Attached files
file | filename |
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EX-31.2 - MODERN MEDICAL MODALITIES CORP | v193873_ex31-2.htm |
EX-32.1 - MODERN MEDICAL MODALITIES CORP | v193873_ex32-1.htm |
EX-31.1 - MODERN MEDICAL MODALITIES CORP | v193873_ex31-1.htm |
EX-32.2 - MODERN MEDICAL MODALITIES CORP | v193873_ex32-2.htm |
EX-10.13 - MODERN MEDICAL MODALITIES CORP | v193873_ex10-13.htm |
EX-10.12 - MODERN MEDICAL MODALITIES CORP | v193873_ex10-12.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D. C. 20549
Form 10-Q
x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 2010
|
|
¨
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
|
FOR
THE TRANSITION PERIOD FROM __________
TO __________
|
|
Commission
File Number: 0-19195
|
MODERN
MEDICAL MODALITIES CORPORATION
(Exact
name of small business issuer as specified in its charter)
New
Jersey
|
22-3059258
|
|
(State
or other jurisdiction
of
incorporation or organization)
|
(I.R.S.
Employer
Identification
No.)
|
439
Chestnut Street, Union, New Jersey 07083
(Address
of principal executive offices)
(908)
687-8840
(Issuer’s
telephone number)
Indicate
by check mark whether the registrant (1) has 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 filings 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 x No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b2 of the Exchange Act.
¨
|
Large accelerated filer
|
Accelerated filer
¨
|
|
¨
|
Non-accelerated filer
(Do not check if a smaller reporting company)
|
Smaller reporting company
x
|
Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).
Yes ¨ No x
As of
August 14, 2010, there were 25,313,385 shares of the registrant’s common stock,
$0.0002 par value, outstanding.
MODERN
MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
JUNE
30, 2010
QUARTERLY
REPORT ON FORM 10-Q
TABLE
OF CONTENTS
PART I.
FINANCIAL INFORMATION
|
|||
Item
1.
|
Financial
Statements
|
||
Condensed
Consolidated Balance Sheets as of June 30, 2010 (unaudited) and December
31, 2009
|
3 -
4
|
||
|
|||
Condensed
Consolidated Statements of Operations for the three and six months ended
June 30, 2010 and 2009 (unaudited)
|
5
|
||
|
|||
Condensed
Consolidated Statements of Cash Flows for the three and six months ended
June 30, 2010 and 2009 (unaudited)
|
6
|
||
|
|||
Notes
to Interim Condensed Consolidated Financial Statements
|
7 -
10
|
||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
11 -
15
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
15
|
|
Item
4.
|
Controls
and Procedures
|
15
|
|
PART II.
OTHER
INFORMATION
|
|||
Item
1.
|
Legal
Proceedings
|
16
|
|
Item
1A.
|
Risk
Factors
|
16
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
16
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
16
|
|
Item
4.
|
(Removed
and Reserved)
|
16
|
|
Item
5.
|
Other
Information
|
17
|
|
Item
6.
|
Exhibit Index
|
17
|
|
SIGNATURES
|
18
|
PART
1 – FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
MODERN
MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
Assets
|
June
30,
2010
|
December
31,
2009
|
||||||
(Unaudited)
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$
|
94,787
|
$
|
2,733,343
|
||||
Escrow
funds – sale of assets
|
200,000
|
300,000
|
||||||
Accounts
receivable (less allowances of $0)
|
-
|
-
|
||||||
Convertible
promissory note – Best Plastics, LLC
|
812,793
|
-
|
||||||
Deposits
and prepaid expenses
|
2,340
|
30,642
|
||||||
Assets
of discontinued operations
|
-
|
597,873
|
||||||
Total
Current Assets
|
1,109,920
|
3,661,858
|
||||||
Property
and equipment, net of accumulated depreciation of $78,153 and $81,929,
respectively
|
15,775
|
35,766
|
||||||
Unamortized
computer software costs, net of accumulated amortization of $150,000 and
$0, respectively
|
1,137,917
|
1,287,917
|
||||||
Restricted
stock held for investment
|
150,750
|
150,750
|
||||||
Total
Other Assets
|
1,288,667
|
1,438,667
|
||||||
Total
Assets
|
$
|
2,414,362
|
$
|
5,136,291
|
See notes
to financial statements.
