XOTC:MMMS Medytox Solutions Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

XOTC:MMMS Fair Value Estimate
Premium
XOTC:MMMS Consider Buying
Premium
XOTC:MMMS Consider Selling
Premium
XOTC:MMMS Fair Value Uncertainty
Premium
XOTC:MMMS Economic Moat
Premium
XOTC:MMMS Stewardship
Premium
 



U.S. 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 June 30, 2012


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


For the transition period from


Commission File No. 333-138251



MEDYTOX SOLUTIONS.  INC.

 (Exact name of registrant as specified in its charter)


Nevada

(State or other Jurisdiction of

Incorporation or Organization)

54-2156042

(I.R.S. Employer

 Identification No.)

 

 

400 South Australian Avenue

8th Floor

West Palm Beach, Florida

33401

(Address of Principal Executive Offices)

(Zip Code)

 

Issuer's Telephone Number: (561) 855-1626



(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 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.


[X] Yes      [   ] No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[  ] Yes      [X] No





1

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


Large accelerated filer

[  ]

Accelerated filer

[  ]

Non-accelerated filer

[  ]


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      [X] No


State the number of shares outstanding of each of the issuer's classes of common equity, as of the last practicable date:  As of July 1, 2012, there were 30,834,800 shares of common stock, par value $0.0001 per share, of the Registrant issued and outstanding.  





2

 


 

TABLE OF CONTENTS


 

Page

PART I - FINANCIAL INFORMATION


Item 1.

Consolidated financial statements

4

Item 2.

Managements Discussion and Analysis of Financial

Condition and Results of Operations

17

Item 3.


Quantitative and Qualitative Disclosures About Market Risk


22

Item 4.

Controls and Procedures

22

 


PART II - OTHER INFORMATION


Item 1.

Legal Proceedings

23

Item 1A.


Risk Factors


24

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

24

Item 3.

Defaults Upon Senior Securities

24

Item 4.

Mine Safety Disclosures

24

Item 5.

Other Information

24

Item 6.

Exhibits

24

 


SIGNATURES

25

 




3

PART I - FINANCIAL INFORMATION


Item 1.      Consolidated financial statements.


Medytox Solutions, Inc.

Consolidated Balance Sheets
















June 30,




December 31,






 2012




 2011





 

 (unaudited)



 

 (audited)

Assets









Current assets










Cash



$

            486,099



$

              97,103


Accounts receivable, net




         1,126,574




         1,619,727


Prepaid and other current assets




              23,500




              23,500


Deferred tax assets




         1,136,023




            723,900


Prepaid expenses




                      -   




                1,000

Total current assets



 

         2,772,196



 

         2,465,230




















Property & equipment, net of accumulated depreciation of  ($99,278) and ($94,224), respectively


            403,280




            165,738











Intangible property, net of accumulated amortization of  ($16,667) and $0, respectively




            267,333




                      -   

Goodwill




         1,302,112




         1,302,112

Deposits




                2,224




                      -   

Total Assets



$

         4,747,145



$

         3,933,080











Liabilities and Stockholders' Equity









Current liabilities










Accounts payable



$

         1,033,438



$

            379,124


Accrued expenses




            561,617




            573,007


Disputed liability




            389,135




                      -   


Loans and notes payable, related parties




            149,551




            150,449


Income tax liabilities




            509,000




            551,700


Current portion notes payable




         2,255,279




         2,107,875

Total current liabilities



 

         4,898,020



 

         3,762,155











Repurchase agreement payable




         1,278,793




         1,311,875

Notes payable, net of current portion




            632,242




              53,671

Total liabilities



 

         6,809,055



 

         5,127,701











Stockholders' Equity










Preferred Stock:










Preferred Stock, 100,000,000 shares authorized; $.0001 par value; 0 and 0 shares issued and outstanding, respectively




                      -   




                      -   


Common Stock, $.0001 par value,  500,000,000 shares authorized; 30,804,800 and 30,764,800 shares issued and outstanding, respectively




                3,080




                3,076


Additional paid-in capital




            615,757




            515,761


Treasury stock




        (1,334,375)




        (1,334,375)


Minority interest




            388,959




            703,202


Accumulated deficit




        (1,735,330)




        (1,082,285)

Total stockholders' deficit



 

        (2,061,909)



 

        (1,194,621)











Total Liabilities and Stockholders' Equity



$

         4,747,145



$

         3,933,080

The notes are an integral part of these consolidated financial statements.

 

4

Medytox Solutions, Inc.

Consolidated Statements of Operations

(unaudited)
























For the Three Months ended



For the Six Months ended





June 30,



June 30,





 

2012



 

2011



 

2012



 

2011



















Revenues



$

  2,352,360



$

            110



$

  3,591,341



$

         4,766



















Operating expenses:


















General and administrative




  2,229,852




      10,563




  3,715,197




       54,796


Sales and marketing expenses




     282,029




                -   




    389,635




               -                         


Direct costs




     738,680




                -   




  1,073,775




               -   


Amortization and depreciation




       45,503








       57,326




                -   


Total operating costs and expenses

 

  3,296,064



 

       10,563



 

  5,235,933



 

       54,796




















Operating loss




  (943,704)




    (10,453)




(1,644,592)




    (50,030)











 









Non-operating activity


















Other income (expense)




       20,694




                -   




       21,203




                -   


Gains (losses) on settlement of debt



       59,000








       59,000




                -   


Interest expenses




  (108,000)








   (158,000)




                      


Total other income (expense)



 

    (28,306)



 

                -   



 

    (77,797)



 

                -   



















Income (Loss) before income taxes




  (972,010)




    (10,453)




(1,722,389)




    (50,030)



















Minority interest




  (286,050)




                -




  (558,457)




                -

Disputed activity




  (358,933)




                -




     137,113




                -

Provision for income taxes




  (365,000)




                -   




   (648,000)




                -   



















Net Income/(Loss)



$

       37,973



$

   (10,453)



$

   (653,045)



$

    (50,030)


















   

Earnings (loss) per share:


















Basic



$

           0.00



$

        (0.00)



$

        (0.02)



$

        (0.00)


Dilutive



$

           0.00



$

        (0.00)



$

        (0.02)



$

        (0.00)



















Weighted average shares outstanding

















Basic



 

30,791,322



 

32,999,744



 

30,778,207



 

32,732,522


Dilutive



 

31,391,322



 

32,999,744



 

30,778,207



 

32,732,522


The notes are an integral part of these consolidated financial statements.



