UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the Transition Period from ______ to ______
Commission
File Number: 333-153290
MEDICAL
ALARM CONCEPTS HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
Nevada |
|
26-3534190 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
200
W. Church Road Suite B, King of Prussia, PA |
|
19406 |
(Address of principal executive offices) |
|
(Zip Code) |
|
(877)
639-2929 |
|
|
(Registrants
telephone number, including area code) |
|
|
|
|
|
N/A |
|
|
(Former
address) |
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No
☒
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No
☒
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act.
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
Non-accelerated
filer |
☐ |
Smaller
reporting company |
☒ |
(Do
not check if a smaller reporting company) |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐ No ☒
Indicate
the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
Class |
|
Outstanding
at May 18, 2015 |
Common
Stock, $0.0001 par value per share |
|
6,994,177
shares |
Table
of contents
PART | | I. FINANCIAL INFORMATION |
Item 1.
Financial Statements |
MEDICAL ALARM CONCEPTS HOLDING, INC. |
CONSOLIDATED BALANCE SHEETS |
(Unaudited) |
| |
| |
|
| |
| March 31, 2015 | | |
| June 30, 2014 | |
ASSETS | |
| | | |
| | |
CURRENT ASSETS | |
| | | |
| | |
Cash | |
$ | 2,453 | | |
$ | 7,673 | |
Accounts receivable net of allowance of $7,906 | |
| 17,676 | | |
| 36,952 | |
Inventory | |
| 113,990 | | |
| 22,839 | |
Loan to employee | |
| 30,000 | | |
| — | |
Purchase deposits | |
| 18,350 | | |
| — | |
Total current assets | |
| 182,469 | | |
| 67,464 | |
| |
| | | |
| | |
NON-CURRENT ASSETS | |
| | | |
| | |
Property and equipment, net | |
| — | | |
| 461 | |
Intangible assets, net | |
| 1,040,159 | | |
| 1,099,036 | |
Total non-current assets | |
| 1,040,159 | | |
| 1,099,497 | |
| |
| | | |
| | |
Total assets | |
$ | 1,222,628 | | |
$ | 1,166,961 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDRS' DEFICIT | |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Derivative liability | |
$ | — | | |
$ | 30,766 | |
Accounts payable | |
| 124,921 | | |
| 67,305 | |
Deferred revenue | |
| 343,746 | | |
| 380,397 | |
Note payable - other | |
| — | | |
| 5,000 | |
Credit line payable - related party | |
| 396,608 | | |
| — | |
Accured expenses and other current liabilities | |
| 221,857 | | |
| 194,025 | |
Convertible notes payable | |
| — | | |
| 25,908 | |
Patent payable | |
| 2,500,000 | | |
| 2,500,000 | |
Total current liabilities | |
| 3,587,132 | | |
| 3,203,401 | |
| |
| | | |
| | |
| |
| | | |
| | |
Total liabilities | |
| 3,587,132 | | |
| 3,203,401 | |
| |
| | | |
| | |
STOCKHOLDERS' DEFICIT | |
| | | |
| | |
Series A Convertible Preferred Stock: $0.0001 par value; 100,000 shares authorized; 688 shares issued and outstanding as of March 31, 2015 and June 30, 2014, respectively | |
| — | | |
| — | |
Series B Convertible Preferred Stock: $0.0001 par value; 62,500 shares authorized; 9,938 shares issued and outstanding as of March 31, 2015 and June 30, 2014, respectively | |
| 1 | | |
| 1 | |
Common stock: $0.0001 par value; 20,000,000 shares authorized; 5,628,679 and 5,623,679 shares issued and outstanding on March 31, 2015 and June 30, 2014, respectively | |
| 563 | | |
| 562 | |
Additional paid-in capital | |
| 12,273,738 | | |
| 12,203,981 | |
Accumulated deficit | |
| (14,638,806 | ) | |
| (14,240,984 | ) |
Total stockholders' deficit | |
| (2,364,504 | ) | |
| (2,036,440 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | |
$ | 1,222,628 | | |
$ | 1,166,961 | |
See accompanying notes to these unaudited
consolidated financial statements.
MEDICAL ALARM CONCEPTS HOLDING, INC. |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
(Unaudited) |
| |
| |
| |
| |
|
| |
For the three months ended March 31, | |
For the nine months ended March 31, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Revenue | |
| 279,627 | | |
| 246,903 | | |
$ | 791,708 | | |
$ | 768,494 | |
Cost of revenue | |
| 124,490 | | |
| 51,945 | | |
| 227,549 | | |
| 215,556 | |
Gross profit | |
| 155,137 | | |
| 194,958 | | |
| 564,159 | | |
| 552,938 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Selling expense | |
| 107,835 | | |
| 47,877 | | |
| 237,719 | | |
| 173,106 | |
General and administrative | |
| 225,337 | | |
| 211,255 | | |
| 591,051 | | |
| 1,466,521 | |
Total operating expenses | |
| 333,172 | | |
| 259,132 | | |
| 828,770 | | |
| 1,639,627 | |
Loss from operations | |
| (178,035 | ) | |
| (64,174 | ) | |
| (264,611 | ) | |
| (1,086,689 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other (income) expenses | |
| | | |
| | | |
| | | |
| | |
Change in fair value of derivative instrument | |
| — | | |
| (53,435 | ) | |
| 11,335 | | |
| (1,508,470 | ) |
Interest expense - related party | |
| 5,487 | | |
| — | | |
| 8,421 | | |
| — | |
Interest expense | |
| 37,910 | | |
| 37,713 | | |
| 113,455 | | |
| 199,194 | |
Total other (income) expense | |
| 43,397 | | |
| (15,722 | ) | |
| 133,211 | | |
| (1,309,276 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) before income tax | |
| (221,432 | ) | |
| (48,452 | ) | |
| (397,822 | ) | |
| 222,587 | |
Income tax provision | |
| — | | |
| — | | |
| — | | |
| — | |
Net income (loss) | |
| (221,432 | ) | |
| (48,452 | ) | |
$ | (397,822 | ) | |
$ | 222,587 | |
| |
| | | |
| | | |
| | | |
| | |
Net income per common share - basic and diluted | |
| (0.04 | ) | |
| (0.01 | ) | |
$ | (0.07 | ) | |
$ | 0.07 | |
Weighted average number of common shares - basic and diluted | |
| 5,628,679 | | |
| 5,443,607 | | |
| 5,628,661 | | |
| 3,209,382 | |
See accompanying notes to these unaudited
consolidated financial statements.
