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, 2014

 

[  ]   Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from __________ to _________

 

Commission File Number: 000-55155

 

Vantage Health

(Exact name of registrant as specified in its charter)

 

Nevada		93-0659770
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

 

401 Warren St. Suite 200

Redwood City, CA 94063

(Address of principal executive offices)

 

(917) 745-7202

(Registrant’s telephone number)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes [  ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[X] Yes [  ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

[  ]  Large accelerated filer	[  ]   Accelerated filer
[  ]  Non-accelerated filer	[X]  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 [X] No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 193,437,478  as of November 3, 2014.

 

 

 

TABLE OF CONTENTS

 

			Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements		3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations		4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk		7
Item 4:	Controls and Procedures		7
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings		8
Item 1A:	Risk Factors		8
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds		8
Item 3:	Defaults Upon Senior Securities		8
Item 4:	Mine Safety Disclosures		8
Item 5:	Other Information		8
Item 6:	Exhibits		8

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our consolidated financial statements included in this Form 10-Q are as follows:

 

F-1	Consolidated Balance Sheets as of September 30, 2014 and June 30, 2014 (unaudited);
F-2	Consolidated Statements of Operations for the three months ended September 30, 2014 and 2013 (unaudited);
F-3	Consolidated Statements of Cash Flows for the three months ended September 30, 2014 and 2013 (unaudited);
F-4	Notes to the Unaudited Consolidated Financial Statements.

 

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended September 30, 2014 are not necessarily indicative of the results that can be expected for the full year.

 

 

VANTAGE HEALTH

BALANCE SHEETS

 

		September 30, 2014				June 30, 2014
		(Unaudited)
ASSETS
Current assets
Cash and each equivalents		$	99,936			$	235,073
Prepaid expenses and other current assets			76,824				143,259
Total current assets			176,760				378,332
Fixed Assets			11,964				-
Securities-available for sale			6,000				20,000
Total assets			194,724				398,332
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities		$	95,193			$	114,486
Convertible notes payable			71,875				71,875
Due to related parties			316,287				-
Derivative liabilities			492,421				659,934
Total current liabilities			975,776				846,295
Convertible debt			372,289				221,544
Total liabilities			1,348,065				1,067,839
Stockholders’ deficit
Common stock; $0.001 par value; 250,000,000 shares authorized; 192,009,927 and 189,423,721 shares issued and outstanding as of September 30, 2014 and June 30, 2014, respectively			192,010				189,424
Additional paid-in capital			7,803,339				7,747,925
Accumulated deficit			(9,148,690	)			(8,606,856	)
Total stockholders’ deficit			(1,153,341	)			(669,507	)
Total liabilities and stockholders’ deficit		$	194,724			$	398,332

 

See accompanying notes to financial statements.

 

 

VANTAGE HEALTH

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

		Three Months Ended
		September 30, 2014				September 30, 2013
Operating expenses
Professional fees			137,520				7,236
General and administrative expenses			104,108				14,503
Officer and director compensation			26,181				-
Consulting			286,585				5,057
Stock based compensation			127,956				-
Royalty expenses			75,000				-
Total operating expenses			757,350				26,796
Loss from operations			(757,350	)			(26,796	)
Other expense
Interest income (expense)			(7,953	)			-
Gain (loss) on derivative			237,469				-
Unrealized loss on investment			(14,000	)			-
Total other expense			215,516				-
Loss before non-controlling interest		$	(541,834	)		$	(26,796	)
Less: Loss attributable to non-controlling interest		$	-			$	8,545
Net loss		$	(541,834	)		$	(18,251	)
Net loss per common share basic and diluted		$	(0.00	)		$	(0.00	)
Basic weighted average common shares outstanding			190,435,715				80,125,000

 

See accompanying notes to financial statements.

