mdhi this is a good read on 2011 audited financial

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During December of 2011, the Company announced the MediPendant® would be distributed by Costco Wholesale Corporation. Costco is one of the largest retailers in not only the United States, but throughout the world with approximately 60,000,000 customers. The Company's relationship with this retailer has been very strong and sales are occurring on a daily basis, customer return rates are low and customer satisfaction is high. This relationship with Costco is advantageous not only because of the retailer’s distribution reach, but also due to positive cash flow upon initial sale that is realized; a situation that is rarely achieved in the medical alarm space. Sales and shipments occur on a consistent basis. Early in the March 2013 quarter, the Company successfully completed a retail promotion with this large discount warehouse chain partner. An additional program began late in the March 2013 quarter and ran through April 21, 2013. During June of 2013, the MediPendant® product was featured in the retailer’s pharmacy-oriented sales magazine, which is being distributed in the pharmacy section in all store locations. The MediPendant® has now received 21 product reviews on the retailer's website, 17 of which are "5 out of 5 Star" ratings. The average rating is "4.5 Stars" out of 5 Stars.



The Company has also had successes internationally with new distribution agreements in Denmark and Ireland. Additionally, the Company is currently working on a distribution/joint venture with JTT-EMS, which is a company located just outside of Beijing, China. Medical Alarm Concepts is expecting steady growth from its international markets during 2013 and believes there are likely several other international contracts that will be consummated during the calendar year. The Company also distributes the MediPendant® through Internet marketing and through various outside call centers. Significant investment is planned to expand sales opportunities relative to these areas.



Medical Alarm Concepts has recently signed a supply and services contract with Coventry Health Care, Inc., which was recently acquired by Aetna Insurance (NYSE:ATA) a diversified and national company, which operates health plans, insurance companies, network rental and workers’ compensation services companies. Under the terms of the agreement, the Company will become the provider of personal medical alarms for Coventry Health Care and its Medicare/Medicaid programs. As part of this new contract, Coventry Health Care, Inc. will offer the Company’s MediPendant® product and monthly monitoring services directly to subscribers of selected healthcare programs provided by Coventry. Additionally, the Company’s MediPendant® product has been included in several large Medicare and Medicaid related contracts on which Coventry Health Care, Inc. is bidding. The Company is expecting this contract to generate significant growth in revenue and earnings. As a result of gaining the contract, the Company plans to significantly expand its business operations in the areas of financial management, research and development, and logistics.



The Company recently received an investment led by strategic partner, JTT-EMS LTD of Shijiazhuang, China. Under the terms of the investment, JTT-EMS LTD purchased Common Stock in a private placement transaction and has indicated to the Company that it plans to hold these shares as a long-term investment. The financing, including additional investments by current shareholders, will total up to approximately $330,000. There are no warrants or options associated with this investment. As more fully noted below, funds received will primarily be used to rebuild inventory levels to meet the growing demand and to pay professional fees associated with returning the Company to fully reporting status.



Management has been very successful in negotiating with debt holders for the cancellation of very significant portions of our debt. Since the beginning of 2012, approximately $56,251 of convertible debt has been cancelled. Recently, the holder of our short-term credit line cancelled $236,397 of the outstanding balance. Additionally, since beginning of 2012, approximately 200,000,000 toxic and highly dilutive warrants were also cancelled. No shares, warrants or options were granted in exchange for these cancellations.



Because trade payables have been paid down very substantially over the past few quarters, we are expecting our balance sheet to be very strong, nearly long- term debt free and with very manageable trade payable levels.



We believe upcoming balance sheets, on which we expect to be free of nearly all long-term debt and free of warrants, options and minimal outstanding preferred stock, will more accurately reflect the true value of our growing company.



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The Company expects calendar year 2013 to be one of continued growth in both monthly recurring revenues and distribution sales, which will allow the Company to realize sustainable positive operating cash flow. We believe the growth rate and the positive operating cash flow we are currently realizing is sustainable into 2014 and beyond.



