Attached files

file filename
EX-31.1 - EXHIBIT 31.1 - iNeedMD Holdings, Inc.f10q0915ex31i_ineedmdhold.htm
EX-31.2 - EXHIBIT 31.2 - iNeedMD Holdings, Inc.f10q0915ex31ii_ineedmdhold.htm
EX-32.1 - EXHIBIT 32.1 - iNeedMD Holdings, Inc.f10q0915ex32i_ineedmdhold.htm
EX-32.2 - EXHIBIT 32.2 - iNeedMD Holdings, Inc.f10q0915ex32ii_ineedmdhold.htm

 

 

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: September 30, 2015

 

OR

 

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

 

For the transition period from __________ to __________

 

Commission File No. 000-55173

 

INEEDMD HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   454487461
(State or other jurisdiction of incorporation)   (IRS Employer Identification No.)

 

650 First Avenue, Third Floor

New York, New York 10016

(Address of principal executive offices)

 

(212) 256-9669

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, 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, or 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

 

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

 

As of November 16, 2015, there were 48,014,424 shares outstanding of the registrant’s common stock.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    PART I – FINANCIAL INFORMATION    
         
Item 1.   Financial Statements   1
         
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   2
         
Item 3.   Quantitative and Qualitative Disclosures About Market Risk   10
         
Item 4.   Controls and Procedures   10
         
    PART II – OTHER INFORMATION    
         
Item 1.   Legal Proceedings   11
         
Item 1A.   Risk Factors   11
         
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds   11
         
Item 3.   Defaults Upon Senior Securities   11
         
Item 4.   Mine Safety Disclosures   11
         
Item 5.   Other Information   11
         
Item 6.   Exhibits   11
         
Signatures   12

 

 

 

INEEDMD HOLDINGS, INC.

 

Condensed Consolidated balance sheets as of September 30, 2015 (unaudited) and December 31, 2014 F-1
   
Condensed Consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014 (unaudited) F-2
   
Condensed Consolidated statements of cash flows for the nine months ended September 30, 2015 and 2014 (unaudited) F-3
   
Notes to condensed consolidated financial statements F-4 - F-10

 

 1 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

iNeedMD Holdings, Inc.

Condensed Consolidated Balance Sheets

 

   September 30,   December 31, 
   2015   2014 
   (unaudited)     
Assets        
Current Assets        
Cash  $353,061   $2,457,622 
Accounts receivable, net   63,217    - 
Inventory   1,098,522    148,476 
Prepaid expenses   17,169    9,931 
   Total Current Assets   1,531,969    2,616,029 
           
Property and equipment, net   35,397    48,549 
           
Other Assets          
Security Deposits   7,941    7,941 
           
   Total Other Assets   7,941    7,941 
           
Total Assets  $1,575,307   $2,672,519 
           
Liabilities and Stockholders' Equity          
           
Current Liabilities:          
Accounts payable and accrued liabilities  $834,807   $247,904 
Deferred revenue   35,775    36,975 
Convertible notes payable, net of debt discount of $9,314 and $59,177, respectively   190,686    140,823 
Derivative Liability   1,810,452    1,898,636 
           
   Total Current Liabilities   2,871,720    2,324,338 
           
Total Liabilities   2,871,720    2,324,338 
           
Commitments and contingencies          
           
Stockholders' Equity          
Preferred Stock par value $0.001: 10,000,000 shares authorized;          
400 and 400 shares issued and outstanding, respectively   -    - 
Class A Common Stock par value $0.001: 65,000,000 shares authorized;          
48,014,424 and 48,014,424 shares issued and outstanding, respectively   48,014    48,014 
Additional paid-in capital   116,220,650    115,640,496 
Accumulated deficit   (117,565,077)   (115,340,329)
   Total Stockholders' Equity (Deficit)   (1,296,413)   348,181 
           
Total Liabilities and Stockholders' Equity  $1,575,307   $2,672,519 

 

See the accompanying notes to these condensed consolidated financial statements

 

 F-1 

 

 

iNeedMD Holdings, Inc.
Condensed Consolidated Statements of Operations
(unaudited)

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2015   2014   2015   2014 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
Revenue  $64,498   $-   $86,176   $- 
                     
Cost of revenue   19,209    -    32,100    - 
                     
Gross profit   45,289    -    54,076    - 
                     
Operating expenses                    
Compensation   119,829    651,324    906,637    34,775,497 
Consulting fees   129,547    278,205    232,723    823,320 
Consulting fees - related party   45,000    60,000    140,000    243,385 
Sales and marketing   -    -    174,369    443,398 
Sales and marketing - related party   -    -    -    20,000 
Research and development   17,000    314,136    63,300    519,309 
General and administrative   299,797    588,187    786,087    991,500 
                     
Total operating expenses   611,173    1,891,852    2,303,116    37,816,409 
                     
Loss from operations   (565,884)   (1,891,852)   (2,249,040)   (37,816,409)
                     
Other income (expenses)                    
Interest income   90    83    182    83 
Interest expense   (4,789)   (24,951)   (14,211)   (81,988)
Amortization of debt discount   (16,804)   (84,203)   (49,863)   (1,091,988)
Amortization of debt issuance costs   -    -    -    (129,459)
Derivative expense   -    -    -    (1,141,407)
Change in fair value of derivative liabilities   31,354    74,498    88,184    924,577 
                     
