UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D. C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2013

 

or

 

o  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 333-166743

 

MEDL MOBILE HOLDINGS, INC.

 (Exact name of registrant as specified in its charter)

 

NEVADA (State or other jurisdiction of incorporation or organization)

80-0194367  (I.R.S. Employer Identification No.)

 

 18475 Bandilier Circle

Fountain Valley, California 92708

(Address of principal executive offices)

 

(714) 617-1991

(Issuer's telephone number)

 

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 x NO o

 

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 x NO o

 

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. (Check one):

 

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

(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 o NO x

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 45,182,166 shares of common stock as of November 13, 2013.

 

 

 

NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Our disclosure and analysis in this Report contains forward-looking statements that provide our current expectations or forecasts of future events.  Forward-looking statements in this Report include, without limitation:

 

● information concerning possible or assumed future results of operations, trends in financial results and business plans, including those related to earnings, earnings growth, revenue and revenue growth;

 

● statements about the level of our costs and operating expenses relative to our revenues, and about the expected composition of our revenues;

 

● statements about expected future sales trends for our products and services;

 

● statements about our future capital requirements and the sufficiency of our cash and cash equivalents;

 

● other statements about our plans, objectives, expectations and intentions; and

 

● other statements that are not historical fact.

 

            Forward-looking statements generally can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “intends, “plans,” “should,” “seeks,” “pro forma,” “anticipates,” “estimates,” “continues,” or other variations thereof (including their use in the negative), or by discussions of strategies, plans or intentions.  Such statements include but are not limited to statements under Part I, Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Report, and elsewhere in this Report.  A number of factors could cause results to differ materially from those anticipated by such forward-looking statements. The absence of these words does not necessarily mean that a statement is not forward-looking.  Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons.

 

You should not unduly rely on these forward-looking statements, which speak only as of the date of this Report.  We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Report, or to reflect the occurrence of unanticipated events.  You should, however, review the factors and risks we describe in the reports we file from time to time with the Securities and Exchange Commission.

 

 

Table of Contents

 

 

			Page
	PART I
Item 1.	Financial Statements.		4
	Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012		4
	Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012 (unaudited)		5
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (unaudited)		6
	Notes to Consolidated Financial Statements (unaudited)		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		26
Item 4.	Controls and Procedures.		27
	PART II		27
Item 1.	Legal Proceedings.		27
Item 1A.	Risk Factors.		27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		28
Item 3.	Defaults Upon Senior Securities.		28
Item 4.	Mine Safety Disclosures.		28
Item 5.	Other Information.		28
Item 6.	Exhibits.		28
SIGNATURES				28

 

 

ITEM 1. FINANCIAL STATEMENTS.

 

MEDL MOBILE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
			September 30, 2013		December 31, 2012
			(Unaudited)
ASSETS
	Current assets:
	Cash		$                702,804		$               112,745
	Accounts receivable, net		291,790		411,747
	Prepaid expenses		37,135		85,631
	Total current assets		1,031,729		610,123
	Fixed assets, net of depreciation		61,394		106,530
	Other assets:
	Security deposits		14,847		21,147
	Investment in marketable securities		50,000		-
	Intangible asset-customer base, net of amortization		87,000		114,000
	Total other assets:		151,847		135,147
	Total  assets		$             1,244,970		$               851,800
LIABILITIES AND STOCKHOLDERS' EQUITY
	Current liabilities:
	Accounts payable and accrued expenses		$                374,104		$               674,494
	Accrued  compensation expenses		156,940		56,292
	Total current liabilities:		531,044		730,786
	Long term liabilities:
	Deferred lease		28,691		35,317
	Security deposit payable		5,200		-
	Derivative liability		-		6,142
	Total long term liabilities		33,891		41,459
	Total liabilities		564,935		772,245
Stockholders' equity
	Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued and outstanding.		-		-
	Common stock, $0.001 par value, 500,000,000 shares authorized; 45,163,208 and 43,982,309 issued and outstanding at September 30, 2013 and December 31, 2012, respectively		45,163		43,983
	Additional paid-in capital		7,933,185		4,676,588
	Accumulated deficit		(6,998,480)		(4,641,016)
	Total MEDL Mobile Holdings, Inc. stockholders'  equity		979,868		79,555
	Non-controlling interest in subsidiary		(299,833)		-
	Total Stockholders' equity		680,035		79,555
Total liabilities and stockholders' equity			$             1,244,970		$               851,800
The accompanying notes are an integral part of these consolidated financial statements

 

MEDL MOBILE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
	Three Months ended September 30,				Nine Months ended September 30,
	2013		2012		2013		2012
Revenues	$          669,654		$             1,118,232		$       1,552,689		$        2,712,892
Cost of goods sold	217,381		912,076		795,062		1,651,949
Gross profit	452,273		206,156		757,627		1,060,943
Expenses:
Selling, general  and administrative	1,355,229		1,000,144		3,402,247		3,482,154
Total expenses	1,355,229		1,000,144		3,402,247		3,482,154
Net loss before other income (expense)	(902,956)		(793,988)		(2,644,620)		(2,421,211)
Other income (expense):
Change in fair value of warrants	-		93,948		6,142		447,976
Interest expense	(4,822)		-		(18,817)		-
Total other income (expense)	(4,822)		93,948		(12,675)		447,976
Net loss	(907,778)		(700,040)		(2,657,295)		(1,973,235)
Net loss attributable to non-controlling interest	200,002		-		299,833		-
Net loss attributable to MEDL Mobile Holdings, Inc.	$         (707,776)		$               (700,040)		$      (2,357,462)		$       (1,973,235)
NET LOSS PER COMMON SHARE
Basic and Diluted	$               (0.02)		$                     (0.02)		$               (0.05)		$                (0.05)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and Diluted	44,576,979		43,520,923		44,334,146		42,455,871
The accompanying notes are an integral part of these consolidated financial statements

 

MEDL MOBILE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
					For the nine months ended September 30,
					2013		2012
Cash flows from operating activities:
	Net loss				(2,357,462)		$                   (1,973,235)
	Adjustments to reconcile net loss to net cash used in
			operating activities:
		Depreciation and amortization			73,513		50,097
		Stock based compensation on options granted			207,208		161,807
		Change in fair value of derivative liability			(6,142)		(447,976)
		Common stock issued for services			347,750		39,800
		Change in allowance for doubtful accounts			8,000		(16,946)
		Non-controlling interest			(299,833)		-
		Changes in operating assets and liabilities:
			Accounts receivable		111,958		52,116
			Prepaid expenses		48,496		22,985
			Security deposits		6,300		(1,290)
			Deferred Revenue		-		116,184
			Accounts payable and accrued expenses		(199,744)		425,181
			Security deposit payable		5,200		-
			Deferred lease		(6,626)		29,252
Net cash used in operating activities					(2,061,382)		(1,542,025)
Cash flows from investing activities:
	Purchase of office equipment				(1,377)		(77,524)
Net cash used in investing activities					(1,377)		(77,524)
Cash flows from financing activities:
	Proceeds from exercise of stock options				8,316		3,276
	Proceeds from issuance of common stock				-		1,485,000
	Proceeds from issuance of subsidiary common stock				2,644,502		-
Net cash provided by financing activities					2,652,818		1,488,276
Net increase (decrease) in cash					590,059		(131,273)
Cash at beginning of period					112,745		1,075,307
Cash at end of period					$                        702,804		$                        944,034
SUPPLEMENTAL CASH FLOW INFORMATION:
	Interest				$                          18,817		$                                  -
	Income taxes				$                               800		$                               800
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
		FINANCING ACTIVITIES:
	Issuance of common stock for sevices				$                        347,750		$                                  -
	Issuance of common stock for Investment in marketable securities				$                          50,000		$                                  -
	Value of shares issued for Acquisition				$                                  -		$                        221,272
	Acquisition of a software company-intangible asset- customer base				$                                  -		$                      (144,000)
	Prepaid consulting fees related to Acquisition				$                                  -		$                        (77,272)
	Derivative Liability				$                                  -		$                          53,612
The accompanying notes are an integral part of these consolidated financial statements

 

MEDL MOBILE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

 

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

 

MEDL Mobile Holdings, Inc. (the “Registrant” or “the Company”) is a developer, incubator, marketer and aggregator of mobile application software, or “Apps”.

