United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2013
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No: 333-13679
MIT HOLDING, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 20-3420795 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer ID No) |
351 Commercial Avenue, Suite B, Savannah, GA 31406
(Address of principal executive office) (Zip Code)
Registrant’s telephone number: (912) 925-1905
| N/A |
| 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 [X] 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, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer [ ] | Accelerated filer [ ] | Non-accelerated filer [ ] (Do not check if a smaller | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The number of shares of common stock, no par value per share, outstanding as of August 10, 2013 was 28,910,601.
MIT HOLDING, INC.
FORM 10-Q
QUARTERLY PERIOD ENDED JUNE 30, 2013
INDEX
TABLE OF CONTENTS
| Page | |||
| PART I – FINANCIAL INFORMATION | |||
| Item 1: | Financial Statements | F-1 | |
| Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 | |
| Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 9 | |
| Item 4T: | Controls and Procedures | 9 | |
| PART II – OTHER INFORMATION | |||
| Item 1: | Legal Proceedings | 10 | |
| Item 1A: | Risk Factors | 10 | |
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 10 | |
| Item 3: | Defaults Upon Senior Securities | 10 | |
| Item 4: | Removed and Reserved | 10 | |
| Item 5: | Other Information | 10 | |
| Item 6: | Exhibits | 10 | |
| 2 |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| 3 |
PART I – FINANCIAL INFORMATION
MIT HOLDING, INC.
| June 30, 2013 | December 31, 2012 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 47,920 | $ | 52,758 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $200,128 and $200,128 respectively | 254,794 | 236,235 | ||||||
| Inventories | 201,047 | 142,878 | ||||||
| Employee advances | - | 1,430 | ||||||
| Prepaid expenses and other current assets | 47,192 | 47,192 | ||||||
| Total current assets | 550,953 | 480,493 | ||||||
| PROPERTY AND EQUIPMENT, net of accumulated depreciation of $133,338 and $126,373, respectively | 27,256 | 27,256 | ||||||
| OTHER ASSETS | ||||||||
| Investment in subsidiary and related contracts | 329,222 | 396,053 | ||||||
| Non-compete agreement, net of accumulated amortization of $200,000 and $200,000, respectively | - | - | ||||||
| Total other assets | 329,222 | 396,053 | ||||||
| TOTAL ASSETS | $ | 907,431 | $ | 903,802 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | 3,125,935 | $ | 2,754,067 | ||||
| Current portion of debt | 296,159 | 337,265 | ||||||
| Total current liabilities | 3,422,094 | 3,091,331 | ||||||
| LONG-TERM DEBT | 953,988 | 953,988 | ||||||
| Common stock subject to mandatory redemption 5,000,000 shares issued 2nd quarter 2012 | 250,000 | 250,000 | ||||||
| Estimated liability for equity-based financial instruments with characteristics of liabilities: | ||||||||
| Series A Convertible Preferred Stock (179.67 and 179.67 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively) | 151,738 | 151,738 | ||||||
| Warrants | 5,213 | 5,213 | ||||||
| TOTAL LIABILITIES | 4,783,033 | 4,315,069 | ||||||
| STOCKHOLDERS’ DEFICIENCY | ||||||||
| Preferred stock, $0.000001 par value; 5,000,000 shares authorized, 179.67 and 179.67 | - | |||||||
| Series B preferred stock $.000001 par value, 1,100,000 shares authorized, 1,100,000 and 1,100,000 issued and outstanding at June 30, 2013 and December 31, 2012 | 1 | |||||||
| Common stock, $0.000001 par value; 250,000,000 shares authorized, 28,910,601 and 81,400,811 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively | 140 | 88 | ||||||
| Additional paid-in capital | 8,264,650 | 7,582,166 | ||||||
| Accumulated deficit | (12,003,190 | ) | (10,993,521 | ) | ||||
| Total stockholders’ (deficiency) | (3,738,401 | ) | (3,411,267 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | 907,431 | $ | 903,802 | ||||
The accompanying notes are an integral part of these statements.
| F-1 |
MIT HOLDING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(UNAUDITED)
| June 30, 2013 | June 30, 2012 | |||||||
| Revenue | ||||||||
| Sales and services rendered | $ | 922,404 | $ | 2,135,586 | ||||
| Cost of medical supplies | 438,560 | 1,038,735 | ||||||
| Gross profit | 483,844 | 1,096,851 | ||||||
| Operating Expenses | ||||||||
| Salaries and payroll cost | 332,347 | 550,542 | ||||||
| Selling, general and administrative | 863,834 | 888,301 | ||||||
| Provision for doubtful accounts | ||||||||
| Depreciation and amortization | 19,998 | |||||||
| Total operating expenses | 1,196,181 | 1,458,841 | ||||||
| Income (loss) from operations | (712,337 | ) | (361,990 | ) | ||||
| Other income (expense): | ||||||||
| Income (expense) from revaluation of equity-based financial instruments with characteristics of liabilities at fair values (as restated for 2009 - note O) | - | (37,429 | ) | |||||
| Interest expense | (297,332 | ) | (113,371 | ) | ||||
| Total other income (expense) | (297,332 | ) | (150,800 | ) | ||||
| Income (loss) before provision for income taxes | (1,009,669 | ) | (512,790 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net income (loss) | (1,009,669 | ) | (512,790 | ) | ||||
| Increase in cumulative dividends payable on Series A Preferred Stock (as restated for 2009 - Note O) | (25,655 | ) | ||||||
| Net income (loss) attributable to common stockholders | $ | (1,009,669 | ) | $ | (538,445 | ) | ||
| Net income (loss) per common share: | ||||||||
| Basic and diluted | $ | $ | (0.01 | ) | ||||
| Weighted average number of common shares outstanding: | ||||||||
| Basic and diluted | 81,400,811 | 81,400,811 | ||||||
The accompanying notes are an integral part of these statements.
