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

 

 

☐     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 000-52408

 

LIFESTYLE MEDICAL NETWORK INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada		13-1026995
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

 

424 E. Central Blvd., Orlando, FL		32801
(Address of principal executive offices)		(Zip Code)

 

(407) 514-1230

(Registrant's Telephone Number, Including Area Code)

 

 

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

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. (Check One):

 

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 ☒

 

The number of shares outstanding of the issuer's common stock, $0.001 par value per share, was 33,658,257 as of November 13, 2015.

 

 

 

LIFESTYLE MEDICAL NETWORK, INC.

 

INDEX

 

		Page
Part I.	Financial Information	1
Item 1.	Financial Statements.	1
	Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014 (unaudited)	2
	Consolidated Statements of Operations for the three and nine months ended September 30, 2015 and 2014 (unaudited)	3
	Consolidated Statement of Stockholders’ Equity for the Period through September 30, 2015 (unaudited)	4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014 (unaudited)	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	16
Item 4.	Controls and Procedures.	16
Part II.	Other Information	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.
Item 5.	Other Information.
Item 6.	Exhibits.	17
Signatures		18

 

 

PART I — FINANCIAL INFORMATION

 

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS.

 

Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. The following unaudited consolidated financial statements should be read in conjunction with the year-end restated consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2014.

 

The results of operations for the three and nine months ended September 30, 2015 and 2014 are not necessarily indicative of the results for the entire fiscal year or for any other period.

 

 

LIFESTYLE MEDICAL NETWORK INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

		September 30,				December 31,
		2015				2014
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	53,824			$	163
Accounts receivable-related party			310,000				-
Loan receivable-related party			55,000				-
Deposit on acquisition			-				100,000
Prepaid expenses			100,150				16,000
Total Current Assets			518,974				116,163
Property, plant and equipment - net			129,582				1,767
Intangible assets - net			84,726				88,893
TOTAL ASSETS		$	733,282			$	206,823
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Short-term debt to related parties		$	-			$	1,050,905
Short-term notes payable			225,000				251,000
Convertible notes payable,net of $25,634 debt discount			574,366				-
Accounts payable and accrued expenses			126,570				127,944
Total Current Liabilities			925,936				1,429,849
Commitments and Contingencies			-				-
STOCKHOLDERS' DEFICIENCY:
Common stock, $.001 par value, 200,000,000 shares  authorized; 33,658,257 and 26,085,101 shares issued and 33,658,139 and 26,084,983 shares outstanding at September 30, 2015 and December 31, 2014, respectively			33,659				26,085
Additional paid-in-capital			9,068,196				7,295,255
Accumulated deficit			(9,285,272	)			(8,535,129	)
Less: Cost of common stock in treasury, 118 and 118 shares at September 30, 2015 and December 31, 2014, respectively			(9,237	)			(9,237	)
Total Stockholders' Deficiency			(192,654	)			(1,223,026	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY		$	733,282			$	206,823

 

See notes to unaudited consolidated financial statements

 

 

LIFESTYLE MEDICAL NETWORK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2015				2014				2015				2014
Revenues:
Management fees-related party		$	216,000			$	-			$	379,500			$	-
Rental income-related party			103,500				-				206,983				-
Total revenues			319,500				-				586,483				-
Costs and expenses:
Selling, general and administrative expenses			337,803				85,565				646,759				230,113
Amortization of warrants			58,000				39,445				625,335				118,335
Total Costs and expenses			395,803				125,010				1,272,094				348,448
Loss from operations			(76,303	)			(125,010	)			(685,611	)			(348,448	)
Other income (expense):
Interest expense			(32,082	)			(12,375	)			(64,532	)			(57,000	)
Total Other income (expense)			(32,082	)			(12,375	)			(64,532	)			(57,000	)
Loss from operations before provision for income taxes			(108,385	)			(137,385	)			(750,143	)			(405,448	)
Provision for income taxes			-				-				-				-
Net loss		$	(108,385	)		$	(137,385	)		$	(750,143	)		$	(405,448	)
Loss per common share - Basic and diluted		$	(0.00	)		$	(0.00	)		$	(0.02	)		$	(0.01	)
Weighted average common shares outstanding
- basic and diluted			33,506,609				26,085,101				32,489,658				26,053,965

 

See notes to unaudited consolidated financial statements

 

 

LIFESTYLE MEDICAL NETWORK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY

(Unaudited)

 

						Common Stock								Additional
						Number of								Paid				Accumulated				Treasury
		Total				Shares				Amount				In Capital				Deficit				Stock
Balance, January 1, 2014		$	(916,604	)			25,835,101			$	25,835			$	7,112,725			$	(8,045,927	)		$	(9,237	)
Issuance of common stock as incentive for debt			25,000				250,000				250				24,750				-				-
Amortization of warrants issued for services			157,780				-				-				157,780				-				-
Net loss for the year ended December 31, 2014			(489,202	)			-				-				-				(489,202	)			-
Balance, December 31, 2014			(1,223,026	)			26,085,101				26,085				7,295,255				(8,535,129	)			(9,237	)
Amortization of warrants issued for services			625,335				-				-				625,335				-				-
Conversion of debt			999,180				7,373,156				7,374				991,806				-				-
Issuance of common stock for services			116,000				200,000				200				115,800				-				-
Beneficial conversion feature			40,000				-				-				40,000				-				-
Net loss for the nine months ended September 30, 2015			(750,143	)			-				-				-				(750,143	)			-
Balance, September 30, 2015		$	(192,654	)			33,658,257			$	33,659			$	9,068,196			$	(9,285,272	)		$	(9,237	)