 

The Registrant, formerly known as Resume in Minutes, Inc. was incorporated in Nevada on May 22, 2008.  On June 24, 2011, the Registrant completed a share exchange with MEDL Mobile, Inc. (“MEDL” and together with the Registrant, “we,” “our,” “us,” or the “Company”), a California corporation, and the shareholders of MEDL (the “MEDL Shareholders”) according to which the MEDL Shareholders transferred all of the issued and outstanding capital stock of MEDL to the Registrant in exchange for the issuance to the MEDL Shareholders of an aggregate of 20,000,000 shares of common stock of the Registrant.  As a result of the share exchange, MEDL became a wholly owned subsidiary of the Registrant and the business of MEDL became the sole line of business of the Registrant.

 

The share exchange was accounted for as a reverse-merger and recapitalization. MEDL is the acquirer for financial reporting purposes and MEDL Mobile Holdings, Inc. is the acquired company. Consequently, the assets and liabilities and the operations reflected in the historical financial statements prior to the share exchange are those of MEDL and are recorded at the historical cost basis of MEDL, and the consolidated financial statements after completion of the share exchange include the assets and liabilities of the Registrant and MEDL, historical operations of MEDL and operations of Registrant from the closing date of the share exchange.

 

On February 28, 2012, the Registrant acquired Inedible Software, LLC (“Inedible”), a developer of mobile Apps and related mobile App technologies whose principal asset was a customer list. While the acquisition of Inedible was structured as a purchase of an entity, the Registrant did not acquire any ongoing business operations and the purpose of the transaction was to acquire Inedible’s customer list as a conduit to Apple, Inc. for future potential. As a result, Inedible became a wholly owned subsidiary of the Registrant. The results of operations of Inedible are included on a going forward basis from the date of acquisition although Inedible is no longer actively engaged in any business activities.

 

On November 2, 2012, the Company formed Hang With, Inc. (“Hang With”) a Nevada corporation with 75,000,000 authorized shares of common stock with a par value of $0.001 per share. Hang With allows live real-time video to be sent from one phone to many. The goal of the platform is twofold: 1) to become the premiere social media network for people around the globe to connect, communicate and share experiences via live streaming broadcasts; and 2) to enable celebrities and public figures to easily monetize their fan bases. Any user can be a broadcaster and/or a follower. After a follower receives a notification that the broadcaster is live, the follower views a short pre-roll advertisement before watching a live video feed sent directly from the broadcaster’s smartphone camera. The follower is able to chat with the broadcaster and other followers during the broadcast. A post-roll advertisement ends the broadcast. As of September 30, 2013, we own 76.29% of Hang With.

 

Going Concern

The consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.  The Company incurred a net loss of $2,357,462 for the nine month period ended September 30, 2013, has incurred losses since inception resulting in an accumulated deficit of $6,998,480 as of September 30, 2013, and has had negative cash flows from operating activities since inception.  The Company anticipates further losses in the development of its business.

 

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company’s ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, or its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of all of the entities that make up the Company.  All significant inter-company balances and transactions have been eliminated.

 

Basis of Accounting

The accompanying unaudited interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, stockholders’ equity or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.

 

The results of operations for the nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2013. The accompanying statements should be read in conjunction with the more detailed financial statements, and the related footnotes thereto, included in the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2013.

 

Use of Estimates

The preparation of financial statements in conformity with 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  On an on-going basis, the Company evaluates its estimates, including, but not limited to, those related to investment tax credits, bad debts, income taxes and contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

 

 Revenue Recognition

Our main source of revenue is from the development of custom applications or “Apps” for customers. We use a hybrid method for recognizing revenue that includes elements from both ASC 985-605, Software Revenue Recognition and ASC 605-35, Construction-Type and Production-Type Contracts.

 

We recognize revenues in accordance with ASC 985-605 when persuasive evidence of an agreement exists, delivery of the software has occurred, the fee is fixed or determinable, and collectability is probable. Nonrecurring revenues related to perpetual license sales with multiple elements are recognized in accordance with the guidance on software revenue recognition.

 

When the arrangement with a customer includes significant production, modification, or customization of the software, we recognize the related revenue using the percentage-of-completion method in accordance with the accounting guidance and certain production-type contracts contained in ASC 605-35.  We use the percentage of completion method provided all of the following conditions exist:

 

·

the contract includes provisions that clearly specify the enforceable rights regarding goods or services to be provided and received by the parties, the consideration to be exchanged and the manner and terms of settlement;

·

the customer can be expected to satisfy its obligations under the contract;

·

the Company can be expected to perform its contractual obligations; and

·

reliable estimates of progress towards completion can be made.

 

We measure completion based on achieving milestones detailed in the agreements with the customers. Costs of providing services, including services accounted for in accordance with ASC 605-35, are expensed as incurred.

 

The following is an example of how revenue is recognized involving an arrangement with a customer that includes significant production, modification, or customization of the software: a typical project will require between 50-100 working days from beginning to end.  On average 25-50 cumulative working days are expended prior to the start of development and this work typically includes, design, storyboards, and architecture. Prior to developing the App, hard costs are incurred as a number of variables are taken into account for preparation.  Those often include the following:

 

·

understanding the client's business situation and environment, including their competitive landscape;

·

researching and establishing the goals of the App;

·

understanding and researching the target and potential App use cases;

·

developing a monetization strategy;

·

determining functionality and articulating the functionality through a storyboard and functional specification document; and

·

determining the resources and timeline needed to complete the final work product.

 

Fifty percent (50%) of the work is completed upon completion of these five phases and at that point in time the customer typically signs our contract and makes a nonrefundable 50% payment. We record the 50% nonrefundable payment as revenue at that point in time. When the Beta version of the App is complete, or at such other time as may be specifically agreed to in the contract, the customer is invoiced for an additional 25% of the total contract price and such payment is booked as revenue. When the App is completed and ready for App store release, the customer is invoiced for the final 25% of total contract price and such payment is booked as revenue.

 

We also generate revenue from in App advertising and the sale of Apps through the Apple store and other App marketplaces. Revenue from advertising is recognized in the period that the ad impressions are delivered, on an accrual basis. Revenue from the sale of Apps is recognized in the period the App is sold to the end user, on an accrual basis.

 

Marketable Securities

Marketable securities are investments in publicly traded equity securities and are generally restricted for sale under Federal securities laws. Since these securities are often restricted, the Company is unable to liquidate them until the restriction is removed. Pursuant to ASC Topic 320, “Investments –Debt and Equity Securities” the Company’s marketable securities have a readily determinable and active quoted price, such as from NASDAQ, NYSE Euronext, the Over the Counter Bulletin Board, and the OTC Markets Group.

 

Marketable securities are carried at fair value, with changes in unrealized gains or losses are recognized as an element of comprehensive income based on changes in the fair value of the security.  Once liquidated, realized gains or losses on the sale of marketable securities will be reflected in the net income (loss) for the period in which the security was liquidated.

 

Intangible Assets 

Intangible assets are stated at cost. Expenditures of costs incurred to renew or extend the term of a recognized intangible asset and materially extend the useful life are capitalized. When assets are sold or otherwise written off due to asset impairment, the cost and the related accumulated amortization are removed from the accounts and any realized gain or loss is recognized at that time. Useful lives of intangible assets are periodically evaluated for reasonableness and the assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may no longer be recoverable. 

 

Amortization is computed primarily on the straight-line method for financial statement purposes over the estimated useful life. Estimated useful lives will vary based on the nature of the intangible asset. 

 

Fair Value of Financial Instruments 

The Company adopted ASC 820, Fair Value Measurements and Disclosures, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that requires the use of fair value measurements which establishes a framework for measuring fair value and expands disclosure about such fair value measurements. 