| F-2 |
MIT HOLDING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2013 AND 2012
(UNAUDITED)
| June 30, 2013 | June 30, 2012 | |||||||
| Revenue | ||||||||
| Sales and services rendered | $ | 489,341 | $ | 930,071 | ||||
| Cost of medical supplies | 197,871 | 475,490 | ||||||
| Gross profit | 291,470 | 454,581 | ||||||
| Operating Expenses | ||||||||
| Salaries and payroll cost | 136,932 | 207,399 | ||||||
| Selling, general and administrative | 498,595 | 530,410 | ||||||
| Provision for doubtful accounts | - | - | ||||||
| Depreciation and amortization | - | 10,000 | ||||||
| Total operating expenses | 635,527 | 747,809 | ||||||
| Income (loss) from operations | (344,057 | ) | (293,228 | |||||
| Other income (expense): | ||||||||
| Income (expense) from revaluation of equity-based financial instruments with characteristics of liabilities at fair values (as restated for 2009 - note O) | - | |||||||
| Interest expense | (228,821 | ) | (51,544 | ) | ||||
| Total other income (expense) | (228,821 | ) | (51,444 | ) | ||||
| Income (loss) before provision for income taxes | (572,878 | ) | (344,772 | |||||
| Provision for income taxes | - | - | ||||||
| Net income (loss) | (572,878 | ) | (336,676 | |||||
| Increase in cumulative dividends payable on Series A Preferred Stock (as restated for 2009 - Note O) | - | (26,950 | ) | |||||
| Net income (loss) attributable to common stockholders | $ | (572,878 | ) | $ | (371,722 | ) | ||
| Net income (loss) per common share: | ||||||||
| Basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||
| Weighted average number of common shares outstanding: | ||||||||
| Basic and diluted | 81,400,811 | 81,400,811 | ||||||
The accompanying notes are an integral part of these statements.
| F-3 |
MIT HOLDING, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY
FOR THE SIX MONTHS ENDED JUNE 30, 2013
(UNAUDITED)
| Series B Preferred Stock $0.000001 par value | Common Stock, $0.000001 par value | Additional paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficiency) | ||||||||||||||||||||||
| Balance at December 31, 2010 | 52,254,571 | 52 | 6,279,362 | (8,527,203 | ) | (2,247,789 | ) | |||||||||||||||||||||
| Unaudited and unreviewed: | ||||||||||||||||||||||||||||
| Issuance of common stock for services in first quarter 2011 | 42,000 | - | 1,470 | - | 1,470 | |||||||||||||||||||||||
| Issuance of common stock for services in third quarter 2011 | 29,104,240 | 29 | 1,164,141 | - | 1,164,170 | |||||||||||||||||||||||
| Net loss for the year ended December 31, 2011 | - | - | (1,329,763 | ) | (1,329,763 | ) | ||||||||||||||||||||||
| Balance at December 31, 2011 | 81,400,811 | 81 | 7,444,973 | (9,856,966 | ) | (2,411,912 | ) | |||||||||||||||||||||
| Issuance of common stock for services in third quarter of 2012 | 6,860,000 | 7 | 137,193 | 137,193 | ||||||||||||||||||||||||
| Net loss for the twelve months ended December 31, 2012 | - | - | (1,136,555 | ) | (1,136,555 | ) | ||||||||||||||||||||||
| Balance at December 31, 2012 | 88,260,811 | 88 | 7,582,166 | (10,993,521 | ) | (3,411,267 | ) | |||||||||||||||||||||
| Issuance of common stock for services in first quarter of 2013 | 35,845,200 | 35 | 107,501 | 107,536 | ||||||||||||||||||||||||
| Adjustment of common stock for reverse split in second quarter of 2013 | (111,695,410 | ) | - | - | - | - | ||||||||||||||||||||||
| Issuance of Series B Preferred stock for services in second quarter of 2013 | 1,100,000 | 1 | 79,999 | 80,000 | ||||||||||||||||||||||||
| Issuance of common stock for services in second quarter 2013 | 16,500,000 | 16 | 494,984 | 495,000 | ||||||||||||||||||||||||
| Net loss for the six months ended June 30, 2013 | - | - | (1,009,669 | ) | (1,009,669 | ) | ||||||||||||||||||||||
| Balance at June 30, 2013 | 1,100,000 | 1 | 28,910,601 | $ | 139 | $ | 8,264,650 | $ | (12,003,190 | ) | $ | (3,738,401 | ) | |||||||||||||||
The accompanying notes are an integral part of these statements.
| F-4 |
MIT HOLDING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(UNAUDITED)
| June 30, 2013 | June 30, 2012 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | (1,009,669 | ) | $ | (512,789 | ) | ||
| Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities: | ||||||||
| Expense(income) from revaluation of equity-based financial instruments with characteristics of liabilities at fair values (as restated for 2009 - note O) | (37,434 | ) | ||||||
| Depreciation and amortization | 19,998 | |||||||
| Issuance of common stock for services | - | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables | �� | (18,599 | ) | 294,320 | ||||
| Inventories | (55,998 | ) | (44,416 | ) | ||||
| Prepaid expenses | - | (7,506 | ) | |||||
| Employee advances | 1,430 | - | ||||||
| Accounts payable and accrued expenses | 481,196 | (165,459 | ||||||
| Cash provided by operating activities | (654,205 | ) | (453,286 | |||||
| INVESTING ACTIVITIES | ||||||||
| Issue of Notes Payable for Trade Payables | (33,168 | ) | 461,906 | |||||
| Capital expenditures | - | - | ||||||
| Cash used for investing activities | (33,168 | ) | 461,906 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Issuance of stock for | 682,536 | |||||||
| Repayment of debt | (52,606 | ) | (34,569 | ) | ||||
| Cash used for financing activities | 629,930 | (34,569 | ) | |||||
| NET INCREASE (DECREASE) IN CASH | (57,443 | ) | (34,612 | ) | ||||
| CASH BALANCE BEGINNING OF PERIOD | 52,757 | 52,569 | ||||||
| CASH BALANCE END OF PERIOD | $ | 47,920 | $ | 17,957 | ||||
| Supplemental Disclosures: | ||||||||
| Interest paid | $ | 297,332 | $ | 113,371 | ||||
| Taxes paid | $ | - | $ | - | ||||
| Non-cash Financing Activities: | ||||||||
| $ | - | $ | - | |||||
| $ | - | $ | - | |||||
The accompanying notes are an integral part of these statements.
| F-5 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE A – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION POLICIES
| 1. | Nature of Operations |
MIT Holding, Inc., a Delaware corporation, is a holding company. Through three wholly-owned subsidiaries, MIT distributes wholesale pharmaceuticals, administers intravenous infusions, operates an ambulatory center where therapies are administered and sells and rents home medical equipment.
Medical Infusion Technologies, Inc. was incorporated in November 1991 in the state of Georgia. On July 6, 2006, an agreement and plan of merger was made between MIT Holding, Inc., a Delaware corporation, Medical Infusion Technologies, Inc., and MIT Acquisition A, Inc. By this agreement, MIT Holding, Inc. became the parent company and Medical Infusion Technologies, Inc. and MIT Ambulatory Care Center, Inc., wholly-owned subsidiaries.
MIT Holding, Inc. Merger with Convention All Holdings, Inc.
