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, 2013

 

OR

 

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

 

Commission File No: 333-13679

 

MIT HOLDING, INC.

(Exact name of registrant as specified in its charter)

 

DELAWARE		20-3420795
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer ID No)

 

351B Commercial Way., Savannah, GA 31406

(Address of principal executive office) (Zip Code)

 

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

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

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

 

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

 

Large accelerated filer [  ]

Accelerated filer [  ]

Non-accelerated filer [  ] (Do not check if a smaller 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 18, 2013 was 28,910,601

 

 

 

MIT HOLDING, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED SEPTEMBER 30, 2013

 

INDEX

 

TABLE OF CONTENTS

 

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

 

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

		Page
Financial Statements (Unaudited)
Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012		F-1
Consolidated Statements of Operations for the three months ended September 30, 2013 and 2012		F-2
Consolidated Statements of Operations for the nine months ended September 30, 2013 and 2012		F-3
Consolidated Statement of Stockholders’ Deficiency for the three months ended September 30, 2013		F-4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012		F-5
Notes to Consolidated Financial Statements		F-6 - F-23

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

MIT HOLDING, INC.

CONSOLIDATED BALANCE SHEETS

 

		SEPTEMBER 30, 2013				DECEMBER 31, 2012
		(Unaudited and Unreviewed)
ASSETS
CURRENT ASSETS
Cash		$	21,821			$	52,758
Accounts receivable, net of allowance for doubtful accounts of $200,127 and $508,719 respectively			362,898				236,235
Inventories			146,819				142,878
Employee advances			450				1,430
Prepaid expenses			47,192				47,192
Total current assets			579,180				480,493
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $133,338 and $133,338, respectively			27,256				27,256
OTHER ASSETS
Investment in subsidiary and related contracts			329,441				396,053
Total other assets			329,441				396,053
TOTAL ASSETS		$	935,877			$	903,802
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses		$	3,317,857			$	2,616,685
Current portion of debt			1,226,647				337,265
Total current liabilities			4,544,504				2,954,130
LONG-TERM DEBT			-				953,988
Common stock subject to mandatory redemption 5,000,000 shares issued second quarter 2012			250,000				250,000
Estimated liability for equity-based financial instruments with characteristics of liabilities:
Series A Convertible Preferred Stock (179.67 and 179.67 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively)			151,738				151,738
Warrants			5,213				5,213
TOTAL LIABILITIES			4,951,455				4,315,069
STOCKHOLDERS’ DEFICIENCY
Preferred stock, $0.000001 par value; 5,000,000 shares authorized, 179.67 and 179.67 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively (included in liabilities)
Series B preferred stock $.000001 par value, 1,100,000 shares authorized, 1,100,000 and 1,100,000 issued and outstanding at September 30, 2013 and December 31, 2012			1				-
Common stock, $0.000001 par value; 250,000,000 shares authorized, 28,910,601 and 52,254,571 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively. (5,000,000 additional shares included in liabilities)			140				88
Additional paid-in capital			8,264,868				7,582,166
Accumulated deficit			(12,280,587	)			(10,993,521	)
Total stockholders’ (deficiency)			(4,015,578	)			(3,411,267	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY		$	935,877			$	903,802

 

The accompanying notes are an integral part of these statements.

 

 

MIT HOLDING, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(UNAUDITED AND UNREVIEWED)

 

		SEPTEMBER 30, 2013				SEPTEMBER 30, 2012
Revenue
Sales and services rendered		$	430,157			$	719,172
Cost of medical supplies			159,766				315,267
Gross profit			270,391				403,905
Operating Expenses
Salaries and payroll cost			151,077				254,738
Selling, general and administrative			330,109				456,767
Provision for doubtful accounts			-				165,000
Depreciation and amortization			-				9,999
Total operating expenses			481,186				886,504
(Loss) from operations			(210,795	)			(482,599	)
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)			-				-
Loss from discontinued operations			-				-
Gain on disposition of Assets by MITRX, Inc- note Q			-				-
Interest expense			(66,600	)			(36,630	)
Total other income (expense)			(66,600	)			(36,630	)
(Loss) before provision for income taxes			(277,395	)			(519,228	)
Provision for income taxes			-				-
Net (loss)			(277,395	)			(519,228	)
Increase in cumulative dividends payable on Series A Preferred Stock (as restated for 2009- Note O)							(25,655	)
Net income (loss) attributable to common stockholders		$	(277,395	)		$	(544,883	)
Net income (loss) per common share:
Basic and diluted		$	(0.01	)		$	(0.07	)
Weighted average number of common shares outstanding:
Basic and diluted			28,910,601				8,140,081

 

The accompanying notes are an integral part of these statements.

