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 March 31, 2015

 

[  ] 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 mHealthcare, Inc.

(Exact name of registrant as specified in its charter)

 

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

 

3 Columbus Circle, 15th Floor

New York, NY 10019

(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: 217,339,610 as of May 14, 2015.

 

 

 

 

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	8
Item 4:	Controls and Procedures	9
PART II – OTHER INFORMATION
		9
Item 1:	Legal Proceedings	9
Item 1A:	Risk Factors	9
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 3:	Defaults Upon Senior Securities	10
Item 4:	Mine Safety Disclosures	10
Item 5:	Other Information	10
Item 6:	Exhibits	10

 

 

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 March 31, 2015 and June 30, 2014 (unaudited);
F-2	Consolidated Statements of Operations for the three and nine months ended March 31, 2015 and 2014 (unaudited);
F-3	Consolidated Statements of Cash Flows for the nine months ended March 31, 2015 and 2014 (unaudited); and
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 March 31, 2015 are not necessarily indicative of the results that can be expected for the full year.

 

 

VANTAGE mHEALTHCARE, INC.

CONSOLIDATED BALANCE SHEETS

UNAUDITED

 

		March 31, 2015				June 30, 2014
ASSETS
Current assets
Cash and cash equivalents		$	69,972			$	235,073
Prepaid expenses			10,528				143,259
Total current assets			80,500				378,332
Fixed Assets			11,101				-
Securities-available for sale			200				20,000
Total assets			91,801				398,332
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities		$	131,086			$	114,486
Convertible notes payable			286,484				71,875
Due to related parties			277,331				-
Derivative liabilities			830,564				659,934
Total current liabilities			1,525,465				846,295
Convertible debt			204,490				221,544
Total liabilities			1,729,955				1,067,839
Stockholders’ deficit
Common stock; $0.001 par value; 250,000,000 shares authorized; 216,006,277 and 189,423,721 shares issued and outstanding as of March 31, 2015 and June 30, 2014, respectively			216,007				189,424
Additional paid-in capital			9,187,999				7,747,925
Accumulated deficit			(11,042,160	)			(8,606,856	)
Total stockholders’ deficit			(1,638,154	)			(669,507	)
Total liabilities and stockholders’ deficit		$	91,801			$	398,332

 

The accompanying notes are an integral part of these unaudited financial statements

 

 

VANTAGE mHEALTHCARE, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

		Three Months Ended								Nine Months Ended
		March 31, 2015				March 31, 2014				March 31, 2015				March 31, 2014
Revenues		$	-			$	-			$	-			$	-
Cost of revenues			-				-				-				-
Gross profit			-				-				-				-
Operating expenses
Professional fees			160,274				74,089				355,114				80,308
General and administrative expenses			104,899				107,251				426,743				109,178
Officer and director compensation			680				-				42,798				-
Officer and director compensation -other			263,669				442,253				263,669				485,799
Consulting			248,695				392,067				808,320				397,067
Consulting - other			20,500				-				41,577				-
Royalty expenses			-				-				100,000				-
Total operating expenses			798,717				1,015,660				2,038,221				1,072,352
Loss from operations			(798,717	)			(1,015,660	)			(2,038,221	)			(1,072,352	)
Other income
Interest income (expense)			(179,193	)			(548	)			(425,642	)			(548	)
Gain (loss) on derivative			304,234				-				48,359				-
Unrealized loss on investment			-				(20,000	)			(19,800	)			(20,000	)
Total other income			125,041				(20,548	)			(397,083	)			(20,548	)
Net loss from continuing operations		$	(673,676	)		$	(1,036,208	)		$	(2,435,304	)		$	(1,092,900	)
Loss from discontinued operations		$	-			$	-			$	-			$	(277,912	)
Net loss		$	(673,676	)		$	(1,036,208	)		$	(2,435,304	)		$	(1,370,812	)
Net loss per common share from continuing operations: basic and diluted		$	(0.00	)		$	(0.01	)		$	(0.01	)		$	(0.01	)
Net loss per common share from discontinued operations basic and diluted		$	-			$	-			$	-			$	(0.00	)
Net loss per common share: basic and diluted		$	(0.00	)		$	(0.01	)		$	(0.01	)		$	(0.01	)
Basic weighted average common shares outstanding			207,987,853				117,609,444				197,876,473				117,580,474