Our company was formerly known as Convention All Holdings, Inc. and, on May 2, 2007, we acquired a 100% ownership interest in MIT Holding, Inc. through a merger of MIT Holding, Inc. with and into MIT CVAH Acquisition Corp, a newly formed Delaware corporation and wholly-owned subsidiary, in exchange for 32,886,779 shares of our common stock. Simultaneously with the Merger, the company formerly known as MIT Holding, Inc. changed its name to Medical Infusion Group, Inc., and we changed our name to MIT Holding, Inc. As a result of the Merger, we now own 100% of Medical Infusion Group, Inc., a Delaware corporation, which, in turn, continues to own 100% of the issued and outstanding shares of capital stock of MIT Ambulatory Care Center, Inc., a Georgia corporation (“Ambulatory”), Medical Infusion Technologies, Inc., a Georgia corporation (“Infusion”) and MIT International Distribution, Inc., a Delaware corporation (“MIT International”).
| 2. | Basis of Presentation |
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.
| 3. | Going Concern |
At June 30, 2013, the Company had negative working capital of $2,037,579. From inception, the Company has incurred an accumulated deficit of $12,003,190. These factors raise substantial doubt as to the Company’s ability to continue as a going concern.
| F-6 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE A – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION POLICIES (continued)
There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company’s existing stockholders.
The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
| F-7 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE B – INTERIM FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements as of June 30, 2013 and for the three months and six months ended June 30, 2013 and 2012 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10 - Q. In the opinion of management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of June 30, 2013 and the results of operations and cash flows for the three months and six months ended June 30, 2013 and 2012. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three month period ended June 30, 2013 is not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending December 31, 2011. The balance sheet at December 31, 2010 has been derived from the audited consolidated financial statements at that date.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2010 included in our Form 10–K filed April 19, 2011.
NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| 1. | Principles of Consolidation |
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include the accounts of MIT Holding, Inc. and Medical Infusion Technologies, Inc. and MIT Ambulatory Care Center, Inc., wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.
| 2. | Use of Estimates |
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
| F-8 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| 3. | Cash Equivalents |
Investments having an original maturity of 90 days or less that are readily convertible into cash are considered cash equivalents. The Company had no cash equivalents as of June 30, 2013.
| 4. | Fair Value of Financial Instruments |
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, net, accounts payable and accrued expenses, and debt. The fair value of these financial instruments approximate their carrying amounts reported in the balance sheets due to the short term maturity of these instruments or based upon market quotations or quotations of instruments with similar interest rates and similar maturities.
| 5. | Accounts Receivable, Net of Allowance for Doubtful Accounts |
The Company derives most of its revenue from contracts with third party payors such as insurance companies and Medicare and Medicaid programs. Its billings are often settled lower by such payors. An allowance for doubtful accounts is established and recorded based on historical experience and the aging of the related accounts receivable.
| 6. | Inventories |
Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value). They consist mainly of pharmaceutical supplies and medical equipment.
| 7. | Property and Equipment |
Property and equipment are stated at cost and are depreciated principally on methods and at rates designed to amortize their costs over their estimated useful lives.
The estimated service lives of property and equipment are principally as follows:
| Furniture and fixtures | 5- 7 years |
| Computer equipment | 3- 7 years |
| Vehicles | 5- 7 years |
| F-9 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Repairs and maintenance are expensed as incurred. Expenditures that increase the value or productive capacity of assets are capitalized.
| 8. | Long-Lived Assets |
Property and equipment and other long-lived assets, including non-compete agreements, are evaluated for impairment whenever events or conditions indicate that the carrying value of an asset may not be recoverable, but not less than annually. If the sum of undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets.
| 9. | Revenue Recognition |
Sales and services rendered are recorded when products and services are delivered to the customers. Provision for discounts, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. In instances where products are configured to customer requirements, revenue is recorded upon the successful completion of the Company’s final test procedures.
| 10. | Stock-Based Compensation |
Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (“ASC”) 718, “Compensation- Stock Compensation”.
In addition to requiring supplemental disclosures, ASC 718,Compensation – Stock Compensation, addresses the accounting for share-based payment transactions in which a company receives goods in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. FASB ASC 718 focuses primarily on accounting for transactions in which a company obtains employee services in share-based payment transactions.
References to the issuances of restricted stock refer to stock of a public company issued in private placement transactions to individuals who are eligible to sell all or some of their shares of restricted Common Stock pursuant to Rule 144 promulgated under the Securities Act of 1933 (“Rule 144”), subject to certain limitations. In general, pursuant to Rule 144, a stockholder who is not an affiliate and has satisfied a six-month holding period may sell all of his restricted stock without restriction, provided that the Company has current information publicly available. Rule 144 also permits, under certain circumstances, the sale of restricted stock, without any limitations, by a non-affiliate of the Company that has satisfied a one-year holding period.
| F-10 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| 11. | Advertising Costs |
Advertising costs are expensed as incurred. Advertising expense totaled $900 for the six months ended June 30, 2013 and $6,129 for the six months ended June 30, 2012.
| 12. | Income Taxes |
Deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements by applying enacted statutory tax rates expected to apply in the years in which these temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
| 13. | Net Income (Loss) per Common Share |
Basic net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as warrants and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation.
For the six months ended June 30, 2013 and 2012, diluted weighted average number of common shares outstanding exclude 3,593,460 (2009 : 3,793,460) shares issuable on conversion of Series A Preferred Stock, 600,000 shares issuable on exercise of outstanding stock options and 8,418,780 shares issuable on exercise of outstanding warrants.
| F-11 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
| 14. | Reclassifications |
Certain prior period amounts have been reclassified to conform to the current period presentation.
| 15. | Recent Accounting Pronouncements |
Certain accounting pronouncements have been issued by FASB and other standard setting organizations which are not yet effective and have not yet been adopted by the Company. The impact on the Company’s consolidated financial position and results of operations from adoption of these standards is not expected to be material.