MEDICAL ALARM CONCEPTS HOLDING, INC. |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Unaudited) |
| |
| |
|
| |
For the nine months ended March 31, |
| |
2015 | |
2014 |
Net income (loss) | |
$ | (397,822 | ) | |
$ | 222,587 | |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |
| | | |
| | |
Common stock issued for services | |
| 1,750 | | |
| 994,448 | |
Change in fair value of derivative instrument | |
| 11,335 | | |
| (1,508,470 | ) |
Amortization of patent | |
| 58,877 | | |
| 58,877 | |
Non-cash interest expense | |
| — | | |
| 28,991 | |
Depreciation | |
| 460 | | |
| 3,938 | |
Change in operating assets and liabilities | |
| | | |
| | |
Accounts receivable | |
| 19,276 | | |
| (9,303 | ) |
Inventory | |
| (91,151 | ) | |
| 19,217 | |
Purchase deposits | |
| (18,350 | ) | |
| (7,339 | ) |
Accounts payable | |
| 57,616 | | |
| 44,035 | |
Accrued expenses and other current liabilities | |
| 27,832 | | |
| 84,734 | |
Deferred revenue | |
| (36,651 | ) | |
| 44,673 | |
Net Cash Used in Operating Activities | |
| (366,828 | ) | |
| (23,612 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | |
Loan to employee | |
| (30,000 | ) | |
| — | |
Net Cash Used in Investing Activities | |
| (30,000 | ) | |
| — | |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
Proceed from (repayment for) note payable - other | |
| (5,000 | ) | |
| 20,000 | |
Proceeds from credit line, related party | |
| 396,608 | | |
| — | |
Net Cash Provided By Financing Activities | |
| 391,608 | | |
| 20,000 | |
| |
| | | |
| | |
NET INCREASE (DECREASE) IN CASH | |
| (5,220 | ) | |
| (3,612 | ) |
| |
| | | |
| | |
CASH AT BEGINNING OF PERIOD | |
| 7,673 | | |
| 5,857 | |
| |
| | | |
| | |
CASH AT END OF PERIOD | |
$ | 2,453 | | |
$ | 2,245 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |
| | | |
| | |
| |
| | | |
| | |
Cash paid for interest expense | |
$ | 106,000 | | |
$ | 112,500 | |
| |
| | | |
| | |
Cash paid for income taxes | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
Conversion of convertible notes to common stock | |
$ | — | | |
$ | 314,819 | |
| |
| | | |
| | |
Derivative liability classified to additional paid-in capital upon conversion of related convertible notes | |
$ | 42,101 | | |
$ | 909,915 | |
| |
| | | |
| | |
Issuance of common stock previously classified as stock to be issued | |
$ | — | | |
$ | 76,900 | |
| |
| | | |
| | |
Forgivenss of convertible notes | |
$ | 25,908 | | |
$ | 618,843 | |
| |
| | | |
| | |
Accrued interest and debt discount classified to additional paid-in capital upon conversion and forgiveness of debt | |
$ | — | | |
$ | 107,656 | |
See accompanying notes to these unaudited
consolidated financial statements.
MEDICAL
ALARM CONCEPTS HOLDING, INC.
NOTES
TO FINANCIAL STATEMENTS
On June 4, 2008, Medical
Alarm Concepts Holding, Inc. (the “Company”) was incorporated under the laws of the State of Nevada. The Company was
formed for the sole purpose of acquiring all of the membership units of Medical Alarm Concepts LLC, a Pennsylvania limited liability
company (“Medical LLC”).
The Company utilizes
new technology in the medical alarm industry to provide 24-hour personal response monitoring services and related products to subscribers
with medical or age-related conditions.
2. | | SUMMARY
OF ACCOUNTING POLICIES |
Basis of Presentation
and Consolidation
The Company’s
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States (“GAAP”).
The consolidated financial
statements include the accounts of the Company and its wholly owned subsidiary. All significant inter-company transactions and
balances among the Company and its subsidiary are eliminated upon consolidation.
These interim consolidated
financial statements are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments)
and disclosures necessary for a fair presentation of these interim consolidated financial statements have been included. The results
reported in the consolidated financial statements for any interim periods are not necessarily indicative of the results that may
be reported for the entire year or any other periods. (a) The consolidated balance sheet as of June 30, 2014, which was derived
from audited financial statements, and (b) the unaudited interim consolidated financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included
in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate
to make the information not misleading. These unaudited consolidated financial statements should be read in conjunction with the
consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the
year ended June 30, 2014.
Certain amounts in
prior period financial statements were reclassified to conform with current period presentation.
Use of Estimates
The preparation of
the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods.
Actual results could differ from those estimates. These estimates and assumptions include the collectability of accounts receivable
and deferred taxes and related valuation allowances. Certain of our estimates, including evaluating the collectability of accounts
receivable, could be affected by external conditions, including those unique to our industry, and general economic conditions.
It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from
our estimates. We re-evaluate all of our accounting estimates at least quarterly based on these conditions and record adjustments
when necessary.