MODERN
MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
June
30,
2010
|
December
31,
2009
|
||||||
(Unaudited)
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
$
|
10,350
|
$
|
94,014
|
||||
Accrued
expenses
|
274,791
|
382,555
|
||||||
Note
payable
|
167,000
|
250,000
|
||||||
Current
portion long term debt
|
2,168
|
9,097
|
||||||
Liabilities
of discontinued operations
|
808,587
|
2,348,143
|
||||||
Total
Current Liabilities
|
1,262,896
|
3,083,809
|
||||||
Other
Liabilities
|
||||||||
Long
term debt
|
3,199
|
4,342
|
||||||
Total
Other Liabilities
|
3,199
|
4,342
|
||||||
Total
Liabilities
|
1,266,095
|
3,088,151
|
||||||
Commitments
and contingencies
|
||||||||
Stockholders’
equity:
|
||||||||
Preferred
stock, $0.0002 par value, authorized – 1,000,000 shares—issued
and outstanding - 0 shares
|
||||||||
Common
stock, $0.0002 par value, authorized –
99,000,000 shares—issued 26,527,051 shares and
outstanding 25,313,385 shares at June 30, 2010 and issued – 26,527,051
shares and outstanding 25,323,385 shares at December 31,
2009
|
5,305
|
5,305
|
||||||
Additional
paid-in capital
|
11,944,866
|
11,944,866
|
||||||
(Deficit)
|
(10,664,004
|
)
|
(9,764,531
|
)
|
||||
Treasury
stock, 1,213,666 and 1,203,666 shares, at June 30, 2010 and December 31,
2009, respectively, at cost
|
(137,900
|
)
|
(137,500
|
)
|
||||
Total
stockholders’ equity
|
1,148,267
|
2,048,140
|
||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
2,414,362
|
$
|
5,136,291
|
See notes
to financial statements
MODERN
MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF OPERATIONS
For
the six months ended
|
For
the three months ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2010
|
2009*
|
2010
|
2009 | * | ||||||||||||
Net
revenues from services
|
$ | 197,087 | $ | 21,950 | $ | 121,576 | $ | 3,512 | ||||||||
Cost
of services provided
|
146,540 | 105,209 | 66,783 | 1,808 | ||||||||||||
Total
operating income (loss)
|
50,547 | (83,259 | ) | 54,793 | 1,704 | |||||||||||
Operating
Expenses:
|
||||||||||||||||
Selling,
general and administrative
|
441,315 | 94,107 | 301,632 | (52,024 | ) | |||||||||||
Depreciation
and amortization
|
169,991 | 8,519 | 10,004 | 3,999 | ||||||||||||
Total
operating expenses
|
611,306 | 102,626 | 311,636 | (48,025 | ) | |||||||||||
(Loss)
income from continuing operations before interest
|
||||||||||||||||
expense,
other income and income taxes.
|
(560,759 | ) | (185,885 | ) | (256,843 | ) | 49,729 | |||||||||
Other
income (expense):
|
||||||||||||||||
Interest
expense
|
(21,308 | ) | (40,544 | ) | (6,652 | ) | (40,070 | ) | ||||||||
Gain
on sale of automobile
|
4,000 | 0 | 4,000 | 0 | ||||||||||||
Total
other income (expense)
|
(17,308 | ) | (40,544 | ) | (2,652 | ) | (40,070 | ) | ||||||||
(Loss)
income from continuing operations before
|
||||||||||||||||
income
taxes
|
(578,067 | ) | (226,429 | ) | (259,495 | ) | 9,659 | |||||||||
Provision
for income taxes
|
13,959 | 7,071 | 3,951 | 1,131 | ||||||||||||
(Loss)
income from continuing operations
|
(592,026 | ) | (233,500 | ) | (263,446 | ) | 8,528 | |||||||||
Discontinued
operations:
|
||||||||||||||||
Loss
(income) from operations Union Imaging Associates,
|
||||||||||||||||
less
applicable income taxes of $0 & $0
|
(208,226 | ) | 172,425 | (123,142 | ) | 272,158 | ||||||||||
Loss
from operations of PET Scan at Union
|
||||||||||||||||
Imaging
less applicable income taxes of $0 & $0
|
(2,707 | ) | (2,329 | ) | (2,664 | ) | (2,329 | ) | ||||||||
Loss
(income) from operations Union Imaging Center,
|
||||||||||||||||
less
applicable income taxes of $0 & $0
|
(96,514 | ) | 88,670 | (96,514 | ) | 173,528 | ||||||||||
(Loss)
income from discontinued operations, net of taxes
|
(307,447 | ) | 258,766 | (222,320 | ) | 443,357 | ||||||||||
Net
(loss) income
|
$ | (899,473 | ) | $ | 25,266 | $ | (485,766 | ) | $ | 451,885 | ||||||
(Loss)
per share, basic and diluted
|
||||||||||||||||
(Loss)
from continuing operations
|
$ | (0.023 | ) | $ | (0.009 | ) | $ | (0.010 | ) | $ | 0.000 | |||||
(Loss)
income from discontinued operations
|
(0.012 | ) | 0.010 | (0.009 | ) | 0.018 | ||||||||||
Net
(loss) income available for common stockholders
|
$ | (0.035 | ) | $ | 0.001 | $ | (0.019 | ) | $ | 0.018 | ||||||
Number
of weighted average shares outstanding
|
25,319,635 | 25,520,260 | 25,322,135 | 25,323,385 |
* =
restated to conform to 2010 presentation.
See notes
to financial statements.
MODERN
MEDICAL MODALITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CASH FLOWS
For the six months ended
June
30,
|
||||||||
2010
|
2009*
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
(loss) income
|
$
|
(899,473
|
)
|
$
|
25,266
|
|||
Less:
net (loss) income from discontinued operations
|
(307,447
|
)
|
258,766
|
|||||
Net
(loss) from continuing operations
|
(592,026
|
)
|
(233,500
|
)
|
||||
Adjustments
to reconcile net (loss) to net cash
|
||||||||
provided
by continuing operations:
|
||||||||
Depreciation
and amortization
|
169,991
|
8,519
|
||||||
Changes
in current assets and liabilities:
|
|
|||||||
Accounts
receivable
|
-
|
(3,721
|
)
|
|||||
Escrow
funds – sale of assets
|
100,000
|
-
|
||||||
Prepaid
Expenses
|
28,302
|
24,516
|
||||||
Note
receivable
|
(812,793
|
)
|
-
|
|||||
Accounts
payable
|
(83,663
|
)
|
482,917
|
|||||
Accrued
expenses
|
(107,764
|
)
|
251,052
|
|||||
(705,927
|
)
|
763,283
|
||||||
Net
cash provided by (used in) operating activities
|
(1,297,953
|
)
|
529,783
|
|||||
Cash
flows from financing activities:
|
||||||||
(Increase)
in Treasury Stock at cost, from purchase of the Company's common
shares
|
(400
|
)
|
(75,000
|
)
|
||||
Increase
in Additional Paid In Capital from stock-based
compensation
|
||||||||
resulting from
issuance of employee stock options and warrants
|
-
|
67,390
|
||||||
(Decrease)
increase in long term debt
|
(91,072
|
)
|
(5,414
|
)
|
||||
Net
cash (used in ) financing activities
|
(91,472
|
)
|
(13,024
|
)
|
||||
Net
cash (used in) provided by operating activities from continuing
operations
|
(1,389,425
|
)
|
516,759
|
|||||
Net
cash (used in) operating activities from discontinued
operations
|
(1,249,131
|
)
|
(510,799
|
)
|
||||
Net
cash(used in) provided by operating activities
|
(2,638,556
|
)
|
5,960
|
|||||
Cash
and equivalents, beginning of the period
|
2,733,343
|
46,518
|
||||||
Cash
and equivalents, at end of period
|
$
|
94,787
|
$
|
52,478
|
||||
Supplemental
cash flow information
|
||||||||
Cash
items:
|
||||||||
Interest
paid
|
$
|
21,308
|
$
|
182,232
|
||||
Income
taxes paid
|
$
|
13,959
|
$
|
65,318
|
*
= Restated to conform to 2010 representation.