Total other income (expenses)   9,851    (34,573)   24,292    (1,520,182)
                     
Income tax provision   -    25    -    25 
                     
Net loss  $(556,033)  $(1,926,450)  $(2,224,748)  $(39,336,616)
                     
Net loss per common share                    
Basic and diluted- Common A shares  $(0.01)  $(0.05)  $(0.05)  $(1.73)
                     
Weighted average common A shares outstanding - basic and diluted   48,014,424    41,270,946    48,014,424    22,782,704 

 

See the accompanying notes to these condensed consolidated financial statements

 

 F-2 

 

 

iNeedMD Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)

 

   Nine Months Ended September 30, 
   2015   2014 
         
Cash Flows From Operating Activities:        
Net loss  $(2,224,748)  $(39,336,616)
Adjustments to reconcile net loss to net cash used by operating activities:          
Depreciation expense   13,152    4,361 
Amortization of debt issuance costs on notes payable   -    129,459 
Amortization of debt discount on notes payable   49,863    1,091,988 
Derivative expense   -    1,141,407 
Change in fair value of derivative liabilities   (88,184)   (924,577)
Share based payments - warrants and Class A common stock issued to employees and consultants   580,154    34,321,986 
Changes in operating assets and liabilities:          
Accounts receivable   (63,217)   - 
Inventory   (950,046)   (31,145)
Prepaid expenses   (7,238)   (23,578)
Prepaid interest   -    10,473 
Security deposit   -    (7,941)
Accounts payable and accrued liabilities   586,903    (193,966)
Deferred revenue   (1,200)   - 
           
Net Cash Used by Operating Activities   (2,104,561)   (3,818,149)
           
Cash Flows from Investing Activities:          
Purchase of equipment   -    (67,819)
           
Cash Flows from Investing Activities:   -    (67,819)
           
Cash Flows from Financing Activities:          
Payment of debt issuance costs   -    (27,000)
Repayment of convertible notes   -    (1,150,000)
Proceeds from the issuance of convertible notes   -    600,000 
Proceeds from common stock subscribed   -    7,063,965 
Net proceeds from the issuance of Class A common stock   -    450,000 
          
Net Cash Provided By Financing Activities   -    6,936,965 
           
Net change  in cash   (2,104,561)   3,050,997 
           
Cash at beginning of reporting period   2,457,622    853,908 
           
Cash at end of reporting period  $353,061   $3,904,905 
           
Supplemental disclosures of cash flow information:          
Interest paid  $-   $39,749 
Income taxes paid  $-   $25 
           
Supplemental disclosure of non-cash investing and financing activities:          
           
Debt issuance costs paid in the form of stock warrants on convertible notes payable  $-   $13,979 
Debt discount in conjunction with the recording of the original value of the derivative liability  $-   $400,000 
Debt discount in conjunction with Class A common stock issued with convertible note payable  $-   $66,667 
Debt discount in conjunction with beneficial ownership feature  $-   $133,333 
Stock issuance costs paid in the form of warrants  $-   $664,869 

 

See the accompanying notes to these condensed consolidated financial statements

 

 F-3 

 

 

iNeedMD Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements

 

Note 1 - Organization and Operations

 

INeedMD Holdings, Inc. (“iNeedMD” or the “Company”) was incorporated on February 16, 2000, under the laws of the State of Delaware. The Company is a medical device company that has developed a disposable device used in the diagnosis, prevention, and monitoring of cardiovascular disease. On January 27, 2014, a new subsidiary was formed in India called iNeedMD Medical Device Private Ltd. The purpose of the formation of the subsidiary was to provide sales and distribution in India.

 

Effective December 24, 2014, Clutterbug Move Management, Inc. a Nevada corporation (“Clutterbug”), Clutterbug Acquisition Corp, a Nevada corporation and wholly-owned subsidiary of Clutterbug (“Merger Sub”), iNeedMD and Victoria Young an individual (the “Majority Shareholder”), entered into an Acquisition Agreement and Plan of Merger (the “Agreement”) pursuant to which the Merger Sub was merged with and into iNeedMD, with iNeedMD surviving as a wholly-owned subsidiary of Clutterbug (the “Merger”). The transaction (the “Closing”) took place on December 24, 2014 (the “Closing Date”). Clutterbug acquired, through a reverse triangular merger, all of the outstanding capital stock of iNeedMD in exchange for issuing iNeedMD’s shareholders (the “iNeedMD Shareholders”), pro-rata, a total of 42,464,424 shares of Clutterbug’s common stock. Immediately after the Merger was consummated, the Majority Shareholder of Clutterbug cancelled 5,350,000 shares of her restricted common stock of Clutterbug (the “Cancellation”). In consideration of the Cancellation of such common stock, iNeedMD paid the Majority Shareholder an aggregate of $350,000 and released the other affiliates from certain liabilities. In addition, iNeedMD agreed to spinout to the Majority Shareholder any and all assets related to the Company’s senior move management and assistance services business within 30 days after the Closing. As a result of the Merger and the Cancellation, the iNeedMD Shareholders became the majority shareholders of the Company.