 

See notes to unaudited consolidated financial statements

 

 

LIFESTYLE MEDICAL NETWORK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For The Nine Months Ended
		September 30,
		2015				2014
Cash flows from operating activities:
Net loss		$	(750,143	)		$	(405,448	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization			18,534				4,164
Depreciation			17,632				675
Amortization of warrants			625,335				143,335
Shares issued for services			116,000				-
Changes in operating assets and liabilities:
Increase in accounts receivable			(310,000	)			-
Increase in prepaid expenses			(84,150	)			(12,250	)
Increase (decrease) in accounts payable and accrued expenses			20,901				3,501
Net Cash Used In Operating Activities			(345,891	)			(266,023	)
Cash flows from investing activities:
Deposit on acquisition			-				(100,000	)
Refund of deposit			100,000				-
Advances to related party			(135,000	)			-
Repayments by related party			80,000				-
Purchase of equipment			(145,448	)			-
Net Cash Used In Investing Activities			(100,448	)			(100,000	)
Cash flows from financing activities:
Proceeds from related parties			42,351				271,772
Repayment of related party debt			(142,351	)			-
Proceeds from short-term debt			600,000				75,000
Net Cash Provided by Financing Activities			500,000				346,772
Net increase (decrease) in cash			53,661				(19,251	)
Cash and cash equivalents - Beginning of period			163				19,974
Cash and cash equivalents - End of period		$	53,824			$	723
Supplementary information:
Cash paid for:
Interest		$	28,750			$	-
Income taxes		$	-			$	-
Non-cash Investing and Financing Activities
Conversion of debt and interest for common stock		$	999,180			$	-
Issuance of common stock for services		$	116,000			$	-
Beneficial conversion feature		$	40,000			$	-

 

See notes to unaudited consolidated financial statements

 

 

LIFESTYLE MEDICAL NETWORK INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30,

2015 AND 2014

 

1.	DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The consolidated balance sheet as of September 30, 2015 and the consolidated statements of operations, stockholders' deficiency and cash flows for the periods presented have been prepared by Lifestyle Medical Network, Inc. and Subsidiaries (the "Company" or "Lifestyle") and are unaudited. The consolidated financial statements are prepared in accordance with the requirements for unaudited interim periods, and consequently, do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations, changes in stockholders' deficiency and cash flows for all periods presented have been made. The information for the consolidated balance sheet as of December 31, 2014 was derived from audited financial statements of the Company.

 

Organization

 

Lifestyle Medical Network Inc. and Subsidiaries (the “Company” or “Lifestyle”) was incorporated in the State of Nevada.  The Company directs its operations through its subsidiaries.  The Company, through its consulting subsidiaries, plans to continue to identify and enter into management and professional consulting services agreements, and to license medical and health technologies, to medical and health clinic operating companies. The Company also intends to open, operate and acquire medical and health clinics, if financing is available and the profile of the clinics’ is favorable.

 

Material Agreements

 

The Company entered management agreements, and have commenced receiving revenues thereunder, with two medical professional associations located in Houston, Texas, MED-Cure Primary Care Physicians, P.A. and MED-CURE Anti-Aging and Skin Care, P.A. (the “MED-CURE Companies”), effective April 1, 2015, which were purchased by Dr. Ronald Moomaw, a director of the Company. The MED-CURE Companies between them operate six medical clinics in Houston, of which four are primary care clinics and two are skin care clinics. Under management agreements with the MED-CURE Companies, the Company, through its subsidiary LifeStyle Texas Medical Management, LLC (“LifeStyle Management”), provides organizational development, accounting, human resources, computer technical support compliance, scheduling, marketing and advertising, office space, equipment supplies and other management services and receives an agreed percentage of the gross revenues of the practice group, with adjustments designed to ensure that management fees do not exceed an agreed cap, or that the monthly payments do not result in an event of default under the acquisition financing documents for the MED-CURE Companies. The leasing arrangements for the properties leased for the MED-CURE Companies’ clinics’ offices were restructured, with our real estate subsidiary, LifeStyle Texas Real Estate. LLC, leasing the properties and then subleasing the properties back to the MED-CURE Companies.

 

Through our subsidiary, Regional Professional Alliance, Inc. , a physician’s professional consulting company that provides professional medical consulting services to medical management companies related to matters affecting professional licensure and medical clinic compliance matters for the benefit of clinics managed by Lifestyle Management, we have entered into an agreement with Dr. Moomaw to provide services through Regional Professional Alliance for the benefit of LifeStyle Management related to oversight and professional medical services coordination of the managed clinics which have entered into management services agreements with LifeStyle Management. Through LifeStyle Texas Licensing, LLC (“LifeStyle Licensing”), the Company plans to sublicense to the MED-CURE Companies the non-exclusive right to use, and to sublicense the use of, certain patents, trademarks, trade names, logos, slogans, trade dress, commercial symbols, operational systems, and other intellectual property rights, in connection with operating and managing medical clinics that provide medical services and/or products of a character and quality, in particular relating to men’s health and weight management.