 

 

VANTAGE HEALTH

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		Three Months Ending
		September 30, 2014				September 30, 2013
Cash Flows from Operating Activities
Net loss		$	(541,834	)		$	(26,796	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Unrealized loss on investment			14,000				-
Amortization of debt discount			745				-
Gain on derivative liability			(237,469	)			-
Warrants issued for services			58,000
Warrants issued for debt			69,956
Depreciation			185				425
Changes in assets and liabilities
(Increase) decrease in prepaid expense			66,435				-
Increase (decrease) in accounts payable			(19,293	)			(14,706	)
Net cash from operating activities			(589,275	)			(41,077	)
Cash Flows from investing
Purchase of fixed assets			(12,149	)			-
Net cash used in investing activities			(12,149	)			-
Cash Flows from Financing Activities
Proceeds from related party debt			316,287				3,576
Payments on related party debt			-				(60,000	)
Proceeds from convertible notes payable			150,000				-
Net cash from financing activities			466,287				(56,424	)
Effect of exchange rate on cash			-				12,429
Net increase (decrease) in Cash			(135,137	)			(85,072	)
Beginning cash balance			235,073				89,089
Ending cash balance		$	99,936			$	4,017
Supplemental disclosure of cash flow information
Cash paid for interest		$	-			$	-
Cash paid for tax		$	-			$	-
Non-Cash investing and financing transactions
Shares issued to acquire intangible assets		$	2,586			$	-

 

See accompanying notes to financial statements.

 

 

VANTAGE HEALTH

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

 

NOTE 1 – BASIS OF PRESENTATION AND GOING CONCERN

 

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

 

Going concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred accumulated deficit of $9,148,690 and requires capital for its contemplated operational and marketing activities to take place. The ability of Vantage Health to continue as a going concern is dependent on the Company generating cash from the sale of its common stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirement and ongoing operations; however, there can be no assurance the Company will be successful in these efforts. 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

 

Fair Value of Financial Instruments

 

The carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items.

 

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

The three levels of the fair value hierarchy are described below:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

 

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

 

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

 

 

VANTAGE HEALTH

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

  

Financial assets and liabilities measured at fair value on a recurring basis are summarized below for September 30, 2014:

 

		Level 1				Level 2				Level 3				Total
Assets
Securities -available for sale		$	6,000			$	—			$	—			$	6,000
Liabilities
Derivative Financial Instruments		$	—			$	—			$	492,421			$	492,421

 

Financial assets and liabilities measured at fair value on a recurring basis are summarized below for June 30, 2014:

 

		Level 1				Level 2				Level 3				Total
Assets
Securities -available for sale		$	20,000			$	—			$	—			$	20,000
Liabilities
Derivative Financial Instruments		$	—			$	—			$	659,934			$	659,934

 

Investment Securities

 

The Company has elected to account for its investments in securities at fair value under the fair value option provisions of FASB ASC 825, Financial Instruments (“FASB ASC 825”). The primary reason for electing the fair value option when it first became available in 2008, was to reduce the burden of monitoring the differences between the cost and the fair value of the Company’s investments, previously classified as available for sale securities, including the assessment as to whether the declines are temporary in nature and to further remove an element of management judgment. In addition, the election was made for certain investments that were previously required to be accounted for under the equity method because their fair value measurements were readily obtainable.

 

Such financial assets accounted for at fair value include in general, securities that would otherwise qualify for available for sale treatment.

 

The changes in fair value (realized and unrealized gains and losses) of these instruments for which the Company has elected the fair value option are recorded in principal transactions and other income in the consolidated statements of operations. All of the investments for which the Company has elected the fair value option are included as a component of securities available for sale, at fair value in the consolidated balance sheets. The Company recognized net gains (losses) of $(14,000) and $0 related to changes in fair value of investments that are included as a component of other investments, at fair value during the three months ended September 30, 2014 and 2013, respectively.

 

NOTE 3 – PREPAID EXPENSES

 

In relation to a sub-licensing agreement with NASA, a shareholder has paid royalty fees applicable to 2014 on behalf of the Company. The $100,000 payment was an additional investment in the Company and is not required to be repaid. During the quarter ending September 30, 2014 $75,000 of the royalties were recognized as an expense, the remaining prepaid royalty balance is $25,000.

