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United States

Securities and Exchange Commission

Washington, D.C.  20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended SEPTEMBER 30, 2012

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File No: 333-13679

 

MIT HOLDING, INC.

(Exact name of registrant as specified in its charter)

 

DELAWARE   20-5068091
(State or other jurisdiction of   I.R.S. Employer ID No)
incorporation or organization)    

 

351A Commercial Way., Savannah, GA31406

 (Address of principal executive office)  (Zip Code)

 

Registrant's telephone number: (912) 925-1905

 

N/A


 Former name, former address and former fiscal year,

(if changed since last report)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)  Yes [  ] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  [  ] Accelerated filer  [  ]  

Non-accelerated filer      

 (Do not check if a smaller
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]

 

The number of shares of common stock, no par value per share, outstanding as of November 10, 2012 was 88,260,811

 

 

 

 
 

 

MIT HOLDING, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012

 

INDEX

 

TABLE OF CONTENTS

 

      Page
PART I – FINANCIAL INFORMATION
 
Item 1: Financial Statements   3
       
Item 2: Management’s Discussion and Analysis of  Financial Condition and Results of Operations   4
       
Item 3: Quantitative and Qualitative Disclosures About Market  Risk   9 
       
Item 4T: Controls and Procedures  
       
PART II – OTHER INFORMATION
 
Item 1: Legal Proceedings   10 
       
Item 1A: Risk Factors   10 
       
Item 2: Unregistered Sales of Equity Securities and Use of  Proceeds   10 
       
Item 3: Defaults Upon Senior Securities   10 
       
Item 4: Removed and Reserved   10 
       
Item 5: Other Information   10 
       
Item 6: Exhibits   11 

 

2
 

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

  Page
   
Financial Statements (Unaudited)  
   
Consolidated Balance Sheets as of  September 30, 2012  and December 31, 2011 F-1
   
Consolidated Statements of Operations for the three months ended September 30, 2012 and 2011 F-2
   
Consolidated Statements of Operations for the nine months ended September 30, 2012 and 2011 F-3
   
Consolidated Statement of Stockholders’ Deficiency  for the three months  ended September 30, 2012 F-4
   
Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 F-5
   
Notes to Consolidated Financial Statements F-6 - F-24

 

3
 

  

MIT HOLDING, INC.

CONSOLIDATED BALANCE SHEETS

 

   SEPTEMBER 30, 2012   December 31, 2011 
   (Unaudited and
Unreviewed)
     
ASSETS        
CURRENT ASSETS          
Cash  $20,348   $52,659 
Amount due from lender received January 24,2011 (Note F)          
Accounts receivable, net of allowance for doubtful accounts of $232,276 and $508,719 respectively   328,881    758,680 
Inventories   164,026    119,610 
Employee advances   1,430    1,862 
Prepaid expenses   47,191    39,686 
           
Total current assets   561,876    972,407 
           
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $127,926 and $123,373, respectively   34,222    34,222 
           
OTHER ASSETS          
Investment in subsidiary and related contracts   386,572    400,000 
Non-compete agreement, net of accumulated
amortization of $200,000 and $171,254, respectively
   -    28,746 
           
Total other assets   386,572    428,746 
           
TOTAL ASSETS  $982,670   $1,435,375 
           
LIABILITIES AND STOCKHOLDERS' DEFICIENCY          
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $2,729,461   $2,575,827 
Current portion of debt   317,148    183,422 
           
Total current liabilities   3,046,609    2,759,249 
           
LONG-TERM DEBT   971,390    718,516 
           
Common stock subject to mandatory redemption 5,000,000 shares issued second quarter 2011   250,000    250,000 
Estimated liability for equity-based financial instruments with characteristics of liabilities:          
Series A Convertible Preferred Stock (1,796.73 and 1,896.73 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively)   151,738    113,804 
Warrants   5,213    5,718 
           
TOTAL LIABILITIES   4,424,950    3,847,287 
           
STOCKHOLDERS' DEFICIENCY          
Preferred stock, $0.000001 par value; 5,000,000 shares authorized, 1,796.73 and 1,896.73 shares issued and outstanding at June 30, 2011 and December 31, 2009, respectively (included in liabilities)   -    - 
Common stock, $0.000001 par value; 250,000,000 shares authorized, 88,260,811 and 52,254,571 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively.  (5,000,000 additional shares included in liabilities)   81    81 
Additional paid-in capital   7,444,973    7,444,973 
Accumulated deficit   (10,887,334)   (9,856,966)
           
Total stockholders' (deficiency)   (3,442,280)   (2,411,912)
           
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY  $982,670   $1,435,375 

 

The accompanying notes are an integral part of these statements.

 

F-1
 

 

MIT HOLDING, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(UNAUDITED AND UNREVIEWED )

 

   SEPTEMBER 30, 2012   SEPTEMBER 30, 2011 
         
Revenue          
           
Sales and services rendered  $719,172   $1,517,794 
           
Cost of medical supplies   315,267    531,379 
           
Gross profit   403,905    986,415 
           
Operating Expenses          
Salaries and payroll cost   254,738    592,289 
Selling, general and administrative   456,766    445,782 
Provision for doubtful accounts   165,000    140,000 
Depreciation and amortization   9,999    9,999 
           
Total operating expenses   886,503    1,188,070 
           
Income (loss) from operations   (482,598)   (201,655)
           
Other income (expense):          
Income (expense) from revaluation of equity-based financial instruments with characteristics of liabilities at fair values (as restated for 2009- note O)  
 
 
 
 
-
 
 
 
 
 
 
 
29,934
 
 
Loss from discontinued operations   -    (204,494)
Gain on disposition of Assets by MITRX, Inc- note Q   -    2,925,600 
Interest expense   (36,630)   (69,490)
Total other income (expense)   (36,630)   2,681,550
           
Income (loss) before provision for income taxes   (519,228)   2,479,894 
           
Provision for income taxes   -    - 
           
Net income (loss)   (519,228)   2,479,894 
           
Increase in cumulative dividends payable on Series A          
 Preferred Stock (as restated for 2009- Note O)      (25,655 )     25,655  
           
