UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

Form 10-Q/A

(Amendment No. 2)

 

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

 

For the quarterly period ended December 31, 2014

 

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

 

For the Transition Period from ______ to ______

Commission File Number: 333-153290

 

MEDICAL ALARM CONCEPTS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		26-3534190
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
200 W. Church Road Suite B, King of Prussia, PA		19406
(Address of principal executive offices)		(Zip Code)

 

(877) 639-2929

(Registrant’s telephone number, including area code)

 

	N/A
	(Former address)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐  No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class		Outstanding at February 16, 2015
Common Stock, $0.0001 par value per share		5,628,679 shares

EXPLANATORY NOTE

 

This Amendment No. 2 to Form 10-Q is being filed by Medical Alarm Concepts Holdings, Inc. (the “Company”) in response to comments made by the staff of the Securities and Exchange Commission (“SEC”) by letter dated March 16, 2015 on the presentation in the Company in its original quarterly report on Form 10-Q for the fiscal quarter ended December 31, 2014 filed with the SEC on February 17, 2015. Except as necessary to respond to the SEC staff comments, the Company has not modified or updated disclosures presented in the original quarterly report on Form 10-Q. Accordingly, this Amendment No. 2 to Form 10-Q does not reflect events occurring after the filing of our original Form 10-Q or modify or update those disclosures affected by subsequent events, except as specifically referenced herein. Accordingly, this Amendment No. 2 to Form 10-Q should be read in conjunction with our periodic filings made with the SEC subsequent to the date of the original filing, including any amendments to those filings, as well as any Current Reports filed on Form 8-K subsequent to the date of the original filing.

 

 

TABLE OF CONTENTS

 

			Pages
PART 1.		FINANCIAL INFORMATION	3
	ITEM 1.	FINANCIAL STATEMENTS	3
	ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	12
	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	16
	ITEM 4.	CONTROLS AND PROCEDURES	16
PART II.		OTHER INFORMATION	22
	ITEM 1.	LEGAL PROCEEDINGS	22
	ITEM 1A.	RISK FACTORS	22
	ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	22
	ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	22
	ITEM 4.	MINE SAFETY DISCLOSURES	22
	ITEM 5.	OTHER INFORMATION	22
	ITEM 6.	EXHIBITS	22
SIGNATURES			23

 

 

 

 

 

PART

I.   FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

MEDICAL ALARM CONCEPTS HOLDING, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
			December 31, 2014				June 30, 2014
ASSETS
CURRENT ASSETS
Cash		$	4,671			$	7,673
Accounts receivable net of allowance of $7,906			14,473				36,952
Inventory			120,494				22,839
Loan to employee			30,000				—
Purchase deposits			42,482				—
Total current assets			212,120				67,464
NON-CURRENT ASSETS
Property and equipment, net			—				461
Intangible assets, net			1,059,785				1,099,036
Total non-current assets			1,059,785				1,099,497
Total assets		$	1,271,905			$	1,166,961
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Derivative liability		$	—			$	30,766
Accounts payable			93,841				67,305
Deferred revenue			363,838				380,397
Note payable - other			—				5,000
Credit line payable - related party			275,000				—
Accrued expenses and other current liabilities			182,298				194,025
Convertible notes payable			—				25,908
Patent payable			2,500,000				2,500,000
Total current liabilities			3,414,977				3,203,401
Total liabilities			3,414,977				3,203,401
STOCKHOLDERS' DEFICIT
Series A Convertible Preferred Stock: $0.0001 par value; 100,000 shares authorized; 688 shares issued and outstanding as of December 31, 2014 and June 30, 2014, respectively			—				—
Series B Convertible Preferred Stock: $0.0001 par value; 62,500 shares authorized; 9,938 shares issued and outstanding as of December 31, 2014 and June 30, 2014, respectively			1				1
Common stock: $0.0001 par value; 20,000,000 shares authorized; 5,628,679 and 5,623,679 shares issued and outstanding on December 31, 2014 and June 30, 2014, respectively			563				562
Additional paid-in capital			12,273,738				12,203,981
Accumulated deficit			(14,417,374	)			(14,240,984	)
Total stockholders' deficit			(2,143,072	)			(2,036,440	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	1,271,905			$	1,166,961

 

See accompanying notes to these unaudited consolidated financial statements.

MEDICAL ALARM CONCEPTS HOLDING, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
		For the three months ended December 31,								For the six months ended December 31,
		2014				2013				2014				2013
Revenue			241,077				256,731			$	512,081			$	521,591
Cost of revenue			41,144				102,178				103,059				163,611
Gross profit			199,933				154,553				409,022				357,980
Operating expenses
Selling expense			69,504				83,878				129,884				125,229
General and administrative			211,958				1,100,300				365,714				1,255,266
Total operating expenses			281,462				1,184,178				495,598				1,380,495
Loss from operations			(81,529	)			(1,029,625	)			(86,576	)			(1,022,515	)
Other (income) expenses
Change in fair value of derivative instrument			(8,096	)			(1,035,900	)			11,335				(1,455,035	)
Interest expense - related party			2,934				—				2,934				—
Interest expense			38,030				81,258				75,545				161,481
Total other (income) expense			32,868				(954,642	)			89,814				(1,293,554	)
Income (loss) before income tax			(114,397	)			(74,983	)			(176,390	)			271,039
Income tax provision			—				—				—				—
Net income (loss)			(114,397	)			(74,983	)		$	(176,390	)		$	271,039
Net income per common share - basic and diluted			(0.02	)			(0.03	)		$	(0.03	)		$	0.13
Weighted average number of common shares - basic and diluted			5,623,679				2,531,655				5,623,679				2,116,555

 

See accompanying notes to these unaudited consolidated financial statements.