 

In addition, the Company has prepaid rent through December 2014, with a remaining prepaid balance of $47,733 as of September 30, 2014. The Company also prepaid interest of 7,500 on a short-term loan as of September 30, 2014 a balance remains capitalized as prepaid expenses. $4,091

 

 

VANTAGE HEALTH

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

 

NOTE 4 – SECURITIES AVAILABLE FOR SALE

 

On January 16, 2014, the Company acquired 2,000,000 restricted common shares of a publicly traded company. The investment was acquired at market value of $0.03 per share, and is held for future trade. The value of the investment will be adjusted quarterly to reflect the change in market value of the holding. The investment does not represent a controlling interest in the publicly traded company. The company has elected the fair value option under ASC 825 allowing gains and losses to be recorded in earnings each period. From receipt of the shares on January 16, 2014 through September 30, 2014 the securities were reduced in value from $60,000 to $6,000 due to a change in the publicly traded company’s stock price. These securities are measured under level 1 of ASC 820.

 

The Company reported an unrealized loss on investment of $14,000 during the quarter ending September 30, 2014

 

NOTE 5 – RELATED PARTY TRANSACTIONS

 

During the three months ended September 30, 2014, the Company received net cash advances from its majority shareholder in the amount of $316,287. All amounts advanced to the Company are unsecured, non-interest bearing and due upon demand.

 

NOTE 6 - CONVERTIBLE NOTE PAYABLE

 

On April 17, 2014, the Company issued a convertible promissory note in the amount of $71,875. The note is due on April 16, 2015 and bears interest at 15% per annum, which was prepaid by the Company and is being amortized over the life of the loan. The loan is secured by shares of the Company’s common stock. The loan becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 50% multiplied by the market price, which is the lowest quoted price for the common stock during the 25 trading day period ending on the latest complete trading day prior to the conversion date. During the quarter ended September 30, 2014, the Company has not converted any portion of this note into shares of common stock. The Company elected to prepay the entire term’s interest this payment was capitalized as a prepaid assets and has been amortized over the term of the note, the interest expense related to this loan was $1,541 for the year ending June 30, 2014 and $1,868 for the quarter ending September 30, 2014. As of September 30, 2014 the remaining prepaid interest balance was $4,091.

 

On April 18, 2014, the Company issued a convertible promissory note in which the Company will be taking tranche payments on pre-defined dates, the total of these payments cannot exceed $650,000. There is an original discount component of 10% per tranche and an additional expense fee of $5,000. Therefore, the funds available to the Company will be $650,000 and the liability (net of interest) will be $750,000 when all disbursements have been received by the Company. Each tranche is accounted for separately with each principal and OID balance becoming due 18 months after receipt. Each tranche bears interest at 8% per annum. The loan is secured by shares of the Company’s common stock. Each portion of the loan becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 50% multiplied by the market price, which is the lowest quoted price for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date. During the period ended June 30, 2014, the Company has received three tranche disbursements of $100,000 on April 21, 2014; $50,000 on May 6, 2014; and $50,000 on June 11, 2014.

 

During the period ended September 30, 2014 the Company receive two additional tranche disbursements of $50,000 on July 15, 2014 and $100,000 on September 30, 2014.

 

 

VANTAGE HEALTH

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

 

The following details the disbursements as of September 30, 2014:

 

Tranche Date		Principal with OID				Accrued Interest				Converted to Stock
April 21, 2014		$	110,776			$	3,933			None
May 6, 2014			55,384				1,784			None
June 11, 2014			55,384				1,347			None
July 16, 2014			55,384				923			None
September 30, 2014			110,768				-			None
Unamortized Original Issue Discount			(15,407	)			-
		$	372,289			$	7,988

 

The Company analyzed the conversion options embedded in the Convertible Promissory Notes for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined that there is not a derivative as the above references convertible notes are not convertible as of September 30, 2014 as they have not reached 180 days from the date of issuance.

