outstanding receivables.

In connection with the acquisition of the three facilities located in Venice, Port Charlotte and Naples, Florida, the Company, in October 2014, entered into professional services agreements whereby the seller of those three facilities continued to handle the billing and collection for the imaging centers (the “third party billing”).  The seller must still provide a full set of verification data to the Company with respect to its account receivable processing and collections so that the Company can determine the extent to which accounts submitted by the seller in connection with the third-party billing have been collected or denied. Final verification will only be able to be completed after the conclusion of the services performed pursuant to the third-party billing contract, and review of account balances which is expected during the 2018 fiscal year.

As of December 31, 2017, and 2016, the allowance for doubtful accounts from direct billings was $596,866 and $475,982, respectively. This includes the allowance for doubtful accounts from third party billings (Florida operations) which was $330,612 and $275,000 in 2017 and 2016 respectively.

Although the gross receivable balance has increased significantly, management is actively pursuing collection efforts directly with patients and insurance payers and believes that the current allowance for doubtful accounts is sufficient to cover any expected losses.

Goodwill and Indefinite Intangible Assets

The Company follows the provisions of Financial Accounting Standard Accounting Standards Codification (“ASC”) 350,  Goodwill and Other Intangible Assets . In accordance with ASC 350, goodwill, representing the excess of the purchase price and related costs over the value assigned to net tangible and identifiable intangible assets of businesses acquired and accounted for under the purchase method, acquired in business combinations is assigned to reporting units that are expected to benefit from the synergies of the combination as of the acquisitions date. Under this standard, goodwill and intangibles with indefinite useful lives are not amortized.  The Company assesses goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if events and circumstances indicate impairment may have occurred in accordance with ASC 350. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, the Company records an impairment loss equal to the difference. ASC 350 also requires that

F-7

the fair value of indefinite-lived purchased intangible assets be estimated and compared to the carrying value. The Company recognizes an impairment loss when the estimated fair value of the indefinite-lived purchased intangible assets is less than the carrying value. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the consolidated financial statements.

For the year ended December 31, 2017 the company recognized $555,000 in impairment of goodwill due to the write down of its Florida centers. The centers have been operating at a negative cash flow and negative income since acquisition and the company has determined that based on this no carrying amount for Goodwill is appropriate, as such the entire amount of Goodwill for the 3 Florida centers has been expensed.

Revenue Recognition

The Company holds contracts with several hospitals and groups of health care facilities to provide Teleradiology services for a specific period of time. The Company bills for services rendered on a monthly basis.  For the year ended December 31, 2017, CTS held seven contracts; four contracts that are renewable on a year-to-year basis and one contract that renewed in 2016 and one to be renewed in 2018. In accordance with the requirement of Staff Accounting Bulletin (“SAB”) 104, the Company recognizes revenue when: (1) persuasive evidence of an arrangement exists (contracts); (2) delivery has occurred (monthly); (3) the seller’s price is fixed or determinable (per the customer’s contract, and services performed); and (4) collectability is reasonably assured (based upon our credit policy).

Revenue is accounted for under the guidelines established by SAB 101,  Revenue Recognition in Financial Statements,  and ASC 605,  Revenue Recognition . For CTS, the Company has the following indicators of gross revenue reporting: (1) CTS is the primary obligator in the provision of services to the Hospitals under contract, (2) CTS has latitude in establishing price, and negotiating contracts with each hospital, (3) CTS negotiates and determines the service specification to be provided to each hospital client, (4) CTS has complete discretion in supplier selection, and (5) CTS has the credit risk. Accordingly, the Company records CTS revenue at gross. For SMI, PIV, PIN, and PIC, revenue is recognized on the date of service and recorded on an aggregate monthly basis.

Cost of Sales

Cost of sales includes fees paid to radiologists for reading services, transcription fees, equipment repairs, system license and usage costs.

Impairment of Long-Lived Assets

In accordance with ASC 360,  Property, Plant and Equipment,  property, equipment, and purchased intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment at least annually.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Stock Based Compensation

The Company follows ASC 718,  Stock Compensation ; a fair value calculation is performed by the Company to establish the “grant date fair value” of each award which will also be the amount recorded by the Company as stock based compensation expense pursuant to the guidance set forth in ASC 718 to produce an estimated fair value.

The Company measures all share-based payments to employees (which includes non-employee Board of Directors), including employee stock options, warrants and restricted stock, at the fair value of the award and expenses it over the requisite service period (generally the vesting period). The fair value of common stock options or warrants granted to employees is estimated at the date of grant using the binomial option pricing model (“BOPM”). The calculation also takes into account the common stock fair market value at the grant date, the exercise price, the expected life of the common stock option or warrant, the dividend yield and the risk-free interest rate.