 

Our consolidated financial statements include the accounts of the Company and its subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

Note 2 - Significant and Critical Accounting Policies and Practices

 

The Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are most important to the portrayal of the Company’s financial condition and results, and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements of the Company should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2014 included in the Company’s Form 10-K. The accompanying condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the rules and regulations of the SEC. Accordingly, since they are interim statements, the accompanying condensed financial statements do not include all of the information and notes required by U.S. GAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position as of September 30, 2015 and results of operations and cash flows for the interim periods presented. The results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the operating results for the full fiscal year or any future period. The December 31, 2014 balance sheet information was derived from the audited financial statements as of that date.

 

 F-4 

 

 

Revenue Recognition

 

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 

Use of Estimates

 

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the useful life of fixed assets and assumptions used in the fair value of stock-based compensation.

 

Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

 

Level 3 Financial Liabilities - Derivative conversion features and warrant liabilities

 

Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the condensed consolidated balance sheet as of September 30, 2015:

 

   Carrying   Fair Value Measurement Using 
   Value   Level 1   Level 2   Level 3   Total 
                          
Derivative conversion features and warrant liabilities  $1,810,452   $-   $-   $1,810,452   $1,810,452 

 

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2015:

 

  

Fair Value Measurement

Using Level 3 Inputs

 
   Total 
Balance, January 1, 2015  $1,898,636 
Change in fair value of derivative liabilities   (88,184)
Balance, September 30, 2015  $1,810,452 

 

The fair value of the derivative conversion features and warrant liabilities as of September 30, 2015 were calculated using a Monte Carlo option model valued with the following weighted average assumptions:

 

Dividend Yield   0%
Expected Volatility   82.63-94.22%
Risk free interest rate   0.08-0.92%
Contractual term   0.14-3.41 years 
Exercise price  $0.35-0.50 
Common shares assumed issued   2,354,880 

 

 F-5 

 

 

Net Income (Loss) per Common Share

 

Net income (loss) per common share is computed pursuant to Section 260-10-45 of the Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) 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 convertible debt, stock options or warrants.

 

The following table shows the outstanding dilutive Class A common shares excluded from the diluted net loss per share calculation as they were anti-dilutive:

 

   September 30, 
   2015   2014 
Warrants   3,996,740    2,996,845 
Conversion features on convertible notes   698,880    1,072,563 
Total potentially dilutive shares   4,695,620    4,069,408 

  

Recently Issued Accounting Pronouncements

 

In May 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. The revenue recognition standard affects all entities that have contracts with customers, except for certain items. The new revenue recognition standard eliminates the transaction and industry-specific revenue recognition guidance under current GAAP and replaces it with a principle-based approach for determining revenue recognition. On July 9th the effective date was delayed one year by a vote by the FASB. Public business entities, certain not-for-profit entities, and certain employee benefit plans would apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application would be permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company has reviewed the applicable ASU and has not, at the current time, quantified the effects of this pronouncement, however it believes that there will be no material effect on the consolidated financial statements.

 

In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-12, Compensation - Stock Compensation. The amendments in this update apply to reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target can be achieved after the requisite service period. This Accounting Standards Update is the final version of Proposed Accounting Standards Update EITF-13D-Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be achieved after the Requisite Service Period, which has been deleted. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. As indicated in the definition of vest, the stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite service period. The amendments in this update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. The Company is currently evaluating the effects of ASU 2014-12 on the consolidated financial statements.

 

 F-6 

 

 

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, Presentation of Financial Statements- Going Concern.  The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2013-300-Presentation of Financial Statements (Topic 205): Disclosure of Uncertainties about an Entity’s Going Concern Presumption, which has been deleted. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the effects of ASU 2014-15 on the consolidated financial statements.

 

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03, Interest-Imputation of Interest. To simplify presentation of debt issuance costs, the amendments in this Update would require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by the amendments in this update. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2014-250-Interest-Imputation of Interest (Subtopic 835-30), which has been deleted. The amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-03 on the consolidated financial statements.

 

Note 3- Going Concern

 

As reflected in the accompanying financial statements, the Company had a net loss and net cash used in operations of $2,224,748 and $2,104,561, respectively, for the nine months ended September 30, 2015. Furthermore, the Company had a working capital deficiency and an accumulated deficit of $1,339,751 and $117,565,077, respectively, as of September 30, 2015. The Company does not generate significant revenue. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The ability of the Company to continue its operations as a going concern is dependent on Management's plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence.

 

The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash along with anticipated revenues may be insufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 4 - Derivative Liabilities

 

The Company identified derivative liabilities associated with the convertible debt and warrants issued from 2012 to 2014.

 

The Company recorded debt discount to the extent of the gross proceeds of each note, and immediately expensed the remaining derivative value if it exceeded the gross proceeds. The Company recorded a derivative expense of $0 and $0 for the three months ended September 30, 2015 and 2014, respectively. The Company recorded a derivative expense of $0 and $1,141,407 for the nine months ended September 30, 2015 and 2014, respectively.

 

The change in fair value of derivative liabilities was a $31,354 gain for the three months ended September 30, 2015 as opposed to a $74,498 gain for the three months ended September 30, 2014. The change in fair value of derivative liabilities was an $88,184 gain for the nine months ended September 30, 2015 as opposed to a gain of $924,577 for the nine months ended September 30, 2014.