5

Medytox Solutions, Inc.

Consolidated Statements of Cash Flows

(unaudited)

























For the Six Months ended





June 30,





 

2012



 

2011











Cash Flows from Operating Activities:










Net (loss) income



$

              (653,045)



$

                (50,030)


Adjustment to reconcile Net Income to net cash provided by operations:










Minority interest loss




              (314,243)




                         -   


Depreciation and amortization




                  57,326




                    4,000


Stock issued for  compensation




                         -   




                  13,000


Bad Debt expense




                550,120




                         -   


Changes in assets and liabilities:










   Accounts receivable




                (56,967)




                         -   


Note receivable




                         -   




                  11,624


Deferred tax assets




              (412,122)




                         -   


Other operating assets




                  (1,224)




                  (8,500)


   Accounts payable and accruals




                642,923




                  20,750


Disputed liability




                389,135




                         -   


Related party loans




                     (898)




                         -   


Income tax liabilities




                (42,700)




                         -   


Net Cash (Used) Provided by Operating Activities



 

                158,305



 

                  (9,156)











Cash Flows from Investing Activities:










   Purchase of property and equipment




              (167,201)




                         -   


Net Cash (Used) by Investing Activities



 

              (167,201)



 

                         -   











Cash Flows from Financing Activities:










   Proceeds from issuance of notes payable




             1,080,243




                         -   


Repayments of notes payable




              (682,350)




                         -   


Net Cash  Provided by Financing Activities



 

                397,893



 

                         -   











Net increase/decrease in Cash




                388,996




                  (9,156)











Cash at beginning of period




                  97,103




                    9,330











Cash at end of period



$

                486,099



$

                       174











Supplemental cash flow information:










Interest paid



$

107,792



$

                         -   


Taxes paid



$

                         -   



$

                         -   











Supplemental Schedule of Noncash Investing and Financing Activities










Purchases of equipment for notes


$

111,000   



$

                         -   


Purchases of intangibles for notes



$

184,000                         



$

                         -   


Purchase intangible for stock



$

100,000



$

                         -   


The notes are an integral part of these consolidated financial statements.





6


NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES


Organization and Consolidation

Casino Players, Inc. (the Company or Medytox) was organized on July 20, 2005 under the laws of the State of Nevada.  The Company had a wholly owned subsidiary, Casino Rated Players, Inc. (CRP), a Nevada corporation that was a casino representative company offering complimentary rooms to rated players.  CRPs revenues were a percentage of the amount of income the casino earned from the rated players.  The casino tracked the play of the rated player to determine its gross income, and  CRP was then paid its contractual percentage based on that income, realized at the time of play.  


During 2010 and 2011 the casino representative business was minimal. In the first half of  2011, the Company management decided to reorganize the operations of Casino Players, Inc. as a holding company to acquire and manage a number of companies in the medical services sector.  


On June 22, 2011 the Company organized Medytox Management Solutions Corp (MMMS), a Florida corporation, as a wholly owned subsidiary.  MMMS is a marketing company selling software to medical clinics, hospitals and physicians offices.  The software aids in the monitoring of drug testing and medication use in patients.  MMMS has offices in West Palm Beach, Florida.


On July 26, 2011 the Company organized Medytox Institute of Laboratory Medicine, Inc. (MILM), a Florida corporation, as a wholly owned subsidiary.  MILM was organized to acquire and manage medical testing laboratories.  MILM operates from the corporate offices in West Palm Beach, Florida.


On August 22, 2011, MILM acquired 49% of Trident Laboratories, Inc. (Trident), a privately owned Florida corporation, through a stock purchase agreement and the right to acquire an additional 32% interest, for a total ownership interest of 81%..  Trident operates a medical testing laboratory specializing in urine testing from a facility in Hollywood, Florida.  Trident sought to rescind the stock purchase agreement, and MILM filed an action in state court against Trident Laboratories, Inc. and its selling shareholders seeking, inter alia, specific performance of the agreement and for damages, including revenue generated by MILM.  The litigation is ongoing and could have negative results in earnings


Also, on August 22, 2011, the Company acquired 100% of Medical Billing Choices, Inc., (MBC) a privately held North Carolina corporation, through a stock purchase agreement for cash and an installment note.  MBC operates a medical billing service for a variety of medical providers throughout the southeastern United States from offices in Charlotte, North Carolina.  After the acquisition, MBC has been  the main billing company for the Companys laboratories.  


On September 16, 2011, the Board of Directors agreed to change the name of the Company to Medytox Solutions Inc. and file for a new trading symbol.  On October 27, 2011, FINRA approved the name change and the new symbol, MMMS.  