See notes
to consolidated financial statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 - BASIS OF PRESENTATION:
The
financial information included herein is unaudited; however, such information
reflects all adjustments (consisting solely of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair statement of
results for the interim period. The results of operations for the
three and six months ended June 30, 2010 are not necessarily indicative of the
results to be expected for the full year. The accompanying unaudited
consolidated financial statements and footnotes have been condensed and,
therefore, do not contain all required disclosures. Reference should
be made to the Company's annual report filed on Form 10-K for the year ended
December 31, 2009.
NOTE
2 – SHARE-BASED PAYMENTS IN ACCORDANCE WITH ASC 718:
On
January 1, 2006, we adopted ASC 718, Share-Based Payment , which
requires companies to expense the grant date fair value of employee stock
options and other forms of share-based awards. ASC 718 addresses accounting for
share-based awards, including shares issued under employee stock purchase plans,
stock options, and share-based awards, with compensation expense measured using
the fair value, for financial reporting purposes, and recorded over the
requisite service period of the award. In accordance with ASC 718, we
recognize compensation expense for awards granted and awards modified,
repurchased, or cancelled after the adoption date. Under ASC 718, we
estimate the fair value of stock options and share-based awards using the Simple
Black-Scholes European Option Pricing Model.
For the
three and six month periods ended June 30, 2010 and 2009, we conducted an
outside independent analysis and our own review, and based on the results, we
recognized $0 and $0, respectively, in 2010 and $8,714 and 58,619, respectively,
in 2009, in share-based payments related to warrants and stock options issued
with the rights to exercise zero shares in 2010 and 1,390,000 shares in 2009 of
our common stock.
At June
30, 2010, the Company had no unrecognized compensation cost related to unvested
stock options.
NOTE
3 – LOAN AGREEMENTS:
In
February 2006, the Company entered into an unsecured note with Jacov Hayut in
the amount of $150,000. The loan was for 12 months with an annual
interest rate of 15%, with monthly payments of interest only and with a lump sum
payment of $150,000 due in February 2007. This note was extended for
36 months under the same terms and conditions, except that the Company agreed to
pay the note in full or in part at the lender’s option upon the first equity
capital raise or February 2010, whichever comes first. On June 13,
2007, we paid $50,000 on the unsecured note, and on June 20, 2007 we paid
$25,000 on the unsecured note. On October 9, 2007, we issued Jacov
Hayut a warrant for 150,000 shares with a term of 5 years and an
exercise price of $0.75 per share as part of the payment for the February 2006
unsecured note which was originally due for full payment in February
2007. On March 11, 2010, we paid the $75,000 note balance plus
$937.50 in accrued interest and thus the note was paid in full.
On
October 25, 2006, we entered into an unsecured promissory note with Complete
Flooring and Renovation, Inc. in the principal amount of $65,000. The
loan’s term was for a period of 24 months with an annual interest rate of
15%. The payments were to be made on the 26th of each month in 23
equal installments of $3,151.63 and 1 final installment of
$3,151.67. The payments commenced on November 26, 2006. On
January 7, 2010, we paid the $29,453.67 note balance plus $8,836.08 in accrued
interest, and thus this note was paid in full.
7
On
November 9, 2006, we entered into a Loan Agreement with Irit and Yosef Azoulai
for $50,000. The terms of the Loan Agreement included an annual
interest rate of 20% and the loan was to be paid, in a lump sum with accrued
interest, at the earlier of 6 months from the effective date of the Agreement,
or the closing date of an equity based financing by the Company. In
addition, the Company issued a warrant to these lenders for the right to
purchase 50,000 shares of the Company's common stock with a term of 5 years and
an exercise price $0.70, the closing market price of the Company's common stock
on November 10, 2006. Irit and Yosef Azoulai have waived the 6 month
payment terms and effective January have changed the interest rate from 20% to
10% annually. On March 11, 2010, we paid the $50,000 note plus
$18,057.89 in accrued interest, and thus this note was paid in
full.
On
December 6, 2006, we entered into an unsecured promissory note with Complete
Flooring and Renovation, Inc. in the principal amount of
$150,000. The loan was for a period of 48 months with an annual
interest rate of 12%. The payments were to be made on the 6th of each
month in 48 equal installments of $3,950.08. The payments commenced
on January 6, 2006. On January 7, 2010, we paid the $116,166.03 note
balance plus $26,805.88 in accrued interest, and thus this note was paid in
full.
