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Lifestyle Medical Network, Inc. – ‘10-Q’ for 9/30/18

On:  Thursday, 10/31/19, at 4:52pm ET   ·   For:  9/30/18   ·   Accession #:  1213900-19-21655   ·   File #:  0-52408

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

10/31/19  Lifestyle Medical Network, Inc.   10-Q        9/30/18   33:1.4M                                   Edgar Agents LLC/FA

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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 September 30, 2018

☐   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)

(407) 377-6336

(Registrant’s Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act: None.

Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.001 par value per share

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit 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.

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 35,583,074 as of October 30, 2019

LIFESTYLE MEDICAL NETWORK, INC.

INDEX

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, 2017.

The results of operations for the three and nine months ended September 30, 2018 and 2017 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

See Notes to Unaudited Consolidated Financial Statements

LIFESTYLE MEDICAL NETWORK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See Notes to Unaudited Consolidated Financial Statements

LIFESTYLE MEDICAL NETWORK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

LIFESTYLE MEDICAL NETWORK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

See Notes to Unaudited Consolidated Financial Statements 

LIFESTYLE MEDICAL NETWORK INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

The consolidated balance sheet as of September 30, 2018 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, 2017 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. In May 2016, the Company commenced working with Global Physicians Healthcare, Inc. (“Global”). The Company entered into a support services agreement with Global in September 2016, under which Global has provided valuable assistance to the Company as a marketing and services consultant in marketing services to healthcare providers and healthcare systems. The Company following initiation of its healthcare provider support services in 2016 is now expanding its generated marketing efforts for client healthcare providers. The Company terminated its agreement with Global on December 31, 2017 but continues to perform the same services without the need of or support from Global.

The Company’s services 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 has access to a nationwide network of ancillary providers of local and regional medical practice solutions. As a result, the Company’s client medical practices may benefit from cost savings, higher quality of patient care, and increased productivity efficiencies and revenue.

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 nine months ended September 30, 2018 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.

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, 2017.

Principles of Consolidation

The consolidated financial statements of the Company include the Company and its wholly-owned 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, directly or indirectly to the Company.

Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing account standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to a customer. The Company adopted the guidance under the new revenue standards using the modified retrospective method effective January 1, 2018. Topic 606 requires the Company to recognize revenues when control of the promised goods or services and receipt of payment is probable.

Upon adoption, the new standards replaced most existing revenue recognition guidance in U.S. GAAP. The adoption of the new revenue standards did not have any impact on its consolidated financial statements and all revenue will be recognized pursuant to Topic 606 under the five-step model specified by the new revenue standards.

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.

Accounting Standards Issued But Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842), to provide a new comprehensive model for lease accounting under this guidance, lessees and lessors should apply a “right-of-use” model in accounting for all leases (including subleases) and eliminate the concept of operating leases and off-balance-sheet leases. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. Similar modifications have been made to lessor accounting in-line with revenue recognition guidance. This guidance is effective for the annual periods and interim periods beginning December 15, 2018. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. Early adoption is permitted. The update guidance requires a modified retrospective adoption. We are currently in the process of evaluating this new standard update.

On January 3, 2018, the Company issued an unsecured convertible promissory note to Cabrewceus Holdings, LLC and received proceeds of $50,000. The promissory note bears interest at 10% per annum and matures one year from the date of issuance. At any time, the holder of the note, at his option, has the right to convert the outstanding principal amount of the note, or any portion of the principal amount hereof, any accrued interest into shares of common stock of the Company at a conversion price of $0.17 per share. Beneficial Conversion Feature analysis was performed by the Company and no discount was recorded.

During 2018, the Company received proceeds of $28,000 from a third party. The advance is unsecured, interest free and due upon demand. The Company repaid $11,000 in 2018 and as of September 30, 2018 the balance due was $17,000. The Company received an additional $7,000 in October 2018 of which $12,000 was repaid in 2018 and $12,000 was repaid in 2019.