 

 F-7 

 

 

Note 5 - Related Party Transactions

 

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

 

Govindan Gopinathan, the Executive Board Chairman and largest shareholder of the Company, advanced the Company monies and the Company repaid portions of the advances. The advances were non-interest bearing and have no specified maturity date. As of September 30, 2015, the Company owed no monies to Govindan Gopinathan.

 

Govindan Gopinathan provided consulting services for the company. Consulting expenses pertaining to his services were $0 and $385 for the three months ended September 30, 2015 and 2014, respectively, and are a component of Consulting fees - related party in the consolidated statement of operations. $0 and $148,385 for the nine months ended September 30, 2015 and 2014, respectively, and are a component of Consulting fees - related party in the consolidated statement of operations.

 

Thomas Nicolette, the Chief Executive Officer, provided consulting services for the Company. Consulting expenses pertaining to his services were $45,000 and $60,000 for the three months ended September 30, 2015 and 2014, respectively, and are a component of Consulting fees - related party in the consolidated statement of operations. Consulting expenses pertaining to his services were $135,000 and $60,000 for the nine months ended September 30, 2015 and 2014, respectively, and are a component of Consulting fees - related party in the consolidated statement of operations.

 

Arthur Tilford, a former Board member, provided consulting services for the company. Consulting expenses pertaining to his services were $0 and $0 for the three months ended September 30, 2015 and 2014, respectively, and are a component of Consulting fees - related party in the consolidated statement of operations. Consulting expenses pertaining to his services were $5,000 and $15,000 for the nine months ended September 30, 2015 and 2014, respectively, and are a component of Consulting fees - related party in the consolidated statement of operations.

 

Andrew Mininger, a former Board member, provided consulting services for the company. Consulting expenses pertaining to his services were $0 and $0 for the three months and ended September 30, 2015 and 2014, respectively, and are a component of Consulting fees - related party in the consolidated statement of operations. Consulting expenses pertaining to his services were $0 and $20,000 for the nine months and ended September 30, 2015 and 2014, respectively, and are a component of Consulting fees - related party in the consolidated statement of operations.

 

Dalen Harrison, a former Board member, provided sales and marketing services for the company. Sales and marketing expenses pertaining to his services were $0 and $0 for the three months ended September 30, 2015 and 2014, respectively, and are a component of Sales and marketing- related party in the consolidated statement of operations. Sales and marketing expenses pertaining to his services were $0 and $20,000 for the nine months ended September 30, 2015 and 2014, respectively, and are a component of Sales and marketing- related party in the consolidated statement of operations.

 

 F-8 

 

 

Note 6 - Convertible Notes Payable

 

Convertible notes payable consist of the following:

 

   September 30,   December 31, 
   2015   2014 
Chertoff Note   100,000    100,000 
           
Van Damm Note   100,000    100,000 
           
Total Convertible Notes   200,000    200,000 
           
Unamortized Debt Discount   (9,314)   (59,177)
           
Total Convertible Notes, Net of Debt Discount   190,686    140,823 
           
Current Portion of Convertible Notes   190,686    140,823 
           
Long-Term Convertible Notes less Current Portion  $-   $- 

 

During the three months ended September 30, 2015 and 2014, the Company recognized $16,804 and $84,203 in amortization of the debt discount, respectively, relating to the convertible notes payable. During the nine months ended September 30, 2015 and 2014, the Company recognized $49,863 and $1,091,988 in amortization of the debt discount, respectively, relating to the convertible notes payable.

 

During the three months ended September 30, 2015 and 2014, the Company recognized $0 and $0 in amortization of the debt issuance costs, respectively, relating to the convertible notes payable. During the nine months ended September 30, 2015 and 2014, the Company recognized $0 and $129,459 in amortization of the debt issuance costs, respectively, relating to the convertible notes payable.

 

Note 7 - Stockholders’ Equity

 

Stock-Based Compensation

 

The Company uses the Black-Scholes option pricing model to determine the fair value of the warrants granted. In applying the Black-Scholes option pricing model to options warrants granted, the Company used the following weighted average assumptions:

 

  

For The Nine Months Ended

September 30,

 
   2015   2014 
Risk free interest rate   1.61%   1.55-1.74%
Dividend yield   0.00%   0.00%
Expected volatility   96.53%   101-117%
Expected life in years   5.00    5.00 
Forfeiture Rate   0.00%   0.00%

 

Stock Warrants

 

On January 1, 2015, the Company issued warrants to purchase 500,000 shares of the Company’s common stock to Patrice McMorrow, Executive Vice President of Business Development. The warrants are exercisable for five years at an exercise price of $0.50 per share. 250,000 of the warrants vested on January 1, 2015 and the other 250,000 warrants vest on September 30, 2015. The total grant date value of the options was $408,030.

 

 F-9 

 

 

The following is a summary of the Company’s stock warrant activity during the nine months ended September 30, 2015:

 

   Number of Warrants   Weighted Average Exercise Price   Weighted Average Remaining Contractual Life 
Outstanding - January 1, 2015   3,496,740   $0.83    4.30 
Granted   500,000   $0.50    4.25 
Exercised   -    -      
Forfeited/Cancelled   -    -      
Outstanding - September 30, 2015   3,996,740   $0.79    3.64 
Exercisable - September 30, 2015   3,996,740   $0.79    3.64 

  

At September 30, 2015, the total intrinsic value of warrants outstanding and exercisable was $1,578,000.