 

The accompanying notes are an integral part of these unaudited financial statements

 

 

VANTAGE mHEALTHCARE, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

		Nine Months Ending
		March 31, 2015				March 31, 2014
Cash Flows from Operating Activities
Net loss		$	(2,435,304	)		$	(1,092,900	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation			-				485,799
Unrealized loss on investment			19,800				20,000
Amortization of debt discount			383,661				-
Gain on derivative liability			(48,359	)			-
Shares issued for services			41,577
Warrants issued for services			321,669				-
Depreciation			1,048				-
Changes in assets and liabilities
(Increase) decrease in prepaid expense			147,731				(55,950	)
Increase (decrease) in accounts payable and accrued expenses			27,210				548
Net cash from operating activities			(1,540,967	)			(642,503	)
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 sales of common stock			-				140,000
Contributed capital			-				253,154
Proceeds from exercise of stock warrants			-				200,000
Proceeds from notes payable			-				100,000
Proceeds from related party debt			1,031,677				-
Payments on related party debt			(292,662	)			-
Proceeds from convertible notes payable			649,000				-
Net cash from financing activities			1,388,015				693,154
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Cash flows from operating activities of discontinued operations			-				(8,903	)
Cash flows from financing activities of discontinued operations			-				18,252
Net Cash (Used by) Provided by Discontinued Operations			-				9,349
Net increase (decrease) in cash			(165,101	)			60,000
Cash, beginning of period			235,073				-
Cash, end of period		$	69,972			$	60,000
Supplemental disclosure of cash flow information
Cash paid for interest		$	-			$	-
Cash paid for tax		$	-			$	-
Non-Cash investing and financing transactions
Common stock issued to settle related party debt		$	461,684			$	-
Shares issued for intangible assets		$	8,586			$	-
Common stock issued to settle debt		$	248,645			$	-
Reclass of derivative to APIC for converted debt		$	393,082			$	-
Recognition of derivative debt discount		$	612,071			$	-
Stock issued for available for sale of securities		$	-			$	60,000
Contribution to capital by payment of prepaid royalty		$	-			$	100,000
Reclass long term debt to short term debt		$	221,544			$	-

 

The accompanying notes are an integral part of these unaudited financial statements

 

 

VANTAGE MHEALTHCARE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

 

NOTE 1 – BASIS OF PRESENTATION AND GOING CONCERN

 

Basis of Presentation

 

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 cumulative net losses of $11,042,160 since its inception and requires capital for its contemplated operational and marketing activities to take place. The ability of Vantage mHealthcare 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 MHEALTHCARE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

 

Financial assets and liabilities measured at fair value on a recurring basis are summarized below for March 31, 2015:

 

		Level 1				Level 2				Level 3				Total
Assets
Securities -available for sale		$	200			$	—			$	—			$	200
Liabilities
Derivative Financial Instruments		$	—			$	—			$	830,564			$	830,564

 

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 losses of $19,800 and $0 related to changes in fair value of investments that are included as a component of other investments, at fair value during the nine months ended March 31, 2015 and 2014, respectively.

 

NOTE 3 – PREPAID EXPENSES

 

The Company has prepaid interest of $22,500 on short-term loans. As of March 31, 2015, the balance that remains capitalized as prepaid expenses is $10,528

 

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 March 31, 2015 the securities were reduced in value from $60,000 to $200 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 $19,800 and $20,000 during the three and nine months ending March 31, 2015 and 2014, respectively.

 

 

VANTAGE MHEALTHCARE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

 

NOTE 5 – RELATED PARTY TRANSACTIONS

 

During the nine months ended December 31, 2014, the Company received cash advances from its majority shareholder in the amount of $1,031,677, of which $292,662 cash and stock valued at $461,684 was repaid during the same period. As of March 31, 2015, there was a balance due to the shareholder of $277,331. 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 was 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.

