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EX-21 - MIT Holding, Inc. | v185946_ex21.htm |
EX-32.2 - MIT Holding, Inc. | v185946_ex32-2.htm |
EX-31.2 - MIT Holding, Inc. | v185946_ex31-2.htm |
EX-31.1 - MIT Holding, Inc. | v185946_ex31-1.htm |
EX-32.1 - MIT Holding, Inc. | v185946_ex32-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K/A
Amendment
No. 2
x
|
Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
|
For
the fiscal year ended December 31, 2009
Or
¨
|
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
|
For
The Transition Period From
To
Commission
File Number 333-136791
MIT
HOLDING, INC.
(Exact
name of registration as specified in its charter)
Delaware
|
20-5068090
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(IRS
Employer
Identification
No.)
|
|
37
West Fairmont Ave., Suite 202
Savannah,
GA
|
31406
|
|
(Address
of principal offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including Area Code (912) 925-1905
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: None
Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act ¨
Check
whether the issuer (1) filed all reports required to be filed by section 13 or
15 (d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes x No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes ¨. No ¨.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer ¨ Accelerated
filer ¨ Non-accelerated
filer ¨
Smaller Reporting Company x
Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No x
APPLICABLE
ONLY TO CORPORATE REGISTRANTS
As of
May 19, 2010, the registrant had 52,054,571 shares of common stock issued and
outstanding .
At June
30, 2009, the aggregate market value of the voting stock held by non-affiliates
was $ 3,821,192 based upon 25,474,615 shares held by
non-affiliates, and the average of the bid price and the asked price of $.15,
per share.
DOCUMENTS
INCORPORATED BY REFERENCE
List
hereunder the following documents if incorporated by reference and the part of
the form 10-K (e.g., part I, part II, etc.) into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or other
information statement; and (3) any prospectus filed pursuant to rule 424 (b) or
(c) under the Securities Act of 1933: None
Transitional
Small Business Disclosure Format (check one) Yes ¨ No x
Nature
of Amendment –
The
Registrant is further amending the Annual Report on Form 10-K for the fiscal
year ended December 31, 2009 in order to reflect the fiscal year 2008
as audited. Those financial statements, which were also filed with
our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, were
audited by Drakeford & Drakeford LLC, our prior accounting firm, which had a
disciplinary proceeding from the PCAOB in 2009 and is therefore not registered
with the PCAOB at this time. The financial statements for fiscal year
2008 have been audited by Michael T. Studer, CPA, PC. as reflected in the audit
opinion included in this filing. In addition, the Balance
Sheet and Statement of Stockholders Equity have been marked as
retated with respect to 2008 to reflect changes in the treatment of common and
preferred stock. There are no other changes to the Registrant’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2009.
Special
Note Regarding Forward-Looking Statements
Certain
statements in this section, and elsewhere in this Annual Report on Form 10-K (as
well as information included in oral statements or other written statements made
or to be made by the Company) constitute “forward-looking statements.” Such
forward-looking statements include the discussions of the business strategies of
the Company and expectations concerning future operations, margins,
profitability, liquidity and capital resources. In addition, in certain portions
of this Annual Report on Form 10-K, the words: “anticipates”, “believes”,
“estimates”, “seeks”, “expects”, “plans”, “intends” and similar expressions, as
they relate to the Company or its management, are intended to identify
forward-looking statements. Although the Company believes that such
forward-looking statements are reasonable, it can give no assurance that any
forward-looking statements will prove to be correct. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors,
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
Investors
are cautioned not to place undue reliance on our forward-looking statements. We
make forward-looking statements as of the date on which Prospectus is filed with
the SEC, and we assume no obligation to update the forward-looking statements
after the date hereof whether as a result of new information or events, changed
circumstances, or otherwise, except as required by law.
ii
MIT
Holding, Inc.
TABLE
OF CONTENTS
Page
|
||
Part
I
|
||
Item
|
||
1.
|
Description
of Business
|
1
|
1A.
|
Risk
Factors
|
8
|
2.
|
Description
of Property
|
13
|
3.
|
Legal
Proceedings
|
14
|
4.
|
Reserved
|
14
|
Part
II
|
||
5.
|
Market
for Common Equity and Related Stockholder
|
14
|
6.
|
Selected
Financial Information
|
16
|
7.
|
Management’s
Discussion and Analysis or Plan of Operation
|
16
|
8.
|
Financial
Statements
|
F-1
– F-22
|
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
22
|
9A.
|
Controls
and Procedures
|
22
|
9B.
|
Other
Information
|
23
|
Part
III
|
||
10.
|
Directors,
Executive Officers, Promoters and Control Person; Compliance with Section
16(a) of the Exchange Act
|
23
|
11.
|
Executive
Compensation
|
27
|
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
31
|
13.
|
Certain
Relationships and Related Transactions
|
32
|
14.
|
Principal
Accountant Fees and Services
|
33
|
Other
|
||
15.
|
Exhibits,
Financial Statement Schedules
|
34
|
Signature
Page
|
35
|
PART
I
ITEM 1. DESCRIPTION
OF BUSINESS
Overview
MIT
Holding, Inc., a Delaware corporation, is a holding company. Through three
wholly-owned subsidiaries MIT distributes wholesale pharmaceuticals, administers
intravenous infusions, operates an ambulatory center where therapies are
administered and sells and rents home medical equipment.
Our
principal executive offices are located at 37 West Fairmont Avenue, Suite 202,
Savannah, Georgia, 31406. The phone number is (912) 925-1905. The website is
www.mitholdinginc.com. Shares of MIT Holding common stock are traded on the OTC
Bulletin Board under the symbol MITD.OB.
History
Our
current name and business operations have been preceded by historical name
changes and changes in our capitalization.
MIT
Holding, Inc. Merger with Convention All Holdings, Inc.
Our
Company was formerly known as Convention All Holdings, Inc. and, until May 2,
2007, we were a “shell company” (as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended. On May 2, 2007, we then
acquired a 100% ownership interest in MIT Holding, Inc. through a merger of MIT
Holding, Inc. with and into MIT CVAH Acquisition Corp, a newly formed Delaware
corporation and wholly-owned subsidiary, in exchange for 32,886,779 shares of
our common stock (the "Merger"). In addition, 4,758,464 shares of
common stock of MIT are issuable to the holders of 6% Series A Convertible
Preferred Stock (“Series A Preferred Stock”) upon conversion of the Series A
Preferred and 9,738,784 shares of common stock are issuable to the holders of
certain warrants issued in conjunction with the Series A Preferred Stock at an
exercise price of $0.75 per share (the “Warrants”) issued in a private placement
by MIT as of May 31, 2007. Simultaneously with the Merger, the
company formerly known as MIT Holding, Inc. changed its name to Medical Infusion
Group, Inc., and we changed our name to MIT Holding, Inc. As a result of the
Merger, we now own 100% of Medical Infusion Group, Inc., which, in turn,
continues to own 100% of the issued and outstanding shares of capital stock of
MIT Ambulatory Care Center, Inc., a Georgia corporation ("Ambulatory"), Medical
Infusion Technologies, Inc., a Georgia corporation (“Infusion”) and MIT
International Distribution, Inc. (“MIT International”).
In May
2007 we changed our ticker symbol on the OTC Bulletin Board to
MITD.OB.
1
MIT
Business and Operations
Overview
Through
its three subsidiaries, MIT distributes wholesale pharmaceuticals, prepares
intravenous medication for home infusion by the patient, operates an ambulatory
center where intravenous infusions are administered and sells and rents home
medical equipment. These services are carried out through a full service
compounding pharmacy in Savannah, Georgia.
Strategy
MIT’s
strategy is to continue marketing efforts in the Savannah and surrounding areas
for its core clinical business in Infusion Technology, Ambulatory Care and
Durable Medical Equipment (DME). 2009 saw a decline in revenues for
all divisions of the company due to contraction of the economy which led to
decreases in referrals and therapies administered. The demand for
these services is created through local physicians, hospitals and insurance
companies and should continue to provide an array of therapies for our pharmacy
based clinic in Savannah. The Company is no longer devoting substantial
resources to wholesale activity, but this focus may change if market conditions
and the Company’s financial condition improve.
MIT in
2009 continued to expend substantial effort to evaluate and confirm the efficacy
of ProVectorBt, a proprietary biopesticide product developed by Dr. Thomas M.
Kollars, Jr. (“Dr. Kollars. This product potentially reduces the spread of
certain mosquito-borne infectious diseases including malaria, dengue fever and
West Nile virus by killing adult mosquitoes and reducing mosquito population.
MIT intends to market ProVector™ through international distribution channels to
developing nations.
In order
for MIT to expand into international markets and other domestic areas, MIT
believes that it will need additional financing. There can be no assurance that
MIT will expand into international markets or that it can obtain additional
financing on favorable terms, if at all.
2
Strategic
Relationship with Georgia Southern University and Dr. Thomas Kollars,
Jr.
In
October 2007, MIT signed a sponsored program agreement with Georgia Southern
University Research & Service Foundation, Inc. (“GSURSF”), a
research division of Georgia Southern University, to research and develop
products to stop the spread of infectious diseases. Pursuant to the agreement,
MIT and Georgia Southern funded research at the university. Dr. Thomas M.
Kollars, Jr. (“Dr. Kollars”), GSURSF’s Chief Scientific Advisor and Director of
the Biodefense and Infectious Disease Laboratory and Associate Professor of
Epidemiology in the Jiann-Ping Hsu College of Public Health, Georgia Southern
University, will oversee the project. Although the agreement with Georgia
Southern terminated in August 2008, MIT has continued
working with Dr. Kollars and his team of experts to develop the ProVectorBt, and
obtain certification as to the efficacy of ProVectorBt. This
certification was completed by GSURSF on November 27,
2008. . Dr. Kollars has developed prototypes of the
ProVector Bt flower that are being tested as we develop a commercial
bio-pesticide product. The initial product, ProVectorTM Bt,
will be only be available internationally as necessary EPA approval for US use
is in the early stage of development and may take up to six months or more to
achieve. The company has registered with the EPA and received its registration
number. The paperwork for an EPA establishment number which will allow us to
immediately market the product for sale overseas has been applied for received.
MIT is in discussion with potential distributor candidates but formal agreements
are not in place at this time. It is essential for us to develop agreements with
distributors overseas who already have established relationships with the
governments where the product is to be sold. MIT does not have the personnel,
the funds or time frame to set up its own distribution network to provide
ProVector to the world market.
In 2007,
MIT also entered into a license agreement with MedEnvVet Laboratories (Mevlabs),
an affiliate of Dr. Kollars and the holder of the intellectual property rights
to the ProVectorBt. Pursuant to the license agreement, MIT acquired
exclusive worldwide rights to sub-license, manufacture and sell the
ProVectorBt. MIT is in discussion with potential distribution
candidates but formal agreements are not in place at this time.
Wholesale
Distribution
MIT is no
longer pursuing the domestic wholesale distribution line of
business.
Our
Suppliers
MIT
purchases the majority of its products for domestic sales from six major
distributors and several minor distributors. In 2009 the three major
distributors supplied approximately 90% of the Company’s purchasing needs with
the other 10% from the other distributors. The Company does not have
long-term contracts or arrangements with any of these
distributors. The loss of certain of these distributors could have a
material adverse effect on our operations, although most of the pharmaceuticals
that we purchase are available from multiple sources and are available in
sufficient quantities to meet our needs and the needs of MIT’s patients.
However, some pharmaceuticals are only available through the manufacturer and
may be subject to limits on distribution. In such cases, MIT needs to establish
and maintain good working relations with the manufacturer in order to
assure sufficient supply to meet its patients’ needs. We utilize several
national delivery companies as an important part of the local and national
distribution of our products and services, particularly in the delivery of
certain specialty pharmaceutical products
In 2008,
MIT began utilizing a procurement process commonly called “mail order”
supply. This process provides drugs used in various therapies
directly to the patient and MIT’s involvement is to administer the drugs so
supplied to the patient. This results in a reduction in revenue to
the company with a corresponding reduction in cost of sales.
Additionally,
certain pharmaceuticals may become subject to general supply shortages, as in
2005 with IVIG immune globulin products. Such shortages can result in cost
increases or hamper MIT’s ability to obtain sufficient quantities to meet the
needs of our patients. MIT works diligently to obtain commitments from its
suppliers, whenever possible, to secure ample supply of pharmaceuticals that are
potentially subject to supply shortages, however, all of its purchasing is
presently “spot” purchasing, and MIT maintains no long-term contracts with any
suppliers, nor does it keep large inventories of our
pharmaceuticals.
3
Pharmacy
Services, Home Infusion Therapy and Ambulatory Centers
MIT
provides infusion pharmacy services through its pharmacy in Savannah,
Georgia. The pharmacy maintains a license from the Drug Enforcement
Agency, and can dispense infusible and non-infusible prescription
pharmaceuticals to treat a wide range of chronic and acute health
conditions. Many infusion therapies cost over $10,000 per patient per
year. These pharmaceuticals may require refrigeration during shipping
as well as special handling to prevent potency degradation. Patients
receiving treatment usually require special counseling and education regarding
their condition and treatment. Retail pharmacies and other
traditional distributors generally are designed to carry inventories of low
cost, high volume products and are not generally equipped to handle the high
cost, low volume specialty pharmaceuticals that have specialized handling and
administration requirements. As a result, these specialty
pharmaceuticals are generally provided by pharmacies such as MIT’s that focus
primarily on filling, labeling and delivering injectible pharmaceuticals and
related support services.
Patients
are generally referred to infusion pharmacy services providers by physicians,
hospital discharge planners and case managers. The medications are mixed and
dispensed under the supervision of a registered pharmacist and the therapy is
typically delivered in the home of the patient by a registered nurse or trained
caregiver. Depending on the preferences of the patient and/or the payor, these
services may also be provided at an ambulatory infusion center. We believe that
several factors will contribute to growth in non-hospital based infusion
therapy, including:
|
·
|
Healthcare
cost containment pressures;
|
|
·
|
Increased
number of therapies that can be safely administered in patients’
homes;
|
|
·
|
Patient
preference for at-home treatment;
|
|
·
|
Increased
acceptance of home infusion by the medical community and by managed care
organizations and other payors;
|
|
·
|
Technological
innovations such as implantable injection ports, vascular access devices
and portable infusion control devices;
and
|
|
·
|
Increased
utilization of home infusion therapies due to demographic trends, in
particular increasing life
expectancies.
|
MIT’s
pharmacy customers can choose to have their therapies administered at the 3,000
square foot ambulatory care center in Savannah, Georgia staffed by three
full-time nurses and two part-time doctors or in their own homes
MIT
offers patients the following services:
|
·
|
Medication
and supplies for administration and use at home or within our ambulatory
infusion center;
|
|
·
|
Consultation
and education regarding the patient’s condition and the prescribed
medication;
|
|
·
|
Clinical
monitoring and assistance in monitoring potential side effects;
and
|
|
·
|
Assistance
in obtaining reimbursement.
|
MIT
provides its patients the following home infusion therapies:
|
·
|
Total
Parenteral Nutrition: intravenous therapy providing required
nutrients to patients with digestive or gastro-intestinal problems, most
of whom have chronic conditions requiring treatment for
life;
|
|
·
|
Anti-infective
Therapy: intravenous therapy providing medication for infections
related to diseases such as osteomyelitis and urinary tract
infections;
|
|
·
|
Pain
Management: intravenous or continuous injection therapy, delivered by
a pump, providing analgesic pharmaceuticals to reduce
pain;
|
|
·
|
Other
therapies: treating a wide range of medical conditions, including
IVIG
|
MIT’s
primary product lines are centered upon infusion therapy. During
2008, approximately 46.9% of infusion therapy revenue came from home infusion
therapies and 53.1% from clinic infusion therapies. In 2008, IVIG and Synagis®
products accounted for approximately 20.1% of therapies dispensed at MIT’s
ambulatory centers. Synagis® (palivizumab), the leading infusion
product administered at the ambulatory center, is prescribed primarily between
September and January. It is a monoclonal antibody licensed for any infectious
disease, but is used primarily for respiratory diseases and allergies that
normally establish themselves in the late summer through winter. In addition,
Synagis® is also prescribed for prevention of human respiratory syncytial virus
(including diseases such as measles and mumps) in pediatric
patients.
Home
Medical Equipment
The home
medical equipment division carries a wide variety of durable medical equipment
and supplies for purchase or lease. The division maintains inventory or can
rapidly obtain a wide variety of home medical equipment products to match almost
any request, from electric wheelchairs to nebulizers. All of MIT’s
business in 2008 related to home medical equipment was from physician
referrals.
4
Billing
and Significant Payors
MIT
derives most of its revenue from contracts with third party payors, insurance
companies, self-insured employers and Medicare and Medicaid programs. Where
permissible, they bill patients for any amounts not reimbursed by third party
payors. For the most part, MIT’s infusion pharmacy revenue consists of
reimbursement for both the cost of the pharmaceuticals sold and the cost of
services provided. Pharmaceuticals are typically reimbursed on a percentage
discount from the published average wholesale price (AWP) of each
pharmaceutical. Nursing services are typically paid separately, on a per visit
basis, while other patient support services and ancillary medical supplies are
either reimbursed separately or on a per diem basis, where
applicable.
MIT also
provides services that are reimbursable through government healthcare programs
such as Medicare and state Medicaid programs. For the twelve months ended
December 31, 2008 and December 31, 2009 respectively, approximately 25.4%
and 11.6% of our infusion pharmacy revenue came from government healthcare
programs such as Medicare and Medicaid. The amounts due from these programs
represented approximately 15.3% and 11.8% of our total accounts receivable,
respectively, as of December 31, 2008 and December 31, 2009.
MIT is
responsible for its own billing and collection practices. MIT bills
payors and tracks all of its accounts receivable through computerized billing
systems. These systems allow the billing staff the flexibility to review and
edit claims in the system before such claims are submitted to payors, which are
submitted either electronically or through the mail. MIT utilizes electronic
claim submission whenever possible to expedite claim review and payment, and to
minimize errors and omissions.
MIT’s
financial performance is highly dependent upon effective billing and collection
practices. The process begins with an accurate and complete patient admission
process, in which essential information about the patient, the patient’s
insurance and their care needs is gathered. A critical part of this
process is verification of insurance coverage and authorization from the
insurance company carrier to provide the required care, which typically takes
place before we initiate services.
Sales
and Marketing
MIT’s
sales and marketing efforts focus on establishing, maintaining and strengthening
relationships with local and regional patient referral sources and maintaining
existing and developing new relationships with pharmaceutical manufacturers to
gain distribution access as they release new products.
Most new
patients are referred to MIT by physicians, medical groups, hospital discharge
planners, case managers employed by Health Maintenance Organizations (HMOs),
Preferred Provider Organizations (PPOs) or other managed care organizations,
insurance companies and home care agencies. MIT’s sales force is responsible for
establishing and maintaining these referral relationships.
Government
Regulation
MIT’s
operations are subject to extensive regulation by a number of governmental
entities at the federal, state and local level. The industry is also subject to
frequent regulatory change. Laws and regulations in the healthcare industry are
extremely complex and, in many instances, the industry does not have the benefit
of significant regulatory or judicial interpretation. Moreover, MIT’s business
is impacted not only by those laws and regulations that are directly applicable
to it but also by certain laws and regulations that are applicable to its
managed care and other clients. If MIT fails to comply with the laws and
regulations directly applicable to its business, it could suffer civil and/or
criminal penalties, and it could be excluded from participating in Medicare,
Medicaid and other federal and state healthcare programs, which would have an
adverse impact on its business.