Net income (loss) attributable to common stockholders  $(544,883)  $2,454,239 
           
Net income (loss) per common share:          
Basic and diluted  $0.01   $0.03
           
Weighted average number of common shares outstanding:          
Basic and diluted   81,400,811    72,105,555 

  

F-2
 

  

MIT HOLDING, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

( UNAUDITED AND UNREVIEWED )

 

  SEPTEMBER 30, 2012   SEPTEMBER 30, 2011 
         
Revenue          
           
Sales and services rendered  $2,854,758   $4,722,825 
           
Cost of medical supplies   1,354,024    1,984,374 
           
Gross profit   1,500,734    2,738,451 
           
Operating Expenses          
Salaries and payroll cost   805,280    1,404,700 
Selling, general and administrative   1,343,394    1,349,747 
Provision for doubtful accounts   165,000    206,000 
Depreciation and amortization   29,997    29,997 
           
Total operating expenses   2,343,671    2,990,444 
           
Income (loss) from operations   (842,937)   (251,993)
           
Other income (expense):          
Income (expense) from revaluation of equity-based financial instruments with characteristics of liabilities at fair values (as restated for 2009- note O)   (37,429)   (46,836 
Loss from discontinued operations   -    (948,786 
Gain on disposition of Assets by MITRX, Inc- note Q   -    2,925,600 
Interest expense   (150,001)   (210,091)
Total other income (expense)   (187,430)   1,719,887
           
Income (loss) before provision for income taxes   (1,030,367)   1,467,894 
           
Provision for income taxes   -    - 
           
Net income (loss)   (1,030,367)   1,467,894 
           
Increase in cumulative dividends payable on Series A          
Preferred Stock (as restated for 2009- Note O)        51,310 
           
Net income (loss) attributable to common stockholders  $(1,056,022)  $1,416,584 
           
Net income (loss) per common share:          
Basic and diluted  $(0.01)  $0.02
           
Weighted average number of common shares outstanding:          
Basic and diluted   81,400,811    62,268,683 

 

F-3
 

 

MIT HOLDING, INC.

 

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

( UNAUDITED AND UNREVIEWED )

 

   Common Stock , $.000001 par value   Additional
Paid-in
   Accumulated   Total
Stockholders’
 
   Shares   Amount   Capital   Deficit   (Deficiency) 
                     
Balance at December 31, 2010   52,254,571    52   $6,279,362   $(8,527,203)  $(2,247,789)
                          
Purchase accounting adjustment for acquisition by MITRX        -    4,919,221    -    4,919,221 
                          
 Issuance of stock for compensation   42,000    -    1,470    -    1,470 
                          
Net loss for six months ended June 30, 2011                  (1,013,145)   (1,013,145)
                          
Balance at June 30, 2011   52,296,571    52    11,200,053    (9,540,348)   1,659,758 
Issuance of stock for compensation of Officers and Directors.   4,104,240    4    164,166         164,170 
                          
Issuance of stock for MITRX acquisition of PLTC   26,860,000    27    1,074,373         1,074,400 
                          
Net income for the nine months ended SEPTEMBER 30, 2012   -     -     -    1,467,894    1,467,894 
                          
Balance at SEPTEMBER 30, 2012   83,260,811   $83   $12,438,592   $(8072,454)  $4,366,222 

   

The accompanying notes are an integral part of these statements.

 

F-4
 

 

MIT HOLDING, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

( UNAUDITED AND UNREVIEWED)

 

   SEPTEMBER 30, 2012   SEPTEMBER 30, 2011 
CASH Flow          
OPERATING ACTIVITIES          
Net income (loss)  $(1,030,367)  $1,467,894 
Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities:          
Expense(income) from revaluation of equity-based financial  instruments with characteristics of liabilities at fair values (as restated for 2009 - note O)   37,429    (46,935)
Depreciation and amortization   29,997    29,997 
Issuance of common stock for services   -    165,640 
Provision for doubtful accounts   165,000    206,000 
Amount due from lender   -    50,000 
Changes in operating assets and liabilities:          
Receivables   503,128    439,033 
Inventories   (44,416)   36,854 
Prepaid expenses   433    30,338 
Employee advances   (7,505)   4,237 
Accounts payable and accrued expenses   (72,519)   (419,996)
           
Cash provided by operating activities   (418,820)   1,963,062 
           
INVESTING ACTIVITIES          
Issuance of stock for acquisition   461,906    1,074,400 
Capital expenditures   -    (10,048)
           
Cash used for investing activities   461,906    1,063,952 
           
FINANCING  ACTIVITIES          
Note receivable for disposition of MITRX operations   -    (2,797,281)
Repayment of debt   (75,307)   (103,791)
           
Cash used for financing activities   (75,307)   (2,901,072)
           
NET  INCREASE (DECREASE) IN CASH   (32,221)   (125,942)
           
CASH BALANCE BEGINNING OF PERIOD   52,569    177,620 
           
CASH BALANCE END OF PERIOD  $20,348   $51,678 
           
Supplemental Disclosures:          
Interest paid  $150,001   $252,229 
Taxes paid  $-   $- 
Non- cash Financing Activities:          
Conversion of Accounts Payable to Fixed Rate Term Note due to Cardinal Health  $   $252,229 
Conversion of Convertible Preferred Stock to Common Stock  $   $- 

 

The accompanying notes are an integral part of these statements.

 

F-5
 

  

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE A – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION POLICIES

 

1.Nature of Operations

 

        MIT Holding, Inc., a Delaware corporation, is a holding company. Through three wholly-owned subsidiaries, MIT distributes wholesale pharmaceuticals, administers intravenous infusions, operates an ambulatory center where therapies are administered and sells and rents home medical equipment.

 

Medical Infusion Technologies, Inc. was incorporated in November 1991 in the state of Georgia. On July 6, 2006, an agreement and plan of merger was made between MIT Holding, Inc., a Delaware corporation, Medical Infusion Technologies, Inc., and MIT Acquisition A, Inc. By this agreement, MIT Holding, Inc. became the parent company and Medical Infusion Technologies, Inc. and MIT Ambulatory Care Center, Inc., wholly-owned subsidiaries.

 

MIT Holding, Inc. Merger with Convention All Holdings, Inc.

