UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended: March 31, 2016

 

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		45-4487461
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

 

366 Veterans Memorial Highway, Suite 1

Commack, New York 11725 

(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 February 7, 2017 there were 52,638,824 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		8
Item 4.		Controls and Procedures		8
		PART II – OTHER INFORMATION
Item 1.		Legal Proceedings		9
Item 1A.		Risk Factors		9
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		9
Item 3.		Defaults Upon Senior Securities		9
Item 4.		Mine Safety Disclosures		9
Item 5.		Other Information		9
Item 6.		Exhibits		10
Signatures				11

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

INEEDMD HOLDINGS, INC.

 

Condensed Consolidated Balance Sheets as of March 31, 2016 (unaudited) and December 31, 2015	F-1
Condensed Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015 (unaudited)	F-2
Condensed Consolidated Statements of Cash Flows for the for the three months ended March 31, 2016 and 2015 (unaudited)	F-3
Notes to Condensed Consolidated Financial Statements	F-4 - F-13

 

 

iNeedMD Holdings, Inc.

Condensed Consolidated Balance Sheets 

 

		March 31, 2016				December 31, 2015
		(unaudited)
Assets
Current Assets
Cash		$	87,534			$	112,195
Accounts receivable, net			1,051				1,051
Inventory			156,000				994,732
Prepaid expenses			-				9,206
Total Current Assets			244,585				1,117,184
Property and equipment, net			-				31,013
Other Assets
Security Deposits			7,941				7,941
Total Other Assets			7,941				7,941
Total Assets		$	252,526			$	1,156,138
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities		$	1,212,153			$	967,315
Accounts payable and accrued liabilities - related party			56,848				26,848
Accrued settlement liability			125,000				2,075,000
Deferred revenue			205,775				35,775
Convertible notes payable			200,000				200,000
Derivative liability			754				583,909
Total Current Liabilities			1,800,530				3,888,847
Total Liabilities			1,800,530				3,888,847
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; 54,569,576 and 53,270,176 shares issued and outstanding, respectively			54,570				53,270
Additional paid-in capital			117,539,648				117,502,538
Accumulated deficit			(119,142,222	)			(120,288,517	)
Total Stockholders' Equity (Deficit)			(1,548,004	)			(2,732,709	)
Total Liabilities and Stockholders' Equity		$	252,526			$	1,156,138

  

See the accompanying notes to these condensed consolidated financial statements

 

 

iNeedMD Holdings, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

		Three Months Ended March 31,
		2016				2015
Revenue		$	-			$	12,306
Cost of revenue			-				12,142
Write-off of obsolete inventory			838,732				-
Gross (loss) profit			(838,732	)			164
Operating expenses
Compensation			148,510				505,303
Consulting fees			2,200				45,496
Consulting fees - related party			45,000				50,000
Sales and marketing			36,509				93,871
Research and development			-				30,000
General and administrative			262,528				230,265
Total operating expenses			494,747				954,935
Loss from operations			(1,333,479	)			(954,771	)
Other income (expenses)
Interest income			-				92
Interest expense			(26,019	)			(4,685	)
Amortization of debt discount and issuance costs			-				(16,438	)
Loss on disposal of fixed assets			(27,362	)			-
Change in fair value of settlement liability			1,950,000				-
Change in fair value of derivative liabilities			583,155				12,500
Total other income (expenses)			2,479,774				(8,531	)
Income tax provision			-				-
Net income (loss)		$	1,146,295			$	(963,302	)
Net income (loss) per common share
Basic and diluted- Common A shares		$	0.02			$	(0.02	)
Weighted average common A shares outstanding - basic and diluted			52,579,623				48,014,424

   

See the accompanying notes to these condensed consolidated financial statements

 