Professional
Licensure. Doctors, Nurses,
pharmacists and certain other healthcare professionals MIT employs are required
to be individually licensed or certified under applicable state law. MIT
performs criminal and other background checks on employees and takes steps to
ensure that employees possess all necessary licenses and certifications, and MIT
believes that its employees comply in all material respects with applicable
licensure laws.
Pharmacy
Licensing and Registration. Georgia laws
require that our pharmacy be licensed as an in-state pharmacy to dispense
pharmaceuticals in Georgia and that home infusion companies to be licensed as
home health agencies. MIT believes that it complies with all state
licensing laws applicable to its business. If MIT is unable to maintain its
licenses, its ability to operate would be severely limited, which could have an
adverse impact on its business.
5
Laws
enforced by the U.S. Drug Enforcement Administration (“DEA”), as well as some
similar state agencies, require MIT’s pharmacy to register in order to handle
controlled substances, including prescription pharmaceuticals. Federal and state
laws also require that MIT follow specific labeling, reporting and
record-keeping requirements for controlled substances. MIT maintains federal and
state controlled substance registrations for each of its facilities that require
such registration and follows procedures intended to comply with all applicable
federal and state requirements regarding controlled substances.
Food, Drug and
Cosmetic Act. Certain
provisions of the federal Food, Drug and Cosmetic Act govern the handling and
distribution of pharmaceutical products. This law exempts many pharmaceuticals
and medical devices from federal labeling and packaging requirements as long as
they are not adulterated or misbranded and are dispensed in accordance with and
pursuant to a valid prescription. MIT believes that it complies with all
applicable requirements.
Wholesale
Licenses. The DEA, the U.S. Food and Drug Administration (“FDA”) and
various state regulatory authorities regulate the distribution of pharmaceutical
products and controlled substances. Wholesale distributors of these substances
are required to register for permits, meet various security and operating
standards, and comply with regulations governing their sale, marketing,
packaging, holding and distribution. The DEA, FDA and state regulatory
authorities have broad enforcement powers, including the ability to seize or
recall products and impose significant criminal, civil and administrative
sanctions for violations of these laws and regulations. As a wholesale
distributor of pharmaceuticals and certain related products, we are subject to
these regulations. MIT has received all necessary regulatory approvals and
believes that it is in compliance with all applicable pharmaceutical wholesale
distribution requirements.
Medicare
Prescription Drug, Improvement and Modernization Act of 2003.
The Medicare Prescription Drug Improvement and Modernization Act of 2003 (“MMA”)
significantly expanded Medicare coverage for outpatient prescription drugs.
Beginning in 2006, Medicare beneficiaries became eligible to enroll in
prescription drug plans that are offered by private entities. Medicare
reimbursement rates for certain pharmaceuticals were impacted by implementation
of the MMA by the U.S. Department of Health and Human
Services. Further Medicare reimbursement reductions and policy
changes are scheduled to be implemented in the future. The Deficit Reduction Act
of 2005 reduced Medicaid reimbursement for certain prescription drugs, and the
U.S. Congress may consider further reductions to Medicaid reimbursement. These
policies may adversely affect MIT’s pharmacy business directly and its wholesale
pharmaceutical distribution business indirectly.
The MMA
also significantly expanded Medicare coverage for outpatient prescription
pharmaceuticals through new Medicare Part D. Beginning in 2006, Medicare
beneficiaries became eligible to enroll in outpatient prescription
pharmaceutical plans that are offered by private entities and became eligible
for varying levels of coverage for outpatient prescription pharmaceuticals.
Beneficiaries who participate select from a range of stand-alone prescription
pharmaceutical plans or Medicare Advantage managed care plans that include
prescription pharmaceutical coverage along with other Medicare services (“Part D
Plans”). The Part D Plans are required to make available certain pharmaceuticals
on their formularies. Each Part D Plan negotiates reimbursement for Part D
pharmaceuticals with pharmaceutical manufacturers. For eligible Medicare
beneficiaries, the cost of equipment, supplies and professional services
associated with infused covered Part D pharmaceuticals will continue to be
reimbursed under Part A or Part B, as applicable. For beneficiaries
who are dually eligible for benefit under Medicare and a state
Medicaid program, covered infused pharmaceuticals will be reimbursed under
individual state coverage guidelines.
Stark Law &
Anti-Kickback Statute. MIT and its customers are subject to
fraud and abuse laws, including the federal anti-kickback statute and the Stark
law. The anti-kickback statute prohibits persons from soliciting, offering,
receiving or paying any remuneration in order to induce the referral of a person
for the furnishing or arranging for the furnishing of any item or service or for
inducing the purchasing, leasing, ordering, or arranging for or recommending
purchasing, leasing, or ordering of items or services that are in any way paid
for by Medicare, Medicaid, or other federal healthcare programs. The Stark law
prohibits physicians from making referrals for designated health services to
certain entities with which they have a financial relationship. The fraud and
abuse laws and regulations are broad in scope and are subject to frequent
modification and varied interpretation. MIT attempts to structure all
of its business relationships to comply with these laws.
Health
Information Practices. The Health Information Portability and
Accountability Act of 1996 (“HIPAA”) and the regulations promulgated thereunder
by HHS set forth health information standards in order to protect security and
privacy in the exchange of individually identifiable health information.
Significant criminal and civil penalties may be imposed for violation of these
standards.
6
Pedigree
Requirements. In recent years, some states have passed or have proposed
laws and regulations that are intended to protect the safety of the supply
channel. For example, Florida and other states are implementing
pedigree requirements that require pharmaceuticals to be accompanied by
information tracing pharmaceuticals back to the
manufacturers. Georgia presently has no such statute. These and other
requirements are expected to increase MIT’s cost of operations. At the federal
level, the FDA issued final regulations pursuant to the Pharmaceutical Drug
Marketing Act that became effective in December 2006. The regulations impose
pedigree and other chain of custody requirements that increase the costs and/or
burden to MIT of selling to other pharmaceutical distributors and handling
product returns.
Competition
The
intravenous ambulatory market is highly fragmented with a small number of high
volume participants. Most intravenous therapies are originally prescribed to
patients while confined to a hospital, and MIT maintains significant
relationships with most of the major hospitals in the metropolitan Savannah
area. There are no other listed ambulatory centers in Savannah,
Georgia.
Over
twenty home medical equipment suppliers are in the Savannah area. Most are
inside pharmacies. MIT maintains a competitive advantage in that once a patient
is referred to MIT, MIT may cross-sell to the patient home medical equipment
prescriptions written by the referring physician. MIT formed its home medical
equipment division so that an infusion patient with a durable medical equipment
prescription would not have to go to another source. Similarly, the
pharmacy was established so an infusion patient with a prescription for
pharmaceuticals could have the prescription filled by MIT’s
pharmacy.
Insurance
MIT
caries a professional liability insurance policy that provides for coverage in
the amount of $1,000,000 per occurrence and $2,000,000 in the
aggregate. A successful claim not covered by our professional
liability insurance or substantially in excess of our insurance coverage could
cause us to pay out a substantial award, harming our financial condition and
results of operations. MIT also maintains officers and directors
liability insurance for aggregate coverage of $3,000,000.
Employees
As
of December 31, 2009, MIT employed 34 persons on a full-time basis of which 8
were involved in administration, 23 in medical services, and 3 for durable
medical equipment. None of MIT’s employees are represented by a labor
union or bound by a collective bargaining unit. MIT believes that its
relationship with its employees is satisfactory.
7
Item
1A. RISK FACTORS
Before
you purchase our securities, you should carefully consider the risks described
below and the other information contained in this prospectus, including our
financial statements and related notes. The risks described below are not the
only ones facing our company. Additional risks not presently known to us or that
we currently deem immaterial may also impair our business operations. If any of
the adverse events described in this “Risk Factors” section actually occurs, our
business, results of operations and financial condition could be materially
adversely affected and you might lose all or part of your
investment.
Our
restricted cash flow raises substantial doubt about our ability to continue
operations unless we obtain financing or generate adequate cash
flow.
Although we had revenues of $6,400,042
in 200 and had receivables of $1,898,794 as of December 31, 2009, our inability
to achieve sufficient increases in our revenues has created a
liquidity challenge that raises doubt about our ability to continue as a going
concern. The auditor’s opinion which accompanies our financial
statements is qualified as to our ability to continue as a going
concern. Revenues declined in 2009 to $6,400,042 from $9,510,626 in
2008. In addition, collection of medical receivables can be delayed as they are
submitted to insurance companies and government agencies, Unless we generate
sufficient collections on our receivables, otherwise increase revenues or obtain
financing through other means, our operations may be difficult to
sustain.
On April 4, 2008, we received a letter
from Northern indicating that Northern considered MIT in default of its
obligations under the credit agreement, and declaring all amounts under the
credit agreement due and payable in full immediately. Subsequent to
this letter, we received oral assurances from Northern that they would continue
to fund MIT for an additional 60 days from April 4. On August 1, 2008, we
received a term loan from Globank, Inc. in the amount of $500,000 and used the
proceeds to pay off our obligation to Northern. The term loan from
Globank, Inc. matures on July 31, 2010.
We
rely on reimbursements from Medicare and Medicaid.
For the
fiscal year ended December 31, 2009 over 11% of our ambulatory and infusion
revenue came from reimbursement by federal and state programs such as Medicare
and Medicaid. Reimbursement from these and other government programs is subject
to statutory and regulatory requirements, administrative rulings,
interpretations of policy, implementation of reimbursement procedures,
retroactive payment adjustments, governmental funding restrictions and changes
to, or new legislation, all of which may materially affect the amount and timing
of reimbursement payments to us. Changes to the way Medicare pays for our
services may reduce our revenue and profitability on services provided to
Medicare patients and increases our working capital requirements.
In
addition, we are sensitive to possible changes in state Medicaid programs as we
do business with a number of state Medicaid providers. Budgetary concerns in
many states have resulted in and may continue to result in, reductions to
Medicaid reimbursement as well as delays in payment of outstanding claims. Any
reductions to, or delays in collecting amounts reimbursable by state Medicaid
programs for our products or services, or changes in regulations governing such
reimbursements, could cause our revenue and profitability to decline and
increase our working capital requirements.
Our
new products strategy is unproven and risky.
Our
business strategy is to develop the sales of ProVector™ in the international
market. Our ability to implement its plans will depend primarily on the ability
to attract distributors in targeted markets where malaria, dengue fever or West
Nile disease are present. Development of a distribution network
throughout the world will determine our sales and growth rate for Provector in
2010. MIT is in discussion with potential distribution candidates but formal
agreements are not in place at this time. There can be no assurance
at this time as to when the distribution network will be in place to generate
sales for ProVector™
8
MIT has no
history with manufacture and distribution of Provector™.
Distributing
ProVector™ overseas is a heavily regulated endeavor, and we will be subject to
both domestic and foreign governmental regulatory schemes and may be required to
rely on a limited number of distributors in each foreign country in which it
will sell products and may be required to obtain registrations in each country
to import product. We have no significant experience complying with
the legal systems of countries other than the United States. We will
be dependent on our relationships with foreign distributors, suppliers,
purchasers and government agencies and enforcement of our rights in foreign
courts, particularly in less developed countries, is uncertain. Such compliance
will be time consuming and expensive, and is expected to require hiring legal
and/or business advisers who are specialists in such transactions. Changes in
foreign statues and regulations could adversely affect our
operations. Achieving significant revenues denominated in foreign
currencies would also subject our financial results to the risk of foreign
exchange fluctuations.
Our
revenues are subject to fluctuations which may adversely affect our
business
MIT’s revenues increased from $7.8
million in 2004 to $16.1 million in 2005, then declined to $13.0 million in
2006. Revenues in 2007 declined to 12.6 million and in 2008, sales
declined by $3.17 million to $9.5 million. In 2009, Revenue fell $3.1
million to $6.4 million. This was a result of our
discontinuing competition in the wholesale market due to decreasing
demand for wholesale products and diminishing margins and insufficient capital
resources to aggressively compete in this market
Our
accounts receivable are subject to an agreement with Northern Healthcare
Capital, LLC.
In
April 2007, MIT and Northern Healthcare Capital, LLC (“Northern”) entered into a
revolving line of credit to replace the receivable purchase agreement. The
initial facility amount is $2,000,000, with the facility increasing in
increments of $400,000 at such time as MIT’s outstanding balance exceeds 85% of
the then existing amount outstanding under the facility. This credit
agreement with Northern is personally guaranteed by Mr. Parker. This
agreement a purchase agreement with Northern executed in May 2005 whereby
Northern purchased from MIT the rights to all our accounts
receivable. Over 95% of our revenues are subject to the
agreement with Northern. We are dependent on our agreement with
Northern and there can be no assurance that we could obtain alternate financing
on terms as favorable to us.
On April 4, 2008, we received a letter
from Northern indicating that Northern considered MIT in default of its
obligations under the credit agreement, and declaring all amounts under the
credit agreement due and payable in full immediately. Subsequent to
this letter, we received oral assurances from Northern that they would continue
to fund MIT for an additional 60 days from April 4. On August 1, 2008, we
received a term loan from Globank, Inc. in the amount of $500,000 and used the
proceeds to pay off our obligation to Northern. The term loan from
Globank, Inc. matures on July 31, 2010.
MIT
experiences seasonal liquidity.
MIT has
historically experienced seasonal liquidity due to the natural cycle of demand
for our wholesale pharmaceutical products, and we expect this seasonal
fluctuation in liquidity to continue. MIT historically experienced
decreases in revenue in the first half of the year compared to the second
half. Lesser cash flow could adversely affect MIT’s liquidity and
funds available for operations.
The
loss of Mr. Parker could adversely affect our operations.
Our
success depends upon the availability and performance of our key employees, such
as President, William C. Parker, MIT’s founder. We intend to purchase “key
person” insurance for Mr. Parker for coverage in the amount of at least
$1,000,000. However, MIT does not currently have such insurance, and
it may not be able to obtain such insurance on favorable terms, at
all. The loss of Mr. Parker’s services could have a material adverse
effect upon our business and results of operations.
We
are highly dependent on reimbursement from non-governmental third party
payors.
We are
highly dependent on reimbursement from a managed care organizations and other
non-governmental third party payors. For the fiscal years ended
December 31, 2009 and December 31, 2008, approximately 88.4% and 97.3% of
our revenue came from managed care organizations and other non-governmental
payors, including self-pay patients. Many payors seek to limit the number of
providers that supply pharmaceuticals to their enrollees in order to build
volume that justifies their discounted pricing. From time to time,
payors with whom we have relationships require that we bid against our
competitors to keep their business. As a result of such bidding process, we may
not be retained, and even if we are retained, the prices at which we are able to
retain the business may be less than what we sought. The loss of a payor
relationship could significantly reduce the number of patients we serve and have
a material adverse effect on our revenue and net income, and a reduction in
pricing could reduce our gross margins and our net income.
9
We
are subject to numerous governmental regulations, including healthcare reform
laws.
Non-compliance
with laws and regulations applicable to MIT’s business and future changes in
those laws and regulations could have a material adverse effect on
MIT. MIT’s operations are subject to stringent laws and regulations
at both the federal and state levels, requiring compliance with burdensome and
complex billing, substantiation and record-keeping requirements. Financial
relationships between MIT and physicians, nurses, and other referral sources are
also subject to strict limitations.
In
addition, strict licensing and safety requirements apply to the provision of
services, pharmaceuticals and equipment. Violations of these laws and
regulations could subject MIT to severe fines, facility shutdowns and possible
exclusion from participation in federal healthcare programs such as Medicare and
Medicaid. Government officials and the public will continue to debate healthcare
reform. Changes in healthcare law, new interpretations of existing laws, or
changes in payment methodology may have a dramatic effect on MIT’s business and
results of operations.
MIT
faces downward pricing pressures.
MIT
believes that continued pressure to reduce healthcare costs could have a
material adverse effect on MIT’s revenue. The current market continues to exert
pressure on healthcare companies to reduce health care costs, resulting in
reduced margins for home healthcare providers such as MIT. Larger
group purchasing organizations and supplier groups exert additional pricing
pressure on home healthcare providers. These include managed care organizations,
which control an increasing portion of the healthcare economy.
MIT
faces competition from other providers for its products and
services.
The
segment of the healthcare market in which MIT operates is highly competitive. In
each of its service lines, there are a number of national providers and numerous
regional and local providers. Other types of healthcare providers, including,
individual hospitals and hospital systems, home health agencies and health
maintenance organizations have entered, and may continue to enter the market to
compete with MIT’s various service lines. Some of these competitors have access
to significantly greater financial and marketing resources than MIT. This may
increase pricing pressure and limit MIT’s ability to maintain or increase its
market share.
MIT
relies heavily on a single source product manufacturer and certain
distributors.
We sell
intravenous therapies that are supplied to us by a variety of manufacturers,
many of which are the only source of that specific pharmaceutical. In order to
have access to these therapies, and to be able to participate in the launch of
new intravenous pharmaceuticals, we must maintain good working relationships
with the manufacturers. Most of the manufacturers of the pharmaceuticals we sell
have the right to cancel their supply contracts with us without cause and after
giving only minimal notice. The loss of our relationship with one or more
pharmaceutical distributors may reduce our revenue and
profitability. In addition, IVIG, which is comprised of approximately
seven products derived from numerous manufacturers and distributors accounted
for approximately 24.8% and 15.8% of MIT’s revenues for the years ended December
31, 2009 and December 31, 2008, respectively. The loss of a key pharmaceutical
manufacturer could have material adverse affect on our
business. There can be no assurance that MIT will have access to
adequate supplies on acceptable terms to meet its demands.
10
Quantities
of our intravenous therapies are limited.
Certain
of the intravenous therapies that we distribute have limited shelf life and
some, such as blood products, are subject to supply shortages. There
can be no assurance that we can obtain the supplies of products that we desire.
In such event, the operations of our wholesale distribution business will be
adversely affected.
Development of new
productsthat compete
with MIT’s product line could materially, adversely affect its financial
condition.
The
pharmaceutical distribution industry is highly competitive and characterized by
changing client preferences and continuous introduction of new products and/or
services. MIT believes that its future growth will depend, in part,
on its ability to anticipate changes in client preferences and develop and
introduce, in a timely manner, new products and/or services that adequately
address such changes. There can be no assurance that MIT will be
successful in developing, introducing and marketing new products and/or services
on a timely and regular basis. If MIT is unable to introduce new
products and/or services or if MIT’s new products and/or services are not
successful, such events could have a material, adverse effect upon its business,
operating results and financial condition.
Changes in state
and federal government regulation could restrict our ability to conduct our
business.
The
marketing, sale and purchase of intravenous pharmaceutical therapies,
pharmaceuticals, other medical supplies and provision of healthcare services
generally is extensively regulated by federal and state governments. Other
aspects of our business are also subject to government regulation. We believe we
are operating our business in compliance with applicable laws and regulations.