 

Our company was formerly known as Convention All Holdings, Inc. and, on May 2, 2007, we acquired a 100% ownership interest in MIT Holding, Inc. through a merger of MIT Holding, Inc. with and into MIT CVAH Acquisition Corp, a newly formed Delaware corporation and wholly-owned subsidiary, in exchange for 32,886,779 shares of our common stock. Simultaneously with the Merger, the company formerly known as MIT Holding, Inc. changed its name to Medical Infusion Group, Inc., and we changed our name to MIT Holding, Inc. As a result of the Merger, we now own 100% of Medical Infusion Group, Inc., a Delaware corporation, which, in turn, continues to own 100% of the issued and outstanding shares of capital stock of MIT Ambulatory Care Center, Inc., a Georgia corporation (“Ambulatory”), Medical Infusion Technologies, Inc., a Georgia corporation (“Infusion”) and MIT International Distribution, Inc., a Delaware corporation (“MIT International”).

 

2.Basis of Presentation

 

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.

 

3.Going Concern

 

At SEPTEMBER 30, 2012, the Company had negative working capital of $1,527,301. From inception, the Company has incurred an accumulated deficit of $6,110,524. These factors raise substantial doubt as to the Company’s ability to continue as a going concern.

 

F-6
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE A – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION POLICIES (continued)

 

There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company’s existing stockholders.

 

The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

 

F-7
 

  

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE B – INTERIM FINANCIAL STATEMENTS

 

The unaudited condensed consolidated financial statements as of September 30, 2012 and for the three months and six months ended September 30, 2012 and 2011 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10 - Q. In the opinion of management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of September 30, 2012 and the results of operations and cash flows for the three months and six months ended September 30, 2012 and 2011. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three month period ended September 30, 2012 is not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending December 31, 2011. The balance sheet at December 31, 2011 has been derived from the audited consolidated financial statements at that date.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2010 included in our Form 10–K filed April 19, 2011.

 

NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

1.Principles of Consolidation
   
  The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include the accounts of MIT Holding, Inc. and Medical Infusion Technologies, Inc. and MIT Ambulatory Care Center, Inc., wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.

  

2.Use of Estimates
   
  The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

F-8
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

3.Cash Equivalents
   
  Investments having an original maturity of 90 days or less that are readily convertible into cash are considered cash equivalents. The Company had no cash equivalents as of September 30, 2012.

  

4.Fair Value of Financial Instruments
   
  The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, net, accounts payable and accrued expenses, and debt. The fair value of these financial instruments approximate their carrying amounts reported in the balance sheets due to the short term maturity of these instruments or based upon market quotations or quotations of instruments with similar interest rates and similar maturities.

  

5.Accounts Receivable, Net of Allowance for Doubtful Accounts
   
  The Company derives most of its revenue from contracts with third party payors such as insurance companies and Medicare and Medicaid programs. Its billings are often settled lower by such payors. An allowance for doubtful accounts is established and recorded based on historical experience and the aging of the related accounts receivable.

  

6.Inventories
   
  Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value). They consist mainly of pharmaceutical supplies and medical equipment.

  

7.Property and Equipment
   
  Property and equipment are stated at cost and are depreciated principally on methods and at rates designed to amortize their costs over their estimated useful lives.
   
  The estimated service lives of property and equipment are principally as follows:

  

Furniture and fixtures   5- 7 years
Computer equipment   3- 7 years
Vehicles   5- 7 years

 

F-9
 

  

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  

  Repairs and maintenance are expensed as incurred. Expenditures that increase the value or productive capacity of assets are capitalized.
   
8.Long-Lived Assets
   
  Property and equipment and other long-lived assets, including non-compete agreements, are evaluated for impairment whenever events or conditions indicate that the carrying value of an asset may not be recoverable, but not less than annually. If the sum of undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets.

  

9.Revenue Recognition
   
  Sales and services rendered are recorded when products and services are delivered to the customers. Provision for discounts, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. In instances where products are configured to customer requirements, revenue is recorded upon the successful completion of the Company’s final test procedures.

  

10.Stock-Based Compensation
   
  Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (“ASC”) 718, “Compensation- Stock Compensation”.
   
  In addition to requiring supplemental disclosures, ASC 718, Compensation – Stock Compensation, addresses the accounting for share-based payment transactions in which a company receives goods in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. FASB ASC 718 focuses primarily on accounting for transactions in which a company obtains employee services in share-based payment transactions.
   
  References to the issuances of restricted stock refer to stock of a public company issued in private placement transactions to individuals who are eligible to sell all or some of their shares of restricted Common Stock pursuant to Rule 144 promulgated under the Securities Act of 1933 (“Rule 144”), subject to certain limitations. In general, pursuant to Rule 144, a stockholder who is not an affiliate and has satisfied a six-month holding period may sell all of his restricted stock without restriction, provided that the Company has current information publicly available. Rule 144 also permits, under certain circumstances, the sale of restricted stock, without any limitations, by a non-affiliate of the Company that has satisfied a one-year holding period.

  

F-10
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

11.Advertising Costs
   
  Advertising costs are expensed as incurred. Advertising expense totaled $ 33,876 for the nine months ended SEPTEMBER 30, 2012 and $ 84,294 for the three months ended September 30, 2011.

  

12.Income Taxes
   
  Deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements by applying enacted statutory tax rates expected to apply in the years in which these temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

  

13.Net Income (Loss) per Common Share
   
  Basic net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during the period.
   
  Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as warrants and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation.
   
  For the nine months ended September 30, 2012 and 2011, diluted weighted average number of common shares outstanding exclude 3,593,460 (2009 : 3,793,460) shares issuable on conversion of Series A Preferred Stock, 600,000 shares issuable on exercise of outstanding stock options and 8,418,780 shares issuable on exercise of outstanding warrants.

   

F-11
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

14.Reclassifications
   
  Certain prior period amounts have been reclassified to conform to the current period presentation.

  

15.Recent Accounting Pronouncements
   
  Certain accounting pronouncements have been issued by FASB and other standard setting organizations which are not yet effective and have not yet been adopted by the Company. The impact on the Company’s consolidated financial position and results of operations from adoption of these standards is not expected to be material.