 

On October 14, 2014, the date the note became convertible, the Company recorded a debt discount in the amount of $71,875 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $98,735 and an initial loss of $26,860 based on the Black Scholes Merton pricing model.

 

As of March 31, 2015, $71,875 of the debt discount has been amortized. The fair value of the derivative liability at the date of conversion was $90,476 resulting in a gain on derivative liabilities of $8,259.

 

As of March 31, 2015, in accordance with the terms of the Note, the holder fully converted the note for 3,683,532 shares of common stock valued at $71,875.

 

On October 1, 2014, the Company issued a short-term convertible promissory note in the amount of $70,000 for $50,000 cash, an original issue discount of $12,500, and prepaid interest of $7,500. The note was due on March 30, 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. As of March 31, 2015, the Company has not converted any portion of this note into shares of common stock. During the nine months ended March 31, 2015, $12,500 of the debt discount has been amortized.The note matured on March 30, 2015. On April 6, 2015, the holder of the note exercised his right to convert $20,000 of the note balance into 1,333,333 shares of common stock.

 

The Company elected to prepay the entire term’s interest of $7,500. This payment was capitalized as a prepaid asset and has been amortized over the term of the note. The interest expense related to this loan was $0 for the year ending June 30, 2014 and $3,667 and $7,500 for the three and nine months ending March 31, 2015. As of March 31, 2015 the remaining prepaid interest balance was $0.

 

On March 30, 2015, the Note became convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $70,000 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $70,014 and initial loss of $14 based on the Black Scholes Merton pricing model.

 

 

VANTAGE MHEALTHCARE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

 

As of March 31, 2015, $70,000 of the debt discount has been amortized. The fair value of the derivative liability at March, 31 2015 is $70,681 resulting in a loss on the change in fair value of the derivative of $667. The Note is shown net of a debt discount of $0 at March 31, 2015.

 

On November 17, 2014, the Company issued a short-term convertible promissory note in the amount of $70,000, which consisted of cash proceeds of $50,000, a debt discount of $12,500 and prepaid interest of $7,500. The note is due on November 14, 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. As of March 31, 2015, the note has not become convertible. During the nine months ended March 31, 2015, $4,627 of the debt discount has been amortized. The Note is shown net of an unamortized debt discount of $7,873 at March 31, 2015.

During the nine months ended March 31, 2015, the Company elected to prepay the entire term’s interest of $7,500. This payment was capitalized as a prepaid asset and has been amortized over the term of the note. The interest expense related to this loan was $0 for the year ending June 30, 2014 and $1,859 and $2,771 for the three and nine months ending March 31, 2015. As of March 31, 2015 the remaining prepaid interest balance was $4,729.

 

On December 23, 2014, the Company issued a short-term convertible promissory note in the amount of $70,000, which consisted of cash proceeds of $50,000, a debt discount of $12,500 and prepaid interest of $7,500. The note is due on December 18, 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. As of March 31, 2015, the note has not become convertible. During the nine months ended March 31, 2015, $3,403 of the debt discount has been amortized. The Note is shown net of an unamortized debt discount of $9,097 at March 31, 2015.

 

The Company elected to prepay the entire term’s interest of $7,500. This payment was capitalized as a prepaid asset and has been amortized over the term of the note. The interest expense related to this loan was $0 for the year ending June 30, 2014 and $1,869 and $2,036 for the three and nine months ending March 31, 2015. As of March 31, 2015, the remaining prepaid interest balance was $5,464.

 

On January 13, 2015, the Company issued a short-term convertible promissory note in the amount of $74,000. The note is due on October 15, 2015 and bears interest at 8% per annum. 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 58% multiplied by the market price, which is the average of the lowest three quoted prices for the common stock during the 10 trading day period ending on the latest complete trading day prior to the conversion date. As of March 31, 2015, the note has not become convertible.