The applicable regulatory framework is complex, and the laws are very broad in
scope. Many of these laws remain open to interpretation and have not been
addressed by substantive court decisions. Accordingly, we cannot provide any
assurance that our interpretation would prevail or that one or more government
agencies will not interpret them differently. Changes in the law or new
interpretations of existing law can have a dramatic effect on what we can do,
our cost of doing business and the amount of reimbursement we receive from
governmental third party payors, such as Medicare and Medicaid. Also, we could
be affected by interpretations of what the appropriate charges are under
government programs.
Some of
the healthcare laws and regulations that apply to our activities
include:
|
·
|
The
federal “Anti-Kickback Statute” prohibits individuals and entities from
knowingly and willfully paying, offering, receiving, or soliciting money
or anything else of value in order to induce the referral of patients or
to induce a person to purchase, lease, order, arrange for, or recommend
services or goods covered in whole or in part by Medicare, Medicaid, or
other government healthcare programs. Although there are “safe harbors”
under the Anti-Kickback Statute, some of our business arrangements and the
services we provide may not fit within these safe harbors or a safe harbor
may not exist that covers the arrangement. The Anti-Kickback Statute is an
intent based statute and the failure of a business arrangement to satisfy
all elements of a safe harbor will not necessarily render the arrangement
illegal, but it may subject that arrangement to increased scrutiny by
enforcement authorities. Violations of the Anti-Kickback Statute can lead
to significant penalties, including criminal penalties, civil fines and
exclusion from participation in Medicare
and Medicaid.
|
|
·
|
The
“Stark Law” prohibits physicians from making referrals to entities with
which the physicians or their immediate family members have a “financial
relationship” (i.e., an ownership, investment or compensation
relationship) for the furnishing of certain Designated Health Services
(“DHS”) that are reimbursable under Medicare. The Stark Law exempts
certain business relationships which meet its exception requirements.
However, unlike the Anti-Kickback Statute under which an activity may fall
outside a safe harbor and still be lawful, a referral for DHS that does
not fall within an exception is strictly prohibited by the Stark Law. A
violation of the Stark Law is punishable by civil sanctions, including
significant fines and exclusion from participation in Medicare and
Medicaid.
|
|
·
|
The
Health Insurance Portability and Accountability Act of 1996 (“HIPAA”)
provides federal privacy protections for individually identifiable health
information. Through the adoption of the Privacy Rule, HIPAA set national
standards for the protection of health information for providers and
others who transmit health information electronically. In addition to
regulating privacy of individual health information, HIPAA includes
several anti-fraud and abuse laws, extends criminal penalties to private
health care benefit programs and, in addition to Medicare and Medicaid, to
other federal health care programs, and expands the Office of Inspector
General’s authority to exclude persons and entities from participating in
the Medicare and Medicaid programs.
|
|
·
|
MIT
must obtain state certain licenses to operate and dispense
pharmaceuticals. If we are unable to maintain our licenses or if states or
the federal government place burdensome restrictions or limitations on
pharmaceutical distributors, this could limit or affect our ability to
operate in some states which could adversely impact our business and
results of operations.
|
11
It
is unlikely that MIT will pay dividends in the foreseeable future.
MIT has not paid cash dividends to its
shareholders in the past, and there is no assurance that MIT will pay dividends
in the future. MIT does not intend to declare or pay cash dividends
in the foreseeable future. Earnings, if any, are expected to be
retained to finance and expand its business.
We
may be subject to liability for the services we offer and the products we
sell.
We and
other participants in the health care market are likely to continue to be
subject to lawsuits based upon alleged malpractice, product liability,
negligence or similar legal theories, many of which involve large claims and
significant defense costs. A successful claim not covered by our professional
liability insurance ($1,000,000 per occurrence) or substantially in excess of
our general liability insurance ($1,000,000 per occurrence) coverage could cause
us to pay out a substantial award, harming our financial condition and results
of operations. In addition, we retain liability on claims up to the $500 -
$1,000 amount of our deductibles, which generally are upwards of $2,000 per year
for infusion per occurrence. Further, our insurance policy is subject to annual
renewal and it may not be possible to obtain liability insurance in the future
on acceptable terms, with adequate coverage against potential liabilities, or at
all. Also, claims against us, regardless of their merit or eventual outcome,
could be a serious distraction to management and could harm our
reputation.
We
are controlled by our principal shareholders and as a result you may not be able
to exert meaningful influence on significant corporate decisions.
At
present, our officers, directors and principal shareholders own approximately
57% of the issued and outstanding shares, including 6,000,000 shares over which
Mr. Parker, our Chief Executive Officer, had the right to vote until May 2009
and therefore have the ability to elect all of the members of the Board of
Directors of the company. Mr. Parker, alone has the right to vote a
majority of the outstanding shares of common stock. As such, control of the
company will remain with the controlling shareholders who will continue to
formulate business decisions and policy.
We
are subject to price volatility due to our operations materially fluctuating, as
a result, any quarter-to-quarter comparisons in our financial statements may not
be meaningful and may also cause the price of our stock to
fluctuate.
As a
result of the evolving nature of the markets in which we compete, and the early
stage in development of our business plan, our operating results have and may in
the future, fluctuate materially, as a result of which quarter-to-quarter
comparisons of our results of operations may not be meaningful. Until we have
developed and demonstrated uses for our services and technology which is
accepted by a significant number of customers on a regular basis (through
licensing or otherwise) our quarterly results of operations may fluctuate
significantly which, in turn, may cause the price of our stock to
fluctuate.
Selling
stockholders from the 2007 Private Placement intend to sell their shares of
common stock in the public market, which sales may cause our stock price to
decline.
The
officers, directors and significant shareholders of the company (who currently
comprise approximately 57% of our issued and outstanding stock) are subject to
the provisions of various insider trading and rule 144 regulations. Also,
officers and key employees are subject to restrictions on selling their shares
of common stock without the consent of Meyers Associates L.P. our financial
advisor in the recent private placements, until May 2, 2009 with respect to
24,270,760 shares of common stock. However, selling stockholders from
the 2007 Private Placement intend to sell in the public market up to 21,805,499
shares of common stock which were registered for resale pursuant to a
registration statement that became effective August 13, 2007. This amount
compared to the total number of shares of common stock issued and outstanding
could cause our stock price to decline. Additionally, shares of
common stock held by non-affiliates may currently be eligible for resale
pursuant to Rule 144, as amended.
MIT’s
common stock is deemed to be a "penny stock," which may make it more difficult
for investors to sell their shares due to suitability requirements.
MIT’s
common stock could be considered to be a "penny stock" if it meets one or more
of the definitions in Rules 15g-2 through 15g-6 promulgated under Section 15(g)
of the Securities Exchange Act of 1934, as amended. These include but
are not limited to the following: (i) the stock trades at a price less than
$5.00 per share; (ii) it is not traded on a "recognized" national
exchange; (iii) it is not quoted on the NASDAQ Stock Market, or even if so, has
a price less than $5.00 per share; or (iv) is issued by a company with net
tangible assets less than $2.0 million, if in business more than a continuous
three years, or with average revenues of less than $6.0 million for the past
three years. The principal result or effect of being designated a
"penny stock" is that securities broker-dealers cannot recommend the stock but
must trade in it on an unsolicited basis.
12
Broker-dealer
requirements may affect trading and liquidity of MIT’s common stock which may
result in shareholders being unable to sell their shares.
Section
15(g) of the Securities Exchange Act of 1934, as amended, and Rule 15g-2
promulgated thereunder by the SEC require broker-dealers dealing in penny stocks
to provide potential investors with a document disclosing the risks of penny
stocks and to obtain a manually signed and dated written receipt of the document
before effecting any transaction in a penny stock for the investor's
account.
Potential
investors in MIT’s common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be "penny
stock." Moreover, Rule 15g-9 requires broker-dealers in penny stocks
to approve the account of any investor for transactions in such stocks before
selling any penny stock to that investor. This procedure
requires the broker-dealer to (i) obtain from the investor information
concerning his or her financial situation, investment experience and investment
objectives; (ii) reasonably determine, based on that information, that
transactions in penny stocks are suitable for the investor and that the investor
has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (iii) provide the investor
with a written statement setting forth the basis on which the broker-dealer made
the determination in (ii) above; and (iv) receive a signed and dated copy of
such statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment
objectives. Compliance with these requirements may make it more
difficult for holders of MIT’s common stock to resell their shares to third
parties or to otherwise dispose of them in the market or otherwise.
We may be exposed to potential risks
relating to our internal controls over financial reporting and our ability to
have those controls attested to by our independent auditors.
As directed by Section 404 of the
Sarbanes-Oxley Act of 2002 or SOX 404, the SEC adopted rules requiring public
companies to include a report of management on the company’s internal controls
over financial reporting in their annual reports, including Form 10-K.
We have established
disclosure controls and procedures effective for the purposes set forth in the
definition thereof in Exchange Act Rule 13a-15(e) as of December 31,
2009. Commencing by the
fiscal year ended December 31, 2010, the independent registered public
accounting firm auditing a company’s financial statements must also attest to
and report on management’s assessment of the effectiveness of the company’s
internal controls over financial reporting as well as the operating
effectiveness of the company’s internal controls. However, there can be no assurance that we will
receive a positive attestation from our independent auditors. In the event we
are unable to receive a positive attestation from our independent auditors with
respect to our internal controls, investors and others may lose confidence in
the reliability of our financial statements. Also projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree or compliance with the policies or procedures may
deteriorate.
We
may be affected by global climate change or by legal, regulatory, or market
responses to such change.
The
growing political and scientific sentiment is that increased concentrations of
carbon dioxide and other greenhouse gases in the atmosphere are influencing
global weather patterns. Changing weather patterns, along with the increased
frequency or duration of extreme weather conditions, could impact the
availability or increase the cost of key raw materials that we use to produce
our products. Additionally, the sale of our products can be impacted by weather
conditions.
Laws
enacted that directly or indirectly affect our production, distribution (which,
in particular, could place restrictions on our use of delivery vehicles),
packaging, cost of raw materials, fuel, ingredients, and water could all impact
our business and financial results.
ITEM
2. DESCRIPTION OF PROPERTY
MIT is
headquartered in Savannah, Georgia at 115 Echols Street, while its
administrative offices are at 37 West Fairmont Street Suite 202, also in
Savannah. This rented facility on Echols Street consists of two buildings, one
warehouses all inventory and is also the location of MIT’s pharmacy, clean room
for compounding and the Savannah ambulatory center. The second
building houses the wholesale trading operations. MIT believes that its premises
are sufficient for its current operations.
13
The
following are the key terms of MIT’s lease agreements:
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·
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The
lease on the facility located at 115B Echols St., Savannah, GA was entered
into January 1, 2007 and expires January 1, 2009. The rent is
$4120 per month. The lease is now on a month to month basis. This lease is
personally guaranteed by William C. Parker, Chairman of the
Board.
|
|
·
|
MIT
leases three suites in the facility located at 37 W. Fairmont Avenue,
Savannah, GA. The leases for Suites 202 and 204 each commenced
November 1, 2004, for a term of 36 months. This lease is now on
a month to month basis. The monthly rent on Suite 202 is $1360,
and the monthly rent on Suite 204 is $1123. The lease for Suite
206 is $1158 and has been added to the master lease. This lease is
personally guaranteed by William C.
Parker.
|
ITEM
3. LEGAL PROCEEDINGS
From time
to time, we are party to litigation that we consider to be a part of the
ordinary course of our business. At present, we are not involved in any pending
claims that we believe could reasonably be expected to have a material adverse
effect on our business, financial condition, or results of
operations.
ITEM 4. RESERVED
ITEM
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market
information
Our
common stock is presently traded in the over-the-counter market and quoted on
the National Association of Securities Dealers' OTC Bulletin Board under the
ticker symbol "MITD.OB". The shares are thinly traded and a limited market
presently exists for the shares. The following table describes, for the
respective periods indicated, the prices of MIT common stock in the
over-the-counter market, based on inter-dealer bid prices, without retail
mark-up, mark-down or commissions and may not necessarily represent actual
transactions. There was no trading reporting prior to May 7,
2007.
Period
|
High
|
Low
|
||||||
2009:
|
||||||||
Quarter
Ended March 31
|
$
|
.06
|
$
|
.03
|
||||
Quarter
Ended June 30
|
.15
|
.04
|
||||||
Quarter
Ended September 30
|
.20
|
.08
|
||||||
Quarter
Ended December 31
|
.16
|
.04
|
||||||
2008:
|
||||||||
Quarter
Ended March 31
|
$
|
1.05
|
$
|
.80
|
||||
Quarter
Ended June 30
|
.80
|
.55
|
||||||
Quarter
Ended September 30
|
.55
|
.28
|
||||||
Quarter
Ended December 31
|
.28
|
.06
|
Holders
Of Record
According
to the Company’s transfer agent, the Company had approximately
101 stockholders of record as of April 14, 2010. Because many of
the Company’s shares of common stock are held by brokers and other institutions
on behalf of stockholders, the Company is unable to estimate the total number of
beneficial stockholders represented by those record holders.
Dividend
Policy
We have
never declared or paid any cash dividends on our capital stock. We currently
plan to retain future earnings, if any, to finance the growth and development of
our business and do not anticipate paying any cash dividends in the foreseeable
future. We may incur indebtedness in the future which may prohibit or
effectively restrict the payment of dividends, although we have no current plans
to do so. Any future determination to pay cash dividends will be at the
discretion of our board of directors.
14
Transfer
Agent
Add
name/address/telephone number of transfer agent
Recent
Sales of Unregistered Securities; Use of Proceeds from Registered
Securities
In
December 2006 and January 2007, MIT issued 11.39 units, each unit consisting of
a promissory note in the amount of $100,000 and 200,000 shares of Common Stock.
The subordinated promissory notes (each a “Bridge Note” and collectively, the
“Bridge Notes”) bear interest at the rate of 10% per annum. The
shares of common stock issued in connection with these Bridge Notes were
registered for resale in a SB-2 registration statement declared effective August
13, 2007 (the “Registration Statement”). The consideration for these Bridge
Notes and the shares of Common Stock consisted of $1,000,000 in cash and
$138,889 from the conversion of a previously issued promissory note. MIT has
used the proceeds of this financing for working capital. Of the
aggregate $1,317,394, holders of Bridge Notes in the aggregate amount of
$1,214,894 (including accrued interest of $41,739.57) converted the principal
balance of their notes and accrued interest into units in our private placement
Series A Convertible Preferred Stock and common stock purchase warrants (the
“Private Placement”). Holders of Bridge Notes in the amount of $102,500 were
paid from the proceeds of the Private Placement.
The Private Placement commenced March
19, 2007 and closed May 31, 2007. MIT closed on an aggregate 4,234.4
units at $1000.00 per unit, each unit consisting of: (i) one share of Series A
Convertible Preferred Stock convertible at the holder’s option into an aggregate
of 2,000 shares of common stock, $.000001 par value at a fixed conversion price
of $0.50 per share and (ii) warrants to purchase an aggregate of 2,000 shares of
Common Stock exercisable for a period of five years from the effective date of
the registration statement which MIT has agreed to file with respect to the
shares of Common Stock, $.0001 par value, issuable upon exercise of the warrants
at a fixed price of $0.75 per share (each a “Unit” and collectively, the
“Units”). MIT offered the Units to institutional and accredited
investors. MIT raised proceeds in the aggregate amount of $4,234,392
from sale of the Units, of which $1,214,892.00 consisted of principal and
accrued interest which holders of Bridge Notes converted into
Units. Meyers Associates, LP, who acted as our financial advisor,
received, as part of its compensation, a five-year option to purchase up to 635
Units. at a price of $1,000 per Unit. The holders of the Series
A Preferred Stock and warrants are selling shareholders under the Registration
Statement.
On October 5, 2007 the Board approved
the issuance of 300,000 shares of restricted stock common stock to MedEnvVet
Laboratories, Inc., pursuant to Section 4(2) of the Securities Act in
consideration for an exclusive worldwide license to the intellectual property
rights associated with the ProVector™, as further described in Item 1,
above. The issuance is exempt from the registration requirements of
the Securities Act of 1933, as amended, by reason of Section 4(2)
thereof. The share certificates were issued November 2,
2007.
On June 7, 2007 the Board approved the
issuance of 312,500 shares of restricted common stock to Arlene Wilhelm and
250,000 shares of restricted common stock to one non-management employee,
pursuant to the terms of each employee’s respective employment
agreement. The issuances are exempt from the registration
requirements of the Securities Act of 1933, as amended, by reason of Section
4(2) thereof. The share certificates were issued November 20,
2007.
Pursuant to an agreement dated July 30,
2007, the Company issued Investor Relations Group a five year-warrant to
purchase 250,000 shares of common stock of the Company at an exercise price of
$2.20 per share. The warrant was issued as partial
consideration for public relations services to be rendered. This Warrant shall
vest and become exercisable as follows:
|
1.
|
62,500
shares on October 31, 2007;
|
|
2.
|
62,500
shares on January 31, 2007;
|
|
3.
|
62,500
shares on April 30, 2008; and
|
|
4.
|
62,500
shares on July 30, 2008.
|
In the
first quarter of 2009, the Board of Directors authorized the issuance of a total
of 850,000 shares of common stock to Board Members and key employees valued at a
price of $0.03 per share, or $25,500 total. In the fourth quarter of 2009, the
Board of Directors authorized the issuance of 2,139,937 shares of common stock
to Board Members valued at prices ranging from $0.04 per share to $0.76 per
share, or $148,352 total. The Company included the $173,582 estimated
fair value of the shares in selling, general and administrative expenses in the
accompanying statement of operations for the year ended December 31, 2009 and
increased common stock and additional paid-in capital by the same
amount.
15
ITEM
6. SELECTED FINANCIAL INFORMATION
Following
is a summary of our operations and financial condition from 2008 through
2009. You are urged to review the detailed audited financial statements and
accompanying footnotes for a complete understanding of our operations.
2009
|
2008
|
|
|
|
||||||||||||||||
Net
sales
|
$ | 6,400,042 | 9,510,626 | |||||||||||||||||
Net
income(loss) from continuing operations
|
$ | (1,243,665 | ) | (2,361,899 | ) | |||||||||||||||
Net
income(loss) from discontinuing operations
|
$ | (1,883,200 | ) | |||||||||||||||||
Net
income(loss)
|
$ | (1,243,665 | (4,387,853 | ) | ||||||||||||||||
Net
income(loss) per common share
|
$ | (.03 | ) | (.09 | ) | |||||||||||||||
Total
assets
|
$ | 1,103,309 | 2,875,479 | |||||||||||||||||
Long-term
debt
|
$ | - | 620,064 | |||||||||||||||||
Working
capital
|
$ | (2,278,070 | ) | (490,882 | ) | |||||||||||||||
Stockholders'
equity
|
$ | (2,347,021 | ) | (943,406 | ) |
No cash
dividends have been paid during any of the periods stated above.
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS
The
statements contained in this prospectus are not purely historical statements,
but rather include what we believe are forward-looking
statements. The forward-looking statements are based on factors set
forth in the following discussion and in the discussions under "Risk Factors"
and "Business." Our actual results could differ materially from results
anticipated in these forward-looking statements. All forward-looking statements
included in this document are based on information available to us on the date
hereof, and we assume no obligation to update any such forward-looking
statements.