 

 

MIT HOLDING, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(UNAUDITED AND UNREVIEWED)

 

		SEPTEMBER 30, 2013				SEPTEMBER 30, 2012
Revenue
Sales and services rendered		$	1,352,561			$	2,854,758
Cost of medical supplies			598,326				1,354,024
Gross profit			754,235				1,500,734
Operating Expenses
Salaries and payroll cost			483,424				805,280
Selling, general and administrative			1,193,944				1,343,394
Provision for doubtful accounts			-				165,000
Depreciation and amortization			-				29,997
Total operating expenses			1,677,368				2,343,671
(Loss) from operations			(923,133	)			(842,937
Other income (expense):
Income (expense) from revaluation of equity-based financial instruments with characteristics of liabilities at fair values (as restated for 2009- note O)			-				(37,429	)
Interest expense			(363,932	)			(150,001	)
Total other income (expense)			(363,932	)			(187,430	)
Income (loss) before provision for income taxes			(1,287,065	)			(1,030,367	)
Provision for income taxes			-				-
Net (loss)			(1,287,065	)			(1,030,367	)
Increase in cumulative dividends payable on Series A Preferred Stock (as restated for 2009- Note O)			-				(25,655	)
Net income (loss) attributable to common stockholders		$	(1,287,065	)		$	(1,056,022	)
Net (loss) per common share:
Basic and diluted		$	(0.06	)		$	(0.13	)
Weighted average number of common shares outstanding:
Basic and diluted			20,055,365				8,140,081

 

The accompanying notes are an integral part of these statements.

 

 

MIT HOLDING, INC. 

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED AND UNREVIEWED)

 

		Series B Preferred Stock $0.000001 par value								Common Stock, $0.000001 par value								Additional paid-in				Accumulated				Total Stockholders’
		Shares				Amount				Shares				Amount				Capital				Deficit				(Deficiency)
Balance at December 31, 2010											5,225,457				52				6,279,362				(8,527,203	)			(2,247,789	)
Unaudited and unreviewed:
Issuance of common stock for services in first quarter 2011											4,200				-				1,470				-				1,470
Issuance of common stock for services in third quarter 2011											2,910,424				29				1,164,141				-				1,164,170
Net loss for the year ended December 31, 2011											-				-								(1,329,763	)			(1,329,763	)
Balance at December 31, 2011											8,140,081				81				7,444,973				(9,856,966	)			(2,411,912	)
Issuance of common stock for services in third quarter of 2012											686,000				7				137,193								137,193
Net loss for the twelve months ended December 31, 2012											-				-								(1,136,555	)			(1,136,555	)
Balance at December 31, 2012											8,826,081				88				7,582,166				(10,993,521	)			(3,411,267	)
Issuance of common stock for services in first quarter of 2013											3,584,520				35				107,501								107,536
Issuance of Series B Preferred stock for services in second quarter of 2013			1,100,000				1												79,997								79,998
Issuance of common stock for services in second quarter 2013											16,500,000				16				494,984								495,000
Net loss for the nine months ended September 30, 2013											-				-								(1,287,065	)			(1,287,065	)
Balance at September 30, 2013			1,100,000				1				28,910,601			$	139			$	8,264,650			$	(12,280,586	)		$	(4,015,798	)

 

The accompanying notes are an integral part of these statements.