 

MEDICAL ALARM CONCEPTS HOLDING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		For the six months ended December 31,
		2014				2013
Net income (loss)		$	(176,390	)		$	271,039
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Common stock issued for services			1,750				955,948
Change in fair value of derivative instrument			11,335				(1,455,035	)
Amortization of patent			39,251				39,251
Non-cash interest expense			—				28,991
Depreciation			461				2,625
Change in operating assets and liabilities
Accounts receivable			22,479				3,600
Inventory			(97,655	)			(5,791	)
Purchase deposits			(42,482	)			32,661
Accounts payable			26,536				25,676
Accrued expenses and other current          liabilities			(11,728	)			52,457
Deferred revenue			(16,559	)			41,703
Net Cash Used in Operating Activities			(243,002	)			(6,875	)
CASH FLOWS FROM INVESTING ACTIVITIES
Loan to employee			(30,000	)			—
Net Cash Used in Investing Activities			(30,000	)			—
CASH FLOWS FROM FINANCING ACTIVITIES
Proceed from (repayment for) note payable - other			(5,000	)			30,000
Proceeds from credit line			275,000				—
Net Cash Provided By Financing Activities			270,000				30,000
NET INCREASE (DECREASE) IN CASH			(3,002	)			23,125
CASH AT BEGINNING OF PERIOD			7,673				5,857
CASH AT END OF PERIOD		$	4,671			$	28,982
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest expense		$	75,000			$	75,000
Cash paid for income taxes		$	—			$	—
Conversion of convertible notes to common stock		$	—			$	314,819
Derivative liability classified to additional paid-in capital upon conversion of related convertible notes		$	42,101			$	909,915
Issuance of common stock previously classified as stock to be issued		$	—			$	24,400
Forgiveness of convertible notes		$	25,908			$	—
Forgiveness of credit line payable classified to additional paid-in capital		$	—			$	618,843
Accrued interest and debt discount classified to additional paid-in capital upon conversion and forgiveness of debt		$	—			$	107,656

 

See accompanying notes to these unaudited consolidated financial statements.

MEDICAL ALARM CONCEPTS HOLDING, INC.

NOTES TO FINANCIAL STATEMENTS

 

1.

NATURE OF OPERATIONS

 

On June 4, 2008, Medical Alarm Concepts Holding, Inc. (the “Company”) was incorporated under the laws of the State of Nevada. The Company was formed for the sole purpose of acquiring all of the membership units of Medical Alarm Concepts LLC, a Pennsylvania limited liability company (“Medical LLC”).

 

The Company utilizes new technology in the medical alarm industry to provide 24-hour personal response monitoring services and related products to subscribers with medical or age-related conditions.

 

2.

SUMMARY OF ACCOUNTING POLICIES

 

Basis of Presentation and Consolidation

 

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

 

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant inter-company transactions and balances among the Company and its subsidiary are eliminated upon consolidation.

 

These interim consolidated financial statements are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) and disclosures necessary for a fair presentation of these interim consolidated financial statements have been included. The results reported in the consolidated financial statements for any interim periods are not necessarily indicative of the results that may be reported for the entire year or any other periods. (a) The consolidated balance sheet as of June 30, 2014, which was derived from audited financial statements, and (b) the unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2014.

 

Certain amounts in prior period financial statements were reclassified to conform with current period presentation.

 

Use of Estimates

 

The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include the collectability of accounts receivable and deferred taxes and related valuation allowances. Certain of our estimates, including evaluating the collectability of accounts receivable, could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. We re-evaluate all of our accounting estimates at least quarterly based on these conditions and record adjustments when necessary.

 

Inventory

 

The Company values inventory, consisting of purchased products, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method. The Company regularly reviews its inventories on hand and, when necessary, records a provision for excess or obsolete inventories based primarily on current selling price and spot market prices. The Company determined that there was no inventory obsolescence as of December 31, 2014.

 

Impairment of long-lived assets

 

The Company follows section 360-10-05-4 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s reviews it long-lived assets, which include property and equipment, and patent, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

 

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future undiscounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated or amortized over the newly determined remaining estimated useful lives. The Company determined that there were no impairment of long-lived assets as of December 31, 2014.

 

Derivative warrant liability

 

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 810-10-05-4 of the FASB Accounting Standards Codification and paragraph 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the Statement of Operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the conversion date and then the related fair value is reclassified to equity.

 

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

 

On January 1, 2009, the Company adopted Section 815-40-15 of the FASB Accounting Standards Codification (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. The adoption of Section 815-40-15 has affected the accounting for certain freestanding warrants that contain exercise price adjustment features.

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value pursuant to GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

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

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

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

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, inventory, accounts payable, deferred revenues and accrued liabilities, approximate their fair values because of the short maturity of these instruments. The Company’s convertible notes payable and patent payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2014.