 

 

Going Concern

 

The consolidated financial statements for the nine months ended September 30, 2015 have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.  The Company has a past history of recurring losses from operations and is a development stage company.  The Company will require additional funding to execute its future strategic business plan.  Successful business operations and its transition to attaining profitability are dependent upon obtaining additional financing and achieving a level of revenue to support its cost structure.  These factors raise substantial doubt about the Company's ability to continue as a going concern.

 

The Company has agreed to enter into management agreements with six medical clinics in Houston, Texas. The Company will provide services to the clinic and will receive an agreed percentage of gross revenues of the practice group. Management intends to make further acquisitions of other medical clinics during 2015.

 

Management believes these completed consulting transactions will be profitable and the cash flows from these operations will enable the Company to fund the operations of the consolidated group over the next twelve months. Therefore, the annual financial statements continue to be prepared on a going concern basis.

 

Significant Accounting Policies

 

The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.  There were no significant changes to these accounting policies, except for Revenue Recognition noted below, during the nine months ended September 30, 2015 and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

 

REVENUE RECOGNITION

 

The Company records revenue from management fees in accordance with the management agreements with the MedCure Companies. The Company will provide organizational development, accounting, human resources, computer technical support compliance, scheduling, marketing and advertising and other management services and will receive an agreed percentage of the gross revenues of MED-CURE Companies, with adjustments designed to ensure that management fees do not exceed an agreed cap, or that the remaining amounts distributed to the doctors are no less than a specified floor percentage of gross revenues.

 

The Company also recognizes rental income from the MED-CURE Companies for office space and the use of equipment in connection with long-term leases

 

2.	INTANGIBLES

 

The MPL License Agreement

 

The MPL License Agreement, under which the Company's wholly-owned subsidiary, Elite, is the licensee pursuant to the Assignment from WMA, provides for the license of medical services, operational systems, manuals, certain names and logo designs and other intellectual property in connection with the operation of medical clinics that provide services related to men’s health within the territory of the continental United States (the “Licensed Rights”). The License Agreement provides for a fee of 6% of gross receipts of Licensee, payable quarterly. The term of the License Agreement is for twenty (20) years from the effective date, May 9, 2011. The Company plans to establish new medical clinics or acquire existing clinics, as well as to provide consulting services to medical clinics utilizing the Licensed Rights.

 

Intangibles are the value of the MPL license. Amounts assigned to this intangible were determined by management. Management considered a number of factors in determining the allocations, including valuations and independent appraisals. The intangibles are being amortized over 19.5 years, the life of the license.

 

 

The components of intangible assets are as follows:

 

	License Agreements
	Balance January 1, 2011		$	-
	Acquisition of license			6,000,000
	Amortization for the period May 8, 2011 through December 31, 2011			(200,000	)
	Balance December 31, 2011			5,800,000
	Amortization for the year ended December 31, 2012			(307,692	)
	Impairment charge			(5,392,308	)
	Balance December 31, 2012			100,000
	Amortization for the year ended December 31, 2013			(5,552	)
	Balance December 31, 2013			94,448
	Amortization for the year ended  December 31, 2014			(5,555	)
	Balance December 31, 2014			88,893
	Amortization for the nine months ended September 30, 2015			(4,167	)
	Balance; September 30, 2015		$	84,726

 

Amortization expense for the nine months ended September 30, 2015 and 2014 amounted to $4,167 and $4,167, respectively.

 

Estimated amortization expense for intangible assets for the next five years is as follows:

 

Year Ending		Amortization
December 31,		Expense
2015		$	1,389
2016			5,555
2017			5,555
2018			5,555
2019			5,555

 

3.	LOAN RECEIVABLE

 

On February 3, 2012, LMC loaned $32,000 to Health Clinics of Florida, LLC. On April 9, 2012 and August 10, 2012, LMC advanced an additional $10,500. The unsecured notes are interest free and due June 15, 2013. In the event of default, interest on the outstanding balance accrues at a rate of ten percent (10%) per annum from the date of the default. The manager of Health Clinics of Florida, LLC is a shareholder of the Company. As of June 30, 2015, the Company wrote off the full amount of the receivable reducing the balance to $-0-.

 

 

The Company advanced operating funds on a short-term basis to the MED-CURE Companies during the nine months ended September 30, 2015. The Company advanced the MED-CURE Companies $135,000 and received repayments of $80,000. As of September 30, 2015, the MED-CURE Companies owed the Company $55,000.

 

4.

DEBT

 

Short-term debt as of September 30, 2015 and December 31, 2014 were as follows:

 

			September 30,				December 31,
			2015				2014
	Short-term Debt to Related Parties
	Unsecured promissory notes, interest free, due June 15, 2015 (1)		$	-			$	682,200
	Unsecured promissory notes, interest @ 10% per annum, due June 15, 2015 (1)			-				75,000
	Unsecured promissory note, interest free, due  June 30, 2015 (2)			-				193,705
	Unsecured promissory note, interest free, due  June 15, 2015 (6)			-				100,000
				-				1,050,905
	Less: Current portion			-				1,050,905
			$	-			$	-

 