 

 

MIT HOLDING, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(UNAUDITED AND UNREVIEWED )

 

		SEPTEMBER 30, 2013				SEPTEMBER 30, 2012
OPERATING ACTIVITIES
Net income (loss)		$	(1,287,065	)		$	(1,030,367	)
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
Depreciation and amortization			-				29,997
Issuance of common stock for services			682,536				-
Provision for doubtful accounts			-				165,000
Amount due from lender			-				-
Changes in operating assets and liabilities:
Receivables			(127,663	)			503,128
Inventories			(1,770	)			(44,416	)
Prepaid expenses							433
Employee advances			980				(7,505	)
Accounts payable and accrued expenses			734,214				(72,519	)
Cash provided by operating activities			1,232				(418,820	)
INVESTING ACTIVITIES
Issuance of stock for acquisition			-				1,074,400
Capital expenditures			-				(10,048	)
Cash used for investing activities			-				1,064,352
FINANCING ACTIVITIES
Issue of stock for Services			-				-
Repayment of debt			(33,168	)			(75,307	)
Cash used for financing activities			(33,168	)			(75,307	)
NET INCREASE (DECREASE) IN CASH			(30,936	)			(32,221	)
CASH BALANCE BEGINNING OF PERIOD			52,757				52,569
CASH BALANCE END OF PERIOD		$	21,821			$	20,348
Supplemental Disclosures:
Interest paid		$	297,332			$	150,001
Taxes paid		$	-			$	-
Non- cash Financing Activities:
Conversion of Accounts Payable to Fixed Rate Term Note due to Cardinal Health		$	-			$	-
Conversion of Convertible Preferred Stock to Common Stock		$	-			$	-

 

The accompanying notes are an integral part of these statements.

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(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, 2013, 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.

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(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.

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(UNAUDITED AND UNREVIEWED)

 

NOTE B – INTERIM FINANCIAL STATEMENTS

 

The unaudited condensed consolidated financial statements as of September 30, 2013 and for the three months and six months ended September 30, 2013 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, 2013 and the results of operations and cash flows for the three months and six months ended September 30, 2013 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, 2013 is not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending December 31, 2011. The balance sheet at December 31, 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.

 

  

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(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, 2013.

 

4.

Fair Value of Financial Instruments

 

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

 

5.

Accounts Receivable, Net of Allowance for Doubtful Accounts

 

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

 

6.

Inventories

 

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

 

7.

Property and Equipment

 

Property and equipment are stated at cost and are depreciated principally on methods and at rates designed to amortize their costs over their estimated useful lives.

 

The estimated service lives of property and equipment are principally as follows:

 

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

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(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.

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(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, 2013 and $ 84,294 for the nine months ended September 30, 2012.

 

12.

Income Taxes

 

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

 

13.

Net Income (Loss) per Common Share

 

Basic net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during the period.

 

Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as warrants and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation.

 

For the nine months ended September 30, 2013 and 2012, diluted weighted average number of common shares outstanding exclude 3,593,460 (2009 : 3,793,460) shares issuable on conversion of Series A Preferred Stock, 600,000 shares issuable on exercise of outstanding stock options and 8,418,780 shares issuable on exercise of outstanding warrants.

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(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, 2013				December 31, 2012
Ambulatory care		$	72,627			$	68,277
Infusions			18,757				18,757
Durable medical equipment			199,457				137,627
Wholesale			272,185				211,702
Total			563,026				436,363
Allowance for doubtful accounts			(200,128	)			(200,128	)
Net		$	362,898			$	236,235

 

The allowance for doubtful accounts changed as follows:

 

		Nine months ended September 30, 2013				Twelve months ended December 31,2012
Balance, beginning of year		$	200,128			$	238,515
Provision for doubtful accounts			-				199,941
Write offs			-				(238,328	)
Balance, end of period		$	200,128			$	200,128

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(UNAUDITED AND UNREVIEWED)

 

NOTE E – INVENTORIES

 

Inventories consist of:

 

		September 30, 2013				December 31, 2012
Ambulatory care		$	72,627			$	57,151
Infusions			66,068				50,007
Durable medical equipment			29,364				38,719
Total		$	146,819			$	142,877

 

NOTE F – NON-COMPETE AGREEMENT

 

Non-compete agreement consists of:

 

		September 30, 2013				December 31,  2012
Consideration to seller of Infusion and Ambulatory (and Company’s chief operating officer) attributable to non-compete agreement executed May 10, 2005		$	200,000			$	200,000
Accumulated amortization			(200,000	)			(97,929	)
Total		$	-			$	102,071