 

NOTE 7 – COMMON STOCK

 

On August 25, 2014, the Company issued 2,586,206 common shares for the conversion of the Parent Company common shares of stock when a Parent Company shareholder exercised their stock warrant and converted their holdings into Vantage Health common stock in a cashless transaction. The fair value of the common shares is $291,983. The fair value of the common shares is considered to be the excess value from the carry over cost basis of $0 and is recorded as a pass through to additional paid in capital.

 

NOTE 8 – STOCK WARRANTS

 

On July 15, 2014 the Company granted stock warrants for 291,494 shares of common stock in association with a long-term loan at no cost to the lender. These warrants have an expiration date of July 15, 2019, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.24/share, the exercise price is $0.0143/share, the value of the issuance is $69,956.

 

The warrants have anti-dilution provisions, including a provision for adjustments to the exercise price and to the number of warrant shares purchasable if we issue or sell common shares at a price less than the then current exercise price. We determined that the warrants were not afforded equity classification because the warrants are not considered to be indexed to our own stock due to the anti-dilution provision. Accordingly, the warrants are treated as a derivative liability and are carried at fair value. We estimate the fair value of these derivative warrants at each balance sheet date and the changes in fair value are recognized in earnings in the statement of operations under the caption “change in fair value of derivative warrant liability” until such time as the derivative warrants are exercised or expire.

 

We estimate the fair value of our derivative warrants on the date of issuance and each subsequent balance sheet date using the Black-Scholes option pricing model, which includes assumptions for expected dividends, expected share price volatility, risk-free interest rate, and expected life of the warrants. Currently, we believe that the potential impact to the fair value of our derivative warrants attributable to the anti-dilution provision is insignificant and we will consider using a lattice model for purposes of valuation if and when the fair value of the anti-dilution provision becomes significant. Our expected volatility assumption is based on our historical weekly closing price of our stock over a period equivalent to the expected remaining life of the derivative warrants.

 

The derivative liability as of June 30, 2014 was $659,934 and the Company recorded a loss in the change in fair value due to derivative warrant liability of $(418,930) during the 12 months ended June 30, 2014.

 

The derivative liability as of September 30, 2014 was $492,421 and the Company recorded a gain in the change in fair value due to derivative warrant liability of $237,469.

 

Over the life of the derivative liability the Company has recorded a net loss in the change in fair value due to derivative warrant liability of $(181,461)

 

 

VANTAGE HEALTH

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

 

Fair value assumptions – derivative warrants:		September 30, 2014
Risk free interest rate			1.78	%
Expected term (years)			5
Expected volatility			362	%
Expected dividends			0	%

 

On July 1, 2014 the Company granted stock warrants for 200,000 shares of common stock for services. These warrants have an expiration date of July 1, 2019, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.29/share, the exercise price is $0.12495/share, the value of the issuance is $58,000.

 

NOTE 9 – COMMITMENTS

 

On January 1, 2014, the Company entered into a Sub-License Agreement affiliated with the National Aeronautics and Space Administration (“NASA”) pursuant to which the Company was granted a royalty-bearing, non-transferable license to certain inventions and patent rights owned by NASA relating to chemical sensing nanotechnology, for use within the United States and its territories. The License is effective as of December 31, 2013 and subject to an initial five year term, during which the License will be exclusive to the Company. Following the initial five-year term, the License shall automatically convert to a non-exclusive license. The License may be terminated by NASA following a 30 day cure period, among other reasons, upon a breach of the License Agreement or upon its determination that the Company has failed to adequately develop or commercialize the licensed patents. Specific milestones and commercialization requirements are set forth in the License Agreement. NASA provides no warranties under the License Agreement and assumes no responsibility for our use, sale or other disposition of the licensed technology. We agree to indemnify NASA against all liabilities arising from such use, sale or other disposition. We must pay certain royalties in connection with the License as set forth in the License Agreement. Royalties owed for 2014 have been paid in advance by a related party and will not be charged to Vantage Health, with the next Vantage Health payment due in 2015.

 

During the year ended June 30, 2014 The Company expensed $1,184,251 under this agreement of which $854,251 was paid directly to the Parent Company who in turned paid NASA for fees under this agreement.