 

On January 26, 2015, the Company issued a convertible promissory note giving the Company the option of taking tranche payments based on amounts determined by the note holder for total payments of not more than $250,000. There is an original discount component of $25,000. Therefore, the funds available to the Company will be $225,000 and the liability (net of interest) will be $250,000 when all disbursements have been received by the Company. Each tranche is accounted for separately with each principal and OID balance becoming due 24 months after receipt. Each tranche bears interest at 12% per annum. The loan is secured by shares of the Company’s common stock. Each portion of the loan becomes convertible immediately upon issuance. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of the lesser of $0.045 per share or 60% multiplied by the market price per share, 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 period ended March 31, 2015, the Company has received one tranche disbursements of $75,000 on January 26, 2015.

  

 

VANTAGE MHEALTHCARE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

 

During the nine months ended March 31, 2015, $658 of the debt discount has been amortized. The Note is shown net of an unamortized debt discount of $6,842 at March 31, 2015.

 

On January 26, 2015, the Note became convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $82,500 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $135,740 and initial loss on derivative liabilities of $53,240 based on the Black Scholes Merton pricing model.

 

As of March 31, 2015, $7,233 of the debt discount has been amortized. The fair value of the derivative liability at March, 31 2015 is $128,958 resulting in a gain on the change in fair value of the derivative of $6,783. The Note is shown net of a debt discount of $75,267 at March 31, 2015.

 

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 nine months ended March 31, 2015, the Company received six additional tranche disbursements of $50,000 on July 15, 2014, $100,000 on September 30, 2014, $50,000 on November 3, 2014, $50,000 on December 1, 2014, $50,000 on December 29, 2014, and $50,000 on February 2, 2015.

 

The following details the disbursements as of March 31, 2015:

 

Tranche Date		Principal with OID				Accrued Interest				Converted to Stock				Balance - March 31, 2015
April 21, 2014		$	110,776			$	6,167			$	116,943				-
May 6, 2014			55,384				4,443			$	59,827				-
June 11, 2014			55,384				4,043				None				55,384
July 16, 2014			55,384				3,132				None				55,384
September 30, 2014			110,768				4,419				None				110,768
November 3, 2014			55,384				1,797				None				55,384
December 1, 2014			55,384				1,457				None				55,384
December 29, 2014			55,384				1,117				None				55,384
February 2, 2015			55,384				692				None				55,384
Unamortized Original Issue Discount			(27,474	)			-								(27,474	)
		$	581,758			$	27,265								415,598

 

During the three and nine months ended March 31, 2015, $5,881 and $10,214 of the debt discount related to the outstanding trances was amortized, respectively. The Note is shown net of an unamortized debt discount of $27,474.

  

 

VANTAGE MHEALTHCARE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

 

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 three tranches received on April 21, 2014, May 6, 2014, June 11, 2014, July 16, 2014, and September 30, 2014, were convertible during the nine months ended March 31, 2015, and as such fall under ASC 815.

 

In accordance with the terms of the Note, the holder fully converted the tranche issued on April 21, 2014 during the nine months ended March 31, 2015 for 3,711,969 shares of common stock for principal and accrued interest of $116,943. The Company recorded a debt discount in the amount of $110,776 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $192,038 and an initial loss of $81,262 based on the Black Scholes Merton pricing model.

 

As of March 31, 2015, $110,776 of the debt discount has been amortized. The fair value of the derivative liability at the date of conversion was $209,614.

 

On October 21, 2014, the Note issued on May 6, 2014 became convertible at the option of the holder, On this date the Company recorded a debt discount in the amount of $55,384 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $95,215 and an initial loss of $39,831 based on the Black Scholes Merton pricing model.

 

In accordance with the terms of the Note, the holder has fully converted the trance during the nine months ended March 31, 2015 for 4,943,581 shares of common stock for principal and interest of $59,827.

 

As of March 31, 2015, $55,384 of the debt discount has been amortized. The fair value of the derivative liability at the date of conversion was $92,993.

 

On December 8, 2014, the Note issued on June 11, 2014 became convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $55,384 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $90,678 and initial loss on derivative liability of $35,294 based on the Black Scholes Merton pricing model.

 

As of March 31, 2015, $17,007 of the debt discount has been amortized. The fair value of the derivative liability at March, 31 2015 is $88,039 resulting in a loss on the change in fair value of the derivative of $2,639. The Note is shown net of a debt discount of $38,377 at March 31, 2015.