 

The derivative liability which consists of embedded conversion feature and warrants issued in connection with our convertible debt, classified as a level 3 liability, are the only financial liabilities measured at fair value on a recurring basis.

 

Income Taxes

 

The Company accounts for income taxes under the provisions of FASB ASC Topic 740, “Income Tax,” which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are recognized for the future tax consequence attributable to the difference between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are measured using the enacted tax rate expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company establishes a valuation when it is more likely than not that the assets will not be recovered.

 

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

 

Revenue Recognition

 

The Company’s revenues are derived principally from utilizing new technology in the medical alarm industry to provide 24-hour personal response monitoring services and related products to subscribers with medical or age-related conditions. The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement that the services have been rendered to the customer, the sales price is fixed or determinable, and collectability is reasonably assured.

 

All revenues from subscription arrangements are recognized ratably over the term of such arrangements. The excess of amounts received over the income recognized is recorded as deferred revenue on the consolidated balance sheet.

 

Shipping and Handling Costs

 

The Company accounts for shipping and handling fees in accordance with paragraph 605-45-45-19 of the FASB Accounting Standards Codification. While amounts charged to customers for shipping products are included in revenues, the related costs are classified in cost of goods sold as incurred.

 

Stock-Based Compensation

 

We recognize compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards. However, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.

 

Net Income per Common Share

 

Net income per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income per common share is computed by taking net income divided by the weighted average number of common shares outstanding for the period. Diluted net income per common share is computed by dividing net income by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through stock options, warrants, and convertible debt. These potential shares of common stock were not included as they were anti-dilutive.

 

3.

GOING CONCERN

 

These consolidated financial statements are presented on the basis that the Company will continue as a going concern. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

 

As reflected in the accompanying consolidated financial statements, as of December 31, 2014, the Company has working capital deficit of $3,202,857; did not generate significant cash from its operations; had stockholders’ deficit of $2,143,072 and had operating loss for prior three years. These circumstances, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

 

While the Company is attempting to generate sufficient revenues, the Company’s cash position may not be enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering, or by alternative methods. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.

 

The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

4.

PATENT

 

On July 10, 2008, the Company entered into a Purchase Agreement and Patent Assignment Agreement (the “Agreement”) to be effective July 31, 2008. The Company is obligated to pay the seller $2,500,000 on June 30, 2012. The Agreement specifies interest of 6% to be payable monthly, commencing on July 31, 2008. The seller will reacquire all patents and applications if payment is not made on June 30, 2012. On December 31, 2014, this due date was extended to March 31, 2015.

 

The patent is being amortized over its estimated useful life. Amortization of patent aggregated $39,251 for the six months ended December 31, 2014 and 2013.

 

Patent, stated at cost, less accumulated amortization consisted of the following:

 

		December 31, 2014				June 30, 2014
Patent		$	2,500,000			$	2,500,000
Less: accumulated amortization			(1,440,215	)			(1,400,964	)
		$	1,059,785			$	1,099,036

 

5.

CONVERTIBLE NOTES PAYABLE

 

The convertible notes are convertible into shares of the Company’s common stock at a fixed conversion price equal to the lesser of the fixed conversion price of $0.002, or seventy five percent (75%) of the average of the closing bid price of the common stock as reported by Bloomberg LP for the principal market for the 5 trading days preceding the conversion date, and was due on September 30, 2013. On November 2, 2014, the holder of convertible note informed the Company that it will no longer be seeking repayment of $25,908.

 

The following table summarizes the convertible promissory notes movement:

Balance at June 30, 2014		$	25,908
Convertible notes issued			—
Convertible notes forgiven			(25,908	)
Total			—
Less: debt discount			—
Balance at December 31, 2014		$	—

 

6.

DERIVATIVE WARRANT LIABILITY AND FAIR VALUE

 

The Company has evaluated the application of ASC 815 Derivatives and Hedging (formerly SFAS No. 133) and ASC 815-40-25 to the Warrants to purchase common stock issued with the Convertible Notes and service agreements. Based on the guidance in ASC 815 and ASC 815-40-25, the Company concluded these instruments were required to be accounted for as derivatives due to the down round protection feature on the conversion price and the exercise price. The Company records the fair value of these derivatives on its balance sheet with changes in the values of these derivatives reflected in the statements of operations as “Gain (loss) on derivative liabilities.” These derivative instruments are not designated as hedging instruments under ASC 815 and are disclosed on the balance sheet under Derivative Liabilities.

 

The Company accounted for the issuance of the convertible debentures in accordance with ASC 815” Derivatives and Hedging.” The debentures are convertible into an indeterminate number of shares for which the Company cannot determine if it has sufficient authorized shares to settle the transaction with. Accordingly, the embedded conversion option is a derivative liability and is marked to market through earnings at the end of each reporting period.

 

The gross proceeds from the sale of the debentures are recorded net of discount of related conversion feature of the embedded conversion option. When the fair value of conversion options is in excess of the debt discount the amount is included as a component of interest expense in the statement of comprehensive income.

 

The fair value of the Warrants underlying the promissory notes issued at the time of their issuance was calculated pursuant to the Black-Scholes option pricing model. The fair value was recorded as a reduction to the promissory notes payable and was charged to operations as interest expense in accordance with effective interest method within the period of the promissory notes. Significant assumptions used in calculating fair value of outstanding warrants are as follows.

