UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

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

 

For the quarterly period ended June 30, 2017

 

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

 

For the transition period from ______________ to _______________

 

Commission file number 000-52408

 

LIFESTYLE MEDICAL NETWORK INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada		13-1026995
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)
121 South Orange Avenue, Suite 1500, Orlando, FL		32801
(Address of principal executive offices)		(Zip Code)

 

(407) 377-6336

(Registrant’s Telephone Number, Including Area Code)

 

(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. Yes ☒   No ☐

 

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

 

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

 

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

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒

 

The number of shares outstanding of the issuer’s common stock, $0.001 par value per share, was 34,885,375 as of August 21, 2017.

 

 

 

LIFESTYLE MEDICAL NETWORK, INC.

 

INDEX

 

		Page
Part I.	Financial Information	1
Item 1.	Financial Statements.	1
	Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016	2
	Consolidated Statements of Operations for the three and six months ended June 30, 2017 and 2016 (unaudited)	3
	Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016 (unaudited)	4
	Notes to Unaudited Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	14
Item 4.	Controls and Procedures.	14
Part II.	Other Information	15
Item 6.	Exhibits.	15
Signatures		16

 

 

PART I — FINANCIAL INFORMATION

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.

 

Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. The following unaudited consolidated financial statements should be read in conjunction with the year-end restated consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2016.

 

The results of operations for the three and six months ended June 30, 2017 and 2016 are not necessarily indicative of the results for the entire fiscal year or for any other period.

 

 

LIFESTYLE MEDICAL NETWORK INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

		June 30,				December 31,
		2017				2016
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	111,163			$	48,376
Accounts receivable-related party			48,500				68,360
Accounts receivable			291,218				232,715
Loan receivable			13,600				-
Prepaid expenses			282,444				275,034
Total Current Assets			746,925				624,485
Property, plant and equipment - net			57,635				69,902
Prepaid expenses-net of current portion			64,530				200,802
TOTAL ASSETS		$	869,090			$	895,189
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accrued expenses		$	386,361			$	426,219
Accounts payable-related party			40,378				71,929
Notes payable			285,000				545,000
Current portion of convertible notes payable, net of $156,449 and $304,718 debt discount			1,659,632				1,185,802
Total Current Liabilities			2,371,371				2,228,950
LONG-TERM LIABILITIES:
Convertible notes payable, net of $433 and $4,543 debt discount			49,567				45,457
Total Liabilities			2,420,938				2,274,407
Commitments and Contingencies			-				-
STOCKHOLDERS’ DEFICIENCY:
Common stock, $.001 par value, 200,000,000 shares authorized; 34,885,375 and 33,958,257 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively			34,885				33,959
Additional paid-in-capital			11,247,721				10,948,581
Non-controlling interest			16,000				-
Accumulated deficit			(12,850,454	)			(12,361,758	)
Total Stockholders’ Deficiency			(1,551,848	)			(1,379,218	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY		$	869,090			$	895,189

 

See notes to unaudited consolidated financial statements

 

 

LIFESTYLE MEDICAL NETWORK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2017				2016				2017				2016
Revenues:						(As revised)								(As revised)
Management fees-related party		$	100,283			$	213,750			$	242,894			$	393,750
Management fees			1,069,305				-				2,266,799				-
Rental income-related party			-				110,250				-				213,750
Total revenues			1,169,588				324,000				2,509,693				607,500
Cost of revenue and operating expenses:
Cost of revenue related to management fees			864,123				170,644				1,782,089				304,607
Cost of revenue related to rental income			-				67,894				-				135,788
Cost of revenue- related party management fees			166,611				-				427,543
Selling, general and administrative expenses			161,538				241,484				363,563				409,514
Total Cost of revenue and operating expenses			1,192,272				480,022				2,573,195				849,909
Loss from operations			(22,684	)			(156,022	)			(63,502	)			(242,409	)
Other income (expense):
Gain(loss) on extingishment of debt			221,500				(61,697	)			221,500				(61,697	)
Other income			-				-				-				25,000
Interest expense			(441,913	)			(115,948	)			(646,694	)			(202,473	)
Total Other income (expense)			(220,413	)			(177,645	)			(425,194	)			(239,170	)
Loss from operations before
Provision for income taxes			(243,097	)			(333,667	)			(488,696	)			(481,579	)
Provision for income taxes			-				-				-				-
Net loss		$	(243,097	)		$	(333,667	)		$	(488,696	)		$	(481,579	)
Loss per common share-basic and diluted		$	(0.01	)		$	(0.01	)		$	(0.01	)		$	(0.01	)
Weighted average common shares outstanding
- basic and diluted			34,885,375				33,707,708				34,480,721				33,682,982