			September 30,				December 31,
			2015				2014
	Short-term Debt
	Unsecured promissory note, interest free, due  on demand (3)		$	-			$	26,000
	Secured promissory note, interest @ 12% per annum, due December 15, 2015 (4)			150,000				150,000
	Unsecured promissory note, interest @ 10%, due December 15, 2015 (5)			75,000				75,000
	Convertible promissory note, interest @ 10% per  anum, due April 27, 2016 (7)			100,000				-
	Convertible promissory notes, interest @ 12% per anum, due April 28, 2016 and June 8, 2016 (8)			474,366				-
			$	799,366			$	251,000
	Less: Current portion			799,366				251,000
			$	-			$	-

 

(1)

During 2012 and 2013, LMC borrowed $757,200 from the Dellinger Fund, of which $75,000 bore interest @ 10% per anum and the balance was interest free. The unsecured notes were due June 15, 2015. At a Board meeting held on April 17, 2015, the Board approved the conversion by the Company of $757,200 principal amount plus accrued interest of $22,275 of Company debt held by the Dellinger Fund into an aggregate of 6,000,000 shares of common stock. The value of the shares was $558,000 based on the closing on the closing price of the stock on April 17th of $0.09. The difference of $221,475 was recorded to Additional Paid-In Capital due to the related party nature of the transaction.

 

 

(2)

During the year ended December 31, 2013 and 2014, Saddleworth Ventures LLC (“Saddleworth”), a related party, paid expenses amounting to $21,933 and $171,772, respectively, on behalf of the Company. These advances are unsecured, interest free and are due June 30, 2016. During the six months ended June 30, 2015, Saddleworth advanced the Company $42,351 and the Company repaid Saddleworth $42,351. At a Board meeting held June 11, 2015, the Board approved the conversion by the Company of $193,705 principal of Company debt held by Saddleworth into an aggregate of 1,210,656 shares of common stock. The value of the shares was $242,000 based on the closing price of the stock on June 11th of $0.20. The difference of $48,426 was recorded to Additional Paid-In Capital due to the related party nature of the transaction.

 

(3)

On May 13, 2013, LMC borrowed $30,000 from Forbes Investment, LLP. The unsecured note is interest free and payable upon demand. In December 2013, LMC repaid $4,000 against the outstanding balance. At a Board meeting held on June 11, 2015, the Board approved the conversion by the Company of $26,000 principal of Company debt held by Forbes Investment LLP into an aggregate of 162,500 shares of common stock. The value of the shares was $32,500 based on the closing price of the stock at June 11th of $0.20; a loss on conversion of $6,500 was recognized with this conversion.

 

(4)

On October 16, 2013, LMC borrowed $150,000 from Edmund Malits, a shareholder of the Company. The secured note bears interest @ 12% per annum and interest and principal are payable in full on or before February 16, 2014. LMC provided the Corporation’s shell on the OTCBB as collateral for the loan. In addition, LMC issued Edmund Malits 500,000 shares of the Company’s common stock with a fair value of $10,000. The note has been extended to December 15, 2015.

 

(5)

On February 4, 2014, the Company executed an unsecured promissory note with Curt Maes and received $75,000. The promissory note bears interest @ 10% per annum and both principal and interest are payable on or before December 15, 2015. As additional consideration, the Company issued Curt Maes 250,000 shares of the Company’s common stock valued @ $25,000.

 

(6)

In February 2014, the Company received from Saddleworth Ventures an advance of $100,000 that was used as an initial down payment for an acquisition. The advance is interest free and due April 15, 2015.  Saddleworth Ventures had the option to convert the note representing the advance, in whole or in part, into shares of the Company’s common stock at a price of $0.10 per share. On April 10, 2015, the note was repaid in full. See Note 9.

 

(7)

On April 27, 2015, the Company issued a convertible promissory note to Jeff Friedrich and received proceeds of $100,000. The promissory note bears interest @ 10% per anum and matures one year from the date of issuance. At any time, the holder of the note, at his option, shall have the right to convert the outstanding principal balance of this note, or any portion of the principal balance hereof, and any accrued interest into shares of common stock of the Company at a conversion price of $0.20 per share, the fair value of the common stock at the date of issuance.

 

(8)

On April 28, 2015 and June 8, 2015, the Company issued convertible promissory notes to Ray Meadow and received proceeds of $500,000. The promissory notes bear interest @ 12% per anum and mature one year from the date of issuance. At any time, the holder of the notes, at his sole option, shall have the right to convert the outstanding principal amount of these notes, or any portion of the principal amount hereof, and any accrued interest into shares of common stock of the Company at a conversion price of $0.15 per share. The fair value of the common stock at the date of the advance was $0.16, which created a Beneficial Conversion Feature of $40,000; this Beneficial Conversion Feature was recorded as a debt discount and will amortize over the life of the notes. The debt discount as of September 30, 2015, was $29,634. The Company also issued warrants to purchase 500,000 common shares valued at $81,000.

 

(9)

In April 2015, the Company purchased medical equipment from Dr. Nazmudin Keshwani. The total cost of the laser equipment was $123,000, all of which was paid as of September 30, 2015. The note is interest free.

 

Interest expense for the nine months ended September 30, 2015 and 2014 amounted to $64,532 and $57,000, respectively.