 

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

 

	Level 1:	Observable inputs such as quoted market prices in active markets for identical assets or liabilities
	Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data
	Level 3:	Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

 The carrying amounts reported in the balance sheet for cash, accounts payable, and accrued liabilities approximate their estimated fair market value based on the short-term maturity of this instrument. 

 

In addition, FASB ASC 825-10-25, Fair Value Option was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.

 

The following table presents a reconciliation of the derivative liability measured at fair value on a recurring basis using significant unobservable input (Level 3) from December 31, 2012 to September 30, 2013: 

 

			Conversion feature derivative liability
Balance December 31, 2012		$	6,142
Change in fair value			(6,142	)
Balance September 30, 2013		$	-0-

 

Goodwill and Other Intangible Assets 

In accordance with ASC 350-30-65 (formerly SFAS 142, Goodwill and Other Intangible Assets), the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Intangible assets were comprised of website assets. Factors the Company considers to be important which could trigger an impairment review include the following:

 

1.

Significant underperformance relative to expected historical or projected future operating results;

 

2.

Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

 

3.

Significant negative industry or economic trends.

 

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. The Company did not consider it necessary to record any impairment charges during the period ended September 30, 2013. 

 

Stock-Based Compensation 

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

 

Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.

 

Recent Accounting Pronouncements

In April 2013, the FASB ASU 2013-07, “Presentation of Financial Statements: Topic Liquidation Basis of Accounting”. ASU 2013-07 requires an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is considered imminent when the likelihood is remote that the organization will return from liquidation and either: (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties; or (b) a plan for liquidation is being imposed by other forces. ASU 2013-07 will be effective for the Company beginning on January 1, 2014. The Company does not expect the adoption of ASU 2013-07 to have a material impact on its financial position, results of operations nor cash flows.

 

In July 2013, the FASB issued ASU 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." ASU 2013-11 provides guidance on the presentation of unrecognized tax benefits related to any disallowed portion of net operating loss carryforwards, similar tax losses, or tax credit carryforwards, if they exist. ASU 2013-11 is effective for fiscal years beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact on the Company’s consolidated financial statements.

There were other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.   

 

NOTE 3 - RELATED PARTY TRANSACTIONS

 

In 2011 the Company entered into a sub-lease with a company in which the Company’s CEO and his family are shareholders.  The sublease is for approximately 4,500 square feet.  The term of the sub-lease is from January 1, 2011 and ends at November 30, 2015 (see Note 5 for further details).

 

NOTE 4 – INVESTMENT IN MARKETABLE SECURITIES

 

On March 8, 2013, in connection with a strategic license agreement, the Company issued 147,692 shares of common stock, valued at $50,000, to the licensor and the licensor issued to the Company 2,500,000 shares of licensor’s common stock, valued at $50,000. The license gives us the right to sell a limited license for United States Patent Number 7,822,816 to business entities that license or purchase our Apps. Under the license, the Company is required to pay the licensor 12.5% of the gross amounts received from purchasers who acquire the limited license to use the patent.

 

These securities are publicly traded equity securities and are currently restricted for sale under Federal securities laws. Since these securities are restricted, the Company is unable to liquidate them until the restriction is removed. Pursuant to ASC Topic 320, “Investments –Debt and Equity Securities” the Company’s marketable securities have a readily determinable and active quoted price, such as from NASDAQ, NYSE Euronext, the Over the Counter Bulletin Board, and the OTC Markets Group.

 

Marketable securities are carried at fair value, with changes in unrealized gains or losses recognized as an element of comprehensive income based on changes in the fair value of the security.  No change in fair value was recorded during the three months ended September 30, 2013. Once liquidated, realized gains or losses on the sale of marketable securities will be reflected in the net income (loss) for the period in which the security was liquidated.

 

NOTE 5 - COMMITMENTS AND CONTINGENCIES

 

Lease

The Company was party to three non-cancelable lease agreements for office space through 2015. The first lease is a sub-lease for approximately 4,500 square feet of space located at 18475 Bandilier Circle, unit A, Fountain Valley, CA.  The term of the sub-lease is from January 1, 2011 and ends on November 30, 2015.  The second lease was for approximately 4,786 square feet and was located at 18350 Mt. Langley Street, Fountain Valley, CA.  The term of this lease was September 1, 2011 through February 28, 2013.  The third lease is for approximately 6,034 square feet of space located at 18475 Bandilier Circle, unit B, Fountain Valley, CA.  The term of this lease is from May 1, 2012 and ends on November 30, 2015.

 

At September 30, 2013, aggregate future minimum payments under these leases is as follows:

 

2013		$	37,353
2014			153,676
2015			150,712
Total		$	341,741

 

The Company subleased the 6,034 square feet of space located at 18475 Bandilier Circle, unit B, Fountain Valley, CA with its landlord’s approval from September 1, 2013 through November 30, 2015, with an annual base rent of $61,547.

 

The rents received from this sublease will be used to offset the corresponding rental expense. The total future minimum lease rental income under the rental lease agreement is as follows:

 

 

2013		$	15,387
2014			61,547
2015			61,547
Total		$	138,481

 

 

NOTE 6 – LINE OF CREDIT

 

On January 17, 2013, the Company entered into a three-year, $500,000 secured revolving credit agreement (the “Line”). The Line is a revolving line of credit that allows the Company to repay principal amounts and re-borrow them at any time during the three-year term. The interest rate on borrowed funds is 10% per annum and the interest rate on undrawn funds is 2.0% per annum. Interest is due within 10 business days following the end of each calendar month. The outstanding balance as of September 30, 2013 is $0.00. All borrowed funds from the Line are secured by a lien on all of the Company’s assets. Interest expense for the three and nine months ended September 30, 2013 is $4,822 and $18,817, respectively.

 

NOTE 7 – STOCKHOLDERS’ EQUITY

 

Preferred Stock

The authorized preferred stock of the Company consists of 10,000,000 shares of preferred stock at a par value of $0.001.  As of September 30, 2013, the Company had no outstanding shares of preferred stock.

 

Common Stock

The authorized common stock of the Company consists of 500,000,000 shares of common stock with a par value of $0.001.

 

On January 2, 2012, the Company issued 41,667 shares of common stock for advisory services at a price per share of $.90 for total expense of $37,500.

 

On February 28, 2012, the Registrant acquired Inedible, a developer of mobile Apps and related mobile App technologies whose principal asset was a customer list, in exchange for 442,542 shares of common stock of the Company. Since the purchase price was not paid in cash, the Company accounted for the value under ASC 805-50-30-2, Business Combinations whereby the measurement of value is based on either (i) the cost which is measured based on the fair value of the consideration given, or (ii) the fair value of the assets (or net assets) acquired, whichever is more clearly evident and thus more reliably measurable. The fair value of the shares issued amounted to $221,272, which was allocated between intangible assets – customer base for $144,000, and $77,272 to prepaid consulting fees.

 

On March 28, 2012, the Company issued to an accredited investor 3,000,000 shares of common stock and a warrant to purchase 1,000,000 shares of common stock for an aggregate purchase price of $1,500,000. The warrant has a three year term and may be exercised at an exercise price of $0.90 per share, subject to adjustment in the case of stock splits, distributions, reorganizations, recapitalizations and the like, and may be exercised on a cashless basis under certain circumstances. The warrant contains full ratchet anti-dilution protection in the case of a share issuance for consideration less than the then exercise price of the warrant, subject to customary exceptions.

 

On May 22, 2012 the Company entered into a consulting agreement for advisory services and agreed to issue up to 200,000 restricted shares of common stock under its 2011 Equity Incentive Plan in two tranches of 100,000 shares each. The issuance of these shares is being made under the Company’s 2011 Equity Incentive Plan. The first tranche of 100,000 shares vested on November 30, 2012; those shares were valued at the market price on the date of the agreement. The expense for the first 100,000 shares was amortized over the six-month period beginning May 22, 2012, with a total expense of $30,000. The Company had the option to terminate the agreement after six months but opted not to. The second tranche of 100,000 shares was issued in December 2012 and vested over a six-month period beginning November 22, 2012. Those 100,000 shares were valued at the market price on November 22, 2012. The expense for second 100,000 shares was amortized over the six-month period beginning November 22, 2012, with a total expense of $15,000. The 200,000 shares were issued on December 28, 2012.