 

See notes to unaudited consolidated financial statements

 

 

LIFESTYLE MEDICAL NETWORK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For The Six Months Ended
		June 30,
		2017				2016
Cash flows from operating activities:						(As revised)
Net loss		$	(488,696	)		$	(481,579	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of intangible assets			-				2,776
Depreciation			14,481				32,435
(Gain) loss on extinguishment of debt			(221,500	)			61,697
Stock-based compensation			-				22,000
Renewal of note and additional interest expense			252,082				-
Amortization of debt discount and warrants			277,379				225,044
Changes in operating assets and liabilities:
Accounts receivable			(58,503	)			-
Accounts receivable-related party			19,860				174,768
Prepaid expenses			148,862				36,857
Accounts payable-related party			(31,551	)			-
Accounts payable and accrued expenses			80,187				157,611
Net Cash Provided by (Used In) Operating Activities			(7,399	)			231,609
Cash flows from investing activities:
Purchase of equipment			(2,214	)			-
Loan receivable			(13,600	)			-
Repayments by related party			0				265,000
Advances to related party			-				(775,181	)
Net Cash Used In Investing Activities			(15,814	)			(510,181	)
Cash flows from financing activities:
Proceeds from short-term debt			125,000				280,000
Proceeds from non-controlling interests			16,000				-
Repayments of short-term debt			(55,000	)			(24,000	)
Net Cash Provided by Financing Activities			86,000				256,000
Net change in cash			62,787				(22,572	)
Cash and cash equivalents - Beginning of period			48,376				49,719
Cash and cash equivalents - End of period		$	111,163			$	27,147
Supplemental Information;
Cash paid for interest		$	-			$	-
Cash paid for income taxes		$	-			$	-
Non-cash Investing and Financing Activities:
Issuance of warrants for prepaid services		$	20,000			$	-
Cashless conversion of warrants		$	926			$	-
Discount on convertible debt		$	125,000			$	-

 

See notes to unaudited consolidated financial statements.

 

 

LIFESTYLE MEDICAL NETWORK INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016

 

1.

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The consolidated balance sheet as of June 30, 2017 and the consolidated statements of operations, stockholders’ deficiency and cash flows for the periods presented have been prepared by Lifestyle Medical Network Inc. and Subsidiaries (the “Company” or “Lifestyle”) and are unaudited. The consolidated financial statements are prepared in accordance with the requirements for unaudited interim periods, and consequently, do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations, changes in stockholders’ deficiency and cash flows for all periods presented have been made. The information for the consolidated balance sheet as of December 31, 2016 was derived from audited financial statements of the Company.

 

Organization

 

Lifestyle Medical Network Inc. and Subsidiaries (the “Company” or “Lifestyle”) was incorporated in the State of Nevada.  The Company directs its operations through its subsidiaries.  The Company, through its consulting subsidiaries, plans to continue to identify and enter into management and professional consulting services agreements, and to license medical and health technologies, to medical and health clinic operating companies. The Company also intends to open, operate and acquire medical and health clinics, if financing is available and the profile of the clinics’ is favorable.

 

Current Operations

 

As of the date of this report, the Company is focusing its efforts, through our consulting subsidiaries, Lifestyle Texas Medical Management LLC and Lifestyle Florida Medical Management LLC, on providing administrative support and practice management services to healthcare providers. The Company’s service package is tailored to a practice group’s specific needs. Practices can select from a menu of business solutions including billing, HR/PEO, accounting and consulting, computer technical support, compliance, and administrative functions including, but not limited to, equipment selection, budgeting, and staffing recruitment.

 

The Company is continuing to look for opportunities in the direct ownership of clinics where the operations of the clinic would be compatible with the applicable regulatory regime governing ownership of medical practices and where the clinic’s operations would complement the Company’s current practice management services operations.

 

Going Concern

 

The consolidated financial statements for the six months ended June 30, 2017 have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has a past history of recurring losses from operations.. The Company will require additional funding to execute its future strategic business plan. Successful business operations and its transition to attaining profitability are dependent upon obtaining additional financing and achieving a level of revenue to support its cost structure. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company had entered into Management agreements with six medical clinics in Houston, Texas. The Company terminated its agreements as of December 31, 2016.

 

Through the Company’s consulting subsidiaries, the Company is currently providing administration support and practice management services to healthcare providers.