Overview
Through
its subsidiaries, MIT prepares intravenous medication for home infusion by the
patient, operates an ambulatory center where intravenous infusions are
administered and sells and rents home medical equipment. MIT and its
subsidiaries have been based in Savannah, Georgia for 19 years and operates an
ambulatory care center there. Our home infusion and ambulatory center accounts
for the majority of our revenues and is anticipated to be our most significant
area of growth.
Critical
Accounting Policies
Management’s
discussion and analysis of our financial condition and results of operations are
based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, management evaluates its estimates, including
those related to revenue recognition, impairment of long-lived assets, including
finite lived intangible assets, accrued liabilities and certain expenses. We
base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ materially from these estimates under different assumptions or
conditions.
Our
significant accounting policies are summarized in Note 1 to our audited
financial statements for the year ended December 31, 2010. We believe the
following critical accounting policies affect our more significant judgments and
estimates used in the preparation of our consolidated financial
statements:
16
Inventories
Inventories
are stated at the lower of cost (first-in, first-out) or market (net realizable
value). They consist mainly of pharmaceutical supplies and medical
equipment.
Factored
Accounts Receivable and Factoring Agreement.
MIT concluded its Factoring Agreement
with Northern Healthcare in August of 2008.
Revenue
Recognition
Sales and
services are recorded when products are delivered to the customers. Provision
for discounts, estimated returns and allowances, and other adjustments are
provided for in the same period the related sales are recorded. In instances
where products are configured to customer requirements, revenue is recorded upon
the successful completion of the Company’s final test procedures.
Advertising
Cost
Advertising
cost is expensed as incurred.
Estimates
Preparing
the Company’s financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
New
Accounting Pronouncements
New
accounting statements issued, and adopted by the Company, include the
following:
In March
2006, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 156, “Accounting for Servicing of Financial Assets” -
an amendment to FASB SFAS No. 140. Statement 156 requires that an entity
recognize a servicing asset or servicing liability each time it undertakes an
obligation to service a financial asset by entering into a service contract
under certain situations. The new standard is effective for fiscal years
beginning after September 15, 2006. The adoption of SFAS No.156 did not have a
material impact on the Company's financial position and results of
operations.
In July
2006, the Financial Accounting Standards Board issued Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement
No. 109”. This interpretation clarifies the accounting for uncertainty in income
taxes recognized in a company’s financial statements and establishes guidelines
for recognition and measurement of a tax position taken or expected to be taken
in a tax return. We have adopted this statement which became effective on
January 1, 2007. The Company has not made any adjustments as a
result of the adoption of this interpretation.
In
September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”).
This Statement defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles, and expands disclosures about
fair value measurements. We are currently evaluating the impact on our
consolidated financial statements of SFAS 157, which will become effective for
us on January 1, 2008 for financial assets and January 1, 2009 for non-financial
assets.
In
February 2007, the Financial Accounting Standards Board issued SFAS 159,
“The Fair Value Option for Financial Assets and Financial Liabilities”. SFAS
No. 159 amends SFAS No. 115, “Accounting for Certain Investments in
Debt and Equity Securities”. SFAS No. 159 permits entities to choose to
measure many financial instruments and certain other items at fair value. The
objective of SFAS No. 159 is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS No. 159 is expected to expand the
use of fair value measurement, which is consistent with the Board’s long-term
measurement objectives for accounting for financial instruments. SFAS
No. 159 applies to all entities, including not-for-profit organizations.
Most of the provisions of SFAS No. 159 apply only to entities that elect
the fair value option. However, the amendment to SFAS No. 115 applies to
all entities with available-for-sale and trading securities. Some requirements
apply differently to entities that do not report net income. This statement is
effective as of the beginning of each reporting entity’s first fiscal year that
begins after November 15, 2007. The Company has not yet determined the
effect of SFAS No. 159 on its financial position, operations or cash
flows.
17
In
December 2007, the FASB issued SFAS No. 141(R), “Business
Combinations.” It will require an acquirer to recognize, at the
acquisition date, the assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree at their full fair values as of that
date. In a business combination achieved in stages (step acquisitions), the
acquirer will be required to remeasure its previously held equity interest in
the acquiree at its acquisition-date fair value and recognize the resulting gain
or loss in earnings. The acquisition-related transaction and restructuring costs
will no longer be included as part of the capitalized cost of the acquired
entity but will be required to be accounted for separately in accordance with
applicable generally accepted accounting principles in the U.S. SFAS
No. 141(R) applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008.
In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements.” The statement clarifies the definition of a
non-controlling (or minority) interest and requires that non-controlling
interests in subsidiaries be reported as a component of equity in the
consolidated statement of financial position and requires that earnings
attributed to the non-controlling interests be reported as part of consolidated
earnings and not as a separate component of income or expense. However, it will
also require expanded disclosures of the attribution of consolidated earnings to
the controlling and non-controlling interests on the face of the consolidated
income statement. SFAS No. 160 will require that changes in a parent’s
controlling ownership interest, that do not result in a loss of control of the
subsidiary, are accounted for as equity transactions among shareholders in the
consolidated entity therefore resulting in no gain or loss recognition in the
income statement. Only when a subsidiary is deconsolidated will a parent
recognize a gain or loss in net income. SFAS No. 160 is effective for
fiscal years beginning on or after December 15, 2008, and will be applied
prospectively except for the presentation and disclosure requirements that will
be applied retrospectively for all periods presented. The Company is currently
evaluating the impact of SFAS No. 160 to its financial position and results
of operations.
Results
of Operations
Comparison
of year ended December 31, 2009 to the year ended December 31,
2008.
The
following tables show the operations of the Company’s reportable
segments:
Medical
|
||||||||||||||||||||
Infusion
|
Wholesale/
|
Ambulatory
|
|
|
||||||||||||||||
and
MIT
|
International
|
Care
|
DME
|
Combined
|
||||||||||||||||
2009
|
||||||||||||||||||||
Revenue
|
$ | 2,610,009 | $ | 0 | $ | 3,344,603 | $ | 445,430 | $ | 6,400,042 | ||||||||||
Income
(loss) before taxes
|
(869,814 | ) | 0 | (333,626 | ) | (196.967 | ) | (1,400,407 | ) | |||||||||||
Interest
expense
|
349,802 | 0 | 0 | 0 | 349,802 | |||||||||||||||
Depreciation
and amortization
|
65,430 | 0 | 0 | 0 | 65,430 | |||||||||||||||
Assets
|
569,468 | 0 | 311,233 | 222,508 | 1,103,209 | |||||||||||||||
2008
|
||||||||||||||||||||
Revenue
|
$ | 3,751,619 | $ | 648,395 | $ | 4,222,825 | $ | 887,788 | $ | 9,510,627 | ||||||||||
Income
(loss) before taxes
|
(4,156,827 | ) | (303,501 | ) | 117,955 | 97,274 | (4,245,099 | ) | ||||||||||||
Interest
expense
|
282,830 | 0 | 0 | 0 | 282,830 | |||||||||||||||
Depreciation
and amortization
|
42,997 | 0 | 0 | 0 | 42,997 | |||||||||||||||
Assets
|
1,451,287 | 54,582 | 822,958 | 546,652 | 2,875,479 |
18
Revenues
Consolidated
revenues for the year ended 2009 were $6,400,042 as compared to $9,510,627 for
the year ended December 31, 2008, representing a decrease of $3,110,584 or
32.7%. Consolidated cost of sales for the year ended December 31, 2009 were
$2,662,685 or 41.6% of sales as compared to cost of sales for the year ended
December 31, 2008 of $5,009,583 or 52.6% of sales. This resulted in a gross
profit for the year ended December 31, 2009 of $3,737,357 or 58.4% as compared
to gross profit for the year ended December 31, 2008 of $4,501,043 or
47.3%. The decrease in our consolidated revenues for the year ended
2009 were the result of decreasing referrals and therapies administered and the
discontinuance of the wholesale line of business. The reduction and
improvement in the costs of good sold and the gross profit is directly related
to mail order drugs supplied by certain healthplans. For the year ended 2009,
for the ambulatory division, sales decreased by $878,222 while costs
of goods sold for the division decreased by $883,707 resulting in an increase in
gross profit of $5,485. Revenues for the infusion division decreased by
$1,143,497 while cost of goods were reduced by $797,667 to $847,745 for the year
resulting in a decrease in gross profit of $345,830.
Operating
Expenses
Total
operating expenses decreased $1,792,745, or a 43.7% decrease to $4,787,818 for
the year ended December 31, 2009 from $6,580,563 for the year ended December 31,
2008. The decrease in operating expense is attributable to the $1,719,766
decrease in bad debt expense in 2009. . The major components of operating
expense include:
|
•
|
Salaries
and payroll related costs decreased $269,945 to $1,904,279 for the year
ended December 31, 2009 as compared to $2,174,224 for the year ended
December 31, 2008, a decrease of 12.4%. The decrease was due primarily to
the realignment of personnel at a decreased
cost.
|
|
|
|
•
|
Sales,
general and administrative expenses increased $174,533 or 10.4% to
$1,831,116 for the year ended December 31, 2009 as compared to $1,656,583
for the year ended December 31, 2008. The increase was due
primarily to a planned increase in our efforts to establish the Provector
product line as a viable new product. Expenses relating to this product
increased $361,336 from $21,400 to $382,736. We anticipate seeing the
results of these expenditures in subsequent quarters. This increase in
spending was offset by reductions in travel and related expenses and a
decrease in legal and accounting fees. Legal and professional
expenses were $266,511; Travel and entertainment was $25,497; consulting
fees of $267,328; outside and contract labor $108,556; license fees of
$110,926. Additional expenses included office expense of $194,008;
Advertising of $25,828; rent expense of $111,300; insurance expense of
$139,510 and telephone of $38,886; and contract services of
$271,980;
|
|
|
|
•
|
Depreciation
and amortization increased $22,443 or 52.1% to $65,430 for the year ended
December 31, 2009 as compared to $42,997 for the year ended December 31,
2008. The increase was mainly attributable to the amortization and
depreciation of assets acquired.
|
Operating
Income
Operating
loss increased $1,029,058 or 49.4% to $1,050,461 for the year ended December 31,
2009 from $$2,079,519 for the year ended December 31, 2008. Operating loss as a
percentage of gross revenue was -16.4% for the year ended December 31, 2008 as
compared to -21.8% for the year ended December 31, 2008.
19
Income
Tax
There was
no tax liability for 2009 and 2008 due to losses sustained in both
years.
Net
income
As a
result of the above factors, and the loss on minority investment of $1,883,200
in 2008, net loss decreased from $4,245,099 for the year ended December 31, 2008
to $1,243,365 for the year ended December 31, 2009.
Liquidity
and Capital Resources
As of
December 31, 2009, we had cash of $113.596, as compared to $111,337 at December
31, 2008. For the year ended December 31, 2009, net cash provided by operating
activities aggregated 322,356 as compared to cash provided by operations for the
year ended December 31, 20 of $383,315. As of December 31, 2008, we had cash of
$111,337 as compared to a cash balance of $51,404 as of December 31,
2007.
In
December 2006 and January 2007, MIT issued 11.39 units, each unit consisting of
a promissory note in the amount of $100,000 and 200,000 shares of Common Stock.
The subordinated promissory notes (each a “Bridge Note” and collectively, the
“Bridge Notes”) bear interest at the rate of 10% per annum. The
shares of common stock issued in connection with these Bridge Notes were
registered for resale in a SB-2 registration statement declared effective August
13, 2007 (the “Registration Statement”). The consideration for these Bridge
Notes and the shares of Common Stock consisted of $1,000,000 in cash and
$138,889 from the conversion of a previously issued promissory note. MIT has
used the proceeds of this financing for working capital. Of the
aggregate $1,317,394, holders of Bridge Notes in the aggregate amount of
$1,214,894 (including accrued interest of $41,739.57) converted the principal
balance of their notes and accrued interest into units in our private placement
Series A Convertible Preferred Stock and common stock purchase warrants (the
“Private Placement”). Holders of Bridge Notes in the amount of $102,500 were
paid from the proceeds of the Private Placement.
The Private Placement commenced March
19, 2007 and closed May 31, 2007. MIT closed on an aggregate 4,234.4
units at $1000.00 per unit, each unit consisting of: (i) one share of Series A
Convertible Preferred Stock convertible at the holder’s option into an aggregate
of 2,000 shares of common stock, $.0001 par value at a fixed conversion price of
$0.50 per share and (ii) warrants to purchase an aggregate of 2,000 shares of
Common Stock exercisable for a period of five years from the effective date of
the registration statement which MIT has agreed to file with respect to the
shares of Common Stock, $.0001 par value, issuable upon exercise of the warrants
at a fixed price of $0.75 per share (each a “Unit” and collectively, the
“Units”). MIT offered the Units to institutional and accredited
investors. MIT raised proceeds in the aggregate amount of $4,234,392
from sale of the Units, of which $1,214,892.00 consisted of principal and
accrued interest which holders of Bridge Notes converted into
Units. Meyers Associates, LP, who acted as our financial advisor,
received, as part of its compensation, a five-year option to purchase up to 635
Units. at a price of $1,000 per Unit. The holders of the Series
A Preferred Stock and warrants are selling shareholders under the Registration
Statement.
The
Company commenced a Private Placement on March 19, 2007 and it terminated on May
31, 2007. Through that period, the Company closed on an aggregate 4,234.4 units
at $1000.00 per unit, each unit consisting of: (i) one share of Series A
Convertible Preferred Stock convertible at the holder's option into an aggregate
of 2,000 shares of common stock, $.0001 par value at a conversion price of $0.50
per share and (ii) warrants to purchase an aggregate of 2,000 shares of Common
Stock exercisable for a period of five years from the effective date of the
registration statement which the Company has agreed to file with respect to the
shares of Common Stock, $.0001 par value, issuable upon exercise of the warrants
at a price of $0.75 per share (each a "Unit" and collectively, the
"Units").
On April
4, 2008, we received a letter from Northern indicating that Northern considered
MIT in default of its obligations under the credit agreement, and declaring all
amounts under the credit agreement due and payable in full
immediately. Subsequent to this letter, we received oral assurances
from Northern that they would continue to fund MIT for an additional 60 days
from April 4. On August 1, 2008, we received a term loan from Globank, Inc. in
the amount of $500,000 and used the proceeds to pay off our obligation to
Northern. The term loan from Globank, Inc. matures on July 31,
2010.
20
Our
inability to achieve sufficient collections on our revenues has created a
liquidity challenge that raises doubt about our ability to continue as a going
concern. The auditor’s opinion which accompanies our financial
statements is qualified as to our ability to continue as a going
concern.
Off-
Balance Sheet Arrangements
We are
not a party to any off-balance sheet arrangements.
21
ITEM
8. FINANCIAL STATEMENTS
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
Page
|
|
Financial
Statements
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-2
|
Consolidated
Balance Sheets as of December 31, 2009 and
December 31, 2008
|
F-3
|
Consolidated
Statements of Operations for the years ended December 31, 2009 and
2008
|
F-4
|
Consolidated
Statements of Stockholders’ Equity (Deficiency) for the years ended
December 31, 2009 and 2008
|
F-5
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2009 and
2008
|
F-6
|
Notes
to Consolidated Financial Statements
|
F-7
-
F-23
|
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of MIT Holding, Inc.
I have
audited the accompanying consolidated balance sheets of MIT Holding, Inc. (the
“Company”) as of December 31, 2009 and 2008 and the related consolidated
statements of operations, stockholders’ equity (deficiency), and cash flows for
the years then ended. These financial statements are the
responsibility of the Company’s management. My responsibility is to express an
opinion on these financial statements based on my audits. I also audited the
adjustments described in Note O that were applied to restate the number of
issued and outstanding shares of Series A Convertible Preferred Stock and the
additional paid-in capital and accumulated deficit balances at December 31,
2007. In my opinion, such adjustments are appropriate and have been properly
applied.
I
conducted my audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide a reasonable
basis for my opinion.
In my
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of MIT Holding, Inc. as of
December 31, 2009 and 2008 and the results of its operations and cash flows for
the years then ended in conformity with accounting principles generally accepted
in the United States.
The
accompanying financial statements referred to above have been prepared assuming
that the Company will continue as a going concern. As discussed in Note B to the
financial statements, the Company’s present financial situation raises
substantial doubt about its ability to continue as a going concern. Management’s
plans in regard to this matter are also described in Note B. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Michael T. Studer CPA
P.C.
Michael
T. Studer CPA P.C.
|
Freeport,
New York
May
19, 2010
F-2
MIT
HOLDING, INC.
CONSOLIDATED
BALANCE SHEETS
December 31, 2009
|
December 31, 2008
|
|||||||
ASSETS
|
(Restated)
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 113,596 | $ | 111,337 | ||||
Accounts
receivable, net of allowance for doubtful accounts of $1,241,477 and
$998,149, respectively
|
657,317 | 2,293,779 | ||||||
Inventories
|
181,928 | 139,863 | ||||||
Employee
advances
|
2,258 | 1,500 | ||||||
Prepaid
expenses
|
40,000 | 161,460 | ||||||
Total
current assets
|
995,099 | 2,707,939 | ||||||
PROPERTY
AND EQUIPMENT, net of accumulated depreciation of $123,373 and $102,541,
respectively
|
6,039 | 20,871 | ||||||
OTHER
ASSETS
|
||||||||
Non-compete
agreement, net of accumulated amortization of $97,929 and $53,331,
respectively
|
102,071 | 146,669 | ||||||
Total
other assets
|
102,071 | 146,669 | ||||||
TOTAL
ASSETS
|
$ | 1,103,209 | $ | 2,875,479 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable and accrued expenses
|
$ | 2,333,915 | $ | 2,565,534 | ||||
Current
portion of debt
|
939,254 | 633,287 | ||||||
Total
current liabilities
|
3,273,169 | 3,198,821 | ||||||
LONG-TERM
DEBT
|
- | 620,064 | ||||||
Estimated
liability for equity-based financial instruments with characteristics of
liabilities:
|
||||||||
Series
A Convertible Preferred stock (1,896.73 shares issued and outstanding at
December 31, 2009)
|
151,738 | - | ||||||
Warrants
|
25,323 | - | ||||||
TOTAL
LIABILITIES
|
3,450,230 | 3,818,885 | ||||||
STOCKHOLDERS'
EQUITY (DEFICIENCY)
|
||||||||
Preferred
stock, $0.000001 par value; 5,000,000 shares authorized, 0 and 1,896.73
shares issued and outstanding at December 31, 2009 and December 31, 2008,
respectively
|
- | - | ||||||
Common
stock, $0.000001 par value; 250,000,000 shares authorized, 51,734,571 and
48,744,634 shares issued and outstanding at December 31, 2009 and December
31, 2008, respectively
|
52 | 49 | ||||||
Additional
paid-in capital (as restated at December 31, 2008 - note
O)
|
6,258,962 | 8,956,429 | ||||||
Retaining
Earnings (accumulated deficit) (as restated at December 31, 2008 - note
O)
|
(8,606,035 | ) | (9,899,884 | ) | ||||
Total
stockholders' equity (deficiency)
|
(2,347,021 | ) | (943,406 | ) | ||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 1,103,209 | $ | 2,875,479 |
The
accompanying notes are an integral part of these statements.