In June, September and December 2018, the Company received proceeds of $16,500, $15,000 and $6,000 from Church Street Capital. The advances are unsecured, interest free and due April 30, 2019 and June 30, 2019, respectively. During 2019, the Company received an additional $13,000 of advances from Church Street Capital.

In May 2019, the Company received proceeds of $50,000 from a third party. The secured note bears interest @ 10% per annum. The note matures on September 15, 2019 and the parties are currently negotiating an extension. The note is secured by an interest in the Company’s lawsuit vs. Aventus Health. In addition to the note owed, the third party will receive 5% of the lawsuit upon settlement or award.

In July 2019, the Company received proceeds of $50,000 from a third party. The note is unsecured and is interest free. The note matures on October 17, 2019 and the parties are currently negotiating an extension.

During 2018, $200,000 of convertible debt and $255,000 of notes payable were extended to April 30, 2019 and August 19, 2019. The loans were extended with no extinguishment of the debt.

During 2018, debt in the amount of $1,566,080 plus interest to Roy Meadows matured. The debt is currently in default but no demand for payment has been received. The parties are currently negotiating an extension agreement.

Debt in the amount of $160,000 to two debtors is currently in default. No demand for payment has been received by the Company.

Interest expense for the nine months ended September 30, 2018 and 2017 was $229,463 and $779,611, respectively.

Amortization of debt discount for the nine months ended September 30, 2018 and 2017 was $36,645 and $505,753, respectively, which is included in the interest expense.

In January 2018, the Company issued warrants to the directors of the Company to purchase 150,000 shares of common stock at an exercise price of $0.11 per share. The warrants were issued in connection with services to be provided through December 31, 2018. These warrants vest immediately and expire 5 years from the date of issuance. The fair value of the warrants was $16,500, all of which was expensed during the nine months ended September 30, 2018.

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 $16,500.

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.

Approximately 90% of the revenues for the nine months ended September 30, 2018, was received from one company.

In January 2018, the Company was served with a complaint in the case Amy Dalton vs. Physician Stat Lab, Inc., LifeStyle Medical Network, Inc., Christopher Smith, and Nathan Hawkins. The case is pending in the United States District Court for the Middle District of Florida, Orlando Division. The complaint alleges breach of contract and failure to pay the minimum wage. The plaintiff has claimed damages of $25,823 and the Company has answered the complaint denying any wrongdoing and asserting affirmative defenses to the plaintiff’s claims. The likelihood of a contingency loss is remote and therefore no accrual was recorded for the year ended December 31, 2017. The Company settled the litigation in December 2018 and paid Amy Dalton $5.000.

In April 2018, the Company was served with a complaint filed January 19, 2018 in the case David Davila vs. LifeStyle Texas Medical Management LLC, a Texas subsidiary of the Company (“LifeStyle Texas Management”) and Christopher Smith, our Chief Executive Officer, in the County Civil Court at Law Number 1, Harris County, Texas. The complaint seeks recovery of debt represented by a March 24, 2016 promissory note in the principal amount of $75,400 bearing interest at the rate of 5% per annum, issued by LifeStyle Texas Management to the plaintiff. The Company entered into a settlement agreement in June 2018, which has stayed prosecution of the lawsuit by plaintiff, pursuant to which agreement the Company would make three payments 0f $18,333 each June 23, July 23, and August 23, 2018., to settle the lawsuit, which may be resumed by the plaintiff if the Company fails to make the payment as required by the settlement agreement. The Company became aware of the obligation in 2018 and the liability of $55,000 has been accrued as of December 31, 2017. The settlement was paid in full in August 2018.