 

On January 12, 2015, the Note issued on July 16, 2014 became convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $55,384 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $91,094 and initial loss on derivative liability of $35,710 based on the Black Scholes Merton pricing model.

 

As of March 31, 2015, $11,707 of the debt discount has been amortized. The fair value of the derivative liability at March, 31 2015 is $99,884 resulting in a loss on the change in fair value of the derivative of $8,790. The Note is shown net of a debt discount of $43,677 at March 31, 2015.

 

On March 29, 2015, the Note issued on September 30, 2014 became convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $110,768 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $182,755 and initial interest expense of $71,987 based on the Black Scholes Merton pricing model.

  

 

VANTAGE MHEALTHCARE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

 

As of March 31, 2015, $604 of the debt discount has been amortized. The fair value of the derivative liability at March, 31 2015 is $209,788 resulting in a loss on the change in fair value of the derivative of $27,033. The Note is shown net of a debt discount of $110,164 at March 31, 2015.

 

Derivative liability for these notes were valued under the Black-Scholes model, with the following assumptions:

 

Fair value assumptions – derivative notes:		March 31, 2015
Risk free interest rate			0.02-3.26	%
Expected term (years)			0.01-2.00
Expected volatility			40-312	%
Expected dividends			0	%

 

None of the other convertible notes amounting to $435,536 are derivative as the above referenced convertible notes are not convertible as of March 31, 2015.

 

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 mHealthcare 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.

 

During the nine months ended March 31, 2015, the Company issued 3,683,532 shares of common stock with a fair value of $71,875 for the conversion of a $71,875 note payable. The note also had an associated derivative liability with a fair value on the date of conversion of $90,476. The conversion of the derivative liability has been recorded through additional paid-in capital.

 

During the nine months ended March 31, 2015, the Company issued 3,711,969 shares of common stock with a fair value of $116,943 for the conversion of a $116,943 note payable. The note also had an associated derivative liability with a fair value on the date of conversion of $209,614. The conversion of the derivative liability has been recorded through additional paid-in capital.

 

During the nine months ended March 31, 2015, the Company issued 1,666,666 shares of common stock with a fair value of $25,000 for the partial conversion of a note payable issued on May 6, 2014 The note also had an associated derivative liability with a fair value on the date of conversion of $40,350. The conversion of the derivative liability has been recorded through additional paid-in capital.

 

During the nine months ended March 31, 2015, the Company issued 540,428 shares of common stock for services with a fair value of $21,077.

 

During the nine months ended March 31, 2015, the Company issued 4,616,840 shares of common stock for the settlement of related party debt with a fair value of $461,684.

 

During the nine months ended March 31, 2015, the Company issued 500,000 shares of common stock for services with a fair value of $20,500.

 

During the nine months ended March 31, 2015, the Company issued 3,276,915 shares of common stock with a fair value of $34,827 for the partial conversion of a note payable issued on May 6, 2014 The note also had an associated derivative liability with a fair value on the date of conversion of $52,643. The conversion of the derivative liability has been recorded through additional paid-in capital.

 

On January 27, 2015, the Company issued 6,000,000 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 mHealthcare common stock in a cashless transaction. The fair value of the common shares is $300,000. 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.

  

 

VANTAGE MHEALTHCARE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

 

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.

 

On October 1, 2014 the Company granted stock warrants for 320,122 shares of common stock in association with a short-term loan at no cost to the lender. These warrants have a term of five years, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.164/share, the exercise price is $0.123/share, the value of the issuance is $52,498.

 

On November 17, 2014 the Company granted stock warrants for 807,692 shares of common stock in association with a long-term loan at no cost to the lender. These warrants have a term of five years, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.065/share, the exercise price is $0.049/share, the value of the issuance is $52,498.

 

On December 23, 2014 the Company granted stock warrants for 1,158,940 shares of common stock in association with a long-term loan at no cost to the lender. These warrants have a term of five years, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.045/share, the exercise price is $0.034/share, the value of the issuance is $52,152.