F-3
MIT
HOLDING, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
December 31, 2009
|
December 31, 2008
|
|||||||
|
||||||||
Revenue
|
||||||||
Sales
and services rendered
|
$ | 6,400,042 | $ | 9,510,627 | ||||
Cost
of medical supplies
|
2,662,685 | 5,009,583 | ||||||
Gross
profit
|
3,737,357 | 4,501,044 | ||||||
Operating
Expenses
|
||||||||
Salaries
and payroll cost
|
1,904,279 | 2,174,224 | ||||||
Selling,
general and administrative
|
1,831,116 | 1,656,583 | ||||||
Provision
for doubtful accounts
|
986,993 | 2,706,759 | ||||||
Depreciation
and amortization
|
65,430 | 42,997 | ||||||
Total
operating expenses
|
4,787,818 | 6,580,563 | ||||||
Income
(loss) from operations
|
(1,050,461 | ) | (2,079,519 | ) | ||||
Other
income (expense):
|
||||||||
Income
(expense) from revaluation of equity-based financial instruments with
characteristics of liabilities at fair values
|
156,741 | - | ||||||
Interest
expense
|
(349,945 | ) | (282,380 | ) | ||||
Loss
on minority interest in foreign corporation
|
- | (1,883,200 | ) | |||||
Income
(loss) before provision for income taxes
|
(1,243,665 | ) | (4,245,099 | ) | ||||
Provision
for income taxes
|
- | - | ||||||
Net
income (loss)
|
(1,243,665 | ) | (4,245,099 | ) | ||||
Increase
in cumulative dividends payable on Series A Preferred
Stock
|
113,804 | 113,804 | ||||||
Net
income (loss) atributable to common stockholders
|
$ | (1,357,469 | ) | $ | (4,358,903 | ) | ||
Net
income (loss) per common share:
|
||||||||
Basic
and diluted
|
$ | (0.03 | ) | $ | (0.09 | ) | ||
Weighted
average number of common shares outstanding:
|
||||||||
Basic
and diluted
|
49,452,967 | 48,687,134 |
The
accompanying notes are an integral part of these statements.
F-4
MIT
HOLDING, INC.
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
(Restated)
Series
A Convertible
|
Retained
|
Total
|
||||||||||||||||||||||||||
Preferred
Stock,
$.000001
par value
|
Common
Stock ,
$.000001
par value
|
Additional
Paid-in
|
Earnings
(Accumulated
|
Stockholders’
Equity
|
||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit)
|
(Deficiency)
|
||||||||||||||||||||||
Balance
at December 31, 2007 (as restated – note O)
|
1,949.23 | $ | - | 48,639,634 | $ | 49 | 8,956,429 | $ | (5,654,785 | ) | $ | 3,301,693 | ||||||||||||||||
Conversion
of preferred stock into common
stock
|
(52.50 | ) | - | 105,000 | - | - | - | - | ||||||||||||||||||||
Net
loss for the year ended December 31,
2008
|
-
|
-
|
-
|
-
|
-
|
(4,245,099
|
) |
(4,245,099
|
) | |||||||||||||||||||
Balance
at December 31, 2008 (as restated – note
O)
|
1,896.73 | - | 48,744,634 | 49 | 8,956,429 | (9,899,884 | ) | (943,406 | ) | |||||||||||||||||||
Cumulative
effect of change in accounting principle relating to reclassification of
Series A Convertible Preferred Stock and warrants from stockholders’
equity to liabilities (note H)
|
(1,896.73 | ) |
-
|
-
|
-
|
(2,871,316
|
) | 2,537,514 |
(333,802
|
) | ||||||||||||||||||
Balance
at January 1, 2009 (after cumulative effect adjustment)
|
- | - | 48,744,634 | 49 | 6,085,113 | (7,362,370 | ) | (1,277,208 | ) | |||||||||||||||||||
Issuance
of common stock for services in first quarter 2009
|
- | - | 850,000 | 1 | 25,499 | - | 25,500 | |||||||||||||||||||||
Issuance
of common stock for services in fourth quarter 2009
|
- | - | 2,139,937 | 2 | 148,350 | - | 148,352 | |||||||||||||||||||||
Net
loss for the year ended December 31, 2009
|
-
|
-
|
-
|
-
|
-
|
(1,243,665
|
) |
(1,243,665
|
) | |||||||||||||||||||
Balance
at December 31, 2009
|
- | $ | - | 51,734.571 | $ | 52 | $ | 6,258,962 | $ | (8,606,035 | ) | $ | (2,347,021 | ) |
The
accompanying notes are an integral part of these statements.
F-5
MIT
HOLDING, INC.
CONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
December 31, 2009
|
December 31, 2008
|
|||||||
|
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
income (loss)
|
$ | (1,243,665 | ) | $ | (4,245,099 | ) | ||
Adjustments
to reconcile net income (loss) to cash provided by (used for) operating
activities:
|
||||||||
Income
from revaluation of equity-based financial instruments with
characteristics of liabilities at fair values
|
(156,741 | ) | - | |||||
Depreciation
and amortization
|
65,430 | 42,997 | ||||||
Issuance
of common stock for services
|
173,852 | - | ||||||
Provision
for doubtful accounts
|
986,993 | 2,706,759 | ||||||
Loss
on minority interest in foreign corporation
|
- | 1,883,200 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Receivables
|
649,469 | (209,013 | ) | |||||
Inventories
|
(42,065 | ) | 120,889 | |||||
Prepaid
expenses
|
121,460 | (161,460 | ) | |||||
Employee
advances
|
(758 | ) | (1,500 | ) | ||||
Notes
receivable
|
- | 59,255 | ||||||
Healthcare
Reserve
|
(87,382 | ) | ||||||
Accounts
payable and accrued expenses
|
(231,619 | ) | 417,034 | |||||
Litigation
payable
|
- | (101,209 | ) | |||||
Notes
payable
|
- | - | ||||||
Income
taxes payable
|
- | (41,156 | ) | |||||
Cash
provided by operating activities
|
322,356 | 383,315 | ||||||
INVESTING
ACTIVITIES
|
||||||||
Capital
expenditures
|
(6,000 | ) | (30,885 | ) | ||||
Cash
used for investing activities
|
(6,000 | ) | (30,885 | ) | ||||
FINANCING
ACTIVITIES
|
||||||||
Proceeds
from notes
|
- | 853,064 | ||||||
Repayment
of debt
|
(314,097 | ) | (1,145,561 | ) | ||||
Cash
used for financing activities
|
(314,097 | ) | (292,497 | ) | ||||
NET
INCREASE (DECREASE) IN CASH
|
2,259 | 59,933 | ||||||
CASH
BALANCE BEGINNING OF PERIOD
|
111,337 | 51,404 | ||||||
CASH
BALANCE END OF PERIOD
|
$ | 113,596 | $ | 111,337 | ||||
Supplemental
Disclosures:
|
||||||||
Interest
|
$ | 331,811 | $ | 185,402 | ||||
Taxes
|
$ | - | $ | 68,659 |
The
accompanying notes are an integral part of these
statements.
F-6
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
NOTE
A – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.
|
Nature
of Operations/ Basis of
Presentation
|
Nature
of Operations
MIT
Holding, Inc., a Delaware corporation, is a holding company. Through three
wholly-owned subsidiaries, MIT distributes wholesale pharmaceuticals,
administers intravenous infusions, operates an ambulatory center where therapies
are administered and sells and rents home medical equipment. Medical Infusion
Technologies, Inc. was incorporated in November 1991 in the state of Georgia. On
July 6, 2006, an agreement and plan of merger was made between MIT Holding,
Inc., a Delaware corporation, Medical Infusion Technologies, Inc., and MIT
Acquisition A, Inc. By this agreement, MIT Holding, Inc. became the parent
company and Medical Infusion Technologies, Inc. and MIT Ambulatory Care Center,
Inc., the wholly-owned subsidiaries.
MIT
Holding, Inc. Merger with Convention All Holdings, Inc.
Our
company was formerly known as Convention All Holdings, Inc. and, on May 2, 2007,
we acquired a 100% ownership interest in MIT Holding, Inc. through a merger of
MIT Holding, Inc. with and into MIT CVAH Acquisition Corp, a newly formed
Delaware corporation and wholly-owned subsidiary, in exchange for 32,886,779
shares of our common stock. Simultaneously with the Merger, the company formerly
known as MIT Holding, Inc. changed its name to Medical Infusion Group, Inc., and
we changed our name to MIT Holding, Inc. As a result of the Merger, we now own
100% of Medical Infusion Group, Inc., a Delaware corporation, which, in turn,
continues to own 100% of the issued and outstanding shares of capital stock of
MIT Ambulatory Care Center, Inc., a Georgia corporation ("Ambulatory"), Medical
Infusion Technologies, Inc., a Georgia corporation (“Infusion”) and MIT
International Distribution, Inc., a Delaware corporation (“MIT
International”).
F-7
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
NOTE
A – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
POLICIES (continued)
Basis of Presentation
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. These financial statements
have been reformatted to be consistent with reports issued this calendar
year. The changes reflected in these statements have no material
effect on net loss.
2.
|
Cash
Equivalents
|
Investments
having an original maturity of 90 days or less that are readily convertible into
cash are considered cash equivalents. The Company had no cash equivalents as of
December 31, 2009 and December 31, 2008.
3.
|
Fair
Value of Financial Instruments
|
The
Company’s financial instruments consist of cash and cash equivalents, accounts
receivable, net, accounts payable and accrued expenses, and debt. The
fair value of these financial instruments approximate their carrying amounts
reported in the balance sheets due to the short term maturity of these
instruments or based upon market quotations or quotations of instruments with
similar interest rates and similar maturities.
4.
|
Inventories
|
Inventories
are stated at the lower of cost (first-in, first-out) or market (net realizable
value). They consist mainly of pharmaceutical supplies and medical
equipment.
F-8
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
NOTE
A – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
POLICIES (continued)
5. Property
and Equipment
Property
and equipment are stated at cost and are depreciated principally on methods and
at rates designed to amortize their costs over their estimated useful
lives.
The
estimated service lives of property and equipment are principally as
follows:
Furniture
and fixtures
|
5-
7 years
|
|
Computer
equipment
|
3-
7 years
|
|
Vehicles
|
5-
7 years
|
Repairs
and maintenance are expensed as incurred. Expenditures that increase the value
or productive capacity of assets are capitalized.
6.
|
Long-Lived
Assets
|
Property
and equipment and other long-lived assets, including non-compete agreements, are
evaluated for impairment whenever events or conditions indicate that the
carrying value of an asset may not be recoverable, but not less than
annually. If the sum of undiscounted cash flows is less than the
carrying value of the related asset or group of assets, a loss is recognized for
the difference between the fair value and carrying value of the asset or group
of assets.
7.
|
Revenue
Recognition
|
Sales and
services are recorded when products are delivered to the customers. Provision
for discounts, estimated returns and allowances, and other adjustments are
provided for in the same period the related sales are recorded. In instances
where products are configured to customer requirements, revenue is recorded upon
the successful completion of the Company’s final test procedures.
8.
|
Stock-Based
Compensation
|
Stock-based
compensation is accounted for at fair value in accordance with Accounting
Standards Codification (“ASC”) 718, “Compensation- Stock
Compensation”.
F-9
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
NOTE
A – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
POLICIES (continued)
In
addition to requiring supplemental disclosures, ASC 718, Compensation – Stock Compensation,
addresses the accounting for share-based payment transactions in which a
company receives goods in exchange for (a) equity instruments of the company or
(b) liabilities that are based on the fair value of the company’s equity
instruments or that may be settled by the issuance of such equity
instruments. FASB ASC 718 focuses primarily on accounting for
transactions in which a company obtains employee services in share-based payment
transactions.
References
to the issuances of restricted stock refer to stock of a public company issued
in private placement transactions to individuals who are eligible to sell all or
some of their shares of restricted Common Stock pursuant to Rule 144 promulgated
under the Securities Act of 1933 (“Rule 144”), subject to certain
limitations. In general, pursuant to Rule 144, a stockholder who is
not an affiliate and has satisfied a six-month holding period may sell all of
his restricted stock without restriction, provided that the Company has current
information publicly available. Rule 144 also permits, under certain
circumstances, the sale of restricted stock, without any limitations, by a
non-affiliate of the Company that has satisfied a one-year holding
period.
9.
|
Advertising
Costs
|
Advertising
costs are expensed as incurred. Advertising expense totaled $ 21,348 for the
year ended December 31, 2009 and $ 22,139 for the year ended December 31,
2008.
10.
|
Income
Taxes
|
Deferred
income taxes are recognized for temporary differences between the tax bases of
assets and liabilities and their reported amounts in the financial statements by
applying enacted statutory tax rates expected to apply in the years in which
these temporary differences are expected to be recovered or
settled. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is not more likely than not that some
portion or all of the deferred tax assets will be realized. Current
income taxes are provided for in accordance with the laws of the relevant taxing
authorities.
11.
|
Net
Income (Loss) per Common Share
|
Basic net
income (loss) per common share is computed on the basis of the weighted average
number of common shares outstanding during the period.
Diluted
net income (loss) per common share is computed on the basis of the weighted
average number of common shares and dilutive securities (such as warrants and
convertible securities) outstanding. Dilutive securities having an
anti-dilutive effect on diluted net income (loss) per share are excluded from
the calculation.
F-10
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
NOTE
A – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
POLICIES (continued)
For the
years ended December 31, 2009 and 2008, diluted weighted average number of
common shares outstanding exclude 3,793,460 shares issuable on conversion of
Series A Preferred Stock and 8,418,780 shares issuable on exercise of
outstanding warrants.
12.
|
Reclassifications
|
Certain
prior period amounts have been reclassified to conform to the current period
presentation.
13.
|
Recent
Accounting Pronouncements
|
Effective
for interim and annual periods ending after September 15, 2009, the
FASB Accounting Standards Codification (the “Codification”) is the single source
of authoritative literature of U.S. generally accepted accounting
principles (“GAAP”). The Codification consolidates all authoritative
accounting literature into one internet-based research tool, which supersedes
all preexisting accounting and reporting standards, excluding separate rules and
other interpretive guidance released by the SEC. New accounting
guidance is now issued in the form of Accounting Standards Updates, which update
the Codification. The adoption of the Codification did not result in
any change in the Company’s significant accounting policies.
In May
2009, the FASB issued standards that establish general standards of accounting
for and disclosures of events that occur after the balance sheet date but before
financial statements are issued or are available to be
issued. These standards require the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date, that is, whether the date represents the date the financial statements
were issued or were available to be issued. This standard is
effective in the first interim period ending after June 15,
2009. This standard did not have any significant impact on
disclosures in the Company’s consolidated financial statements.
In June
2009, the FASB issued authoritative guidance which eliminates the exemption for
qualifying special-purpose entities from consolidation requirements, contains
new criteria for determining the primary beneficiary of a variable interest
entity, and increases the frequency of required reassessments to determine
whether a company is the primary beneficiary of a variable interest
entity. The guidance is applicable for annual periods beginning after
November 15, 2009 and interim periods therein and thereafter. The
Company does not expect the adoption of this standard to have a material effect
on its consolidated financial position or results of
operations.
F-11
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
NOTE
A – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
POLICIES (continued)
In June
2009, the FASB issued authoritative guidance which eliminates the concept of a
qualifying special-purpose entity, creates more stringent for reporting a
transfer of a portion of a financial asset as a sale, clarifies other
sale-accounting criteria, and changes the initial measurement of a transferor’s
interest in transferred financial assets. The guidance is applicable
for annual periods beginning after November 15, 2009 and interim periods therein
and thereafter. The Company does not expect the adoption of this
standard to have a material effect on its consolidated financial position and
results of operations.
Certain
other accounting pronouncements have been issued by FASB and other standard
setting organizations which are not yet effective and have not yet been adopted
by the Company. The impact on the Company’s consolidated financial
position and results of operations from adoption of these standards is not
expected to be material.
NOTE
B—GOING CONCERN
There can be no assurance that
sufficient funds required during the next year or thereafter will be generated
from operations or that funds will be available from external sources such as
debt or equity financings or other potential sources. Although we had revenues
of $ 6,400,042 for the year 2009 and had receivables of $ 657,317 as of December
31, 2009, our inability to achieve sufficient collections on our revenues has
created a liquidity challenge that raises doubt about our ability to continue as
a going concern. The lack of additional capital resulting from the
inability to generate cash flow from operations or to raise capital from
external sources would force the Company to substantially curtail or cease
operations and would, therefore, have a material adverse effect on its business.
Furthermore, there can be no assurance that any such required funds, if
available, will be available on attractive terms or that they will not have a
significant dilutive effect on the Company’s existing stockholders.
The accompanying financial statements
do not include any adjustments related to the recoverability of classification
of asset-carrying amounts or the amounts and classification of liabilities that
may result should the Company be unable to continue as a going
concern.
F-12
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
NOTE
C – ACCOUNTS RECEIVABLE
Accounts
receivable consist of:
December 31,
|
||||||||
2009
|
2008
|
|||||||
Ambulatory
care
|
$ | 526,744 | $ | 940,936 | ||||
Infusions
|
797,502 | 1,392,850 | ||||||
Durable
medical equipment
|
523,078 | 703,560 | ||||||
Wholesale
|
51,470 | 254,582 | ||||||
Total
|
1,898,794 | 3,291,928 | ||||||
Allowance
for doubtful accounts
|
(1,241,477 | ) | (998,149 | ) | ||||
Net
|
$ | 657,317 | $ | 2,293,779 |
The
allowance for doubtful accounts changed as follows:
Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Balance,
beginning of year
|
$ | 998,149 | $ | - | ||||
Provision
for doubtful accounts
|
986,993 | 2,706,759 | ||||||
Writeoffs
|
(743,665 | ) | (1,708,610 | ) | ||||
Balance,
end of year
|
$ | 1,241,477 | $ | 998,149 |
F-13
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
NOTE
D – INVENTORIES
Inventories
consist of:
December 31,
|
||||||||
2009
|
2008
|
|||||||
Ambulatory
care
|
$ | 81,868 | $ | 62,938 | ||||
Infusions
|
63,675 | 48,952 | ||||||
Durable
medical equipment
|
36,385 | 27,973 | ||||||
Wholesale
|
- | - | ||||||
Total
|
$ | 181,928 | $ | 139,863 |
NOTE
E – MINORITY INTEREST IN FOREIGN CORPORATION
On
December 20, 2007, the Company entered into a business development and
consulting agreement with Miura Enterprises, S.A. (“Miura”) of the Dominican
Republic whereby we exchanged the account receivable from our Dominican customer
for an 18% equity ownership in Miura. One of Miura’s task was to
assist the Company in the collection of this account receivable and we were to
receive up to 80% of the amount collected. As of December 31, 2008,
none of the receivable was collected and the Company had ceased operations in
the Dominican Republic. Accordingly, the Company recognized a
$1,883,200 loss and reduced the carrying value of its investment to
0.
NOTE
F – NON-COMPETE AGREEMENT
Non-compete
agreement consists of:
December
31,
|
||||||||
2009
|
2008
|
|||||||
Consideration
to seller of Infusion and Ambulatory (and Company's chief
operating officer) attributable to non-compete
agreement executed May 10, 2005
|
$ | 200,000 | $ | 200,000 | ||||
Accumulated
amortization
|
(97,929 | ) | (53,331 | ) | ||||
Total
|
$ | 102,071 | $ | 146,669 |
The
non-compete agreement is being amortized over the estimated remaining period of
the agreement (see Note N).