 

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

 

 

NOTE G – DEBT

 

The Company’s debt is as follows:

 

		September 30, 2013				December 31, 2012
Globank Corp., interest at 14.9% payable monthly commencing January 1, 2001(interest at 60% in 2009 and 2010), due in monthly installments of $1,000 from February 1, 2011 to December 1, 2013 and a balloon payment of $1,002,727 on January 1, 2014, secured by Company assets and guaranties of the Company’s chief executive officer and the Company’s three subsidiaries (less unamortized debt discounts of $410,000 and $0, respectively) MIT’s newly elected Co-Chairman and Co-President, Walter H.C. Drakeford (“Drakeford”) whom is also the Company’s new Chief Financial Officer, Secretary and Director has had a professional relationship with a financing entity in which the president of Globank is involved in.		$	705,727			$	695,727
Suntrust Bank fixed rate term note, interest at 10% due in monthly installments of principal and interest of $7,798 through April 10, 2014, secured by guaranty of the Company’s Chief Executive Officer			154,863				166,358
Smith Drug Co. fixed rate term note, interest at 6% due in monthly installments of principal and interest of $5,211 through December 28, 2013, secured by guaranty of the Company’s Chief Executive Officer			24,462				74,572
Metro Medical Inc. fixed rate term note, interest at 12%, due in monthly installments of principal and interest of $7,798 through September 20, 2014, secured by guaranty of the Company’s Chief Executive Officer. Principal and interest payments of $5,000 through September 20,2012, $10,000 through March 20, 2013 and $20,000 through August 20, 2014			341,595				354,595
Total			1,226,647				1,291,252
Current portion of debt			1,226,647				337,265
Long – term debt		$	-			$	953,987

 

Maturities of debt at September 30, 2013 are as follows:

 

Years ending June 30,		Amount
2013		$	323,726
2014			964,813
		$	1,226,647

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(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”.

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(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, 2013								December 31,2012
		Common								Common
		Shares				Fair				Shares				Fair
		Equivalent				Value				Equivalent				Value
Series A Convertible Preferred Stock			3,593,460			$	143,738				3,793,460			$	151,738
Warrants			8,168,780				9,803				8,168,780				25,323
Total financial instruments			11,762,240				153,541				11,962,240			$	177,061

 

Below is a reconciliation of the change in the fair values of the financial instruments from January 1, 2009 through September 30, 2013:

 

		Common
		Shares				Fair
		Equivalent				Value
Balance, January 1, 2009			11,962,240			$	333,802
Revaluation credited to operations			-				(164,271	)
Balance, March 31, 2009			11,962,240				169,531
Revaluation charged to operations			-				789,139
Balance, June 30, 2009			11,962,240				958,670
Revaluation credited to operations			-				(403,695	)
Balance, September 30, 2009			11,962,240				554,975
Revaluation credited to operations			-				(377,914	)
Balance, December 31, 2009			11,962,240				177,061
Revaluation charged to operations			-				332,169
Balance, March 31,2010			11,962,240				509,230
Revaluation credited to operations			-				(295,050	)
Balance, June 30, 2010			11,962,240				214,180
Conversion of Series A Convertible Preferred Stock			(200,000	)			(8,000	)
Revaluation credited to operations			-				(52,639	)
Balance, September 30, 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, 2013			11,762,240			$	119,621

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(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, 2013, there are 1,796.73 shares of Series A Preferred Stock issued and outstanding. Holders of Series A Preferred Stock are entitled at any time to convert their shares of Series A Preferred Stock into Common Stock, without any further payment Each share of Series A Preferred Stock is initially convertible into 2,000 shares of Common Stock, equivalent to a Conversion Price of $0.50 per share. The number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock is subject to adjustment upon the occurrence of certain events, including, among others, a stock split, reverse stock split or combination of MIT’s Common Stock; an issuance of Common Stock or other securities of MIT as a dividend or distribution on the Common Stock; a reclassification, exchange or substitution of the Common Stock; or a capital reorganization of MIT. In the event that MIT issues any additional shares of its Common Stock following the Offering, the Conversion rate will be that number of shares of Common Stock equal to $1,000 divided by the price per share at which MIT issues Common Stock in such offering. At our option, following the effectiveness of a registration statement registering the shares of Common Stock issuable upon the conversion of the Series A Preferred Stock and the exercise of the Warrants, if the price of the Common Stock trades above 300% of the Conversion Price per share during any period of 30 consecutive trading days and the average trading volume is at least 50,000 shares per day, for such 30 day period, each share of Series A Preferred Stock can be automatically converted into Common Stock at the Conversion Rate then in effect.