On January 16, 2012 Trident Laboratories, Inc. (Trident) requested in writing to rescind the stock purchase agreement and  is currently in a dispute with the Companys  subsidiary Medytox Institute of Laboratory Medicine, Inc. (MILM) arising out of a stock purchase agreement granting MILM the right to acquire an additional 32 % interest in Trident.  MILM filed an action in state court against Trident Laboratories, Inc. and its selling shareholders seeking, inter alia, specific performance of the agreement and for damages, including revenue generated by MILM.  MILM filed a motion seeking to enjoin Trident from rescinding the stock purchase agreement, and the court has entered a standstill order maintaining the status quo pending the final adjudication of the dispute. Due to difficulties in obtaining information during litigation, the results of operations through January 16, 2012 have been included in operating income.  An estimated loss in the amount of $271,060, from January 17, 2012 through June 30, 2012, has been included in other income.  This amount has been considered as part of the minority interest since realization by the Company is in doubt.




7


As of the date of these statements, the suit has not yet been resolved and MILM may not recover any of its sales proceeds from Trident.  This has caused a significant reduction in receivables due at a later date. The legal dispute has caused a disruption in our operations and business plan during the first six months of 2012.


Tridents assertions include: (1) failure to pay $500,000 required by the stock purchase agreement.  Legal counsel has offered the court evidence indicating that this amount is payable on August 31, 2012 whereby breach could not occur until maturity date and; (2) practices of MILM are not in compliance with HIPPA.  Legal counsel has addressed claims to the court.  Management, on consultation with counsel, believes that the Company is in compliance with regulations and will prevail in defense of assertion.  


In February 2012, Bradley Ray filed an action claiming the ownership of the Company subsidiary Medytox Institute of Laboratory Medicine, Inc. (MILM).  At the time of incorporation of this subsidiary, Mr. Ray was a paid consultant to Medytox and was considered to be acting as an agent of Medytox.  Mr. Ray has asserted that he was the sole incorporator and named owner of MILM and therefore has legal rights to contracts and agreements with Trident.  Medytox has incurred all expenses in association with the selling and marketing expenses, for which the company was created.  Management disputes this claim and believes it is without merit. The litigation is ongoing and may not be resolved without a court hearing.


In February 2012 several claims have  were  by prior employees and consultants for unpaid salaries and commissions.  The Company has accrued certain liabilities based on contractual obligations.  The Company acknowledges certain liabilities, however disputes amounts for certain claims.  The employee claims include other assertions of improper business practices by the Company, reiterating those claimed by Trident, above.  Legal counsel has addressed these claims and disputes the claims, finding several of them to be without legal merit. The Company has accrued $200,000 liabilities in regard to these other claims.


On February 6, 2012 the Company formed Medytox Diagnostics Inc. as a wholly owned subsidiary that will acquire and build clinical Laboratories that will be owned by Medytox Solutions, Inc.


On February 16, 2012, the Company entered into an agreement to acquire majority interest in Collectaway LLC (now known as PB Laboratories LLC) (PB Labs), a Florida limited liability company.  PB Labs is the Companys main testing facility. The Company has ordered and is in the process of installing new equipment that will enable PB Labs to facilitate the increased volume of urine toxicology and blood testing that the Company anticipates.  The total purchase price to be paid for the 50.5% interest in  PB Labs  $201,000.  The purchase price shall be paid as follows: (i) $1,000 paid at closing; and (ii) Medytox shall deliver a secured promissory note (the "Note") to Seller in the amount of $200,000 at closing, the note is interest bearing at 5% with four (4) quarterly payments due of $50,000, commencing May 16, 2012 and ending February 15, 2013.  The operations of PB Labs have been included since the date of the agreement.

On February 27, 2012, Medytox appointed Jace Simmons the Chief Financial Officer, effective March 1, 2012, and entered into an Employment Agreement.  The term of the Agreement is for two years, renewable for additional one-year periods if neither party otherwise gives at least 90 days' notice.  Under the Agreement, Mr. Simmons will receive an annual salary of $150,000, subject to review each year.  He will participate in senior management bonus programs to be approved by the Board of Directors.  He will also receive annually options to purchase 200,000 shares of Medytox common stock exercisable at $3.00 a share.  When the common stock commences trading, Mr. Simmons will receive options to purchase an additional 400,000 shares, also exercisable at $3.00 a share.  Medytox will also reimburse Mr. Simmons for agreed-upon moving expenses and for his temporary housing expenses for up to 90 days.

On March 9, 2012 the Company formed Medytox Medical Marketing & Sales Inc. as a wholly owned subsidiary that will provide the marketing for clinical Laboratories that are owned by Medytox Solutions Inc.

The management of the Company is considering options to divest the casino representative business known as Casino Rated Players  (CRP) but has not approved a plan of disposition.  The results of t CRP are immaterial and do not constitute a significant segment for reporting purposes.  As of September 30, 2011, the Company operates in the medical service segment.




8


Basis of Accounting

We have prepared the accompanying consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these consolidated financial statements give effect to all normal recurring adjustments necessary to present fairly the financial position and results of operations and cash flows of the Company.


Although we believe that the disclosures included in our consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted. Accordingly, the accompanying consolidated financial statements should be read in conjunction with the Companys latest annual report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission (the SEC) on April 13, 2012.


The results of operations for the six months ended June 30, 2012 are not necessarily indicative of the results to be expected for the full 2012 year.


Certain prior period amounts have been reclassified to conform to current-period presentation. These reclassifications had no effect on net loss for the periods presented.


Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.  Actual results could differ from those estimates.  The most significant estimates included in the preparation of the consolidated financial statements are related to asset lives and accruals.


Accounts Receivable

Accounts receivable consisted of amounts due from insurance companies on behalf of customers for laboratory services performed and are shown net of an allowance for doubtful accounts.  Receivables are determined to be past due, based on payment terms of original contracts or invoices.  The Company used the allowance method for recognizing bad debts. When an account was deemed uncollectible, it was written off against the allowance. The Company generally does not require collateral for its accounts receivable. The Company does not typically charge interest on past due receivables.  