On March
6, 2007, we entered into a Loan Agreement with Irit and Yosef Azoulai for
$100,000. The terms of this Loan Agreement included an annual
interest rate of 20% and the loan was to be paid, in a lump sum with accrued
interest, at the earlier of 6 months from the effective date of the Agreement,
or the closing date of an equity based financing by the Company. In
addition, the Company issued a warrant to these lenders for the right to
purchase 100,000 shares of the Company's common stock with a term of 5 years and
an exercise price $0.82 based on the closing market price of the Company's
common stock on March 6, 2007. Irit and Yosef Azoulai have waived the
6 month payment terms and effective January have changed the interest rate from
20% to 10% annually. On March 11, 2010, we paid the $100,000 note
plus $35,932.61 in accrued interest, and thus this note was paid in
full.
On
September 14, 2007 we entered into an Asset Purchase Agreement (the "Agreement")
with MTI Partners II, L.P.("MTI-II") to acquire MTI-II's Healthcare Payer Admin
Software Asset (the "Asset") in exchange for 500,000 shares of our common stock
("Common Stock"), warrants ("Warrants") for 900,000 shares of our common stock
with an exercise price of $0.70 per share, and $250,000 to be paid within 12
months from the date of the Agreement. The transaction closed at
the end of
September 2007. The Asset consists of healthcare payer admin computer
software that helps organize, manage, and maintain health plans, membership,
eligibility, claims administration, and includes other customized components.
The shares of Common stock were issued pursuant to Section 4(2) of the
Securities Act of 1933, as amended. Paul Harrison, a member of the
Company’s Board of Directors, is the President of INEX Group, Inc., which serves
as the General Partner of MTI-II. Mr. Harrison received
281,250 shares of our Common Stock, and a Warrant for the right to purchase up
to 506,250 shares of our Common Stock with a term of 5 years at an exercise
price of $0.70 per share which were issuable to MTI-II pursuant to this
Agreement. We renegotiated the $250,000 note, paying $83,000 on January 14, 2010
and extending the balance to December 31, 2010. Starting February 1,
2010, we are paying $1,113.33 in monthly interest or an 8% annual rate of
interest.
On
October 3, 2008, we entered into a Loan Agreement with Moseh and Aliza Lazarian
for $100,000. The terms of this Loan Agreement included an annual
interest rate of 12% and the loan was to be paid in amounts of $50,000 on or
before February 1, 2009 and $50,000 on or
before October 1, 2009. In addition, the Company issued a warrant to
these lenders for the right to purchase up to 500,000 shares of the Company’s
common stock with a term of 5 years and an exercise price of $0.10 per
share. The February 1, 2009, payment was not made by the Company and
under the terms of the loan agreement, the interest rate on the note increased
from 12% to 15% until the $50,000 payment is made. On January 5,
2010, we paid the $100,000 note plus $2,583.33 in accrued interest, and thus the
note was paid in full.
On
November 6, 2008, we entered into a Loan Agreement with Issak Hayut for
$100,000. The terms of this Loan Agreement included an annual
interest rate of 12% and the loan was to be paid in full on or before November
5, 2009. In addition, the Company issued a warrant for the right to
purchase up to 500,000 shares of the Company’s common stock with a term of 5
years and an exercise price of $0.10 per share. On January 7, 2010,
we paid the $100,000 note plus $2,583.33 in accrued interest, and thus this note
was paid in full.
On
January 15, 2009, we entered into a Loan Agreement with Issak Hayut for
$112,500. The terms of this Loan Agreement included interest payments
of $10,000 per month for 3 months and the loan was to be paid in full on or
before April 15, 2009. In addition, the Company issued a warrant for
the right to purchase up to 500,000 shares of the Company’s common stock with a
term of 5 years and an exercise price of $0.10 per share. This Loan Agreement
was entered into in order to have sufficient funds to meet a deadline on a debt
settlement payment due and to help realize a gain on the restructured debt with
Siemens Medical Solutions, USA, Inc. On January 7, 2010, we paid the
$112,500 note plus $20,000 in accrued interest, and thus this note was paid in
full.
On
February 15, 2009, we entered into a Loan Agreement with Issak Hayut for
$112,500. The terms of this Loan Agreement included interest payments
of $10,000 per month for 3 months and the loan was to be paid in full on or
before May 15, 2009. In addition, the Company issued a warrant for
the right to purchase up to 500,000 shares of the Company’s common stock with a
term of 5 years and an exercise price of $0.10 per share. The loan agreement was
entered into in order to have sufficient funds to meet a deadline on a debt
settlement payment due and to help realize a gain on the restructured debt with
Siemens Medical Solutions, USA, Inc. On January 7, 2010 we paid the
$112,500 note plus $30,000 in accrued interest, and thus this note was paid in
full.
NOTE
4 – DR. WOLKSTEIN PUT 350,000 COMMON SHARES TO THE COMPANY.
On
September 1, 2006, we purchased Dr. Wolkstein's share of his ownership interest
in Union Imaging Associates, Inc. ("UIA, Inc.") in exchange for 350,000 shares
of the Company's common stock with a valuation of $154,000 at the time of
purchase, and a note for $27,000 to be paid in 18 payments of $1,500.00 per
month. The 350,000 shares of common stock were issued on October 20,
2006. As a condition of the purchase, the Company agreed to
repurchase the 350,000 shares from Dr. Wolkstein for $75,000 if, for any
consecutive 20 day period commencing September 1, 2008 through the last day of
February 2009, the stock price was below $1.00 per share. On January
22, 2009, Dr. Wolkstein exercised his put option requiring the Company to
repurchase the 350,000 shares in accordance with the purchase
agreement. In March 2010, we agreed to pay Dr. Wolkstein $75,000 in 3
equal installments of $25,000 each. The first installment was paid on
April 2, 2010, with the 2 remaining installments due June 30, 2010 and September
30, 2010.