 

In relation to a sub-licensing agreement with NASA, a shareholder has paid royalty fees applicable to 2014 on behalf of the Company. The $100,000 payment was an additional investment in the Company and is not required to be repaid. During the quarter ending September 30, 2014 $75,000 of the royalties were recognized as an expense, the remaining prepaid royalty balance is $25,000.

 

NOTE 10 – SUBSEQUENT EVENTS

 

On April 17, 2014, we issued a convertible promissory note in the amount of $71,875. The loan became convertible 180 days after date of the note. The loan and any accrued interest could then be converted into shares of our common stock at a rate of 50% multiplied by the market price, which is the lowest quoted price for the common stock during the 25 trading day period ending on the latest complete trading day prior to the conversion date. On October 16, 2014 the note holder exercised their conversion rights and converted a portion of the note into 713,266 shares of common stock.

 

On April 18, 2014, we issued a convertible promissory note in which we have taken tranche payments on pre-defined dates. Each portion of the loan becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted into shares of our common stock at a rate of 50% multiplied by the market price, which is the lowest quoted price for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date. On April 21, 2014 we took our first tranche payment of totaling $110,776. On October 22, 2014 the note holder exercised their conversion rights and converted a portion of the tranche note into 714,285 shares of common stock.

 

 

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

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

 

Overview

 

We were incorporated in the State of Nevada on April 21, 2010. We were initially in the business of becoming a pharmaceutical manufacturer with the specific intention of bidding on South African government health care contracts and tenders. We abandoned that business plan when, on November 7, 2013, Nanobeak, Inc., a California corporation (“Nanobeak”) acquired a majority interest in our company through the stock purchase of a controlling interest in our company from Bayview Terrace Limited.

 

Since the change of control, we have implanted a new business plan. On January 1, 2014, Nanobeak entered into a License Agreement (the “License Agreement”) with the National Aeronautics and Space Administration (“NASA”) pursuant to which Nanobeak was granted a royalty-bearing, non-transferable license (the “License”) to certain inventions and patent rights owned by NASA relating to chemical sensing nanotechnology, for use within the United States and its territories.

 

The License is effective as of December 31, 2013 and subject to an initial five year term, during which the License will be exclusive to Nanobeak. Following the initial five-year term, the License shall automatically convert to a non-exclusive license. Under the License, Nanobeak is required to develop and commercialize the licensed patents. NASA provided no warranties under the License Agreement and assumed no responsibility for our use, sale or other disposition of the licensed technology. Nanobeak has agreed to indemnify NASA against all liabilities arising from such use, sale or other disposition.

 

Pursuant to Section 3.1.1 of the License Agreement, Nanobeak is permitted to sublicense its rights under the License Agreement to subcontractors. Effective as of February 20, 2014, Nanobeak has sublicensed such rights to us as set forth in a Sublicense Agreement.

 

The Sublicense Agreement grants patent rights to us on the same terms as such rights have been granted to Nanobeak under the License Agreement; provided, however, that the field of use for the patent rights granted to Vantage Health is limited to disease detection.

 

We must pay to Nanobeak certain royalties in connection with the Sublicense Agreement, which royalties are equivalent to those owed by Nanobeak to NASA pursuant to the License Agreement. We must further comply with other obligations of Nanobeak under the License Agreement as though we were a party thereto, including achievement of practical application of the patent rights and certain reporting obligations.

 

The Sublicense Agreement will terminate upon the earlier of (i) termination of the License Agreement or (ii) termination by either party to the Sublicense Agreement as set forth therein.

 

 

As a result of the License Agreement and Sublicense Agreement, we are now a mobile health technology company that is developing personalized and point-of-care screening using applications based upon chemical sensing residing within a small device attached to a smartphone. With our foundations in advanced nanotechnology, our first product, the Vantage Health Sensor, is the convergence of nano-electronics, bio-informatics, and wireless technology to create the next generation mobile health application. Still under development, the first mobile application is expected to be for lung cancer screening with additional mobile healthcare applications in the planning stages.