 

Stock-based compensation for stock warrants has been recorded in the consolidated statements of operations and totaled $68,005 and $430,283 for the three months ended September 30, 2015 and 2014, respectively. Stock-based compensation for stock warrants has been recorded in the consolidated statements of operations and totaled $580,154 and $430,283 for the nine months ended September 30, 2015 and 2014, respectively.

 

As of September 30, 2015, unrecognized compensation costs related to non-vested warrants was $0.

 

Note 8 - Significant Risks and Uncertainties

 

Accounts Payable Concentrations

 

Accounts payable from a single vendor in any one year can exceed 10% of our total purchases. As of September 30, 2015, one vendor represented 95% of our accounts payable. As of December 31, 2014, three vendors represented 66% of our accounts payable. The loss of any key vendor would have to be replaced by others or our inability to do so may have a material adverse effect on our business and financial condition.

 

Note 9 - Commitments and Contingencies

 

Litigation

 

The Company is from time to time involved in legal proceedings in the ordinary course of business. It does not believe that below claim and proceeding against it is likely to have a material adverse effect on its financial condition or results of operations.

 

The Company and its board of directors are currently involved in litigation against Michael E. Makover, M.D. (“Makover”). On April 30, 2015, Makover filed a class action complaint in the Court of Chancery of the State of Delaware alleging claims including breaches of fiduciary duties. On October 29, 2015, by agreement of the parties, the class action complaint was withdrawn and a first amended verified complaint was filed in the Court of Chancery of the State of Delaware with Makover as the sole plaintiff. As of the date hereof, the Company and Makover are continuing good faith settlement discussions to work towards an amicable resolution of this matter.

 

Operating Leases

 

Rent expense was $37,746 and $53,301 for the nine months ended September 30, 2015 and 2014, respectively. Future minimum payments of the Company’s leases are as follows:

 

2015 (remainder of year)  $10,045 
2016   48,363 
2017   49,813 
2018   51,308 
2019   26,033 
   $185,532 

 

Note 10 - Subsequent Events

 

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company evaluated subsequent events through the date when the financial statements were issued. The Company determined that there were no reportable subsequent event(s) to be disclosed.

 

 F-10 

 

 

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

 

This quarterly report on Form 10-Q and other reports filed by iNeedMD Holdings, Inc. (the “Company”) from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward- looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

 

Overview

 

We intend for this discussion to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements.

 

Business Overview

 

iNeedMD Holdings, Inc. (“iNeedMD” or the “Company”) was incorporated on February 1, 2012, under the laws of the State of Nevada. iNeedMD is a medical device company that has developed a disposable device called The EKG Glove that standardizes and simplifies the placement of a system of electrodes and lead wire circuitry required to obtain a diagnostic, 12-lead Electrocardiogram (“ECG” or “EKG”). An ECG is the mainstay in the assessment of cardiac health and is used in the diagnosis, prevention, and monitoring of cardiovascular disease. The EKG Glove is FDA-cleared and CE-Marked and therefore has the appropriate regulatory clearances for sale in the US and the EU.

 

Results of Operations

 

Summary of Statements of Operations for the Three Months Ended September 30, 2015 and 2014:

 

   Three Months Ended 
  

September 30,

2015

  

September 30,

2014

 
Revenue  $64,498   $- 
Gross profit  $45,289   $- 
Compensation  $119,829   $651,324 
Consulting fees  $129,547   $278,205 
Consulting fees - related party  $45,000   $60,000 
Research and development  $17,000   $- 
General and administrative  $299,797   $314,136 
Interest expense  $(4,789)  $(24,951)
Amortization of debt discount  $(16,804)  $(84,203)
Change in fair value of derivative liabilities  $31,354   $74,498 
Net loss  $(556,033)  $(1,926,450)
Loss per common A share - basic  $(0.01)  $(0.05)

 

 2 

 

   

Revenue

 

Revenue was $64,498 for the three months ended September 30, 2015 as compared to $0 for the three months ended September 30, 2014. The increase in revenue is primarily attributable to sales of product to international distributors initiating agreements with the Company. During the three months ended September 30, 2014, the Company focused their efforts on research and development and finalizing the commercial version of The EKG Glove.

 

Gross Profit

 

Gross profit percentage for the three months ended September 30, 2015 was 70%; there was no revenue during the three months ended September 30, 2014. During the three months ended September 30, 2015, the Company accepted some orders from international distribution partners, some at discounted prices, for products used for demonstration purposes in order to increase product awareness and generate future sales among their customer bases. iNeedMD has previously announced relationships with distributors in Turkey, the Middle East, UK, Ireland, Australia and New Zealand. In addition, iNeedMD advised in late September that it had received approval to market The EKG Glove in China and is currently assessing distribution opportunities. The Company also continues to have direct sales activity with a US governmental agency who is broadening the use of The EKG Glove paired with a compatible and portable ECG acquisition device (“The EKG Glove System”).