NOTE
5 – BEST PLASTICS, LLC:
On March
21, 2010, we entered into discussions with Best Plastics, LLC (“Best Plastics”)
to pursue a new business opportunity in order to grow our revenues and
potentially increase our value. This action was taken since we sold
our medical clinics and are pursuing new sources of revenues. As part
of these discussions and our due diligence process, we entered into a six month
Convertible Promissory Note (“March 2010 Promissory Note”) in the amount of
$500,000 at a 6% annualized rate of interest on the outstanding
principal. The Convertible Promissory Note includes a provision
for the right to increase the amount due under the Note, and includes a
provision to convert the outstanding balance due under the Note into
specified ownership interest in Best Plastics. As part of our
provision for the right to increase the amount of the Convertible Promissory
Note, effective April 9, 2010, we entered into a new Convertible Promissory Note
for $600,000 (“April 9, 2010 Promissory Note”) that replaced the March 2010
Promissory Note. Effective April 22, 2010, we entered into another
new Convertible Promissory Note for $700,000 that replaced the April 9, 2010
Promissory Note. In addition, effective April 23, 2010, we entered
into a Business Services Agreement with Best Plastics. Pursuant to the
Business Services Agreement, we will provide management, information, and other
services in exchange for a service fee equal to: (1) one and one-half percent
(1.5%) of the first $25,000,000 of Best Plastics’ gross revenues earned during
the term of the Business Services Agreement, with a minimum fee of $300,000 per
calendar year; (2) one and one-quarter percent (1.25%) of Best Plastics’ gross
revenues earned during the term of the Business Services Agreement for amounts
between $25,000,000 and $50,000,000 of Best Plastics’ gross revenues; and (3)
one percent (1%) of Best Plastics’ gross revenues earned during the term of this
Agreement for the amounts of $50,000,000 of Best Plastics’ gross revenues and
above. As of June 30, 2010, we
have advanced Best Plastics, LLC, $812,793 of the $1,000,000 authorized under
the April 22, 2010 Convertible Promissory Note.
NOTE
6 – TSI BILLING SERVICES, INC LAWSUIT:
On May 3,
2010, we were served with a complaint filed by TSI Billing Service, Inc. against
the Company in the Superior Court of New Jersey, law division, county of
Union on March 31, 2010. The complaint involves breach of
contract claims made by TSI in connection with certain amounts that are
allegedly owed for billing and other services provided to the Company, and
for other costs that were incurred by TSI. The relief sought
by TSI that were alleged in the complaint include monetary damages of
$511,842.33, together with interest, attorney’s fees, and costs of suit for the
TSI claims related to billings services, tax penalties, and incurred and paid
legal fees. We intend to vigorously defend this
lawsuit. On June 4, 2010, we filed a counterclaim alleging breach of
duty of loyalty, breach of implied covenant of good faith and fair dealing,
tortious interference with an employment relationship and tortious interference
with prospective economic advantage.
NOTE
7 – SUBSEQUENT EVENTS:
On July
25, 2010, our board of directors approved a non-cash bonus for Mr. Paul W.
Harrison, our Lead Director of the Board of Directors. The non-cash bonus is a
transfer and assignment of a company automobile with a net book value of
approximately $4,008. The non-cash bonus was paid to preserve cash and was
issued to compensate Mr. Harrison for performing substantial extra work beyond
his regular board duties for several years without receiving any increases in
fees.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Forward-looking
Statements
This
Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in this Item 2 of Part I of
this Quarterly Report include forward-looking statements. These
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity,
performance, or achievements expressed or implied by forward-looking
statements.
In some
cases, you can identify forward-looking statements by terminology such as "may,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "proposed," "intended," or "continue" or the negative
of these terms or other comparable terminology. You should read
statements that contain these words carefully, because they discuss our
expectations about our future operating results or our future financial
condition or state other "forward-looking" information. There may be
events in the future that we are not able to accurately predict or
control. You should be aware that the occurrence of any of the events
described in this Quarterly Report could substantially harm our business,
results of operations and financial condition, and that upon the occurrence of
any of these events, the trading price of our securities. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, growth rates, levels of
activity, performance or achievements. We are under no duty to update
any of the forward-looking statements after the date of this Quarterly Report to
conform these statements to actual results.
The
following discussion should be read in conjunction with Modern Medical
Modalities Corporation’s (“Modern Medical”, the “Company”, “we”, or “us”)
unaudited condensed consolidated financial statements and notes included
herein. The results described below are not necessarily indicative of
the results to be expected in any future period. Certain statements
in this discussion and analysis, including statements regarding our strategy,
financial performance and revenue sources, are forward-looking statements based
on current expectations and entail various risks and uncertainties that could
cause actual results to differ materially from those expressed in the
forward-looking statements. Readers are referred to our Annual Report
on Form 10-K for the year ended December 31, 2009 as filed with the Securities
and Exchange Commission. We undertake no duty to update any
forward-looking statement to conform the statement to actual results or changes
in our expectations.
Overview
We provide internet
driven, healthcare administrative and information services that are supported by
our advanced, web-based, enterprise-wide information system. Our
healthcare administrative and information services have the capacity to service
multi-specialty healthcare markets. The healthcare administrative and
information services include human resources, supply management, medical
customer relationship management (CRM), electronic health records, patient
billing and accounts receivables services, claims adjudication services, and
business intelligence services.
We intend
to focus on providing outsourced administrative and information services through
our wholly-owned subsidiary HealthIXS Corporation, in order to expand into the
more profitable information and administrative services
markets.