 

The liquidation preference amount of each share of Series A Preferred Stock is $1,000, or a total of $1,796,730 for the 1,796.73 shares issued and outstanding as of September 30, 2013 $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, 2013 and December 31, 2012, respectively.

 

In the first quarter of 2013, the Board of Directors authorized 5,000,000 shares of Series B preferred shares to issued to vendors and related parties in lieu of payments for goods and services. In the second quarter of 2013, 1,100,000 shares of Series B preferred stock were issued to vendors in settlement of $80,000. in debt incurred for prior services.

 

NOTE J – ISSUANCE OF COMMON STOCK

 

In the first quarter of 2013, the Board of Directors authorized the issuance of a total of 35,845,200 shares of common stock to vendors and consultants valued at a price of $0.003 per share, or $137,200 total for settlement for goods and services.. The Company included the $137,200 in selling, general and administrative expenses in the accompanying statement of operations for the twelve months ended December 31,2012 and increased common stock and additional paid-in capital by the same amount.

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(UNAUDITED AND UNREVIEWED)

 

NOTE J – ISSUANCE OF COMMON STOCK (continued)

 

In the first quarter of 2013, the Board of Directors authorized the issuance of a total of 35,845,200 shares of common stock to vendors and consultants valued at a price of $0.003 per share, or $137,200 total for settlement for goods and services.

 

In the second quarter of 2013, the Board of Directors authorized the issuance of a total of 16,000,500 shares of common stock to vendors and consultants valued at a price of $0.003 per share, or $495,000 total for settlement for goods and services provided to the company.

  

NOTE K – STOCK OPTIONS AND COMMON STOCK PURCHASE WARRANTS

 

A summary of stock options and warrants activity for the year ended December 31, 2012 and for the nine months ended September 30, 2013 follows:

 

All options have expired as of August 12, 2012

 

			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, 2013			600,000				8,418,780

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(UNAUDITED AND UNREVIEWED)

 

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

 

Stock options outstanding at September 30, 2013 and December 31, 2012 are:

 

All options have expired as of August 12, 2012

 

Date Granted		Number Outstanding				Number Exercisable				Exercise Price				Expiration Date
May 2, 2007			600,000				600,000			$	0.50			May 2, 2012
Totals			600,000				600,000

 

Common stock purchase warrants outstanding at September 30, 2013 and December 31, 2012 are:

 

Date Granted		Number Outstanding				Exercise Price				Expiration Date
May 31, 2007			8,168,780			$	0.75			August 13, 2012
July 30, 2007			250,000			$	2.20			July 30, 2012
Total:			8,418,780

 

NOTE L – INCOME TAXES

 

Expected income tax expense (benefit) computed by applying the United States statutory income tax rate of 34% to pretax income (loss) differs from the Company’s provision for (benefit from) income taxes, as follows:

 

			Nine months ended September 30,
			2013				2012
	Expected income tax expense (benefit) at 34%		$	437,602			$	499,083
	Non-deductible stock-based compensation			602,536				55,184
	Non-deductible expense (non-taxable income) from revaluation of equity-based financial instruments with characteristics of liabilities at fair values			-				(10,178	)
	Change in valuation allowance			(1,040,138	)			(844,089	)
	Provision for income taxes		$	-			$	-

  

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(UNAUDITED AND UNREVIEWED)

 

NOTE L – INCOME TAXES (continued)

 

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

 

		September 30, 2013				December 31, 2012
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, 2013 will be realized. Accordingly, the Company has maintained its 100% allowance against the deferred tax asset in the financial statements at September 30, 2013. The Company will continue to review this valuation allowance and make adjustments as appropriate. The $3,394,382 net operating loss carryforward expires $1,743,693 in year 2028, $983,226 in year 2029 and $667,463 in year 2030.