 

Expected dividend	Expected volatility	Risk-free rate of interest	Expected term (year)	Exercise price	Underlying Number of shares
-	196.14% - 348.56%	0.07%/1 year 0.35%/2 years 0.5%/3 years	As set forth by each promissory note agreement	$0.0002 per share	As set forth by each promissory note agreement

 

7.

NOTE PAYABLE – OTHER

 

On November 1, 2013, the Company issued a $30,000 promissory note to a vendor who provide monitoring services to the Company. The note is non-interest bearing and due on June 1, 2014. The note will be paid in six installment payments with $5,000 due on the first day of each month from January to June 2014. Based on the note, all subscribers monitoring agreements owned or newly originated by the Company must be monitored by the note holder until the terms of the agreement are satisfied. This note is guaranteed by the CEO of the Company. As of December 31, 2014, the note was paid in full.

 

8.

CREDIT LINE – RELATED PARTY

 

On September 30, 2014, the Company entered into a line of credit with a company, which is partially owned by the Company’s CEO. Under the line of credit agreement, the Company will be able to borrow up to $300,000 with the rate of interest of 6.5% per annum. The maturity date of the credit line is September 30, 2017.

 

As of December 31, 2014, outstanding balance under the line of credit was $275,000.

 

9.

LOAN TO EMPLOYEE

 

During three months ended December 31, 2014, the Company loaned $30,000 to an employee of the Company. This loan is non-interest bearing and due in December 31, 2015. The employee pledged 60,000 shares of the Company’s common stock as collateral.

 

As of December 31, 2104, the amount outstanding was $30,000.

 

10.

INCOME TAX

 

The reconciliation of income tax benefit at the U.S. statutory rate of 34% for the six months ended December 31, 2014 and 2013 to the Company’s effective tax rate is as follows:

 

		Six months ended December 31,
		2014				2013
U.S. federal statutory rate			(34.0	)%			(34.0	)%
State income tax, net of federal benefit			(9.99	)%			(9.99	)%
Change in valuation allowance			43.99	%			43.99	%
Income tax provision (benefit)			0.0	%			0.0	%

 

The benefit for income tax is summarized as follows:

 

		Six months ended December 31,
		2014				2013
Federal:
Current		$	—			$	—
Deferred			(49,616	)			301,850
State and local:
Current			—				—
Deferred			(14,578	)			88,690
Change in valuation allowance			64,194				(390,540	)
Income tax provision (benefit)		$	—			$	—

 

As of December 31, 2014, the Company had approximately $11 million of federal and state net operating loss carryovers (“NOLs”) which begin to expire in 2028.  Utilization of the NOLs may be subject to limitation under the Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under regulations.

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.  Based on the assessment, management has established a full valuation allowance against the entire deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.

 

The Company files U.S. federal and states of Pennsylvania tax returns that are subject to audit by tax authorities beginning with the year ended June 30, 2008. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax expense.

 

11.

CONCENTRATIONS

 

The Company had only one supplier during the three and six months ended December 31, 2014 and 2013, respectively.

 

12.

SUBSEQUENT EVENTS

 

On January 28, 2015, the Company entered into an agreement to acquire 51% ownership of Medical Sales Group, LLC (“Medical Sales Group”) in exchange for one million shares of restricted common stock of the Company. This acquisition is expected to close once all accounting work has been completed on the acquisition.  The Company’s CEO owns 33% interest in Medical Sales Group. Medical Sales Group was formed in 2014 as a vehicle for acquiring companies in the rapidly expanding medical and telehealth fields.

 

Item

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

 

This Quarterly Report on Form 10-Q for the three and six months ended December 31, 2013 contains “forward-looking statements”, including statements that include the words “believes,” “expects,” “anticipates,” or similar expressions. These forward-looking statements include, among others, statements concerning our expectations regarding our working capital requirements, financing requirements, business, growth prospects, competition and results of operations, and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. The forward-looking statements in this Quarterly Report on Form 10-Q for the three and three months ended December 31, 2014 involve known and unknown risks, uncertainties and other factors that could cause our actual results, performance or achievements to differ materially from those expressed in or implied by the forward-looking statements contained herein.

 

Overview and Recent Events

 

Medical Alarm Concepts Holding, Inc. (the “Company” or “Medical Alarm”) was formed in June 2008 and, on June 24, 2008 we acquired 100% of the membership interests in Medical Alarm Concepts, LLC, a Delaware limited liability corporation. The operation was financed with a considerable amount of toxic convertible debt. This type of financing, along with several other issues, prevented the Company from realizing a robust growth rate for its first few years of operation. Since that time, considerable management time has been spent and investor money utilized to turn the Company's operation around. As of the date of this filing, the Company is currently experiencing a robust growth rate, quality relationships with quality customers, and a significantly improved balance sheet.