Results of Operations



Net Sales



Net sales generated during the years ended June 30, 2011 and 2010 was $452,816 and $613,357, respectively; representing a 26% or $160,541 decrease, resulting from a change in strategic business direction toward more spread more widespread product distribution and away from reliance on only a few resellers and distributors. This Company believes this change in business direction will lead to stronger growth and margins and higher overall sales during future periods. During fiscal 2011 and 2010, net sales were generated from sales to distributors, resellers and from direct sales to consumers who pay the Company for monthly monitoring services.



Cost of Sales



Cost of sales incurred during years ended June 30, 2011 and 2010 were $168,642 and $266,501, respectively, representing a 37% or $97,859 decrease. The decrease of cost of sales was mainly due to decrease of net sales, as the Company changed its strategic business direction more toward sales to consumers who pay monthly monitoring services .



Gross Profit



Gross profit generated during fiscal 2011 and 2010 was $284,174 and $346,856, representing an 18% or $62,682 decrease. The gross profit margin for 2011 and 2010 was 63% and 57%, respectively.



Selling Expenses



Selling expenses incurred during fiscal 2011 and 2010 was $318,413 and $711,569, respectively. The $393,156 was a 55% decrease compared to the previous period. During fiscal 2011, the Company began to shift its sales emphasis more toward consumer marketing, which contributed to the reduction in sales expenses .



General and Administrative



General and administrative expenses for fiscal 2011 and 2010 were $1,322,798 and $2,399,102 respectively; representing 45% or $1,076,304 decrease in general and administrative expense mainly due to the decrease of salary. During fiscal 2011, the Company was able to reduce its staffing due an increased focus on consumer marketing and a decreased emphasis on channel marketing.



Derivative Instrument



Changes in fair value of derivative instrument generated $1,996,861 income and $1,206,196 expenses during fiscal 2011 and 2010, respectively. This was due to a lower value of the derivative liability due to a decrease in the market value of the Company’s common stock.



Interest Expense



Interest expense for fiscal 2011 and 2010 were $1,047,360 and $692,368, respectively. The $354,992 or 51% increase in interest expense was mainly due to increased amount of amortization of discount of convertible notes and interest expense recorded on the excess of derivative liability over the amount of the convertible debt.



Net Loss



Net loss incurred during fiscal 2011 and 2010 were $407,536 and $4,662,379, respectively for the reasons stated above.



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Liquidity and Capital Resources



As of June 30, 2011 and 2010, we had $22 and $0 in cash, respectively.



During fiscal 2011 and 2010, operating activities used net cash of $278,456 and $1,206,101, respectively. Main reasons for the $927,645 or 77% decrease in net cash used in operating activities were outlined below:



1. Net loss incurred during fiscal 2011 decreased $4,254,843 or 91%, comparing with fiscal 2010;
2. During 2011, the Company issued 61,536,585 shares of common stock as compensation to service providers, which were valued at $488,300; comparably, during 2010, the Company issued 57,250,000 shares of common stocks to service providers, worthy of $1,066,500;
3. Changes in fair value of derivative instrument during 2011 generated non-cash income of $1,966,861; however, during 2010, such changes incurred non-cash expense of $1,206,196;
4. Non-cash interest expense during 2011 and 2010 was $897,359 and $450,682, respectively;



During fiscal 2011and 2010, financing activities generated net cash inflow of $278,478 and $1,155,350, respectively. Main reasons for the $876,872 or 76% decrease in net cash provided in financing activities were outlined below:



1. During 2010, the Company collected $90,000 subscription receivable; there was no similar transaction during 2011;
2. During 2010, the Company borrowed $24,000 from its officers; and repaid the same amount in 2011;
3. During 2010, sales of preferred stocks generated net cash of $769,000; the Company did not sale any preferred stocks during 2011


Read more: http://www.faqs.org/sec-filings/130815/MEDICA...z2f0jSzDJh