 

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 related to the warrant 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 related to the warrants as of March 31, 2015 was $233,215 and the Company recorded a loss in the change in fair value due to derivative warrant liability of $32,325.

 

Over the life of the derivative liability the Company has recorded a net gain in the change in fair value due to derivative warrant liability of $77,745.

 

 

VANTAGE MHEALTHCARE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

 

Fair value assumptions – derivative warrants:		Grant Date
Risk free interest rate			1.59%- 1.76	%
Expected term (years)			5
Expected volatility			362	%
Expected dividends			0	%

 

Fair value assumptions – derivative warrants:		March 31, 2015
Risk free interest rate			1.37	%
Expected term (years)			5
Expected volatility			224	%
Expected dividends			0	%

 

On July 1, 2014 the Company granted stock warrants for 200,000 shares of common stock for services. These warrants had 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.

 

On January 15, 2015, the Company granted stock warrants for 8,000,000 shares of common stock for services. These warrants had an expiration date of January 15, 2020, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.0332/share, the exercise price is $0.05/share, the value of the issuance was $263,669.

 

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 mHealthcare, with the next Vantage mHealthcare 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 nine months ending March 31, 2015 $100,000 of the royalties were recognized as an expense.

 

NOTE 10 – SUBSEQUENT EVENTS

 

On October 1, 2014, the Company issued a short-term convertible promissory note in the amount of $70,000 for $50,000 cash, an original issue discount of $12,500, and $2,500 in prepaid interest. 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. On April 6, 2015, the holder of the note exercised his right to convert $20,000 of the note balance into 1,333,333 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, LLC, a Delaware limited liability company (formerly 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 us 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 connected to a smartphone. With our foundations in advanced nanotechnology, our first product, the Vantage Healthcare 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 connects 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 recognized as a world-leader in the field of personalized modelling and is part of the international Virtual Physiologic Human (VPH) project. The Institute has successfully commercialized 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.

 

We have plans to deliver 100 Health Sensors over the next month to hospitals and research facilities in the United States and New Zealand, advancing to the next phase of our research and development process, in order to prepare for human clinical trials.

 

Over the past six months, we have invested a great deal of time, effort, and resources in improving the ergonomic design of the hand-held device; adding blue-tooth communication capabilities to the unit, increasing the sensitivity of the nanotube-based chemical sensors, refining the software algorithms used to interpret the raw sensor data, and automating the production of the critical components.

 

Several variations of ergonomic fittings used to capture breath exhaled by patients were designed, manufactured, tested, and optimized to produce a device appropriate for initial testing. Blue-tooth communication capabilities allow the hand-held unit to communicate in real-time to smart-phones, tablets, and laptops. Several new nanomaterials used to sense airborne VOCs were created, tested, and enhanced to improve the sensitivity of the device in detecting biomarkers containing a critical VOC exhaled in low levels by many patients needing an easy-to-use, non-invasive tool for an early screening of their medical condition. An early detection of disease, while treatments can still be initiated before the disease becomes terminal, will help them fight their condition. The proprietary software algorithm used to interpret the raw sensor data in the lab setting is now being translated into apps that will soon allow real-time data interpretation using the portable displays on smart-phones, tablets and laptops. Lastly, automating the production allows us to quickly scale up production for much larger volumes needed to meet future testing and production goals.

 

 

These developments are bringing the disruptive technology closer to market, where they will be used to screen for specific diseases by detecting VOCs known by medical experts to be exhaled by patients with medical conditions such as cancer. We have worked diligently with our many science partners to overcome some engineering challenges and looks forward to testing in more hospitals and research facilities around the world.

 

Recently, we have decided to work in conjunction with our majority shareholder, Nanobeak and NASA, to develop a mobile app to be used in connection with our sensor that will enable law enforcement to screen for marijuana use and deliver in-the-moment results to the officer’s smartphone, tablet or laptop in the field. We will not be distracted from our current efforts and resources in continuing to develop early lung cancer detection and detection for other diseases. The ability to go-to-market will be much faster than the process required for obtaining FDA approval for our lung cancer screening technology because the marijuana detection sensor for use by law enforcement will be exempt from the FDA approval process. With our President’s background and relationships, we believe we have an advantage when entering the law enforcement market with this product.