F-14
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
NOTE
G – DEBT
The
Company’s debt is as follows:
December 31,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Globank,
Inc., interest at 60% payable monthly, due in full on July 29, 2010,
secured by guaranties of the Company’s chief executive officer and the
Company’s three subsidiaries
|
$ | 500,000 | $ | 500,000 | ||||
The
Coastal Bank - installment loan, interest at 10%, initially due September
28, 2008, now informally due in monthly installments of principal and
interest of $10,000 through April 20, 2011, secured by Company assets and
guaranty of the Company’s Chief Executive Officer
|
146,038 | 261,083 | ||||||
The
Coastal Bank – vehicle loans, interest at rates ranging from 6.5% to
8.22%, due in monthly installments of principal and interest through
November 21, 2010
|
8,151 | 27,203 | ||||||
CuraScript
(former supplier) pursuant to Settlement Agreement, interest at 0%, due in
monthly installments of $15,000 through July 15, 2010
|
142,565 | 300,064 | ||||||
Note
for legal fees, interest at 0%, past due
|
142,500 | 165,000 | ||||||
Total
|
939,254 | 1,253,351 | ||||||
Current
portion of debt
|
939,254 | 633,287 | ||||||
Long
– term debt
|
$ | - | $ | 620,064 |
NOTE
H – ESTIMATED LIABILITY FOR EQUITY-BASED FINANCIAL INSTRUMENTS
WITH CHARACTERISTICS OF LIABILITIES
WITH CHARACTERISTICS OF LIABILITIES
Effective
January 1, 2009, in accordance with EITF Issue No. 07-05, “Determining Whether
an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock”, the
Company reclassified the fair values at January 1, 2009 of the outstanding
Series A Convertible Preferred Stock and warrants from the private placement of
the units which closed May 31, 2007 from stockholders’ equity to liabilities, as
follows:
F-15
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
Common
|
||||||||
Shares
|
Fair
|
|||||||
Equivalent
|
Value
|
|||||||
Series
A Convertible Preferred Stock
|
3,793,460 | $ | 227,608 | |||||
Warrants
|
8,168,780 | 106,194 | ||||||
Total
financial instruments
|
11,962,240 | $ | 333,802 |
Since at
January 1, 2009 the carrying value of the outstanding financial instruments was
$2,871,316, the Company recognized a cumulative effect adjustment resulting from a change
in accounting principle of $2,537,514. Accordingly, the accumulated
deficit balance at December 31, 2008 was decreased from $9,899,884 to
$7,362,370, as adjusted, on January 1, 2009.
The
characteristics which require classification of the Series A Preferred Stock and
warrants as liabilities are the Company’s obligations to reduce the conversion
price of the Series A Preferred Stock and the exercise price of the warrants in
the event that the Company sells, grants, or issues any nonexcluded shares,
options, warrants, or any convertible instrument at a price below the $0.50
current conversion price of the Series A Preferred Stock. As a
result, the Company remeasures the fair values of these financial instruments
each quarter,
adjusts the liability balances, and reflects changes in operations as “income
(expense) from revaluation of equity-based financial instruments with
characteristics of liabilities at fair values”.
At
December 31, 2009, the fair values of the financial instruments consisted
of:
Common
|
||||||||
Shares
|
Fair
|
|||||||
Equivalent
|
Value
|
|||||||
Series
A Convertible Preferred Stock
|
3,793,460 | $ | 151,738 | |||||
Warrants
|
8,168,780 | 25,323 | ||||||
Total
financial instruments
|
11,962,240 | $ | 177,061 |
Below is
a reconciliation of the change in the fair values of the financial instruments
from January 1, 2009 through December 31, 2009:
F-16
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
Common
|
||||||||
Shares
|
Fair
|
|||||||
Equivalent
|
Value
|
|||||||
Balance,
January 1, 2009
|
11,962,240 | $ | 333,802 | |||||
Revaluation
credited to operations
|
- | (164,271 | ) | |||||
Balance,
March 31, 2009
|
11,962,240 | 169,531 | ||||||
Revaluation
charged to operations
|
- | 789,139 | ||||||
Balance,
June 30, 2009
|
11,962,240 | 958,670 | ||||||
Revaluation
credited to operations
|
- | (403,695 | ) | |||||
Balance,
September 30, 2009
|
11,962,240 | 554,975 | ||||||
Revaluation
credited to operations
|
- | (377,914 | ) | |||||
Balance,
December 31, 2009
|
11,962,240 | $ | 177,061 |
NOTE
I – PREFERRED STOCK
The
Company is authorized to issue 5,000,000 shares of Preferred Stock, of which
5,000 shares have been designated Series A Preferred Stock, par value
$ 0.000001. As of December 31, 2009 and December 31, 2008, there are
1,896.73 shares of Series A Preferred Stock issued and outstanding. Holders of
Series A Preferred Stock are entitled at any time to convert their shares of
Series A Preferred Stock into Common Stock, without any further payment
therefore. Each share of Series A Preferred Stock is initially convertible into
2,000 shares of Common Stock, equivalent to a Conversion Price of $0.50 per
share. The number of shares of
Common Stock issuable upon conversion of the Series A Preferred Stock is subject
to adjustment upon the occurrence of certain events, including, among others, a
stock split, reverse stock split or combination of MIT's Common Stock; an
issuance of Common Stock or other securities of MIT as a dividend or
distribution on the Common Stock; a reclassification, exchange or substitution
of the Common Stock; or a capital reorganization of MIT. In the event that MIT
issues any additional shares of its Common Stock following the Offering, the
Conversion rate will be that number of shares of Common Stock equal to $1,000
divided by the price per share at which MIT issues Common Stock in such
offering. At our option, following the effectiveness of a registration statement
registering the shares of Common Stock issuable upon the conversion of the
Series A Preferred Stock and the exercise of the Warrants, if the price of the
Common Stock trades above 300% of the Conversion Price per share during any
period of 30 consecutive trading days and the average trading volume is at least
50,000 shares per day, for such 30 day period, each share of Series A Preferred
Stock can be automatically converted into Common Stock at the Conversion Rate
then in effect.
The liquidation preference amount of
each share of Series A Preferred Stock is $1,000, or a total of $1,896,730 for
the 1,896.73 shares issued and outstanding as of December 31, 2009 and December
31, 2008.
F-17
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
As part
of its private placement of the Units (including the Series A Preferred Stock)
which closed May 31, 2007, the Company granted a financial advisor a five-year
option to purchase up to 635 units (comprised of 635 shares of Series A
Preferred Stock and warrants to purchase up to 1,270,000 shares of common stock
at an exercise price of $0.75 per share to August 13, 2012) at a price of $1,000
per Unit.
Dividends accrue on the Series A
Preferred Stock at the rate of 6% per annum and are cumulative. If
and when declared, the Company may pay such dividends in cash or common
stock. The cumulative undeclared and unpaid dividends are
$295,831 and $182,027 at December 31, 2009 and December 31, 2008,
respectively.
NOTE
J – ISSUANCE OF COMMON STOCK
In the first quarter of 2009, the Board
of Directors authorized the issuance of a total of 850,000 shares of common
stock to Board Members and key employees valued at a price of $0.03 per share,
or $25,500 total. In the fourth quarter of 2009, the Board of Directors
authorized the issuance of 2,139,937 shares of common stock to Board Members
valued at prices ranging from $0.04 per share to $0.76 per share, or $148,352
total. The Company included the $173,582 estimated fair value of the
shares in selling, general and administrative expenses in the accompanying
statement of operations for the year ended December 31, 2009 and increased
common stock and additional paid-in capital by the same amount.
NOTE
K – STOCK OPTIONS AND COMMON STOCK PURCHASE WARRANTS
A summary
of stock options and warrants activity for the years ended December 31, 2009 and
2008 follows:
Common Shares Equivalent
|
||||||||
Stock
|
||||||||
Options
|
Warrants
|
|||||||
Outstanding
at December 31, 2007
|
600,000 | 8,418,780 | ||||||
Granted
and issued
|
- | - | ||||||
Exercised
|
- | - | ||||||
Forfeited/expired/cancelled
|
- | - | ||||||
Outstanding
at December 31, 2008
|
600,000 | 8,418,780 | ||||||
Granted
and issued
|
- | - | ||||||
Exercised
|
- | |||||||
Forfeited/expired/cancelled
|
- | - | ||||||
Outstanding
at December 31, 2009
|
600,000 | 8,418,780 |
F-18
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
Stock
options outstanding at December 31, 2009 and 2008 are:
Date Granted
|
Number
Outstanding
|
Number
Exercisable
|
Exercise
Price
|
Expiration
Date
|
|||||||||
May
2, 2007
|
600,000 | 600,000 | $ | 0.50 |
May
2, 2012
|
||||||||
Totals
|
600,000 | 600,000 |
Common stock purchase warrants
outstanding at December 31, 2009 and December 31, 2008 are:
Date Granted
|
Number Outstanding
|
Exercise Price
|
Expiration Date
|
||||||
May
31, 2007
|
8,168,780 | $ | 0.75 |
August
13, 2012
|
|||||
July
30, 2007
|
250,000 | $ | 2.20 |
July
30, 2012
|
|||||
Total:
|
8,418,780 |
NOTE
L – INCOME TAXES
Expected
income tax expense (benefit) computed by applying the United States statutory
income tax rate of 34% to pretax income (loss) differs from the Company’s
provision for (benefit from) income taxes, as follows:
Year Ended
|
Year Ended
|
|||||||
December 31, 2009
|
December 31, 2008
|
|||||||
Expected
income tax expense (benefit) at 34%
|
$ | (422,846 | ) | $ | (1,443,333 | ) | ||
Non-deductible
stock-based compensation
|
59,110 | - | ||||||
Non-taxable
income from revaluation of equity-based financial instruments
with characteristics of liabilities at fair values
|
(53,292 | ) | - | |||||
Change
in valuation allowance
|
417,028 | 1,443,333 | ||||||
Provision
for income taxes
|
$ | - | $ | - |
F-19
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
The
components of net deferred income tax assets are as follows:
December 31, 2009
|
December 31, 2008
|
|||||||
Allowance
for doubtful accounts
|
$ | 422,102 | $ | 339,371 | ||||
Net
operating loss carryforward
|
927,152 | 592,855 | ||||||
Total
|
1,349,254 | 932,226 | ||||||
Less
valuation allowance
|
(1,349,254 | ) | (932,226 | ) | ||||
Net
deferred income tax assets
|
$ | - | $ | - |
Based on management’s present
assessment, the Company has not yet determined it to be more likely than not a
deferred income tax asset of up to approximately $1,349,255 attributable to the
future utilization of the net operating loss carryforwards and other timing
differences of approximately $3,968,396 as of December 31, 2009 will be
realized. Accordingly, the Company has provided a 100% allowance
against the deferred tax asset in the financial statements at December 31,
2009. The company will continue to review this valuation allowance
and make adjustments as appropriate. The $2,726,919 net operating
loss carryforward expires $1,743,693 in year 2028 and $983,226 in year
2029.
NOTE
M – OPERATING SEGMENTS
The
Company has four principal operating segments, which are as
follows:
|
·
|
Medical
Infusion Technologies-“MIT”
|
|
·
|
MIT Wholesale
-“Wholesale”
|
|
·
|
Durable Medical Equipment -
“DME”
|
|
·
|
MIT
Ambulatory Care Center -“Ambulatory
Care”
|
“MIT” is
a provider of intravenous therapies to patients at their home, at a designated
facility. MIT’s primary product lines are centered upon infusion
therapy.
“Wholesale”
primarily aims at a network of hard to find pharmaceuticals. It concentrates in
sales on rare products in the pharmaceutical industry.
“DME”
carries a variety of durable medical equipment and supplies.
“Ambulatory
Care” administers the intravenous therapies to patients in the Company’s
facility.
The
following tables show the summarized financial information of the Company’s
reportable segments at December 31, 2009 and 2008 and for the years then
ended:
F-20
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
Medical
|
||||||||||||||||||||
Infusion
|
Wholesale/
|
Ambulatory
|
DME
|
Combined
|
||||||||||||||||
- MIT
|
International
|
Care
|
||||||||||||||||||
2009
|
||||||||||||||||||||
Revenue
|
$ | 2,610,009 | $ | - | $ | 3,344,603 | $ | 445,430 | $ | 6,400,042 | ||||||||||
Income
(loss) from operations
|
(519,868 | ) | - | (333,626 | ) | (196.967 | ) | (1,050,461 | ) | |||||||||||
Depreciation
and amortization
|
65,430 | - | - | - | 65,430 | |||||||||||||||
Assets
|
569,468 | - | 311,233 | 222,508 | 1,103,209 | |||||||||||||||
2008
|
||||||||||||||||||||
Revenue
|
$ | 3,751,619 | $ | 648,395 | $ | 4,222,825 | $ | 887,788 | $ | 9,510,627 | ||||||||||
Income
(loss) from operations
|
(1,991,247 | ) | (303,501 | ) | 117,955 | 97,274 | (2,079,519 | ) | ||||||||||||
Depreciation
and amortization
|
42,997 | - | - | - | 42,997 | |||||||||||||||
Assets
|
1,451,287 | 54,582 | 822,958 | 546,652 | 2,875,479 |
NOTE
N - COMMITMENTS AND CONTINGENCIES
Employment
Agreements
Pursuant
to an Employment Agreement with the Company’s chief executive officer effective
June 30, 2006 and expiring June 30, 2011, the Company is obligated to pay its
chief executive officer a salary of $250,000
per year.
Pursuant
to an Employment Agreement with the Company’s chief operating officer effective
May 10, 2005, as amended March 14, 2006, April 1, 2006, December 20, 2006, and
June 7, 2007, the Company is obligated to pay its chief operating officer a
salary of approximately $117,000 per year through May 10, 2010 and,
on May 10, 2010, cash or common stock, at the option of the Company, equal to
the amount (if any) by which $625,000 exceeds the sum of ( i ) the market value
of the remainder of the 312,500 unsold shares issued to her on June 7, 2007 and
( ii) the proceeds, if any, received by her from the sale of any of the 312,500
shares. As part of the agreement, the Company’s chief operating
officer has agreed not to compete with the Company for a period of three years
after the sales of any shares of the Company.
Pursuant
to an Employment Agreement with the Company’s pharmacist in charge
effective May 10, 2005, as amended March 14, 2006, April 1, 2006, December 20,
2006, and June 7, 2007, the Company is obligated to pay its pharmacist in charge
a salary of approximately $40,000 per year through May 10, 2010 and,
on May 10, 2010, cash or common stock, at the option of the Company, equal to
the amount (if any) by which $500,000 exceeds the sum of ( i ) the market value
of the remainder of the 250,000 unsold shares issued to
him on June 7, 2007 and ( ii) the proceeds, if any, received by him from the
sale of any of the 250,000 shares. As part of the agreement, the
pharmacist in charge has agreed not to compete with the Company for a period of
three years after the sales of any shares of the Company.
F-21
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
NOTE
N -COMMITMENTS AND CONTINGENCIES (continued)
Lease
Agreements
The
following are the key terms of MIT’s lease agreements:
|
·
|
The
lease on the facility located at 115B Echols St., Savannah, GA was entered
into January 1, 2007 and expired January 1, 2009. It is now on
a month to month lease basis. The rent is $4,180 per month. This lease is
personally guaranteed by William C. Parker, Chairman of the
Board.
|
|
·
|
MIT
leases two suites in the facility located at 37 W. Fairmont Avenue,
Savannah, GA. The leases for Suites 202 and 204 each commenced
November 1, 2004, for a term of 36 months. They are now on a
month to month lease basis. The monthly rent on Suite 202 is $1,360, and
the monthly rent on Suite 204 is $1,123. This lease was amended on
September 6, 2008 to include Suite 206 at a monthly rent of $1,158 per
month ending on November 30, 2009. This lease is personally
guaranteed by William C. Parker.
|
Stock-Based
Compensation Plan
On June
7, 2007 the Board of Directors approved the 2007 Stock Incentive Plan (the
"Plan") covering 5,000,000 shares. The shareholders subsequently approved the
Plan. The shares underlying the Plan are restricted. The Plan is identical to
MIT’s 2006 Stock Incentive Plan (which was adopted by Medical Infusion Group,
Inc. (the former MIT Holding, Inc.) prior to the Merger) in all material
respects, other than that the 2006 Stock Incentive Plan covers 7,000,000 shares.
All awards under the 2006 Stock Incentive Plan were exchanged for awards under
the Plan effective upon the Company’s May 2, 2007 merger with Medical Infusion
Group, Inc.
The Plan
is intended to benefit the stockholders of the Company by providing a means to
attract, retain and reward individuals who can and do contribute to the
longer-term financial success of the Company. Further, the recipients
of stock-based awards under the Plan should identify their success with that of
the Company's shareholders and therefore will be encouraged to increase their
proprietary interest in the Company. The Compensation Committee administers the
Plan.
NOTE
O – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL INFORMATION
In the
accompanying consolidated financial statements, the Company has restated the
number of issued and outstanding shares of Series A Convertible Preferred Stock
and the additional paid-in capital and accumulated deficit balances at December
31, 2007 and 2008 in order to correct errors relating to the accounting for
various transactions involving the Company’s Series A Convertible Preferred
Stock and common stock in 2007. As previously reported, among other
things, the Company failed to account for all common stock issuances for
services in 2007 and failed to account for all conversions of preferred stock
into common stock in 2007. Correction of the errors will have a
material adverse effect on operations for 2007 but has no effect on operations
for the years ended December 31, 2009 and 2008.
F-22
MIT
HOLDING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2009
The
effect of the restatement adjustments on the consolidated balance sheet at
December 31, 2008 follows:
As Previously
|
As
|
|||||||||||
Reported
|
Adjustments
|
Restated
|
||||||||||
Total
assets
|
$ | 2,875,479 | $ | - | $ | 2,875,479 | ||||||
Total
liabilities
|
$ | 3,818,885 | $ | - | $ | 3,818,885 | ||||||
Stockholders'
equity (deficiency):
|
||||||||||||
Preferred
stock
|
- | - | - | |||||||||
Common
stock
|
48 | 1 | 49 | |||||||||
Additional
paid-in capital
|
1,798,388 | 7,158,041 | 8,956,429 | |||||||||
Accumulated
deficit
|
(2,741,842 | ) | (7,158,042 | ) | (9,899,884 | ) | ||||||
Total
stockholders' equity (deficiency)
|
(943,406 | ) | - | (943,406 | ) | |||||||
Total
liabilities and stockholders' equity
|
$ | 2,875,479 | $ | - | $ | 2,875,479 |
NOTE
P – SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through the filing date of this Form
10-K and has determined that there were no subsequent events to recognize or
disclose in these financial statements.
F-23
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND ACCOUNTING AND
FINANCIAL DISCLOSURE
On June
24, 2009, the Company’s independent accountants, Drakeford and Drakeford LLC
(“Drakeford”) advised the Company that it must refuse to stand for re-election
as the Company’s independent certified public accountant. Drakeford
’ s refusal to stand for reelection resulted from the revocation of the
registration of Drakeford by the Public Company Accounting Oversight
Board.