The Company from time to time may issue stock options, warrants and restricted stock to acquire goods or services from third parties. Restricted stock, options or warrants issued to other than employees or directors are recorded on the basis of their fair value. The options or warrants are valued using the BOPM on the basis of the market price of the underlying equity instrument on the “valuation date,” which for options and warrants related to contracts that have substantial disincentives to non-performance, is the date of the contract, and for all other contracts is the vesting date. Expenses related to the options and warrants are recognized on a straight-line basis over the period which services are to be received.

There was no stock-based compensation expense to non-employees for the year ended December 31, 2017.

For the year ended December 31, 2016, the Company recognized stock granted to employees of $14,000.

For the year ended December 31, 2017, the Company recognized stock granted to employees of $54,350

Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced sale or liquidation.

The carrying amounts of the Company’s financial instruments, including cash, accounts receivable, prepaid expenses, accounts payable, accrued liabilities and notes and loans payable approximate fair value due to their most maturities.

F-8

Fair Value Measurements

The Company follows ASC 820 for disclosures about fair value of its financial instruments and to measure the fair value of its financial instruments. ASC 820 establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by ASC 820 are described below:

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2 pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3 pricing inputs that are generally observable inputs and not corroborated by market data.

The carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable approximate their fair values because of the short maturity of these instruments.

The Company does not have assets and liabilities that are carried at fair value on a recurring basis.

Foreign Currency Translation

The Company’s functional currency for its wholly-owned subsidiary, CTS, is the Canadian dollar, and their financial statements have been translated into U.S. dollars. The Canadian dollar based accounts of the Company’s foreign operations have been translated into United States dollars using the current rate method. Assets and liabilities of those operations are translated into U.S. dollars using exchange rates as of the balance sheet date; income and expenses are translated using the weighted average exchange rates for the reporting period. Translation adjustments are recorded as accumulated other comprehensive income (loss), a separate component of stockholders’ equity.

The Company recognized a foreign currency loss on transactions from operations of $(73,776) for the year ended December 31, 2017 and a gain of $62,196 for the year ended December 31, 2016.

The Company recognized other comprehensive income of $45,909 for the year ended December 31, 2017 and a loss of $(2,525) for the year ended December 31, 2016.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740,  Income   Taxes .  This statement prescribes the use of the asset and liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Net Income (Loss) Per Share

The Company follows the provisions of ASC 260,  Earnings   per   Share .  Basic net income (loss) per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Basic and diluted losses per share are the same as all potentially dilutive securities are anti-dilutive.

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock or conversion of notes into shares of the Company’s common stock that could increase the number of shares outstanding and lower the earnings per share of the Company’s common stock. This calculation is not done for periods in a loss position as this would be antidilutive.

Recent Accounting Updates

The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow.

Reclassification of Accounts

Certain prior period amounts have been reclassified to conform to December 31, 2016 presentation.

F-9

Note 2. Property and Equipment

Property and equipment are stated at cost.   Assets under capital lease obligations are recorded at the lower of their fair value or the present value of the aggregate future minimum lease payments as of the beginning of the lease term.  Depreciation is calculated using the straight - line method over the estimated useful life of the assets. At December 31, 2017 and 2016, the major class of property and equipment were as follows:

Depreciation expense was $580,151 and $561,077 for the year ended December 31, 2017 and 2016, respectively.

Note 3. Operating Lease Commitments

CTS has a lease commitment for its office space of approximately $2,450 minimum rental per month, not including utilities, realty taxes, and operating costs. The lease renewed in April 2013 for a period of five years and will expire in March 2018.  CTS has sublet the space under the original lease to the end of its original term. In accordance with ASC 840, Leases, the Company has recognized approximately $8,000 in total sublease loss, as a result of total anticipated revenue on the operating lease being less than original lease obligations. The loss was recorded on sublease execution and amortized over its term.

CTS has a lease commitment for its new office space in Toronto, Canada of approximately $2,600 minimum rental per month, not including utilities, realty taxes, and operating costs. The lease will expire April 30, 2021.

SMI entered into a lease commitment for its office space in Pottsville, Pennsylvania. The lease will expire on July 30, 2021. Monthly rental amounts are $6,908 per month not including utilities, realty taxes, and operating costs.

SMI has a lease for its x-ray equipment space in Pottsville, Pennsylvania. The lease term is seven years from commitment date of October 2014. Monthly lease payments are $2,000.

SMI has a lease for use of x-ray equipment and space in Pottsville, Pennsylvania. The lease is month to month. Monthly lease payments are $3,000.