NOTE D – ACCOUNTS RECEIVABLE
Accounts receivable consists of
| June 30, 2013 | December 31, 2012 | |||||||
| Ambulatory care | $ | 62,714 | $ | 68,277 | ||||
| Infusions | 209,003 | 230,459 | ||||||
| Durable medical equipment | 183,205 | 137,627 | ||||||
| Wholesale | - | - | ||||||
| Total | 454,922 | 436,363 | ||||||
| Allowance for doubtful accounts | (200,128 | ) | (200,128 | ) | ||||
| Net | $ | 254,794 | $ | 236,235 | ||||
The allowance for doubtful accounts changed as follows:
| Six months ended June 30, 2013 | Twelve months | |||||||
| Balance, beginning of year | $ | 200,128 | $ | 200,128 | ||||
| Provision for doubtful accounts | - | - | ||||||
| Write offs | - | - | ||||||
| Balance, end of period | $ | 200,128 | $ | 200,128 | ||||
| F-12 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE E – INVENTORIES
Inventories consist of:
| June 30, 2013 | December 31, 2012 | |||||||
| Ambulatory care | $ | 28,147 | $ | 57,151 | ||||
| Infusions | 82,429 | 50,007 | ||||||
| Durable medical equipment | 90,471 | 38,719 | ||||||
| Total | $ | 201,047 | $ | 142,877 | ||||
NOTE F – NON-COMPETE AGREEMENT
Non-compete agreement consists of:
| June 30, 2013 | December 31, 2012 | |||||||
| Consideration to seller of Infusion and Ambulatory (and Company’s chief operating officer) attributable to non-compete agreement executed May 10, 2005 | $ | 200,000 | $ | 200,000 | ||||
| Accumulated amortization | (200,000 | ) | (200,000 | ) | ||||
| Total | $ | - | $ | - | ||||
The non-compete agreement is being amortized over the estimated remaining period of the agreement (see Note N).
| F-13 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE G – DEBT
The Company’s debt is as follows:
| June 30, 2013 | December 31, 2012 | |||||||
| Globank Corp., interest at 14.9% payable monthly commencing January 1, 2001(interest at 60% in 2009 and 2010), due in monthly installments of $1,000 from February 1, 2011 to December 1, 2013 and a balloon payment of $1,002,727 on January 1, 2014, secured by Company assets and guaranties of the Company’s chief executive officer and the Company’s three subsidiaries (less unamortized debt discounts of $410,000 and $0, respectively) MIT’s newly elected Co-Chairman and Co-President, Walter H.C. Drakeford (“Drakeford”) whom is also the Company’s new Chief Financial Officer, Secretary and Director has had a professional relationship with a financing entity in which the president of Globank is involved in. | $ | 705,727 | $ | 695,727 | ||||
| Suntrust Bank fixed rate term note, interest at 10% due in monthly installments of principal and interest of $7,798 through April 10, 2014, secured by guaranty of the Company’s Chief Executive Officer | 154,863 | 166,358 | ||||||
| Smith Drug Co. fixed rate term note, interest at 6% due in monthly installments of principal and interest of $5,211 through December 28, 2013, secured by guaranty of the Company’s Chief Executive Officer | 34,962 | 74,572 | ||||||
| Metro Medical Inc. fixed rate term note, interest at 12%, due in monthly installments of principal and interest of $7,798 through September 20, 2014, secured by guaranty of the Company’s Chief Executive Officer. Principal and interest payments of $5,000 through September 20, 2012, $10,000 through March 20, 2013 and $20,000 through August 20, 2014 | 354,595 | 354,595 | ||||||
| Total | 1,250,147 | 1,291,252 | ||||||
| Current portion of debt | 296,159 | 337,265 | ||||||
| Long – term debt | $ | 953,988 | $ | 953,987 | ||||
Maturities of debt at June 30, 2013 are as follows:
| Years ending June 30, | Amount | |||
| 2013 | 356,.985 | |||
| 2014 | 893,162 | |||
| $ | 1,250,147 | |||
| F-14 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE H – ESTIMATED LIABILITY FOR EQUITY-BASED FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF LIABILITIES
Effective January 1, 2009, in accordance with EITF Issue No. 07-05, “Determining Whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock”, the Company reclassified the fair values at January 1, 2009 of the outstanding Series A Convertible Preferred Stock and warrants from the private placement of the units which closed May 31, 2007 from stockholders’ equity to liabilities, as follows:
| Common | ||||||||
| Shares | Fair | |||||||
| Equivalent | Value | |||||||
| Series A Convertible Preferred Stock | 3,793,460 | $ | 227,608 | |||||
| Warrants | 8,168,780 | 106,194 | ||||||
| Total financial instruments | 11,962,240 | $ | 333,802 | |||||
All warrants have expired as of August 12, 2012.
Since at January 1, 2009 the carrying value of the outstanding financial instruments was $2,871,316, the Company recognized a cumulative effect adjustment resulting from a change in accounting principle of $2,537,514. Accordingly, the accumulated deficit balance at December 31, 2008 was decreased from $9,899,884 to $7,362,370, as adjusted, on January 1, 2009.
The characteristics which require classification of the Series A Preferred Stock and warrants as liabilities are the Company’s obligations to reduce the conversion price of the Series A Preferred Stock and the exercise price of the warrants in the event that the Company sells, grants, or issues any non excluded shares, options, warrants, or any convertible instrument at a price below the $0.50 current conversion price of the Series A Preferred Stock. As a result, the Company remeasures the fair values of these financial instruments each quarter, adjusts the liability balances, and reflects changes in operations as “income (expense) from revaluation of equity-based financial instruments with characteristics of liabilities at fair values”.
| F-15 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE H – ESTIMATED LIABILITY FOR EQUITY-BASED FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF LIABILITIES (continued)
The fair values of the financial instruments consisted of:
| June 30, 2013 | December 31, 2012 | |||||||||||||||
| Common | Common | |||||||||||||||
| Shares | Fair | Shares | Fair | |||||||||||||
| Equivalent | Value | Equivalent | Value | |||||||||||||
| Series A Convertible Preferred Stock | 3,593,460 | $ | 143,738 | 3,793,460 | $ | 151,738 | ||||||||||
| Warrants | 8,168,780 | 9,803 | 8,168,780 | 25,323 | ||||||||||||
| Total financial instruments | 11,762,240 | 153,541 | 11,962,240 | $ | 177,061 | |||||||||||
Below is a reconciliation of the change in the fair values of the financial instruments from January 1, 2009 through June 30, 2013:
| Common | ||||||||
| Shares | Fair | |||||||
| Equivalent | Value | |||||||
| Balance, January 1, 2009 | 11,962,240 | $ | 333,802 | |||||
| Revaluation credited to operations | - | (164,271 | ) | |||||
| Balance, March 31, 2009 | 11,962,240 | 169,531 | ||||||
| Revaluation charged to operations | - | 789,139 | ||||||
| Balance, June 30, 2009 | 11,962,240 | 958,670 | ||||||
| Revaluation credited to operations | - | (403,695 | ) | |||||
| Balance, September 30, 2009 | 11,962,240 | 554,975 | ||||||
| Revaluation credited to operations | - | (377,914 | ) | |||||
| Balance December 31, 2009 | 11,962,240 | 177,061 | ||||||
| Revaluation charged to operations | - | 332,169 | ||||||
| Balance March 31, 2010 | 11,962,240 | 509,230 | ||||||
| Revaluation credited to operations | - | (295,050 | ) | |||||
| Balance June 30, 2010 | 11,962,240 | 214,180 | ||||||
| Conversion of Series A Convertible Preferred Stock | (200,000 | ) | (8,000 | ) | ||||
| Revaluation credited to operations | - | (52,639 | ) | |||||
| Balance September 30, 2010 | 11,762,240 | 153,541 | ||||||
| Revaluation credited to operations | - | (80,855 | ) | |||||
| Balance, December 31, 2010 | 11,762,240 | 72,686, | ||||||
| Revaluation credited to operations | - | 35,395 | ||||||
| Balance, March 31, 2013 | 11,762,240 | $ | 151,378 | |||||
| Revaluation credited to operations | - | - | ||||||
| Balance, June 30, 2013 | 11,762,240 | 151,738 | ||||||
| F-16 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE I – PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of Preferred Stock, of which 5,000 shares have been designated Series A Preferred Stock, par value $0.000001. As of June 30, 2013, there are 1,796.73 shares of Series A Preferred Stock issued and outstanding. Holders of Series A Preferred Stock are entitled at any time to convert their shares of Series A Preferred Stock into Common Stock, without any further payment Each share of Series A Preferred Stock is initially convertible into 2,000 shares of Common Stock, equivalent to a Conversion Price of $0.50 per share. The number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock is subject to adjustment upon the occurrence of certain events, including, among others, a stock split, reverse stock split or combination of MIT’s Common Stock; an issuance of Common Stock or other securities of MIT as a dividend or distribution on the Common Stock; a reclassification, exchange or substitution of the Common Stock; or a capital reorganization of MIT. In the event that MIT issues any additional shares of its Common Stock following the Offering, the Conversion rate will be that number of shares of Common Stock equal to $1,000 divided by the price per share at which MIT issues Common Stock in such offering. At our option, following the effectiveness of a registration statement registering the shares of Common Stock issuable upon the conversion of the Series A Preferred Stock and the exercise of the Warrants, if the price of the Common Stock trades above 300% of the Conversion Price per share during any period of 30 consecutive trading days and the average trading volume is at least 50,000 shares per day, for such 30 day period, each share of Series A Preferred Stock can be automatically converted into Common Stock at the Conversion Rate then in effect.