 

NOTE M – OPERATING SEGMENTS

 

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

 

	●	Medical Infusion
	●	MIT International Consulting
	●	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 /Consulting” is the division responsible for the marketing and distribution of Provector on a worldwide basis for international sales and consulting only.

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(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, 2013 and 2012 and for the nine months then ended:

 

		Medical					International			Ambulatory
		Infusion					Consulting			Care				DME				Wholesale				Combined
2013
Revenue		$	209,878			$	-			$	181,992			$	421,004			$	539,687			$	1,352,561
Income (loss) from operations			(399,303	)			-				73,178				65,838				(1,026,778	)			(1,287,065	)
Depreciation and amortization			-				-				-				-				-				-
Assets		$	186,158				-			$	112,880			$	157,924				478,695			$	935,657
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				(161,263	)			(1,030,367	)
Depreciation and amortization			29,997				-				-				-				-				29,997
Assets		$	729,855				-			$	114,622			$	138,192				-			$	982,669

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(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 June 30, 2013, the Company is obligated to pay its chief executive officer a salary of $250,000 per year, temporarily adjusted downward to $150,000 per year.

 

Lease Agreements

 

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

 

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

 

MIT 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 facility is $1,375 per month.

 

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(UNAUDITED AND UNREVIEWED)

 

NOTE N - COMMITMENTS AND CONTINGENCIES (continued)

 

Rent expense incurred under the aforementioned leases totaled $10,859 and $15,574 for the three months ended and $35,682 and $54,653 for the nine months ended September 30, 2013 and 2012, respectively.

 

Stock-Based Compensation Plan

 

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

 

The Company intends to extend the stock incentive plan to 10,000,000 shares, subject to shareholder approval.

 

The Plan is intended to benefit the stockholders of the Company by providing a means to attract, retain and reward individuals who can and do contribute to the longer-term financial success of the Company. Further, the recipients of stock-based awards under the Plan should identify their success with that of the Company’s shareholders and therefore will be encouraged to increase their proprietary interest in the Company. The Compensation Committee administers the Plan

 

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.

 

 

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, 2013. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

 

Inventories

 

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

 

Revenue Recognition

 

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

 

 

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, 2013 to nine months ended September 30, 2012.

 

Revenues

 

Consolidated revenues for the nine months ended September 30, 2013 were $1,352,561 as compared $2,854,758 for the nine months ended September 30, 2012, representing a decrease of $1,502,197 or 57.2%. Consolidated cost of sales for the nine months ended September 30, 2013 were $598,326 or 44.2% of sales as compared to cost of sales for the previous period ended September 30, 2012 of $1,352,024 or 47.4% of sales. This resulted in a gross profit for the period of $598,325 or 55.8% as compared to gross profit for the same period in 2012 of $1,500,733 or 52.6%. 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, 2013 were $430,157, as compared $719,172 for the three months ended September, 2012, representing an decrease of $289,015 or 40.2%. Consolidated cost of sales for the three months ended September 30, 2013 were $159,765 or 37.1% of sales as compared to cost of sales for the previous period ended September 30, 2012 of $315,266 or 43.8% of sales. This resulted in a gross profit for the three month period of $274,391 or 62.9% as compared to gross profit for the same period in 2012 of $403,905 or 56.2%.

 

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 four principal operating segments, which are as follows:

 

	●	Medical Infusion
	●	MIT International Consulting
	●	Medical Infusion 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 consulting” is the division responsible for the marketing and distribution of Provector on a worldwide basis for international sales and consulting 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				International				Ambulatory
		Infusion				Consulting				Care				DME				Wholesale				Combined
2013
Revenue		$	209,878			$	—			$	181,992			$	421,004			$	539,687			$	1,352,561
Income (loss) from operations			(399,303	)			—				73,178				65,838				(1,026,778	)			(1,287,065	)
Depreciation and amortization			—				—				—				—				—				—
Assets		$	186,158				—			$	112,880			$	157,924				478,695			$	935,657
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				(161,263	)			(1,030,367	)
Depreciation and amortization			29,997				—				—				—				—				29,997
Assets		$	729,855				—			$	114,622			$	138,192				—			$	982,670