 

iNeedMD Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

		Three Months Ended March 31,
		2016				2015
Cash Flows From Operating Activities:
Net income (loss)		$	1,146,295			$	(963,302	)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Depreciation expense			3,651				4,384
Allowance for inventory obsolescence			838,732				-
Loss on disposal of property and equipment			27,362				-
Amortization of debt discount on notes payable			-				16,438
Change in fair value of derivative liabilities			(583,155	)			(12,500	)
Change in fair value of settlement liability			(1,950,000	)
Share based payments - warrants and Class A common stock issued to employees and consultants			19,205				358,087
Non-cash compensation			100,805
Changes in operating assets and liabilities:
Accounts receivable			-				(4,985	)
Inventory			-				(212,586	)
Prepaid expenses			9,206				9,931
Accounts payable and accrued liabilities			201,038				47,719
Accounts payable and accrued liabilities - related party			30,000				-
Deferred revenue			-				(1,200	)
Net Cash Used by Operating Activities			(156,861	)			(758,014	)
Cash Flows from Investing Activities:
Cash acquired			132,200				-
Net Cash Flows Provided by Investing Activities			132,200				-
Net change in cash			(24,661	)			(758,014	)
Cash at beginning of reporting period			112,195				2,457,622
Cash at end of reporting period		$	87,534			$	1,699,608
Supplemental disclosures of cash flow information:
Interest paid		$	-			$	-
Income taxes paid		$	-			$	-

 

See the accompanying notes to these condensed consolidated financial statements

 

 

 

iNeedMD Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1 - Organization and Operations

 

iNeedMD Holdings, Inc. (“iNeedMD” or the “Company”) is a holding company and was incorporated on February 1, 2012, under the laws of the State of Nevada. The Company’s wholly owned subsidiary, iNeedMD, Inc., incorporated on February 16, 2000 under the laws of the State of Delaware, operates as 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.

 

The Merger

 

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.

 

The Share Exchange

 

Effective March 16, 2016 (the “Closing Date”), the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) by and among Mediplex Alliances Inc., a Delaware corporation (“Mediplex”), and Jonathan Loutzenhiser and Darryl Cleveland, individuals and the sole shareholders of Mediplex (the “Shareholders” and together with the Company and Mediplex, the “Parties”). On the Closing Date, pursuant to the terms and conditions of the Share Exchange Agreement, the Shareholders assigned, transferred and delivered, free and clear of all liens, 100% of the outstanding shares of common stock of Mediplex representing 100% of the equity interest in Mediplex to the Company. In exchange, the Company will issue to the Shareholders in accordance with their ownership in Mediplex, (i) 2,500,000 shares of common stock of the Company subject to a Clawback (as defined below) by the Company, and (ii) 2,500,000 shares of common stock of the Company on the six-month anniversary of the Closing Date subject to a Clawback by the Company (collectively, (i) and (ii) the “Closing Shares”). 

 

If, on the first anniversary of the Closing Date, revenues prepared in accordance with generally accepted accounting principles ("GAAP") attributable to the business acquired from Mediplex for the 12-month period ending on the last day of the month preceding the date of such first anniversary are not greater than $2,500,000 for the 12- month period ending on the last day of the month preceding the date hereof (the "Mediplex Year 1 Revenues"), then the Closing Shares shall be forfeited by Mediplex, and cancelled by the Company, as soon as practicable following the determination of the Mediplex Year l Revenues and the comparison (the " Clawback").

 

The Company considered the purchase of Mediplex using the acquisition method of accounting as specified in ASC 805 “Business Combinations”. This method of accounting requires the acquirer to (i) record purchase consideration issued to sellers in a business combination at fair value on the date control is obtained, (ii) determine the fair value of any non-controlling interest, and (iii) allocate the purchase consideration to all tangible and intangible assets acquired and liabilities assumed based on their acquisition date fair values.

  

 

The Company considered the above guidance and determined that the Share Exchange did not meet the requirements for a business combination. The Company therefore treated the transaction and the related share issuance as part of an employee contract. The Company recorded the fair value of the shares $19,205 and net liabilities assumed ($81,600) as compensation of $100,805 on the condensed consolidated statements of operations.

  

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 - Unaudited Interim Financial Information

 

The accompanying unaudited condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”).

 

The financial statements contained herein have been prepared by the Company in accordance with GAAP for interim financial information. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. The balance sheet at December 31, 2015 was derived from audited financial statements but does not include all disclosures required by GAAP. In the opinion of management, the interim financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results of the periods presented. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2015.