As of June 30, 2012 and December 31, 2011, management recorded allowances for uncollectible accounts in the amount of $1,417,538 and $872,045, respectively.


Revenue Recognition

The Company recognizes revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met:

persuasive evidence of an arrangement exists,

the product has been shipped or the services have been rendered to the customer,

the sales price is fixed or determinable, and

 collectability is reasonably assured.


Income taxes

We account for current income taxes using the federal and state statutory corporate tax rates in the jurisdictions in which we operate.  Deferred income taxes are determined by considering the estimated future tax effects of differences between the consolidated financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded if realization of the deferred tax assets do not meet the more likely than not criteria of current accounting standards.




9


We recognize the consolidated financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

 

Earnings Per Share

Basic earnings per share are computed based on the weighted average number of shares outstanding during the period.  Diluted earnings per share are computed using the weighted average common shares and all potentially dilutive common shares outstanding during the period.  



NOTE 2: GOING CONCERN


The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period of time. We have minimal history with our new operating plan and cannot predict if we will be successful.  The future of the Company is dependent on its ability to execute its new business plan and to obtain funding though traditional sources. Although the Company plans to pursue funding through all means, there can be no assurance that the Company will be able raise sufficient working capital to maintain its operations. If the Company is unable to raise the necessary working capital though the traditional sources it will be forced to continue relying on cash from operations and loans from related parties to satisfy its working capital needs. There can be no assurance that the company will be able rely on these sources to maintain its operations.  The Company is in litigation with Trident Laboratories and the results of the litigation may have a negative effect  on  the profits of the Company.


Assets and liabilities of the disputed subsidiary as of June 30, 2012 are as follows:


Total assets

 


 

$

1,948,983

 


Total liabilities




$

28,609



NOTE 3: NOTES PAYABLE


The Company and its subsidiaries are party to a number of loans with unrelated parties.  At June 30, 2012  long term debt consisted of the following:



 June 30 , 2012



December 31, 2011


Convertible debenture for working capital, dated September 15, 2011 in the amount of $500,000 and bearing interest at 20%.  Interest is payable monthly and principle is payable in 10 equal installments ending August 31, 2013 The note is convertible at $2.50 per share until August 31, 2013 when the note is due. This note is subordinated to loan from TCA and is secured by the assets of MSI, MMMS and Trident.

$

            500,000



 500,000


 

 

 

 

 

 

 

Short-term loan for working capital, dated September 15, 2011 in the amount of $500,000 and bearing interest at 20%.  Interest is payable monthly and principle is payable in 10 equal payments ending November 30, 2013.  This note is subordinated to the loan from TCA and is secured by the assets of MSI, MMMS and Trident.


            500,000



500,000


 

 

 

 

 

 

 

10

 

Acquisition note to former shareholder of Medical Billing Choices, original amount $850,000, payable from percentage of collections,  payable by August 22, 2013


 

            683,947



691,375


 

 

 

 

 

 

 

Loan from TCA Global Credit Master Fund, LP. Principle of $550,000, term extended to February 8, 2013. Secured by all assets of the Company, see note 10 below.


550,000



-


 

 

 

 

 

 

 

Acquisition note to former shareholders of Trident Laboratories, Inc., original amount $500,000, payable from collections on new work, interest at 6%, payable by August 22, 2012.


            4,932



                  290,893  


 

 

 

 

 

 

 

Short-term working capital note, noninterest bearing, payable on demand.


    -



95,000


 

 

 

 

 

 

 


Acquisition of PB laboratories LLC 50.5% ownership with payments of $50,000 quarterly starting May 17, 2012.                                                                           


           150,000



                     -   


 

 

 

 

 

 

 

Short-term notes from various contractors, bearing interest at 12% to 20%.  Interest and principle are due on demand.  


           395,551



                 10,295  


 

 

 

 

 

 

 

Commercial loan with a finance company, dated November 30, 2011 in the original amount of $29,996 and bearing interest at 6.5%.  Principle and interest payments in the amount of $854.41 are payable for 60 months ending on October 31, 2015.  This note is secured by a lien on a vehicle with a carrying value of $30,000 at December 31, 2012


              26,416



29,896


 

 

 

 

 

 

 

Commercial loan with a finance company, dated December 10, 2010, in the original amount of $63,700 and bearing interest at 8%.  Principle and interest payments in the amount of $2,000 are payable for 36 months ending on December 10, 2013. This note is secured by a lien on a vehicle with a carrying value of $48,898 at December 31, 2012.


              44,087



44,087


 

 

 

 

 

 

 

Commercial auto loan payable in principle and interest payments of $430.51 over 3 years.


16,294



     -


 

 

 

 

 

 

 

Commercial auto loan payable in principle and interest payments of $430.51 over 3 years.


16,294



      -


 

 

2,887,521

 

 

                  2,161,546  

 

Less current portion


(2,255,279)



(2,107,875)


 

$

            

632,242


 

$

                  53,671   

 












11


Principal maturities of notes payables for the next five years and thereafter are as follows:

Period ended  











June 30, 2013




$       2,255,279


 

   2014




577,597


 

   2015




50,058


 

   2016




4,587


 

   2017 and thereafter




  -


 





$        2,887,521


 


NOTE 4: INCOME TAXES


The Company recognizes the consolidated financial statement impact of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-thannot threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

 

The Company is subject to income taxes in the U.S. federal jurisdiction and the states of Florida and North Carolina. The tax regulations within each jurisdiction are subject to interpretation of related tax laws and regulations and require significant judgment to apply.



NOTE 5: STOCK BASED COMPENSATION


Employee and non-employee stock awards are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.


The Ccompany has 1,600,000 options outstanding to various officers with exercise prices of $2.50 and $3.00.  Since there is no market for the stock, no value has been assigned to the options.  


