Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 11-May-15 | |
Document And Entity Information | ||
Entity Registrant Name | Medytox Solutions, Inc. | |
Entity Central Index Key | 1374536 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 29,306,026 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2015 |
Condensed_Balance_Sheets
Condensed Balance Sheets (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash | $650,505 | $2,406,246 |
Accounts receivable, net | 23,833,608 | 17,463,947 |
Prepaid expenses and other current assets | 187,288 | 170,353 |
Deferred tax assets | 28,300 | 28,300 |
Deposits on acquisitions | 0 | 259,875 |
Total current assets | 24,699,701 | 20,328,721 |
Property and equipment, net | 7,318,521 | 7,678,123 |
Other assets: | ||
Intangible assets | 4,428,424 | 4,436,473 |
Goodwill | 3,278,813 | 3,139,942 |
Deposits | 216,717 | 177,495 |
Total assets | 39,942,176 | 35,760,754 |
Current liabilities: | ||
Accounts payable | 3,057,100 | 3,356,797 |
Accrued expenses | 2,689,490 | 2,297,416 |
Income tax liabilities | 8,545,715 | 8,087,946 |
Current portion of notes payable | 226,684 | 443,292 |
Current portion of notes payable, related party | 5,990,274 | 2,620,000 |
Current portion of capital lease obligation | 727,307 | 962,562 |
Derivative liability | 380,000 | 380,000 |
Total current liabilities | 21,616,570 | 18,148,013 |
Other liabilities: | ||
Notes payable, net of current portion | 0 | 93,392 |
Capital lease obligations, net of current portion | 2,260,564 | 2,222,625 |
Deferred tax liabilities | 301,800 | 252,900 |
Total liabilities | 24,178,934 | 20,716,930 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock | 2,931 | 2,905 |
Additional paid-in-capital | 5,713,824 | 5,357,367 |
Retained earnings | 10,046,476 | 9,562,517 |
Total Medytox Solutions stockholders' equity | 15,763,242 | 14,922,820 |
Noncontrolling interest | 0 | 121,004 |
Total stockholders' equity | 15,763,242 | 15,043,824 |
Total liabilities and stockholders' equity | 39,942,176 | 35,760,754 |
Series B Preferred Stock | ||
Stockholders' equity: | ||
Preferred stock, 100,000,000 shares authorized: | 1 | 1 |
Series D preferred stock | ||
Stockholders' equity: | ||
Preferred stock, 100,000,000 shares authorized: | 5 | 20 |
Series E preferred stock | ||
Stockholders' equity: | ||
Preferred stock, 100,000,000 shares authorized: | $5 | $10 |
Condensed_Balance_Sheets_Paren
Condensed Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Preferred stock shares authorized | 100,000,000 | 100,000,000 |
Common stock par value | $0.00 | $0.00 |
Common stock shares authorized | 500,000,000 | 500,000,000 |
Common stock shares issued | 29,306,026 | 29,046,386 |
Common stock shares outstanding | 29,306,026 | 29,046,386 |
Series B Preferred Stock | ||
Preferred stock shares authorized | 5,000 | 5,000 |
Preferred stock par value | $0.00 | $0.00 |
Preferred stock shares issued | 5,000 | 5,000 |
Preferred stock shares outstanding | 5,000 | 5,000 |
Series D preferred stock | ||
Preferred stock shares authorized | 200,000 | 200,000 |
Preferred stock par value | $0.00 | $0.00 |
Preferred stock shares issued | 50,000 | 200,000 |
Preferred stock shares outstanding | 50,000 | 200,000 |
Series E preferred stock | ||
Preferred stock shares authorized | 100,000 | 100,000 |
Preferred stock par value | $0.00 | $0.00 |
Preferred stock shares issued | 45,000 | 100,000 |
Preferred stock shares outstanding | 45,000 | 100,000 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Revenues | ||
Gross charges (net of contractual allowances and discounts) | $20,122,515 | $21,062,572 |
Provision for bad debts | -6,473,733 | -6,187,033 |
Net Revenues | 13,648,782 | 14,875,539 |
Operating expenses: | ||
Direct costs of revenue | 4,031,274 | 3,277,841 |
General and administrative | 5,639,933 | 3,719,958 |
Legal fees related to disputed subsidiary | 0 | 58,672 |
Sales and marketing expenses | 1,182,221 | 789,302 |
Depreciation and amortization | 580,793 | 165,688 |
Total operating expenses | 11,434,221 | 8,011,461 |
Income from operations | 2,214,561 | 6,864,078 |
Other income (expense): | ||
Other income | 21 | 121 |
Gain on disposition of subsidiary | 0 | 134,185 |
Gain on legal settlement | 275,028 | 0 |
Interest expense | -505,101 | -96,751 |
Total other income (expense) | -230,052 | 37,555 |
Income before income taxes | 1,984,509 | 6,901,633 |
Provision for income taxes | 977,500 | 2,598,100 |
Net income attributable to Medytox Solutions | 1,007,009 | 4,303,533 |
Preferred stock dividends | 523,050 | 913,563 |
Net income (loss) attributable to Medytox Solutions common shareholders | $483,959 | $3,389,970 |
Net income per common share: Basic | $0.02 | $0.11 |
Net income per common share: Diluted | $0.02 | $0.11 |
Weighted average number of shares outstanding during the period - Basic | 29,141,679 | 30,043,053 |
Weighted average number of shares outstanding during the period - Diluted | 31,269,912 | 30,337,497 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Cash flows from operating activities: | ||
Net income | $1,007,009 | $4,303,533 |
Adjustments to reconcile net income to net cash provided by operations: | ||
Depreciation and amortization | 580,793 | 165,688 |
Stock issued in lieu of cash compensation | 300,000 | 0 |
Stock-based compensation | 56,463 | 0 |
Bad debts | 6,473,733 | 6,187,033 |
Accretion of beneficial conversion feature as interest | 246,575 | 3,278 |
Accretion of debt discount | 93,699 | 0 |
Gain on disposition of subsidiary | 0 | -134,185 |
Gain on legal settlement | -275,028 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | -12,843,394 | -11,069,300 |
Prepaid expenses and other current assets | -16,935 | -62,261 |
Deferred tax assets | 0 | -1,331,400 |
Security deposits | -39,222 | -25,820 |
Accounts payable | -299,697 | 78,767 |
Accrued expenses | 417,102 | -115,891 |
Income tax liabilities | 457,769 | 3,333,598 |
Deferred tax liabilities | 48,900 | 33,000 |
Net cash provided by (used in) operating activities | -3,791,233 | 1,366,040 |
Cash flows used in investing activities: | ||
Purchase of property and equipment | -213,142 | -387,407 |
Cash paid for acquisitions | 0 | -1,000,000 |
Cash received in acquisitions | 0 | 19,306 |
Net cash provided by (used in) investing activities | -213,142 | -1,368,101 |
Cash flows provided by (used in) financing activities: | ||
Dividends on Series B preferred stock | -523,050 | -913,563 |
Proceeds from issuance of notes payable, related party | 3,030,000 | 0 |
Payments on notes payable | -60,000 | -429,486 |
Payments on capital lease obligations | -197,316 | -57,093 |
Net cash provided by (used in) financing activities | 2,249,634 | -1,400,142 |
Net increase (decrease) in cash | -1,755,741 | -1,402,203 |
Cash at beginning of period | 2,406,246 | 4,141,416 |
Cash at end of period | 650,505 | 2,739,213 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 160,835 | 85,951 |
Cash paid for taxes | 470,831 | 600,000 |
Non-cash investing and financing activities: | ||
Net liabilities (assets) acquired in acquisitions, net of cash | 0 | 969,486 |
Goodwill | 0 | -2,273,503 |
Contingent acquisition liability | 0 | 54,017 |
Notes payable issued | 0 | 0 |
Series D preferred stock | 0 | 20 |
Additional paid in capital | 0 | 1,249,980 |
Adjustment to purchase price for Biohealth Medical Laboratory, Inc.: | ||
Goodwill | 259,875 | 0 |
Notes payable issued | -138,871 | 0 |
Accrued expenses | -121,004 | 0 |
Common stock issued as payment of accrued bonuses: | ||
Accrued bonuses | 0 | -525,000 |
Common stock | 0 | 21 |
Additional paid in capital | 0 | 524,979 |
Capital lease assets acquired | 0 | -249,111 |
Capital lease obligations | $0 | $249,111 |
1_Organization_and_Presentatio
1. Organization and Presentation | 3 Months Ended |
Mar. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
1. Organization and Presentation | Organization |
Medytox Solutions, Inc. (the “Company”), was incorporated in Nevada on July 20, 2005 as Casino Players, Inc. In the first half of 2011, Company management decided to reorganize the operations of the Company as a holding company to acquire and manage a number of companies in the medical services sector. | |
On June 22, 2011, the Company organized Medytox Medical Management Solutions Corp. ("MMMSC"), a Florida corporation, as a wholly-owned subsidiary. MMMSC was a marketing company selling laboratory testing services to medical clinics, hospitals and physicians’ offices. On October 26, 2013, MMMSC changed its name to Medytox Information Technology, Inc. (“MIT”). MIT provides information technology services and solutions to all subsidiaries and customers of the Company and operates from the corporate offices in West Palm Beach, Florida. | |
On July 26, 2011, the Company organized Medytox Institute of Laboratory Medicine, Inc. ("MILM"), a Florida corporation, as a wholly-owned subsidiary. MILM was organized to acquire and manage medical testing laboratories. MILM operates from the corporate offices in West Palm Beach, Florida. | |
On August 22, 2011, the Company acquired 100% of the equity interests in Medical Billing Choices, Inc. ("MBC"), a privately-owned North Carolina corporation, through a stock purchase agreement for cash and an installment note. MBC operates a medical billing service for a variety of medical providers throughout the southeastern United States from offices in Charlotte, North Carolina. Since the acquisition, MBC is the main billing company for the Company's laboratories. | |
On February 6, 2012, the Company formed Medytox Diagnostics Inc. (“MDI”), a Florida corporation, as a wholly-owned subsidiary to acquire and build clinical laboratories. MDI operates from the corporate offices in West Palm Beach, Florida. | |
On February 16, 2012, MDI acquired majority interest in Collectaway LLC, now known as PB Laboratories, LLC ("PB Labs"), a Florida limited liability company. On October 12, 2012, MDI acquired the remaining controlling interest in PB Labs. As of October 31, 2012, PB Labs is a wholly-owned subsidiary of MDI. | |
On March 9, 2012, the Company formed Medytox Medical Marketing & Sales, Inc. (“MMMS”), a Florida corporation, as a wholly-owned subsidiary that provides marketing for clinical laboratories that are owned by the Company. | |
On December 7, 2012, MDI acquired a majority interest in Biohealth Medical Laboratory, Inc. (“Biohealth”), a Florida corporation. The remaining minority interest was acquired on March 31, 2015. The initial agreement allowed MDI to retain all revenues. | |
On January 1, 2013, MDI purchased 100% of the stock of Alethea Laboratories, Inc. ("Alethea"). Althea operates a licensed clinical lab in Las Cruces, New Mexico and is an enrolled Medicare provider. | |
On January 29, 2013, MDI formed Advantage Reference Labs, Inc. (“Advantage”), a Florida corporation, as a wholly-owned subsidiary to provide reference, confirmation and clinical testing services. On October 14, 2013, Advantage changed its name to EPIC Reference Labs, Inc. (“EPIC”). | |
On April 4, 2013, MDI purchased 100% of the interests in International Technologies, LLC ("Tech"). In October 2013, Tech began doing business as NJ Reference Labs (“NJ Ref”). NJ Ref operates a licensed clinical lab in Waldwick, New Jersey and is an enrolled Medicare provider. | |
On March 18, 2014, MDI, purchased all of the outstanding stock of Clinlab, Inc. Clinlab develops and markets laboratory information management systems. | |
On May 9, 2014, the Company formed Medical Mime, Inc. (“Mime”), a Florida corporation, as a wholly-owned subsidiary. | |
On May 23, 2014, Mime purchased certain net assets, primarily consisting of software, of GlobalOne Information Technologies, LLC (“GlobalOne”). GlobalOne developed software and provided services for the electronic health records management (“ERMEHR”) segment of the medical industry. | |