PIV has a lease for office space in Venice, Florida. The lease will expire September 30, 2021. Monthly rental amounts are $13,170 per month.

PIN has a lease for office space in Naples, Florida. The lease will expire January 1, 2020. Monthly rental amounts are $9,543 per month.

PIC has a lease for office space in Port Charlotte, Florida. The lease will expire June 20, 2021. Monthly rental amounts are $5,512 per month.

Expected future minimum lease commitments as of December 31, 2017:

Note 4. Capital Lease Obligations

A detailed summary of the capital lease obligations is as follows:

^{*Annual Percentage Rate (“APR”).}

F-10

Minimum future lease payments under the capital leases as of December 31, 2017 are as follow:

^{*Annual Percentage Rate (“APR”)}

Note 6. Convertible Notes

On July 7, 2017 the Company issued a $153,000 convertible note to a non-affiliate. The note pays interest at a rate of 12% per annum, payable at maturity. The note holder has the right at any time following the initial 180 days of note issuance, to convert all or any part of the outstanding and unpaid principal amount of this note to shares of common stock. The conversion price shall equal the variable conversion price of 65% multiplied by the market price. The market price shall mean the average of the lowest three (3) VWAP’s for the common stock during the ten (10) trading day period ending on the latest complete trading day prior to the conversion date. “VWAP” shall mean the daily dollar volume-weighted average sale price for the common stock on the principal market on any particular trading day. Conversion is subject to limitation of 4.99% beneficial ownership of the outstanding shares of common stock. The notes maturity is January 5, 2019. Prepayment on the note within one hundred twenty-one (121) day from the issue date and ending one hundred eighty (180) days following the issue day is subject to 120% Prepayment amount.

On December 5, 2012 and March 27, 2013, the Company sold, through a private placement to accredited investors, three-year 12% convertible notes (“Series B Notes”) in the aggregate principal amount of $1,865,000, and $365,000, respectively. The Notes pay interest at a rate of 12% per annum, payable to the holder at 1% per month, and are convertible into common shares of the Company at $0.10 per share. In addition, each purchaser of the Notes received shares dependent on the dollar amount of Notes purchased. The total number of shares of common stock issued was 5,315,000 shares.

On December 1, 2015, the holders of $1,840,000 Series B Notes agreed to extend the maturity date of the debt outstanding to July 1, 2017 from its original maturity date of December 31, 2015. As part of the extension the Company issued warrants to entitle the holders to purchase up to 1,840,000 shares of common stock at an exercise price of $0.07 per share at any time from December 1, 2015 to July 1, 2018. The Company has valued the warrants at $0.0058 per issued share, and recorded a total discount of $10,672 to be amortized over the 18-month extension period.

On March 31, 2016, the holders of $50,000 Series B Notes agreed to extend the maturity date of the debt outstanding to September 1, 2017 from its original maturity date of March 31, 2016. As part of the extension the Company issued warrants to entitle the holders to purchase up to 50,000 shares of common stock at an exercise price of $0.07 per share at any time from March 31, 2016 to September 30, 2018. The Company has valued the warrants at $0.00278 per issued share, and recorded a total discount of $139 to be amortized over the 18-month extension period.

On March 31, 2016, the holder of $25,000 Series B Notes agreed to extend the maturity date of the debt outstanding to September 1, 2019 from its original maturity date of March 31, 2016. As part of the extension the Company issued warrants to entitle the holders to purchase up to 25,000 shares of common stock at an exercise price of $0.07 per share at any time from March 31, 2016 to September 30, 2019. The Company has valued the warrants at $0.00583 per issued share, and recorded a total discount of $146 to be amortized over the 30-month extension period.

On May 22, 2014, the Company sold, through private placement to accredited investors, three-year 12% convertible notes (“Series C Notes”) in the aggregate principal amount of $95,000. The Notes bear interest at a rate of 12% per annum, payable to the holder at 1% per month, with the principal amount due on May 31, 2017. The Notes are convertible into shares of the Company’s common stock at an initial conversion rate of $0.15 per share. In addition, each holder of Series C Notes received shares dependent on the dollar amount of Notes purchased. On August 25, 2014, October 31, 2014 and February 17, 2015, the Company sold an additional $75,000, $50,000 and $20,000, respectively of Series C Notes. The total number of shares of common stock issued was 240,000 shares.

On March 26, 2014, the Company issued a $300,000 convertible note to a non-affiliate. The note pays interest at a rate of 12% per annum, payable to the holder at 1% per month. In addition to interest payments, the Company is making monthly payments of $5,000

F-11

towards the principal balance beginning June 1, 2014 until the note due date of February 27, 2018. The note is convertible into common shares of the Company at $0.15 per share. In addition, the purchaser of the note received 300,000 shares as part of the note agreement.  As of December 31, 2017, principal balance of the note was $125,082.