On June 19, 2019, the Company’s Texas operating subsidiaries, Lifestyle Texas Management and Services, LLC and Lifestyle Texas Medical Management, LLC, and Christopher Smith, our Chief Executive Officer (collectively, “Plaintiffs”), filed a lawsuit in the District Courts of Harris County, Texas, against Aventus Health, LLC, and seven related companies and three individuals associated with these companies, that transacted business with Plaintiffs in Texas (collectively, “Defendants”). The lawsuit seeks damages of amounts owing by Defendants of $464,040 in unpaid invoices, and additional damages including attorney’s fees, expert fees and the costs of litigation that are anticipated to be in excess of $250,000.00 through the time of trial, due to numerous false and material misrepresentations by Defendants to Plaintiffs with the intent that these misrepresentations be relied upon and made with no intention of fulfilling their contractual duties to compensate Plaintiffs as per agreements between the parties. Defendants’ misrepresentations to Plaintiffs are stated in the lawsuit to include but are not limited to misrepresentations concerning payment for management services of Plaintiffs. On September 11, 2019, Defendants removed the lawsuit to the U.S. District Courts for the Southern District of Texas, Houston Division; however, on September 18, 2019, Plaintiffs and Defendants filed a joint motion to remand the lawsuit back to the District Courts of Harris County, Texas, as the U.S. District Courts did not have jurisdiction over the lawsuit. On September 23, 2019, the motion was granted and the lawsuit was remanded back to the District Courts of Harris County, Texas. It is anticipated that it may take 12 to 18 months to fully litigate the lawsuit.

During the nine months ended September 30, 2018, the Company received $16,000 from non-controlling interests representing 40% interests in various subsidiaries. The Company returned $100,500 to the non-controlling interests representing return of capital and distribution of earnings of the subsidiaries.

During the nine months ended September 30, 2019, the Company advanced Global Medical Equipment LLC $10,000. The advance is interest free and due upon demand.

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, 2017. There were no significant changes to these accounting policies during the nine months ended September 30, 2018, 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

THREE MONTHS ENDED SEPTEMBER 30, 2018 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2017

During the three months ended September 30, 2018, we had revenues of $ 215,561, as compared with revenues of $1,004,905 in the three months ended September 30, 2017, and we recorded a net loss of $216,257 in 2018, as compared with a net loss of $481,697 for 2017. The decrease in the net loss for the three months ended September 30, 2018 was principally due to a decrease in total costs and expenses of $358,358 in 2018, as compared with $1,353,685 in 2017, and a decrease in interest expense from $132,917 in 2017, to $64,106 in 2018, offset by decreases in revenues of $789,344 in 2018. In the three months ended September 30, 2018, cost of revenue related to management fees was $248,736 and $-0- of related party fees, as compared with $895,817 and $75,452in 2017. General and administrative expense was $109,622 in 2018, as compared with general and administrative expense in 2017 of $382,416 which reflects amortization of warrant expense in 2018 of $-0- as compared to $243,750 in 2017.

NINE MONTHS ENDED SEPTEMBER 30, 2018 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2017

During the nine months ended September 30, 2018, we had revenues of $ 963,039, as compared with revenues of $3,514,598 in the nine months ended September 30, 2017, and we recorded a net loss of $561,285 in 2018, as compared with a net loss of $970,393 for 2017. The decrease in the net loss for the nine months ended September 30, 2018 was principally due to a decrease in total costs and expenses of $1,202,096 in 2018, as compared with $3,926,880 in 2017, and a decrease in interest expense from $779,611 in 2017, to $229,463 in 2018, of which approximately $36,644 was amortization of the beneficial conversion feature of outstanding debt, offset by decreases in revenues of $2,551,559 in 2018. In the nine months ended September 30, 2018, cost of revenue related to management fees was $805,692 and $-0- of related party fees, as compared with $2,677,906 and $502,995 in 2017. General and administrative expense was $396,404 in 2018, as compared with general and administrative expense in 2017 of $745,979 which reflects amortization of warrant expense in 2018 of $16,500 as compared to $399,250 in 2017.

LIQUIDITY AND FINANCIAL RESOURCES

At September 30, 2018, we had a working capital deficiency of approximately $2.9 million. At September 30, 2018, we had total assets of approximately $83,042, including $1,635 of cash. Net cash used in operating activities in the nine months ended September 30, 2018 was approximately $12,159; net cash used in investing activities was approximately $10,033; and $109,500 of short-term debt was received in 2018, offset by $11,000 of repayments.