 

Compensation

 

Compensation was $119,829 for the three months ended September 30, 2015 compared to $651,324 for the three months ended September 30, 2014, a decrease of $531,495. Furthermore, during the three months ended September 30, 2015, the Company expensed $68,005 in share based payments for warrants issued compared to share based payments of $430,283 for shares issued to consultants during the three months ended September 30, 2014. The decrease is offset by the Company hiring employees to perform business functions instead of hiring consultants.

 

Consulting Fees

 

Consulting fees, including related party consulting fees, were $174,547 for the three months ended September 30, 2015 as compared to $338,205 for the three months ended September 30, 2014, a decrease of $163,658. The decrease is attributable to the Company hiring employees instead of consultants to perform business functions. During the three months ended September 30, 2014, the Company utilized consultants to transition from a private to a publicly traded company.

  

Research and Development

 

Research and development expenses were $17,000 for the three months ended September 30, 2015 versus $314,136 for the three months ended September 30, 2014, a decrease of $297,136. During the three months ended September 30, 2015, the Company incurred less research and development expenses as it primarily focused on introducing the commercialized version of The EKG Glove to the international marketplace. During the three months ended September 30, 2014, the Company continued to focus on refining the design of The EKG Glove and initiating the development of a portable Electrocardiography acquisition device that will feature a wireless interface with application software.

 

 3 

 

 

General and Administrative Expenses

 

General and administrative expenses were $299,797 for the three months ended September 30, 2015 versus $588,187 for the three months ended September 30, 2014, a decrease of $288,390. The decrease is attributable to the additional legal, audit and accounting expenses associated with the transition from a private to a publicly traded company during the prior year.

 

Interest Expense

 

Interest expense was $4,789 for the three months ended September 30, 2015 as compared to $24,951 for the three months ended September 30, 2014, a decrease of $20,162. The decrease is attributable to the Company repaying and converting most of its outstanding debt by the end of 2014.

 

Amortization of Debt Discount

 

Amortization of debt discount was $16,804 for the three months ended September 30, 2015 as compared to $84,203 for the three months ended September 30, 2014, a decrease of $67,399. The decrease is attributable to the Company repaying and converting most of its outstanding debt by the end of 2014. The majority of the expense during the three months ended September 30, 2014 was attributable to the warrants issued in connection with Ayer Notes I & II.

 

Change in Fair Value of Derivative Liabilities

 

Change in fair value of derivative liabilities was a gain of $31,354 for the three months ended September 30, 2015 versus a gain of $74,498 for the three months ended September 30, 2014.

 

Net Loss

 

For the reasons mentioned above, net loss for the three months ended September 30, 2015 was $556,033, or a loss per share of $0.01 to Common A shareholders. Net loss for the three months ended September 30, 2014 was $1,926,450, or loss per share of $0.05 to Common A shareholders.

 

Summary of Statements of Operations for the Nine Months Ended September 30, 2015 and 2014:

 

   Nine Months Ended 
  

September 30,

2015

  

September 30,

2014

 
Revenue  $86,176   $- 
Gross profit  $54,076   $- 
Compensation  $906,637   $34,775,497 
Consulting fees  $232,723   $823,320 
Consulting fees - related party  $140,000   $243,385 
Sales and marketing  $174,369   $443,398 
Sales and marketing - related party  $-   $20,000 
Research and development  $63,300   $519,309 
General and administrative  $786,087   $991,500 
Interest income  $182   $83 
Interest expense  $(14,211)  $(81,988)
Amortization of debt discount  $(49,863)  $(1,091,988)
Amortization of debt issuance costs  $-   $(129,459)
Derivative expense  $-   $(1,141,407)
Change in fair value of derivative liabilities  $88,184   $924,577 
Net loss  $(2,224,748)  $(39,336,616)
Loss per common A share - basic  $(0.05)  $(1.73)

 

 4 

 

 

Revenue

 

Revenue was $86,176 for the nine months ended September 30, 2015 as compared to $0 for the nine months ended September 30, 2014. The increase in revenue is primarily attributable to orders from international distribution partners, for products used for demonstration purposes in order to increase product awareness and generate future sales among their customer bases. The Company also had direct sales activity with a US governmental agency who is assessing the use of The EKG Glove System. During the nine months ended September 30, 2014, the Company focused their efforts on research and development and finalizing the commercial version of The EKG Glove.

 

Gross Profit

 

Gross profit percentage for the nine months ended September 30, 2015 was 62.8%; there was no revenue during the three months ended September 30, 2014. During the nine months ended September 30, 2015, the Company accepted some orders from international distribution partners, some at discounted prices, for demonstration purposes in order to increase product awareness and generate future sales. The Company also had direct sales activity with a US governmental agency who is assessing the use of The EKG Glove system.

 

Compensation

 

Compensation was $906,637 for the nine months ended September 30, 2015 compared to $34,775,497 for the nine months ended September 30, 2014, a decrease of $33,868,860. During the nine months ended September 30, 2015, the Company expensed $580,154 in share based payments for warrants issued compared to share based payments of $34,321,986 for shares issued to consultants during the nine months ended September 30, 2014. The decrease is offset by the Company hiring employees to perform business functions instead of hiring consultants.

 

Consulting Fees

 

Consulting fees, including related party consulting fees, were $372,723 for the nine months ended September 30, 2015 as compared to $1,066,705 for the nine months ended September 30, 2014, a decrease of $693,982. The decrease is attributable to the Company hiring employees instead of consultants to perform business functions. During the nine months ended September 30, 2014, the Company utilized consultants to transition from a private to a publicly traded company.