 

 

Management believes these services will be profitable and the cash flows from these operations will enable the Company to fund the operations of the consolidated group over the next twelve months. Therefore, the annual financial statements continue to be prepared on a going concern basis.

 

Significant Accounting Policies

  

The Company’s significant accounting policies are found below. These policies should be read in conjunction with Note 1 found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. There were no significant changes to these accounting policies during the six months ended June 30, 2017 and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

 

Principles of Consolidation

 

The consolidated financial statements of the Company include the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated.

 

Non-controlling interests are reported in the consolidated statement balance sheet as a separate component of equity. Non-controlling interests represent the equity of subsidiaries not attributable, directly or indirectly, to the Company.

 

Revenue Recognition

Revenue is recognized in accordance with SAB No. 104. Persuasive evidence of an arrangement exists; Delivery has occurred or services have been rendered; Seller’s price to the buyer is fixed or determinable; and Collectability is relatively assured.

 

The Company records revenue from management fees for providing administrative support and practice management services in accordance with management agreements to other healthcare providers. The Company receives an agreed percentage of the net revenues of these healthcare providers once cash is collected. At this point the services have been rendered, price is determinable and collectability is assured.

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates including, but not limited to, those related to such items as income tax exposures, accruals, depreciable/useful lives, allowance for doubtful accounts and valuation allowances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

 

2.

PROPERTY AND EQUIPMENT

 

Property and equipment consists of the following:

 

			June 30,				December 31,
			2017				2016
	Equipment		$	118,101			$	115,887
	Accumulated depreciation			(60,466	)			(45,985	)
			$	57,635			$	69,902

 

Depreciation expense for six months ended June 30, 2017 and 2016 was $14,481 and $32,435, respectively.

 

 

3.

DEBT

 

Short-term debt as of June 30, 2017 and December 31, 2016 were as follows:

 

			June 30,				December 31,
			2017				2016
	Short-term and Convertible Debt
	Unsecured promissory note, interest @ 12% per annum, due July 15, 2017		$	150,000			$	150,000
	Unsecured promissory note, interest @ 10%, due August 15, 2017			75,000				75,000
	Convertible promissory note, interest @ 10% per annum, due November 1, 2017			100,000				100,000
	Convertible promissory note, interest @ 12% per annum, due April 28, 2018 and June 8, 2018 (2)			758,320				461,897
	Convertible promissory note, interest @ 12% per annum, due December 17, 2016			100,000				100,000
	Convertible promissory note, interest @ 10% per annum, due November 1, 2017			50,000				50,000
	Unsecured promissory note, interest @ 10% per annum, due May 1, 2017			-				25,000
	Secured promissory note, interest free due October 15, 2017 (6)			60,000				275,000
	Convertible promissory note, interest @ 12% per annum, due June 13, 2018 (3)			307,760				242,652
	Unsecured promissory note, interest free, due on demand (1)			-				20,000
	Convertible promissory note, interest @ 12% per annum, due October 24 , 2017 (4)			226,282				187,467
	Convertible promissory note, interest @ 12% per annum, due November 28, 2017 (5)			87,818				43,786
	Convertible promissory note, interest @ 12% per annum, due August 24, 2018 (7)			49,567				45,457
	Convertible promissory note, interest @ 12% per annum, due April 4, 2018 (8)			29,452				-
				1,994,199				1,776,259
	Less: Current portion			1,944,632				1,730,802
			$	49,567			$	45,457

 

(1)

On February 18, 2016, the Company executed an unsecured promissory note with Gail Keats (an unrelated party) and received $30,000. The promissory note is interest-free and is payable on or before August 15, 2016. The Company repaid the note in full in July 2016. In October 2016, Keats advanced an additional $20,000. The note is interest free and due on demand. The Company repaid the note in full in March 2017.

 

 

  

(2)

In June 2017, the Company renewed its loan agreements with Roy Meadows (“Meadows”), an unrelated party. The origination dates of the note were April 28, 2016 and June 8, 2016. The Company agreed to pay Meadows a renewal fee of $34,496 and $34,442 on its two outstanding loans with Meadows and extend the maturity dates of the loans to April 28, 2018 and June 8, 2018, respectively. The new outstanding balances of the loans including interest and the renewal fees amounted to $379,456 and $378,864, respectively. In addition to the renewal fees, the Company issued 689,382 renewal warrants valued at $110,302 (see noted 6 for further discussion).

 

The Company also agreed to maintain the conversion price of the loans into the Company’s common stock @ $0.10 per share. At any time, the holder of the notes, at his option, shall have the right to convert the outstanding principal balance or any portion of the principal amount hereof, and any accrued interest into shares of common stock of the Company.