We may
also diversify and invest in businesses or ventures that may or may not be
synergistic with our past operations or our remaining information and
administrative services business operated by HealthIXS Corporation in order
to pursue other new sources of revenue. On March 21, 2010, we
entered into discussions with Best Plastics, LLC (“BPL”) to pursue a new
business opportunity in order to grow our revenues and potentially increase our
value. As part of these discussions and our due diligence process, we
entered into a six month Convertible Promissory Note (“March 2010 Promissory
Note”) in the amount of $500,000 at a 6% annualized rate of interest on the
outstanding principal. The Convertible Promissory Note includes
a provision for the right to increase the amount due under the Note,
and includes a provision to convert the outstanding balance due under
the Note into specified ownership interest in Best Plastics. As part
of our provision for the right to increase the amount of the Convertible
Promissory Note, effective April 9, 2010, we entered into a new Convertible
Promissory Note for $600,000 (“April 9, 2010 Promissory Note”) that replaced the
March 2010 Promissory Note. Effective April 22, 2010, we entered into
another new Convertible Promissory Note for $700,000 that replaced the April 9,
2010 Promissory Note and which is attached as Exhibit 10.12 to this Quarterly
Report. In addition, effective April 23, 2010, we entered into a
Business Services Agreement with Best Plastics. Pursuant to the Business
Services Agreement, which is attached hereto as Exhibit 10.13, we will provide
management, information, accounting and other related services in exchange for a
service fee equal to: (1) one and one-half percent (1.5%) of the first
$25,000,000 of Best Plastics’ gross revenues earned during the term of the
Business Services Agreement, with a minimum fee of $300,000 per calendar year;
(2) one and one-quarter percent (1.25%) of Best Plastics’ gross revenues earned
during the term of the Business Services Agreement for amounts between
$25,000,000 and $50,000,000 of Best Plastics’ gross revenues; and (3) one
percent (1%) of Best Plastics’ gross revenues earned during the term of this
Agreement for the amounts of $50,000,000 of Best Plastics’ gross revenues and
above. As
of June 30, 2010, we have advanced Best Plastics, LLC, $812,793 of the
$1,000,000 authorized under the April 22, 2010 Convertible Promissory
Note.
We have
also positioned ourselves to expand our business and participate more in
outsourced management services and the expanding, more profitable administrative
and information services markets. In order to support our business
expansion, we have added customizations to our acquired information system and
derivative software obtained through special licensing terms to produce a more
comprehensive integrated information system that will allow us to provide better
administrative and information services and improve overall
profitability.
On a
consolidated basis, we currently recognize the majority of our revenues from a
range of healthcare administrative and information services that are supported
by our advanced, web-based, enterprise-wide information system that allow us to
leverage our common information system platform, in order to potentially
increase operating income once fixed costs are more rapidly covered with higher
volumes of administrative and information services performed as the healthcare
outpatient services and related markets to continue to grow and operate within
larger networks.
Results
of Operations:
FOR THE
SIX MONTHS ENDED JUNE 30, 2010 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
2009.
Net
Revenues from Services:
For the
six months ended June 30, 2010, net revenues from services totaled $197,087 as
compared to $21,050 for the same period in 2009, a net increase of
$176,037. This increase in net revenues is attributable primarily to
the start up of HealthIXS’ first collaboration agreement for its advanced,
web-based, enterprise-wide information system.
Cost of
services provided:
For the
six months ended June 30, 2010, cost of services provided totaled $146,540 as
compared to $105,209 for the same period in 2009, a decrease of $41,331. This
increase is attributable to costs associated to the start up of HealthIXS’ first
collaboration agreement for its advanced, web-based, enterprise-wide information
system.
Selling,
general and administrative expenses:
For the
six months ended June 30, 2010, selling, general and administrative expenses
totaled $441,315 as compared to $94,107 for the same period in 2009, an increase
of $347,208. This increase resulted primarily from corporate
administrative expenses no longer being allocated to the operations sold at
December 31, 2009. We expect that this should turn around as revenues
from business services generated through HealthIXS’ and other sources starts to
grow.
Loss from continuing
operations:
Loss from
continuing operations for the six months ended June 30, 2010 was $442,026 as
compared to a loss of $233,500 for the same period in 2009, an increase in the
loss from continuing operations of $208,526. This increase in
loss from continuing operations relates directly to the sale of the imaging
centers sold at December 31, 2009. We expect that this should be
reduced as revenues from business services generated through HealthIXS’ and
other sources starts to develop.
12
Results
of Operations:
FOR THE
THREE MONTHS ENDED JUNE 30, 2010 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
2009.
Net
Revenues from Services:
For the
three months ended June 30, 2010, net revenues from services totaled $121,576 as
compared to $3,512 for the same period in 2009, a net increase of
$118,64. This increase in net revenues is attributable primarily to
the start up of HealthIXS’ first collaboration agreement for its advanced,
web-based, enterprise-wide information system.
Cost of
services provided:
For the
three months ended June 30, 2010, cost of services provided totaled $66,783 as
compared to $1,808 for the same period in 2009, a increase of $64,975. This
increase is attributable to costs associated to the start up of HealthIXS’ first
collaboration agreement for its advanced, web-based, enterprise-wide information
system.
Selling,
general and administrative expenses:
For the
three months ended June 30, 2010, selling, general and administrative expenses
totaled $301,632 as compared to $(52,024) for the same period in 2009, an
increase of $353,656. This increase resulted primarily from corporate
administrative expenses no longer being allocated to the operations sold at
December 31, 2009. We expect that this should turn around as revenues
from business services generated through HealthIXS’ and other sources starts to
grow.