 

Sales and Marketing

 

Sales and marketing expenses, including related party sales and marketing fees, were $174,369 for the nine months ended September 30, 2015 as compared to $463,398 for the nine months ended September 30, 2014, a decrease of $289,029. The decrease is attributable to the Company no longer incurring significant marketing expenses associated the India subsidiary formed during the first quarter of 2014. This was partially offset by the Company incurring significant expenses sending product demos to potential customers during the nine months ended September 30, 2015.

 

Research and Development

 

Research and development expenses were $63,300 for the nine months ended September 30, 2015 versus $519,309 for the nine months ended September 30, 2014, a decrease of $456,009. During the nine months ended September 30, 2015, the Company incurred less research and development expenses as it primarily focused on introducing the commercialized version of The EKG Glove in the international marketplace. During the nine months ended September 30, 2014, the Company focused on refining the design of The EKG Glove and initiating the development of a portable Electrocardiography acquisition device that will feature a wireless interface with application software.

 

 5 

 

 

General and Administrative Expenses

 

General and administrative expenses were $786,087 for the nine months ended September 30, 2015 versus $991,500 for the nine months ended September 30, 2014, a decrease of $205,413. The decrease is attributable to the additional legal, audit and accounting expenses associated with the transition from a private to a publicly traded company during the prior year.

 

Interest Expense

 

Interest expense was $14,211 for the nine months ended September 30, 2015 as compared to $81,988 for the nine months ended September 30, 2014, a decrease of $67,777. The decrease is attributable to the Company repaying and converting most of its outstanding debt by the end of 2014.

 

Amortization of Debt Discount

 

Amortization of debt discount was $49,863 for the nine months ended September 30, 2015 as compared to $1,091,988 for the nine months ended September 30, 2014, a decrease of $1,042,125. The decrease is attributable to the Company repaying and converting most of its outstanding debt by the end of 2014. The majority of the expense during the nine months ended September 30, 2014 was attributable to the warrants issued in connection with Ayer Notes I & II.

 

Amortization of Debt Issuance Costs

 

Amortization of debt issuance costs was $0 for the nine months ended September 30, 2015 as compared to $129,459 for the nine months ended September 30, 2014. The decrease is attributable to the Company repaying Ayer Notes I and II during the summer of 2014.

 

Derivative Expense

 

Derivative expense was $0 for the nine months ended September 30, 2015 versus $1,141,407 for the nine months ended September 30, 2014. The decrease in the derivative expense is attributable to the value of the warrants issued in the first quarter of 2014 as consideration for extending the maturity date on Ayer Note I.

 

Change in Fair Value of Derivative Liabilities

 

Change in fair value of derivative liabilities was a gain of $88,184 for the nine months ended September 30, 2015 versus a gain of $924,577 for the nine months ended September 30, 2014.

 

Net Loss

 

For the reasons mentioned above, net loss for the nine months ended September 30, 2015 was $2,224,748, or a loss per share of $0.05 to Common A shareholders. Net loss for the nine months ended September 30, 2014 was $39,336,616 or loss per share of $1.73 to Common A shareholders.

 

Liquidity and Capital Resources

 

The following table summarizes total current assets, liabilities and working capital at September 30, 2015, compared to December 31, 2014:

 

  

September 30,

2015

   December 31, 2014   Increase (Decrease) 
Current Assets  $1,531,969   $2,616,029   $(1,084,060)
Current Liabilities  $2,871,720   $2,324,338   $547,382 
Working Capital (Deficit)  $(1,339,751)  $291,691   $(1,631,442)

 

At September 30, 2015, we had working capital deficit of $1,339,751 as compared to working capital of $291,691 at December 31, 2014, a decrease in working capital of $1,631,442. The decrease is primarily attributable to a decrease in cash of $2,104,561 and an increase in accounts payable and accrued liabilities of $586,903 offset by an increase in inventory of $950,046.

 

 6 

 

 

Net Cash

 

Net cash used in operating activities for the nine months ended September 30, 2015 and 2014 was $2,104,561 and $3,818,149, respectively. The net loss for the nine months ended September 30, 2015 and 2014 was $2,224,748 and $39,336,616, respectively. During the nine months ended September 30, 2015, the net loss was offset by share based payments for warrants issued and the increase in inventory in anticipation of future fulfillment of distribution agreements. During the nine months ended September 30, 2014, the net loss was offset by share based payments to employees and consultants, the amortization of debt issuance costs and debt discount on the notes payable, and the derivative expense.

 

Investing

 

Net cash used in investing activities for the nine months ended September 30, 2014 was $67,819 paid for the purchase of equipment.

 

Financings

 

During the nine months ended September 30, 2015, the Company did not engage in any financing activities. During the nine months ended September 30, 2014, we received proceeds of $7,513,965 from the issuance of Class A common shares and $600,000 from the issuance of a convertible note. The issuance of additional debt during the nine months ended September 30, 2014 resulted in the payment of $27,000 in debt issuance costs. During the nine months ended September 30, 2014, we also repaid $1,150,000 of convertible notes.