  

NOTE D – ACCOUNTS RECEIVABLE

 

Accounts receivable consist of:

 

   September 30, 2012   December 31, 2011 
Ambulatory care  $119,337   $501,767 
Infusions   236,422    435,361 
Durable medical equipment   138,308    93,935 
Wholesale   -    - 
           
Total   494,068    1,031,086 
           
Allowance for doubtful accounts   (165,187)   (232,276)
           
Net  $328,881   $798,810 

 

The allowance for doubtful accounts changed as follows:

 

 

 

 

Nine months ended
September 30, 2012

   

Nine months ended
September 30, 2011

 
Balance, beginning of year   $ 238,719     $ 508,719  
Provision for doubtful accounts     165,000        206,000  
Writeoffs     (238,532 )     (482,443 )
                 
Balance, end of period   $ 165,187     $ 232,276  

 

F-12
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE E – INVENTORIES

 

Inventories consist of:

 

   SEPTEMBER 30, 2012   December 31, 2011 
Ambulatory care  $72,013   $50,236 
Infusions   65,610    45,451 
Durable medical equipment   16,402    23,922 
    -      
Total  $164,025   $119,609 

 

NOTE F – NON-COMPETE AGREEMENT

 

Non-compete agreement consists of:

 

   SEPTEMBER 30, 2012   December 31, 2011 
Consideration to seller of Infusion and Ambulatory (and Company's chief operating officer) attributable to non-compete agreement executed May 10, 2005  $200,000   $200,000 
           
Accumulated amortization   (200,000)   (97,929)
           
Total  $-   $102,071 

 

The non-compete agreement is being amortized over the estimated remaining period of the agreement (see Note N).

 

F-13
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

( UNAUDITED AND UNREVIEWED )

NOTE G – DEBT

 

The Company’s debt is as follows:  September 30, 2012   December 31, 2011 
       
Globank Corp., interest at 14.9% payable monthly commencing January 1, 2011(interest at 60% in 2009 and 2010), due in monthly installments of $1,000 from February 1, 2011 to December 1, 2013 and a balloon payment of $1,002,727 on January 1, 2014, secured by Company assets and guaranties of the Company’s chief executive officer and the Company’s three subsidiaries (less unamortized debt discounts of $410,000 and $0, respectively) MIT’s newly elected Co-Chairman and Co-President, Walter H.C. Drakeford (“Drakeford”) whom is also the Company’s new Chief Financial Officer, Secretary and Director has had a professional relationship with a financing entity in which the president of Globank is involved in.  $695,727   $709,727 
           
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.   -     
           
Metro Medical – installment loan, interest at 12% due in monthly installments of principal and interest of $20,000 through August 20,2014, secured by Company assets and guaranty of the Company’s Chief Executive Officer   354,595      
           
Smith Medical – installment loan, interest at 12%, due in monthly installments of principal and interest of $5,212 through December 28,2013 , secured by Company assets and guaranty of the Company’s Chief Executive Officer   84,177      
           
Suntrust Bank Fixed Rate Term Note, interest at 10%, due in monthly installments of principal and interest of $7,798 through April 10, 2014, secured by guaranty of the Company’s Chief Executive Officer   154,039    192,212 
           
           
Total   1,288,538    901,939 
Current portion of debt   317,148    183,423 
Long – term debt  $971,390   $718,516 

 

Maturities of debt at SEPTEMBER 30, 2012 are as follows:

 

Years ending June 30,   Amount 
 2012   $86,359 
 2013    323,726 
 2014    878,453 
     $1,288,538 

 

F-14
 

  

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE H ESTIMATED LIABILITY FOR EQUITY-BASED FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF LIABILITIES

 

Effective January 1, 2009, in accordance with EITF Issue No. 07-05, “Determining Whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock”, the Company reclassified the fair values at January 1, 2009 of the outstanding Series A Convertible Preferred Stock and warrants from the private placement of the units which closed May 31, 2007 from stockholders’ equity to liabilities, as follows:

 

   Common     
   Shares   Fair 
   Equivalent   Value 
Series A Convertible Preferred Stock   3,793,460   $227,608 
Warrants   8,168,780    106,194 
           
Total financial instruments   11,962,240   $333,802 

 

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”.

 

F-15
 

  

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE H –ESTIMATED LIABILITY FOR EQUITY-BASED FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF LIABILITIES (continued)

 

The fair values of the financial instruments consisted of:

 

   SEPTEMBER 30, 2012   December 31,2011 
   Common       Common     
   Shares   Fair   Shares   Fair 
   Equivalent   Value   Equivalent   Value 
Series A Convertible Preferred Stock   3,593,460   $143,738    3,793,460   $151,738 
Warrants   8,168,780    9,803    8,168,780    25,323 
                     
Total financial instruments   11,762,240    153,541    11,962,240   $177,061 

 

Below is a reconciliation of the change in the fair values of the financial instruments from January 1, 2009 through SEPTEMBER 30, 2012:

 

   Common     
   Shares   Fair 
   Equivalent   Value 
Balance, January 1, 2009   11,962,240   $333,802 
Revaluation credited to operations   -    (164,271)
Balance, March 31, 2009   11,962,240    169,531 
Revaluation charged to operations   -    789,139 
 Balance, June 30, 2009   11,962,240    958,670 
Revaluation credited to operations   -    (403,695)
Balance, September 30, 2009   11,962,240    554,975 
Revaluation credited to operations   -    (377,914)
Balance, December 31, 2009   11,962,240    177,061 
Revaluation charged  to operations   -    332,169 
Balance, March 31,2010   11,962,240    509,230 
Revaluation credited to operations   -    (295,050)
Balance, June 30, 2010   11,962,240    214,180 
Conversion of Series A Convertible Preferred Stock   (200,000)   (8,000)
Revaluation credited to operations   -    (52,639)
Balance, September 30, 2011   11,762,240    153,541 
Revaluation credited to operations        (80,855)
Balance, December 31, 2010   11,762,240    72,686 
Revaluation charged to operations        35,395 
Balance, March 31,2011   11,762,240    108,081 
Revaluation charged to operations        41,375 
Balance, June 30,2011   11,762,240    149,459 
Revaluation credited to operations        (29,838)
Balance, SEPTEMBER 30, 2012   11,762,240   $119,621 