Loss from
continuing operations:
Loss from
continuing operations for the three months ended June 30, 2010 was $263,446 as
compared to income of $8,528 for the same period in 2009, a increase in the loss
from continuing operations of $271,974. This increase in loss
from continuing operations relates directly to the sale of the imaging centers
sold at December 31, 2009. We expect that this should be reduced as
revenues from business services generated through HealthIXS’ and other sources
starts to develop.
Liquidity
and Capital Resources:
As of
June 30, 2010, we had a working capital deficiency of $152,976, as compared to
working capital deficiency of $2,203,612 as of June 30, 2009. This positive
shift in working capital was a result of the sale at December 31, 2009 of
substantially all the assets of the Union Imaging centers assets. We
do not believe that our cash flow from operations will be sufficient to fund our
continuing operations and we will continue to have to raise capital to fund
those operations. We may raise additional capital through the
issuance of debt, equity or a combination thereof. There can be no assurance
that any additional financing will be available on terms acceptable to us, if at
all.
Debt:
In
February 2006, the Company entered into an unsecured note with Jacov Hayut in
the amount of $150,000. The loan was for 12 months with an annual
interest rate of 15%, with monthly payments of interest only and with a lump sum
payment of $150,000 due in February 2007. This note was extended for
36 months under the same terms and conditions, except that the Company agreed to
pay the note in full or in part at the lender’s option upon the first equity
capital raise or February 2010, whichever comes first. On June 13,
2007, we paid $50,000 on the unsecured note, and on June 20, 2007 we paid
$25,000 on the unsecured note. On October 9, 2007, we issued Jacov
Hayut a warrant for 150,000 shares with a term of 5 years and an exercise price
of $0.75 per share as part of the payment for the February 2006 unsecured note
which was originally due for full payment in February 2007. On March
11, 2010, we paid the $75,000 note balance plus $937.50 in accrued interest and
thus the note was paid in full.
On
October 25, 2006, we entered into an unsecured promissory note with Complete
Flooring and Renovation, Inc. in the principal amount of $65,000. The
loan’s term was for a period of 24 months with an annual interest rate of
15%. The payments were to be made on the 26th of each month in 23
equal installments of $3,151.63 and 1 final installment of
$3,151.67. The payments commenced on November 26, 2006. On
January 7, 2010, we paid the $29,453.67 note balance plus $8,836.08 in accrued
interest, and thus this note was paid in full.
On
November 9, 2006, we entered into a Loan Agreement with Irit and Yosef Azoulai
for $50,000. The terms of the Loan Agreement included an annual
interest rate of 20% and the loan was to be paid, in a lump sum with accrued
interest, at the earlier of 6 months from the effective date of the Agreement,
or the closing date of an equity based financing by the Company. In
addition, the Company issued a warrant to these lenders for the right to
purchase 50,000 shares of the Company's common stock with a term of 5 years and
an exercise price $0.70, the closing market price of the Company's common stock
on November 10, 2006. Irit and Yosef Azoulai have waived the 6 month
payment terms and effective January have changed the interest rate from 20% to
10% annually. On March 11, 2010, we paid the $50,000 note plus
$18,057.89 in accrued interest, and thus this note was paid in
full.
13
On
December 6, 2006, we entered into an unsecured promissory note with Complete
Flooring and Renovation, Inc. in the principal amount of
$150,000. The loan was for a period of 48 months with an annual
interest rate of 12%. The payments were to be made on the 6th of each
month in 48 equal installments of $3,950.08. The payments commenced
on January 6, 2006. On January 7, 2010, we paid the $116,166.03 note
balance plus $26,805.88 in accrued interest, and thus this note was paid in
full.
On March
6, 2007, we entered into a Loan Agreement with Irit and Yosef Azoulai for
$100,000. The terms of this Loan Agreement included an annual
interest rate of 20% and the loan was to be paid, in a lump sum with accrued
interest, at the earlier of 6 months from the effective date of the Agreement,
or the closing date of an equity based financing by the Company. In
addition, the Company issued a warrant to these lenders for the right to
purchase 100,000 shares of the Company's common stock with a term of 5 years and
an exercise price $0.82 based on the closing market price of the Company's
common stock on March 6, 2007. Irit and Yosef Azoulai have waived the
6 month payment terms and effective January have changed the interest rate from
20% to 10% annually. On March 11, 2010, we paid the $100,000 note
plus $35,932.61 in accrued interest, and thus this note was paid in
full.
On September 14, 2007 we
entered into an Asset Purchase Agreement (the "Agreement") with MTI Partners II,
L.P.("MTI-II") to acquire MTI-II's Healthcare Payer Admin Software Asset (the
"Asset") in exchange for 500,000 shares of our common stock ("Common Stock"),
warrants ("Warrants") for 900,000 shares of our common stock with an exercise
price of $0.70 per share, and $250,000 to be paid within 12 months from the date
of the Agreement. The transaction closed at the end of September
2007. The Asset consists of healthcare payer admin computer software
that helps organize, manage, and maintain health plans, membership, eligibility,
claims administration, and includes other customized components. The shares of
Common stock were issued pursuant to Section 4(2) of the Securities Act of 1933,
as amended. Paul Harrison, a member of the Company’s Board of
Directors, is the President of INEX Group, Inc., which serves as the General
Partner of MTI-II. Mr. Harrison received 281,250 shares of
our Common Stock, and a Warrant for the right to purchase up to 506,250 shares
of our Common Stock with a term of 5 years at an exercise price of $0.70 per
share which were issuable to MTI-II pursuant to this Agreement. We renegotiated
the $250,000 note, paying $83,000 on January 14, 2010 and extending the balance
to December 31, 2010. Starting February 1, 2010, we are paying
$1,113.33 in monthly interest or an 8% annual rate of interest.