 

On June 28, 2012 the Company granted a 10-year option to purchase 500 shares of common stock to a consultant at an exercise price of $0.30 per share under our 2011 Equity Incentive Plan.

 

On July 6, 2012 options to purchase 7,500 shares of common stock were exercised for a total exercise price of price of $1,875. The options were issued under our 2011 Equity Incentive Plan.

 

On September 25, 2012 the Company issued under its 2011 Equity Incentive Plan 10,000 shares of common stock for advisory services at a price per share of $0.23 for total expense of $2,300.

 

On November 14, 2012, the Company agreed to issue under its 2011 Equity Incentive Plan 250,000 shares of common stock for accounting services to Murray Williams as the Company's new Chief Financial Officer at a price per share of $0.18 for a total amount of $45,000. The shares vest quarterly over eight (8) quarters with the first tranche of 31,250 shares vesting on Feb 2, 2013. The 250,000 shares were issued on December 28, 2012. The $45,000 amount was recorded as prepaid expense and is being amortized monthly over the 24-month vesting period.

 

On February 21, 2013, the Company issued 200,000 shares of common stock at $0.50 per share for $100,000 of certain outstanding legal fees.

 

On March 8, 2013, in connection with a strategic license agreement that granted the Company the right to sell a limited license for United States Patent Number 7,822,816, the Company issued 147,692 shares of common stock, valued at $50,000, to the licensor and the licensor issued to the Company 2,500,000 shares of he licensor’s common stock, valued at $50,000.

 

On June 6, 2013, the Company issued 75,000 shares of common stock at $0.50 per share for $24,000 of certain outstanding marketing fees and $13,500 for a 4-month marketing services agreement from June to September 2013. The $13,500 expense for the shares issued for the 4-month marketing agreement was amortized over the four-month period beginning June 6, 2013.

 

On September 11, 2013, in connection with a strategic license agreement with a famous musician, the Company issued 725,000 shares of common stock, valued at $210,250, to the musician and his agents.

 

On September 30, 2013, the Company issued 33,207 shares of common stock for employee stock option exercises resulting in proceeds of $8,316.

 

Hang With, Inc. Subsidiary Common Stock

The authorized common stock of Hang With, Inc. consists of 75,000,000 shares of common stock with a par value of $0.001.

 

Between January 10, 2013 and September 30, 2013, our Hang With, Inc. (“Hang With”) subsidiary raised an aggregate of $2,644,502 from for the sale of 3,107,335 shares of Hang With common stock to accredited investors. The sale of the Hang With shares was effected as a private placement intended to be exempt under Rule 506 of Regulation D and Regulation S. As of September 30, 2013, non-controlling shareholders own 23.71% of Hang With. In accordance with GAAP, the financial results of Hang With are consolidated in the Company’s financial statements, and the portion of net loss attributable the 23.71% non-controlling interest is disclosed as a separate line item in the Company’s unaudited financial statements included herein.

Warrants

The Company has warrants outstanding to purchase 1,000,000 shares of common stock at $0.90 per share as of September 30, 2013. The warrants are subject to full ratchet anti-dilution protection if the Company sells shares or share equivalents at less than the $0.90 exercise price.  Since the warrants do not meet the conditions for equity classification, the warrants are required to be carried as a derivative liability, at fair value.  Management estimates the fair value of the warrants on the inception date, and subsequently at each reporting period, using the Lattice option-pricing model, adjusted for dilution, because that technique embodies all assumptions (including volatility, expected terms, dilution and risk free rates) that are necessary to determine the fair value of freestanding warrants. This resulted in a derivative liability value of zero on the balance at September 30, 2013. Significant inputs in calculating this valuation using the Lattice option-pricing model are as follows:

 

		September 30, 2013
Expected volatility			43.2%
Expected term			1.5 Years
Risk-free interest rate			0.40%
Expected dividend yield			0%

 

2011 Equity Incentive Plan

The board of directors adopted the 2011 Equity Incentive Plan, as amended, (the “Plan”) of MEDL Mobile Holdings, Inc. (Nevada) that provided for the issuance of a maximum of 10,000,000 shares of common stock.   As of September 30, 2013, there were options to purchase 5,549,300 shares outstanding under the Plan and approximately 3,944,393 shares remained available for future grant under the Plan.

 

The Company generally grants stock options to employees and directors at exercise prices equal to the fair market value of the Company's stock on the dates of grant. Stock options are typically granted throughout the year and generally vest over four years of service thereafter and expire ten years from the date of the award, unless otherwise specified. The Company recognizes compensation expense for the fair value of the stock options over the requisite service period for each stock option award.

 

Total share-based compensation expense included in the consolidated statements of operations for the nine months ended September 30, 2013 and 2012 was $207,208 and $161,806, respectively. For the nine months ended September 30, 2013, compensation expense included in selling, general and administration is $166,942. Compensation expense included in cost of goods sold is $40,266.

 

Option activity for the three months ended September 30, 2013 was as follows:

 

Assumptions: 

		2013
Dividend yield			0.00
Risk-free interest rate			.40%
Expected volatility			43.2%
Expected life (in years)			10.00

 

 

						Weighted Average				Weighted Average
						Exercise				Remaining				Aggregate
						Price				Contractual				Intrinsic
		Options				($)				Life (Yrs.)				Value ($)
Options outstanding at June 30, 2013			5,367,007				0.27				8.34			$	330,458
Granted			215,500				0.31				8.82			$	8,785
Exercised			(33,207	)			0.25				—				—
Forfeited or cancelled			—				—				—				—
Options outstanding at September 30, 2013			5,549,300				0.27				8.24			$	280,941
Options expected to vest in the future as of September 30, 2013			2,050,165				0.27				8.35			$	112,713
Options exercisable at September 30, 2013			3,499,135				0.27				7.98			$	168,228
Options vested, exercisable and options expected to vest at September 30, 2013			5,549,300				0.27				8.12			$	280,941

 

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock as of September 30, 2013 for those awards that have an exercise price currently below the closing price.

 

Unvested share activity for the three months ended September 30, 2013 was as follows:

 

				Unvested				Weighted
				Number of				Average Grant
				Options				Fair Value
	Unvested balance at June 30, 2013				2,592,583				0.19
	Granted				215,500				0.18
	Vested				(344,799	)			0.15
	Cancelled				—				—
	Forfeited				—				—
	Unvested balance at September 30, 2013				2,050,165				0.19

 

 At September 30, 2013, there was $416,192 unrecognized share-based compensation expense related to unvested employee share options with a weighted average remaining recognition period of 2.11 years.

  

NOTE 8– SUBSEQUENT EVENTS

 

On October 21, 2013, the company issued 18,958 shares of common stock for employee stock option exercises resulting in proceeds of $1,346.

 

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

 

Forward Looking Statements

 

Some of the statements contained in this Form 10-Q that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 10-Q, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events.

 

All written forward-looking statements made in connection with this Form 10-Q that are attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

 

In this section, unless the context indicates otherwise, all references herein to “MEDL,” “the Company,” “we,” “our” or “us” refer collectively to MEDL Mobile Holdings, Inc. and its wholly owned subsidiaries.

 

Overview

 

We have built a system for developing and taking ownership of mobile application software, or “Apps”. To date, we have developed a library of approximately 200 Apps for iPhone, iTouch, iPad and Android. MEDL and MEDL Apps have been featured on CNBC, BBC, ABC, CBS, NBC, CNN, in the pages of Esquire, Fast Company, The New York Times, The LA Times, The Chicago Tribune, The Orange County Register, The Washington Post and The Guardian; and by top sites such as Mashable, Macworld and Gizmodo. Multiple MEDL Apps have reached #1 in their category on the Apple App Store.