Inventory
The Company values
inventory, consisting of purchased products, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”)
method. The Company regularly reviews its inventories on hand and, when necessary, records a provision for excess or obsolete inventories
based primarily on current selling price and spot market prices. The Company determined that there was no inventory obsolescence
as of March 31, 2014.
Impairment of long-lived
assets
The Company follows
section 360-10-05-4 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s reviews it long-lived
assets, which include property and equipment, and patent, for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable.
The Company assesses
the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related
long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts.
Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally
determined using the asset’s expected future undiscounted cash flows or market value, if readily determinable. If long-lived
assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally
estimated, the net book values of the long-lived assets are depreciated or amortized over the newly determined remaining estimated
useful lives. The Company determined that there were no impairment of long-lived assets as of March 31, 2015.
Derivative warrant
liability
The Company evaluates
its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts
qualify as derivatives to be separately accounted for in accordance with paragraph 810-10-05-4 of the FASB Accounting Standards
Codification and paragraph 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is
that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the
event that the fair value is recorded as a liability, the change in fair value is recorded in the Statement of Operations as other
income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value
at the conversion date and then the related fair value is reclassified to equity.
In circumstances where
the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative
instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted
for as a single, compound derivative instrument.
The classification
of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at
the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification
are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities
will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative
instrument is expected within 12 months of the balance sheet date.
On January 1, 2009,
the Company adopted Section 815-40-15 of the FASB Accounting Standards Codification (“Section 815-40-15”) to determine
whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an
entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed
to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. The adoption of Section
815-40-15 has affected the accounting for certain freestanding warrants that contain exercise price adjustment features.
Fair Value of Financial
Instruments
The Company follows
paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments
and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the
fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value pursuant to GAAP
and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and
related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques
used to measure fair value into three (3) 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 (3) levels of fair
value hierarchy defined by Paragraph 820-10-35-37 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, accounts receivable, inventory, accounts payable, deferred
revenues and accrued liabilities, approximate their fair values because of the short maturity of these instruments. The Company’s
convertible notes payable and patent payable approximate the fair value of such instruments based upon management’s best
estimate of interest rates that would be available to the Company for similar financial arrangements at March 31, 2015.
Income Taxes
The Company accounts
for income taxes under the provisions of FASB ASC Topic 740, “Income Tax,” which requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial
statements or tax returns. Deferred tax assets and liabilities are recognized for the future tax consequence attributable to the
difference between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax
assets and liabilities are measured using the enacted tax rate expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment date. The Company establishes a valuation when it is
more likely than not that the assets will not be recovered.
ASC Topic 740.10.30
clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken
or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting
periods presented.
Revenue Recognition
The Company’s
revenues are derived principally from utilizing new technology in the medical alarm industry to provide 24-hour personal response
monitoring services and related products to subscribers with medical or age-related conditions. The Company applies paragraph 605-10-S99-1
of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or
realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement
that the services have been rendered to the customer, the sales price is fixed or determinable, and collectability is reasonably
assured.
All revenues from
subscription arrangements are recognized ratably over the term of such arrangements. The excess of amounts received over the income
recognized is recorded as deferred revenue on the consolidated balance sheet.
Shipping and Handling
Costs
The Company accounts
for shipping and handling fees in accordance with paragraph 605-45-45-19 of the FASB Accounting Standards Codification. While amounts
charged to customers for shipping products are included in revenues, the related costs are classified in cost of goods sold as
incurred.
Stock-Based Compensation
We recognize compensation
expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, we calculate the fair value
of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for
unrestricted shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based
awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards. However, the awards
are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time
the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based
award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The
estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates
differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider
many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.
Net Income per
Common Share
Net income per common
share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income per common share
is computed by taking net income divided by the weighted average number of common shares outstanding for the period. Diluted net
income per common share is computed by dividing net income by the weighted average number of shares of common stock and potentially
outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable
through stock options, warrants, and convertible debt. These potential shares of common stock were not included as they were anti-dilutive.
These consolidated
financial statements are presented on the basis that the Company will continue as a going concern. The going concern concept contemplates
the realization of assets and satisfaction of liabilities in the normal course of business.
As reflected in the
accompanying consolidated financial statements, as of March 31, 2015, the Company has working capital deficit of $3,404,663; did
not generate significant cash from its operations; had stockholders’ deficit of $2,364,504 and had operating loss for prior
three years. These circumstances, among others, raise substantial doubt about the Company’s ability to continue as a going
concern.
While the Company
is attempting to generate sufficient revenues, the Company’s cash position may not be enough to support the Company’s
daily operations. Management intends to raise additional funds by way of a public or private offering, or by alternative methods.
Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues
provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy
to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the
Company to continue as
a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.
The consolidated financial
statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
On July 10, 2008,
the Company entered into a Purchase Agreement and Patent Assignment Agreement (the “Agreement”) to be effective July
31, 2008. The Company is obligated to pay the seller $2,500,000 on June 30, 2012. The Agreement specifies interest of 6% to be
payable monthly, commencing on July 31, 2008. The seller will reacquire all patents and applications if payment is not made on
June 30, 2012. On December 31, 2014, this due date was extended to June 30, 2015.
The patent is being
amortized over its estimated useful life. Amortization of patent aggregated $58,877 for the nine months ended March 31, 2015 and
2014.
Patent, stated at
cost, less accumulated amortization consisted of the following:
| |
March 31, 2015 | |
June 30, 2014 |
Patent | |
$ | 2,500,000 | | |
$ | 2,500,000 | |
Less: accumulated amortization | |
| (1,459,841 | ) | |
| (1,400,964 | ) |
| |
$ | 1,040,159 | | |
$ | 1,099,036 | |
5. | | CONVERTIBLE NOTES PAYABLE |
The convertible notes
were convertible into shares of the Company’s common stock at a conversion price equal to the lesser of the fixed conversion
price of $0.002, or seventy five percent (75%) of the average of the closing bid price of the common stock as reported by Bloomberg
LP for the principal market for the 5 trading days preceding the conversion date, and was due on September 30, 2013. On November
2, 2014, the holder of convertible note informed the Company that it will no longer be seeking repayment of $25,908. The Company
recorded the forgiveness of the debt and related derivative liability as additional paid-in capital.