 

 

5.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

			September 30,				December 31,
			2015				2014
	Interest		$	46,291			$	47,150
	Salaries - Officer			-				20,000
	Professional fees			48,026				56,421
	Other			32,253				4,373
			$	126,570			$	127,944

 

6.	INCOME TAXES

 

The Company adopted the provisions of ASC 740, "Income Taxes", ("ASC 740").  As a result of the implementation of ASC 740, the Company recognized no adjustment in the net liability for unrecognized income tax benefits.  The Company believes there are no potential uncertain tax positions and all tax returns are correct as filed.  Should the Company recognize a liability for uncertain tax positions, the Company will separately recognize the liability for uncertain tax positions on its balance sheet.  Included in any liability for uncertain tax positions, the Company will also setup a liability for interest and penalties.  The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of the current provision for income taxes.

 

There is no U.S. tax provision due to losses from U.S. operations during the nine months ended September 30, 2015 and 2014.  Deferred income taxes are provided for the temporary differences between the financial reporting and tax basis of the Company's assets and liabilities. The principal item giving rise to deferred taxes is the net operating loss carryforward in the U.S.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  The Company has set up a valuation allowance for losses for certain carryforwards that it believes may not be realized.

 

Section 382 of the U.S. Internal Revenue Code imposes an annual limitation on the availability of NOL carryforwards to offset taxable income when an ownership change occurs.  The Company's reverse capitalization meets the definition of an ownership change and some of the NOL's will be limited.

 

7.

STOCKHOLDERS' EQUITY

 

On February 4, 2014, the Company issued Curt Maes 250,000 shares of the Company’s common stock with a fair value of $25,000 as incentive for debt financing.

 

At the Board meeting held on April 17, 2015, our Board approved the conversion by the Company of $757,200 principal amount plus accrued interest of Company debt held by The Dellinger Fund, into an aggregate of 6,000,000 shares of common stock.

 

At a Board meeting held June 11, 2015, our Board approved the conversion by the Company of $193,705 principal amount of Company debt held by Saddleworth, into an aggregate of 1,210,656 shares of common stock.

 

At a Board meeting held June 11, 2015, our Board approved the conversion by the Company of $26,000 principal amount of Company debt held by Forbes Investment LLP, into an aggregate of 162,500 shares of common stock.

 

At a Board meeting held September 8, 2015, our Board approved the issuance of 200,000 shares of common stock, valued at $116,000, for investor relations services. 

 

8.

BASIC AND DILUTED EARNINGS PER SHARE

 

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net earnings by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. At September 30, 2015, there were outstanding warrants to purchase 8,000,000 shares. Because of the net loss, the effect of these warrants is anti-dilutive.

 

 

9.

WARRANTS

 

On February 6, 2012, the Company issued warrants as compensation to a third party to purchase 2,400,000 shares of the Company's common stock for services performed. The warrants expire February 6, 2017. The estimated value of the compensatory warrants was determined using the Black Scholes pricing model using the following assumptions: Expected term of 3 years, a risk free interest rate of 0.32%, a dividend yield of -0-% and volatility of 432%. The fair value of the warrant amounted to $479,912 to be amortized over 3 years. The Company recorded an expense of $20,159 and $118,335 on the Company’s consolidated statement of operations for the nine months ended September 30, 2015 and 2014, respectively.

 

In connection with the engagement of our Director, Dr. Ronald Moomaw, under a Regional Medical Director Agreement with RPA, at a Board of Directors meeting, held on April 17, 2015, the Board authorized the issuance to Dr. Moomaw of a seven year stock purchase warrant, expiring April 17, 2022, to purchase 5,000,000 shares of our common stock, at an exercise price of $.09 per share, the fair value at the date of issuance.

 

In connection with a financing from Roy Meadow, at a Board of Directors meeting held on April 28, 2015 and June 8, 2015, the Board authorized the issuance to Roy Meadow a five year purchase warrant, expiring April 28, 2020 and June 8, 2020, to purchase 500,000 shares of our common stock, at an exercise price of $0.025.

 

In connection with the engagement of Emerging Markets consulting LLC for investor relations services, at a Board of Directors meeting held on September 8, 2015, the Board authorized the issuance to Emerging Markets Consulting LLC a five year purchase warrant, expiring September 8, 2020, to purchase 100,000 shares of our common stock, at an exercise price of $0.75.

 

The estimated value of the warrants was determined using the Black Scholes pricing model using the following assumptions: expected term of 5 to 7 years, a risk free interest rate between 1.39% and 1.72%, a dividend yield of -0- and volatility between 427% and 459%. The fair value of the warrants amounted to $1,083,912, of which $624,159 was expensed during the nine months ended September 30, 2015.

  

The following table summarizes the changes in warrants outstanding and the related price of the shares of the Company's common stock issued to non-employees of the Company. The warrants were granted in lieu of cash compensation for services performed.

 

							Exercise				Remaining		Intrinsic
			Shares				Price				Life		Value
	Outstanding, January 1, 2015			2,400,000			$	0.20
	Granted			5,600,000				0.10
	Expired/Cancelled			-				-
	Exercised			-				-
	Outstanding-period ending September 30, 2015			8,000,000			$	0.13			4.8 years		$	3,165,500
	Exercisable-period ending September 30, 2015			8,000,000			$	0.13			4.8 years		$	3,165,500

 

10.

RELATED PARTY TRANSACTIONS

 

a)

During the years ended December 31, 2014 and 2013, Saddleworth Ventures LLC paid expenses amounting to $21,933 and $171,772, respectively, on behalf of the Company. These advance are unsecured, interest free and due June 30, 2016. During the nine months ended September 30, 2015, Saddleworth advanced the Company $42,351 and the Company repaid Saddleworth $42,351. See Note 4 for further information.