 

 

Operating Expenses

  

Operating expenses decreased $632,256 or 27.4% to $1,677,367 for the nine months ended September 30, 2013 from $2,984,424 for the same period in 2012 and income (loss) from operations decreased by $114,242 from $(808,890) to ($923,132) from 2012. The decrease in operating expense is attributable to a $284,808 decrease in Labor and related costs and $273,661 decrease in consulting expense offset by $331,876 increase in contract services expense and as well as decreases in nearly all controllable costs offset by an increase in accounting and legal fees and contract labor.

 

	●	For the nine months ended September 30, 2013, selling, general and administrative expenses were $1,193,943 as compared to $1,346,394 in 2012, a decrease of $152,499 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: accounting and legal fees of $270,768, contract services of $332,061 and employee benefits and payroll related costs of $41,947, insurance expense of $19,111, office expense of $30,169 auto expense of $19,122.
		For the three months ended September, 2013, selling, general and administrative expenses were $330,109 as compared to $445,028 in 2012, a decrease of $124,919 or 27.5% that is attributable to decreases in consulting fees, off set by increases in legal and accounting fees. For the three months ended September 30, 2013, we had the following expenses: legal and accounting fees of $168,414, contract labor of $ 55,464, employee benefits and payroll related costs of $11,739, lease expense of $10,859, insurance expense of $9,237, office expense of $11,089 and telephone expense of $10,267.
	●	Depreciation and amortization was unchanged at $0 for the nine months ended September 30, 2013 as compared to $29,997 in 2012 and was decreased $9,999 for the three months ended September 30, 2013 to$0 as compared to the same period in 2012. The company has had no capital investments in the current year.

 

Operating Income (loss)

 

Operating income (loss) decreased $290,744 or 29.2% to ($1,287,064) for the nine months ended September 30, 2013 from $996,320 for the same period ended September 30, 2012 and decreased $270,065 or 56.2%, to ($210,795) from $(480,860) for the three months ended SEPTEMBER 30, 2013. This is primarily attributable to lower revenues than in 2011.

 

Net income (loss)

 

Pretax income (loss) decreased $ 2904,744 or 29.2% to ($1,287,064) for the nine months ended September 30, 2013 from $996,319 for the same period ended September 30, 2012 and decreased $240,094 or 46.4%, to ($277,395) from ($517,490) for the three months ended September 30, 2013. This is primarily attributable to lower revenues than in 2011 and the extraordinary gain recorded in 2011.

 

 

Liquidity and Capital Resources

 

As of September 30, 2013, the company had cash of $21,821 as compared to 52,569 at December 31, 2012. For the nine months ended September 30, 2013, net cash used by operating activities aggregated $601,640 as compared to cash provided by operating activities for the nine months ended September 30, 2012 of $418,820. As of September 30, 2013, we were funded primarily through operations. The principal financing activities for the six months ended September 30, 2013 consisted of repayment of debt of $75,307 as compared to $103,971 for the nine months ended September 30, 2012.

 

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 ProVector ^TM 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 ProVector ^TM .to entities that could provide working capital and provide means to distribute the ProVector ^TM; 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, 2013, we were engaged in the following litigation: MIT Holding Inc v. Medenvvet Laboratories, Inc, Provector, LLC and Thomas M. Kollars, Jr. Civil Action No. 1B13CV016P in the Superior Court of Bulloch County.

 

Off-Balance Sheet Arrangements

 

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

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable.

 

Item 4T. Controls and Procedures

 

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

 

Changes in Internal Control Over Financial Reporting. During the most recent quarter ended SEPTEMBER 30, 2013, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

INFLATION

 

Inflation has not had a material impact on our business.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

  

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.

 

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

 

** In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”.

 

 

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 09, 2013	By:	/s/ William C Parker
		William C. Parker, Chief Executive Officer
		(principal executive officer)
	By:	/s/ Walter H. C. Drakeford
		Walter H. C. Drakeford, the Principal Financial Officer
		(principal financial officer)