6. | | DERIVATIVE WARRANT LIABILITY AND FAIR VALUE |
The Company has evaluated
the application of ASC 815 Derivatives and Hedging (formerly SFAS No. 133) and ASC 815-40-25 to the Warrants to purchase common
stock issued with the Convertible Notes and service agreements. Based on the guidance in ASC 815 and ASC 815-40-25, the Company
concluded these instruments were required to be accounted for as derivatives due to the down round protection feature on the conversion
price and the exercise price. The Company records the fair value of these derivatives on its balance sheet with changes in the
values of these derivatives reflected in the statements of operations as “Gain (loss) on derivative liabilities.” These
derivative instruments are not designated as hedging instruments under ASC 815 and are disclosed on the balance sheet under Derivative
Liabilities.
The Company accounted
for the issuance of the convertible debentures in accordance with ASC 815” Derivatives and Hedging.” The debentures
are convertible into an indeterminate number of shares for which the Company cannot determine if it has sufficient authorized shares
to settle the transaction with. Accordingly, the embedded conversion option is a derivative liability and is marked to market through
earnings at the end of each reporting period.
The gross proceeds
from the sale of the debentures are recorded net of discount of related conversion feature of the embedded conversion option. When
the fair value of conversion options is in excess of the debt discount the amount is included as a component of interest expense
in the statement of comprehensive income.
The fair value of
the Warrants underlying the promissory notes issued at the time of their issuance was calculated pursuant to the Black-Scholes
option pricing model. The fair value was recorded as a reduction to the promissory notes payable and was charged to operations
as interest expense in accordance with effective interest method within the period of the promissory notes. Significant assumptions
used in calculating fair value of outstanding warrants are as follows.
Expected dividend |
Expected volatility |
Risk-free rate of interest |
Expected term
(year) |
Exercise price |
Underlying Number of shares |
- |
193.89% - 322.21% |
0.07%/1 year
0.35%/2 years
0.5%/3 years |
As set forth by each promissory note agreement |
$0.0002 per share |
As set forth by each promissory note agreement |
7. | | CREDIT LINE – RELATED PARTY |
On September 30, 2014,
the Company entered into a line of credit with a company, which is partially owned by the Company’s CEO. Under the line of
credit agreement, the Company will be able to borrow up to $300,000 with the rate of interest of 6.5% per annum. The maturity date
of the credit line is September 30, 2017. The Company has the option to extend the maturity date for one year to September 30,
2018.
On January 31, 2015,
the limit on the line of credit was increased to $500,000 with same interest rate and due date.
During nine months
ended March 31, 2015, the Company loaned $30,000 to an employee of the Company. This loan is non-interest bearing and due on December
31, 2015. The employee pledged 60,000 shares of the Company’s common stock as collateral.
The reconciliation
of income tax benefit at the U.S. statutory rate of 34% for the nine months ended March 31, 2015 and 2014 to the Company’s
effective tax rate is as follows:
| |
Nine months ended March 31, |
| |
2015 | |
2014 |
U.S. federal statutory rate | |
| (34.0 | )% | |
| (34.0 | )% |
State income tax, net of federal benefit | |
| (9.99 | )% | |
| (9.99 | )% |
Change in valuation allowance | |
| 43.99 | % | |
| 43.99 | % |
Income tax provision (benefit) | |
| 0.0 | % | |
| 0.0 | % |
The benefit for income
tax is summarized as follows:
| |
Nine months ended March 31, |
| |
2015 | |
2014 |
Federal: | |
| | | |
| | |
Current | |
$ | — | | |
$ | — | |
Deferred | |
| (125,900 | ) | |
| (400,864 | ) |
State and local: | |
| | | |
| | |
Current | |
| — | | |
| — | |
Deferred | |
| (36,992 | ) | |
| (117,783 | ) |
Change in valuation allowance | |
| 162,892 | | |
| 518,647 | |
Income tax provision (benefit) | |
$ | — | | |
$ | — | |
As of March 31, 2015,
the Company had approximately $11 million of federal and state net operating loss carryovers (“NOLs”) which begin to
expire in 2028. Utilization of the NOLs may be subject to limitation under the Internal Revenue Code Section 382 should there be
a greater than 50% ownership change as determined under regulations.
In assessing the realization
of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets
will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management
has established a full valuation allowance against the entire deferred tax asset relating to NOLs for every period because it is
more likely than not that all of the deferred tax asset will not be realized.
The Company files
U.S. federal and states of Pennsylvania tax returns that are subject to audit by tax authorities beginning with the year ended
June 30, 2008. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax
expense.
The
Company had only one supplier during the three and nine months ended March 31, 2015 and 2014,
respectively.
On April 3, 2015,
the Company issued 1,370,000 shares of common stocks to six consultants as partial payment for their services on behalf of the
Company to investigate international distributions and investor relation services.
| Item | 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
This Quarterly
Report on Form 10-Q for the three and nine months ended March 31, 2015 contains “forward-looking statements” within
the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, including statements that include the words
“believes,” “expects,” “anticipates,” or similar expressions. These forward-looking statements
include, among others, statements concerning our expectations regarding our working capital requirements, financing requirements,
business, growth prospects, competition and results of operations, and other statements of expectations, beliefs, future plans
and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. The forward-looking
statements in this Quarterly Report on Form 10-Q for the three and three months ended March 31, 2015 involve known and unknown
risks, uncertainties and other factors that could cause our actual results, performance or achievements to differ materially from
those expressed in or implied by the forward-looking statements contained herein.