 

(3)

In June 2017, the Company renewed its loan agreement with Meadows. The origination date of the note was June 13, 2016. The Company agreed to pay Meadows a renewal fee of $27,798 on its loan with Meadows and extend the maturity date of the loan to June 13, 2018. The new outstanding balance of the loan including interest and the renewal fee amounted to $307,760.  At any time, the holder of the note, at his sole option, shall have the right to convert the outstanding principal amount of this note, or any portion of the principal hereof, and any accrued interest into shares of common stock of the Company, at a conversion price of $0.10 per share.  In addition to the renewal fees, the Company issued 279,782 renewal warrants valued at $44,765 (see noted 6 for further discussion).

 

(4)

On October 17, 2016, the Company issued a convertible note to Meadows and received proceeds of $250,000. The promissory note bears interest @ 12% per annum and matures on June 13, 2017. At any time, the holder of the note, at his sole option, shall have the right to convert the outstanding principal amount of this note, or any portion hereof, and any accrued interest into shares of common stock of the Company, at a conversion price of $0.06 per share. The fair value of the common stock at the date of issuance of the advance was $0.07, which created a beneficial conversion feature of $78,705, the beneficial conversion feature was recorded as a debt discount over the life of the note. The debt discount as of June 30, 2017 was $23,718.

 

(5)

On November 28, 2016, the Company issued a convertible note to Meadows and received proceeds of $125,000. The promissory note bears interest @ 12% per annum and matures on November 28, 2017. At any time, the holder of the note, at his sole option, shall have the right to convert the outstanding principal amount of this note, or any portion hereof, and any accrued interest into shares of common stock of the Company, at a conversion price of $0.06 per share. The fair value of the common stock at the date of issuance of the advance was $0.15, which created a beneficial conversion feature of $89,286, the beneficial conversion feature was recorded as a debt discount over the life of the note. The debt discount as of June 30, 2017 was $37,182.

 

(6)

On April 1, 2016, the Company issued a secured promissory note to Emile Fares, M.D. (the “Payee”), an unrelated party, and promised to the Payee $275,000 in exchange for all the medical equipment owned by RMC Totalcare Medical PA. The secured promissory note bears interest @ 6% per annum and matures one year from the date issuance. On April 1, 2017, the Company and payee entered into an agreement to modify the original note of the Company to the payee to decrease the principal amount of the note from $275,000 to $70,000, and to extend the maturity to October 15, 2017. Any interest accrued would be included as part of the principal payment. The Company repaid $10,000 in May 2017 against the unsecured note. The Company recorded a gain on the settlement of the debt in the amount of $221,500 during the six months ended June 30, 2017.

 

(7)

On August 24, 2016, the Company issued a convertible note to Daniel Hagen, an unrelated party, and received proceeds of $50,000. The promissory note bears interest @ 10% per annum and matures on August 24, 2018. At any time, the holder of the note, at his sole option, shall have the right to convert the outstanding principal amount of this note, or any portion hereof, and any accrued interest into shares of common stock of the Company, at a conversion price of $0.06 per share. The fair value of the common stock at the date of issuance of the advance was $0.07, which created a beneficial conversion feature of $8,333, the beneficial conversion feature was recorded as a debt discount over the life of the note. The debt discount as of June 30, 2017 was $433.

 

(8)

On April 4, 2017, the Company issued a convertible note to Meadows and received proceeds of $125,000. The promissory note bears interest @ 12% per annum and matures on April 4, 2018. At any time, the holder of the note, at his sole option, shall have the right to convert the outstanding principal amount of this note, or any portion hereof, and any accrued interest into shares of common stock of the Company, at a conversion price of $0.10 per share. The fair value of the common stock at the date of issuance of the advance was $0.16, which created a beneficial conversion feature of $125,000, the beneficial conversion feature was recorded as a debt discount over the life of the note. The Company issued 250,000 warrants valued at $62,500 (see note 6 for further discussion), of the $125,000 debt discount recorded, $40,541 represents the relative fair-value of the warrants allocated and remaining to the debt discount. The debt discount as of June 30, 2017 was $95,548.

 

Interest expense for the six months ended June 30, 2017 and 2016 amounted to $646,694 and $202,473, respectively.

 

 

4

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

			June 30,				December 31,
			2017				2016
	Interest		$	119,500			$	171,636
	Professional fees			110,745				104,278
	Consulting			134,921				124,384
	Other			21,195				25,921
			$	386,361			$	426,219
	Consulting fee – related
	Party		$	40,378			$	71,929

 

5.