NOTE 6: RELATED PARTY TRANSACTIONS


A shareholder has advanced loans to the Company for the payment of certain operating expenses.  The loans are non-interest bearing and are due on demand. Loans from shareholders at June 30, 2012 amounted to $50,010.


At June 30, 2012, senior management had deferred compensation of approximately $290,000 from the prior Company and $221,000 from current operations.


NOTE 7: STOCKHOLDERS EQUITY


On June 20, 2011 the Company issued 1,300,000 shares of common stock for consulting fees totaling $13,000.


The Company has offered promissory notes in the total amount of $278,793 to a number of shareholders in exchange for retiring a total of 2,898,500 shares of common  stock.  These shares had not been returned by June  30, 2012 and were still outstanding. The Company paid $33,082 to shareholders for partial payment of their shares during the six months ended June 30, 2012.  


On April 30, 2012, the Company issued 40,000 shares valued at $100,000 for an investment fee on new funding.  




12


NOTE 8: RECENT ACCOUNTING PRONOUNCEMENTS


From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.


In July 2012, the FASB issued ASU 2012-02, Intangibles Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment.  This newly issued accounting standard simplifies how an entity tests indefinite-lived intangible assets by permitting an entity to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test.  The more likely than not threshold is defined as having a likelihood of more than 50 percent.  As the objective is to reduce the cost and complexity of impairment testing, adoption of this standard is not expected to impact our financial position or results of operations.


In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU 2011-11). This newly issued accounting standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on its financial position. This ASU is required to be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. As this accounting standard only requires enhanced disclosure, the adoption of this standard is not expected to have an impact on our financial position or results of operations.


NOTE 9: SIGNIFICANT ACQUISTIONS


Acquisition of Collectaway LLC (now known as PB Laboratories LLC).

On February 16, 2012, the Company, through its subsidiary, Medytox Diagnostics Inc., agreed to purchase 50.5% of PB Laboratories, LLC. (PB Labs) from an  unrelated party for cash and an installment note in a total amount of $201,000.  The note will be paid in $50,000 quarterly payments over the next 12 months.

PB Labs was organized in October 2005.  The Company was not required to file audited consolidated financial statements for the years ended December 31, 2011 and 2010 via Form 8-K.  

Medytox accounted for the assets, liabilities and ownership interests in accordance with the provisions ofthe Business Combinations Topic of the FASB Accounting Standards Codification.  As such, the recorded assets and liabilities acquired have been recorded at fair value and any difference in the net asset values and the consideration given has been recorded as a gain on acquisition or as goodwill. The unaudited values as of the date of agreement are as follows:







February 16, 2012 (Unaudited)


Fixed assets

$

            17,000


Intangible


            184,000




                    -   


Total assets purchased

 $

            201,000






Cash paid

 $

1,000


Acquisition note


            200,000




                    -   


Total liabilities assumed and consideration given

 $

            201,000










13


Pro-forma activity as though this acquisition had taken place at January 1, 2012 are as follows:






Six months ended







June 30, 2012







(unaudited)









Revenues




$

3,680,730









Net Income (loss)




$

(627,740)









Earnings per share




$

                (0.02)
















Shares outstanding





        30,791,322











Acquisition of Trident Laboratories, Inc.

On August 22, 2011 the Company, through its subsidiary, MILM, agreed to purchase up to 81% of Trident Laboratories, Inc. (Trident) from unrelated parties for an installment note in a total amount of $500,000.  MILM will pay the $500,000 note, payments from the revenue generated by MILM business brought to Trident.  



Acquisition of Medical Billing Choices, Inc.

On August 22, 2011 the Company agreed to purchase 100% of Medical Billing Choices, Inc. (MBC) from an unrelated party for cash and a note for a total amount of $850,000.  Medytox paid $100,000 down in cash and will pay the $750,000 note in monthly payments from the collections in MBC on Medytox billings.  The $750,000 must be paid off within 24 months or the shareholders of MBC have the right to rescind the agreement. The Company has paid $66,053 and has a balance due of $683,947.


Combined results


Pro forma results of operations for the six months ended June 30, 2011 as though both acquisitions had taken place at January 1, 2011 are as follows:










Six Months Ended June 30, 2011






Revenues



$              

579,998






Net Income (loss)



$

(131,816)






Earnings per share



$

(0.00)







Note 10.  $4,000,000 Revolving Credit Facility


On May 14, 2012, Medytox Solutions, Inc. ("Medytox") borrowed $550,000 from TCA Global Credit Master Fund, LP (the "Lender") pursuant to the terms of the Senior Secured Revolving Credit Facility Agreement, dated as of Aril 30, 2012 (the "Credit Agreement"), among Medytox, Medytox Medical Marketing & Sales, Inc. ("Medytox Medical"), Medytox Diagnostics, Inc. ("Diagnostics"), PB Laboratories, LLC ("PB Labs") and the Lender.  The funds will be used for general corporate purposes,  Under the Credit Agreement, Medytox may borrow up to an amount equal to the lesser of 80% of its Eligible Accounts (as defined in the Credit Agreement) and the revolving loan commitment, which initially is $550,000.  Medytox may request that the revolving loan commitment



14


be raised by various specified amounts at specified times, up to a maximum of $4,000,000.  In each case, whether to agree to any such increase in the revolving loan commitment is in the Lender's sole discretion.  The loan matures on November 30, 2012, subject to a six-month extension at the request of Medytox, or upon 60 days written notice by the Lender.  The maturity date may also be extended, in the Lender's sole discretion, in connection with an increase in the revolving loan commitment. Further details are available in the Companys form 8-K filed on  May 18, 2012.  On August 8, 2012, the Company received a second round of funding in the amount of $525,000 and the due date was extended to February 8, 2013.  The Company issued 30,000 shares of restricted common stock as a commitment fee.