 

b)

During the year ended December 31, 2012, the Company received $737,200 in advances from the Dellinger Fund, a shareholder of the Company. During the year ended December 31, 2013, the Dellinger Fund advanced an additional $20,000.  The majority of these advances are interest free.  The Company recorded interest expense for the nine months ended September 30, 2015 and 2014 in the amount of $1,875 and $5,625, respectively, on the advances that were not interest free.  See Note 4 for further information.

 

c)

In February 2014, the Company received from Saddleworth Ventures an advance of $100,000 that was used as an initial down payment for an acquisition. The advance is interest free and due June 15, 2015.  Saddleworth Ventures had the option to convert the note representing the advance, in whole or in part, into shares of the Company’s common stock at a price of $0.10 per share. See Note 4 for further information.

 

d)

Dr. Ronald Moomaw (“Moomaw”), a director of the Company, is the sole owner of the MED-CURE Companies. The Company received 100% of its revenue for the nine months ended September 30, 2015 from the MED-CURE Companies.

 

 

In connection with the management of the Med-Cure Companies, Moomaw was issued a warrant for the purchase of 5,000,000 shares of the Company’s common stock valued @ $465,000, the fair value at the time of issuance.

 

Moomaw also received consulting fees of $39,600 for the nine months ended September 30, 2015 as part of his management compensation.

 

e)

The Company advanced operating funds on a short-term basis to the MED-CURE Companies during the nine months ended September 30, 2015. The Company advanced the Med-Cure Companies $135,000 and received repayments of $80,000. As of September 30, 2015, the MED-CURE Companies owe the Company $55,000.

 

f)

100% of the revenues for the nine months ended September 30, 2015, was received from the MED-CURE Companies, a company owned by Dr. Ronald Moomaw, a director of the Company.

 

11.

REFUND OF DEPOSIT

 

On April 10, 2015, the Company received from Dr. Nazmudin Keshwani a refund of the $100,000 deposit made by the Company on February 14, 2014, in connection with the Company’s previous negotiations to acquire the MED-CURE Companies.

 

12.

MAJOR CUSTOMERS

 

100% of the revenues for the nine months ended September 30, 2015, was received from the MED-CURE Companies., a company owned 100% by Dr. Ronald Moomaw, a director of the Company.

 

13.

COMMITMENTS AND CONTINGENCIES

 

Consulting Agreements

 

a)

During 2015 and 2014, Lifestyle entered into various consulting agreements with third parties in connection with business advisory services. For the nine months ended September 30, 2015 and 2014, consulting services amounted to $111,187 and $67,500, respectively.

 

b)

On July 1, 2012, Lifestyle entered into an employment agreement with Christopher Smith ("Smith"), the Company's Chief Executive Officer. The term of the agreement is for five years. Lifestyle will pay Smith minimum compensation of $60K per year. Smith will also receive a performance bonus based on a percentage of the Company's net operating profit before income taxes. For the nine months ended September 30, 2015, and 2014, payroll-officer amounted to $60,000 and $45,000, respectively. Effective, August 1, 2015, the monthly salary for Smith was increased to 12,500.

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto and the other financial information included elsewhere in this report.  Certain statements contained in this report, including, without limitation, statements containing the words “believes,” “anticipates,” “expects” and words of similar import, constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements involve known and unknown risks and uncertainties.  Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including our ability to create, sustain, manage or forecast our growth; our ability to attract and retain key personnel; changes in our business strategy or development plans; competition; business disruptions; adverse publicity; and international, national and local general economic and market conditions.

 

Organization

 

The Company was incorporated in the State of Nevada on September 3, 2003, under the name Beverly Hills Film Studios, Inc. and changed its name to Emerging Media holdings, Inc. on September 28, 2006. On September 30, 2006, we effectuated a share exchange whereby we acquired all of the outstanding equity interests in our wholly-owned subsidiary, IM “Media Alianta” SRL, the 100% owner of SA “Analiticmedia-Grup”, both Moldovan companies ("AMG"), and on May 2, 2008, the Company acquired the common stock of “TNT-Bravo” channel-ICS “Media Top Prim” SRL, the exclusive operator in Moldova of Russian channel TNT programs owned by Gazprom Media.

 

On July 11, 2012, through a merger with our wholly-owned Nevada subsidiary, Lifestyle Medical Network Inc., the name of our Company was changed from Emerging Media Holdings, Inc. to Lifestyle Medical Network Inc.  The change of our corporate name was approved by FINRA, effective for trading purposes on July 31, 2012.

 

Acquisition of Lifestyle Medical Corp.

 

On December 29, 2011, we closed an acquisition of 100% of the outstanding shares of Lifestyle Medical Corp. (“Lifestyle Medical”), which has rights to technologies and practices licensed to its subsidiary, Elite Professional IP Licensing, LLC (“Elite”), pursuant to an October 5, 2010 License Agreement with Modular Properties Limited, Inc. (the “License Agreement”). The consideration paid by the Company for the acquisition of Lifestyle Medical was 5,000,000 shares of our common stock paid to the holders of a majority of the outstanding shares of LMC, valued at $2,500,000. On February 2, 2012, we completed acquisition of the rights to our licensed men’s medical clinic operating technologies and processes, by acquiring from Worldwide Medassets, Ltd. (SAL) the full assignment of rights to the License Agreement, by the issuance of 19,000,000 shares of our common stock in exchange for the satisfaction of the outstanding $3,000,000 principal balance on the note issued to Worldwide Medassets, Ltd. in connection with the assignment of rights to the License Agreement to Elite.