BASIC AND DILUTED EARNINGS PER SHARE

 

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net earnings by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. At June 30, 2017, there were 38,973,125 potential common shares respectively. Because of the net loss, the effect of these potential common shares is anti-dilutive.

 

6.

WARRANTS

 

In January 2017, the Company issued warrants to the directors of the Company to purchase 200,000 shares of common stock at an exercise price of $0.09 per share. The warrants were issued in connection with services to be provided through December 31, 2017. These warrants vest immediately and expire 5 years from the date of issuance. The fair value of the warrants was $20,000, all of which was expensed during the six months ended June 30, 2017.

 

On April 4, 2017, the Company issued a warrant to Roy Meadows to purchase 250,000 shares of the Company’s common stock at an exercise price of $0.025 per share. The warrant was issued in connection with financing provided to the Company. The relative fair value of the warrant was $40,541, which is included in the $125,000 debt discount recorded against the note and will be amortized.

 

On May 16,2017, the Company issued a warrant to Roy Meadows to purchase 969,164 shares of the Company’s common stock at an exercise price of $0.025 per share. The purchase warrant consists of a renewal warrant issued in connection with the extension of three Meadows’ notes. The fair value of the warrant amounted to $155,067, all of which was expensed during the six months ended June 30, 2017.

 

In March 2017, Roy Meadows exercised a cashless common stock purchase warrant and the Company issued Roy Meadows 927,118 shares of common stock.

 

During the six months ended June 30, 2017, 2,900,000 warrants expired.

 

The estimated value of the warrants was determined using the Black Scholes pricing model using the following assumptions: expected term of 5 years, a risk-free interest rate of 1.19%, a dividend yield of -0- and volatility of 387.1%. The fair value of the warrants issued amounted to $60,541.

  

The following table summarizes the changes in warrants outstanding and the related price of the shares of the Company’s common stock issued. The warrants were granted in lieu of cash compensation for services performed.

 

			Shares				Price				Life				Value
	Outstanding, January 1, 2017			22,834,564			$	0.10				4.4
	Granted			1,419,164				0.03				5.0
	Expired/Cancelled			(3,032,446	)
	Exercised			(927,118	)			0.025
	Outstanding, June 30, 2017			20,294,164			$	0.09				4.8 years			$	2,250,229
	Exercisable, June 30, 2017			20,294,164			$	0.09				4.8 years			$	2,250,229

 

7.

RELATED PARTY TRANSACTIONS

 

a) Our Chief Executive Officer, Christopher Smith and Nathan Hawkins, a director of the Company, are each a 33 ½ % owner of Global Physicians Healthcare, Inc. a healthcare consulting company, which was paid $427,543 by the Company for services rendered under a September 16, 2016 Support Services Agreement with the Company during the six months ended June 30, 2017.

 

b) Nathan Hawkins, a director of the Company, has an indirect 47.5% interest in Physicians Stat Lab LLC, a medical services laboratory. In connection with support services rendered by the Company, Physicians Stat Lab, LLC made $242,894 of consulting payments to Lifestyle during the six months ended June 30, 2017.

 

 

8.

COMMITMENTS AND CONTINGENCIES

 

On July 1, 2017, Lifestyle entered into an employment agreement with Christopher Smith (“Smith”), the Company’s Chief Executive Officer. The term of the agreement is for five years. Effective July 1, 2017, the monthly salary for Smith was increased to $20,000. Smith will also receive a performance bonus based on a percentage of the Company’s net operating profit before income taxes. For the six months ended June 30, 2017, and 2016, payroll-officer amounted to $75,000 and $75,000, respectively.

 

 

9.	REVISION OF PRIOR QUARTERS CONSOLIDATED FINANCIAL STATEMENTS

 

During the audit of the Company’s consolidated financial statements for the year ended December 31, 2016, the Company identified an error relating to the recognition of income. The effect of error is to increase net loss for the period ended June 30, 2016.

 

In accordance with the guidance provided by the SEC’s Staff Accounting Bulletin 99, Materiality, and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Measurements in Current Year Financial Statements, the Company determined that the impact of the adjustments relating to the correction of this accounting error are not material to previously issued unaudited consolidated financial statements. Accordingly, these changes are disclosed herein and will be disclosed prospectively.