Note 11.  Contingencies

Legal Matters

During the course of business, litigation commonly occurs.  From time to time the Company may be a party to litigation matters involving claims against the Company.  The Company operates in a highly regulated industry and employ s personnel which may inherently lend itself to legal matters.  Management is aware that litigation has associated costs and that results of adverse litigation verdicts could have a material effect on the Companys financial position or results of operations. Management, in consultation with legal counsel, has addressed known assertions and predicted unasserted claims below. 

Legal Matters Trident Labs

As described in Item 1, Disputed Segment, one subsidiary, Trident Laboratories, Inc. (Trident) is currently in a contract dispute with the Company.  The Company has filed suit against Trident Laboratories, Inc. and its selling shareholders.  The judge has denied the rescission and ordered a Stand Still Agreement, which currently is in force. The suit is not yet resolved and Medytox may not recover any of its sales proceeds from Trident which will cause a significant reduction in receivables due at a later date. The legal dispute has caused a disruption in our operations during 2012.

Tridents assertions include: (1) failure to pay $500,000 note.  Legal counsel has offered the courts evidence of original promissory notes, which indicate that loan is payable on August 31, 2012 whereby breach could not occur until maturity date and (2) practices of Medytox are not in compliance with HIPPA.  Legal counsel has addressed claims to the court.  Management, on consultation with counsel, believes that the Company is in compliance with regulations and will prevail in defense of assertion.

Legal Matters Prior Consultant, Bradley T. Ray

In February 2012, interference and ownership claims on the Company subsidiary Medytox Institute of Laboratory Medicine, Inc. (MILM), has been filed by Bradley Ray.  At the time of incorporation of this subsidiary, Mr. Ray was a paid consultant to Medytox and was considered to be acting as an agent of Medytox while filing incorporation documents.  Mr. Ray has asserted claim that he was the sole incorporator and named owner of MILM and therefore has legal rights to contracts and agreements with Trident Labs.  Medytox has incurred all expenses in association with the selling and marketing expenses, for which the company was created.  Management disputes this claim and legal counsel is currently litigating these claims as it believes the substance of the entities activities is to prevail over the form of incorporation.  Management and counsel believe these claims are without merit and will be dismissed.

Legal Matters Prior Employees and Consultants

Several claims have been made by prior employees and consultants for unpaid salaries and commissions.  The Company has accrued certain liabilities based on contractual obligations.  The Company acknowledges certain liabilities, however disputes amounts for certain claims.  The employee claims include other assertions of improper business practices by the Company, reiterating those claimed by Trident, above.  Legal counsel has addressed these claims and disputes the claims, finding them to be without legal merit. The Company has accrued over $200,000  of liabilities in regard to these other claims.





15


Note 12.  Subsequent events


On August 8, 2012, the Company received a second round of funding in the amount of $525,000from TCA and the due date of the Revolving Credit Facility was extended to February 8, 2013.  The Company issued 30,000 shares of restricted common stock as a commitment fee.


Legal Matters Prior Employees McCullough


The Company has received an injunction against a former employee Richard McCullough enjoining him from contacting Medytox employee or business partners with the intention to interfere with the Company business relationships.  




16


 Item 2.       Management's Discussion and Analysis of Financial Condition and Results of Operations.


Forward-Looking Statements


This Report contains statements that we believe are, or may be considered to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Report regarding the prospects of our industry or our prospects, plans, financial position or business strategy, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as may, will, expect, intend, estimate, foresee, project, anticipate, believe, plans, forecasts, continue or could or the negatives of these terms or variations of them or similar terms. Furthermore, such forward-looking statements may be included in various filings that we make with the SEC or press releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which reflect managements opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any additional disclosures we make in our reports to the SEC. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Report.


Unless stated otherwise, the words we, us, our, the Company, or Medytox Solutions, Inc. in this section collectively refer to Medytox Solutions, Inc., Medytox Medical Marketing and Sales, Inc., Medytox Institute of Laboratory Medicine, Corp, Medytox Diagnostics Inc., PB Laboratories LLC,  Medytox Management Solutions, Inc., Trident Laboratories, Inc., Medical Billing Choices, Inc. and Casino Rated Players, Inc.



Overview


Medytox Solutions, Inc. (the Company or Medytox) was organized July 20, 2005 under the laws of the State of Nevada.  The Company had a wholly owned subsidiary, Casino Rated Players, Inc. (CRP), a Nevada corporation that was a casino representative company offering complementary rooms to rated players.  CRPs revenues were a percentage of the amount of income the casino earned from the rated players.  The casino tracked the play of the rated player to determine its gross income, and  CRP was then paid its contractual percentage based on that income, realized at the time of play.  


During 2010 and 2011 the casino representative business was minimal.  As of June 30, 2011, the Company management decided to reorganize the operations of Medytox Solutions, Inc. as a holding company, under the name Medytox Solutions, Inc., to acquire and manage a number of companies in the medical services sector.  The Company organized two subsidiaries in the second and third  quarter and acquired two others through stock purchases.  


As of September 30, 2011, we operate a medical testing laboratory, a medical billing service, a marketing firm for medical monitoring software and services and corporate offices.  The operations of the casino representative business are immaterial and do not constitute a separate segment.  


Our main offices are located at 400 S. Australian Ave, Suite 800, West Palm Beach, Florida; our telephone number is (561) 855-1626.  We operate other facilities in Hollywood, Florida; Lake Worth, Florida and Charlotte North Carolina.



17


Going Concern


At June 30, 2012, we had $486,099 in cash on hand and a stockholders deficit of $2,061,909.  Our new business model has resulted in a loss for the six months ended June 30, 2012.  Our auditors included a going concern paragraph in their audit report for December 31, 2011.