The liquidation preference amount of each share of Series A Preferred Stock is $1,000, or a total of $1,796,730 for the 1,796.73 shares issued and outstanding as of June 30, 2013 (December 31, 2009: $1,896,730 for the $1,896.73 shares issued and outstanding).
As part of its private placement of the Units (including the Series A Preferred Stock) which closed May 31, 2007, the Company granted a financial advisor a five-year option to purchase up to 635 units (comprised of 635 shares of Series A Preferred Stock and warrants to purchase up to 1,270,000 shares of common stock at an exercise price of $0.75 per share to August 13, 2012) at a price of $1,000 per Unit.
Dividends accrue on the Series A Preferred Stock at the rate of 6% per annum and are cumulative. If and when declared, the Company may pay such dividends in cash or common stock. The cumulative undeclared and unpaid dividends are $494,117 and $440,215 at June 30, 2013 and December 31, 2011, respectively.
In the first quarter of 2013, the Board of Directors authorized 1,100,000 shares of Series B preferred shares to issued to vendors and related parties in lieu of payments for goods and services. In the second quarter of 2013, 1,100,000 shares of Series B preferred stock were issued to vendors in settlement of $80,000. in debt incurred for prior services, valued at the rate of $.07 per share.
NOTE J – ISSUANCE OF COMMON STOCK
In the first quarter of 2013, the Board of Directors authorized the issuance of a total of 35,845,200 shares of common stock to vendors and consultants valued at a price of $0.03 per share, or $1,075,356 total for settlement for goods and services.. The Company included the $1,075,356 in selling, general and administrative expenses in the accompanying statement of operations for the twelve months ended December 31, 2012 and increased common stock and additional paid-in capital by the same amount.
| F-17 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE J – ISSUANCE OF COMMON STOCK (continued)
In the second quarter of 2013, the Board of Directors authorized the issuance of a total of 16,500,000 shares of common stock to vendors and consultants valued at a price of $0.03 per share, or $495,000 total for settlement for goods and services provided to the company.
NOTE K – STOCK OPTIONS AND COMMON STOCK PURCHASE WARRANTS
A summary of stock options and warrants activity for the year ended December 31, 2012 and for the six months ended June 30,
2013 follows:
All options have expired as of August 12, 2012
| Common Shares Equivalent | ||||||||
| Stock Options | Warrants | |||||||
| Outstanding at December 31, 2011 | 600,000 | 8,418,780 | ||||||
| Granted and issued | - | - | ||||||
| Exercised | - | - | ||||||
| Forfeited/expired/cancelled | - | - | ||||||
| Outstanding at December 31, 2012 | 600,000 | 8,418,780 | ||||||
| Granted and issued | - | - | ||||||
| Exercised | - | - | ||||||
| Forfeited/expired/cancelled | - | - | ||||||
| Outstanding at June 30, 2013 | 600,000 | 8,418,780 | ||||||
| F-18 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE K – STOCK OPTIONS AND COMMON STOCK PURCHASE WARRANTS (continued)
Stock options outstanding at June 30, 2013 and December 31, 2012 are:
All options have expired as of August 12, 2012
| Date Granted | Number Outstanding | Number Exercisable | Exercise Price | Expiration Date | ||||||||||
| May 2, 2007 | 600,000 | 600,000 | $ | 0.50 | May 2, 2012 | |||||||||
| Totals | 600,000 | 600,000 | ||||||||||||
Common stock purchase warrants outstanding at June 30, 2013 and December 31, 2012 are:
| Date Granted | Number Outstanding | Exercise Price | Expiration Date | |||||||
| May 31, 2007 | 8,168,780 | $ | 0.75 | August 13, 2012 | ||||||
| July 30, 2007 | 250,000 | $ | 2.20 | July 30, 2012 | ||||||
| Total: | 8,418,780 | |||||||||
NOTE L – INCOME TAXES
Expected income tax expense (benefit) computed by applying the United States statutory income tax rate of 34% to pretax income (loss) differs from the Company’s provision for (benefit from) income taxes, as follows:
| Six months ended June 30, | ||||||||
| 2013 | 2012 | |||||||
| Expected income tax expense (benefit) at 34% | $ | (343,348 | ) | $ | (174,348 | ) | ||
| Non-deductible stock-based compensation | - | - | ||||||
| Non-deductible expense (non-taxable income) from revaluation of equity-based financial instruments with characteristics of liabilities at fair values | - | 37,429 | ||||||
| Change in valuation allowance | 343,348 | 136,919 | ||||||
| Provision for income taxes | $ | - | $ | - | ||||
| F-19 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE L – INCOME TAXES (continued)
The components of net deferred income tax assets are as follows:
| June 30, 2013 | December 31, 2012 | |||||||
| Allowance for doubtful accounts | $ | 200,127 | $ | 200,127 | ||||
| Net operating loss carryforward | 4,202,664 | 3,202,664 | ||||||
| Total | 4,402,791 | 3,402,791 | ||||||
| Less valuation allowance | (4,402,791 | ) | (3,402,791 | ) | ||||
| Net deferred income tax assets | $ | - | $ | - | ||||
Based on management’s present assessment, the Company has not yet determined it to be more likely than not that a deferred income tax asset of up to $1,308,074 attributable to the future utilization of the net operating loss carry forwards and other timing differences of approximately $3,847,276 as of June 30, 2013 will be realized. Accordingly, the Company has maintained its 100% allowance against the deferred tax asset in the financial statements at June 30, 2013. The Company will continue to review this valuation allowance and make adjustments as appropriate. The $3,394,382 net operating loss carryforward expires $1,743,693 in year 2028, $983,226 in year 2029 and $667,463 in year 2030.