In accordance with ASC 470,  Debt with conversion and other options,   (“ASC 470”)  on issuance of the shares, the Company recognized additional paid-in capital and a discount against the notes for a total of $36,383.  Amortization of the discount for the years ended December 31, 2017 and 2016 was $45,512 and $15,156, respectively.

In accordance with ASC 480,   Distinguishing Liabilities from Equity, the Company determined that the warrants are a freestanding instrument based on the following:

Following are maturities of the long –term debt as of December 31, 2017:

For the year ended December 31, 2017, the Company had a cumulative net operating loss carryover of approximately $2,977,115 available for U.S federal income tax, which expire beginning in 2019. The net operating loss carryovers may be subject to limitations under Internal Revenue Code due to significant changes in the Company’s ownership. The Company has provided a full valuation allowance against the full amount of the net operating loss benefit, since, in the opinion of management, based upon the earnings history of the Company, it is more likely than not that the benefits will not be realized.

Deferred net tax asset (34%) consists of the following at December 31, 2017:

A reconciliation between income taxes at statutory tax rates (34%) and the actual income tax provision for continuing operations as of December 31, 2017 follows:

The Company has filed its tax returns through December 31,2016 and filed for a six months extension on its December 31, 2017 tax return filing.

The provisions of ASC 740 require companies to recognize in their financial statements the impact of a tax position if that position is more likely than not to be sustained upon audit, based upon the technical merits of the position. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosure.

Management does not believe that the Company has any material uncertain tax positions requiring recognition or measurement in accordance with the provisions of ASC 740. The Company’s policy is to record interest and penalties on uncertain tax positions, if any, as income tax expense.

Included in interest and penalties is an amount of $40,988 (2016 – $28,044) representing interest on overdue taxes.

All past six tax years for the Company remain subject to future examinations by the applicable taxing authorities.

Note 9. Related Party Transactions

During January 2017, the Company entered into an agreement with a company that is owned and controlled by a major shareholder to provide consulting services. Fees payable for performance of the consulting services are $10,000 per month. Fees incurred to the related party consultant for the years ended December 31, 2017 and 2016 were $120,000, respectively, and are included as an expense in Legal and Professional fees in the accompanying statement of operations for the period.

Note 10. Common Stock Transactions

Note 11. Going Concern

As shown in the accompanying consolidated financial statements, the Company incurred net comprehensive loss of $2,977,115, and $1,333,411 for the years ended December 31, 2017 and 2016, as well as a working capital deficit of $6,994,401 at December 31, 2017. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. Management plans to raise additional financing in order to continue its operations and fulfill its debt obligations in 2018, but there can be no assurances that the plan will be successful. These consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls

Our management evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2017. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files and submits under the Exchange Act is accumulated and communicated to management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of December 31, 2017, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting (as discussed below).

(b) Management’s Responsibility for Financial Statements

Our management is responsible for the integrity and objectivity of all information presented in this report. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management’s best estimates and judgments. Management believes the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the Company’s condensed consolidated financial position and results of operations for the periods and as of the dates stated therein.

(c) Management’s Assessment of Internal Control over Financial Reporting

The Company management is responsible for establishing and maintaining adequate internal control over financial reporting as defined by Rules 13a–15(f) and 15(d)-15(f) under the Securities and Exchange Act of 1934.  This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, a system of internal control over financial reporting can only provide reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time.

Under the direction of Chief Executive Officer and Chief Financial Officer, management evaluated the effectiveness of the system of internal control over financial reporting based on the framework in Internal Control-Integrated Framework, published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Management is aware of the following material weaknesses:

(i)

Inadequate segregation of duties and effective risk assessment

(ii)

Insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

(iii)

Uncertainty of contractual and non-contractual billings adjustments from medical imaging revenues.

However, at this time management has decided that taking into account the abilities of the employees now involved, the control procedures in place and its awareness of the issues presented, the risks associated with such lack of segregation are low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management will periodically re-evaluate this situation and report to the registered public accounting firm to the Company about this condition. Based on our overall controls and taking into account the reporting and interaction by our Board of Directors, management determined that the Company’s system of internal control over financial reporting was not effective as of December 31, 2017.

(d) Report of Independent Registered Public Accounting Firm

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm.

ITEM 9B. OTHER INFORMATION

There is no other information to be disclosed in a report on Form 8-K during the fourth quarter of the year covered by this Form 10-K that has not been previously filed with the Securities and Exchange Commission.