The Company's flagship product is called the MediPendant®, which is a personal emergency alarm, often referred to in the industry as a Personal Emergency Response System (PERS), which is used to summon help in the event of an emergency at home. While it is primarily a device for older people, there is also a market for those who are physically disabled, as well as for persons living alone. The MediPendant® device has significant feature and function advantages over other personal medical alarms in the marketplace today. Approximately 70% of all medical alarms currently being sold in the United States are first-generation technologies that require the user to speak and listen through a central base station unit. If the user of one of these older generation products is not within speaking or listening distance to the base station, the user may not be heard by the operator in the centralized emergency monitoring center. The MediPendant® enables the wearer to simply speak and listen directly through the pendant in the event of an emergency. The MediPendant® is designed to be worn in the bath or shower and offers a 600-foot range, so that the wearer can operate the unit from virtually anywhere within their home or on their property. The product is extremely durable, very reliable, and offers an extremely long battery life. The MediPendant® has strong intellectual property patent protection. The patent protects a unique feature of the product, which is voice prompts that alert the user of the operational status of the device. This gives the user some peace of mind during an emergency because they know with certainty that their distress signal has been activated and help is being summoned.

 

During December of 2011, the Company announced that the MediPendant® would be distributed by Costco Wholesale Corporation. Costco is one of the largest retailers in not only the United States, but throughout the world with approximately 75,000,000 customers. The Company's relationship with this retailer has been strong, sales are occurring on a daily basis, and customer satisfaction is high. The Company successfully runs sales programs at Costco including email blasts, Costco coupons, inserts in Costco Magazines, and assorted other promotions. The MediPendant® product will continue to be included in Costco promotions. The MediPendant® has received 28 product reviews on the retailer's website, 21 of which are "5 out of 5 Star" ratings. The average rating is "4.5 Stars" out of 5 Stars.

 

The Company has a relationship with APS Healthcare Bethesda Inc. Under the terms of the contract, the MediPendant® will be offered to qualified individuals, based on certain criteria, at little or no cost to the individual. The health insurance company is responsible for the monthly monitoring fee as well as the cost of the equipment. These programs are not only an added benefit and security measure for qualifying individuals living alone with medical issues, but also as a cost-saving method for health insurance companies, by helping to avoid unnecessary ambulance and emergency room visits. We expect to expand this program to other health insurance companies throughout the country during 2015.

 

The Company has also had successes internationally with distribution agreements and relationships in Denmark, Ireland, Canada, and Bermuda. Medical Alarm Concepts is expecting steady growth from its international markets in 2015 and is currently working on an agreement in Dubai that would create a pilot program to supply medical monitoring with the MediPendant in the Arabic language.

 

The Company also distributes the MediPendant® through Internet marketing via SEO (search engine optimization), online advertising, social media, and relationships with other websites that have synergistic products and customer demographics. We work with several online dealers who promote and sell the MediPendant® on their own websites and through their own online marketing channels.

We also have relationships with outside call centers/monitoring centers whose customer base and marketing efforts are similar to ours. We have a variety of marketing agreements with these call centers to promote the MediPendant® to new and existing customers.

Significant investment is planned to expand sales opportunities relative to the above areas.

 

The Company has spent significant time and money over the past year in an effort to update its financial statements and reporting process.  We have made a total of 16 filings within the past 12 months, and we are now current and a fully reporting publicly traded OTC company.

 

During the last year, seeing that we could create a profitable operation, the Company began to plan for the future.  The stock issued as a result of the Global Settlement Agreement described elsewhere in this prospectus, which was designed to eliminate the Company’s toxic debt, increased the SG&A expenses for the year ending June 30, 2014. This was as a direct result of the costs associated with the stock awarded as part of the Global Settlement Agreement.  This was a one-time event, and the associated expenses will not appear in upcoming financials. The derivative liabilities and the underlying warrants that have been part of our financial statements for the past few years are no longer a part of the Company and its capital structure. All have been retired as a result of the Global Settlement Agreement.

 

The working capital decrease from 2013 in our filings has not changed significantly over the past year, and the stockholders deficit has remained fairly constant as well.  The Company feels that increased sales resulting from its new product launch, and its plans on raising money during 2015, will help improve its stockholders deficit. However, there is no assurance that the company will be able to raise capital successfully.

 

The Company expects the balance of calendar year 2015 and 2016 to be one of continued growth when taking into account the combined effect of both monthly recurring revenues and distribution sales, which will allow the Company to realize sustainable positive operating cash flow. In general, monthly recurring revenues have been growing steadily. Distribution sales (sales of equipment only)in both 2013 & 2014 represented about 30% of total revenue. However, because of our new product (iHelp Mobile Medical Alert System) and its dealer program we are working on, we believe that growth will continue in both monthly revenues and distribution sales and that this growth would be based on the new iHelp Alert system and remain sustainable into the future.

The company recently announced the launch of a new, advanced medical alarm device called the iHelp™. The iHelp™ is an advanced mobile medical alert system, designed to be easy to use, lightweight yet durable, but with significantly advanced features. The company has invested time, manpower, and money into the development and launch of this product. On September 30, 2014 the company signed an agreement for a $300,000 line of credit to enable it to launch iHelp™ and to build the infrastructure that will allow us to buy and track air time from AT&T and T-Mobile for cellular operation of this unit. The iHelp™ has enhanced features and functions including an advanced GPS system, the ability to remotely locate a loved one, patented voice prompts, and a dealer portal that enables dealers to manage their own iHelp customer base. A significant amount of time was spent on the back end systems, including the dealer portal. iHelp™ dealers will have significant benefits, most importantly the ease of use in ordering product, activating and deactivating customers, tracking their customer usage, and creating and printing a variety of reports to assist in billing and collecting revenues. The iHelp™ dealer program is a turn-key program that offers the dealer the opportunity to provide his/her customers with the latest products without having to change his/her own back end. The company has already had a significant amount of interest in the iHelp™ product and anticipates that the iHelp™ will increase its revenues substantially, and enable it to show continued growth in both revenues, gross margins, and cash flow.