 

Principles of Consolidation

 

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

 

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. Significant estimates include the useful life of fixed assets and assumptions used in the fair value of stock-based compensation and the valuation of derivative liabilities. Actual results could differ from those estimates.  

 

 

Inventory

 

Inventory is stated using the first-in, first-out (FIFO) valuation method. Inventory was comprised solely of finished goods of $156,000 and $994,732 at March 31, 2016 and December 31, 2015, respectively.

 

The Company recorded an allowance for obsolete inventory of $838,732 and $0 for the three months ended March 31, 2016 and 2015, respectively. 

 

Property and Equipment

 

Property and equipment are recorded at cost. Depreciation expense is computed using the straight-line method over the estimated useful lives. Asset lives for financial statement reporting of depreciation are:

 

Computer equipment	3-5 years
Leasehold improvements	5 years

 

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 March 31, 2016:

 

		Carrying				Fair Value Measurement Using
		Value				Level 1				Level 2				Level 3				Total
Derivative conversion features and warrant liabilities		$	754			$	-			$	-			$	754			$	754

 

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 December 31, 2015:

 

		Carrying				Fair Value Measurement Using
		Value				Level 1				Level 2				Level 3				Total
Derivative conversion features and warrant liabilities		$	583,909			$	-			$	-			$	583,909			$	583,909

 

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 three months ended March 31, 2016:

 

		Fair Value Measurement Using Level 3 Inputs
		Total
Balance, January 1, 2016		$	583,909
Change in fair value of derivative liabilities			(583,155	)
Balance, March 31, 2016		$	754

 

  

The fair value of the derivative conversion features and warrant liabilities as of March 31, 2016 were calculated using a Monte Carlo option model valued with the following weighted average assumptions:

 

Dividend Yield			0	%
Expected Volatility			132.14	%
Risk free interest rate			0.21	%
Contractual term			1.75 years
Exercise price		$	0.35
Common shares assumed issued			754,066

 

Changes in the observable input values would likely cause material changes in the fair value of the Company’s Level 3 financial instruments. The significant unobservable input used in the fair value measurement is the estimation of the likelihood of the occurrence of a change in the contractual terms of the financial instruments. A significant increase (decrease) in this likelihood would result in a higher (lower) fair value measurement. 

 

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.

 

Deferred Revenue (Liability)

 

The Company receives up-front payments for goods.  These payments are initially deferred and subsequently recognized when the goods are shipped. Deferred revenue at March 31, 2016 and December 31, 2015 was $205,775 and $35,775, respectively.

  

Income Tax Provision

 

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

 

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

 

The 2013 through 2015 tax years remain subject to examination by taxing authorities.

 

 

Uncertain Tax Positions

 

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting periods ended March 31, 2016 or December 31, 2015.

 

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:

 

		March 31,
		2016				2015
Warrants			1,600,209				3,246,740
Settlement shares			2,500,000				-
Conversion features on convertible notes			754,066				699,632
Total potentially dilutive shares			4,854,275				3,946,372

 

The computations of basic and diluted net income attributable to common stockholders are as follows:

 

		For the Three Months Ended
		March 31, 2016
		Income				Shares(a)
Net income/(loss) attributable to common stockholders		$	1,146,295
Basic net income/(loss) per common share		$	0.02				52,579,623
Net income/(loss) attributable to common stockholders		$	1,146,295				52,579,623
Dilutive securities:
Warrants							-
Diluted net loss		$	1,146,295				52,579,623
Diluted net loss per common share		$	0.02

 

(a) - Weighted-average common shares outstanding.

 

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.

  

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 February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” Under ASU 2016-02, lessees will be required to recognize, for all leases of 12 months or more, a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature of an entity’s leasing activities. This ASU is effective for public reporting companies for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and must be adopted using a modified retrospective approach. The Company is in the process of evaluating the effect of the new guidance on its condensed consolidated financial statements and disclosures.

 

In April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)”. The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.

 

In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (Topic 606)”. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net) (Topic 606)”. These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entity's promise to grant a license provides a customer with either a right to use an entity's intellectual property or a right to access an entity's intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entity's adoption of ASU 2014-09, which the Company intends to adopt for interim and annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the new standard.