On July 28, 2014, the Company formed Platinum Financial Solutions, Ltd (“PFS”) as a 100% owned foreign subsidiary of the Company to pursue the opportunity of providing financial solutions, including factoring and accounts receivable acquisition in the healthcare sector. PFS has a Florida subsidiary, Platinum Financial Solutions, LLC, through which it may do business with U.S. based customers. | |
On August 26, 2014, MDI purchased all of the outstanding stock of Epinex Diagnostics Laboratories, Inc. (“Epinex”), a California corporation. Epinex is a clinical laboratory in Tustin, California. | |
Basis of Presentation | |
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q. Accordingly, they do not include all of the information and footnotes required in annual financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows for the interim periods reported in this Form 10-Q. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year. | |
These unaudited interim condensed consolidated financial statements should be read in conjunction with the 2014 audited annual financial statements included in the Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on April 15, 2015. | |
Revenue Recognition | |
Service revenues are principally generated from laboratory testing services including chemical diagnostic tests such as blood analysis and urine analysis. Net service revenues are recognized at the time the testing services are performed and are reported at their estimated net realizable amounts. | |
Net service revenues are determined utilizing gross service revenues net of contractual allowances. Even though it is the responsibility of the patient to pay for laboratory service bills, most individuals in the United States have an agreement with a third party payor such as Medicare, Medicaid or a commercial insurance provider to pay all or a portion of their healthcare expenses; the majority of services provided by Medytox are to patients covered under a third party payor contract. In certain cases, the individual has no insurance or does not provide insurance information. Despite follow up billing efforts, the Company does not currently anticipate collection of a significant portion of self-pay billings including the patient responsibility portion of the billing for patients covered by third party payors. The Company currently does not have any capitated agreements. In the remainder of the cases, Medytox is provided the third party billing information and seeks payment from the third party under the terms and conditions of the third party payor for health service providers like Medytox. Each of these third party payors may differ not only with regard to rates, but also with regard to terms and conditions of payment and providing coverage (reimbursement) for specific tests. Estimated revenues are established based on a series of procedures and judgments that require industry specific healthcare experience and an understanding of payor methods and trends. | |
We review our calculations on a monthly basis in order to make certain that we are properly allowing for the uncollectable portion of our gross billings and that our estimates remain sensitive to variances and changes within our payor groups. The contractual allowance calculation is made on the basis of historical allowance rates for the various specific payor groups on a monthly basis with a greater weight being given to the most recent trends; this process is adjusted based on recent changes in underlying contract provisions and shifts in the testing being performed. The provision for bad debts represents our estimate of net revenues that will ultimately be uncollectable and is based upon our analysis of historical payment rates by specific payor groups on a monthly basis with primary weight being given to the most recent trends; this approach allows bad debt to more accurately adjust to short-term changes in the business environment. These two calculations are routinely analyzed by Medytox on the basis of actual allowances issued by payors and the actual payments made to determine what adjustments, if any, are needed. | |
Contractual Allowances and Doubtful Accounts | |
Accounts receivable are reported at realizable value, net of allowances for contractual credits and doubtful accounts, which are estimated and recorded in the period the related revenue is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of the estimation process related to allowances for contractual credits and doubtful accounts. In addition, the Company regularly assesses the state of its billing operations in order to identify issues which may impact the collectability of these receivables or reserve estimates. Receivables deemed to be uncollectible are charged against the allowance for doubtful accounts at the time such receivables are written-off. Recoveries of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. Historically, revisions to the allowances for doubtful accounts estimates were recorded as an adjustment to the provision for bad debt within selling, general and administrative expenses. | |
During the third quarter of 2014, the Company corrected the classification of the provision for bad debts from a component of operating expenses to a reduction in revenues in our Condensed Consolidated Statements of Operations. This presentation is required under U.S. GAAP due to the uncertainties of collection of the self-pay portion of patent service revenues. | |
Basic and Diluted Income per Share | |
The Company computes income per share in accordance with ASC 260, "Earnings per Share", which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing income available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all potential dilutive equivalent shares of common stock outstanding during the period using the treasury stock method and convertible debt and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, convertible debt, convertible preferred stock, or warrants. | |
Segment Information | |
In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, the Company is required to report financial and descriptive information about its reportable operating segments. The Company has two operating segments; laboratory services and medical solutions support services. | |
Reclassifications | |
Certain other items on the statement of operations for the three months ended March 31, 2014 and the statement of cash flows for the three months ended March 31, 2014 have been reclassified to conform to current period presentation. | |
2_LongLived_Assets
2. Long-Lived Assets | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Property, Plant and Equipment [Abstract] | |||||||||
Long-Lived Assets | Property and equipment at March 31, 2015 and December 31, 2014 consisted of the following: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Medical equipment | $ | 922,552 | $ | 896,641 | |||||
Equipment | 504,967 | 396,551 | |||||||
Equipment under capital leases (See Note 5 - Capital Lease Obligations) | 4,024,449 | 4,024,449 | |||||||
Furniture | 412,725 | 333,316 | |||||||
Leasehold improvements | 1,673,405 | 1,665,501 | |||||||
Vehicles | 177,534 | 177,534 | |||||||
Computer equipment | 599,081 | 595,571 | |||||||
Software | 1,832,053 | 1,832,053 | |||||||
10,146,766 | 9,921,616 | ||||||||
Less accumulated depreciation | (2,828,245 | ) | (2,243,493 | ) | |||||
Property and equipment, net | $ | 7,318,521 | $ | 7,678,123 | |||||
Depreciation of property and equipment was $580,793 and $165,688 for the three months ended March 31, 2015 and 2014, respectively. | |||||||||
Management periodically reviews the valuation of long-lived assets for potential impairments. Management has not recognized an impairment of these assets to date, and does not anticipate any negative impact from known current business developments. |
3_Notes_Payable
3. Notes Payable | 3 Months Ended | ||||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||
Notes Payable | The Company and its subsidiaries are party to a number of loans with affiliates and unrelated parties. At March 31, 2015 and December 31, 2014, notes payable consisted of the following: | ||||||||||||||||||||
March 31, | December 31, | ||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||
Acquisition convertible note No. 1 to former member of International Technologies, LLC in the amount of $250,000 at 5% interest and was due January 17, 2014. The note was convertible into the Company's common stock at a ten percent (10%) discount to the average market price for the thirty days prior to conversion. The note is discounted for its unamortized beneficial conversion feature of $-0- and $1,639 at March 31, 2015 and December 31, 2014, respectively. See "Acquisition Convertible Notes" below. | $ | – | $ | 250,000 | |||||||||||||||||
Loan payable to former shareholder of Epinex Diagnostic Laboratories, Inc. in the amount of $400,000, at 0% interest, with principal payments of $100,000 due in periodic installments from November 26, 2014 through February 26, 2016. Amount recorded is net of imputed discount of $13,316 at December 31, 2014. | 226,684 | 286,684 | |||||||||||||||||||
226,684 | 536,684 | ||||||||||||||||||||
Less current portion | (226,684 | ) | (443,292 | ) | |||||||||||||||||
Notes payable, net of current portion | $ | – | $ | 93,392 | |||||||||||||||||
Note Payable – Related Parties | |||||||||||||||||||||
31-Mar-15 | |||||||||||||||||||||
Face Value | Put | Put | Debt | Net Value | |||||||||||||||||
of Note | Discount | Premium | Discount | of Note | |||||||||||||||||
Convertible debenture dated December 31, 2014 in the amount of $3,000,000 which bears interest at 10% and is due December 31, 2015. The note provides the lender the option to covert the note into the Company's common stock at a 25% discount to the average trading price (as defined in the note agreement) for the ten consecutive trading days prior to the conversion date. The note has been discounted by the value of warrants issuable upon conversion of $380,000 at December 31, 2014. The note has also been discounted by the unamortized value of its put premium of $1,000,000, and increased by the put premium liability of $1,000,000, at December 31, 2014. | $ | 3,000,000 | $ | (753,425 | ) | $ | 1,000,000 | $ | (286,301 | ) | $ | 2,960,274 | |||||||||
Loan payable to Alcimede LLC in the amount of $3,000,000, at 6% interest, with one payment of $3,000,000, plus interest, due on February 2, 2016. | $ | 3,000,000 | – | – | – | $ | 3,000,000 | ||||||||||||||
Loan payable to Alcimede LLC, dated February 27, 2015. (Repaid on April 15, 2015) | $ | 30,000 | – | – | – | $ | 30,000 | ||||||||||||||
$ | 6,030,000 | $ | (753,425 | ) | $ | 1,000,000 | $ | (286,301 | ) | $ | 5,990,274 | ||||||||||
TCA Global | |||||||||||||||||||||
Under terms of the Senior Secured Revolving Credit Facility agreement with TCA Global Credit Master Fund, LP, originally signed May 12, 2012 and as subsequently amended, the Company executed an Amended and Restated Revolving Promissory Note, due January 15, 2014, in the amount of $3,025,000. The note was extended by the lender from January 15, 2014 to September 15, 2014. The borrowings under this facility were repaid in full on September 8, 2014. | |||||||||||||||||||||
Acquisition Convertible Notes | |||||||||||||||||||||
The Company filed actions against Reginald Samuels and Ralph Perricelli seeking, among other things, a declaration that the convertible debentures in the aggregate amount of $500,000 that the Company issued to Mr. Samuels and Mr. Perricelli as part of the consideration for the purchase of their interests in International Technologies, LLC are null and void. | |||||||||||||||||||||