The company has also begun its search to acquire synergistic company(s), in an effort to expand the business in other areas of the healthcare-related industry. We believe that adding company acquisitions to our business plan in 2015 will help us with our strategy to build a strong company with long term goals, and enable us to increase our market share in this vastly growing market.

 

The company generates sales mainly through recurring revenues generated by monitoring fees paid by the users of our medical alert systems, equipment sales which are generated by those “dealers” that would like to resell our products to users, and through recurring revenues generated by those dealers who will resell our new mobile alert system (iHelpAlarm) air time that we purchase through Kore, a reseller of air time (AT & T and T-Mobile). Our customers pay us a monthly subscription fee (recurring) in exchange for providing them a service. This creates an initial negative cash flow because the company also needs to supply equipment (a medical alert system) for the customer to be able to use their services. When the customer pushes the emergency button on the unit’s transmitter, an operator at a monitoring center that we subcontract this service to will respond and ask if they need help. Most companies, except possibly for the very largest, in the PERS (Personal Emergency Response System) industry also subcontract this work out because it is often less expensive, the costs are fixed, and they do not have enough customers to take advantage of scaling this cost. We use three different monitoring centers.  We pay a fixed cost for this monitoring (approximately $4 per customer), and pass this on to our “user” for approximately $30 per customer.  The gross margin helps pay for the cost of the medical alert system equipment, the cost for the monitoring, customer service, warranty replacements, and billing functions.  We will either dispatch help, patch the call to a loved one, or answer any questions they may have. The ability to contract this monitoring service has allowed the company to have an exact fee that we are charged for this service, and to create relationships with people in the industry (the monitoring centers) that help us sell our product. With the new arrival of the iHelpAlarm system we will be increasing our equipment sales as this will be a “dealer” program. This unit will be mainly sold directly to dealers and/or monitoring centers who will resell the product and its services directly to users. Additionally, each iHelpAlarm system requires a SIM card for ongoing telecommunications. The Company will continue to charge the dealer a monthly fee for the ongoing telecommunications charges, and this monthly rate will create a profit for the company on an ongoing monthly basis as long as the unit stays activated.

 

The Company recently announced the acquisition of 51% of Medical Sales Group, LLC (MSG).  MSG is owned equally by three individuals, one of which is Ronald Adams, the CEO of Medical Alarm Concepts. MSG was formed primarily to acquire PERS and mPERS accounts in bulk, from dealers that want to quickly capitalize on their account base.  MSG has done several acquisitions and continues to seek out additional dealers interested in selling their existing accounts.  MSG is also seeking to acquire synergistic company(s), in an effort to expand the business in other areas as well. The Company plans to accomplish this by either raising money through an offering, doing acquisitions with stock, or through a combination of both methods. An agreement is in place, but the acquisition will not be completed until an ongoing audit necessary to comply with regulatory requirements is finished.

 

During six months ended December 31, 2014, the Company lent $30,000 to one of employees. There was no transaction in similar nature during the same period of previous year. The loan was made pursuant to a secured promissory note that calls for the entire amount of the loan to be paid in full on or before December 31, 2015. The loan does not bear interest and payments of principal are to be made as soon as possible or in incremental amounts acceptable to the Company. Repayment of the loan is secured by 60,000 common shares of the Company owned by the employee that have been pledged as collateral.

 

Going Concern

 

These consolidated financial statements are presented on the basis that we will continue as a going concern. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business

 

As reflected in the accompanying consolidated financial statements, the Company has working capital deficit of $3,202,857, did not generate significant cash from its operations, had stockholders’ deficit of $2,143,072 and had operating loss for prior three years. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern.

 

While the Company is attempting to generate sufficient revenues, the Company’s cash position may not be enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering, or by alternative methods. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.

 

The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Results of Operations

Results of Operations for Three Months Ended December 31, 2014 and 2013

Net Sales

 

Net sales generated during the quarters ended December 31, 2014 and 2013 were $241,077 and $256,731, respectively; representing a 6% or $15,654 decrease, resulting from decrease in sales to distributors. During the quarters ended December 31, 2014 and 2013, net sales were generated from sales to distributors, resellers and from direct sales to consumers who pay the Company for monthly monitoring services.

 

Cost of Sales

 

Cost of sales incurred during quarters ended December 31, 2014 and 2013 were $41,144 and $102,178, respectively, representing a 60% or $61,034 decrease. The decrease of cost of sales was mainly due to decrease of net sales to distributors and more revenue generated from monitoring services, which has lower costs.

 

Gross Profit

 

Gross profit generated during quarters ended December 31, 2014 and 2013 was $199,933 and $154,553, respectively. The gross profit margin for quarters ended December 31, 2014 and 2013 was 83% and 60%, respectively. The increase in gross profit margin was mainly due to more revenue generated from monitoring services which has higher gross profit margin.