 

F-16
 

  

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

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 SEPTEMBER 30, 2012, there are 1,796.73 shares of Series A Preferred Stock issued and outstanding. Holders of Series A Preferred Stock are entitled at any time to convert their shares of Series A Preferred Stock into Common Stock, without any further payment Each share of Series A Preferred Stock is initially convertible into 2,000 shares of Common Stock, equivalent to a Conversion Price of $0.50 per share. The number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock is subject to adjustment upon the occurrence of certain events, including, among others, a stock split, reverse stock split or combination of MIT's Common Stock; an issuance of Common Stock or other securities of MIT as a dividend or distribution on the Common Stock; a reclassification, exchange or substitution of the Common Stock; or a capital reorganization of MIT. In the event that MIT issues any additional shares of its Common Stock following the Offering, the Conversion rate will be that number of shares of Common Stock equal to $1,000 divided by the price per share at which MIT issues Common Stock in such offering. At our option, following the effectiveness of a registration statement registering the shares of Common Stock issuable upon the conversion of the Series A Preferred Stock and the exercise of the Warrants, if the price of the Common Stock trades above 300% of the Conversion Price per share during any period of 30 consecutive trading days and the average trading volume is at least 50,000 shares per day, for such 30 day period, each share of Series A Preferred Stock can be automatically converted into Common Stock at the Conversion Rate then in effect.

 

The liquidation preference amount of each share of Series A Preferred Stock is $1,000, or a total of $1,796,730 for the 1,796.73 shares issued and outstanding as of SEPTEMBER 30, 2012 (December 31, 2009: $1,896,730 for the $1,896.73 shares issued and outstanding).

 

As part of its private placement of the Units (including the Series A Preferred Stock) which closed May 31, 2007, the Company granted a financial advisor a five-year option to purchase up to 635 units (comprised of 635 shares of Series A Preferred Stock and warrants to purchase up to 1,270,000 shares of common stock at an exercise price of $0.75 per share to August 13, 2012) at a price of $1,000 per Unit.

 

Dividends accrue on the Series A Preferred Stock at the rate of 6% per annum and are cumulative.  If and when declared, the Company may pay such dividends in cash or common stock. The cumulative undeclared and unpaid dividends are $361,184 and $295,831 at SEPTEMBER 30, 2012 and December 31, 2009, 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 statement of operations for the year ended December 31, 2009 and increased common stock and additional paid-in capital by the same amount.

  

F-17
 

  

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE J – ISSUANCE OF COMMON STOCK (continued)

 

In the first quarter of 2010, the Board of Directors authorized the issuance of a total of 320,000 shares of common stock to Board Members and key employees valued at a price of $0.04 per share, or $12,400 total. The Company included the $12,400 in selling, general and administrative expenses in the accompanying statement of operations for the six months ended SEPTEMBER 30, 2012 and increased common stock and additional paid-in capital by the same amount.

 

In the third quarter of 2010, a holder of Series A Convertible Preferred Stock elected to convert 100 shares owned into 200,000 Shares of Common Stock. In the second quarter of 2011, 5,000,000 shares of common stock were issued to Globank, Inc. as consideration for the loan to MIT by Globank and 42,000 shares were issued as compensation to certain officers. In the third quarter of 2011, 4,104,240 were issued as compensation to officers and directors of the Company and 26,860,000 shares were issued in connection with the purchase by MITRX of Palmetto Long Term Pharmacy (PLTC) and National Direct Home Pharmacy (NDHP). The value of the shares was included in the value of the acquisition.

 

NOTE K – STOCK OPTIONS AND COMMON STOCK PURCHASE WARRANTS

 

A summary of stock options and warrants activity for the year ended December 31, 2009 and for the six months ended September 30, 2012 follows:

 

   Common Shares Equivalent 
   Stock Options   Warrants 
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 
Granted and issued   -    - 
Exercised   -    - 
Forfeited/expired/cancelled   -    - 
           
Outstanding at September 30, 2012   600,000    8,418,780 

 

F-18
 

  

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE K – STOCK OPTIONS AND COMMON STOCK PURCHASE WARRANTS (continued)

 

Stock options outstanding at SEPTEMBER 30, 2012 and December 31, 2011 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 SEPTEMBER 30, 2012 and December 31, 2011 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:

 

   Nine months ended September 30, 
   2012   2011 
Expected income tax expense (benefit) at 34%  $499,083   $23,783 
Non-deductible stock-based compensation   55,184    4,216 
Non-deductible expense (non-taxable income) from revaluation of equity-based financial instruments with characteristics of liabilities at fair values   (10,178)   (5,277)
Change in valuation allowance   (844,089)   (22,725)
           
Provision for income taxes  $-   $- 

 

F-19
 

  

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE L – INCOME TAXES (continued)

 

The components of net deferred income tax assets are as follows:

 

   SEPTEMBER 30, 2012   December 31, 2011 
         
Allowance for doubtful accounts  $78,794   $172,964 
Net operating loss carryforward   356,369    1,178,039 
Total   435,163    1,351,003 
Less valuation allowance   (435,163)   (1,351,003)
Net deferred income tax assets  $-   $- 

 

Based on management’s present assessment, the Company has not yet determined it to be more likely than not that a deferred income tax asset of up to $1,308,074 attributable to the future utilization of the net operating loss carryforwards and other timing differences of approximately $3,847,276 as of SEPTEMBER 30, 2012 will be realized.  Accordingly, the Company has maintained its 100% allowance against the deferred tax asset in the financial statements at SEPTEMBER 30, 2012. The Company will continue to review this valuation allowance and make adjustments as appropriate.  The $3,394,382 net operating loss carryforward expires $1,743,693 in year 2028, $983,226 in year 2029 and $667,463 in year 2030.

 

NOTE M – OPERATING SEGMENTS

 

The Company has four principal operating segments, which are as follows:

 

  Medical Infusion Technologies-“MIT”
  MIT International / Provector
  Durable Medical Equipment - “DME”
  MIT Ambulatory Care Center -“Ambulatory Care”

 

“MIT” is a provider of intravenous therapies to patients at their home, at a designated facility. MIT’s primary product lines are centered upon infusion therapy.