Overview and
Recent Events
Medical Alarm Concepts
Holding, Inc. (the “Company” or “Medical Alarm”) was formed in June 2008 and, on June 24, 2008 we acquired
100% of the membership interests in Medical Alarm Concepts, LLC, a Delaware limited liability corporation. The operation was financed
with a considerable amount of toxic convertible debt. This type of financing, along with several other issues, prevented the Company
from realizing a robust growth rate for its first few years of operation. Since that time, considerable management time has been
spent and investor money utilized to turn the Company's operation around. As of the date of this filing, the Company is currently
experiencing a robust growth rate, quality relationships with quality customers, and a significantly improved balance sheet.
The Company's flagship
product is called the MediPendant®, which is a personal emergency alarm, often referred to in the industry as a Personal Emergency
Response System (PERS), which is used to summon help in the event of an emergency at home. While it is primarily a device for older
people, there is also a market for those who are physically disabled, as well as for persons living alone. The MediPendant®
device has significant feature and function advantages over other personal medical alarms in the marketplace today. Approximately
70% of all medical alarms currently being sold in the United States are first-generation technologies that require the user to
speak and listen through a central base station unit. If the user of one of these older generation products is not within speaking
or listening distance to the base station, the user may not be heard by the operator in the centralized emergency monitoring center.
The MediPendant® enables the wearer to simply speak and listen directly through the pendant in the event of an emergency. The
MediPendant® is designed to be worn in the bath or shower and offers a 600-foot range, so that the wearer can operate the unit
from virtually anywhere within their home or on their property. The product is extremely durable, very reliable, and offers an
extremely long battery life. The MediPendant® has strong intellectual property patent protection. The patent protects a unique
feature of the product, which is voice prompts that alert the user of the operational status of the device. This gives the user
some peace of mind during an emergency because they know with certainty that their distress signal has been activated and help
is being summoned.
During December of
2011, the Company announced that the MediPendant® would be distributed by Costco Wholesale Corporation. Costco is one of the
largest retailers in not only the United States, but throughout the world with approximately 75,000,000 customers. The Company's
relationship with this retailer has been strong, sales are occurring on a daily basis, and customer satisfaction is high. The Company
successfully runs sales programs at Costco including email blasts, Costco coupons, inserts in Costco Magazines, and assorted other
promotions. The MediPendant® product will continue to be included in Costco promotions. The MediPendant® has received 28
product reviews on the retailer's website, 21 of which are "5 out of 5 Star" ratings. The average rating is "4.5
Stars" out of 5 Stars.
The Company has a
relationship with APS Healthcare Bethesda Inc. Under the terms of the contract, the MediPendant® will be offered to qualified
individuals, based on certain criteria, at little or no cost to the individual. The health insurance company is responsible for
the monthly monitoring fee as well as the cost of the equipment. These programs are not only an added benefit and security measure
for qualifying individuals living alone with medical issues, but also as a cost-saving method for health insurance companies, by
helping to avoid unnecessary ambulance and emergency room visits. We expect to expand this program to other health insurance companies
throughout the country during 2015.
The Company has also
had successes internationally with distribution agreements and relationships in Denmark, Ireland, Canada, and Bermuda. Medical
Alarm Concepts is expecting steady growth from its international markets in 2015 and is currently working on an agreement in Dubai
that would create a pilot program to supply medical monitoring with the MediPendant in the Arabic language.
The Company also distributes
the MediPendant® through Internet marketing via SEO (search engine optimization), online advertising, social media, and relationships
with other websites that have synergistic products and customer demographics. We work with several online dealers who promote and
sell the MediPendant® on their own websites and through their own online marketing channels.
We also have relationships
with outside call centers/monitoring centers whose customer base and marketing efforts are similar to ours. We have a variety of
marketing agreements with these call centers to promote the MediPendant® to new and existing customers.
Significant investment
is planned to expand sales opportunities relative to the above areas.
The Company has spent
significant time and money over the past year in an effort to update its financial statements and reporting process. We have made
a total of 16 filings within the past 12 months, and we are now current and a fully reporting publicly traded OTC company.
During the last year,
seeing that we could create a profitable operation, the Company began to plan for the future. The stock issued as a result of the
Global Settlement Agreement described elsewhere in this prospectus, which was designed to eliminate the Company’s toxic debt,
increased the SG&A expenses for the year ending June 30, 2014. This was as a direct result of the costs associated with the
stock awarded as part of the Global Settlement Agreement. This was a one-time event, and the associated expenses will not appear
in upcoming financials. The derivative liabilities and the underlying warrants that have been part of our financial statements
for the past few years are no longer a part of the Company and its capital structure. All have been retired as a result of the
Global Settlement Agreement.
The working capital
decrease from 2013 in our filings has not changed significantly over the past year, and the stockholders deficit has remained fairly
constant as well. The Company feels that increased sales resulting from its new product launch, and its plans on raising money
during 2015, will help improve its stockholders deficit. However, there is no assurance that the company will be able to raise
capital successfully.
The Company expects
the balance of calendar year 2015 and 2016 to be one of continued growth when taking into account the combined effect of both monthly
recurring revenues and distribution sales, which will allow the Company to realize sustainable positive operating cash flow. In
general, monthly recurring revenues have been growing steadily. Distribution sales (sales of equipment only)in both 2013 &
2014 represented about 30% of total revenue. However, because of our new product (iHelp Mobile Medical Alert System) and its dealer
program we are working on, we believe that growth will continue in both monthly revenues and distribution sales and that this growth
would be based on the new iHelp Alert system and remain sustainable into the future.