All litigation with Mr. Samuels was settled by the Company on December 8, 2014. Specifics of the settlement are confidential. | |||||||||||||||||||||
The Company received a default judgement against Mr. Perricelli in January 2015, relieving the Company of its obligations under the convertible debenture. The note payable and related accrued interest were written off in January 2015, resulting in a “Gain on Legal Settlement” of $275,028. |
4_Related_Party_Transactions
4. Related Party Transactions | 3 Months Ended |
Mar. 31, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | On February 27, 2015, the Company borrowed $30,000 from Alcimede LLC, of which our CEO is the sole manager. The loan was repaid on April 15, 2015. |
On February 3, 2015, the Company borrowed $3,000,000 from Alcimede LLC, of which our CEO is the sole manager. The note has an interest rate of 6% and is due on February 2, 2016. | |
On December 31, 2014, the Company borrowed $3,000,000 from D&D Funding II, LLC (“D&D”), Christopher Diamantis, a director of the Company, is the manager and 50% owner of D&D. (See Note 3 for a description of this Note.) |
5_Capital_Lease_Obligations
5. Capital Lease Obligations | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Debt Disclosure [Abstract] | |||||||||
Capital Lease Obligations | The Company leases various assets under capital leases expiring through 2020 as follows: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Medical equipment | $ | 4,024,449 | $ | 4,024,449 | |||||
Less accumulated depreciation | (1,098,060 | ) | (883,015 | ) | |||||
Net | $ | 2,926,389 | $ | 3,141,434 | |||||
Depreciation expense on assets under capital leases was $215,045 and $54,980 for the three months ended March 31, 2015 and 2014, respectively. | |||||||||
Aggregate future minimum rentals under capital leases are as follows: | |||||||||
Future minimum rentals | |||||||||
December 31, | |||||||||
2015 | $ | 846,860 | |||||||
2016 | 1,078,010 | ||||||||
2017 | 969,606 | ||||||||
2018 | 382,395 | ||||||||
2019 | 35,575 | ||||||||
Thereafter | 32,611 | ||||||||
Total | 3,345,057 | ||||||||
Less interest | 357,186 | ||||||||
Present value of minimum lease payments | 2,987,871 | ||||||||
Less current portion of capital lease obligations | 727,307 | ||||||||
Capital lease obligations, net of current portion | $ | 2,260,564 | |||||||
6_Stockholders_Equity
6. Stockholders' Equity | 3 Months Ended | ||||||||||||||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||
Stockholders' Equity | Authorized Capital | ||||||||||||||||||||||||||||||
The Company has 500,000,000 authorized shares of Common Stock at $0.0001 par value per share and 100,000,000 authorized shares of Preferred Stock at $0.0001 par value per share. | |||||||||||||||||||||||||||||||
On October 1, 2012, the Company filed a certificate of designation with the Secretary of State of Nevada to designate 5,000 shares of Series B Non-convertible Preferred Stock, at $0.0001 par value per share. The Series B shares do not include any voting rights and allow for monthly dividends in an amount equal to the sum of 1) 10% of the amount of gross sales in excess of $1 million collected in the ordinary course of business, not to exceed $150,000, and 2) 15% of the amount of gross sales in excess of $2.5 million collected in the ordinary course of business. At each of March 31, 2015 and December 31, 2014, there were 5,000 shares of Series B Preferred Stock outstanding. | |||||||||||||||||||||||||||||||
On March 27, 2014, each of the holders of shares of Series B Preferred Stock entered into a purchase option agreement with the Company. Each agreement grants the Company an option to purchase any or all shares of Series B Preferred Stock held by the holder at any time through March 27, 2016 at a purchase price of $5,000 per share. Each holder agreed not to transfer or dispose of any shares of Series B Preferred Stock during the term of the option, other than to the Company upon an exercise of the option. Any exercise of an option is completely at the Company's discretion. | |||||||||||||||||||||||||||||||
On October 7, 2012, the Company filed a certificate of designation with the Secretary of State of Nevada to designate 1,000,000 shares of Series C Convertible Preferred Stock, at $0.0001 par value per share. The Series C shares were convertible into shares of Common Stock by the quotient of 1 divided by the product of 0.80 multiplied by the market price of the Company’s Common Stock at the date of conversion. The Series C shares also included voting rights of 25 votes for every share of Series C Preferred Stock and were entitled to dividends at the same time any dividend was paid or declared on any shares of the Company’s Common Stock. Pursuant to their terms, all of the shares of Series C Preferred Stock were converted into shares of Common Stock on December 31, 2013. | |||||||||||||||||||||||||||||||
On March 17, 2014, the Company filed a Certificate of Designation with the Secretary of State of Nevada authorizing up to 200,000 shares of Series D Convertible Preferred Stock at $0.0001 par value per share ("Series D Preferred Stock"). Each share of Series D Preferred Stock is convertible into the number of shares of Common Stock equal to the quotient of 5 divided by the product of 0.80 multiplied by the market price, as defined in Certificate of Designation, of the Company’s Common Stock at the date of conversion. After the earlier of the date the trading volume of the Common Stock exceeds an aggregate of 3,000,000 shares in any 30 day period or the date the Company sells shares of Common Stock in a firm commitment underwritten public offering with aggregate gross proceeds of at least $30,000,000, each share of Series D Preferred Stock shall be convertible into the number of shares of Common Stock equal to the quotient of (i) 5 divided by (ii) the market price of the Common Stock. All shares of Series D Preferred Stock outstanding on the second anniversary of the original issuance date shall be automatically converted into shares of Common Stock. | |||||||||||||||||||||||||||||||
The Series D shares also include voting rights of 1 vote for every share of Series D Preferred Stock and are entitled to dividends, at the same time any dividend is paid or declared on any shares of the Company’s Common Stock The dividends are to be in an amount equal to the amount such holder would have received if the Series D Preferred Stock were converted to Common Stock. As of March 31, 2015 and December 31, 2014, there were 50,000 and 200,000 shares of Series D Preferred Stock outstanding, respectively. | |||||||||||||||||||||||||||||||
On August 21, 2014, the Company filed a Certificate of Designation with the Secretary of State of Nevada authorizing 100,000 shares of Series E Convertible Preferred Stock at a par value of $.0001 per share. The Series E shares are convertible into the number of shares of Common Stock equal to the quotient of 8 divided by the average market price of the Company’s Common Stock for thirty trading days prior to the date of conversion, multiplied by the number of Series E shares being converted. Any Series E shares which remain outstanding on August 28, 2016 will be automatically converted into Common Stock using the prescribed formula. The Series E shares also include voting rights of 1 vote for every share of Series E Preferred Stock and are entitled to dividends at the same time any dividend is paid or declared on any shares of the Company’s Common Stock. The dividends are to be in an amount equal to the amount such holder would have received if the Series E Preferred Stock were converted to Common Stock at the same time any dividend is paid or declared on any shares of the Company’s Common Stock. As of March 31, 2015 and December 31, 2014, there were 45,000 and 100,000 shares of Series E Preferred Stock outstanding, respectively. | |||||||||||||||||||||||||||||||
Preferred Stock | |||||||||||||||||||||||||||||||
During the three months ended March 31, 2015 and 2014, the Series B preferred shareholders earned dividends totaling $523,050 and $913,563, respectively. | |||||||||||||||||||||||||||||||
On March 18, 2014, 200,000 shares of Series D Preferred Stock of the Company were issued to the previous owners of Clinlab pursuant to a stock purchase agreement whereby the Company purchased all of the outstanding stock of Clinlab. On March 20, 2015, 150,000 shares of this Series D Preferred stock were converted into 125,334 shares of common stock. | |||||||||||||||||||||||||||||||
On August 28, 2014, 100,000 shares of Series E Preferred Stock of the Company were issued to the previous owner of Epinex pursuant to a stock purchase agreement whereby the Company purchased all of the outstanding stock of Epinex. On March 3, 2015, 55,000 shares of this Series E Preferred stock were converted into 58,856 shares of common stock. | |||||||||||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||||||||
During the three months ended March 31, 2015 , the Company issued an aggregate of 259,190 shares of the Company’s common stock; 184,190 were issued in connection with the conversions of the Series D and E Preferred Stock and 75,000 shares, valued at $4.00 per share, were issued as compensation to two employees pursuant to employment agreements. | |||||||||||||||||||||||||||||||
2013 Equity Plan | |||||||||||||||||||||||||||||||
On September 25, 2013, the Company’s board of directors approved and adopted the Medytox Solutions, Inc. 2013 Incentive Compensation Plan (the “2013 Plan”). The 2013 Plan was approved by a majority of stockholders of the Company on November 22, 2013. The 2013 Plan provides for the grant of shares of common stock, options, performance shares, performance units, restricted stock, stock appreciation rights and other awards. | |||||||||||||||||||||||||||||||
The following summarizes activity under the 2013 Plan through March 31, 2015: | |||||||||||||||||||||||||||||||
Shares approved for issuance at plan inception | 5,000,000 | ||||||||||||||||||||||||||||||
Options granted in 2014 | (1,435,000 | ) | |||||||||||||||||||||||||||||
Options cancelled in 2014 | 10,000 | ||||||||||||||||||||||||||||||
Restricted shares issued in 2014 | (210,000 | ) | |||||||||||||||||||||||||||||
Balance at December 31, 2014 and March 31, 2015 | 3,365,000 | ||||||||||||||||||||||||||||||
Stock Options | |||||||||||||||||||||||||||||||
The following summarizes options outstanding at March 31, 2015: | |||||||||||||||||||||||||||||||
Weighted | |||||||||||||||||||||||||||||||
average | |||||||||||||||||||||||||||||||
Options | exercise | ||||||||||||||||||||||||||||||
Outstanding | price | ||||||||||||||||||||||||||||||
Balance at March 31, 2015 | 24,225,000 | $ | 5.47 | ||||||||||||||||||||||||||||
The following table summarizes information with respect to stock options outstanding and exercisable by employees, directors and consultants at March 31, 2015: | |||||||||||||||||||||||||||||||
Options outstanding | Options vested and exercisable | ||||||||||||||||||||||||||||||
Weighted | |||||||||||||||||||||||||||||||
average | Weighted | Weighted | |||||||||||||||||||||||||||||
remaining | average | Aggregate | average | Aggregate | |||||||||||||||||||||||||||
Exercise | Number | contractual | exercise | intrinsic | Number | exercise | intrinsic | ||||||||||||||||||||||||
price | outstanding | life (years) | price | value | vested | price | value | ||||||||||||||||||||||||
$2.50 | 9,475,000 | 3.37 | $2.50 | $ | 14,212,500 | 8,987,500 | $2.50 | $ | 13,481,250 | ||||||||||||||||||||||