 

Results of operations for the three and nine months ended March 31, 2015 and 2014

 

We have earned no revenues from our inception to March 31, 2015. We do not expect to earn any revenues until we complete our technology and bring it to market.

 

Our operating expenses decreased to $798,717 for the three months ended March 31, 2015, as compared with operating expenses of $1,015,660 for the three months ended March 31, 2014. Our operating expenses for the three months ended March 31, 2015 mainly consisted of warrant compensation to our officers and directors of $263,669, consulting expenses of $248,695, professional fees of $160,274 and general and administrative expenses of $104,899. Our operating expenses for the three months ended March 31, 2014 mainly consisted of officer and director compensation of $442,253, consulting expenses of $392,067, professional fees of $74,089 and general and administrative expenses of $107,251.

 

Our operating expenses increased to $2,038,221 for the nine months ended March 31, 2015, as compared with operating expenses of $1,072,352 for the nine months ended March 31, 2014. Our operating expenses for the nine months ended March 31, 2015 mainly consisted of consulting expenses of $808,320, general and administrative expenses of $426,743, warrant compensation to our officers and directors of $263,669, professional fees of $355,114 and royalty expenses of $100,000. Our operating expenses for the nine months ended March 31, 2014 mainly consisted of consulting expenses of $397,067, general and administrative expenses of $109,178, officer and director compensation of $485,799 and professional fees of $80,308.

 

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.

 

We recognized other income of $125,041 for the three months ended March 31, 2015, as compared with other expenses of $20,548 for the three months ended March 31, 2014. Our income in 2015 was mainly attributable to Interest expense of $179,193, which was offset by the gain in the change in fair value due to derivative warrant liabilities of $304,234.

 

Our other expenses increased to $397,083 for the nine months ended March 31, 2015, as compared with other expenses of $20,548 for the nine months ended March 31, 2014. Our increase in other expenses was mainly attributable to interest expense of $425,642 and unrealized loss on investment of $19,800, which was offset by a gain in the change in fair value due to derivative warrant liabilities of $48,359.

 

We incurred a net loss of $673,676 for the three months ended March 31, 2015, compared with a net loss of $1,036,208 for the three months ended March 31, 2014.

 

 

We incurred a net loss of $2,435,304 for the nine months ended March 31, 2015, compared with a net loss of $1,370,812 for the nine months ended March 31, 2014. Our net loss for the nine months ended March 31, 2014 consisted of $1,092,900 from continuing operations, and $277,912 attributable to discontinued operations.

 

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 March 31, 2015, we had total current assets of $80,500, consisting of cash and prepaid expenses. We had current liabilities of $1,525,465 as of March 31, 2015. Accordingly, we had negative working capital of $1,444,965 as of March 31, 2015.

 

Operating activities used $1,540,967 in cash for the nine months ended March 31, 2015, as compared with $642,503 for the nine months ended March 31, 2014. Our negative operating cash flow for the nine months ended March 31, 2015 was mainly attributable to our net loss for the period and a gain on derivative liability, offset by the amortization of derivative debt discount, warrants issued for services and a decrease in prepaid expenses.

 

Investing activities used $12,149 in cash for the nine months ended March 31, 2015 associated with the purchase of fixed assets, as compared with no cash used in investing activities for the nine months ended March 31, 2014.

 

Financing activities for the nine months ended March 31, 2015 provided $1,388,015 in cash, as compared with cash flows provided by financing activities of $693,154 for the nine months ended March 31, 2014. Our positive cash flow for the nine months ended March 31, 2014 was mainly the result of contributed capital, proceeds from the sale of common stock, notes payable and related party debt, and the positive cash flow for the nine months ended March 31, 2015 was the result of proceeds from related party debt, offset by payments on related party debt.

 

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 March 31, 2015, we received nine tranche disbursements: $100,000 on April 21, 2014; $50,000 on May 6, 2014; $50,000 on June 11, 2014; $50,000 on July 15, 2014; $100,000 on September 30, 2014; $50,000 on November 3, 2014, $50,000 on December 1, 2014; $50,000 on December 29, 2014; and $50,000 on February 2, 2015.