 

On December 29, 2011, we completed the sale of our remaining Moldova media subsidiaries in exchange for the assumption of the liabilities of the subsidiaries and 250,000 shares of our common stock.

 

Recent Developments

 

We have entered into management agreements, and have commenced receiving revenues thereunder, with two medical professional associations located in Houston, Texas, MED-CURE Primary Care Physicians, P.A. and MED-CURE Anti-Aging and Skin Care, P.A. (the “MED-CURE Companies”), effective April 1, 2015, which were purchased by Dr. Ronald Moomaw, a director of the Company. The MED-CURE Companies between them operate six medical clinics in Houston, of which four are primary care clinics and two are skin care clinics. Under the management agreements with the MED-CURE Companies, the Company, through its subsidiary Lifestyle Texas Medical Management, LLC (“Lifestyle Management”), provides organizational development, accounting, human resources, computer technical support compliance, scheduling, marketing and advertising, office space, equipment supplies and other management services and receives an agreed percentage of the gross revenues of the practice group, with adjustments designed to ensure that management fees do not exceed an agreed cap, or that monthly payments do not result in an event of default under the acquisition financing documents for the MED-CURE Companies. The leasing arrangements for the properties leased for the MED-CURE Companies’ clinics’ offices were restructured, with our real estate subsidiary, Lifestyle Texas Real Estate, LLC, leasing the properties and then subleasing the properties back to the Med-Cure Companies.

 

Through our subsidiary, Regional Professional Alliance, Inc., a physician’s professional consulting company that provides professional medical consulting services to medical management companies related to matters affecting professional licensure and medical clinic compliance matters for the benefit of clinics managed by Lifestyle Management, we have entered into an agreement with Dr. Moomaw to provide services through Regional Professional Alliance for the benefit of Lifestyle Management related to oversight and professional medical services coordination of the managed clinics which have entered into management services agreements with Lifestyle Management. Through Lifestyle Texas Licensing, LLC (“Lifestyle Licensing”), the Company plans to sublicense to the MED-CURE Companies the non-exclusive right to use, and to sublicense the use of, certain patents, trademarks, trade names, service marks, logos, slogans, trade dress, commercial symbols, operational systems, and other intellectual property rights, in connection with operating and managing medical clinics that provide medical services and/or products of a distinctive character and quality, in particular relating to men’s health and weight management.

 

 

Throughout this Form 10-Q, the terms "we," "us," "our," "LMN" and the "Company" refer to Lifestyle Medical Network Inc., a Nevada corporation, and unless the context indicates otherwise, includes our subsidiaries.

 

Critical Accounting Policies and Estimates

 

The discussion and analysis of our plan of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect our reported results of operations and the amount of reported assets and liabilities.

 

Some accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. Actual results may differ from the estimates and assumptions used in the preparation of our consolidated financial statements.

 

The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.  There were no significant changes to these accounting policies during the nine months ended September 30, 2015, and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

 

PLAN OF OPERATION

 

We have commenced receiving revenues through our management and other agreements with the MedCure Companies. Through our consulting subsidiaries, we plan to continue to identify and enter into management and professional consulting services agreements, and to license medical and health technologies, to medical and health clinic operating companies. We also we intend to open, operate and acquire men’s medical and health clinics, if financing is available and the profile of the clinics’ services is consistent with the types of medical businesses we view as favorable for acquisition.

 

RESULTS OF OPERATIONS

 

NINE MONTHS ENDED SEPTEMBER 30, 2015 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2014

 

During the nine months ended September 30, 2015, we had revenues of $586,483, as compared with revenues of $-0- in the nine months ended September 30, 2014. Primarily due to the management agreements with the MedCure Companies entered into on April 1, 2015. We incurred a net loss of approximately $750,143 for the nine months ended September 30, 2015, as compared to net loss of approximately $405,500 for the nine months ended September 30, 2014. The increase in the net loss for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 is primarily due to higher general and administrative expense of approximately $647,000, and the amortization of warrants of approximately $625,000, offset by an increase in revenues of $586,483 in 2015, compared to no revenues and approximately $230,000 of general and administrative expenses in 2014. The increase in general and administrative expenses is primarily due to additional operating expenses incurred in connection with the MedCure Companies management agreements. Our loss from operations increased from approximately $348,000 in 2014 to approximately $686,000 in 2015 is due to revenues received in 2015, net of higher general and administrative expense and warrant amortization in that period.

 

THREE MONTHS ENDED SEPTEMBER 30, 2015 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2014

 

During the three months ended September 30, 2015, we had revenues of $319,500, as compared with revenues of $-0- in the three months ended September 30, 2014. Primarily due to the management agreements with the MedCure Companies entered into on April 1, 2015. We incurred a net loss of approximately $108,400 for the three months ended September 30, 2015, as compared to net loss of approximately $137,400 for the three months ended September 30, 2014. The decrease in the net loss for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 is primarily due to revenues of $319,500 and higher general and administrative expense of approximately $338,000 in 2015, compared to no revenues and approximately $86,000 of administrative expenses in 2014. The increase in general and administrative expenses is primarily due to additional operating expenses incurred in connection with the MedCure Companies management agreements. Our loss from operations decreased from approximately $125,000 in 2014 to approximately $76,000 in 2015 is due to revenues received in 2015, net of higher general and administrative expense and warrant amortization in that period.