 

In the fourth quarter of 2012 we reorganized our corporate focus to better capitalize upon market opportunities. MEDL is now focused on three symbiotic areas of opportunity:

 

1.

MEDL Custom Development

Mission:

To develop the cutting edge standard for mobile applications across platform, operating system and classification - on behalf of third parties.

 

2.

MEDL Marketing Technologies

Mission: To create scalable technology solutions which solve the challenges of discovery and monetization in the mobile ecosystem.

 

3.

MEDL Ventures

Mission: To incubate and develop the next generation of great mobile apps, both in partnership and as wholly owned entities.

 

1. Custom Development

 

Our custom development arm develops Apps for customers that vary in size from small start-ups to large multinational corporations, in a diverse range of industries including retailing, fast food, air travel, medical devices, higher education and fashion.  We are typically paid a fixed price for development of the App. Our customers cover the development costs and own the final work product while we retain ownership of the elements of the computer code.  

 

MEDL believes it is known for high quality strategic mobile development, securing development and consulting contracts with companies such as: Hyundai, Disney, Taco Bell, Iconix Brand Group, Monster.com, Emirates Airlines, Teleflora, Medtronic, Kaiser Permanente and About.com.

 

At the present time, we prepare for our customers, packages for sale in the Apple App Store and the Google Android Marketplace. This package includes App store copy, sample screen shots and SEO tags to improve discovery of the Apps in the App stores. We are familiar with the App stores’ requirements and our average approval time is 5-10 days.  During this phase, we also work with customers to develop a custom launch plan, or to augment their existing plans. We use tools including social network marketing, viral videos, bloggers, banner marketing, public relations and integration into our clients’ existing advertising and marketing strategies to further this launch plan.  We also leverage our deep marketing and advertising experience to work with advertising, media and PR agencies.

 

In addition, we provide maintenance, reporting and upgrades and also integrate third party vendors into an App to provide a complete suite of user analytics, which allows customers to track downloads, total number of App user sessions, time spent per session, features of the App accessed and advertising click-through.

 

2. Marketing Technologies

 

Our MEDL Marketing Technologies operations were created to drive user acquisition and create an ever-growing base of users who can be monetized via advertising and sponsorship. Marketing Technologies aims to solve a vast inefficiency in the market. The low barrier to entry for App development encourages innovation on a massive scale, causing developers to create new Apps faster than consumers can find them.

 

We believe that we have solved this problem by developing a patent-pending algorithmic MEDL Brain that learns user behavior and then makes recommendations based upon this user behavior (“MEDL Brain”). This fully proprietary technology collects quantitative and qualitative user analytics and analyzes user behavior in order to place users into “Mobile Lifestyle” categories. As the Brain collects data and “gets smarter”, it can use these Mobile Lifestyle categories to continuously make better recommendations. Each user’s data is kept in a Detailed Anonymous Profile (“DAP”). As a user engages a mobile application, the DAP collects information such as:

 

·

Device Data: Operating System, Language Settings, Device Type

·

Quantitative Data: Location, Frequency, Timing and Duration of Usage

·

Qualitative Data: Direct input data, App Meta data, usage patterns, direct feedback

 

App usage crosses traditional demographic profiles. By categorizing users into “Mobile Lifestyles” we are able to better target recommendations for new apps, ads, content, etc. MEDL has analyzed nearly 6 million of our users and ranked them on a variant scale according to approximately 250 different “Mobile Lifestyles” such as: Active, Adult, Age, Alternative, Artistic, Athletic, Beauty Conscious, Business Person, Gender, Housewife, Gamer, Education, Budget, Creative, Employment, Marital Status, Musician, Optimistic, Organized, Outdoorsman, Parent, Planner, Profession, Religious, Single, Sports Fan, Sportsman, etc.

 

Using this technology, we believe we will be able to 1) drive exponential downloads of Apps in the MEDL Library, and 2) better monetize our user-base via targeted advertising messages. We have an aggressive campaign to extend the reach of our MEDL Brain by acquiring underperforming Apps and redeploying them with our technology embedded through our MEDL Alliance program.

 

Push Recommendations

MEDL has developed a proprietary Push Notification Center that allows us to communicate directly with our users via push messaging. The Notification Center is able to send push notifications to groups of users by App and will soon be able to target direct push notification to a specific user based upon their DAP, allowing MEDL to send targeted push notifications based on specific mobile lifestyles.

 

Growth of the network through the MEDL Alliance

With more than 1,000,000 Apps in existence, and more being created every day, we believe that the App stores have become seas of distressed intellectual property. Tens of thousands of great Apps are languishing, unable to break through the clutter and make money.

 

We believe the MEDL Alliance solves the problem of increasing App proliferation while also driving rapid growth of the MEDL Library through acquisition. MEDL’s developer outreach program is now ongoing with new Apps being added to the library on an ongoing basis. More than 50 new Apps were added to our library in 2012.

 

Defined Search Criteria

MEDL has developed proprietary software that can identify existing Apple and Android Apps that meet specific acquisition criteria. Once target Apps have been identified, MEDL contacts them and in many cases can acquire these applications for a percentage of future revenues.

 

Low cost/No cost Acquisition

In the Alliance model, MEDL can often take ownership of all app-related IP and source code in exchange for a percentage of future revenues.

 

Easy Onboarding

MEDL has streamlined its on-boarding process in order to rapidly add new Apps into the MEDL library via the company’s proprietary custom-developed SDK.

 

Generating revenue through mobile advertising

Advertising Apps, products and services from within our applications represents a major opportunity for revenue moving forward.

 

Monetization beyond advertising

As the App economy continues to evolve, we are getting more sophisticated in our App monetization strategies. Our primary monetization strategies beyond advertising are Pay-to-Download and Freemium.

 

Pay-to-download - Users pay a one-time fee to download an application. MEDL Apps range in price from $.99 to $24.99 per copy.

 

Freemium- In this newly dominant method of monetization, the strategy is to give away the App for free - and then charge for the purchases of digital goods, additional content, to unlock items, etc.

 

MEDL has a large and growing library of Apps that are monetized via Freemium content - either through the sale of Digital Goods, or through the purchase of coins in a virtual Micro Economy.

 

Digital Goods - Digital objects are purchased within an application. Some examples of MEDL Apps that sell Digital goods include:

·

My Wild Night with Ted

·

Cheech & Chong

·

Zane Lamprey

·

Walter Foster Learn to Draw

·

KIDS Learn to Draw with Walter Foster

·

Military Regulations

·

Marlee Signs

·

Know Skateboarding Pro Tips

·

Tyzen Hypnosis

 

Micro Economy - In this strategy a secondary economy is created within the game. The user must earn or purchase credits that can be used to unlock digital goods.

·

This model is employed by MEDL’s mobile App called Journey to Real Madrid that was developed as a revenue share and as an officially licensed product of Real Madrid.

 

3. MEDL Ventures

 

We identify emerging mobile initiatives that we believe will yield a high rate of return on investment and we create or acquire Apps that address those initiatives. In the fourth quarter of 2012 we made a significant shift of company resources in order to properly capitalize upon MEDL Ventures. We believe that this shift will allow us to grow this area of our business, and our overall business, more rapidly.