 

The note holder converted the initial tranche made April 21, 2014 into 3,711,969 shares of common stock for principal and accrued interest of $116,943. The note holder also converted a portion of second tranche made on May 6, 2014 into 4,943,581 shares of common stock for principal and accrued interest of $59,827.

 

On October 1, 2014, we issued a short-term convertible promissory note in the amount of $70,000 for $50,000 cash, an original issue discount of $12,500, and prepaid interest of $7,500. The note bears interest at a rate of 15% per annum. The loan and any accrued interest can 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. The note matured on March 30, 2015. On April 6, 2015, the holder of the note exercised his right to convert $20,000 of the note balance into 1,333,333 shares of common stock.

 

 

On November 17, 2014, we issued a short-term convertible promissory note in the amount of $70,000. The note bears interest at a rate of 15% per annum. The loan and any accrued interest can 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. As of March 31, 2015, the note has not been converted into shares of common stock. The note is due on November 14, 2015.

 

On December 23, 2014, we issued a short-term convertible promissory note in the amount of $70,000. The note bears interest at a rate of 15% per annum. The loan and any accrued interest can 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. As of March 31, 2015, the note has not been converted into shares of common stock. The note is due on December 18, 2015.

 

On January 13, 2015, we issued a short-term convertible promissory note in the amount of $74,000. The note is due on October 15, 2015 and bears interest at 8% per annum. 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 58% multiplied by the market price, which is the average of the lowest three trading prices for the common stock during the 10 trading day period ending on the latest complete trading day prior to the conversion date. As of March 31, 2015, the note has not been converted into shares of common stock.

 

On January 26, 2015, we issued a convertible promissory note giving us the option of taking tranche payments based on amounts determined by the note holder for total payments of not more than $250,000. There is an original discount component of 10% per tranche and an additional expense fee of $25,000. Therefore, the funds available to us will be $225,000 and the liability (net of interest) will be $250,000 when all disbursements have been received us. Each tranche is accounted for separately with each principal and OID balance becoming due 24 months after receipt. Each tranche bears interest at 12% per annum. The loan is secured by shares of our common stock. Each portion of the loan becomes convertible immediately upon issuance. The loan and any accrued interest can then be converted into shares of our common stock at a rate of the lesser of $0.045 per share or 60% multiplied by the market price per share, 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. We have received one tranche disbursements of $75,000 on January 26, 2015. As of March 31, 2015, the note has not been converted into shares of common stock.

 

As of March 31, 2015, we had $69,972 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 March 31, 2015, there were no off balance sheet arrangements.

 

Going Concern

 

We have incurred cumulative net losses of $11,042,160 since our inception and require capital for our contemplated operational and marketing activities to take place. Our ability to continue as a going concern is dependent on us 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. The ability to successfully resolve these factors raise substantial doubt about our ability to continue as a going concern.

 

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 March 31, 2015 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

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is 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 will have, individually or in the aggregate, a material adverse effect on our business, consolidated financial condition, or operating results.

 

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 January 15, 2015, we granted warrants for 8,000,000 shares of common stock for services rendered. These warrants expire on January 1, 2020 and have an exercise price of $0.05 per share.

 

On January 27, 2015, we issued 6,000,000 shares of common stock to Nanobeak in connection with the exercise of a cashless warrant.

 

In March of 2015, we issued 4,616,840 shares of our common stock at a premium price of $0.10 equal to $461,684 to Nanobeak in exchange for full cancellation of its debt in our company.

 

During the quarter ended March 31, 2015, we issued 500,000 shares of common stock for services with a fair value of $20,500.

 

During the quarter ended March 31, 2015, we issued 3,276,915 shares of common stock with a fair value of $34,827 for the partial conversion of a note payable issued on May 6, 2014.

 

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
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

  

 

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 mHealthcare, Inc.
Date: May 15, 2015	By:	/s/ Joseph C. Peters
	Name:	Joseph C. Peters
	Title:	Chief Executive Officer