 

The sensor will collect a breath signature based upon chemical sensing technology residing in a small Bluetooth-enabled breathalyzer device that attaches to any smartphone. The sensor devices will ultimately be sold through a distributor to healthcare professionals, who will then download screening applications and pay a monthly subscription fee. Subsequently the company plans to sell direct to consumers in conjunction with a major pharmacy platform.

 

We have entered into a Strategic Partnership with Scripps Translational Sciences Institute (STSI) to assist in the development, advancement, and commercialization of the mobile technology. Scripps will also provide the testing, evaluation, and detection of certain combinations of Volatile Organic Compounds (VOCs) known as the breath signature and will assist in managing our clinical trials in partnership with several other research hospitals in the United States. These clinical trials will support the 510K that will be submitted to the FDA. It is expected that the contemplated clinical trials will take approximately four months with another four months expected for the 510K process within the FDA.

 

We have also entered into a Strategic Partnership with Theranostics Laboratory, a translational research company, with offices in the USA and New Zealand. Theranostics laboratory was founded at the Cleveland Clinic in 2010 and works on subcontracted research, in collaboration with the Auckland Bioengineering Institute (ABI), in New Zealand, and with NASA (via NASA Grant NCC 9-58).

 

The Auckland Bioengineering Institute is recognised as a world-leader in the field of personalised modelling and is part of the international Virtual Physiologic Human (VPH) project. The Institute has successfully commercialised numerous mHealth technologies, including wireless telemetry systems, wearable sensors and a needle-free injectable system into the US market.

 

The partnership between the Theranostics laboratory and the Auckland Bioengineering Institute (ABI) is a strategic alliance for us through which the lab will act as principal investigators for us in the areas of mobile strep detection, mobile virus detection and other related areas including breath sample conditioning methodologies. The partnership gives us access to world-class expertise and skill in the field of personalized modelling. It also provides us with cost-efficiencies working across multiple time zones, as well as insight into the Australasian MedTech market.

 

Results of operations for the three months ended September 30, 2014 and 2013

 

We have earned no revenues from our inception to September 30, 2014. We do not expect to earn any revenues until we complete our technology and bring it to market.

 

Our operating expenses increased to $757,350 for the three months ended September 30, 2014, as compared with operating expenses of $26,796 for the three months ended September 30, 2013. Our operating expenses for the three months ended September 30, 2014 mainly consisted of consulting expenses of $286,585, professional fees of $137,520, stock based compensation of $127,956, royalty expense of $75,000, office expenses of $60,576, and travel of $42,941. Our operating expenses for the three months ended September 30, 2013 mainly consisted of office expenses of $7,923, professional fees of $7,236, travel of $6,003, and consulting expenses of $5,057.

 

We anticipate our operating expenses will increase as we undertake our plan of operations. The increase will be attributable to administrative and operating costs associated with developing and commercializing our technology and our continued reporting obligations with the Securities and Exchange Commission.

 

Our other expenses increased to $215,516 for the three months ended September 30, 2014, as compared with other expenses of $0 for the three months ended September 30, 2013. Our increase in other expenses was mainly attributable to a gain in the change in fair value due to derivative warrant liability of $237,469.

 

 

We incurred a net loss of $541,834 for the three months ended September 30, 2014, compared with a net loss of $18,251 for the three months ended September 30, 2013. Our net loss for the three months ended September 30, 2013 consisted of $26,796 from continuing operations, offset by $8,545 attributable to non-controlling interest.

 

We have not attained profitable operations and are dependent upon obtaining financing to continue with our business plan. For these reasons, there is substantial doubt that we will be able to continue as a going concern.

 

Liquidity and Capital Resources

 

As of September 30, 2014, we had total current assets of $176,760, consisting of cash, prepaid expenses and other current assets. We had current liabilities of $975,776 as of September 30, 2014. Accordingly, we had negative working capital of $799,016 as of September 30, 2014.