During
the fiscal years ended December 31, 2008 and 2007, and any subsequent period
through June 24, 2009, (i) there were no disagreements between the Company and
Drakeford on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of Drakeford would have caused Drakeford to make reference to
the matter in its reports on the Company's financial statements, and (ii) except
as described below, Drakeford’s reports on the Company's financial statements
did not contain an adverse opinion or disclaimer of opinion, and was not
modified as to uncertainty, audit scope or accounting principles. Drakeford’s
audit reports for the years ended December 31, 2007 and December 31, 2008 stated
that several factors raised substantial doubt about the Company’s ability to
continue as a going concern and that the financial statements do not include any
adjustments that might result from the outcome of this
uncertainty. During the fiscal years ended December 31, 2008 and 2007
and through June 24, 2009, there were no reportable events as the term described
in Item 304(a)(1)(iv) of Regulation S-K.
The
Company provided Drakeford with a copy of the disclosures it is making in
response to Item 4.01 on this Form 8-K, and Drakeford furnished it
with a letter addressed to the Securities and Exchange Commission stating that
it agreed with the above statements.
On July
22, 2009, the Company engaged Michael T. Studer CPA P.C. (“Studer”) as Company’s
new independent accountants. At no time during the past two fiscal years or any
subsequent period prior to the engagement did the Company consult with Studer,
the newly engaged accountants, regarding any matter described in Item
304(a)(2) of Regulation SK, including any issue related to Company’s
financial statements or the type of audit opinion that might be rendered for the
Company. The change of independent accountants was approved by the
Board of Directors of the Company
ITEM
9A. CONTROLS AND PROCEDURES.
Evaluation
of Disclosure Controls and Procedures
Based on
their evaluation as of December 31, 2009, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended) were effective to ensure that the information required to be
disclosed by us in this Annual Report on Form 10-K was recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
instructions for Form 10-K.
Management’s
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934, as amended). Our management assessed the
effectiveness of our internal control over financial reporting as of December
31, 2009.
22
Our
internal control over financial reporting is a process designed by or under the
supervision of our principal executive and principal financial officers to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Our internal control over
financial reporting includes policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect transactions and dispositions of assets; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures are being made only in accordance
with authorizations of management and the directors of the Company; and
(3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Company’s assets that
could have a material effect on our financial statements.
In making
this assessment, our management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in ‘Internal
Control – Integrated Framework’. Our management has concluded that, as of
December 31, 2009, our internal control over financial reporting is effective
based on these criteria.
This
annual report does not include an attestation report of the company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management's report
in this annual report.
There
were no changes in our internal controls over financial reporting during the
year ended December 31, 2009 that have materially affected, or are
reasonably likely to materially affect our internal controls over financial
reporting.
Our
management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures or our internal
controls will prevent all error and all fraud. A control system, no matter
how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the
design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within China Marine Food Group Limited have been
detected.
ITEM
9B. OTHER INFORMATION
None.
ITEM
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT.
As of
April 15, 2010, our executive officers and directors are:
NAME
|
AGE
|
POSITION WITH COMPANY
|
||
William
C. Parker
|
54
|
President,
CEO, & Chairman of the Board of Directors
|
||
John
Sabia
|
57
|
Secretary,
Controller & Director
|
||
Brinson
Clements
|
53
|
Vice-President
of Administration, Director
|
||
Arlene
Wilhelm
|
53
|
Chief
Operating Officer
|
||
Steven
W. Schuster
|
55
|
Director
|
||
Thomas
Duncan
|
55
|
Director
|
||
Robert
Rubin
|
68
|
Director
|
23
William
C. Parker
Mr.
Parker has served as President, Chief Executive Officer and Chairman of the
Board of Directors of MIT since May 2007, and he has served as President, Chief
Executive Officer, and founding member each of MIT’s operating subsidiaries
since the inception of each. Mr. Parker attended Armstrong State University in
Savannah, Georgia and graduated from the American Banking Institute, in
Savannah. The Board believes that Mr. Parker has the
experience, qualifications, attributes and skills necessary to serve on the
Board because of his experience in the pharmaceutical and medical infusion
industry, his having provided leadership and strategic direction to the Company
and his unparalleled knowledge of the Company and its business. Mr. Parker is not a
member of the Board of any other public company or any investment company,
neither has he been a member of the boards of directors of such companies for
the past five years.
John
A. Sabia
Mr. Sabia
has served as Director, Secretary and Chief Financial Officer of MIT since May
2007 and he has held identical positions at in each of MIT’s operating
subsidiaries since February 2006. Mr. Sabia is responsible for the
operations of the billing and accounting departments of MIT. As an
ordained minister, in 2002, he became a corporate officer for The Sanctuary of
Savannah, Inc. and assumed the responsibilities as administrator and financial
officer of the church until February 2006. He began working with the
church in February 1997 as one of the ministers and directors for its homeless
mission, Old Savannah City Mission and he served five years as executive
director and administrator for the mission. Mr. Sabia has over 22
years of experience in law enforcement in the Police Department of Hialeah,
Florida. Mr. Sabia holds his B.A degree from Biscayne College in
Miami, Florida and a MS in Public Administration from St. Thomas University in
Miami, Florida. The Board believes that Mr. Sabia has the experience,
qualifications, attributes and skills necessary to serve on the Board because of
his experience in finance, his having provided leadership and strategic
direction to the Company and his unparalleled knowledge of the Company and its
business. Mr. Sabia
is not a member of the Board of any other public company or any investment
company, neither has he been a member of the boards of directors of such
companies for the past five years.
Arlene
O. Wilhelm, RN
Ms.
Wilhelm has been the Chief Operating Officer of the Company since May
2007. She is a founder of Medical Infusion Group, Inc. and has been
its Chief Operating Officer since its formation in 2006. She has served as Vice
President of Clinical Services of Infusion for over 15 years, where she is
responsible for directing medical operations. Ms. Wilhelm served as a member of
the Board of Directors of Infusion from 1991 through 2006. Ms.
Wilhelm has over 17 years experience as a Registered Professional
Nurse. She attained her RN from Armstrong Atlantic University in
Savannah, Georgia, and is a Certified Surgical Technologist, a Certified
Surgical Assistant and is certified for use of PICC catheters. The Board believes that
Ms. Wilhelm has the experience, qualifications, attributes and skills necessary
to serve on the Board because of her experience in the medical infusion field,
her having provided leadership and strategic direction to the Company and her
unparalleled knowledge of the Company and its business. Ms. Wilhelm is not a
member of the Board of any other public company or any investment company,
neither has he been a member of the boards of directors of such companies for
the past five years.
Brinson
Clements
Mr.
Clements is a director and Vice President of Administration since May
2007. Mr. Clements joined MIT in November 2005, taking on positions
as the Director of Human Resources and Liaison for Web Development, as well as
consultant on various projects. Mr. Clements comes to MIT with over
30 years experience in the retail furniture business, where he was the General
Manager, Secretary and Treasurer of J.C. Clements Furniture Inc. from 1977
through 2004. Mr. Clements has been the owner and operator of Clements
Furniture, LLC since October 2004. Mr. Clements holds a BBA in Finance from
Armstrong State College, in Savannah, Georgia. The Board
believes that Mr. Clements has the experience, qualifications, attributes and
skills necessary to serve on the Board because of his experience in Management
and Finance, having provided leadership and strategic direction to the Company
and his unparalleled knowledge of the Company and its business. Mr. Clements is not a
member of the Board of any other public company or any investment company,
neither has he been a member of the boards of directors of such companies for
the past five years.
24
Steven
W. Schuster, Esq.
Mr.
Schuster became a member of the Board of Directors of MIT in May 2007, and
joined the board of directors of Medical Infusion Group in
2006. Mr. Schuster has been engaged in the practice of corporate
law for over 25 years and is co-chair of McLaughlin &
Stern LLP’s corporate and securities department, where he has worked since
1995. Since 1997, he has served as a member of the Board of Directors
of Tower Group, Inc., a publicly traded holding company whose subsidiaries are
providers of insurance. Mr. Schuster received his B.A. from Harvard
University in 1976 and his J.D. from New York University
in 1980. The Board believes that Mr. Schuster has the
experience, qualifications, attributes and skills necessary to serve on the
Board because of his experience in the legal profession, his having provided
leadership and strategic direction to the Company and his knowledge of the
Company and its business. With the exception of
Tower Group, Inc. for which he is currently a director, Mr. Schuster is not a
member of the Board of any other public company or any investment company,
neither has he been a member of the boards of directors of such companies for
the past five years
Thomas
J. Duncan
Mr.
Duncan became a member of the Board of Directors of MIT in May 2007, and joined
the board of directors of Medical Infusion Group in September
2006. Mr. Duncan is employed with Southeast Vending, LLC, where he
has been President since 2001, and he is its sole member. He has been President
of Southeast Lumber and Construction, Inc. since 2001, and Secretary and
Treasurer of both Custom Locators, Inc. and Auto Locators, Inc., since 2000 and
2004, respectively. Mr. Duncan maintains controlling interests
in each entity. Since 2005, Mr. Duncan has been a member of the Board
of Directors of CNB BanCorp,Inc., the holding company for Citizens National
Bank, a national commercial bank based in Windsor Virginia. Mr. Duncan graduated
from the University of Georgia in 1976 with a BBA in Accounting. The
Board believes that Mr. Duncan has the experience, qualifications, attributes
and skills necessary to serve on the Board because of his experience in finance,
his having provided leadership and strategic direction to the Company and his
unparalleled knowledge of the Company and its business. . Mr. Duncan
is not a member of the Board of any other public company or any investment
company, neither has he been a member of the boards of directors of such
companies for the past five years except for CNB BanCorp, Inc for which he is
currently a director.
Robert
Rubin
Robert Rubin became a member of the
Board of Directors in April 2007. He has served as the Chairman
of the Board of Directors of Solar Thin Films, Inc. f/k/a American United Global
Inc, since May 1991, and was the Chief Executive Officer from May 1991 to
January 1, 1994. Between October 1990 and January 1, 1994, Mr. Rubin served as
the Chairman of the Board and Chief Executive Officer of the company and its
subsidiaries; from January 1, 1994 to January 19, 1996, he served only as
Chairman of the Board of the company and its subsidiaries. From January 19, 1996
to the present, Mr. Rubin served as Chairman of the Board, President and Chief
Executive Officer. Mr. Rubin was the founder, President, Chief Executive Officer
and a Director of Superior Care, Inc. ("SCI") from its inception in 1976 until
May 1986, when the business was sold to Olsten Corporation (NYSE). Mr. Rubin
continued as a director of SCI until the latter part of 1987. Mr. Rubin is also
a Director of Western Power and Equipment Corp. Mr. Rubin was a director of
Med-Emerg, Inc., a publicly held Canadian management company for hospital
emergency rooms and outpatient facilities until November 2001. Mr. Rubin was
also a director of StyleSite Marketing, Inc., which liquidated its assets for
the benefit of secured creditors in January 2000. The Board believes
that Mr. Rubin has the experience, qualifications, attributes and skills
necessary to serve on the Board because of his experience in the medical
industry, his having provided leadership and strategic direction to the Company
and his unparalleled knowledge of the Company and its business. . Mr.
Clements is not a member of the Board of any other public company or any
investment company, neither has he been a member of the boards of directors of
such companies for the past five years except for Solar Thin Films, Inc. for
which he is currently a director.
25
INVOLVEMENT
IN CERTAIN LEGAL PROCEEDINGS
None of
our directors, executive officers, or control persons has been involved in any
of the following events during the past ten years:
l
|
Any
bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of
bankruptcy or within two years prior to that time;
or
|
l
|
Any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses);
or
|
l
|
Being
subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities;
or
|
l
|
Being
found by a court of competent jurisdiction (in a civil violation), the SEC
or the Commodity Future Trading Commission to have violated a federal or
state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated; or
|
l
|
Being
the subject of, or a party to, any Federal or State judicial or
administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated, relating to an alleged violation of: any
Federal or State securities or commodities law or regulation; or any law
or regulation respecting financial institutions or insurance companies
including, but not limited to, a temporary or permanent injunction, order
of disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order; or any
law or regulation prohibiting mail or wire fraud or fraud in connection
with any business entity. This violation does not apply to any settlement
of a civil proceeding among private litigants;
or
|
l
|
Being
the subject of, or a party to, any sanction or order, not subsequently
reversed, suspended or vacated, of any self-regulatory organization (as
defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))),
any registered entity (as defined in Section 1(a)(29) of the Commodity
Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange,
association, entity or organization that has disciplinary authority over
its members or persons associated with a
member.
|
FAMILY
RELATIONSHIPS
There are
no family relationships between the officers and directors of the
Company.
Section
16(a) Beneficial Ownership Reporting Compliance
Under
Section 16(a) of the Exchange Act, all executive officers, directors, and each
person who is the beneficial owner of more than 10% of the common stock of a
company that files reports pursuant to Section 12 of the Exchange Act, are
required to report the ownership of such common stock, options, and stock
appreciation rights (other than certain cash-only rights) and any changes in
that ownership with the Commission. Specific due dates for these reports have
been established, and we are required to report, in this Form 10-K, any failure
to comply therewith during the fiscal year ended December 2008. We believe that
the following persons failed to satisfy the filing requirements of Section
16(a):
26
|
1.
|
Mr.
Robert Rubin, Director – no Form 3 or 5 is on
file
|
|
2.
|
Mr.
Thomas J. Duncan, Director - no Form 3 or 5 is on
file
|
Mr.
Schuster, Mr. Sabia, and Mr. Clements each filed Forms 5, as appropriate,
although filings were subsequent to the respective filing deadlines for each
such disclosure.
ITEM
11. EXECUTIVE COMPENSATION
COMPENSATION
PHILOSOPHY
Our board
of directors have historically determined the compensation to be paid to our
executive officers based on our financial and operating performance and
prospects, and contributions made by the officers’ to our
success. Each of the named officers will be measured by a series of
performance criteria by the board of directors, on a yearly
basis. Such criteria will be based on certain objective parameters
such as job characteristics, required professionalism, management skills,
interpersonal skills, related experience, personal performance and overall
corporate performance.
Our board
of directors have not adopted or established a formal policy or procedure for
determining the amount of compensation paid to our executive
officers. As our executive leadership and board of directors grow,
our board of directors may decide to form a compensation committee charged with
the oversight of executive compensation plans, policies and
programs.
Our
compensation program for our executive officers and all other employees is
designed such that it will not incentivize unnecessary risk-taking. We provide
our executive officers solely with a base salary to compensate them for services
rendered during the year. Our policy of compensating our executives
with a cash salary has served us well. To date, we have not believed
it necessary to provide our executives discretionary bonuses, equity incentives,
or other benefits in order for us to continue to be successful. Senior
executives do not have the incentive to take unnecessary risks in order to
receive a bonus. However, as the Company grows and the
operations become more complex, the Board of Directors may deem it in the best
interest of the Company to provide such additional compensation to existing
executives and in order to attract new executives.
The
following table and discussion sets forth information with respect to all
compensation earned by or paid by us to our President and Chief Executive
Officer, William Parker, our Chief Financial Officer, John Sabia and
our most highly compensated executive officers other than the CEO and CFO, for
all services rendered in all capacities to us for each of the last two (2)
fiscal years. No disclosure has been made for any executive officer
whose total annual salary and bonus does not exceed $100,000.
Name and
Principal Position
(a)
|
Year
(b)
|
Salary
($)
(c)
|
Bonus
($)
(d)
|
Stock
Awards
($)
(e)
|
Options
Awards
($)
(f)
|
Non-
equity
incentive
plan
compensation
($)
(g)
|
Change in
pension value
and
nonqualified
deferred
compensation
earnings
($)
(h)
|
ALL OTHER
COMPENSATION
($)
(i)
|
Total
($)
(j)
|
|||||||||||||||||||||||||
William
C. Parker
|
2009
|
175,807 | — | — | — | — | — | 81,408 | 296,448 | |||||||||||||||||||||||||
CEO
& President
|
2008
|
230,029 | — | — | — | — | — | 91,130 | 325,208 | |||||||||||||||||||||||||
Arlene
Wilhelm
|
2009
|
146,016 | — | — | — | — | — | 24,586. | 170,602 | |||||||||||||||||||||||||
COO
|
2008
|
149,345 | — | — | — | — | — | 27,240 | 162,844 | |||||||||||||||||||||||||
Brinson
Clements
|
2009
|
132,800 | — | — | — | — | — | — | 132,800 | |||||||||||||||||||||||||
VP –
Admin.
|
2008
|
130,730 | — | — | — | — | — | 0 | 130,730 |
27
Employment
Agreements
MIT and
Mr. Parker have entered into an employment agreement for a term of five years
commencing June 2006. The employment agreement provides for a base salary of
$250,000 (exclusive of housing and expense allowances), with bonuses to be
determined annually by the Board of Directors.
In May
2005, Arlene Wilhelm, MIT’s Chief Operating Officer, and MIT entered into an
employment agreement and stock purchase agreement. Under the agreements, Ms.
Wilhelm agreed to sell all of her shares of stock of Infusion and Ambulatory for
$1,200,000, with $100,000 payable upon execution and $1,100,000 payable upon the
earlier of April 15, 2006 or the closing of MIT’s merger with a public
company. Under the employment agreement, Ms. Wilhelm receives a
salary of $108,000 per year for five years, with an eight percent annual cost of
living adjustment, and an expense account of $18,000 per year. MIT also agreed
to issue Ms. Wilhelm shares of common stock following its merger with a public
company, which shares would have an aggregate value of $625,000 over the term of
her agreement. In April 2006, MIT and Ms. Wilhelm executed an
amendment to the agreement which provided for the issuance of 1,050,000 shares
of Common Stock of MIT to Ms. Wilhelm and an additional deferred purchase price
of $500,000. In December 2006, MIT and Ms. Wilhelm executed an amendment to the
agreement which provided that the $500,000 payable on a deferred basis is
payable as follows: (i) one hundred thousand dollars ($100,000) on July 1, 2007,
(ii) three hundred thousand dollars ($300,000) on January 2, 2008, and (iii) and
one hundred thousand dollars ($100,000) on July 1, 2008. On June 7,
2007, MIT and Ms. Wilhelm executed another amendment to her employment agreement
which provided that, MIT issue Ms. Wilhelm 312,500 shares of common
stock of the Company on June 7, 2007, and, on May 10, 2010, cash or common
stock, at the option of the Company, equal to the amount, if any, by which
$625,000 exceeds the sum of (i) the market value of those 312,500 shares issued
to Wilhelm on June 7, 2007 which she holds on May 10, 2010, and (ii) the amount
of proceeds, if any, Wilhelm received upon the sale of any of the 312,500
shares. Market value of the shares is to be determined at the
discretion of the Compensation Committee of the Board of Directors, if any, and
should a Compensation Committee not exist, by the Board of Directors, effective
as of May 10, 2010.