 

 

 

LIQUIDITY AND FINANCIAL RESOURCES

 

At September 30, 2015, we had total assets of approximately $733,000 compared to total assets of approximately $207,000 at December 31, 2014. Net cash used in operating activities in the nine months ended September 30, 2015 was $345,891, as compared with net cash used in operating activities of $266,023 in 2014; net cash used in investing activities was $100,000 in 2014 and $100,448 in 2015; and net cash generated from financing activities was $346,772 in 2014 and $500,000 in 2015.

 

At September 30, 2015, we had a working capital deficiency of approximately $407,000.  At September 30, 2015, we had total assets of approximately $733,000, including cash of $53,824. Net cash used in operating activities in the nine months ended September 30, 2015 was $345,891, primarily from the net loss of approximately $750,000 and amortization of warrants of approximately $625,000, offset by an increase in accounts receivable of $310,000. There is no assurance that we will operate profitably in the future.

 

On April 17, 2015, the Company issued 6,000,000 shares of common stock in conversion of $757,200 principal amount of debt plus accrued interest. In addition, on June 11, 2015 the Company converted $26,000 of outstanding debt into 162,500 shares of common stock, and $193,705 of debt into 1,210,656 shares of common stock.

 

We have obtained interim capital through a $500,000 loan, evidenced by two12% Promissory Notes, issued April 28 and June 8, 2015, due in one year with an aggregate principal amount of $500,000, and a $100,000 loan, evidenced by a 10% Promissory Note due April 27, 2016, and return of a deposit payment of $100,000.

 

On May 13, 2013, the Company borrowed $30,000 from Forbes Investment, LLP. The unsecured note is interest free and payable upon demand. In December 2013, the Company repaid $4,000 against the outstanding balance. At a Board meeting held on June 11, 2015, the Board approved the conversion by the Company of $26,000 principal of Company debt held by Forbes Investment LLP into an aggregate of 162,500 shares of common stock.

 

On October 16, 2013, the Company borrowed $150,000 from Edmund Malits, a shareholder of the Company. In addition, the Company issued Edmund Malits 500,000 shares of the Company’s common stock with a fair value of $10,000. The note has been extended to December 15, 2015.

 

On February 4, 2014, the Company executed an unsecured promissory note with Curt Maes and received $75,000. As additional consideration, the Company issued Curt Maes 250,000 shares of the Company’s common stock valued at $25,000.

 

There is no assurance that we will be able to obtain sufficient capital to implement our business plans. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  These conditions and uncertainties raise substantial doubt about the Company's ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

  

Off Balance Sheet Arrangements

 

We do not currently have any off balance sheet arrangements falling within the definition of Item 303(c) of Regulation S-B.

 

Inflation

 

To date inflation has not had a material impact on our operations.

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

ITEM 4.

Controls and Procedures.

 

As of September 30, 2015, the end of the period covered by this quarterly report, the Chief Executive and Chief Financial Officer of the Company (the “Certifying Officer”) conducted an evaluation of the Company’s disclosure controls and procedures.  As defined under Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officer, to allow timely decisions regarding required disclosure.

 

Based on this evaluation, the Certifying Officer has concluded that the Company’s disclosure controls and procedures were not effective for the quarter ended September 30, 2015, to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply with the Company’s disclosure obligations under the Exchange Act, and the rules and regulations promulgated there under.

 

Further, there were no changes in the Company’s internal control over financial reporting during the first fiscal quarter of our 2014 fiscal year that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

PART II

 

Other Information

 

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

 

The following table sets forth the sales of unregistered securities since the Company’s last report filed under this item

 

Date		Title and Amount(1)		Purchaser		Principal Underwriting		Total Offering Price/ Discounts
August 12, 2015		162,000 shares of common stock issued upon conversion of $26,000 of debt.		Private investor.		NA		$26,000/NA
September 24, 2015		200,000 shares of common stock together with a five year purchase warrant, expiring September 8, 2020, to purchase 100,000 shares of our common stock, at an exercise price of $0.75.		Consultant.		NA		$174,000/NA

   

(1)

The issuances to lenders, consultants and investors are viewed by the Company as exempt from registration under the Securities Act of 1933, as amended (“Securities Act”), alternatively, as transactions either not involving any public offering, or as exempt under the provisions of Regulation D promulgated by the SEC under the Securities Act.

 

Item 6.

Exhibits.

 

31	Certification of Chief Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a)
32	Certification of Chief Executive Officer and Principal Financial Officer  pursuant to 18 U.S.C. Section 1350

 

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

 

SEC Ref. No.		Title of Document
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Label Linkbase Document
101.PRE		XBRL Taxonomy Presentation Linkbase Document

 

The XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

	LIFESTYLE MEDICAL NETWORK INC.  (Registrant)
Date:   November 23, 2015	By:	/s/ Christopher Smith
		Christopher Smith, Chief Executive Officer and Principal Financial Officer

 

 

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