 

Going Concern

 

As reflected in the accompanying financial statements, the Company had a net loss and net cash used in operations of $2,224,748 and $2,104,561, respectively, for the nine months ended September 30, 2015. Furthermore, the Company had a working capital deficiency and an accumulated deficit of $1,339,751 and $117,565,077, respectively, as of September 30, 2015. The Company does not generate significant revenue. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The ability of the Company to continue its operations as a going concern is dependent on Management's plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence.

 

The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash along with anticipated revenues may be insufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Off-Balance Sheet Arrangements

 

As of September 30, 2015 and December 31, 2014, the Company had no off-balance sheet arrangements.

 

Critical Accounting Policies

 

We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

 

 7 

 

 

Revenue Recognition

 

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

 

The Company’s significant accounting estimates and assumptions affecting the consolidated financial statements were the estimates and assumptions used in valuation of equity and derivative instruments. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

 

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

 

Management regularly reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

 

Stock Based Compensation

 

All stock-based payments to employees, non-employee consultants, and to nonemployee directors for their services as directors, including any grants of restricted stock and stock options, are measured at fair value on the grant date and recognized in the statements of operations as compensation or other expense over the relevant service period. Stock- based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable the measurement date is the date the award is issued.

 

Fair Value of Financial Instruments

 

We follow paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of our 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 our financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (“U.S. 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 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.

 

Derivative Instruments

 

We evaluate our convertible debt and warrants 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 and Paragraph 815-40-25 of the 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 statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and the fair value is reclassified to equity.

 

 8 

 

 

Recent Accounting Pronouncements

 

In May 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. The revenue recognition standard affects all entities that have contracts with customers, except for certain items. The new revenue recognition standard eliminates the transaction and industry-specific revenue recognition guidance under current GAAP and replaces it with a principle-based approach for determining revenue recognition. On July 9th the effective date was delayed one year by a vote by the FASB. Public business entities, certain not-for-profit entities, and certain employee benefit plans would apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application would be permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company has reviewed the applicable ASU and has not, at the current time, quantified the effects of this pronouncement, however it believes that there will be no material effect on the consolidated financial statements.

 

In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-12, Compensation- Stock Compensation. The amendments in this update apply to reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target can be achieved after the requisite service period. This Accounting Standards Update is the final version of Proposed Accounting Standards Update EITF-13D-Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be achieved after the Requisite Service Period, which has been deleted. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. As indicated in the definition of vest, the stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite service period. The amendments in this update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. The Company is currently evaluating the effects of ASU 2014-12 on consolidated financial statements.

 

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, Presentation of Financial Statements- Going Concern.  The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2013-300-Presentation of Financial Statements (Topic 205): Disclosure of Uncertainties about an Entity’s Going Concern Presumption, which has been deleted. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the effects of ASU 2014-15 on the consolidated financial statements.

 

 9 

 

 

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03, Interest-Imputation of Interest. To simplify presentation of debt issuance costs, the amendments in this Update would require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by the amendments in this update. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2014-250-Interest-Imputation of Interest (Subtopic 835-30), which has been deleted. The amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-03 on the consolidated financial statements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

We do not hold any derivative instruments and do not engage in any hedging activities.

 

Item 4. Controls and Procedures.

 

(a) Evaluation of Disclosure Controls and Procedures.

 

In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, our Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our PEO and PFO concluded that our disclosure controls and procedures as of the end of the period covered by this report were not effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

(b) Changes in Internal Control over Financial Reporting.

 

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 10 

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Other than described below, we are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

The Company and its board of directors are currently involved in litigation against Michael E. Makover, M.D. (“Makover”). On April 30, 2015, Makover filed a class action complaint in the Court of Chancery of the State of Delaware alleging claims including breaches of fiduciary duties. On October 29, 2015, by agreement of the parties, the class action complaint was withdrawn and a first amended verified complaint was filed in the Court of Chancery of the State of Delaware with Makover as the sole plaintiff. As of the date hereof, the Company and Makover are continuing good faith settlement discussions to work towards an amicable resolution of this matter.

 

Item 1A. Risk Factors.

 

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our annual report on Form 10-K for the year ended December 31, 2014, filed with the SEC on April 15, 2015.

 

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

  

There were no unregistered sales of the Company’s equity securities during the quarter ended September 30, 2015, other than those previously reported in a Current Report on Form 8-K.

 

Item 3. Defaults Upon Senior Securities.

 

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

Not applicable.

 

Item 6. Exhibits.

 

Exhibit No.   Description
     
31.1   Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002*
     
31.2   Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002*
     
32.1   Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
     
32.2   Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
     
101.INS   XBRL Instance Document**
101.SCH   XBRL Taxonomy Extension Schema Document**
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB   XBRL Taxonomy Extension Label Linkbase Document**
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document**

 

* Filed herewith
   
** In accordance with Regulation S-T, the XBRL related information on Exhibit No. 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” herewith not “filed”.

 

 11 

 

 

SIGNATURES

 

Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  INEEDMD HOLDINGS, INC.
     
Date: November 16, 2015 By: /s/ Thomas A. Nicolette
  Name: Thomas A. Nicolette
  Title: Chief Executive Officer
    (Principal Executive Officer)
    (Principal Financial Officer)
    (Principal Accounting Officer)

 

 

 

12