NOTE M – OPERATING SEGMENTS
The Company has four principal operating segments, which are as follows:
| ● | Medical Infusion Technologies-”MIT” | |
| ● | MIT International / Provector | |
| ● | Durable Medical Equipment - “DME” | |
| ● | MIT Ambulatory Care Center -”Ambulatory Care” |
“MIT” is a provider of intravenous therapies to patients at their home, at a designated facility. MIT’s primary product lines are centered upon infusion therapy.
“International / Provector” is the division responsible for the marketing and distribution of Provector on a worldwide basis for international sales only.
| F-20 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE M – OPERATING SEGMENTS (continued)
“DME” carries a variety of durable medical equipment and supplies.
“Ambulatory Care” administers the intravenous therapies to patients in the Company’s facility.
“MITRX” provided Long Term Care Pharmaceuticals to to Care Facilities. Division sold in 2011.
The following tables show the summarized financial information of the Company’s reportable segments at June 30, 2013 and 2012 and for the six months then ended:
| Medical | ||||||||||||||||||||||||
| Infusion | International | Ambulatory | ||||||||||||||||||||||
| - MIT | Provector | Care | DME | MITRX | Combined | |||||||||||||||||||
| 2013 | ||||||||||||||||||||||||
| Revenue | $ | 530,691 | $ | $ | 128,019 | $ | 263,694 | $ | $ | 922,904 | ||||||||||||||
| Income (loss) from operations | (735,763 | ) | 23,186, | 240 | (712,337 | ) | ||||||||||||||||||
| Depreciation and amortization | - | - | - | - | - | |||||||||||||||||||
| Assets | $ | 651,078 | - | $ | 63,272 | $ | 193,091 | $ | 907,431 | |||||||||||||||
| 2012 | ||||||||||||||||||||||||
| Revenue | $ | 1,386,355 | $ | $ | 559,218 | $ | 190,014 | $ | $ | 2,135,586 | ||||||||||||||
| Income (loss) from operations | (435,003 | ) | 76,629 | (2,035 | ) | (360,427 | ) | |||||||||||||||||
| Depreciation and amortization | 19,998 | - | - | - | 19,998 | |||||||||||||||||||
| Assets | $ | 819,936 | - | $ | 264,170 | $ | 125,123 | $ | 1,209,229 | |||||||||||||||
| F-21 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE N – COMMITMENTS AND CONTINGENCIES
Employment Agreements
Pursuant to an Employment Agreement with the Company’s chief executive officer effective June 30, 2006 and expiring June 30, 2013, the Company is obligated to pay its chief executive officer a salary of $250,000 per year, temporarily adjusted downward to $150,000 per year.
Lease Agreements
The following are the key terms of MIT’s lease agreements:
The lease on the facility located at 115B Echols St., Savannah, GA was entered into January 1, 2007 is on a month to month lease basis. The rent is $4,180 per month. This lease is personally guaranteed by William C. Parker, Chairman of the Board.
MIT leased two suites in the facility located at 37 W. Fairmont Avenue, Savannah, GA. These facilities were destroyed in a fire in November 2011. The company has relocated to temporary facilities on a month to month basis. Lease expense on the facility is $1,375 per month.
| F-22 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE N – COMMITMENTS AND CONTINGENCIES (continued)
Rent expense incurred under the aforementioned leases totaled $23,694 and $23,465 for the three months ended and $47,182 and $39,490 for the six months ended June 30, 2013 and 2012, respectively.
Stock-Based Compensation Plan
On June 7, 2007 the Board of Directors approved the 2007 Stock Incentive Plan (the “Plan”) covering 5,000,000 shares. The shareholders subsequently approved the Plan. The shares underlying the Plan are restricted. The Plan is identical to MIT’s 2006 Stock Incentive Plan (which was adopted by Medical Infusion Group, Inc. (the former MIT Holding, Inc.) prior to the Merger) in all material respects, other than that the 2006 Stock Incentive Plan covers 7,000,000 shares. All awards under the 2006 Stock Incentive Plan were exchanged for awards under the Plan effective upon the Company’s May 2, 2007 merger with Medical Infusion Group, Inc.
The Company intends to extend the stock incentive plan to 10,000,000 shares, subject to shareholder approval.
The Plan is intended to benefit the stockholders of the Company by providing a means to attract, retain and reward individuals who can and do contribute to the longer-term financial success of the Company. Further, the recipients of stock-based awards under the Plan should identify their success with that of the Company’s shareholders and therefore will be encouraged to increase their proprietary interest in the Company. The Compensation Committee administers the Plan.
| F-23 |
MIT HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
(UNAUDITED)
NOTE O – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL INFORMATION
In the accompanying consolidated financial statements, the Company has restated the consolidated statement of operations for the six months ended June 30, 2010 in order to correct errors relating to (1) the failure to account for the Series A Convertible Preferred Stock and warrants as liabilities and reflect changes in fair values in operations in accordance with EITF Issue No. 07-05 (see note H) and (2) the overstatement of the increase in cumulative dividends payable on Series A Preferred Stock as a result of the overstated number of issued and outstanding shares of Series A Preferred Stock.