Results of Operations


For the Three Months Ended June 30, 2012 and 2011


The Company has a new business model as of September 30, 2011 and comparison of financials is not relative; the Company has entered the medical service industry versus the casino hosting business.


Our new business model has resulted in significant revenue increases for the three months ended June 30, 2012.


Revenues


Revenues  for the  three months ended June, 2012 were $2,352,360 vs. $110 for the three months ended June 30, 2011 .  The increase is due to the change in our business model from Casino related operations to Laboratory testing.


Operating expenses


Operating expenses have increased during the three months ended June 30, 2012 to $3,296,064from $10,563 for the same period in 2011. The increase is due to a new business model that increases both revenues and expenses. In addition, the Company incurred legal expenses regarding the Trident litigation and other matters totaling approximately $250,000, and recorded accrued sales commissions totaling approximately $40,000 relating to Trident collections.


Net Operating Income/Losses  


Net operating loss for the three months ended June 30, 2012 was $(943,704) compared to a loss of $(10,453) for the three months ended June 30, 2011.  The increase in losses is due to the change in our business model.



For the Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011




18


Revenues


Revenues for the six months ended June, 2012 were $3,591,341 vs $4,766 for the six months ended June 30, 2011.  The increase is due to the change in our business model.


Operating expenses


Operating expenses increased during the six months ended June 30, 2012 to $5,235,933 from $54,796 for the same period in 2011. The increase is due to a new business model that increases both revenues and expenses. In addition, the Company incurred legal expenses regarding the Trident litigation and other matters totaling approximately $450,000 and recorded accrued sales commissions totaling $260,290 relating to Trident collections.


Net Operating Income/Losses  


Net operating loss for the six months ended June 30, 2012 wase $(1,644,592) compared to a loss of $(50,030) for the six months ended June 30, 2011.  The difference in losses is due to the change in business model.


Cash status


The Companys cash position has increased to $486,099 vs. $97,103, June 30, 2012 and December 31, 2011, respectively.  Accounts receivable on June 30, 2012 were $1,126,574 vs. $1,619,727 on December 31, 2011.


Assets


At June 30, 2012, we had total assets of $4,747,145 compared to $3,933,080 on December 31, 2011. Total assets at June 30, 2012 consisted of $486,099 in cash on hand and $403,280 in property  equipment (net of $99,278 in depreciation). Total assets at December 31, 2011 consisted of $97,103 in cash on hand and $165,738 in property and equipment (net of $94,224 in depreciation). The increase in assets is due to an overall accumulation of increases in cash, accounts receivable, deferred tax assets, property   and equipment, and intangible property.


Liabilities


Our total liabilities were $6,809,055 at June 30, 2012 compared to $5,127,701 at December 31, 2011. The increase was primarily due to increases of approximately $650,000 in accounts payable, $690,000 in additional debt, and about $390,000 in disputed liability.


Total Stockholders Deficit


Our stockholders deficit was $(2,061,909) at June 30, 2012 compared to $(1,194,621) at December 31, 2011.


Liquidity and Capital Resources


As reflected in the financial statements we have an accumulated deficit of $(1,735,330) and have a positive cash flow from operations of $158,305 for the six months ended June 30, 2012. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital and execution of its business plan.  We note that we have significant current accounts receivable at June 30, 2012.  As we continue to execute our business plan, we expect that our liquidity numbers will improve, although there is no guarantee that will occur.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.


Deferred Compensation


At June 30, 2012, senior management had deferred compensation recorded of approximately $290,000 from the Company from prior operations and $221,000 from current operations.




19


Critical Accounting Policies


Our discussion and analysis of financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures on the date of the consolidated financial statements.


We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates. Critical accounting policies identified are as follows:


Revenue Recognition


In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable and collectability is reasonably assured.

The Company performs medical testing of samples supplied by medical and corporate customers.  Services are billed when the results are presented.  The Company uses our subsidiary billing agency to process the invoices.  The services are billed at the estimated reimbursement rates published by the various payers.  A portion of the services are with billed governmental payers and subject to periodic review and retroactive adjustment.  

Retroactive adjustment due to a Medicare or Medicaid review  is considered to be a change in the estimate and recorded in the period that the adjustment is communicated to the Company.  Adjustments are normal and recurring, and generally communicated within reasonable time or within the billing period.  Adjustments are considered immaterial.

The Company also provides consulting services on billing and collecting processes to medical providers on fee for services basis.  These services are billed as services are provided according to the contract.

Use of Estimates


The Companys significant estimates include allowance for doubtful accounts and accrued expenses. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. While the Company believes that such estimates are fair when considered in conjunction with the consolidated financial statements taken as a whole, the actual amounts of such estimates, when known, will vary from these estimates. If actual results significantly differ from the Companys estimates, the Companys financial condition and results of operations could be materially impacted.

Cash and Cash Equivalents


Cash and cash equivalents include all interest-bearing deposits or investments with original maturities of three months or less.


Fair Value Measurement

All financial and nonfinancial assets and liabilities were recognized or disclosed at fair value in the financial statements.  This value was evaluated on a recurring basis (at least annually).  Generally accepted accounting principles in the United States define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on a measurement date. The accounting principles also established a fair value hierarchy which required an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  Three levels of inputs were used to measure fair value.




20


*

Level 1: Quotes market prices in active markets for identical assets or liabilities.

*

Level 2: Observable market based inputs or unobservable inputs that were corroborated by market data.

*

Level 3: Unobservable inputs that were not corroborated by market data.


.

Accounts Receivable

Accounts receivable represent amounts due from customers in the ordinary course of business from sales activities in each of the Companys market segments.  The Company considers accounts more than 120  days old to be past due. The Company uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance.  A portion of the receivables are with governmental payers and are subject to periodic review and adjustment.  