 

As a result of the aforementioned correction of accounting errors, the revised prior unaudited financial statements have been revised as follows:

 

Effects on financial statements for the six months ended June 30, 2016:

 

			June 30, 2016
			As Previously								As
	Consolidated Balance Sheet		Reported				Adjustments				Revised
	Accounts Receivable-related party		$	516,100			$	(174,000	)		$	342,100
	Accumulated deficit			(9,668,548	)			(174,000	)			(9,845,548	)
	Total stockholders’ deficit			67,928				(174,000	)			(109,772	)

 

			For the Six Months ended June 30, 2016
			As Previously								As
	Consolidated Statement of Operations		Reported				Adjustments				Revised
	Management fees-related party		$	567,750			$	(174,000	)		$	393,750
	Net loss			(307,579	)			(174,000	)			(481,579	)
	Net loss-basic and diluted			(0.01	)							(0.01	)

 

			For the Six Months ended June 30, 2016
			As Previously								As
	Consolidated Statement of Cash Flows		Reported				Adjustments				Revised
	Net loss		$	(307,579	)		$	(174,000	)		$	(481,579	)
	Accounts receivable			768				174,000				174,768

 

			For the Three Months ended June 30, 2016
			As Previously								As
	Consolidated Statement of Operations		Reported				Adjustments				Revised
	Management fees-related party		$	238,283			$	(138,000	)		$	100,283
	Net loss			(105,047	)			(138,000	)			(342,097	)
	Net loss-basic and diluted			(0.01	)							(0.01	)

  

10.

SUBSEQUENT EVENTS

 

In July 2017, Roy Meadows exercised two cashless common stock purchase warrants and for which the Company is to issue to Roy Meadows 447,699 shares of common stock.

 

 

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

 

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto and the other financial information included elsewhere in this report. Certain statements contained in this report, including, without limitation, statements containing the words “believes,” “anticipates,” “expects” and words of similar import, constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including our ability to create, sustain, manage or forecast our growth; our ability to attract and retain key personnel; changes in our business strategy or development plans; competition; business disruptions; adverse publicity; and international, national and local general economic and market conditions.

 

Organization

 

Disclosure regarding forward-looking statements

 

Throughout this report, we make statements that may be deemed “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, that address activities, events, outcomes and other matters that the Company plans, expects, intends, assumes, believes, budgets, predicts, forecasts, projects, estimates or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report.

 

General

 

Organization

 

The Company was incorporated in the State of Nevada on September 3, 2003, under the name Beverly Hills Film Studios, Inc. and changed its name to Emerging Media Holdings, Inc. on September 28, 2006. On September 30, 2006, we acquired IM “Media Alianta” SRL, the 100% owner of SA “Analiticmedia-Grup”, both Moldovan companies (“AMG”), and on May 2, 2008 “TNT-Bravo” channel-ICS “Media Top Prim” SRL, the exclusive operator in Moldova of Russian channel TNT programs owned by Gazprom Media.

 

We changed the focus of our business and disposed of three of our Moldova media subsidiaries on February 10, 2011. On December 29, 2011, we completed the sale of our remaining Moldova media subsidiaries and acquired rights to technologies and practices pursuant to an October 5, 2010 License Agreement for operating technologies and processes services related to men’s health within the territory of the continental United States. On February 2, 2012, we acquired the full assignment of rights to this License Agreement. Effective July 31, 2012, the name of our Company was changed from Emerging Media Holdings, Inc. to Lifestyle Medical Network Inc.

 

Medical Management Agreements with Houston Medical Facilities

 

The operations of the MED-CURE and Total Care clinics in Houston, Texas, were acquired in 2015 and 2016 by Dr. Ronald Moomaw, a former director of the Company and a licensed physician in the State of Texas. The Company, through its subsidiary Lifestyle Texas Medical Management, LLC, had provided scheduling, marketing and advertising, office space, equipment, supplies and other management services to these clinics and in return for a percentage of the gross revenues of each of the practice groups. The MED-CURE and Total Care clinics terminated operations in late 2016. In connection with the cessation of operations of these clinics, the Company incurred a bad debt expense write-off of $1,371,475 as at December 31, 2016, representing the aggregate of our investments in these clinics and clinic debt to us as of that date.

 

 

Current Operations

 

As of the date of this report, we are focusing our efforts, through our consulting subsidiaries, Lifestyle Texas Medical Management LLC and Lifestyle Florida Medical Management LLC, on providing administrative support and practice management services to healthcare providers. The services package is tailored to a practice group’s specific needs. Practices can select from menu of business solutions including billing, HR/PEO, accounting and consulting, computer technical support, compliance, and administrative functions including, but not limited to, equipment selection, budgeting, and staffing recruitment.

 

Critical Accounting Policies and Estimates

 

The discussion and analysis of our plan of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect our reported results of operations and the amount of reported assets and liabilities.