 

“International / Provector” is the division responsible for the marketing and distribution of Provector on a worldwide basis for international sales only.

 

F-20
 

  

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE M – OPERATING SEGMENTS (continued)

 

“DME” carries a variety of durable medical equipment and supplies.

 

“Ambulatory Care” administers the intravenous therapies to patients in the Company’s facility.

 

The following tables show the summarized financial information of the Company’s reportable segments at SEPTEMBER 30, 2012 and 2011 and for the nine months ended:

 

    Medical                                
    Infusion     International/     Ambulatory              
    - MIT     Provector     Care     DME     Wholesale     Combined  
2012                                    
Revenue   $ 1,381,898     $ -     $ 711,343     $ 310,355     $ 451,162     $ 2,854,758  
Income (loss) from operations     (1,051,379 )     -       173,479       8,796       26,166       (842,937 )
Depreciation and amortization     29,997       -       -       -               29,997  
Assets   $ 729,855       -     $ 114,622     $ 138,192             $ 982,670  
                                                 
2011                                                
Revenue   $ 1,846,175     $ 200,000     $ 2,414,311     $ 262,339     $       $ 4,722,825  
Income (loss) from operations     (1,169,217 )     (193,946 )     1,077,188       33,981               (251,993
Depreciation and amortization     29,997       -       -       -               29,997  
Assets   $ 4,546,132       -     $ 473,744     $ 87,150             $ 5,107,026  

 

F-21
 

   

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

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 September 30, 2012, 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 was 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. This agreement has been verbally extended and amended to defer the $625,000 common stock market value contingent liability of the Company until 2012.

 

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 was 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 agreed not to compete with the Company for a period of three years after the sales of any shares of the Company.  This agreement has been verbally extended and amended to defer the $500,000 common stock market value contingent liability of the Company until 2012.

 

Lease Agreements

 

The following are the key terms of MIT’s lease agreements:

 

The lease on the facility located at 115B Echols St., Savannah, GA was entered into January 1, 2007 is on a month to month lease basis. The rent is $4,180 per month. This lease is personally guaranteed by William C. Parker, Chairman of the Board.

 

MIT leases two suites in the facility located at 37 W. Fairmont Avenue, Savannah, GA. These facilities were destroyed in a fire in November 2011. The company has relocated to temporary facilities on a month to month basis. Lease expense on the faciltiy is $1,375 per month.

  

F-22
 

  

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE N - COMMITMENTS AND CONTINGENCIES (continued)

 

Rent expense incurred under the aforementioned leases totaled $23,694 and $23,465 for the three months ended and $47,182 and $39,490 for the nine months ended September 30, 2012 and 2010, respectively.

 

Stock-Based Compensation Plan

 

On June 7, 2007 the Board of Directors approved the 2007 Stock Incentive Plan (the "Plan") covering 5,000,000 shares. The shareholders subsequently approved the Plan. The shares underlying the Plan are restricted. The Plan is identical to MIT’s 2006 Stock Incentive Plan (which was adopted by Medical Infusion Group, Inc. (the former MIT Holding, Inc.) prior to the Merger) in all material respects, other than that the 2006 Stock Incentive Plan covers 7,000,000 shares. All awards under the 2006 Stock Incentive Plan were exchanged for awards under the Plan effective upon the Company’s May 2, 2007 merger with Medical Infusion Group, Inc.

 

The 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 – SUBSEQUENT EVENTS

 

On October 31, 2011 a fire started in a suite of offices adjacent to our corporate offices. The fire completely destroyed 4 offices and caused smoke damage to the remainder of the suites. This has caused significant efforts to be taken to relocate offices, acquire replacement furniture and equipment and to reassign responsibilities to continue to operate the Company. Due to redundancy in data backups and sound Information Technology Internal Controls, it is believed that no data was lost although the Company continues to review its operating data and has not found any loss of data. Hard copy files relating to accounting such as bank statements, check supporting documents were lost but it is believed that the Company can reconstruct or replace any lost documents.

 

NOTE Q – LOSS ON DISCONTINUED OPERATIONS

 

As noted in the 8k issued on September 20, 2011, MITRX Corporation, a wholly owned subsidiary of MIT Holding Inc. (“MIT” or the “Company”) executed two Stock Purchase agreements selling One hundred Percent (100%) of each of the companies; National Direct Home Pharmacy, Inc to TDT Investments Inc. and Palmetto Long Term Care Pharmacy, Inc. to Pharmco, Inc.  There are no material relationships between the purchasers, its owners, affiliates, officers or directors and MIT’s officers, directors or affiliates, other than Tommy Duncan who is a long term director of MIT, who abstained from any voting pertaining to these transactions.

 

F-23
 

   

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

SEPTEMBER 30, 2012

 

(UNAUDITED AND UNREVIEWED)

 

NOTE Q – LOSS ON DISCONTINUED OPERATIONS (Continued)

 

The operations of the company for the period January 20, 2011 to August 19,2011 is summarized below

 

   Results of Operations 
     
Sales and Services rendered  $12,901,669 
      
Cost of Medical Supplies   10,515,438 
      
Gross profit   2,386,231
Operating Expenses     
Salaries and payroll costs   1,881,909
Selling, general and administrative   1,424,525 
Depreciation Expense   28,583 
Total Operating Expenses  $3,335,017
      
Income (loss) from operations  $(948,786)

 

F-24
 

 

Item 2. Management’s Discussion and Analysis

 

The statements contained in this 10Q, are not purely historical statements, but rather include what we believe are forward-looking statements. The forward-looking statements are based on factors set forth in the following discussion. Our actual results could differ materially from results anticipated in these forward-looking statements. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements.