$5.00 | 7,750,000 | 2.99 | $5.00 | – | 7,700,000 | $5.00 | – | ||||||||||||||||||||||||
$10.00 | 7,000,000 | 8.01 | $10.00 | – | 7,000,000 | $10.00 | – | ||||||||||||||||||||||||
24,225,000 | $5.47 | $ | 14,212,500 | 23,687,500 | $5.53 | $ | 13,481,250 | ||||||||||||||||||||||||
During the three months ended March 31, 2014, the Company issued options to purchase a total of 100,000 shares of the Company’s common stock to an employee pursuant to terms of an employment agreement. These options had contractual lives of two years and were valued at an average grant date fair value of $0.25 per option, or $25,000, using the Black-Scholes Option Pricing Model with the following assumptions: | |||||||||||||||||||||||||||||||
Stock price | $2.50 | ||||||||||||||||||||||||||||||
Expected term | 1 year | ||||||||||||||||||||||||||||||
Expected volatility | 24.43% | ||||||||||||||||||||||||||||||
Risk free interest rate | 0.30% | ||||||||||||||||||||||||||||||
Dividend yield | 0 | ||||||||||||||||||||||||||||||
The stock price was based on the price of shares sold to investors and volatility was based on comparable volatility of other companies since the Company had no significant historical volatility. | |||||||||||||||||||||||||||||||
During the three months ended March 31, 2014, the Company issued options to purchase a total of 1,035,000 shares of the Company’s common stock to various employees. These options had contractual lives of ten years and were valued at an average grant date fair value of $0.70 per option, or $724,500, using the Black-Scholes Option Pricing Model with the following assumptions: | |||||||||||||||||||||||||||||||
Stock price | $2.50 | ||||||||||||||||||||||||||||||
Expected term | 5.375 years | ||||||||||||||||||||||||||||||
Expected volatility | 27.72% | ||||||||||||||||||||||||||||||
Risk free interest rate | 1.46% | ||||||||||||||||||||||||||||||
Dividend yield | 0 | ||||||||||||||||||||||||||||||
The stock price was based on the price of shares sold to investors and volatility was based on comparable volatility of other companies since the Company had no significant historical volatility. As of March 31, 2015, all of these options had vested and the Company recognized $52,024 of stock-based compensation expense for the three months ended March 31, 2015. | |||||||||||||||||||||||||||||||
In May 2014, the Company issued options to purchase a total of 300,000 shares of the Company’s common stock to a director. These options had contractual lives of four years and were valued at an average grant date fair value of $0.18 per option, or $54,000, using the Black-Scholes Option Pricing Model with the following assumptions: | |||||||||||||||||||||||||||||||
Stock price | $2.50 | ||||||||||||||||||||||||||||||
Expected term | 2 years | ||||||||||||||||||||||||||||||
Expected volatility | 24.43% | ||||||||||||||||||||||||||||||
Risk free interest rate | 0.43% | ||||||||||||||||||||||||||||||
Dividend yield | 0 | ||||||||||||||||||||||||||||||
The stock price was based on the price of shares sold to investors and volatility was based on comparable volatility of other companies since the Company had no significant historical volatility. As of March 31, 2015, 200,000 of these options had vested and the Company recognized $4,438 of stock-based compensation expense for the three months ended March 31, 2015. | |||||||||||||||||||||||||||||||
As of March 31, 2015, there were unrecognized compensation costs of $2,959 related to stock options. The Company expects to recognize those costs over a weighted average period of .16 years as of March 31, 2015. Future option grants will increase the amount of compensation expense to be recorded in these periods. | |||||||||||||||||||||||||||||||
Warrants | |||||||||||||||||||||||||||||||
The following table summarizes warrant transactions for the three months ended March 31, 2015: | |||||||||||||||||||||||||||||||
Weighted | |||||||||||||||||||||||||||||||
Weighted | average | ||||||||||||||||||||||||||||||
average | remaining | Aggregate | |||||||||||||||||||||||||||||
Number | exercise | contractual | intrinsic | ||||||||||||||||||||||||||||
of warrants | price | term (years) | value | ||||||||||||||||||||||||||||
Outstanding and Exercisable at December 31, 2014 | 300,000 | $ | 3.33 | – | $ | – | |||||||||||||||||||||||||
Outstanding and Exercisable at March 31, 2015 | – | $ | – | – | $ | – | |||||||||||||||||||||||||
Weighted Average Grant Date Fair Value | $ | – | |||||||||||||||||||||||||||||
The warrants were issued by the Company in 2013 to two individuals in connection with obligations entered into by the Company’s subsidiaries. These warrants had contractual lives of two years and expired in January 2015. | |||||||||||||||||||||||||||||||
Basic and Diluted Income per Share | |||||||||||||||||||||||||||||||
The Company computes income per share in accordance with ASC 260, "Earnings per Share", which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing income available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all potential dilutive equivalent shares of common stock outstanding during the period using the treasury stock method and convertible debt and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, convertible debt, convertible preferred stock, or warrants. | |||||||||||||||||||||||||||||||
Basic and Diluted EPS were calculated as follows: | |||||||||||||||||||||||||||||||
Three Months Ended March 31, | |||||||||||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||||||||||
Basic: | |||||||||||||||||||||||||||||||
Numerator - net income available to common stockholders | $ | 483,959 | 3,389,970 | ||||||||||||||||||||||||||||
Denominator - weighted-average shares outstanding | 29,141,679 | 30,043,053 | |||||||||||||||||||||||||||||
Net income per share - Basic | $ | 0.02 | $ | 0.11 | |||||||||||||||||||||||||||
Diluted: | |||||||||||||||||||||||||||||||
Numerator: | |||||||||||||||||||||||||||||||
Net income available to common stockholders | $ | 483,959 | $ | 3,389,970 | |||||||||||||||||||||||||||
Interest expense on convertible debt, net of taxes | 46,912 | 3,700 | |||||||||||||||||||||||||||||
530,871 | 3,393,670 | ||||||||||||||||||||||||||||||
Denominator: | |||||||||||||||||||||||||||||||
Weighted-average shares outstanding | 29,141,679 | 30,043,053 | |||||||||||||||||||||||||||||
Weighted-average equivalent shares options and warrants | 866,378 | – | |||||||||||||||||||||||||||||
Weighted-average equivalent shares from convertible debt | 1,000,000 | 222,222 | |||||||||||||||||||||||||||||
Weighted-average equivalent shares from Series C convertible preferred stock | – | – | |||||||||||||||||||||||||||||
Weighted-average equivalent shares from Series D convertible preferred stock | 179,776 | 72,222 | |||||||||||||||||||||||||||||
Weighted-average equivalent shares from Series E convertible preferred stock | 82,079 | – | |||||||||||||||||||||||||||||
31,269,912 | 30,337,497 | ||||||||||||||||||||||||||||||
Net income per share - Diluted | $ | 0.02 | $ | 0.11 | |||||||||||||||||||||||||||
Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of March 31, 2015 and 2014, the following potential common stock equivalents were excluded from the calculation of Diluted EPS as their effect was anti-dilutive: | |||||||||||||||||||||||||||||||
March 31, | |||||||||||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||||||||||
Stock options outstanding | 24,225,000 | 23,995,000 | |||||||||||||||||||||||||||||
Warrants outstanding | – | 346,400 | |||||||||||||||||||||||||||||
24,225,000 | 24,341,400 | ||||||||||||||||||||||||||||||
7_Income_Taxes
7. Income Taxes | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Income Tax Disclosure [Abstract] | |||||||||
Income Taxes | Significant components of the income tax provision are summarized as follows: | ||||||||
Three Months Ended March 31, | |||||||||
2015 | 2014 | ||||||||
Current provision: | |||||||||
Federal | $ | 792,900 | $ | 3,327,000 | |||||
State | 135,700 | 569,500 | |||||||
Deferred provision: | |||||||||
Federal | 44,100 | (1,173,200 | ) | ||||||
State | 4,800 | (125,200 | ) | ||||||
$ | 977,500 | $ | 2,598,100 | ||||||
A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate on income before income taxes for the three months ended March 31, 2015 and 2014 is as follows: | |||||||||
Three Months Ended March 31, | |||||||||
2015 | 2014 | ||||||||
Expected federal income tax at 34% statutory rate | 34.00% | 34.00% | |||||||
State income taxes | 4.70% | 4.20% | |||||||
Permanent differences | 10.60% | -0.60% | |||||||
49.30% | 37.60% | ||||||||
Of the $8,545,715 of income tax liabilities at March 31, 2015, $1,649,877 relates to 2013 and $5,967,238 relates to 2014. The Company has made no payments on its 2015 tax liability. | |||||||||
The Company provides for income taxes using the liability method in accordance with FASB ASC Topic 740 “Income Taxes”. Deferred income taxes arise from the differences in the recognition of income and expenses for tax purposes. Deferred tax assets and liabilities are comprised of the following at March 31, 2015 and December 31, 2014: | |||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Deferred income tax assets: | |||||||||
Allowance for bad debts | $ | 28,300 | $ | 28,300 | |||||
Stock options | 444,400 | 423,200 | |||||||
Total deferred income tax assets | $ | 472,700 | $ | 451,500 | |||||
Deferred income tax liabilities: | |||||||||
Property and equipment | $ | (558,800 | ) | $ | (513,600 | ) | |||
Intangible amortization | (187,400 | ) | (162,500 | ) | |||||
Total deferred income tax liabilities | $ | (746,200 | ) | $ | (676,100 | ) | |||
Net deferred income taxes: | |||||||||
Current | $ | 28,300 | $ | 28,300 | |||||
Non-current | (301,800 | ) | (252,900 | ) | |||||
$ | (273,500 | ) | $ | (224,600 | ) | ||||
Management has reviewed the provisions regarding assessment of its valuation allowance on deferred tax assets and based on that criteria determined that it will have sufficient taxable income to realize those assets. Therefore, management has assessed the realization of the deferred tax assets and has determined that it is more likely than not that they will be realized. | |||||||||
The Company recognizes the consolidated financial statement impact of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than–not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. |
8_Business_Combinations
8. Business Combinations | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Business Combinations [Abstract] | |||||||||
Business Combinations | The Company acquired the remaining 49.5% of Biohealth in the three months ended March 31, 2015. The Company completed three acquisitions during the year ended December 31, 2014. The Company accounted for the assets, liabilities and ownership interests in accordance with the provisions of FASB ASC 805 “Business Combinations”. As such, the recorded assets and liabilities acquired have been recorded at fair value and any difference in the net asset values and the consideration given has been recorded as goodwill. | ||||||||
Goodwill was attributable to the following subsidiaries as of March 31, 2015 and December 31, 2014: | |||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Medical Billing Choices, Inc. | $ | 1,202,112 | $ | 1,202,112 | |||||
PB Laboratories, LLC | 107,124 | 107,124 | |||||||
Biohealth Medical Laboratory, Inc. | 255,634 | 116,763 | |||||||
Clinlab, Inc. | 857,532 | 857,532 | |||||||
Medical Mime, Inc. | 274,811 | 274,811 | |||||||
Epinex Diagnostics Laboratories, Inc. | 581,600 | 581,600 | |||||||
$ | 3,278,813 | $ | 3,139,942 | ||||||
The purchase of the remaining portion of Biohealth increased previously reported goodwill by $138,871. | |||||||||