 

In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is currently evaluating the impact of the new standard.

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently evaluating the impact of the new standard.

 

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.

 

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption permitted. The provisions of this guidance are to be applied using a retrospective approach which requires application of the guidance for all periods presented. The Company is currently evaluating the impact of the new standard.

  

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements. 

 

 

Note 3 - Going Concern

 

As reflected in the accompanying financial statements, the Company had net income and net cash used in operations of $1,146,295 and $156,861, respectively, for the three months ended March 31, 2016. Furthermore, the Company had a working capital deficiency and an accumulated deficit of $1,555,945 and $119,142,222, respectively, as of March 31, 2016. 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 - Property and Equipment

 

Property and equipment consisted of the following:

 

		March 31, 2016				December 31, 2015
Computer equipment		$	-			$	46,938
Leasehold improvements			-				9,450
			-				56,388
Less: Accumulated depreciation			-				(25,375	)
Total		$	-			$	31,013

 

The Company recorded depreciation expense of $3,651 and $4,384 for the three months ended March 31, 2016 and 2015, respectively. During the three months ended March 31, 2016, the Company disposed of all its fixed assets and recorded a loss on disposal of $27,362.

 

 

Note 5 - Convertible Notes Payable

 

Convertible notes payable consist of the following:

 

		March 31,				December 31,
		2016				2015
Chertoff Note			100,000				100,000
Van Damm Note			100,000				100,000
Total Convertible Notes			200,000				200,000
Unamortized Debt Discount			-				-
Total Convertible Notes, Net of Debt Discount			200,000				200,000
Current Portion of Convertible Notes			200,000				200,000
Long-Term Convertible Notes less Current Portion		$	-			$	-

 

During the three months ended March 31, 2016 and 2015, the Company recognized $0 and $16,438 in amortization of the debt discount, respectively, relating to the convertible notes payable.

 

During the year ended December 31, 2015, the Company entered into a settlement agreement with former note holders which resulted in the conversion of derivative notes and warrants to 3,255,752 shares of common stock.

 

Note 6 - 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.

 

As a result of the application of ASC No. 815, the fair values of the Company’s derivative liabilities are summarized as follows: 

 

		Note Conversion Features				Warrants				Total
Balance, January 1, 2016			583,909			$	-			$	583,909
Change in fair value			(583,155	)			-				(583,155	)
Balance, March 31, 2016		$	754			$	-			$	754

 

The change in fair value of derivative liabilities was a gain of $583,155 for the three months ended March 31, 2016 compared to a gain of $12,500 for the three months ended March 31, 2015.

 

Note 7 - 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 March 31, 2016 and December 31, 2015, the Company owed $56,848 and $26,848, respectively, to Govindan Gopinathan. 

 

Thomas Nicolette, the Chief Executive Officer, provided consulting services for the Company. Consulting expenses pertaining to his services were $45,000 and $45,000 for the three months ended March 31, 2016 and 2015, 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 $5,000 for the three months ended March 31, 2016 and 2015, respectively, and are a component of Consulting fees - related party in the consolidated statement of operations.

 

 

Note 8 - 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 Three Months Ended March 31,
		2016				2015
Risk free interest rate			-	%			1.61	%
Dividend yield			-	%			0.00	%
Expected volatility			-	%			96.53	%
Expected life in years			-				5.00
Forfeiture Rate			-	%			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 vested on September 30, 2015. The total grant date value of the options was $408,030.

 

The following is a summary of the Company’s stock warrant activity during the three months ended March 31, 2016:

 

		Number of Warrants				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life
Outstanding – January 1, 2016			2,340,740			$	0.79				3.39
Granted			-				-				-
Exercised			-				-				-
Forfeited/Cancelled			-				-				-
Outstanding – March 31, 2016			2,340,740			$	0.79				3.14
Exercisable – March 31, 2016			2,340,740			$	0.79				3.14

  

At March 31, 2016, the total intrinsic value of warrants outstanding and exercisable was $1,578,000.

 

Stock-based compensation for stock warrants has been recorded in the condensed consolidated statements of operations and totaled $0 and $358,087 for the three months ended March 31, 2016 and 2015, respectively.