 

Overview

 

Through its subsidiaries, MIT prepares intravenous medication for home infusion by the patient, operates an ambulatory center where intravenous infusions are administered and sells and rents home medical equipment. MIT is based in Savannah, Georgia and operates an ambulatory care center in that area.  Although all of the Company’s revenues in 2010 have been derived from providing intravenous therapies and renting home medical equipment in the Savannah area, the Company is developing ProVector© BTi , to kill mosquitoes in the fight to reduce malaria, dengue fever and other infectious diseases transmitted by them. The Company is seeking a grant to fund the production and distribution of the product. In connection with its attempt to obtain this grant, the Company is in discussions with a not-for-profit organization to obtain the grants necessary to be able to deliver Provector to countries in need.  However, there is no assurance that funding will be received. If sufficient funding is received, the Company will pursue world wide sales of this malaria fighting product The Company is also providing technical information to foreign governments which are interested in pursuing the Provector as well.

 

Critical Accounting Policies

 

Management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, impairment of long-lived assets, including finite lived intangible assets, accrued liabilities and certain expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

 

Our significant accounting policies are summarized in Note A to our financial statements for the six months ended September 30, 2012. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

 

Inventories

 

Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value). They consist mainly of pharmaceutical supplies and medical equipment.

 

Revenue Recognition

 

Sales and services are recorded when products are delivered to the customers. Provision for discounts, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. In instances where products are configured to customer requirements, revenue is recorded upon the successful completion of the Company’s final test procedures.   Beginning in the fourth quarter of 2008, the Company began using “mail order drugs” for some expensive drugs to reduce the need for cash in providing certain therapies.  In this plan, drugs are shipped to MIT prepaid by the respective insurance companies.  The company recognizes revenue for the efforts of pharmacy personnel in formulation and for nurses in the administration of the drugs to our patients as well as supplies used and no revenue or costs associated with the drugs is recorded. This has caused a reduction in revenue and cost of sales and creating an increase in margins.

 

4
 

   

Advertising Cost

 

Advertising costs are expensed as incurred.

 

Estimates

 

Preparing the Company’s financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Recent Accounting Pronouncements

 

The impact on the Company’s financial position and results of operations from accounting pronouncements which went effective and were adopted by the Company in the periods presented was not material.  The future impact of accounting pronouncements issued by the FASB and other standard setting organizations which are not yet effective and have not yet been adopted by the Company are not expected to be material.

 

Results of Operations

 

Comparison of nine months ended September 30, 2012 to nine months ended September 30, 2011.

 

Revenues

 

Consolidated revenues for the nine months ended September 30, 2012 were $2,854,758 as compared $4,722,825 for the nine months ended September 30, 2011, representing a decrease of $1,896,067 or 39.5%. Consolidated cost of sales for the  nine months ended September 30, 2012  were $1,352,024 or 47.4% of sales as compared to cost of sales for the previous period ended September 30, 2011 of $1,984,374 or 42.0% of sales. This resulted in a gross profit for the period of $1,500,733 or 52.6% as compared to gross profit for the same period in 2011 of $2,738,451 or 58.0%. The decrease came as a result to lower referrals to the infusion clinic resulting from concerns in the medical community of the impact of the Affordable Care Act.

 

Consolidated revenues for the three months ended September 30, 2012 were $719,172, as compared $1,517,794 for the three months ended September, 2011, representing an decrease of $798,622 or 52.2%. Consolidated cost of sales for the three months ended September 30, 2012 were $315,266 or 43.8% of sales as compared to cost of sales for the previous period ended September 30, 2011 of $531,379 or 35.0% of sales. This resulted in a gross profit for the three month period of $403,905 or 56.2% as compared to gross profit for the same period in 2011 of $986,415 or 65.0%.

 

The decrease in consolidated revenues for the period reflects a decrease of revenue in the Ambulatory division on a quarter to quarter basis due to continued use of mail order drugs leading to little change in sales volume with a decrease in sales.  In addition, the Company has opened a compounding pharmacy in South Carolina which incurred significant startup costs in the last 12 months while not achieving the anticipated revenues that the Company had forecasted. The company has currently began to participate in the Wholesale market in the current periods with modest results due to capital restrictions. The company does not anticipate any significant increases in Wholesale in future periods until such times as sufficient operating funds are realized. The lack of operating funds and reduced profit margins in the sale of IVIG has caused the Company to cease its efforts in wholesale sales of pharmaceutical products, both domestically and internationally, and focus more on the medical infusion and ambulatory care operations at its remaining location in Savannah, Georgia.  The Company anticipates that it will reenter the wholesale distribution business if it obtains sufficient operating funds and believes that satisfactory profit margins can be achieved, of which there can be no assurance.

 

5
 

  

The Company has four principal operating segments, which are as follows:

 

  Medical Infusion Technologies-“MIT”
  MIT International-International / Provector
  Medical Infusion Tech,DME-“DME”
  MIT Ambulatory Care Center-“Ambulatory Care”

 

“MIT” is a provider of intravenous therapies to patients at their home, at a designated facility, or at the Company’s office facilities. MIT’s primary product lines are centered upon infusion therapy.

 

“International / Provector” is the division responsible for the marketing and distribution of Provector on a worldwide basis for international sales only.

 

“DME” carries the gamut of durable medical equipment and supplies.

 

“Ambulatory Care” administers the intravenous therapies to patients in the Savannah Clinic.

 

The following tables show the operations of the Company’s reportable segments:

 

For the Nine months ended September 30,

 

    Medical                                
    Infusion     International/     Ambulatory              
    - MIT     Provector     Care     DME     MITRX     Combined  
2012                                    
Revenue   $ 1,381,898     $ -     $ 711,343     $ 310,355     $ 451,162     $ 2,854,758  
Income (loss) from operations     (1,051,379 )     -       173,479       8,796       26,166       (251,994 )
Depreciation and amortization     29,997       -       -       -               29,997  
Assets   $ 729,855       -     $ 114,622     $ 138,192             $ 982,670  
                                                 
2011                                                
Revenue   $ 1,846,175     $ 200,000     $ 2,414,311     $ 262,339     $       $ 4,722,825  
Income (loss) from operations     (1,169,217 )     (193,946 )     1,077,188       33,981               (251,994  
Depreciation and amortization     29,997       -       -       -               29,997  
Assets   $ 4,546,132       -     $ 473,744     $ 87,150             $ 5,107,026  

 

6
 

  

Operating Expenses

 

Operating expenses decreased $640,753 or 21.4% to $2,343,671 for the nine months ended September 30, 2012 from $2,984,424 for the same period in 2011 and income (loss) from operations decreased by $596,964 from $(245,973) to ($842,973) from 2011. The decrease in operating expense is attributable to a $599,42 decrease in Labor and related costs and $41,000 increase in bad debt expense as well as decreases in nearly all controllable costs offset by an increase in consulting fees and contract labor.