The effect of the restated adjustments on the Consolidated Statement of Operations for the six months ended June 30, 2010 follows:
| As Previously | As | |||||||||||
| Reported | Adjustments | Restated | ||||||||||
| Income from operations | $ | (596,602 | ) | $ | - | $ | (596,602 | ) | ||||
| (Loss) from revaluation of equity-based Financial instruments with characteristics of liabilities at fair values | - | (221,173 | ) | (221,173 | ) | |||||||
| Interest Expense | (250,188 | ) | - | (250,188 | ) | |||||||
| Loss before provision for Income Taxes | (846,790 | ) | (221,173 | ) | (1,067,963 | ) | ||||||
| Provision for Income taxes | - | - | - | |||||||||
| Net Loss | (846,790 | ) | (221,173 | ) | (1,067,963 | ) | ||||||
| Increase in cumulative dividends payable on Series A Preferred Stock | 156,505 | (71,152 | ) | 85,353 | ||||||||
| Net loss attributable to common stockholders | $ | (1,003,295 | ) | $ | (150,021 | ) | $ | (1,153,316 | ) | |||
| Net loss per common share | $ | (0.02 | ) | $ | (0.00 | ) | $ | (0.02 | ) | |||
| F-24 |
Item 2. Management’s Discussion and Analysis
The statements contained in this 10Q, are not purely historical statements, but rather include what we believe are forward-looking statements. The forward-looking statements are based on factors set forth in the following discussion. Our actual results could differ materially from results anticipated in these forward-looking statements. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements.
Overview
Through its subsidiaries, MIT prepares intravenous medication for home infusion by the patient, operates an ambulatory center where intravenous infusions are administered and sells and rents home medical equipment. MIT is based in Savannah, Georgia and operates an ambulatory care center in that area. Although all of the Company’s revenues in 2013 have been derived from providing intravenous therapies and renting home medical equipment in the Savannah area, the Company is developing ProVector©BTi, to kill mosquitoes in the fight to reduce malaria, dengue fever and other infectious diseases transmitted by them. The Company is seeking a grant to fund the production and distribution of the product. In connection with its attempt to obtain this grant, the Company is in discussions with a not-for-profit organization to obtain the grants necessary to be able to deliver Provector to countries in need. However, there is no assurance that funding will be received. If sufficient funding is received, the Company will pursue world wide sales of this malaria fighting product The Company is also providing technical information to foreign governments which are interested in pursuing the Provector as well.
Critical Accounting Policies
Management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, impairment of long-lived assets, including finite lived intangible assets, accrued liabilities and certain expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
Our significant accounting policies are summarized in Note A to our financial statements for the six months ended June 30, 2013. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value). They consist mainly of pharmaceutical supplies and medical equipment.
Revenue Recognition
Sales and services are recorded when products are delivered to the customers. Provision for discounts, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. In instances where products are configured to customer requirements, revenue is recorded upon the successful completion of the Company’s final test procedures. Beginning in the fourth quarter of 2008, the Company began using “mail order drugs” for some expensive drugs to reduce the need for cash in providing certain therapies. In this plan, drugs are shipped to MIT prepaid by the respective insurance companies. The company recognizes revenue for the efforts of pharmacy personnel in formulation and for nurses in the administration of the drugs to our patients as well as supplies used and no revenue or costs associated with the drugs is recorded. This has caused a reduction in revenue and cost of sales and creating an increase in margins.
| 4 |
Advertising Cost
Advertising costs are expensed as incurred.
Estimates
Preparing the Company’s financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
The impact on the Company’s financial position and results of operations from accounting pronouncements which went effective and were adopted by the Company in the periods presented was not material. The future impact of accounting pronouncements issued by the FASB and other standard setting organizations which are not yet effective and have not yet been adopted by the Company are not expected to be material.
Results of Operations
Comparison of six months ended June 30, 2013 to six months ended June 30, 2012.
Revenues
Consolidated revenues for the six months ended June 30, 2013 were $922,404 as compared $2,135,586 for the six months ended June 30, 2012, representing an decrease of $1,213,182 from the prior period. Consolidated cost of sales for the six months ended June 30, 2013 were $483,843 or 47.5% of sales as compared to cost of sales for the previous period ended June 30, 2012 of $1,038,758 or 48.6% of sales. This resulted in a gross profit for the period of $483,844 or 52.5% as compared to gross profit for the same period in 2012 of $1,096,851 or 51.4%. The decrease in gross profit of $612,984,for the six months ended June 30, 2013 is due to reduced profit on reduced referrals to the Infusion clinic in Savannah.
Consolidated revenues for the three months ended June 30, 2013 were $489,341 as compared to $930,071 for the three months ended June 30, 2012, representing an decrease of $440,738 due primarily to decreases in referrals to clinical operations in Savannah. Consolidated cost of sales for the three months ended June 30, 2013 were $197,871 or 40.14 of sales as compared to cost of sales for the previous period ended June 30, 2012 of $475,517 or 51.1% of sales. This resulted in a gross profit for the three month period of $291,469 or 59.6% as compared to gross profit for the same period in 2012 of $454,5553 or 48.9%. The reduction in gross profit for three months ended June 30, 2013 were also related to reduced referrals for clinical operations in Savannah.
Continued use of mail order drugs led to little change in sales volume with a continued decrease in cost of sales. The company has not participated in the Wholesale market in recent periods. The company does not anticipate any significant activity in Wholesale in future periods until such times as sufficient operating funds are realized. The lack of operating funds and reduced profit margins in the sale of IVIG has caused the Company to cease its efforts in wholesale sales of pharmaceutical products, both domestically and internationally, and focus more on the medical infusion and ambulatory care operations at its remaining location in Savannah, Georgia. The Company anticipates that it will reenter the wholesale distribution business if it obtains sufficient operating funds and believes that satisfactory profit margins can be achieved, of which there can be no assurance.
| 5 |
The Company has four principal operating segments, which are as follows:
| ● | Medical Infusion Technologies-”MIT” | |
| ● | MIT International-International / Provector | |
| ● | Medical Infusion Tech,DME-”DME” | |
| ● | MIT Ambulatory Care Center-”Ambulatory Care” |
“MIT” is a provider of intravenous therapies to patients at their home, at a designated facility, or at the Company’s office facilities. MIT’s primary product lines are centered upon infusion therapy.
“International / Provector” is the division responsible for the marketing and distribution of Provector on a worldwide basis for international sales only.
“DME” carries the gamut of durable medical equipment and supplies.
“Ambulatory Care” administers the intravenous therapies to patients in the Savannah Clinic.
“MITRX” provides pharmacy services to Long Term Care facilities throughout South Carolina as well as “mail order prescriptions” to mail order customers.