The company recently
announced the launch of a new, advanced medical alarm device called the iHelp™. The iHelp™ is an advanced mobile medical
alert system, designed to be easy to use, lightweight yet durable, but with significantly advanced features. The company has invested
time, manpower, and money into the development and launch of this product. On September 30, 2014 the company signed an agreement
for a $300,000 line of credit to enable it to launch iHelp™ and to build the infrastructure that will allow us to buy and
track air time from AT&T and
T-Mobile for cellular operation of this unit. The iHelp™ has enhanced features and functions including an advanced GPS system,
the ability to remotely locate a loved one, patented voice prompts, and a dealer portal that enables dealers to manage their own
iHelp customer base. A significant amount of time was spent on the back end systems, including the dealer portal. iHelp™
dealers will have significant benefits, most importantly the ease of use in ordering product, activating and deactivating customers,
tracking their customer usage, and creating and printing a variety of reports to assist in billing and collecting revenues. The
iHelp™ dealer program is a turn-key program that offers the dealer the opportunity to provide his/her customers with the
latest products without having to change his/her own back end. The company has already had a significant amount of interest in
the iHelp™ product and anticipates that the iHelp™ will increase its revenues substantially, and enable it to show
continued growth in both revenues, gross margins, and cash flow.
The company has also
begun its search to acquire synergistic company(s), in an effort to expand the business in other areas of the healthcare-related
industry. We believe that adding company acquisitions to our business plan in 2015 will help us with our strategy to build a strong
company with long term goals, and enable us to increase our market share in this vastly growing market.
The company generates
sales mainly through recurring revenues generated by monitoring fees paid by the users of our medical alert systems, equipment
sales which are generated by those “dealers” that would like to resell our products to users, and through recurring
revenues generated by those dealers who will resell our new mobile alert system (iHelpAlarm) air time that we purchase through
Kore, a reseller of air time (AT & T and T-Mobile). Our customers pay us a monthly subscription fee (recurring) in exchange
for providing them a service. This creates an initial negative cash flow because the company also needs to supply equipment (a
medical alert system) for the customer to be able to use their services. When the customer pushes the emergency button on the unit’s
transmitter, an operator at a monitoring center that we subcontract this service to will respond and ask if they need help. Most
companies, except possibly for the very largest, in the PERS (Personal Emergency Response System) industry also subcontract this
work out because it is often less expensive, the costs are fixed, and they do not have enough customers to take advantage of scaling
this cost. We use three different monitoring centers. We pay a fixed cost for this monitoring (approximately $4 per customer),
and pass this on to our “user” for approximately $30 per customer. The gross margin helps pay for the cost of the medical
alert system equipment, the cost for the monitoring, customer service, warranty replacements, and billing functions. We will either
dispatch help, patch the call to a loved one, or answer any questions they may have. The ability to contract this monitoring service
has allowed the company to have an exact fee that we are charged for this service, and to create relationships with people in the
industry (the monitoring centers) that help us sell our product. With the new arrival of the iHelpAlarm system we will be increasing
our equipment sales as this will be a “dealer” program. This unit will be mainly sold directly to dealers and/or monitoring
centers who will resell the product and its services directly to users. Additionally, each iHelpAlarm system requires a SIM card
for ongoing telecommunications. The Company will continue to charge the dealer a monthly fee for the ongoing telecommunications
charges, and this monthly rate will create a profit for the company on an ongoing monthly basis as long as the unit stays activated.
The Company recently
announced the acquisition of 51% of Medical Sales Group, LLC (MSG). MSG is owned equally by three individuals, one of which is
Ronald Adams, the CEO of Medical Alarm Concepts. MSG was formed primarily to acquire PERS and mPERS accounts in bulk, from dealers
that want to quickly capitalize on their account base. MSG has done several acquisitions and continues to seek out additional dealers
interested in selling their existing accounts. MSG is also seeking to acquire synergistic company(s), in an effort to expand the
business in other areas as well. The Company plans to accomplish this by either raising money through an offering, doing acquisitions
with stock, or through a combination of both methods. An agreement is in place, but the acquisition will not be completed until
an ongoing audit necessary to comply with regulatory requirements is finished.
During nine months
ended March 31, 2015, the Company lent $30,000 to one of employees. There was no transaction in similar nature during the same
period of previous year. The loan was made pursuant to a secured promissory note that calls for the entire amount of the loan to
be paid in full on or before December 31, 2015. The loan does not bear interest and payments of principal are to be made as soon
as possible or in incremental amounts acceptable to the Company. Repayment of the loan is secured by 60,000 common shares of the
Company owned by the employee that have been pledged as collateral.
Going Concern
These consolidated
financial statements are presented on the basis that we will continue as a going concern. The going concern concept contemplates
the realization of assets and satisfaction of liabilities in the normal course of business
As reflected in the
accompanying consolidated financial statements, the Company has working capital deficit of $3,404,663, did not generate significant
cash from its operations, had stockholders’ deficit of $2,364,504 and had operating loss for prior three years. These circumstances
raise substantial doubt about the Company’s ability to continue as a going concern.
While the Company
is attempting to generate sufficient revenues, the Company’s cash position may not be enough to support the Company’s
daily operations. Management intends to raise additional funds by way of a public or private offering, or by alternative methods.
Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues
provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy
to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the
Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and
generate sufficient revenues.
The consolidated financial
statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Results of
Operations
Results of Operations
for Three Months Ended March 31, 2015 and 2014
Net Sales
Net sales generated
during the quarters ended March 31, 2015 and 2014 were $279,627 and $246,903, respectively; representing a 13% or $32,724 increase,
resulting from a change in strategic business direction toward more widespread product distribution and away from reliance on only
a few resellers and distributors. The Company believes this change in business direction will lead to stronger growth and margins
and higher overall sales during future periods. During the quarters ended March 31, 2015 and 2014, net sales were generated from
sales to distributors, resellers and from direct sales to consumers who pay the Company for monthly monitoring services.