 

Some accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. Actual results may differ from the estimates and assumptions used in the preparation of our consolidated financial statements.

 

The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. There were no significant changes to these accounting policies during the six months ended June 30, 2017, and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

 

RESULTS OF OPERATIONS

 

SIX MONTHS ENDED JUNE 30, 2017 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2016

 

During the six months ended June 30, 2017, we had revenues of $2,509,693, as compared with revenues of $607,500 in the six months ended June 30, 2016, and we recorded a net loss of $488,696 in 2017, as compared with a net loss of $481,579 for 2016. The lower loss in the six months ended June 30, 2016 was principally due to an increase in revenues during the comparable period in 2017 offset by an increase in total costs and expenses of $2,573,195 in 2017, as compared with $849,909 in 2016, and an increase in interest expense from $202,473 in 2016 to $646,694 in 2017, of which approximately $277,379 was amortization of the beneficial conversion feature of outstanding debt. In the six months ended June 30, 2017, cost of revenue related to management fees was $1,782,019 and $427,543 of related party fees, as compared with $304,607 in 2016, and of cost of revenue related to rental income was $135,788 in 2016, for which the 2017 amount was $-0-. The higher cost of revenue related to rental income in 2016 was due to commencement of medical consulting operations in Houston in April 2015. Amortization of warrant expense in the six months ended June 30, 2017 was $277,379, as compared to $225,044 in 2016. General and administrative expense was $363,563 in 2017, as compared with general and administrative expense in 2016 of $409,514, which reflects higher operating costs associated with management of the MED-CURE clinic operations in 2016.

 

THREE MONTHS ENDED JUNE 30, 2017 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2016

 

During the three months ended June 30, 2017, we had revenues of $1,169,518, as compared with revenues of $324,000 in the three months ended June 30, 2016, and we recorded a net loss of $243,097 in 2017, as compared with a net loss of $333,667 for 2016. The lower loss in the three months ended June 30, 2016 was principally due to an increase in revenues during the comparable period in 2017 offset by an increase in total costs and expenses of $1,192,272 in 2017, as compared with $480,022 in 2016, and an increase in interest expense from $115,948 in 2016 to $441,913 in 2017, of which approximately $97,000 was related to renewal of convertible notes with Roy Meadows. In the three months ended June 30, 2017, cost of revenue related to management fees was $864,123 and $166,661 of related party fees, as compared with $170,644 in 2016, and of cost of revenue related to rental income was $67,894 in 2016, for which the 2017 amount was $-0-. The higher cost of revenue related to rental income in 2016 was due to commencement of medical consulting operations in Houston in April 2015. General and administrative expense was $161,538 in 2017, as compared with general and administrative expense in 2016 of $241,484, which reflects higher operating costs associated with management of the MED-CURE clinic operations in 2016.

 

 

LIQUIDITY AND FINANCIAL RESOURCES

 

At June 30, 2017, we had a working capital deficiency of approximately $1,624,446. At June 30, 2017, we had total assets of approximately $869,090, including $111,163 of cash. Net cash provided by operating activities in the six months ended June 30, 2017 was approximately $7,399; net cash used in investing activities was approximately $15,814; and $55,000 of short term debt was repaid in 2017. 

  

Our operations have never been profitable, and it is expected that we will continue to incur operating losses in the future. In the six months ended June 30, 2016, we generated revenues of $2,509,693, incurred total operating expenses of $2,573,195 and had a net loss of $488,696. As of June 30, 2017, we had $111,163 of cash on hand to fund operations. There is no assurance that we will operate profitably in the future.

 

The Company has financed its operations in part with issuances of convertible debt to private investors.

 

On February 18, 2016, the Company executed an unsecured promissory note with Gail Keats and received $30,000. The promissory note bears interest at 10% per annum and both principal and interest are payable on or before August 15, 2016. The Company repaid the note in full in July 2016.

 

On April 1, 2016, the Company issued a secured $275,000 promissory note to Emile Fares, M,D, (“Farris”) in payment for all the medical equipment owned by RMC Totalcare Medical PA.. The secured promissory note bears interest at 6% per annum and matures one year from the date issuance. The note is secured by all collections received by Lifestyle Texas Medical Management LLC pursuant to a Management Agreement with RMC Totalcare Medical PA. On April 1, 2017, the Company and Farris, entered into an agreement to modify the original note of the Company to Farris to decrease the principal amount of the note from $275,000 to $70,000.