The following tables show the operations of the Company’s reportable segments:
For the Six months ended June 30,
| Medical | ||||||||||||||||||||||||
| Infusion | International | Ambulatory | ||||||||||||||||||||||
| - MIT | Provector | Care | DME | MITRX | Combined | |||||||||||||||||||
| 2013 | ||||||||||||||||||||||||
| Revenue | $ | 530,691 | $ | $ | 128,019 | $ | 263,694 | $ | $ | 922,904 | ||||||||||||||
| Income (loss) from operations | (735,763 | ) | 23,186, | 240 | (712,337 | ) | ||||||||||||||||||
| Depreciation and amortization | - | - | - | - | - | |||||||||||||||||||
| Assets | $ | 651,078 | - | $ | 63,272 | $ | 193,091 | $ | 907,431 | |||||||||||||||
| 2012 | ||||||||||||||||||||||||
| Revenue | $ | 1,386,355 | $ | $ | 559,218 | $ | 190,014 | $ | $ | 2,135,586 | ||||||||||||||
| Income (loss) from operations | (435,003 | ) | 76,629 | (2,035 | ) | (360,427 | ) | |||||||||||||||||
| Depreciation and amortization | 19,998 | - | - | - | 19,998 | |||||||||||||||||||
| Assets | $ | 819,936 | - | $ | 264,170 | $ | 125,123 | $ | 1,209,229 | |||||||||||||||
| 6 |
Operating Expenses
Operating expenses decreased $228,676 or 16.0% to $1,196,181 for the six months ended June 30, 2013 from $1,424,858 for the same period in 2012 and income (loss) from operations decreased by $384,307 from ($328,029 to ($712,3370 from 2012. The decrease in operating expense is attributable to cost cutting measures for to reflect reductions in revenues from continuing operations and offset by increase fees paid to consultants.
| ● | For the six months ended June 30, 2013, payroll expenses were $332,346 as compared to $513,494 in 2012, a decrease of $181,147 or 35.2%, due to restructuring of salaries and personnel. Selling, general and administrative expenses were $863,834 as compared to $891,366 in 2012, a decrease of $27,531 or 3.1% that is attributable to decreased expenses relating to lease costs, postage costs, computer costs. For the six months ended June 30, 2013, we had the following expenses: consulting expenses of $473,848, contract labor expenses of 122,372 accounting and legal expense of $102,354 payroll related costs of $30,208, lease expenses of $24,822, office expense of $19,079, telephone expense of $16,297, travel expense of 11,831. | |
| For the three months ended June 30, 2013, selling, general and administrative expenses were $498,595, as compared to $525,497 in 2012, a decrease of $26,902 or 5.1% that is attributable to decreases in salaries and wages, consulting costs, lease expense, legal and accounting fees, marketing costs, and postage expense. For the three months ended June 30, 2013, we had the following consulting costs of $348,507, payroll taxes of $11,128, lease costs of $14,775, computer expense of $6,228, telephone expense of $7,738, automobile expense of $7,438, and office expense of $10,481. | ||
| ● | Depreciation and amortization decreased to $0 from $19,998 for the six months ended June 30, 2013 as no depreciation expense was incurred as compared to the same period in 2012. |
Operating Income (loss)
Operating income (loss) decreased $384,307 to ($712,337) for the six months ended June 30, 2013 from $328,029 for the same period ended June 30, 2012 and decreased $92,121, or 36.9%, to ($344,056) from ($251,283) for the three months ended June 30, 2012. This is primarily attributable to lower gross margins and lower operating revenues for the current period as well as lower margins for prior operations in 2012 offset by higher consulting and professional fees and payroll costs.
Net income (loss)
Pretax income (loss) decreased $530,839 to ($1,009,669) for the six months ended June 30, 2013 from ($478,829) for the same period ended June 30, 2012 and decreased $274,051 to ($576,878 from ($302,826 for the three months ended June 30, 2012. This is primarily lower gross margins in clinical operations and decreases in operating revenues prior operations.
| 7 |
Liquidity and Capital Resources
As of June 30, 2013, the company had cash of $47,920 as compared to $52,724 at December 31, 2012. For the six months ended June 30, 2013, net cash used by operating activities aggregated ($654,205) as compared to cash provided by operating activities for the six months ended June 30, 2011 of $105,194. As of June 30, 2013, we were funded primarily through operations. The principal financing activities for the six months ended June 30, 2013 consisted of repayment of debt of $52,605 as compared to $135,748 for the six months ended June 30, 2012.
On August 1, 2008, the Company borrowed $500,000 from Globank, Inc. The loan had interest at the rate of 60% per year, with monthly payments of interest only of $25,000 beginning on September 1, 2008. The loan matured on September 1, 2010 and is secured by all of the assets of the Company. The Globank note was renewed on December 31, 2010 with interest at 14.9% payable in three years. The loan is guaranteed by the Company’s chief executive officer and each of the Company’s subsidiaries.
At December 31, 2010, the Company received a going concern opinion from our outside auditors. The Company has no additional lines of credit available at this time. The grant of the security interest in the company’s assets and any failure to pay the loan to Globank when due may adversely our ability to secure additional financing. Globank could declare the loan in default and pursue its remedies, which would adversely affect our operations. The collection of accounts receivable continues to be slower than management would prefer. Our inability to achieve sufficient collections on our receivables has created a liquidity challenge that raises doubt about our ability to continue as a going concern. The development of ProVectorTM has produced interest from outside parties to provide funds and enable the Company to make the product available to the market in late 2010 should adequate financing be obtained. The Company is actively promoting the viability of the ProVectorTM.to entities that could provide working capital and provide means to distribute the ProVectorTM; however, there are no assurances that such third parties will provide the funding or that alternate funding can be obtained on acceptable terms.
Litigation
We are subject from time to time to litigation relating to the activities of our business and in the marketplace which it serves. As of June 30, 2013, we were not engaged in any litigation.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements
| 8 |
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4T. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer, William C. Parker, and Principal Financial Officer, Walter H.C. Drakeford, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Changes in Internal Control Over Financial Reporting. During the most recent quarter ended June 30, 2013, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
INFLATION
Inflation has not had a material impact on our business.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this quarterly report on Form 10-Q contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause its actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond its control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this quarterly report in its entirety, including but not limited to its financial statements and the notes thereto. Except for its ongoing obligations to disclose material information under the Federal securities laws, the Company undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
| 9 |
From time to time, we are party to litigation that we consider to be a part of the ordinary course of our business. At present, we are not involved in any pending claims that we believe could reasonably be expected to have a material adverse effect on our business, financial condition, or results of operations.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None.
None.
| 31.1* | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2* | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS** | XBRL Instance Document | |
| 101.SCH** | XBRL Taxonomy Extension Schema Document | |
| 101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB** | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document |
| * | Filed Herewith. |
| ** | In accordance with Regulation S-T, the XBRL related information on Exhibit No. 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” herewith not “filed”. |
| 10 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
| MIT HOLDING, INC. | ||
| DATE: August 19, 2013 | By: | /s/ William C Parker |
| William C. Parker, Chief Executive Officer | ||
| (principal executive officer) | ||
| By: | /s/ Walter H. C. Drakeford | |
| Walter H. C. Drakeford, the Principal Financial Officer | ||
| (principal financial officer) | ||
| 11 |