Cost of
Sales
Cost of sales incurred
during quarters ended March 31, 2015 and 2014 were $124,490 and $51,945, respectively, representing a 140% or $72,545 decrease..
The increase in cost of sales was mainly due to the Company’s new product iHelp and its sales method of selling equipment
to other dealers, thereby increasing revenues but decreasing sales margins.
Gross Profit
Gross profit generated
during quarters ended March 31, 2015 and 2014 was $155,137 and $194,958, respectively. The gross profit margin for quarters ended
March 31, 2015 and 2014 was 55% and 79%, respectively. The decrease in gross profit margin was mainly due to more revenue generated
from the sales of its new product iHelp directly to other dealers, which has lower gross profit margin.
General
and Administrative
General and administrative
expenses for quarters ended March 31, 2015 and 2014 were $225,337 and $211,255, respectively; representing 7% or $14,082 increase
in general and administrative expense.
Selling
Expenses
Selling expenses
incurred during quarters ended March 31, 2015 and 2014 were $107,835 and $47,877, respectively. The $59,958 increase compared to
the previous period.
Change in
Fair Value of Derivative Instrument
Changes in fair
value of derivative instrument generated income of $53,435 during quarters ended March 31, 2014. The Company didn’t have
any derivative liabilities during the quarter ended March 31, 2015.
Interest
Expense
Interest expense
for the quarter ended March 31, 2015 and 2014 was $43,397 and $37,713, respectively. The $5,684 or 15% decrease in interest expense
was mainly due to decreased amount of interest expense recorded on debt discount and increased interest expense for credit line
and convertible notes.
Net Loss
Net loss incurred
during quarter ended March 31, 2015 and 2014 was $221,432 and $48,452, respectively. Change in net loss is due to the reasons stated
above.
Results of Operations
for Nine months Ended March 31, 2015 and 2014
Net Sales
Net sales generated
during the nine months ended March 31, 2015 and 2014 were $791,708 and $768,494, respectively; representing a 3% or $23,214 increase,
resulting from a change in strategic business direction toward more widespread product distribution and away from reliance on only
a few resellers and distributors. The Company believes this change in business direction will lead to stronger growth and margins
and higher overall sales during future periods. During the nine months ended March 31, 2015 and 2014, net sales were generated
from sales to distributors, resellers and from direct sales to consumers who pay the Company for monthly monitoring services.
Cost of
Sales
Cost of sales incurred
during nine months ended March 31, 2015 and 2014 were $227,549 and $215,556, respectively, representing a 6% or $11,993 increase.
The increase of cost of sales was mainly due to the Company changed its strategic business direction and began generating revenue
from the company’s new product iHelp and its sales method of selling equipment directly to dealers. Revenue from equipment
normally generate lower gross profit.
Gross Profit
Gross profit generated
during nine months ended March 31, 2015 and 2014 was $564,159 and $552,938, respectively. The gross profit margin for nine months
ended March 31, 2014 and 2014 was 71% and 72%, respectively. The increase in gross profit margin was mainly due to more revenue
generated from monitoring services which has higher gross profit margin.
General
and Administrative
General and administrative
expenses for nine months ended March 31, 2015 and 2014 were $591,051 and $1,466,521, respectively; representing 875,470 or 60%
decrease mainly due to the Company recorded $909,915 stock compensation expense for stock issued to management pursuant to Global
Settlement Agreement entered on December 10, 2013.
Selling
Expenses
Selling expenses
incurred during nine months ended March 31, 2015 and 2014 were $237,719 and $173,106, respectively, representing $64,613 or 37%
increase.
Change in
Fair Value of Derivative Instrument
Changes in fair
value of derivative instrument generated income of $1,508,470 during nine months ended March 31, 2014; comparably, such change
generated loss of $11,335 during current period. This was due to a lower value of the derivative liability at March 31, 2015.
Interest
Expense
Interest expense
for the nine months ended March 31, 2015 and 2014 was $121,876 and $199,194, respectively. The $77,318 or 39% decrease in interest
expense was mainly due to decreased amount of interest expense recorded on the excess of derivative liability over the amount of
the convertible debt, which was recorded as interest expense at the inception of the note, amortization of debt discount and interest
expense for credit line and convertible notes.
Net Income
(Los)
Net loss during
nine months ended March 31, 2015 $397,822; net income during nine months ended March 31, 2014 was $222,587. Change in net income
is due to the reasons stated above.
Liquidity
and Capital Resources
As of March 31, 2015
and June 30, 2014, we had $2,453 and $7,673 in cash, respectively.