 

As of March 31, 2016, unrecognized compensation costs related to non-vested warrants was $0.

 

Note 9 - 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 March 31, 2016, two vendors represented 62% of our accounts payable. As of December 31, 2015, two vendors represented 88% 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 10 - Commitments and Contingencies

 

Employment Agreement

 

On January 1, 2016, Mr. Jonathan Loutzenhiser joined Mediplex as Chief Executive Officer. Under the terms of the contract, Mr. Loutzenhiser will receive an annual base salary of $180,000 and will be eligible for bonuses during the initial three year term of the agreement and any renewal or extension period thereafter.

 

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. On August 22, 2016 the Company and Makover participated in a mediation which resulted in an agreement which would provide for the issuance of 2,500,000 shares of the Company’s common stock to Makover and a payment of $100,000 by the Company to Makover. The stock issuance and payment are contingent upon the Company securing additional financing. As of March 31, 2016, the Company accrued $125,000 as the potential settlement liability. The liability is based on the payment to be made to Makover and the valuation of the shares to be issued using the estimated share price or $0.01 per share as of March 31, 2016.

 

Operating Leases

 

Rent expense was $11,565 and $12,286 for the three months ended March 31, 2016 and 2015, respectively. Future minimum payments of the Company’s leases are as follows:

 

2016		$	48,720
2017			50,181
2018			51,687
2019			13,017
		$	163,605

 

Note 11 - 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.

 

On April 14, 2016, in connection with the Mediplex Alliances Inc. acquisition, (i) Thomas Nicolette resigned as President of the Company, (ii) Jonathan Loutzenhiser was appointed President and a member of the Board of Directors of the Company, and (ii) Dr. Joseph Asuncion was appointed as a member of the Board of Directors of the Company.

 

On June 30, 2016, Thomas Nicolette resigned as Chief Executive Officer of the Company and a member of the Company’s Board of Directors. 

 

On October 31, 2016, Dr. Govindan Gopinathan was appointed Executive Chairman of the Board of Directors.

 

Subsequent to March 31, 2016, the Company borrowed $347,300 in exchange for convertible note agreements with seven third party lenders. The notes are convertible into shares of the Company’s common stock at the option of the lender.

 

In February 2017, the Company received a letter of judgement from two convertible note holders regarding the settlement of the outstanding liabilities of the notes which are currently in default as well as the related accrued interest. As of March 31, 2016, the Company recorded the outstanding balance of the notes and related accrued interest of $200,000 and $85,205, respectively, on the condensed consolidated balance sheet. The company will be taking the proper steps to vacate the Judgment.

 

 

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”) is a holding company and was incorporated on February 1, 2012, under the laws of the State of Nevada. The Company’s wholly owned subsidiary, iNeedMD, Inc., incorporated on February 16, 2000 under the laws of the State of Delaware, operates as 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 March 31, 2016 and 2015:

 

		Three Months Ended
		March 31, 2016				March 31, 2015
Revenue		$	-			$	12,306
Gross profit		$	(838,732	)		$	164
Compensation		$	148,510			$	505,303
Consulting fees		$	2,200			$	45,496
Consulting fees - related party		$	45,000			$	50,000
Sales and marketing		$	36,509			$	93,871
Research and development		$	-			$	30,000
General and administrative		$	262,528			$	230,265
Interest income		$	-			$	92
Interest expense		$	(26,019	)		$	(4,685	)
Amortization of debt discount and issuance costs		$	-			$	(16,438	)
Loss on disposal of fixed assets		$	(27,362	)		$	-
Change in fair value of settlement liability		$	1,950,000			$	-
Change in fair value of derivative liabilities		$	583,155			$	12,500
Net income (loss)		$	1,146,295				(963,302	)
Income (loss) per common A share - basic		$	0.02			$	(0.02	)

   

Revenue

 

Revenue was $0 for the three months ended March 31, 2016 as compared to $12,306 for the three months ended March 31, 2015. The decrease in revenue is primarily attributable to no sales occurring during the three months ended March 31, 2016 compared to the three months ended March 31, 2015.