 

On May 16, 2016, the Company amended its loan agreements with Roy Meadows (“Meadows”). The Company agreed to pay Meadows a renewal fee of $28,000 and $27,956 on its two outstanding loans with Meadows and extend the maturity dates of the loans to April 28, 2017 and June 8, 2017, respectively. The new outstanding balances of the loans including interest and the renewal fees amounted to $308,000 and $307,520, respectively.

 

The Company also agreed to amend the conversion price of the loans into the Company’s common stock to $0.10 per share. At any time, the holder of the notes, at his option, shall have the right to convert the outstanding principal balance or any portion of the principal amount hereof, and any accrued interest into shares of common stock of the Company. The fair value of the common stock at the date of issuance of the advance was $0.13, which created a beneficial conversion feature of $409,766. The beneficial conversion feature was recorded as a debt discount over the life of the notes. The debt discount as of June 30, 2017 was $52,195.

 

On June 13, 2016, the Company issued a convertible promissory note to Meadows and received proceeds of $250,000. The promissory note bears interest at 12% per annum and matures one year from the date of issuance. At any time, the holder of the note, at his sole option, shall have the right to convert the outstanding principal amount of this note, or any portion of the principal hereof, and any accrued interest into shares of common stock of the Company, at a conversion price of $0.15 per share. The debt discount as of June 30, 2017 was $43,126

 

On August 24, 2016, the Company borrowed $50,000 from Daniel Hagen. The loan is at an interest rate of 8%, is due August 24, 2018, and is convertible into common stock at an exercise price of $.06 per share. The fair value of the Company’s common stock on the date of funding of the loan resulted in a beneficial conversion feature of $7,488, which was recorded as a debt discount over the life of the loan. The debt discount as of June 30, 2017 was $2,488.

 

In April 2017, the Company issued a convertible note to Roy Meadows and received proceeds of $125,000. The note is convertible into common stock at a conversion price of $0.10 per share. In connection with the convertible note, the Company also issued Meadows a 5-year common stock purchase warrant to purchase 250,000 shares of common stock at an exercise price of $0.16 per share.

 

 

As of June 19, 2017, the Company renewed three promissory notes with the holder, Roy Meadows (the “Holder”), such that: (a) the Note dated April 28, 2015 with a Maturity Date of April 28, 2017 (“April 2015 Note”), was renewed to April 28, 2018; (b) the Note dated June 8, 2015 with a Maturity Date of April 28, 2017 (“June 2015 Note”), was renewed to June 8, 2018; and (c) the Note dated June 13, 2016 with a Maturity Date of June 13, 2017 (“June 2016 Note”), was renewed to June 13, 2018 (The “Renewals”). The Renewal Fees were 10% of the outstanding balance of each Note: $34,496 for the April 2015 Note, $34,442.23 for the June 2015 Note and $27,978.16 for the June 2016 Note. In connection with the Renewals, each Note’s Renewal Fee was added to the outstanding balance of the respective Note as of its Maturity Date.

 

In connection with the Renewals, a five-year common stock purchase warrant to purchase 969,264 shares of common stock of the Company, at an exercise price of $.025 per share, was issued to the Holder of the Notes.

 

There is no assurance that we will be able to obtain sufficient capital to implement our business plans. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. These conditions and uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Off Balance Sheet Arrangements

 

We do not currently have any off balance sheet arrangements falling within the definition of Item 303(c) of Regulation S-B.

 

Inflation

 

To date inflation has not had a material impact on our operations.

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

ITEM 4. Controls and Procedures.

 

As of June 30, 2017, the end of the period covered by this quarterly report, the Chief Executive and Chief Financial Officer of the Company (the “Certifying Officer”) conducted an evaluation of the Company’s disclosure controls and procedures. As defined under Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officer, to allow timely decisions regarding required disclosure.

 

Based on this evaluation, the Certifying Officer has concluded that the Company’s disclosure controls and procedures were not effective for the quarter ended June 30, 2017, to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis to comply with the Company’s disclosure obligations under the Exchange Act, and the rules and regulations promulgated there under.

 

Further, there were no changes in the Company’s internal control over financial reporting during the second fiscal quarter of our 2017 fiscal year that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

PART II

 

Other Information

 

Item 6. Exhibits.

 

31		Certification of Chief Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a)
32		Certification of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350

 

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

 

SEC Ref. No.		Title of Document
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Label Linkbase Document
101.PRE		XBRL Taxonomy Presentation Linkbase Document

 

The XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

  

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

	LIFESTYLE MEDICAL NETWORK INC. (Registrant)
Date: August 21, 2017	By:	/s/ Christopher Smith
		Christopher Smith, Chief Executive Officer and Principal Financial Officer

 

 

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