 

 

For the nine months ended September 30, 2012, selling, general and administrative expenses were $1,343,394 as compared to $1,343,727 in 2011, with only a minor increase of $332 from the prior period with increase consulting fees offset by lower marketing costs, and expenditures relating to Provector costs.  For the nine months ended September, 2012, we had the following expenses: consulting fees of $421,424, contract labor of $308,810 and employee benefits and payroll related costs of $70,538, insurance expense of $60,651, office expense of $40,881 auto expense of $32,087.

 

For the three months ended September 30, 2012, selling, general and administrative expenses were essentially unchanged at $456,766 as compared to $445,762 in 2011, an increase of $11,004 or 2.5% that is attributable to increases in  consulting fees, off set by decreases in legal and accounting fees and marketing costs. For the three months ended September 30, 2012, we had the following expenses: consulting fees of $154,536, contract labor of $ 97,999, employee benefits and payroll related costs of $27,780, lease expense of $15,574, insurance expense of $14,862, office expense of $6,747 and telephone expense of $8,466. 

 

  Depreciation and amortization was unchanged at $29,997 for the nine months ended September 30, 2012 as compared to same period in 2011 and was unchanged at $9,999 for the three months ended September 30, 2012 as compared to the same period in 2011. The company has had no capital investments in the current year.

 

Operating Income (loss)

 

Operating income (loss) decreased $596,964 or 242.7% to ($842,937) for the nine months ended September 30, 2012 from $245,973 for the same period ended September 30, 2011 and decreased $280,963, or 139.3%, to ($482,598) from $(201,635) for the three months ended September 30, 2012.  This is primarily attributable to lower revenues than in 2011.

 

Net income (loss)

 

Pretax income (loss) decreased $ 2,504,280 or 169.9% to ($1,030,367) for the nine months ended September 30, 2012 from $1,473,912 for the same period ended September 30, 2011 and decreased $2,254,850 or 129.9%, to ($519,228) from $1,735,622 for the three months ended September 30, 2012.  This is primarily attributable to lower revenues than in 2011 and the extraordinary gain recorded in 2011. 

 

7
 

   

Liquidity and Capital Resources

 

As of September 30, 2012, the company had cash of $20,348 as compared to 52,568 at December 31, 2011. For the nine months ended September 30, 2012, net cash used by operating activities aggregated $364,696 as compared to cash provided by operating activities for the nine months ended September 30, 2011 of $2,925,600.  As of September 30, 2012, we were funded primarily through operations. The principal financing activities for the six months ended September 30, 2012 consisted of repayment of debt of $75,307 as compared to $103,971 for the nine months ended September 30, 2011.

 

On December 31, 2010, the Company entered into the New Loan with Globank to modify the original agreement and original note dated July 29, 2008. Pursuant to the New Loan and Amended and Restated Promissory Note, the principal amount increased from $500,000 to $1,037,727, the maturity date was extended from July 29, 2010 to January 1, 2014,and the interest rate was reduced from 60% to 14.9% per annum.

 

At December 31, 2010, the Company received a going concern opinion from our outside auditors.  The Company has no additional lines of credit available at this time.  The grant of the security interest in the company’s assets and any failure to pay the loan to Globank when due may adversely our ability to secure additional financing. Globank could declare the loan in default and pursue its remedies, which would adversely affect our operations. The collection of accounts receivable continues to be slower than management would prefer.   Our inability to achieve sufficient collections on our receivables has created a liquidity challenge that raises doubt about our ability to continue as a going concern.  The development of ProVectorTM has produced interest  from outside parties to provide funds and enable the Company to make the product available to the market in late 2010 should adequate financing be obtained. The Company is actively promoting the viability of the ProVectorTM .to entities that could provide working capital and provide means to distribute the ProVectorTM; however, there are no assurances that such third parties will provide the funding or that alternate funding can be obtained on acceptable terms.

 

Litigation

 

We are subject from time to time to litigation relating to the activities of our business and in the marketplace which it serves. As of September 30, 2012, we were not engaged in any litigation.

 

Off-Balance Sheet Arrangements

 

We are not a party to any off-balance sheet arrangements

 

8
 

  

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable.

 

Item 4T. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer, William C. Parker, and Principal Financial Officer, John Sabia, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of the period covered by this report.  Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure.  A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

Changes in Internal Control Over Financial Reporting.   During the most recent quarter ended SEPTEMBER 30, 2012, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

INFLATION

 

Inflation has not had a material impact on our business.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements in this quarterly report on Form 10-Q contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause its actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond its control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this quarterly report in its entirety, including but not limited to its financial statements and the notes thereto. Except for its ongoing obligations to disclose material information under the Federal securities laws, the Company undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

 

9
 

   

PART II. OTHER INFORMATION

 

Item 1. 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 1A.  Risk Factors

 

Not applicable.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Removed and Reserved.

 

Item 5. Other Information

 

None.

 

10
 

 

Item 6. Exhibits

 

31.1   Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2   Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101.INS*    XBRL Instance Document 
101.SCH*   XBRL Taxonomy Extension Schema Document 
101.CAL*    XBRL Taxonomy Extension Calculation Linkbase Document 
101.DEF*    XBRL Taxonomy Extension Definition Linkbase Document 
101.LAB*    XBRL Taxonomy Extension Label Linkbase Document   
101.PRE*    XBRL Taxonomy Extension Presentation Linkbase Document 

 

*   Filed herewith.

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  MIT HOLDING, INC.
     
DATE: December 6, 2012 By: /s/ William C. Parker
    William C. Parker, Chief Executive Officer
    (principal executive officer)
     
  By: /s/ Walter H. C. Drakeford
    Walter H. C. Drakeford, the Principal Financial Officer
    (principal financial officer)

 

11