 

General and Administrative

 

General and administrative expenses for quarters ended December 31, 2014 and 2013 were $211,958 and $1,100,300, respectively; representing 81% or $888,342 decrease in general and administrative expense. During three months ended December 31, 2013, the Company issued 1,493,669 shares of common stocks to management pursuant to Global Settlement Agreement and recorded stock compensation expense of $909,915.

 

Selling Expenses

 

Selling expenses incurred during quarters ended December 31, 2014 and 2013 were $69,504 and $83,878, respectively. The $14,374 decrease compared to the previous period.

 

Change in Fair Value of Derivative Instrument

 

Changes in fair value of derivative instrument generated income of $8,096 and $1,035,900 during quarters ended December 31, 2014 and 2013, respectively. This was due to a lower value of the derivative liability at December 31, 2014.

 

Interest Expense

 

Interest expense for the quarter ended December 31, 2014 and 2013 was $38,030 and $81,258, respectively. The $43,228 or 53% decrease in interest expense was mainly due to decreased amount of interest expense recorded on the convertible debt and credit line. The Company also accrued interest of $2,934 on the credit line obtained from a company partially owned by the Company’s CEO during the quarter ended December 31, 2014.

 

Net Loss

 

Net loss incurred during quarter ended December 31, 2014 and 2013 was $114,397 and $74,983, respectively. Change in net income is due to the derivative liabilities and the reasons stated above.

Results of Operations for Six Months Ended December 31, 2014 and 2013

Net Sales

 

Net sales generated during the six months ended December 31, 2014 and 2013 were $512,081 and $521,591, respectively; representing a 2% or $9,510 decrease, resulting from less revenue generated from sales to distributors.

 

Cost of Sales

 

Cost of sales incurred during six months ended December 31, 2014 and 2013 were $103,059 and $163,611, respectively, representing a 37% or $60,552 decrease. The decrease of cost of sales was mainly due to decrease of net sales to distributors and more revenue generated from monitoring services, which has lower costs.

 

Gross Profit

 

Gross profit generated during six months ended December 31, 2014 and 2013 was $409,022 and $357,980, respectively. The gross profit margin for six months ended December 31, 2014 and 2013 was 80% and 69%, respectively. The increase in gross profit margin was mainly due to more revenue generated from monitoring services which has higher gross profit margin.

 

General and Administrative

 

General and administrative expenses for six months ended December 31, 2014 and 2013 were $365,714 and $1,255,266, respectively; representing 71% or $889,552 decrease in general and administrative expense mainly due to the Company recorded $909,915 stock compensation expense for stock issued to management pursuant to Global Settlement Agreement entered in December 10, 2013.

 

Selling Expenses

 

Selling expenses incurred during six months ended December 31, 2014 and 2013 were $129,884 and $125,229, respectively, representing $4,655 or 4% increase due to increased sales compared to the previous period.

 

Change in Fair Value of Derivative Instrument

 

Changes in fair value of derivative instrument generated income of $1,455,035 during six months ended December 31, 2013; comparably, during the same period of 2014, change in fair value of derivative instrument generated expenses of $11,335. This was due to a lower value of the derivative liability at December 31, 2014.

 

Interest Expense

 

Interest expense for the six months ended December 31, 2014 and 2013 was $75,545 and $161,481, respectively. The $85,936 or 53% decrease in interest expense was mainly due to decreased amount of interest expense recorded on to convertible notes and credit line. The Company also accrued interest of $2,934 on the credit line obtained from a company partially owned by the Company’s CEO during the six months ended December 31, 2014.

 

Net Income (Loss)

 

Net income during six months ended December 31, 2013 was $271,039; comparably net loss incurred during the same period of 2014 was $176,390. Change in net income is due to the reasons stated above.

 

Liquidity and Capital Resources

 

As of December 31, 2014 and June 30, 2014, we had $4,671 and $7,673 in cash, respectively.

 

During six months ended December 31, 2014 and 2013, our operating activities incurred net cash outflow of $243,002 and $6,875, respectively. Main reasons for the change in net cash used in operating activities were outlined below:

 

1.

Changes in fair value of derivative instrument during six months ended December 31, 2013 generated non-cash income of $1,455,035, comparably during the same period of 2014, such changes generated non-cash expense of $11,335;

2.

During six months ended December 31, 2013, amortization of discount on convertible notes and interest expense incurred non-cash expense of $28,991 and zero for the six months ended December 31, 2014.

3.

During six months ended December 31, 2013, the increase of deferred revenue generated cash inflow of $41,703; comparably, during the same period of 2014, decrease of deferred revenue incurred cash outflow of $16,559.

4.

During six months ended December 31, 2014 and 2013, expenses incurred from issuance of common stock for services were $1,750 and $955,948, respectively.

5.

During six months ended December 31, 2014 and 2013, the Company paid $97,655 and $5,791 on purchasing inventories.

6.

During six months ended December 31, 2014, the Company paid $42,482 as purchase deposits; comparably, during the same period of 2013, the decrease of purchase deposit generated net cash inflow of $32,661.

 

During six months ended December 31, 2014, the Company lent $30,000 to one of employees. There was no transaction in similar nature during the same period of previous year.