 

We evaluate Apps according to six criteria:

 

1. Original: We are not interested in redoing what others have already done.

2. Functional: Does it perform a service people want? Does it perform that service well?

3. Social: Does it have the ability to plug into the social graph in a way that’s meaningful?

4. Simple: Can you pitch it in one sentence?

5. Marketability: Can we drive downloads using our existing marketing network.

6. Profitable: Can it be monetized?

 

Hang w/

The patent-pending “Hang w/” App allows live real-time video to be sent from one phone to many. The goal of the platform is twofold: 1) to become the premiere social media network for people around the globe to connect, communicate and share experiences via live streaming broadcasts; and 2) to enable celebrities and public figures to easily monetize their fan bases. The “Hang w/” live social mobile video platform was approved for release by Apple on March 20, 2013 and is available for download on the Apple App Store. The “Hang w/” live social mobile video platform was approved for release by Google on July 9, 2013 and is available for download on android phones via the Google Apps Marketplace. This new App provides an important new channel of advertising revenue. “Hang w/” allows live real-time video to be sent from one phone to many. Any user can be a broadcaster and/or a follower. After a follower receives a notification that the broadcaster is live, the follower views a short pre-roll advertisement before watching a live video feed sent directly from the broadcaster’s smartphone camera. The follower is able to chat with the broadcaster and other followers during the broadcast. A post-roll advertisement ends the broadcast.

 

MEDL Incubator and Partnerships

We work with internal teams and outside partners to incubate new mobile Apps that are either wholly owned by us or joint-owned by us and outside partners. The costs of development of partner Apps is typically covered in part by our partner and our partner provides their unique IP, perspective or licensed materials. Revenue from Apps that are developed in partnership is typically shared 50/50 with our development partners. MEDL has secured partnerships and revenue sharing deals with partners such as Real Madrid, DJ Pauly D, Quinton “Rampage” Jackson, Walter Foster Publishing, Encyclopedia Britannica, Cheech & Chong, Iowa State University and others.

 

Additionally, MEDL receives a steady flow of new App ideas that are submitted to MEDL via our proprietary App and web portal known as “The App Incubator.” To date, more than 100,000 original App concepts have been submitted to us via The App Incubator.    If the submission passes a series of tests it goes into development and eventually production.  All ideas submitted pursuant to The Incubator App or website become our property.  Submitters receive 25% of net revenues (proceeds received by us after App store commissions are taken out) generated by the App after all costs paid by us to develop and market the App have been reimbursed.  We evaluate Apps based on their originality, functionality, simplicity, revenue opportunity, marketability, and on the submitters’ motivation and subject matter expertise.

 

MEDL Key Performance Indicators:

A primary goal of MEDL Mobile is to accumulate a large user base that we can monetize through various revenue streams. We routinely monitor the following user metrics as a barometer of progress:

 

·

MEDL API Installs - Total Installations of the MEDL API (MEDL Brain/Analytics/Advertising Platform) increased to 5,052,179 for 2012 from 760,746 in 2011, an increase of 564%.

 

·

Daily Active Users - Daily Active Users (DAUs) of Apps in MEDL’s library increased to an average of 45,194 in 2012 from an average of 5,588 in 2011, an increase of 708%.

 

·

Monthly Active Users - Monthly Active Users (MAUs) of Apps in MEDL’s library increased to an average of 754,286 in 2012 from an average of 78,432 in 2011, an increase of 861%.

 

·

User Sessions - Total User Sessions of Apps in MEDL’s library increased to 28,162,433 for 2012 from 3,700,110 for 2011, an increase of 661%.

 

Results of Operations

 

Three Months Ended September 30, 2013 Compared to the Three Months Ended September 30, 2012 (unaudited)

 

The following table presents our results of operations for the three months ended September 30, 2013 compared to the three months ended September 30, 2012.

 

	Three Months ended September 30,
	2013			2012			$ Change			% Change
Revenues	$	669,654		$	1,118,232		$	(448,578)		-40%
Cost of goods sold		217,381			912,076			(694,695)		-76%
Gross profit		452,273			206,156			246,117		119%
Expenses:
Selling, general and administrative		1,355,229			1,000,144			355,085		36%
Loss from Operations		(902,956)			(793,988)			(108,968)		22%
Other income (expense):
Change in fair value of warrants		-			93,948			(93,948)		-100%
Interest expense		(4,822)			-			(4,822)		100%
Net loss		(907,778)			(700,040)			(207,738)		30%
Less: Net loss attributable to non-controlling interest		200,002			-			200,002		100%
Net loss attributable to MEDL Mobile Holdings, Inc.		(707,776)			(700,400)			(7,736)		1%

 

Revenues

 

Revenues primarily consisted of fees we received for developing custom Apps for third parties. Revenues for the three months ended September 30, 2013 decreased to $669,654 as compared to $1,118,232 for the three months ended September 30, 2012, a decrease of $448,578 or 40%. The decrease is primarily attributable to a reduction in the development of customized mobile applications for third parties during the three months ended September 30, 2013 as compared to the three months ended September 30, 2012 due to our continued focus on the development and expansion of the “Hang w/” App. Hang With pays us for providing product development and maintenance services for live social mobile video App. The revenue paid to us by Hang With for the development of the “Hang w/” App is eliminated in consolidation because we owned 76.29% of Hang With as of September 30, 2013.

 

Based on the unpredictability of market and customer demand for our services, we cannot accurately predict revenue trends on a quarter-to-quarter basis.

 

Cost of Goods Sold

 

Cost of goods sold consists primarily of the cost of our employees and the cost of our contractors engaged in developing Apps for our customers. Cost of goods sold for the three months ended September 30, 2013 decreased to $217,381 as compared to $912,076 for the three months ended September 30, 2012, a decrease of $694,695 or 76%. The decrease is primarily due to the reduction in employees and outside contractors because of the reduction in the development of customized mobile applications for third parties in order to focus on the continued development of the “Hang w/” App. The costs of goods sold for the development of the “Hang w/” App are eliminated in consolidation because we own 76.29% of Hang With as of September 30, 2013.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses for the three months ended September 30, 2013 increased to $1,355,229 as compared to $1,000,144 for the three months ended September 30, 2012, an increase of $355,085 or 14%. The increase is primarily attributable to our shift in focus from the development of customized mobile applications for third parties to the development of the “Hang w/” App. Reducing the number of customized mobile applications we build for third parties allowed for various cutbacks resulting in a $362,865 decrease in payroll and contract labor costs, a $49,397 decrease in marketing expense, and an $832 decrease in general and administrative expenses. In addition, bad debt decreased by $34,179 and better management of legal and other professional fees resulted in a $48,232 decrease in legal, accounting and other professional fees. These reductions were offset by $843,645 in expenses for our Hang With, Inc. subsidiary and a $6,945 increase in insurance expense.

 

Other Income/Expense

 

Other expense for the three months ended September 30, 2013 was $4,822 as compared to other income of $93,948 for the three months ended September 30, 2012, a decrease of $98,770 or 105%. The decrease is mainly attributable to a $93,948 decrease in the recorded fair value of warrants issued in a private placement in March 2012, and the remaining decrease relates to $4,822 of interest expense on the $500,000 line of credit in 2013. Since the line of credit was not in place in 2012, we did not incur interest expense in 2012.  

 

Net Loss

 

Net loss attributable to MEDL Mobile Holdings, Inc. for the three months ended September 30, 2013 increased to $707,776 as compared to $700,040 for the three months ended September 30, 2012, an increase of $7,736 or 1%. The increase in net loss was the result of our shift in focus from the development of customized mobile applications for third parties to the development of the “Hang w/” App as noted above.

 

Nine Months Ended September 30, 2013 Compared to the Nine Months Ended September 30, 2012 (unaudited)

 

The following table presents our results of operations for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012.

 

	Nine Months ended September 30,
	2013			2012			$ Change			% Change
Revenues	$	1,552,689		$	2,712,892		$	(1,160,203)		-43%
Cost of goods sold		795,062			1,651,949			(856,887)		-52%
Gross profit		757,627			1,060,943			(303,316)		-29%
Expenses:
Selling, general and administrative		3,402,247			3,482,154			(79,907)		-2%
Loss from Operations		(2,644,620)			(2,421,211)			223,409		9%
Other income (expense):
Change in fair value of warrants		6,142			447,976			(441,834)		99%
Interest expense		(18,817)			-			18,817		100%
Net loss		(2,657,295)			(1,973,235)			684,060		35%
Less: Net loss attributable to non-controlling interest		299,833			-			299,833		100%
Net loss attributable to MEDL Mobile Holdings, Inc.		(2,357,462)			(1,973,235)			384,227		19%

 

Revenues

 

Revenues primarily consisted of fees we received for developing custom Apps for third parties. Revenues for the nine months ended September 30, 2013 decreased to $1,552,689 as compared to $2,712,892 for the nine months ended September 30, 2012, a decrease of $1,160,203 or 43%. The decrease is primarily attributable to a reduction in the development of customized mobile applications for third parties during the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012 due to our continued focus on the development and expansion of the “Hang w/” App. Hang With pays us for providing product development and maintenance services for live social mobile video App. The revenue paid to us by Hang With for the development of the “Hang w/” App is eliminated in consolidation because we owned 76.29% of Hang With as of September 30, 2013.