 

Gross Profit

 

Gross profit percentage for the three months ended March 31, 2016 was 0%; as compared to 1.33% for the three months ended March 31, 2015. During the three months ended March 31, 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 was assessing the use of The EKG Glove system. The gross profit decline is also attributable to a write-off of $838,732 for obsolete inventory recorded by the Company during the three months ended March 31, 2016. 

 

Compensation

 

Compensation was $148,510 for the three months ended March 31, 2016 compared to $505,303 for the three months ended March 31, 2015, a decrease of $356,793. During the three months ended March 31, 2016, the Company expensed $19,205 in share based payments compared to share based payments of $358,087 for shares and warrants issued during the three months ended March 31, 2015 and expensed $100,805 as part of compensation for the liabilities assumed in the transaction with Mediplex. The decrease is also attributable to the Company hiring consultants during the three months ended March 31, 2016 compared to the use of employees in the comparable period.

 

Consulting Fees

 

Consulting fees, including related party consulting fees, were $47,200 for the three months ended March 31, 2016 as compared to $95,496 for the three months ended March 31, 2015, a decrease of $48,296. The decrease is attributable to the Company reducing its number of consultants required to perform business functions.

 

Sales and Marketing

 

Sales and marketing expenses were $36,509 for the three months ended March 31, 2016 as compared to $93,871 for the three months ended March 31, 2015, a decrease of $57,362. The decrease is attributable to the Company no longer having adequate working capital on hand to support the sales and marketing efforts.

 

 

Research and Development

 

Research and development expenses were $0 for the three months ended March 31, 2016 versus $30,000 for the three months ended March 31, 2015, a decrease of $30,000. During the three months ended March 31, 2016, the Company incurred no research and development expenses as it primarily focused on introducing the commercialized version of The EKG Glove in the international marketplace.

 

General and Administrative Expenses

 

General and administrative expenses were $262,528 for the three months ended March 31, 2016 versus $230,265 for the three months ended March 31, 2015, an increase of $32,263. The increase is attributable to the additional expenses associated with the Mediplex transaction. 

 

Amortization of Debt Discount and Issuance Costs

 

Amortization of debt discount was $0 for the three months ended March 31, 2016 as compared to $16,438 for the three months ended March 31, 2015, a decrease of $16,438. The decrease is attributable to the Company repaying and converting most of its outstanding debt by the end of 2015.

 

Loss on Disposal of Fixed Assets

 

During the three months ended March 31, 2016, the Company disposed of all of it fixed assets and recorded a loss of $27,362 compared to $0 for the three months ended March 31, 2015.

 

Change in Fair Value of Settlement Liability

 

Change in fair value of settlement liability was a gain of $1,950,000 for the three months ended March 31, 2016 versus $0 for the three months ended March 31, 2015.

 

Change in Fair Value of Derivative Liabilities

 

Change in fair value of derivative liabilities was a gain of $583,155 for the three months ended March 31, 2016 versus a gain of $12,500 for the three months ended March 31, 2015.

 

Net Income (Loss)

 

For the reasons mentioned above, net income for the three months ended March 31, 2016 was $1,146,295 or income per share of $0.02 to Common A shareholders. Net loss for the three months ended March 31, 2015 was ($963,302) or loss per share of ($0.02) to Common A shareholders.

 

Liquidity and Capital Resources

 

The following table summarizes total current assets, liabilities and working capital at March 31, 2016, compared to December 31, 2015:

 

		March 31, 2016				December 31, 2015				Increase (Decrease)
Current Assets		$	244,585			$	1,117,184			$	(872,599	)
Current Liabilities		$	1,800,530			$	3,888,847			$	(2,088,317	)
Working Capital (Deficit)		$	(1,555,945	)		$	(2,771,663	)		$	1,215,718

 

At March 31, 2016, we had working capital deficit of $1,555,945 as compared to working capital deficit of $2,771,663 at December 31, 2015, an increase in working capital of $1,215,718. The decrease is primarily attributable to a decrease in cash and inventory of $24,661 and $838,732, an increase in accounts payable of $253,555, an increase in deferred revenue of $170,000, a decrease in the accrued settlement liability of $1,950,000 and a decrease in derivative liability of $583,155.