 

During six months ended December 31, 2014 and 2013, financing activities generated net cash inflow of $270,000 and $30,000, respectively. Main reasons for the change in net cash provided by financing activities were outlined below:

 

1.

During six months ended December 31, 2014, the Company raised $275,000 by obtaining a credit line from a company, which is partially owned by the Company’s CEO.

2.

During the six month ended December 31, 2014, the Company made $5,000 loan payment to a vendor. During the six months ended December 31, 2013, the Company received $30,000 proceed from a vendor.

 

We believe we can satisfy our cash requirements for the next twelve months with our current cash flow from business operations, although there can be no assurance to that effect. If we are unable to satisfy our cash requirements, we may be unable to proceed with our plan of operation. We do not anticipate the purchase or sale of any significant equipment. We also do not expect any significant additions to the number of employees. The foregoing represents our best estimate of our cash needs based on current planning and business conditions. In the event we are not successful in reaching our initial revenue targets, additional funds may be required, and we may not be able to proceed with our business plan for the development and marketing of our core services. Should this occur, we may be forced to suspend or cease operations.

 

We anticipate incurring operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.

 

Off-Balance Sheet Arrangements

 

At December 31, 2014, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Item

3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

Item

4.    Controls and Procedures

Evaluation of Disclosure Controls.

 

Our management, under the supervision and with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), has evaluated the effectiveness of our disclosure controls and procedures as defined in SEC Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this Quarterly Report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 ("Exchange Act") is recorded, processed, summarized, and reported within the time periods specified in the SEC’s forms, and that such information is accumulated and communicated to our management including our CEO and CFO, to allow timely decisions regarding required disclosures. Based on their evaluation, our CEO and CFO have concluded that, as of December 31, 2014, our disclosure controls and procedures were ineffective.

 

Our management has conducted, with the participation of our CEO and CFO, an assessment, including testing of the effectiveness, of our disclosure controls and procedures as of December 31, 2014. Based on such evaluation, management identified deficiencies that were determined to be a material weakness.

 

A material weakness is a deficiency, or a combination of deficiencies, in disclosure controls and procedures, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Because of the material weaknesses described below, management concluded that our disclosure controls and procedures were ineffective as of December 31, 2014.

 

The specific material weakness identified by the Company’s management as of December 31, 2014 are described as follows:

 

•

The Company is lacking qualified resources to perform the internal audit functions properly. In addition, the scope and effectiveness of the Company’s internal audit function are yet to be developed.

•

We currently do not have an audit committee.

•

The Company is relatively inexperienced with certain complexities within USGAAP and SEC reporting.

 

Remediation Initiative

 

ž  We are committed to establishing the disclosure controls and procedures but due to limited qualified resources in the region, we were not able to hire sufficient internal audit resources by December 31, 2014. However, internally we established a central management center to recruit more senior qualified people in order to improve our internal control procedures. Externally, we are looking forward to engaging an accounting firm to assist the Company in improving the Company’s internal control system based on the COSO Framework. We also will increase our efforts to hire the qualified resources.

 

ž  We intend to establish an audit committee of the board of directors as soon as practicable. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls.

 

Conclusion

 

The Company did not have sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of generally accepted accounting principles accepted in the United States of America commensurate with the Company’s disclosure controls and procedures requirements, which resulted in a number of deficiencies in disclosure controls and procedures that were identified as being significant. The Company’s management believes that the number and nature of these significant deficiencies, when aggregated, was determined to be a material weakness.

 

Despite of the material weaknesses and deficiencies reported above, the Company’s management believes that its condensed consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented and that this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

 

Changes in internal control over financial reporting.

 

There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item

1.    Legal Proceedings

 

None.

ITEM

1A.              RISK FACTORS

Not applicable.

Item

2.    Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item

3.    Defaults Upon Senior Securities

None.

Item

4.    Mine safety disclosures

Not applicable.

Item

5.    Other Information

None.

Item

6.    Exhibits

Exhibit No.	Description	Incorporated by Reference in Document	Exhibit No. in Incorporated Document
3.1	Amendment to the Articles of Incorporation Filed on September 24, 2009 with the Nevada Secretary of State.	Filed as Exhibit to the Form 8-K filed on September 30, 2009 and incorporated herein by reference.	3.1
31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) and Rule15d-14(a) of the Securities Exchange Act of 1934, as amended	Filed herewith.
32.1	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith.
101 INS**	XRBL Instance Document	Filed herewith.
101.SCG**	XRBL Taxonomy Extension Schema	Filed herewith.
101.CAL**	XRBL Taxonomy Extension Calculation Linkbase	Filed herewith.
101.DEF**	XRBL Taxonomy Extension Definition Linkbase	Filed herewith.
101.LAB**	XRBL Taxonomy Extension Label Linkbase	Filed herewith.
101.PRE**	XRBL Taxonomy Extension Presentation Linkbase	Filed herewith.

**		XRBL (Extensible Business Reporting Language information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of th

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

MEDICAL ALARM CONCEPTS HOLDING, INC.

(Registrant)

 

 

/s/ Ronnie Adams		April 10, 2015	Chief Executive Officer and Chief Financial Officer
Ronnie Adams			(Principal Executive Officer, Principal Financial and Accounting Officer)
/s/ Allen Polsky		April 10, 2015	Director
Allen Polsky