 

Based on the unpredictability of market and customer demand, we cannot accurately predict revenue trends on a quarter-to-quarter basis.

 

Our planned revenue model for Hang With is to show a short advertisement before and after live Hang With broadcasts, which advertisements will be sold to targeted advertisers.  Hang With made a strategic decision to delay the introduction of advertisements in order to rapidly increase the number of dedicated, repeat Hang With users.  Accordingly, Hang With has not yet initiated its advertising revenue model.

 

Cost of Goods Sold

 

Cost of goods sold consists primarily of the cost of our employees and the cost of our contractors engaged in developing Apps for our customers. Cost of goods sold for the nine months ended September 30, 2013 decreased to $795,062 as compared to $1,651,949 for the nine months ended September 30, 2012, a decrease of $856,887 or 52%. The decrease is primarily due to the reduction in employees and outside contractors because of the reduction in the development of customized mobile applications for third parties in order to focus on the continued development of the “Hang w/” App. The costs of goods sold for the development of the “Hang w/” App are eliminated in consolidation because we own 76.29% of Hang With as of September 30, 2013.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses for the nine months ended September 30, 2013 decreased to $3,402,247 as compared to $3,482,154 for the nine months ended September 30, 2012, a decrease of $79,907 or 2%. The decrease is primarily attributable to our shift in focus from the development of customized mobile applications for third parties to the development of the “Hang w/” App. Reducing the number of customized mobile applications we build for third parties allowed for various cutbacks resulting in a $1,021,724 decrease in payroll and contract labor costs, a $252,335 decrease in marketing expense, and a $137,802 decrease in general and administrative expenses. In addition, bad debt decreased by $104,692 and better management of legal and other professional fees resulted in a $210,006 decrease in legal, accounting and other professional fees. These reductions were offset by $1,604,682 in expenses for our Hang With, Inc. subsidiary and a $41,970 increase in insurance expense.

 

Other Income/Expense

 

Other expense for the nine months ended September 30, 2013 was $12,675 as compared to other income of $447,976 for the nine months ended September 30, 2012, a decrease of $460,661 or 103%. The decrease is mainly attributable to a $441,834 difference in the change in recorded fair value of warrants issued in a private placement in March 2012, and the remaining decrease relates to $18,817 of interest expense on the $500,000 line of credit in 2013. Since the line of credit was not in place in 2012, we did not incur interest expense in 2012.  

 

Net Loss

 

Net loss attributable to MEDL Mobile Holdings, Inc. for the nine months ended September 30, 2013 increased to $2,357,462 as compared to $1,973,235 for the nine months ended September 30, 2012, an increase of $384,227 or 19%. The increase in net loss was primarily the result of our shift in focus from the development of customized mobile applications for third parties to the development of the “Hang w/” App as noted above.

 

 

Liquidity and Capital Resources

 

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, the availability of credit facilities, levels of accounts receivable and accounts payable and capital expenditures.

 

At September 30, 2013 and December 31, 2012, we had cash of $702,804 and $112,745, respectively and as of September 30, 2013 we had working capital of $500,685 versus negative working capital of $120,66 as of September 30, 2012. Between January 10, 2013 and September 30, 2013, our Hang With, Inc. (“Hang With”) subsidiary raised an aggregate of $2,644,502 from the sale of 3,107,335 shares of Hang With common stock to accredited off-shore investors. These funds are intended to be used to fund Hang With’s product development and commercialization efforts. Since we are compensated by Hang With for providing services, a portion of these funds have been paid to the Company and used by the Company to support this MEDL’s liquidity needs. In accordance with GAAP, Hang With’s cash is consolidated with the Company’s cash in the Company’s consolidated financial statements included herein.

 

Net cash used in operating activities for the nine months ended September 30, 2013 was $2,061,382 compared to net cash used in operating activities of $1,542,025 for the nine months ended September 30, 2012.  The increase in net cash used in operating activities was primarily attributable to the $384,227 increase in net loss.   Net cash used in investing activities for the nine months ended September 30, 2013 was $1,377 as compared to net cash used in investing activities of $77,524 for the nine months ended September 30, 2012. The decrease in net cash used in investing activities was attributable to a reduction in fixed asset purchases.  Net cash provided by financing activities for the nine months ended September 30, 2013 was $2,652,818 as compared to net cash provided by financing activities of $1,488,276 for the nine months ended September 30, 2012. Net cash provided by financing activities for the period ended September 30, 2013 reflects the $2,644,502 raised by our subsidiary, Hang With, Inc., in a private placement and $8,316 received for the exercise of stock options. Net cash provided by financing activities for the period ended September 30, 2012 was the result of $1,485,000 of net proceeds from a private placement of our common stock that closed on March 28, 2012 and $3,276 received for the exercise of stock options.

 

To date we have financed our operations through internally generated revenue from operations, the sale of equity, borrowings under a line of credit, the issuance of notes and loans from a shareholder.

 

On January 17, 2013, we entered into a three-year, five hundred thousand dollar ($500,000) secured revolving credit agreement (the “Line”) with an investment fund. The Line is a revolving line of credit that allows us to repay principal amounts and re-borrow them at any time during the three-year term. The interest rate on borrowed funds is 10% per annum and the interest rate on undrawn funds is 2.0% per annum. Interest is due within 10 business days following the end of each calendar month. All borrowed funds from the Line are secured by all of our assets. Although we have, from time to time, borrowed funds under the Line, we had fully repaid all such borrowings as of September 30, 2013.

 

Between January 10, 2013 and September 30, 2013, Hang With raised an aggregate of $2,644,502 from the sale of 3,107,335 shares of Hang With common stock to accredited off-shore investors in a private placement. These funds were allocated to the development of Hang With’s live social mobile video App. Since we have been providing the development and maintenance services to Hang With on a fee for services basis, a portion of the funds raised by Hang With have been paid to us for these services.

 

We currently have a limited amount of cash to fund our working capital needs, and, accordingly, our ability to fund our working capital needs in the next twelve months will depend upon new customer contracts we receive for custom App development and funds derived from our other business lines (including the success of Hang With). We do not have any material commitments for capital expenditures during the next twelve months. However, based on our internal forecasts, if we do not receive substantial new App development orders in the near term, we will have to fund our short-term liquidity needs through the sale of additional debt or equity, strategic partnerships, or other means. Therefore our future operations may be dependent on our ability to secure additional financing.  Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we may have to curtail our marketing and development plans and possibly cease our operations. 

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and related notes. Our significant accounting policies are described in Note 1 to our consolidated financial statements included in our Annual Report dated December 31, 2012. We have identified below our critical accounting policies and estimates that we believe require the greatest amount of judgment. These estimates and judgments have a significant impact on our consolidated financial statements. Actual results could differ materially from those estimates. The accounting policies that reflect our more significant estimates and judgments and that we believe are the most critical to fully understand and evaluate our reported financial results include the following:

 

·

Revenue Recognition

·

Intangible Assets

·

Fair Value of Financial Instruments

·

Good will and other intangible assets

·

Stock-Based Compensation

 

 Revenue Recognition

Our main source of revenue is from the development of custom applications or “Apps” for customers. We use a hybrid method for recognizing revenue that includes elements from both ASC 985-605, Software Revenue Recognition and ASC 605-35, Construction-Type and Production-Type Contracts.