During nine months
ended March 31, 2015 and 2014, our operating activities incurred net cash outflow of $366,828 and $23,612, respectively. Main reasons
for the change in net cash used in operating activities were outlined below:
| 1. | Changes in fair value of derivative instrument during nine months
ended March 31, 2014 generated non-cash income of $1,508,470; comparably during the same period of current year, such changes generated
loss of $11,335; |
| 2. | During nine months ended March 31, 2015 and 2014, amortization of
discount on convertible notes and interest expense incurred non-cash expense of $nil and $28,991, respectively. |
| 3. | During nine months ended March 31, 2015 and 2014, the increase of
deferred revenue generated cash inflow of $44,673; comparably, during current period such changes generated cash outflow of $36,651. |
| 4. | During nine months ended March 31, 2015 and 2014, expenses incurred
from issuance of common stock for services were $1,750 and $994,448, respectively. |
| 5. | During nine months ended March 31, 2015, the Company paid $91,151
on purchasing inventories; comparably during the same period of 2014, the decrease of inventory generated net cash inflow of $19,217. |
| 6. | During nine months ended March 31, 2015 and 2014, the increase of
accrued expenses and other current liabilities generated net cash inflow of $27,832 and $84,734, respectively. |
During nine months
ended March 31, 2015 and 2014, financing activities generated net cash inflow of $391,608 and $20,000, respectively. Main reasons
for the change in net cash provided by financing activities were outlined below:
| 1. | During the nine months ended March 31, 2015, the Company
received proceeds of $396,608 by obtaining a credit line from a company, which is partially owned by the Company’s
CEO. |
| 2. | During the nine months ended March 31, 2015, the Company made $5,000
loan payment to a vendor. During the nine months ended March 31, 2014, the Company received $20,000 proceed from a vendor. |
We believe we can
satisfy our cash requirements for the next twelve months with our current cash flow from business operations, although there can
be no assurance to that effect. If we are unable to satisfy our cash requirements, we may be unable to proceed with our plan of
operation. We do not anticipate the purchase or sale of any significant equipment. We also do not expect any significant additions
to the number of employees. The foregoing represents our best estimate of our cash needs based on current planning and business
conditions. In the event we are not successful in reaching our initial revenue targets, additional funds may be required, and we
may not be able to proceed with our business plan for the development and marketing of our core services. Should this occur, we
may be forced to suspend or cease operations.
We anticipate incurring
operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue
as a going concern.
Off-Balance
Sheet Arrangements
At March 31, 2015,
we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could
arise if we had engaged in such relationships.
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not required for smaller
reporting companies.
Item 4.
Controls and Procedures |
Evaluation of Disclosure
Controls.
Our management, under
the supervision and with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"),
has evaluated the effectiveness of our disclosure controls and procedures as defined in SEC Rules 13a-15(e) and 15d-15(e) as of
the end of the period covered by this Quarterly Report. Our disclosure controls and procedures are designed to ensure that information
required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 ("Exchange Act")
is recorded, processed, summarized, and reported within the time periods specified in the SEC’s forms, and that such information
is accumulated and communicated to our management including our CEO and CFO, to allow timely decisions regarding required disclosures.
Based on their evaluation, our CEO and CFO have concluded that, as of March 31, 2015, our disclosure controls and procedures were
ineffective.
Our management has
conducted, with the participation of our CEO and CFO, an assessment, including testing of the effectiveness, of our disclosure
controls and procedures as of March 31, 2015. Based on such evaluation, management identified deficiencies that were determined
to be a material weakness.
A material weakness
is a deficiency, or a combination of deficiencies, in disclosure controls and procedures, such that there is a reasonable possibility
that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on
a timely basis. Because of the material weaknesses described below, management concluded that our disclosure controls and procedures
were ineffective as of March 31, 2015.
The specific material
weakness identified by the Company’s management as of March 31, 2015 are described as follows:
| · | The Company is lacking qualified resources
to perform the internal audit functions properly. In addition, the scope and effectiveness of the Company’s internal audit
function are yet to be developed. |
| · | We currently do not have an audit committee. |
| · | The Company is relatively inexperienced
with certain complexities within USGAAP and SEC reporting. |
Remediation Initiative
| · | We are committed to establishing the disclosure
controls and procedures but due to limited qualified resources in the region, we were not able to hire sufficient internal audit
resources by March 31, 2015. However, internally we established a central management center to recruit more senior qualified people
in order to improve our internal control procedures. Externally, we are looking forward to engaging an accounting firm to assist
the Company in improving the Company’s internal control system based on the COSO Framework. We also will increase our efforts
to hire the qualified resources. |
| · | We intend to establish an audit committee
of the board of directors as soon as practicable. We envision that the audit committee will be primarily responsible for reviewing
the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls. |
Conclusion
The Company did not
have sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in
the application of generally accepted accounting principles accepted in the United States of America commensurate with the Company’s
disclosure controls and procedures requirements, which resulted in a number of deficiencies in disclosure controls and procedures
that were identified as being significant. The Company’s management believes that the number and nature of these significant
deficiencies, when aggregated, was determined to be a material weakness.
Despite of the material
weaknesses and deficiencies reported above, the Company’s management believes that its condensed consolidated financial statements
included in this report fairly present in all material respects the Company’s financial condition, results of operations
and cash flows for the periods presented and that this report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report.
Changes in internal
control over financial reporting.
There were no changes
in the Company’s internal control over financial reporting during the quarter ended March 31, 2015 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
PART | | II. OTHER INFORMATION |
Item 1.
Legal Proceedings |
None.
Note: in addition
to the other information set forth in this report, you should carefully consider the factors discussed in “Item 1A. Risk
Factors” contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2014, which could materially affect
our business, financial condition, or future results. During the nine ended March 31, 2015, there have been no material changes
to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended June 30, 2014.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds |
None.
Item 3.
Defaults Upon Senior Securities |
None.
Item 4.
Mine safety disclosures |
Not applicable.
Item 5.
Other Information |
None.
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
MEDICAL ALARM CONCEPTS
HOLDING, INC.
(Registrant)
/s/ Ronnie Adams |
|
May 20, 2015 |
Chief Executive Officer and Chief Financial Officer |
|
Ronnie Adams |
|
|
(Principal Executive Officer, Principal Financial and Accounting Officer) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Allen Polsky |
|
May 20, 2015 |
Director |
|
|
|
|
|
Allen Polsky |
|
|
|
|
|
|
|
|
1. I have
reviewed this Quarterly Report on Form 10-Q of Medical Alarm Concepts Holding, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The small business
issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
5. The small business
issuer’s other certifying officer and 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 the small business issuer’s board of
directors (or persons performing the equivalent functions):
In
connection with the Quarterly Report of Medical Alarm Concepts Holding, Inc. (the “Company”) on Form 10-Q for the quarter
ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronnie
Adams, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
Principal Executive
Officer, Principal Financial Officer and Principal Accounting Officer