Our operations have never been profitable, and it is expected that we will continue to incur operating losses in the future. In the nine months ended September 30, 2018, we generated revenues of $ 963,039, incurred total operating expenses of $1,202,906 and had a net loss of $561,285. As of September 30, 2018, we had $1,635 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.

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. As of September 30, 2018, the balance due the Holder for the April 2017 Note was $379,456; the balance on the June 2015 Note was $378,864; and the balance on the June 2016 Note $307,760.

In connection with the Renewals, a five-year common stock purchase warrant to purchase 969,164 shares of common stock of the Company, at an exercise price of $.025 per share, was issued to the Holder of the Notes.

We are negotiating a forbearance agreement with the Holder for the total amount of principal and accrued interest of $1,799,342 due on the Notes as of June 30, 2018, which would toll the accrual of interest under the Notes and extend the maturity dates. However, there is no assurance that we will be able to complete these negotiations on terms satisfactory to the Company.

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 September 30, 2018, 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, due to the lack of segregation of duties, the Certifying Officer has concluded that the Company’s disclosure controls and procedures were not effective for the quarter ended September 30, 2018, 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 thereunder. We have relied heavily on entity or management review controls to lessen the inherent issue of segregation of duties in a small company.

Further, there were no changes in the Company’s internal control over financial reporting during the fourth 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 1. LEGAL PROCEEDINGS.

On June 19, 2019, the Company’s Texas operating subsidiaries, Lifestyle Texas Management and Services, LLC and Lifestyle Texas Medical Management, LLC, and Christopher Smith, our Chief Executive Officer (collectively, “Plaintiffs”), filed a lawsuit in the District Courts of Harris County, Texas, against Aventus Health, LLC, and seven related companies and three individuals associated with these companies, that transacted business with Plaintiffs in Texas (collectively, “Defendants”). The lawsuit seeks damages of amounts owing by Defendants of $464,040 in unpaid invoices, and additional damages including attorney’s fees, expert fees and the costs of litigation that are anticipated to be in excess of $250,000.00 through the time of trial, due to numerous false and material misrepresentations by Defendants to Plaintiffs with the intent that these misrepresentations be relied upon and made with no intention of fulfilling their contractual duties to compensate Plaintiffs as per agreements between the parties. Defendants’ misrepresentations to Plaintiffs are stated in the lawsuit to include but are not limited to misrepresentations concerning payment for management services of Plaintiffs. On September 11, 2019, Defendants removed the lawsuit to the U.S. District Courts for the Southern District of Texas, Houston Division; however, on September 18, 2019, Plaintiffs and Defendants filed a joint motion to remand the lawsuit back to the District Courts of Harris County, Texas, as the U.S. District Courts did not have jurisdiction over the lawsuit. On September 23, 2019, the motion was granted and the lawsuit was remanded back to the District Courts of Harris County, Texas. It is anticipated that it may take 12 to 18 months to fully litigate the lawsuit.

ITEM 6. EXHIBITS

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

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.

15

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Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing		Date		Other Filings
Filed on:		10/31/19		10-Q
		10/30/19
		10/17/19
		9/30/19
		9/23/19
		9/18/19
		9/15/19
		9/11/19
		8/19/19
		6/30/19
		6/19/19
		4/30/19
		12/31/18
		12/15/18
For Period end:		9/30/18
		8/23/18
		6/30/18		10-Q
		6/13/18
		6/8/18
		4/28/18
		1/19/18
		1/3/18
		1/1/18
		12/31/17		10-K,  NT 10-K
		9/30/17		10-Q
		6/19/17		8-K
		6/13/17
		4/28/17
		12/31/16		10-K,  NT 10-K
		6/13/16
		3/24/16
		6/8/15
		4/28/15
		7/31/12
		2/2/12
		12/29/11		3,  8-K,  8-K/A
		2/10/11		8-K,  8-K/A
		10/5/10
		5/2/08		8-K
		9/30/06
		9/28/06
		9/3/03
				List all Filings

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Filing Submission 0001213900-19-021655   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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