Director
Compensation
Contemporaneously
with the Merger on May 2, 2007 and pursuant to its terms, the Board ratified the
following issuances, each of which had been previously approved by the Board of
Medical Infusion Group, Inc. on March 19, 2007: (i) options to purchase 100,000
shares of common stock of MIT at an exercise price of $0.50 per share, which
options vest on May 2, 2008, provided the Director remains a Director of the
Company; (ii) common stock with a market value of $10,000 per year as of April 1
of each year that the non-management Director remains a Director, provided, that
such shares shall vest in the non-management Directors on the one year
anniversary of their issuance; and (iii) the payment to each non-management
Director a fee of $15,000 cash per year for each year that each such Director
serves as a Director, with the fee payable quarterly in arrears commencing June
30, 2007, and a fee of $1,000 for each meeting of the Board of Directors and
each meeting of a Committee of the Board of Directors attended by such
Director. In 2009 the outside directors were issued common shares in
lieu of cash payment. Each director received 13,158 shares for 2008 and 250,000
shares for 2009, On May 2, 2007, the Company’s Board of
Directors authorized the issuance of options to John Sabia and Brinson Clements
to purchase 100,000 shares of common stock of MIT at an exercise price of $0.50
per share, which options vest on May 2, 2008, provided the Director remains a
Director of the Company. Each of the foregoing grants to the non-management
Directors was made pursuant to the Corporation’s 2006 Stock Incentive
Plan. In November 2008, the Company awarded 100,000 shares of Common
Stock to each of the six directors for services rendered in 2008.
Equity
Incentive Plan
On June
7, 2007 the Board of Directors approved the 2007 Stock Incentive Plan (the
"Plan") covering 5,000,000 shares. The shareholders subsequently approved the
Plan. The shares underlying the Plan are restricted. The Plan is identical to
MIT’s 2006 Stock Incentive (which was adopted by which was adopted by Medical
Infusion Group (the former MIT Holding Inc.) prior to the Merger) in all
material respects, other than that the 2006 Stock Incentive Plan covers
7,000,000 shares. All awards under the 2006 Stock Incentive Plan were exchanged
for awards under the Plan effective upon the Company’s May 2, 2007 merger with
Medical Infusion Group, Inc.
28
The Plan is intended to benefit the
stockholders of the Company by providing a means to attract, retain and reward
individuals who can and do contribute to the longer-term financial success of
the Company. Further, the recipients of stock-based awards under the
Plan should identify their success with that of the company's shareholders and
therefore will be encouraged to increase their proprietary interest in the
Company. The Compensation Committee administers the Plan.
The Plan
provides for the granting of non-qualified stock options, incentive stock
options (within the meaning of Section 422 of the Code), stock appreciation
rights ("SARs"), restricted stock and restricted stock unit awards, performance
shares and other cash or share-based awards. In the event of any merger,
reorganization, recapitalization, stock split, stock dividend, or other change
in corporate structure that affects our common stock, an adjustment may be made
to the (a) maximum number of shares available for grants under the plan and/or
kind of shares that may be delivered under the plan, (b) the individual award
limits under the plan and (c) number, kind and/or price of shares subject to
outstanding awards granted under the plan, by the Compensation Committee of the
company, to prevent dilution or enlargement of rights. Shares of stock covered
by an award under the plan that is cancelled, expired, forfeited or settled in
cash will again be available for issuance in connection with future grants of
awards under the plan.
Our
Compensation Committee has broad authority to administer the plan, including the
authority to determine when and to whom awards will be made, determine the type
and size of awards, determine the terms and conditions of awards, construe and
interpret the plan and award agreements, establish rates and resolutions for the
plan's administration, and amend outstanding awards. Generally, the plan is open
to directors, employees and consultants who are selected by the Compensation
Committee.
Stock Options.
Options granted under the plan may be "incentive stock options," as defined in
Section 422 of the Code, or "nonqualified stock options" which are stock options
that do not qualify as incentive stock options. An incentive stock option must
expire within ten years from the date it is granted (five years in the case of
options granted to holders of more than 10% of the total combined voting power
of all classes of our stock and the stock of our subsidiaries). The exercise
price of an incentive stock option, qualified or non-qualified, must be at least
equal to 120% of the fair market value on the date such incentive stock option
is granted. Subject to such restrictions as the Compensation
Committee may impose, the exercise price of options granted under the plan may
be paid (i) in cash or its equivalent, (ii) by delivery, or attesting to the
ownership, of previously-acquired shares of our common stock, (iii) pursuant to
a cashless exercise program, (iv) by such other methods as the compensation
committee may permit or (v) by any combination of (i), (ii), (iii) and (iv). As
of the date of this prospectus, no non-qualified stock options had been granted
under the plan.
SARs. The
Compensation Committee may grant a SAR in connection with all or any portion of
an option grant as well as independent of any option grant. A SAR entitles the
participant to receive the amount by which the fair market value of a specified
number of shares on the exercise dates exceeds an exercise price established by
the committee. The excess amount will be payable in common stock, in cash, or in
a combination of shares and cash.
Restricted Stock.
Restricted Stock Units and Performance Shares. These awards may be granted in
such amounts and subject to such terms and conditions as determined by the
Compensation Committee. Holders of restricted stock may generally exercise full
voting rights and may be credited with regular dividends paid with respect to
the underlying shares while they are so held; however, stock dividends or other
non-cash distributions made with respect to restricted stock awards generally
will be subject to the same restrictions as the restricted stock award.
Generally, after the last day of the applicable period of restriction, the
shares become freely transferable.
Restricted
stock units and performance shares are conditional grants of a right to receive
a specified number of shares of common stock or an equivalent amount of cash (or
a combination of shares and cash) if certain conditions are met. Each restricted
stock unit and performance share must have an initial value equal to the fair
market value of a share on the date of grant. Restricted stock units may have
conditions relating to continued service or employment only or continued
employment or service and attainment of performance goals, as determined by the
Compensation Committee. Performance shares may be granted based on a performance
period of one or more years or other periods, as determined by the Compensation
Committee.
29
The
Compensation Committee must determine the performance objectives for grants of
performance shares and the range of the number of shares to be paid to an
employee if the relevant measure of performance is met within the performance
period. Recipients of restricted stock units and performance shares may receive
dividend equivalents with respect to their awards.
Other Awards. Subject
to the terms of the plan, the Compensation Committee may grant other awards such
as deferred share, share or cash awards based on attainment of performance or
other goals or shares in lieu of cash under other incentive or bonus programs.
Payment under such awards may be made in such manner and at such times as the
Compensation Committee may determine.
Except as
otherwise provided in a participant's award agreement, upon the occurrence of a
change in control of the company, all outstanding stock options and SARs become
immediately exercisable, any restriction imposed on restricted stock, restricted
stock units, performance shares or other awards will lapse, and any performance
shares or other awards with performance-related vesting conditions will be
deemed earned at the target level (or if no target level is specified, the
maximum level). Unless a participant's award agreement provides otherwise, if a
participant's employment or service terminates following a change in control,
any of the participant's stock options or SARs that were outstanding on the date
of the change in control and that were vested as of the date of termination of
employment or service will remain exercisable for a period ending not before the
earlier of the first anniversary of the termination of the participant's
employment or service or the expiration of the stated term of the
award.
The Plan
may be amended, suspended or terminated at any time by our board of directors,
provided that no amendment that requires shareholder approval in order for the
plan to comply with any applicable stock exchange listing standards or
securities laws will be effective unless the requisite shareholder approval is
obtained, and no amendment or termination may be made without approval of a
participant to the extent the amendment or termination materially adversely
affects the participant's outstanding awards.
As of
December 31, 2009 we have granted 80,000 shares of common stock and options to
purchase 600,000 shares of common stock pursuant to the Plan. Each Director
other than Mr. Parker holds options to purchase 100,000 shares of Common stock.
Each option was priced at the fair market value of the company’s common shares
at the date of grant. In May 2007, MIT issued Messrs. Schuster,
Rubin, Duncan and Bagwell 20,000 shares of common stock of MIT as compensation
for services rendered and to be rendered in 2007.
In
November, 2008, the Board of Directors granted 100,000 shares to each member of
the Board for services rendered in 2008.
Equity
Compensation Plan Information
Plan Category
|
Number of securities to
be issued upon exercise
of outstanding options
warrants and rights
|
Weighted-average
exercise price of
outstanding options,
warrants and right
|
Number of securities
remaining available for
future issuance under
equity compensation
plans
|
|||||||||
Equity
compensation plans approved by security holders
|
680,000 | 1.08 | 4,320,000 | |||||||||
Equity
compensation plans not approved by security holders
|
0 | N/a | 0 | |||||||||
Total
|
680,000 |
30
Management
Bonus Shares subject to Performance Criteria
MIT’s
management had an opportunity to receive a share bonus award for fiscal year
2007 and 2008, but the Company did not reach its Pre-Tax Profit
Target. For purposes of calculating the Pre-Tax Profit Target,
non-cash expenses shall be excluded. In the event that the cumulative Pre-Tax
Profits for fiscal years 2007 and 2008 was at least $60,000,000, then an
aggregate of 15 million bonus shares would have been awarded.
2007
|
2008
|
|||||||
Bonus
Shares
|
10,000,000 | 5,000,000 | ||||||
Pre-Tax
Profit Target
|
$ | 25,000,000 | $ | 35,000,000 |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The table
below shows the amount of our common stock beneficially owned as of April 14,
2009 by each of our directors and officers, all executive officers and directors
as a group, and each person whom we believe beneficially owns more than 5% of
our outstanding voting stock. As of April 11, 2009 there were
51,734,571 shares of common stock of the
Company issued and outstanding.
Name
|
Amount and Nature of Beneficial Ownership
of Common Shares
|
Percent of Class
(1)
|
||||||
William
C. Parker
|
21,595,760 | 41.74 | ||||||
Arlene
Wilhelm
|
1,392,500 | 2.69 | ||||||
John
Sabia (1)
|
250,000 | * | ||||||
Brinson
Clements (1)
|
250,000 | * | ||||||
Steven
W. Schuster (1)(2)(3)
|
1,805,380 | 3.30 | ||||||
Thomas
Duncan (1)(2)
|
483,158 | * | ||||||
Robert
Rubin (1)(2)(4)
|
483,158 | * | ||||||
Meyers
Associates, LP (5)
|
3,475,000 | 6.72 | ||||||
All
Executive Officers and Directors
as
a Group (8 persons)(3)
|
26,259,956, | 50.76 | % |
* Less
than 1%
(1)
|
Includes
options to purchase 100,000 shares of common stock of MIT, which options
vested on May 2, 2008 provided the director remains a director of the
company.
|
(2)
|
20,000
shares were issued on May 2, 2007 to each of Messrs. Schuster, Duncan,
Rubin and Bagwell as outside directors of the Company. The
shares vested on May 2, 2008.
|
(3)
|
Includes
822,222 shares of common stock issued to McLaughlin & Stern LLP, of
which Mr. Schuster is a member, in consideration for legal services
rendered to the company.
|
31
(4)
|
Excludes
1,148,668 shares of common stock, warrants to purchase 173,020 shares of
common stock and Series A Preferred Stock convertible into 173,020 shares
of common stock by the Rubin Family Irrevocable Stock Trust, over which
Mr. Rubin disclaims beneficial
ownership.
|
(5)
|
Includes
935,000 shares of common stock and an option to purchase up to 635 units,
each unit consisting of one share of Series A Preferred Stock and one
Warrant to purchase 2,000 shares of common stock, at a purchase price of
$1,000 per unit. Meyers Associates L.P. disclaims beneficial ownership of
980,000 shares of common stock owned by Bruce Meyers, an affiliate of
Meyers Associates L.P.
|
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Certain Relationships and
Related Transactions
We
believe that all prior related party transactions have been entered into upon
terms no less favorable to us than those that could be obtained from
unaffiliated third parties. Our reasonable belief of fair value is based upon
proximate similar transactions with third parties or attempts to obtain the
consideration from third parties. All ongoing and future transactions with such
persons, including any loans or compensation to such persons, will be approved
by a majority of disinterested members of the Board of Directors.
On August
1, 2008, MIT borrowed $500,000 from Globank, Inc. The loan bears interest at the
rate of 60% per year, with monthly payments of interest only of $25,000
beginning on September 1, 2008. The term of the loan is for 24 months, is not
prepayable and is secured by all of the assets of the Company. The Globank note
is guaranteed by Mr. William C. Parker and each MIT’s
subsidiaries. The proceeds of the loan were used to repay Northern
Healthcare in full and avoid threatened litigation. The balance of
the proceeds was used to pay a portion of the loan due Coastal Bank, pay certain
suppliers and settle certain outstanding litigation.
Director
Independence
Each of Messrs. Rubin,
Duncan and Schuster are independent directors and do not constitute a majority
of the Board of Directors. None of them nor their affiliates have taken
any positions inside the company except for being the independent directors, and
are thus considered as independent
Audit
Committee and Financial Experts
Our audit
committee consists of Mr. Duncan and Mr. Schuster, who are independent member of
our Board of Directors The functions of our audit committee include
things such as: recommending an independent registered public accounting firm to
audit the annual financial statements; reviewing the independent registered
public accounting firm’s independence, the financial statements and their audit
report; and reviewing management's administration of the system of internal
accounting controls. We do not currently have a written audit committee charter
or similar document. In 2008, the audit committee met together with the other
independent directors.
Compensation
Committee
Our
compensation committee consists of Mr. Schuster, Mr. Rubin, and Mr.
Sabia. The compensation committee reviews and sets the compensation
of our executive officers and directors. We do not currently have a written
compensation committee charter or similar document. The compensation
payable to Mr. Parker and Ms. Wilhelm, the two most highly paid executives, is
determined by their employment agreements. The Company’s performance
was not deemed to be sufficiently successful in 2009 to warrant the payment of
performance bonuses. The Committee, together with other independent
directors, receives recommendations from Mr. Parker, the President of
MIT. The Committee, in reaching its conclusions, reviews MIT’s
performance in comparison to the expectations set forth the prior
year.
32
Code of
Ethics
MIT has
not yet adopted a code of ethics. The company is reviewing a code of
ethics as part of its reorganization following the Merger. The code
of ethics is reasonably designed to deter wrongdoing and promote honest and
ethical conduct; provide full, fair, accurate, timely and understandable
disclosure in public reports; comply with applicable laws; ensure prompt
internal reporting of code violations; and provide accountability for adherence
to the code.
Meetings of the Board of
Directors and Committees
The Board of Directors met four times
in 2009 and all members were present. The audit committee and the
compensation committee met jointly with the other independent directors once,
and all members were present.
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
For 2009,
the Company was billed $71,142 for audit fees and no other accounting fees by
the principal accountant for the audit. For 2008, the Company was
billed $52,000 for audit fees and no other accounting fees by the principal
accountant for the audit. The principal accountant was not paid any fees for
other services in 2008 or 2007. The audit committee approved the engagement of
the independent accountant for all services rendered in 2008.
33
ITEM
15. EXHIBITS.
EXHIBITS
Exhibits:
|
||
2.1
|
Agreement
and Plan of Merger, dated as of May 2, 2007, by and among MIT Holding,
Inc. and Convention All Holdings, Inc. (1)
|
|
3.1
|
Certificate
of Incorporation, as amended(2)
|
|
3.2
|
Bylaws
(1)
|
|
4.1
|
Certificate
of Designations, Rights and Preferences of Series A Preferred Stock of MIT
Holding Inc.
(1)
|
|
4.2
|
Form
of warrant of MIT Holding Inc. issued in the Private Placement(1)
|
|
4.3
|
Registration
Rights Agreement issued to investors in the Private Placement (1)
|
|
4.4
|
Registration
Rights Agreement issued to investors in November 2006 Bridge Loan(1)
|
|
4.5
|
Promissory
Note issued to Northern Healthcare Capital(1)
|
|
10.1
|
Credit
and Security Agreement between MIT and Northern Healthcare Capital, dated
April 2007(1)
|
|
10.2
|
Unit
Purchase Option dated May 2, 2007(1)
|
|
10.3
|
Employment
Agreement of William C. Parker dated as of June 30, 2006(1)
|
|
10.4
|
Employment
Agreement of Arlene Wilhelm, dated December 2006, as amended(2)
|
|
10.5
|
Employment
Agreement of Dexter Truax, dated December 2006, as amended (1)
|
|
10.6
|
Real
Property Lease: 115B Echols St, Savannah(1)
|
|
10.7
|
Real
Property Lease & Guaranty: 37 W. Fairmont Ave., Suite 202,
Savannah(1)
|
|
10.8
|
Real
Property Lease & Guaranty: 37 W. Fairmont Ave., Suite 204,
Savannah(1)
|
|
10.9
|
Real
Property Lease & Guaranty: 393 EH Court, Brunswick(1)
|
|
10.10
|
MIT's
2006 Stock Incentive Plan(1)
|
|
10.11
|
2007
Stock Incentive Plan(2)
|
|
10.12
10.13
10.14
10.15
10.16
10.17
|
Agreement
with MIURA Enterprises, dated December 20, 2007
Promissory
Note between the Company and Globank Corp. dated as of July 29,
2008
Guaranty
of William C. Parker in favor of Globank Corp. dated as of July
29, 2008
Guaranty
of Medical Infusions Technologies Inc. in favor of Globank
Corp. dated as of July 29, 2008
Guaranty
of Medical Infusions Technologies Ambulatory Care Center, LLC
in favor of Globank Corp. dated as of July 29, 2008
Guaranty
of MIT Ambulatory Care Center, Inc. in favor of Globank Corp.
dated as of July 29,
2008
|
21.1
|
List
of subsidiaries of MIT
|
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Rule
13a-14(a)
|
|
31.2
|
Certification
of the Principal Financial Officer pursuant to Rule
15d-14(a)
|
|
32.2
|
Certification
of the Chief Executive Officer and the Principal Financial Officer
pursuant to 18 U.S.C. 1350
|
|
(1)
|
This
Exhibit is filed as an Exhibit to the Form 8-K filed by the Company with
the Securities Exchange Commission on May 8, 2007, and incorporated herein
by reference.
|
|
(2)
|
This
Exhibit is filed as an Exhibit to the Form SB-2 filed by the Company with
the Securities Exchange Commission on July 5, 2007, and incorporated
herein by reference
|
|
(3)
|
This
Exhibit is filed as an Exhibit to the Form 10KSB for the period ended
September 30, 2008 and incorporated herein by
reference
|
34
Signatures
In
accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
this annual report on Form 10-K/A for the year ended December 31, 2009 to be
signed on its behalf by the undersigned, thereunto duly authorized.
MIT
Holding, Inc.
|
|
By:
|
/s/
William C. Parker
|
William
C. Parker, Chief Executive Officer
|
Date: May 19,
2010
Signature
|
Title
|
Date
|
||
/s/
William C. Parker
|
President,
Chief Executive Officer,
|
May 19,
2010
|
||
William
C. Parker
|
Chairman
& Director
|
|||
/s
John A. Sabia
|
Controller
(the Principal Financial
|
May
19, 2010
|
||
John
A. Sabia
|
Officer)
& Director
|
|||
/s/
Brinson Clements
|
Director
|
May
19, 2010
|
||
Brinson
Clements
|
||||
|
Director
|
May
__, 2010
|
||
Thomas
Duncan
|
||||
/s/Steven W. Schuster
|
Director
|
May
19, 2010
|
||
Steven
W. Schuster
|
||||
|
Director
|
May
__, 2010
|
||
Robert
Rubin
|
35