On January 16, 2015, in contemplation of the business combination the Company entered into a Loan and Security Agreement with CollabRx, Inc. (“CollabRx”), pursuant to which it was agreed the Company would loan up to $2,395,644 to CollabRx and an Agreement with CollabRx, pursuant to which CollabRx agreed that in the event it enters into a merger or other sale transaction involving at least thirty-five percent (35.0%) of its shares or assets with a party other than the Company, CollabRx will pay the Company a $1,000,000 fee. | |||||||||
On February 19, 2015, Medytox and CollabRx entered into an amendment to the Loan Agreement. The Amendment sets forth CollabRx’s agreement not to request any further advances from Medytox pursuant to the Loan Agreement until after it has spent at least the greater of (i) $1,500,000 of the proceeds of a recent offering by CollabRx of shares of its common stock and warrants or (ii) 60% of the net proceeds of the offering. | |||||||||
All amounts loaned to date under the Loan Agreement were repaid during the three months ended March 31, 2015. (See further discussion of the contemplated CollabRx acquisition in Note 11) |
9_Commitments_and_Contingencie
9. Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Legal Matters |
During the course of business, litigation commonly occurs. From time to time the Company may be a party to litigation matters involving claims against the Company. The Company operates in a highly regulated industry and employs personnel which may inherently lend itself to legal matters. Management is aware that litigation has associated costs and that results of adverse litigation verdicts could have a material effect on the Company's financial position or results of operations. Management, in consultation with legal counsel, has addressed known assertions and unasserted claims below. | |
On February 26, 2014, the Company filed an action against Reginald Samuels and Ralph Perricelli in the United States District Court for the Southern District of Florida seeking, among other things, a declaration that the convertible debentures in the aggregate amount of $500,000 that the Company issued to Mr. Samuels and Mr. Perricelli as part of the consideration for the purchase of their interests in International Technologies, LLC are null and void. On October 21, 2013, Mr. Samuels had filed a complaint in the Superior Court of New Jersey (Bergen County) against the Company and Medytox Diagnostics, Inc. alleging breach of contract under his employment agreement and the agreement under which International Technologies, LLC was acquired; unjust enrichment, fraud; intentional and negligent misrepresentation; and breach of an implied duty of good faith and fair dealing and seeking an accounting. Mr. Perricelli filed a similar action. | |
All litigation with Reginald Samuels was settled by the Company on December 8, 2014. Specifics of the settlement are confidential. | |
The Company received a default judgement against Ralph Perricelli on February 12, 2015, relieving the Company of its obligations under the convertible debenture. As a consequence of the settlement, the Company recognized a gain of $275,028. |
10_Segment_Reporting
10. Segment Reporting | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Segment Reporting [Abstract] | |||||||||
Segment Reporting | Selected financial information for the Company’s operating segments is as follows: | ||||||||
Three Months Ended March 31, | |||||||||
2015 | 2014 | ||||||||
Net revenues - External | |||||||||
Laboratory Services | $ | 13,499,803 | $ | 14,788,210 | |||||
Medical Support Solutions | 148,979 | 87,329 | |||||||
Corporate & Eliminations | – | – | |||||||
$ | 13,648,782 | $ | 14,875,539 | ||||||
Net revenues - Inter Segment | |||||||||
Laboratory Services | $ | – | $ | – | |||||
Medical Support Solutions | 384,108 | 516,744 | |||||||
Corporate & Eliminations | – | – | |||||||
$ | 384,108 | $ | 516,744 | ||||||
Income (loss) from operations | |||||||||
Laboratory Services | $ | 5,065,421 | $ | 7,277,346 | |||||
Medical Support Solutions | (1,357,989 | ) | 103,476 | ||||||
Corporate & Eliminations | (1,492,870 | ) | (516,744 | ) | |||||
$ | 2,214,562 | $ | 6,864,078 | ||||||
Depreciation and amortization | |||||||||
Laboratory Services | $ | 447,325 | $ | 156,690 | |||||
Medical Support Solutions | 160,356 | 8,998 | |||||||
Corporate & Eliminations | (26,888 | ) | – | ||||||
$ | 580,793 | $ | 165,688 | ||||||
Capital expenditures | |||||||||
Laboratory Services | $ | 187,885 | $ | 279,381 | |||||
Medical Support Solutions | 25,257 | 108,026 | |||||||
Corporate & Eliminations | – | – | |||||||
$ | 213,142 | $ | 387,407 | ||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Total assets | |||||||||
Laboratory Services | $ | 35,191,475 | $ | 29,362,062 | |||||
Medical Support Solutions | 6,330,406 | 5,214,139 | |||||||
Corporate & Eliminations | (1,579,705 | ) | 1,184,553 | ||||||
$ | 39,942,176 | $ | 35,760,754 | ||||||
Intangible assets | |||||||||
Laboratory Services | $ | 4,087,502 | $ | 4,088,835 | |||||
Medical Support Solutions | 340,922 | 347,638 | |||||||
Corporate & Eliminations | – | – | |||||||
$ | 4,428,424 | $ | 4,436,473 | ||||||
Goodwill | |||||||||
Laboratory Services | $ | 944,358 | $ | 805,487 | |||||
Medical Support Solutions | 2,334,455 | 2,334,455 | |||||||
Corporate & Eliminations | – | – | |||||||
$ | 3,278,813 | $ | 3,139,942 | ||||||
11_Subsequent_Events
11. Subsequent Events | 3 Months Ended |
Mar. 31, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | On April 15, 2015, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Medytox, CollabRx, and CollabRx Merger Sub, Inc., a wholly owned subsidiary of CollabRx (“Merger Sub”), pursuant to which it is contemplated that Merger Sub would merge with and into Medytox, with Medytox surviving the merger as a wholly owned subsidiary of CollabRx (the “Merger”). |
In the Merger, (i) each share of Medytox Common Stock will be converted into the right to receive such number of shares of CollabRx Common Stock equal to the Exchange Ratio (as defined in the Merger Agreement), (ii) each share of Medytox Series B Preferred Stock will be converted into the right to receive one share of CollabRx Series B Preferred Stock, which will be designated prior to the closing of the Merger, (iii) each share of Medytox Series D Preferred Stock will be converted into the right to receive one share of CollabRx Series D Preferred Stock, which will be designated prior to the closing of the Merger, (iv) each share of Medytox Series E Preferred Stock will be converted into the right to receive one share of CollabRx Series E Preferred Stock, which will be designated prior to the closing of the Merger, (v) each option and warrant to purchase shares of CollabRx Common Stock will continue in existence pursuant to its terms, (vi) each restricted stock unit for CollabRx Common Stock will settle prior to the closing of the Merger in accordance with its terms, and (vii) Medytox’s equity incentive plan will be assumed by CollabRx and each outstanding option to purchase shares of Medytox Common Stock will be assumed by CollabRx and converted into an option to purchase shares of CollabRx Common Stock (with proportional adjustment to the number of shares underlying the option and the exercise price, each in accordance with the Exchange Ratio). The Exchange Ratio will be calculated such that holders of CollabRx equity prior to the closing of the Merger (including all outstanding CollabRx Common Stock and all restricted stock units, options and warrants exercisable for shares of CollabRx Common Stock) will hold 10% of CollabRx’s Common Stock following the closing of the Merger, and holders of Medytox equity prior to the closing of the Merger (including all outstanding Medytox Common Stock and all outstanding options exercisable for shares of Medytox Common Stock, but less certain options that will be cancelled contingent upon the closing pursuant to agreements between Medytox and such optionees) will hold 90% of CollabRx’s Common Stock following the closing of the Merger, in each case on a fully diluted basis, provided, however, outstanding shares of the newly designated CollabRx Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, certain outstanding convertible promissory notes exercisable for CollabRx Common Stock after the closing and certain option grants expected to be made at or immediately following the closing of the Merger are excluded from such ownership percentages. | |
The Company has evaluated other subsequent events through the date the financial statements were issued and filed with the SEC. The Company has determined that there are no other subsequent events that warrant disclosure or recognition in the consolidated financial statements. |
1_Organization_and_Presentatio1
1. Organization and Presentation (Policies) | 3 Months Ended |
Mar. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization |
Medytox Solutions, Inc. (the “Company”), was incorporated in Nevada on July 20, 2005 as Casino Players, Inc. In the first half of 2011, Company management decided to reorganize the operations of the Company as a holding company to acquire and manage a number of companies in the medical services sector. | |
On June 22, 2011, the Company organized Medytox Medical Management Solutions Corp. ("MMMSC"), a Florida corporation, as a wholly-owned subsidiary. MMMSC was a marketing company selling laboratory testing services to medical clinics, hospitals and physicians’ offices. On October 26, 2013, MMMSC changed its name to Medytox Information Technology, Inc. (“MIT”). MIT provides information technology services and solutions to all subsidiaries and customers of the Company and operates from the corporate offices in West Palm Beach, Florida. | |
On July 26, 2011, the Company organized Medytox Institute of Laboratory Medicine, Inc. ("MILM"), a Florida corporation, as a wholly-owned subsidiary. MILM was organized to acquire and manage medical testing laboratories. MILM operates from the corporate offices in West Palm Beach, Florida. | |
On August 22, 2011, the Company acquired 100% of the equity interests in Medical Billing Choices, Inc. ("MBC"), a privately-owned North Carolina corporation, through a stock purchase agreement for cash and an installment note. MBC operates a medical billing service for a variety of medical providers throughout the southeastern United States from offices in Charlotte, North Carolina. Since the acquisition, MBC is the main billing company for the Company's laboratories. | |
On February 6, 2012, the Company formed Medytox Diagnostics Inc. (“MDI”), a Florida corporation, as a wholly-owned subsidiary to acquire and build clinical laboratories. MDI operates from the corporate offices in West Palm Beach, Florida. | |
On February 16, 2012, MDI acquired majority interest in Collectaway LLC, now known as PB Laboratories, LLC ("PB Labs"), a Florida limited liability company. On October 12, 2012, MDI acquired the remaining controlling interest in PB Labs. As of October 31, 2012, PB Labs is a wholly-owned subsidiary of MDI. | |
On March 9, 2012, the Company formed Medytox Medical Marketing & Sales, Inc. (“MMMS”), a Florida corporation, as a wholly-owned subsidiary that provides marketing for clinical laboratories that are owned by the Company. | |
On December 7, 2012, MDI acquired a majority interest in Biohealth Medical Laboratory, Inc. (“Biohealth”), a Florida corporation. The remaining minority interest was acquired on March 31, 2015. The initial agreement allowed MDI to retain all revenues. | |
On January 1, 2013, MDI purchased 100% of the stock of Alethea Laboratories, Inc. ("Alethea"). Althea operates a licensed clinical lab in Las Cruces, New Mexico and is an enrolled Medicare provider. | |