 

 

Net Cash

 

Net cash used in operating activities for the three months ended March 31, 2016 and 2015 was $156,861 and $758,014, respectively. The net income (loss) for the three months ended March 31, 2016 and 2015 was $1,167,577 and ($963,302), respectively. During the three months ended March 31, 2016, the net income was decreased by the change in fair value of the settlement liability of $1,950,000 and the change in fair value of derivative liabilities of $583,155. These decreases were offset by depreciation expense of $3,651, a write off of inventory of $838,732 a loss on disposal of fixed assets of $27,362 and increases in accounts payable and accrued expenses of $209,755. During the three months ended March 31, 2015, the net loss was offset by depreciation expense of $4,384, share based payments to employees and consultants of $358,087, the amortization of debt discount on the notes payable of $16,438, increases in prepaid expenses of $9,931 and the increase in accounts payable and accrued expenses of $47,719. These increases during the three months ended March 31, 2015 were offset by a gain in fair value of derivative liabilities of $12,500, a decrease in accounts receivable of $4,985 and a decrease in inventory of $212,586.

 

Investing

 

Net cash provided by investing activities for the three months ended March 31, 2016 was $132,200 resulting from the share exchange with Mediplex.

 

Going Concern

 

As reflected in the accompanying financial statements, the Company had net income and net cash used in operations of $1,146,295 and $156,861, respectively, for the three months ended March 31, 2016. Furthermore, the Company had a working capital deficiency and an accumulated deficit of $1,555,945 and $119,142,222, respectively, as of March 31, 2016. 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 March 31, 2016 and December 31, 2015, 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.”

 

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.

 

  

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 February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” Under ASU 2016-02, lessees will be required to recognize, for all leases of 12 months or more, a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature of an entity’s leasing activities. This ASU is effective for public reporting companies for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and must be adopted using a modified retrospective approach. The Company is in the process of evaluating the effect of the new guidance on its condensed consolidated financial statements and disclosures.

 

In April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)”. The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.

 

In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (Topic 606)”. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net) (Topic 606)”. These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entity's promise to grant a license provides a customer with either a right to use an entity's intellectual property or a right to access an entity's intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entity's adoption of ASU 2014-09, which the Company intends to adopt for interim and annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the new standard.

 

In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is currently evaluating the impact of the new standard.

 

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently evaluating the impact of the new standard.

 

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.

 

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption permitted. The provisions of this guidance are to be applied using a retrospective approach which requires application of the guidance for all periods presented. The Company is currently evaluating the impact of the new standard.

  

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying 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 March 31, 2016, 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.

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

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. On August 22, 2016 the Company and Makover participated in a meditation which resulted in an agreement which would provide for the issuance of 2,500,000 shares of the Company’s common stock to Makover and a payment of $100,000 by the Company to Makover. The stock issuance and payment are contingent upon the Company securing additional financing. As of the date hereof, this matter has not been settled and the parties are in the process of scheduling an additional mediation to work towards finalizing a settlement. 

 

In February 2017, the Company received a letter of judgement from two convertible note holders regarding the settlement of the outstanding liabilities of the notes which are currently in default as well as the related accrued interest. As of March 31, 2016, the Company recorded the outstanding balance of the notes and related accrued interest of $200,000 and $85,205, respectively, on the condensed consolidated balance sheet. The company will be taking the proper steps to vacate the Judgment.

 

Except as disclosed above, we are not currently involved in any litigation that we believe could have a materially 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 Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

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, 2015, filed with the SEC on November 15, 2016.

 

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 March 31, 2016, 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

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	INEEDMD HOLDINGS, INC.
Date: February 7, 2017	By:	/s/ Govindan Gopinathan
	Name:	Govindan Gopinathan
	Title:	Executive Chairman
		(Principal Executive Officer)
		(Principal Financial Officer)
		(Principal Accounting Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature		Title		Date
/s/ Dr. Govindan Gopinathan		Executive Chairman		February 7, 2017
Dr. Govindan Gopinathan		Principal Executive Officer,
		Principal Financial Officer, Principal Accounting Officer
/s/ Dr. Joseph Asuncion		Director		February 7, 2017
Dr. Joseph Asuncion

 

 

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