On
October 3, 2008, we entered into a Loan Agreement with Moseh and Aliza Lazarian
for $100,000. The terms of this Loan Agreement included an annual
interest rate of 12% and the loan was to be paid in amounts of $50,000 on or
before February 1, 2009 and $50,000 on or
before October 1, 2009. In addition, the Company issued a warrant to
these lenders for the right to purchase up to 500,000 shares of the Company’s
common stock with a term of 5 years and an exercise price of $0.10 per
share. The February 1, 2009, payment was not made by the Company and
under the terms of the loan agreement, the interest rate on the note increased
from 12% to 15% until the $50,000 payment is made. On January 5,
2010, we paid the $100,000 note plus $2,583.33 in accrued interest, and thus the
note was paid in full.
On
November 6, 2008, we entered into a Loan Agreement with Issak Hayut for
$100,000. The terms of this Loan Agreement included an annual
interest rate of 12% and the loan was to be paid in full on or before November
5, 2009. In addition, the Company issued a warrant for the right to
purchase up to 500,000 shares of the Company’s common stock with a term of 5
years and an exercise price of $0.10 per share. On January 7, 2010,
we paid the $100,000 note plus $2,583.33 in accrued interest, and thus this note
was paid in full.
On
January 15, 2009, we entered into a Loan Agreement with Issak Hayut for
$112,500. The terms of this Loan Agreement included interest payments
of $10,000 per month for 3 months and the loan was to be paid in full on or
before April 15, 2009. In addition, the Company issued a warrant for
the right to purchase up to 500,000 shares of the Company’s common stock with a
term of 5 years and an exercise price of $0.10 per share. This Loan Agreement
was entered into in order to have sufficient funds to meet a deadline on a debt
settlement payment due and to help realize a gain on the restructured debt with
Siemens Medical Solutions, USA, Inc. On January 7, 2010, we paid the
$112,500 note plus $20,000 in accrued interest, and thus this note was paid in
full.
On
February 15, 2009, we entered into a Loan Agreement with Issak Hayut for
$112,500. The terms of this Loan Agreement included interest payments
of $10,000 per month for 3 months and the loan was to be paid in full on or
before May 15, 2009. In addition, the Company issued a warrant for
the right to purchase up to 500,000 shares of the Company’s common stock with a
term of 5 years and an exercise price of $0.10 per share. The loan agreement was
entered into in order to have sufficient funds to meet a deadline on a debt
settlement payment due and to help realize a gain on the restructured debt with
Siemens Medical Solutions, USA, Inc. On January 7, 2010 we paid the
$112,500 note plus $30,000 in accrued interest, and thus this note was paid in
full.
These are
the only trends, commitments, events and/or material uncertainties known to
Modern Medical.
Off-Balance
Sheet Arrangements:
None.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
The
Registrant is a smaller reporting company and is not required to provide a
response under this Item 3.
Item
4. Controls and Procedures
Evaluations
of Disclosure Controls and Procedures
Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) under the Securities
Exchange Act of 1934 as of the end of the period covered by this report (the
"Evaluation Date"). Based upon the evaluation, our principal
executive officer and principal financial officer concluded as of the Evaluation
Date that our disclosure controls and procedures were
effective. Disclosure controls are controls and procedures designed
to reasonably ensure that information required to be disclosed in our reports
filed under the Exchange Act, such as this report, is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms. Disclosure controls include controls and procedures designed
to reasonably ensure that such information is accumulated and communicated to
our management, including our chief executive officer and chief financial
officer, as appropriate to allow timely decisions regarding required
disclosure.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting that occurred
during the quarterly period covered by this Quarterly report that have
materially affected, or are reasonable likely to materially affect, our internal
control over financial reporting.
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings
From time
to time, the Company may become involved in various lawsuits and legal
proceedings which arise in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in these
or other matters may arise from time to time that may harm the Company's
business. Except as otherwise disclosed herein, the Company is currently not
aware of any such legal proceedings or claims that it believes will have,
individually or in the aggregate, a material adverse affect on its business,
financial condition or operating results.
Other
than the matters described above, we are not involved in any other material
legal proceedings.
Item
1A. Risk Factors
As a
smaller reporting company, we are not required to provide disclosure under this
Item 1A.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item
3. Defaults upon Senior Securities
There
have not been any defaults on any senior securities during the period covered by
this Quarterly Report.
Item
4. (Removed and Reserved).
Item
5. Other Information
None.
Item
6. Exhibits:
Exhibit
Index
Exhibit
Number
|
Description
|
|
10.12
|
*
Convertible Promissory Note (Due October 22, 2010) issued by Best
Plastics, LLC and Michael Bohbot to the Company dated April 22,
2010
|
|
10.13
|
*
Business Services Agreement between the Company and Best Plastics, LLC
executed on April 23, 2010
|
|
31.1
|
*
Certification of the Company's Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
*
Certification of the Company's Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
32.1
|
*
Certification of the Company's Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
32.2
|
|
*
Certification of the Company's Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
* filed
herewith
SIGNATURES
In
accordance with the requirements of the Securities and Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MODERN
MEDICAL MODALITIES CORPORATION
|
||
Dated:
August 16, 2010
|
/s/ Baruh
Hayut
|
|
Baruh
Hayut
|
||
Chairman
of the Board and Chief Executive Officer
|
||
(Principal
Executive Officer)
|
||
Dated:
August 16, 2010
|
/s/ Minesh
Patel
|
|
Minesh
Patel
|
||
Chief
Financial Officer
|
||
(Principal
Financial and Accounting Officer)
|