On January 29, 2013, MDI formed Advantage Reference Labs, Inc. (“Advantage”), a Florida corporation, as a wholly-owned subsidiary to provide reference, confirmation and clinical testing services. On October 14, 2013, Advantage changed its name to EPIC Reference Labs, Inc. (“EPIC”). | |
On April 4, 2013, MDI purchased 100% of the interests in International Technologies, LLC ("Tech"). In October 2013, Tech began doing business as NJ Reference Labs (“NJ Ref”). NJ Ref operates a licensed clinical lab in Waldwick, New Jersey and is an enrolled Medicare provider. | |
On March 18, 2014, MDI, purchased all of the outstanding stock of Clinlab, Inc. Clinlab develops and markets laboratory information management systems. | |
On May 9, 2014, the Company formed Medical Mime, Inc. (“Mime”), a Florida corporation, as a wholly-owned subsidiary. | |
On May 23, 2014, Mime purchased certain net assets, primarily consisting of software, of GlobalOne Information Technologies, LLC (“GlobalOne”). GlobalOne developed software and provided services for the electronic health records management (“ERMEHR”) segment of the medical industry. | |
On July 28, 2014, the Company formed Platinum Financial Solutions, Ltd (“PFS”) as a 100% owned foreign subsidiary of the Company to pursue the opportunity of providing financial solutions, including factoring and accounts receivable acquisition in the healthcare sector. PFS has a Florida subsidiary, Platinum Financial Solutions, LLC, through which it may do business with U.S. based customers. | |
On August 26, 2014, MDI purchased all of the outstanding stock of Epinex Diagnostics Laboratories, Inc. (“Epinex”), a California corporation. Epinex is a clinical laboratory in Tustin, California. | |
Basis of Presentation | Basis of Presentation |
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q. Accordingly, they do not include all of the information and footnotes required in annual financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows for the interim periods reported in this Form 10-Q. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year. | |
These unaudited interim condensed consolidated financial statements should be read in conjunction with the 2014 audited annual financial statements included in the Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on April 15, 2015. | |
Revenue Recognition | Revenue Recognition |
Service revenues are principally generated from laboratory testing services including chemical diagnostic tests such as blood analysis and urine analysis. Net service revenues are recognized at the time the testing services are performed and are reported at their estimated net realizable amounts. | |
Net service revenues are determined utilizing gross service revenues net of contractual allowances. Even though it is the responsibility of the patient to pay for laboratory service bills, most individuals in the United States have an agreement with a third party payor such as Medicare, Medicaid or a commercial insurance provider to pay all or a portion of their healthcare expenses; the majority of services provided by Medytox are to patients covered under a third party payor contract. In certain cases, the individual has no insurance or does not provide insurance information. Despite follow up billing efforts, the Company does not currently anticipate collection of a significant portion of self-pay billings including the patient responsibility portion of the billing for patients covered by third party payors. The Company currently does not have any capitated agreements. In the remainder of the cases, Medytox is provided the third party billing information and seeks payment from the third party under the terms and conditions of the third party payor for health service providers like Medytox. Each of these third party payors may differ not only with regard to rates, but also with regard to terms and conditions of payment and providing coverage (reimbursement) for specific tests. Estimated revenues are established based on a series of procedures and judgments that require industry specific healthcare experience and an understanding of payor methods and trends. | |
We review our calculations on a monthly basis in order to make certain that we are properly allowing for the uncollectable portion of our gross billings and that our estimates remain sensitive to variances and changes within our payor groups. The contractual allowance calculation is made on the basis of historical allowance rates for the various specific payor groups on a monthly basis with a greater weight being given to the most recent trends; this process is adjusted based on recent changes in underlying contract provisions and shifts in the testing being performed. The provision for bad debts represents our estimate of net revenues that will ultimately be uncollectable and is based upon our analysis of historical payment rates by specific payor groups on a monthly basis with primary weight being given to the most recent trends; this approach allows bad debt to more accurately adjust to short-term changes in the business environment. These two calculations are routinely analyzed by Medytox on the basis of actual allowances issued by payors and the actual payments made to determine what adjustments, if any, are needed. | |
Contractual Allowances and Doubtful Accounts | Contractual Allowances and Doubtful Accounts |
Accounts receivable are reported at realizable value, net of allowances for contractual credits and doubtful accounts, which are estimated and recorded in the period the related revenue is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of the estimation process related to allowances for contractual credits and doubtful accounts. In addition, the Company regularly assesses the state of its billing operations in order to identify issues which may impact the collectability of these receivables or reserve estimates. Receivables deemed to be uncollectible are charged against the allowance for doubtful accounts at the time such receivables are written-off. Recoveries of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. Historically, revisions to the allowances for doubtful accounts estimates were recorded as an adjustment to the provision for bad debt within selling, general and administrative expenses. | |
During the third quarter of 2014, the Company corrected the classification of the provision for bad debts from a component of operating expenses to a reduction in revenues in our Condensed Consolidated Statements of Operations. This presentation is required under U.S. GAAP due to the uncertainties of collection of the self-pay portion of patent service revenues. | |
Basic and Diluted Income per Share | Basic and Diluted Income per Share |
The Company computes income per share in accordance with ASC 260, "Earnings per Share", which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing income available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all potential dilutive equivalent shares of common stock outstanding during the period using the treasury stock method and convertible debt and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, convertible debt, convertible preferred stock, or warrants. | |
Segment Information | Segment Information |
In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, the Company is required to report financial and descriptive information about its reportable operating segments. The Company has two operating segments; laboratory services and medical solutions support services. | |
Reclassifications | Reclassifications |
Certain other items on the statement of operations for the three months ended March 31, 2014 and the statement of cash flows for the three months ended March 31, 2014 have been reclassified to conform to current period presentation. |
2_LongLived_Assets_Tables
2. Long-Lived Assets (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Property, Plant and Equipment [Abstract] | |||||||||
Property and equipment | March 31, | December 31, | |||||||
2015 | 2014 | ||||||||
Medical equipment | $ | 922,552 | $ | 896,641 | |||||
Equipment | 504,967 | 396,551 | |||||||
Equipment under capital leases (See Note 5 - Capital Lease Obligations) | 4,024,449 | 4,024,449 | |||||||
Furniture | 412,725 | 333,316 | |||||||
Leasehold improvements | 1,673,405 | 1,665,501 | |||||||
Vehicles | 177,534 | 177,534 | |||||||
Computer equipment | 599,081 | 595,571 | |||||||
Software | 1,832,053 | 1,832,053 | |||||||
10,146,766 | 9,921,616 | ||||||||
Less accumulated depreciation | (2,828,245 | ) | (2,243,493 | ) | |||||
Property and equipment, net | $ | 7,318,521 | $ | 7,678,123 |
3_Notes_Payable_Tables
3. Notes Payable (Tables) | 3 Months Ended | ||||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||
Schedule of Notes Payable | March 31, | December 31, | |||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||
Acquisition convertible note No. 1 to former member of International Technologies, LLC in the amount of $250,000 at 5% interest and was due January 17, 2014. The note was convertible into the Company's common stock at a ten percent (10%) discount to the average market price for the thirty days prior to conversion. The note is discounted for its unamortized beneficial conversion feature of $-0- and $1,639 at March 31, 2015 and December 31, 2014, respectively. See "Acquisition Convertible Notes" below. | $ | – | $ | 250,000 | |||||||||||||||||
Loan payable to former shareholder of Epinex Diagnostic Laboratories, Inc. in the amount of $400,000, at 0% interest, with principal payments of $100,000 due in periodic installments from November 26, 2014 through February 26, 2016. Amount recorded is net of imputed discount of $13,316 at December 31, 2014. | 226,684 | 286,684 | |||||||||||||||||||
226,684 | 536,684 | ||||||||||||||||||||
Less current portion | (226,684 | ) | (443,292 | ) | |||||||||||||||||
Notes payable, net of current portion | $ | – | $ | 93,392 | |||||||||||||||||
Notes Payable - Related Parties | 31-Mar-15 | ||||||||||||||||||||
Face Value | Put | Put | Debt | Net Value | |||||||||||||||||
of Note | Discount | Premium | Discount | of Note | |||||||||||||||||
Convertible debenture dated December 31, 2014 in the amount of $3,000,000 which bears interest at 10% and is due December 31, 2015. The note provides the lender the option to covert the note into the Company's common stock at a 25% discount to the average trading price (as defined in the note agreement) for the ten consecutive trading days prior to the conversion date. The note has been discounted by the value of warrants issuable upon conversion of $380,000 at December 31, 2014. The note has also been discounted by the unamortized value of its put premium of $1,000,000, and increased by the put premium liability of $1,000,000, at December 31, 2014. | $ | 3,000,000 | $ | (753,425 | ) | $ | 1,000,000 | $ | (286,301 | ) | $ | 2,960,274 | |||||||||
Loan payable to Alcimede LLC in the amount of $3,000,000, at 6% interest, with one payment of $3,000,000, plus interest, due on February 2, 2016. | $ | 3,000,000 | – | – | – | $ | 3,000,000 | ||||||||||||||
Loan payable to Alcimede LLC, dated February 27, 2015. (Repaid on April 15, 2015) | $ | 30,000 | – | – | – | $ | 30,000 | ||||||||||||||
$ | 6,030,000 | $ | (753,425 | ) | $ | 1,000,000 | $ | (286,301 | ) | $ | 5,990,274 |
5_Capital_Lease_Obligations_Ta
5. Capital Lease Obligations (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Debt Disclosure [Abstract] | |||||||||
Capital Lease table | March 31, | December 31, | |||||||
2015 | 2014 | ||||||||
Medical equipment | $ | 4,024,449 | $ | 4,024,449 | |||||