 

We recognize revenues in accordance with ASC 985-605 when persuasive evidence of an agreement exists, delivery of the software has occurred, the fee is fixed or determinable, and collectability is probable. Nonrecurring revenues related to perpetual license sales with multiple elements are recognized in accordance with the guidance on software revenue recognition.

 

When the arrangement with a customer includes significant production, modification, or customization of the software, we recognize the related revenue using the percentage-of-completion method in accordance with the accounting guidance and certain production-type contracts contained in ASC 605-35.  We use the percentage of completion method provided all of the following conditions exist:

 

·

the contract includes provisions that clearly specify the enforceable rights regarding goods or services to be provided and received by the parties, the consideration to be exchanged and the manner and terms of settlement;

·

the customer can be expected to satisfy its obligations under the contract;

·

the Company can be expected to perform its contractual obligations; and

·

reliable estimates of progress towards completion can be made.

 

We measure completion based on achieving milestones detailed in the agreements with the customers. Costs of providing services, including services accounted for in accordance with ASC 605-35, are expensed as incurred.

 

The following is an example of how revenue is recognized involving an arrangement with a customer that includes significant production, modification, or customization of the software: a typical project will require between 50-100 working days from beginning to end.  On average 25-50 cumulative working days are expended prior to the start of development and this work typically includes, design, storyboards, and architecture. Prior to developing the App, hard costs are incurred as a number of variables are taken into account for preparation.  Those often include the following:

 

·

understanding the client's business situation and environment, including their competitive landscape;

·

researching and establishing the goals of the App;

·

understanding and researching the target and potential App use cases;

·

developing a monetization strategy;

·

determining functionality and articulating the functionality through a storyboard and functional specification document; and

·

determining the resources and timeline needed to complete the final work product.

 

Fifty percent (50%) of the work is completed upon completion of these five phases and at that point in time the customer typically signs our contract and makes a nonrefundable 50% payment. We record the 50% nonrefundable payment as revenue at that point in time. When the Beta version of the App is complete, or at such other time as may be specifically agreed to in the contract, the customer is invoiced for an additional 25% of the total contract price and such payment is booked as revenue. When the App is completed and ready for app store release, the customer is invoiced for the final 25% of total contract price and such payment is booked as revenue.

 

We also generate revenue from inA advertising and the sale of Apps through the Apple store and other App marketplaces. Revenue from advertising is recognized in the period that the ad impressions are delivered, on an accrual basis. Revenue from the sale of Apps is recognized in the period the App is sold to the end user, on an accrual basis.

 

Marketable Securities

Marketable securities are investments in publicly traded equity securities and are generally restricted for sale under Federal securities laws. Since these securities are often restricted, the Company is unable to liquidate them until the restriction is removed. Pursuant to ASC Topic 320, “Investments –Debt and Equity Securities” the Company’s marketable securities have a readily determinable and active quoted price, such as from NASDAQ, NYSE Euronext, the Over the Counter Bulletin Board, and the OTC Markets Group.

 

Marketable securities are carried at fair value, with changes in unrealized gains or losses are recognized as an element of comprehensive income based on changes in the fair value of the security.  Once liquidated, realized gains or losses on the sale of marketable securities will be reflected in the net income (loss) for the period in which the security was liquidated.

 

Intangible Assets 

Intangible assets are stated at cost. Expenditures of costs incurred to renew or extend the term of a recognized intangible asset and materially extend the useful life are capitalized. When assets are sold or otherwise written off due to asset impairment, the cost and the related accumulated amortization are removed from the accounts and any realized gain or loss is recognized at that time. Useful lives of intangible assets are periodically evaluated for reasonableness and the assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may no longer be recoverable. 

 

Amortization is computed primarily on the straight-line method for financial statement purposes over the estimated useful life. Estimated useful lives will vary based on the nature of the intangible asset. 

 

Fair Value of Financial Instruments 

The Company adopted ASC 820, Fair Value Measurements and Disclosures, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that requires the use of fair value measurements that establishes a framework for measuring fair value and expands disclosure about such fair value measurements. 

 

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

 

	Level 1:	Observable inputs such as quoted market prices in active markets for identical assets or liabilities
	Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data
	Level 3:	Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

 The carrying amounts reported in the balance sheet for cash, accounts payable, and accrued liabilities approximate their estimated fair market value based on the short-term maturity of this instrument. 

 

In addition, FASB ASC 825-10-25, Fair Value Option was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.

 

The following table presents a reconciliation of the derivative liability measured at fair value on a recurring basis using significant unobservable input (Level 3) from December 31, 2012 to September 30, 2013: 

 

		Conversion feature derivative liability
Balance December 31, 2012		$	6,142
Change in fair value			(6,142)
Balance September 30, 2013		$	-

 

Goodwill and Other Intangible Assets 

In accordance with ASC 350-30-65 (formerly SFAS 142, Goodwill and Other Intangible Assets), the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Intangible assets were comprised of website assets. Factors the Company considers to be important which could trigger an impairment review include the following:

1.

Significant underperformance relative to expected historical or projected future operating results;

 

2.

Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

 

3.

Significant negative industry or economic trends.

 

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. The Company did not consider it necessary to record any impairment charges during the period ended September 30, 2013. 

 

Stock-Based Compensation 

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

 

Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.

 

Off Balance Sheet Arrangements

 

We do not engage in any activities involving variable interest entities or off-balance sheet arrangements.

 

Recent Accounting Pronouncements

 

We do not believe that the adoption of any recently issued accounting standards will have a material effect on our financial position and results of operations.

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company's management, including the Company's Chief Executive Officer ("CEO") and the Company's Chief Financial Officer ("CFO"), of the effectiveness of the Company's disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the quarter ended September 30, 2013. Based upon that evaluation, the Company's CEO and CFO concluded that the Company's disclosure controls and procedures were not effective as of September 30, 2013 due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review.

 

Management is in the process of determining how best to change our current system and implement a more effective system to insure that information required to be disclosed in this quarterly report on Form 10-Q has been recorded, processed, summarized and reported accurately. Our management acknowledges the existence of this issue, and intends to developed procedures to address them to the extent possible given limitations in financial and manpower resources. While management is working on a plan, no assurance can be made at this point that the implementation of such controls and procedures will be completed in a timely manner or that they will be adequate once implemented.

 

CHANGES IN INTERNAL CONTROLS

 

There were no changes in the Company's internal control over financial reporting that occurred during the Company’s fiscal quarter ended September 30, 2013, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

 

PART II--OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Litigation is, however, subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe would or could have, individually or in the aggregate, a material adverse effect on us.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On September 11, 2013, in connection with a strategic license agreement, the company issued 725,000 shares of common stock, valued at $210,250, to a musician and his agents.

 

The securities were offered and sold pursuant to an exemption from the registration requirements under Section 4(2) of the Securities Act of 1933, as amended since, among other things, the transactions did not involve a public offering and the securities were acquired for investment purposes only and not with a view to or for sale in connection with any distribution thereof.

 

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4- MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5 - OTHER INFORMATION

None.

 

ITEM 6 - EXHIBITS.

 

31.1		Section 302 Certification of Principal Executive Officer
31.2		Section 302 Certification of Principal Financial Officer
32.1*		Section 906 Certification of Principal Executive Officer
32.2*		Section 906 Certification of Principal Financial Officer
101**		The following materials from MEDL Mobile Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flow, and (iv) Notes to Consolidated Financial Statements.

 

*

In accordance with Item 601of Regulation S-K, this Exhibit is hereby furnished to the SEC as an accompanying document and is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933.

 

**

In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

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.

 

MEDL Mobile Holdings, Inc.

 

 

November 13, 2013	By: /s/ Andrew Maltin
	Andrew Maltin Chief Executive Officer (Principal Executive Officer)
November 13, 2013	By: /s/ Murray Williams
	Murray Williams Chief Financial Officer (Principal Financial and Accounting Officer)