 

Operating activities used $589,275 in cash for continuing operations for the three months ended September 30, 2014, as compared with $41,077 for the three months ended September 30, 2013. Our negative operating cash flow for the three months ended September 30, 2014 was mainly attributable to our net loss for the period and a gain in the change in fair value due to derivative warrant liability.

 

Financing activities for the three months ended September 30, 2014 provided $466,287 in cash for continuing operations, as compared with cash flows used by financing activities of $56,424 for the three months ended September 30, 2013. Our negative cash flow for the three months ended September 30, 2013 was mainly the result of payments made on related party notes, and the positive cash flow for the three months ended September 30, 2014 was the result of proceeds from related party debt and from convertible notes payable.

 

On March 7, 2014, we issued a convertible promissory note in the amount of $100,000. Soon thereafter, we fully paid off this loan in cash and did not convert any portion of this note into shares of common stock. The interest associated with this loan was $2,411, with an additional early payment fee of $24,846.

 

On April 17, 2014, we issued a convertible promissory note in the amount of $71,875. The note is due on April 16, 2015 and bears interest at 15% per annum, which we elected to prepay. The loan is secured by shares of our common stock. The loan becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted into shares of our common stock at a rate of 50% multiplied by the market price, which is the lowest quoted price for the common stock during the 25 trading day period ending on the latest complete trading day prior to the conversion date. During the three months ended September 30, 2014, we have not converted any portion of this note into shares of common stock.

 

 On April 18, 2014, we issued a convertible promissory note in which we will be taking tranche payments on pre-defined dates, the total of these payments cannot exceed $650,000. There is an original discount component of 10% per tranche and an additional expense fee of $5,000. Therefore, the funds available to us will be $650,000 and the liability (net of interest) will be $750,000 when we have received all disbursements. Each tranche is accounted for separately with each principal and OID balance becoming due 18 months after receipt. Each tranche bears interest at 8% per annum. The loan is secured by shares of our common stock. Each portion of the loan becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted into shares of our common stock at a rate of 50% multiplied by the market price, which is the lowest quoted price for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date. Through September 30, 2014, we received five tranche disbursements: $100,000 on April 21, 2014; $50,000 on May 6, 2014; $50,000 on June 11, 2014; $50,000 on July 14, 2014; and $100,000 on September 30, 2014.

 

On April 30, 2014, we issued a convertible promissory note with available funds of $250,000, however, we only received one tranche payment of $60,000 from this note, carrying a loan balance of $66,000 with principal and OID. We have fully paid off this loan in cash and did not convert any portion of this note into shares of common stock. The interest associated with this loan was $667.

 

 

As of September 30, 2014, we had $99,936 in cash. Until we are able to sustain our ongoing operations through sales revenue, we intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

 

Off Balance Sheet Arrangements

 

As of September 30, 2014, there were no off balance sheet arrangements.

 

Going Concern

 

We have incurred losses since inception, and have not yet received material revenues from sales of products or services. These factors create substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.

 

Our ability to continue as a going concern is dependent on generating cash from the sale of our common stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling our equity securities and obtaining debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance we will be successful in these efforts.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our company’s disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company’s management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.

 

We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending June 30, 2015, subject to obtaining additional financing: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

 

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2014 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A: Risk Factors

 

A smaller reporting company is not required to provide the information required by this Item.

 

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

 

Aside from that provided below, there have been no issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.

 

On July 1, 2014, we granted stock warrants for 200,000 shares of common stock for services. These warrants have an expiration date of July 1, 2019, and are exercisable at a price of $0.12495 per share.

 

The above securities were issued in reliance upon the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder.

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

Exhibit Number		Description of Exhibit
10.1		License Agreement*
31.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 formatted in Extensible Business Reporting Language (XBRL).

 

* Portions of this exhibit have been omitted pursuant to a request for confidential treatment with the Securities and Exchange Commission.

**Provided herewith

 

 

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.

 

Vantage Health
Date: November 14, 2014
By:	/s/ Joseph C. Peters
Name:	Joseph C. Peters
Title:	Chief Executive Officer