Less accumulated depreciation | (1,098,060 | ) | (883,015 | ) | |||||
Net | $ | 2,926,389 | $ | 3,141,434 | |||||
Aggregate future minimum rentals under capital leases | December 31, | ||||||||
2015 | $ | 846,860 | |||||||
2016 | 1,078,010 | ||||||||
2017 | 969,606 | ||||||||
2018 | 382,395 | ||||||||
2019 | 35,575 | ||||||||
Thereafter | 32,611 | ||||||||
Total | 3,345,057 | ||||||||
Less interest | 357,186 | ||||||||
Present value of minimum lease payments | 2,987,871 | ||||||||
Less current portion of capital lease obligations | 727,307 | ||||||||
Capital lease obligations, net of current portion | $ | 2,260,564 |
6_Stockholders_Equity_Tables
6. Stockholders' Equity (Tables) | 3 Months Ended | ||||||||||||||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||
Summary of plan activity | Shares approved for issuance at plan inception | 5,000,000 | |||||||||||||||||||||||||||||
Options granted in 2014 | (1,435,000 | ) | |||||||||||||||||||||||||||||
Options cancelled in 2014 | 10,000 | ||||||||||||||||||||||||||||||
Restricted shares issued in 2014 | (210,000 | ) | |||||||||||||||||||||||||||||
Balance at December 31, 2014 and March 31, 2015 | 3,365,000 | ||||||||||||||||||||||||||||||
Options outstanding | Weighted | ||||||||||||||||||||||||||||||
average | |||||||||||||||||||||||||||||||
Options | exercise | ||||||||||||||||||||||||||||||
Outstanding | price | ||||||||||||||||||||||||||||||
Balance at March 31, 2015 | 24,225,000 | $ | 5.47 | ||||||||||||||||||||||||||||
Schedule of stock option activity | Options outstanding | Options vested and exercisable | |||||||||||||||||||||||||||||
Weighted | |||||||||||||||||||||||||||||||
average | Weighted | Weighted | |||||||||||||||||||||||||||||
remaining | average | Aggregate | average | Aggregate | |||||||||||||||||||||||||||
Exercise | Number | contractual | exercise | intrinsic | Number | exercise | intrinsic | ||||||||||||||||||||||||
price | outstanding | life (years) | price | value | vested | price | value | ||||||||||||||||||||||||
$2.50 | 9,475,000 | 3.37 | $2.50 | $ | 14,212,500 | 8,987,500 | $2.50 | $ | 13,481,250 | ||||||||||||||||||||||
$5.00 | 7,750,000 | 2.99 | $5.00 | – | 7,700,000 | $5.00 | – | ||||||||||||||||||||||||
$10.00 | 7,000,000 | 8.01 | $10.00 | – | 7,000,000 | $10.00 | – | ||||||||||||||||||||||||
24,225,000 | $5.47 | $ | 14,212,500 | 23,687,500 | $5.53 | $ | 13,481,250 | ||||||||||||||||||||||||
Option assumptions | During the three months ended March 31, 2014, the Company issued options to purchase a total of 100,000 shares of the Company’s common stock to an employee pursuant to terms of an employment agreement. These options had contractual lives of two years and were valued at an average grant date fair value of $0.25 per option, or $25,000, using the Black-Scholes Option Pricing Model with the following assumptions: | ||||||||||||||||||||||||||||||
Stock price | $2.50 | ||||||||||||||||||||||||||||||
Expected term | 1 year | ||||||||||||||||||||||||||||||
Expected volatility | 24.43% | ||||||||||||||||||||||||||||||
Risk free interest rate | 0.30% | ||||||||||||||||||||||||||||||
Dividend yield | 0 | ||||||||||||||||||||||||||||||
During the three months ended March 31, 2014, the Company issued options to purchase a total of 1,035,000 shares of the Company’s common stock to various employees. These options had contractual lives of ten years and were valued at an average grant date fair value of $0.70 per option, or $724,500, using the Black-Scholes Option Pricing Model with the following assumptions: | |||||||||||||||||||||||||||||||
Stock price | $2.50 | ||||||||||||||||||||||||||||||
Expected term | 5.375 years | ||||||||||||||||||||||||||||||
Expected volatility | 27.72% | ||||||||||||||||||||||||||||||
Risk free interest rate | 1.46% | ||||||||||||||||||||||||||||||
Dividend yield | 0 | ||||||||||||||||||||||||||||||
In May 2014, the Company issued options to purchase a total of 300,000 shares of the Company’s common stock to a director. These options had contractual lives of four years and were valued at an average grant date fair value of $0.18 per option, or $54,000, using the Black-Scholes Option Pricing Model with the following assumptions: | |||||||||||||||||||||||||||||||
Stock price | $2.50 | ||||||||||||||||||||||||||||||
Expected term | 2 years | ||||||||||||||||||||||||||||||
Expected volatility | 24.43% | ||||||||||||||||||||||||||||||
Risk free interest rate | 0.43% | ||||||||||||||||||||||||||||||
Dividend yield | 0 | ||||||||||||||||||||||||||||||
Warrant transactions | Weighted | ||||||||||||||||||||||||||||||
Weighted | average | ||||||||||||||||||||||||||||||
average | remaining | Aggregate | |||||||||||||||||||||||||||||
Number | exercise | contractual | intrinsic | ||||||||||||||||||||||||||||
of warrants | price | term (years) | value | ||||||||||||||||||||||||||||
Outstanding and Exercisable at December 31, 2014 | 300,000 | $ | 3.33 | – | $ | – | |||||||||||||||||||||||||
Outstanding and Exercisable at March 31, 2015 | – | $ | – | – | $ | – | |||||||||||||||||||||||||
Weighted Average Grant Date Fair Value | $ | – | |||||||||||||||||||||||||||||
Basic and Diluted Income Per Share | Three Months Ended March 31, | ||||||||||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||||||||||
Basic: | |||||||||||||||||||||||||||||||
Numerator - net income available to common stockholders | $ | 483,959 | 3,389,970 | ||||||||||||||||||||||||||||
Denominator - weighted-average shares outstanding | 29,141,679 | 30,043,053 | |||||||||||||||||||||||||||||
Net income per share - Basic | $ | 0.02 | $ | 0.11 | |||||||||||||||||||||||||||
Diluted: | |||||||||||||||||||||||||||||||
Numerator: | |||||||||||||||||||||||||||||||
Net income available to common stockholders | $ | 483,959 | $ | 3,389,970 | |||||||||||||||||||||||||||
Interest expense on convertible debt, net of taxes | 46,912 | 3,700 | |||||||||||||||||||||||||||||
530,871 | 3,393,670 | ||||||||||||||||||||||||||||||
Denominator: | |||||||||||||||||||||||||||||||
Weighted-average shares outstanding | 29,141,679 | 30,043,053 | |||||||||||||||||||||||||||||
Weighted-average equivalent shares options and warrants | 866,378 | – | |||||||||||||||||||||||||||||
Weighted-average equivalent shares from convertible debt | 1,000,000 | 222,222 | |||||||||||||||||||||||||||||
Weighted-average equivalent shares from Series C convertible preferred stock | – | – | |||||||||||||||||||||||||||||
Weighted-average equivalent shares from Series D convertible preferred stock | 179,776 | 72,222 | |||||||||||||||||||||||||||||
Weighted-average equivalent shares from Series E convertible preferred stock | 82,079 | – | |||||||||||||||||||||||||||||
31,269,912 | 30,337,497 | ||||||||||||||||||||||||||||||
Net income per share - Diluted | $ | 0.02 | $ | 0.11 | |||||||||||||||||||||||||||
Antidilutive Securities | March 31, | ||||||||||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||||||||||
Stock options outstanding | 24,225,000 | 23,995,000 | |||||||||||||||||||||||||||||
Warrants outstanding | – | 346,400 | |||||||||||||||||||||||||||||
24,225,000 | 24,341,400 |
7_Income_Taxes_Tables
7. Income Taxes (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Income Tax Disclosure [Abstract] | |||||||||
Income tax provision | Three Months Ended March 31, | ||||||||
2015 | 2014 | ||||||||
Current provision: | |||||||||
Federal | $ | 792,900 | $ | 3,327,000 | |||||
State | 135,700 | 569,500 | |||||||
Deferred provision: | |||||||||
Federal | 44,100 | (1,173,200 | ) | ||||||
State | 4,800 | (125,200 | ) | ||||||
$ | 977,500 | $ | 2,598,100 | ||||||
Reconciliation of the statutory federal income tax rate | Three Months Ended March 31, | ||||||||
2015 | 2014 | ||||||||
Expected federal income tax at 34% statutory rate | 34.00% | 34.00% | |||||||
State income taxes | 4.70% | 4.20% | |||||||
Permanent differences | 10.60% | -0.60% | |||||||
49.30% | 37.60% | ||||||||
Deferred Tax Liability | March 31, | December 31, | |||||||
2015 | 2014 | ||||||||
Deferred income tax assets: | |||||||||
Allowance for bad debts | $ | 28,300 | $ | 28,300 | |||||
Stock options | 444,400 | 423,200 | |||||||
Total deferred income tax assets | $ | 472,700 | $ | 451,500 | |||||
Deferred income tax liabilities: | |||||||||
Property and equipment | $ | (558,800 | ) | $ | (513,600 | ) | |||
Intangible amortization | (187,400 | ) | (162,500 | ) | |||||
Total deferred income tax liabilities | $ | (746,200 | ) | $ | (676,100 | ) | |||
Net deferred income taxes: | |||||||||
Current | $ | 28,300 | $ | 28,300 | |||||
Non-current | (301,800 | ) | (252,900 | ) | |||||
$ | (273,500 | ) | $ | (224,600 | ) |
8_Business_Combinations_Tables
8. Business Combinations (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Business Combinations [Abstract] | |||||||||
Schedule of goodwill | March 31, | December 31, | |||||||
2015 | 2014 | ||||||||
Medical Billing Choices, Inc. | $ | 1,202,112 | $ | 1,202,112 | |||||
PB Laboratories, LLC | 107,124 | 107,124 | |||||||
Biohealth Medical Laboratory, Inc. | 255,634 | 116,763 | |||||||
Clinlab, Inc. | 857,532 | 857,532 | |||||||
Medical Mime, Inc. | 274,811 | 274,811 | |||||||
Epinex Diagnostics Laboratories, Inc. | 581,600 | 581,600 | |||||||
$ | 3,278,813 | $ | 3,139,942 |
10_Segment_Reporting_Tables
10. Segment Reporting (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Segment Reporting [Abstract] | |||||||||
Segment information | Three Months Ended March 31, | ||||||||
2015 | 2014 | ||||||||
Net revenues - External | |||||||||
Laboratory Services | $ | 13,499,803 | $ | 14,788,210 | |||||
Medical Support Solutions | 148,979 | 87,329 | |||||||
Corporate & Eliminations | – | – | |||||||
$ | 13,648,782 | $ | 14,875,539 | ||||||
Net revenues - Inter Segment | |||||||||
Laboratory Services | $ | – | $ | – | |||||
Medical Support Solutions | 384,108 | 516,744 | |||||||
Corporate & Eliminations | – | – | |||||||
$ | 384,108 | $ | 516,744 | ||||||
Income (loss) from operations | |||||||||
Laboratory Services | $ | 5,065,421 | $ | 7,277,346 | |||||
Medical Support Solutions | (1,357,989 | ) | 103,476 | ||||||
Corporate & Eliminations | (1,492,870 | ) | (516,744 | ) | |||||
$ | 2,214,562 | $ | 6,864,078 | ||||||
Depreciation and amortization | |||||||||
Laboratory Services | $ | 447,325 | $ | 156,690 | |||||
Medical Support Solutions | 160,356 | 8,998 | |||||||
Corporate & Eliminations | (26,888 | ) | – | ||||||
$ | 580,793 | $ | 165,688 | ||||||
Capital expenditures | |||||||||
Laboratory Services | $ | 187,885 | $ | 279,381 | |||||
Medical Support Solutions | 25,257 | 108,026 | |||||||
Corporate & Eliminations | – | – | |||||||
$ | 213,142 | $ | 387,407 | ||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Total assets | |||||||||
Laboratory Services | $ | 35,191,475 | $ | 29,362,062 | |||||
Medical Support Solutions | 6,330,406 | 5,214,139 | |||||||
Corporate & Eliminations | (1,579,705 | ) | 1,184,553 | ||||||
$ | 39,942,176 | $ | 35,760,754 | ||||||
Intangible assets | |||||||||
Laboratory Services | $ | 4,087,502 | $ | 4,088,835 | |||||
Medical Support Solutions | 340,922 | 347,638 | |||||||
Corporate & Eliminations | – | – | |||||||
$ | 4,428,424 | $ | 4,436,473 | ||||||
Goodwill | |||||||||
Laboratory Services | $ | 944,358 | $ | 805,487 | |||||
Medical Support Solutions | 2,334,455 | 2,334,455 | |||||||
Corporate & Eliminations | – | – | |||||||
$ | 3,278,813 | $ | 3,139,942 |
2_LongLived_Assets_Details
2. Long-Lived Assets (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Property and equipment, gross | $10,146,766 | $9,921,616 |
Accumulated depreciation | -2,828,245 | -2,243,493 |
Property and equipment, net | 7,318,521 | 7,678,123 |
Medical equipment | ||
Property and equipment, gross | 922,552 | 896,641 |
Equipment | ||
Property and equipment, gross | 504,967 | 396,551 |
Capital lease assets | ||
Property and equipment, gross | 4,024,449 | 4,024,449 |
Furniture | ||
Property and equipment, gross | 412,725 | 333,316 |
Leasehold Improvements | ||
Property and equipment, gross | 1,676,405 | 1,665,501 |
Vehicles | ||
Property and equipment, gross | 177,534 | 177,534 |
Computer Equipment | ||
Property and equipment, gross | 599,081 | 595,571 |
Software | ||
Property and equipment, gross | $1,832,053 | $1,832,053 |
2_LongLived_Assets_Details_Nar
2. Long-Lived Assets (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation | $580,793 | $165,688 |
3_Notes_Payable_DetailsNotes_P
3. Notes Payable (Details-Notes Payable) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Notes payable, total | $226,684 | $536,684 |
Less: current portion | -226,684 | -443,292 |
Notes payable, net of current portion | 0 | 93,392 |
Acquisition note No. 1 | ||
Notes payable, total | 0 | 250,000 |
Loan payable to former shareholder of Epinex | ||
Notes payable, total | $226,684 | $286,684 |
3_Notes_Payable_DetailsRelated
3. Notes Payable (Details-Related Party) (USD $) | Mar. 31, 2015 |
Notes payable - related parties [Member] | |
Face Value of Note | $6,030,000 |
Put Discount | -753,425 |
Put Premium | 1,000,000 |
Debt Discount | -286,301 |
Net Value of Note | 5,990,274 |
Convertible Debt [Member] | |
Face Value of Note | 3,000,000 |
Put Discount | -753,425 |
Put Premium | 1,000,000 |
Debt Discount | -286,301 |
Net Value of Note | 2,690,274 |
Loan payable to Alcimide [Member] | |
Face Value of Note | 3,000,000 |
Net Value of Note | 3,000,000 |
Loan payable to Alcimide 2 [Member] | |
Face Value of Note | 30,000 |
Net Value of Note | $30,000 |
3_Notes_Payable_Details_Narrat
3. Notes Payable (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Debt Disclosure [Abstract] | ||
Gain on settlement of debt | $275,028 | $0 |
4_Related_Party_Transactions_D
4. Related Party Transactions (Details Narrative) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Alcimede [Member] | |
Proceeds from related parties | $30,000 |
Repayments of related party debt | 30,000 |
Alcimede | |
Proceeds from related parties | 3,000,000 |
D & D Funding [Member] | |
Proceeds from related parties | $3,000,000 |
5_Capital_Lease_Obligations_De
5. Capital Lease Obligations (Details-Capital leased assets) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Capital Lease Obligations [Abstract] | ||
Medical equipment | $4,024,449 | $4,024,449 |
Less accumulated depreciation | -1,098,060 | -883,015 |
Net | $2,926,389 | $3,141,434 |
5_Capital_Lease_Obligations_De1
5. Capital Lease Obligations (Details-Future payments) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
December 31, | ||
2015 | $846,860 | |
2016 | 1,078,010 | |
2017 | 969,606 | |
2018 | 382,395 | |
2019 | 35,575 | |
Thereafter | 32,611 | |
Total | 3,345,057 | |
Less interest: | 357,186 | |
Present value of minimum lease payments | 2,987,871 | |
Less current portion of capital lease obligations | 727,307 | 962,562 |
Capital lease obligations, net of current portion | $2,260,564 | $2,222,625 |
5_Capital_Lease_Obligations_De2
5. Capital Lease Obligations (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Capital Lease Obligations Details Narrative | ||
Depreciation expense on capital leases | $215,045 | $54,980 |
6_Stockholders_Equity_Details_
6. Stockholders' Equity (Details - 2013 Plan activity) (2013 Equity Plan) | 3 Months Ended |
Mar. 31, 2015 | |
2013 Equity Plan | |
Options outstanding | |
Options outstanding, beginning balance | 5,000,000 |
Options granted | -1,435,000 |
Options cancelled or expired | 10,000 |
Restricted shares issued | -210,000 |
Options outstanding, ending balance | 3,365,000 |
6_Stockholders_Equity_DetailsO
6. Stockholders Equity (Details-Option to employees and directors) (Employees and Directors, Stock Options, USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Options Outstanding - Employees and Directors | |
Options outstanding | 24,225,000 |
Weighted average exercise price - outstanding | $5.47 |
Aggregate intrinsic value - outstanding | $14,212,500 |
Options Vested and Exercisable - Employees and Directors | |
Options vested | 23,687,500 |
Weighted average exercise price - vested and exercisable | $5.53 |
Aggregate intrinsic value - vested and exercisable | 13,481,250 |
Exercise price $2.50 | |
Options Outstanding - Employees and Directors | |
Options outstanding | 9,475,000 |
Weighted average remaining contractual life | 3 years 4 months 13 days |
Weighted average exercise price - outstanding | $2.50 |
Aggregate intrinsic value - outstanding | 14,212,500 |
Options Vested and Exercisable - Employees and Directors | |
Options vested | 8,987,500 |
Weighted average exercise price - vested and exercisable | $2.50 |
Aggregate intrinsic value - vested and exercisable | 13,481,250 |
Exercise price $5.00 | |
Options Outstanding - Employees and Directors | |
Options outstanding | 7,750,000 |
Weighted average remaining contractual life | 2 years 11 months 26 days |
Weighted average exercise price - outstanding | $5 |
Aggregate intrinsic value - outstanding | 0 |
Options Vested and Exercisable - Employees and Directors | |
Options vested | 7,700,000 |
Weighted average exercise price - vested and exercisable | $5 |
Aggregate intrinsic value - vested and exercisable | 0 |
Exercise price $10.00 | |
Options Outstanding - Employees and Directors | |
Options outstanding | 7,000,000 |
Weighted average remaining contractual life | 8 years 4 days |
Weighted average exercise price - outstanding | $10 |
Aggregate intrinsic value - outstanding | 0 |
Options Vested and Exercisable - Employees and Directors | |
Options vested | 7,000,000 |
Weighted average exercise price - vested and exercisable | $10 |
Aggregate intrinsic value - vested and exercisable | $0 |
6_Stockholders_Equity_DetailsW
6. Stockholders Equity (Details-Warrants) (Warrant, USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Warrant | ||
Number of warrants | ||
Warrants outstanding - beginning balance | 0 | 300,000 |
Warrants oustanding - ending balance | 0 | 300,000 |
Weighted average exercise price | ||
Warrants outstanding - beginning balance | $0 | $3.33 |
Warrants outstanding - ending balance | $0 | $3.33 |
6_Stockholders_Equity_Earnings
6. Stockholders Equity Earnings (Details-EPS) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Basic: | ||
Net income (loss) attributable to Medytox Solutions common shareholders | $483,959 | $3,389,970 |
Weighted average number of shares outstanding during the period - Basic | 29,141,679 | 30,043,053 |
Basic net loss per share attributable to common stockholders | $0.02 | $0.11 |
Diluted: | ||
Net income available to common stockholders | 483,959 | 3,389,970 |
Interest expense on convertible debt, net of taxes | 46,912 | 3,700 |
Diluted net income | $530,871 | $3,393,670 |
Weighted-average shares outstanding | 29,141,679 | 30,043,053 |
Weighted-average equivalent shares options and warrants | 866,378 | 0 |
Weighted-average equivalent shares from convertible debt | 1,000,000 | 222,222 |
Diluted Shares Outstanding | 31,269,912 | 30,337,497 |
Net income per share - Diluted | $0.02 | $0.11 |
Convertible Series C Preferred Stock | ||
Diluted: | ||
Weighted-average equivalent shares from convertible preferred stock | 0 | 0 |
Series D preferred stock | ||
Diluted: | ||
Weighted-average equivalent shares from convertible preferred stock | 179,776 | 72,222 |
Series E preferred stock | ||
Diluted: | ||
Weighted-average equivalent shares from convertible preferred stock | 82,079 | 0 |
6_Stockholders_Equity_Details_1
6. Stockholders' Equity (Details - Antidilutive shares) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Antidilutive securities | 24,225,000 | 23,341,400 |
Stock Options | ||
Antidilutive securities | 24,225,000 | 23,995,000 |
Warrant | ||
Antidilutive securities | 0 | 346,400 |
6_Stockholders_Equity_Details_2
6. Stockholders' Equity (Details Narrative) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Equity [Abstract] | |
Unrecognized compensation costs | $2,959 |
Unrecognized compensation weighted average amortization period | 1 month 28 days |
7_Income_Taxes_DetailsIncome_t
7. Income Taxes (Details-Income tax components) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Current provision: | ||
Federal | $792,900 | $3,327,000 |
State | 135,700 | 569,500 |
Deferred provision: | ||
Federal | 44,100 | -1,173,200 |
State | 4,800 | -125,200 |
Provision for income taxes | $977,500 | $2,598,100 |
7_Income_Taxes_DetailsEffectiv
7. Income Taxes (Details-Effective income tax rate) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Income Tax Disclosure [Abstract] | ||
Expected federal income tax at 34% statutory rate | 34.00% | 34.00% |
State income taxes | 4.70% | 4.20% |
Permanent differences | 10.60% | -0.60% |
Income tax provision (benefit) | 49.30% | 37.60% |
7_Income_Taxes_DetailsDeferred
7. Income Taxes (Details-Deferred income taxes) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Deferred tax assets: | ||
Allowance for bad debts | $28,300 | $28,300 |
Stock options | 444,400 | 423,200 |
Total deferred tax assets | 472,700 | 451,500 |
Deferred tax liabilities: | ||
Property and equipment | -558,800 | -513,600 |
Intangible amortization | -187,400 | -162,500 |
Total deferred liabilities | -746,200 | -676,100 |
Net deferred income taxes: | ||
Current | 28,300 | 28,300 |
Non-current | -301,800 | -252,900 |
Net deferred tax | ($273,500) | ($224,600) |
8_Business_Combinations_Detail
8. Business Combinations (Detail-Goodwill) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Goodwill | $3,278,813 | $3,139,942 |
Medical Billing Choices | ||
Goodwill | 1,202,112 | 1,202,112 |
PB Laboratories | ||
Goodwill | 107,124 | 107,124 |
Biohealth Medical Laboratory | ||
Goodwill | 255,634 | 116,763 |
Clinlab, Inc. | ||
Goodwill | 857,532 | 857,532 |
Medical Mime, Inc. | ||
Goodwill | 274,811 | 274,811 |
Epinex Diagnostics Laboratories, Inc. | ||
Goodwill | $581,600 | $581,600 |
10_Segment_Reporting_Details
10. Segment Reporting (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Net revenues - External | $13,648,782 | $14,875,539 | |
Net revenues - Inter Segment | 384,108 | 516,744 | |
Income (loss) from operations | 2,214,561 | 6,864,078 | |
Depreciation and amortization | 580,793 | 165,688 | |
Capital expenditures | 213,142 | 387,407 | |
Total assets | 39,942,176 | 35,760,754 | |
Intangible assets | 4,428,424 | 4,436,473 | |
Goodwill | 3,278,813 | 3,139,942 | |
Laboratory Services | |||
Net revenues - External | 13,499,803 | 14,788,210 | |
Net revenues - Inter Segment | 0 | 0 | |
Income (loss) from operations | 5,065,421 | 7,277,346 | |
Depreciation and amortization | 447,325 | 156,690 | |
Capital expenditures | 187,885 | 279,381 | |
Total assets | 35,191,475 | 29,362,062 | |
Intangible assets | 4,087,502 | 4,088,835 | |
Goodwill | 944,358 | 805,487 | |
Medical Support Solutions | |||
Net revenues - External | 148,979 | 87,329 | |
Net revenues - Inter Segment | 384,108 | 516,744 | |
Income (loss) from operations | -1,357,989 | 103,476 | |
Depreciation and amortization | 160,356 | 8,998 | |
Capital expenditures | 25,257 | 108,026 | |
Total assets | 6,330,406 | 5,214,139 | |
Intangible assets | 340,922 | 347,638 | |
Goodwill | 2,334,455 | 2,334,455 | |
Corporate & Eliminations | |||
Net revenues - External | 0 | 0 | |
Net revenues - Inter Segment | 0 | 0 | |
Income (loss) from operations | -1,492,870 | -516,744 | |
Depreciation and amortization | -26,888 | 0 | |
Capital expenditures | 0 | 0 | |
Total assets | -1,579,705 | 1,184,553 | |
Intangible assets | 0 | 0 | |
Goodwill | $0 | $0 |