 

Property and Equipment


Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Machinery and equipment are depreciated over 3 to 10 years. Furniture and fixtures are depreciated over 7 years. Accelerated methods of depreciation are generally used for income tax purposes. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvement or the term of the lease.


 The Company performs ongoing evaluations of the estimated useful lives of the property and equipment for depreciation purposes. The estimated useful lives are determined and continually evaluated based on the period over which services are expected to be rendered by the asset. Maintenance and repairs are expensed as incurred.


Impairment of Long-Lived Assets


The Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the assets estimated fair value and its book value.

Other Intangible Assets


Acquired intangible assets are separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented or exchanged, regardless of the Companys intent to do so.


Earnings per Share


Basic earnings (loss) per common share are calculated by dividing net income (loss) by the weighted average number of common shares outstanding during each period. The calculation of diluted earnings (loss) per common share is similar to that of basic earnings (loss) per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, such as those issuable upon the conversion of debentures, notes or exercise of options, were issued during the period.


Fair Value of Financial Instruments


The carrying amounts reported in the balance sheet for cash and cash equivalents, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments.



21


Stock Based Compensation


Equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.


Accounting for Warrants, Options and Freestanding Derivative Financial Instruments


The Company evaluates its warrants, options and other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for.    If the warrant or option is determined to be a derivative, the fair value of the warrants and options is marked-to-market each balance sheet date and recorded as a liability. The change in fair value of the warrants and options is recorded in the Statement of Operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion or exercise date and then that fair value is reclassified to equity.


Equity instruments that are initially classified as equity then become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. In the event that the warrants and options are determined to be equity, no value is assigned for financial reporting purposes.

Intangible Assets and Related Impairment of Long-lived Assets


Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of shall be classified as held for sale and are reported at the lower of the carrying amount or fair value less costs to sell.


Income taxes


The Company accounts for income taxes using the liability method.  This method provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.  A valuation allowance may be applied against the net deferred tax due to the uncertainty of its ultimate realization.



Item 3. Quantitative and Qualitative Disclosures about Market Risk


N/A


Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Companys internal control over financial reporting is a process designed under the supervision of the Companys Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Companys financial statements for external purposes in accordance with U.S. generally accepted accounting principles.


With respect to the period ending June 30, 2012, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls



22


and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934.  


Based upon our evaluation regarding the period ending June 30, 2012, the Companys management, including its Chief Executive Officer and Chief Financial Officer, has concluded that its disclosure controls and procedures were effective.  Through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.  


The Companys disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.  However, the Companys management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.


Changes in Internal Controls.


With the acquisition of significant subsidiaries, the Company is in the process of aligning the controls in the various companies and formulating the various controls and reporting processes necessary for accurate reporting.  Numerous changes in internal controls are anticipated as the Company grows.  The Company employs competent management in all subsidiaries and is developing a system of strong corporate oversight.  Currently, the Company has hired various internal and outside accounting personnel to oversee the consolidation and reporting of the Company results.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.



PART II - OTHER INFORMATION


Item 1.  Legal Proceedings.

.

Legal Matters Trident Labs


Trident Laboratories, Inc. (Trident) is currently in a dispute with the Companys subsidiary Medytox Institute of Laboratory Medicine, Inc. (MILM) arising out of a stock purchase agreement granting MILM the right to acquire an additional 32 % interest in Trident. Trident sought to rescind the stock purchase agreement, and MILM filed an action in state court against Trident Laboratories, Inc. and its selling shareholders seeking, inter alia, specific performance of the agreement and for damages, including revenue generated by MILM.


MILM filed a motion seeking to enjoin Trident from rescinding the stock purchase agreement, and the court has entered a standstill order maintaining the status quo pending the final adjudication of the dispute.


The suit is not yet resolved and MILM may not recover any of its sales proceeds from Trident which will cause a significant reduction in receivables due at a later date. The legal dispute has caused a disruption in our operations during 2012. Tridents assertions include: (1) failure to pay $500,000 required by the stock purchase agreement. Legal counsel has offered the court evidence indicating that this amount is payable on August 31, 2012 whereby breach could not occur until maturity date; (2) practices of MILM are not in compliance with HIPPA. Legal counsel has addressed claims to the court. Management, on consultation with counsel, believes that the Company is in compliance with regulations and will prevail in defense of assertion.


Legal Matters Prior Consultant, Bradley T. Ray

In February 2012, ownership claims on the Company subsidiary Medytox Institute of Laboratory Medicine, Inc. (MILM), were filed by Bradley Ray. At the time of incorporation of this subsidiary, Mr. Ray was a paid consultant to Medytox and was considered to be acting as an agent of Medytox. Mr. Ray has asserted claim that he was the sole incorporator and named owner of MILM and therefore has legal rights to contracts and agreements with



23


Trident Labs. Medytox has incurred all expenses in association with the selling and marketing expenses, for which the company was created. Management disputes this claim and believes it is without merit.


Legal Matters Prior Employees and Consultants

Several claims have been made by prior employees and consultants for unpaid salaries and commissions. The Company has accrued certain liabilities based on contractual obligations. The Company acknowledges certain liabilities, however disputes amounts for certain claims. The employee claims include other assertions of improper business practices by the Company, reiterating those claimed by Trident, above. Legal counsel has addressed these claims and disputes the claims, finding them to be without legal merit. The Company accrued over $200,000 in regard to these other claims.


Legal Matters Prior Employees McCullough

The Company has received an injunction against a former employee Richard McCullough enjoining him from contacting Medytox employee or business partners with the intention to interfere with the Company business relationships.  


Item 1A. Risk Factors.


Litigation results could be harmful to the revenues and profits to the Company.


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


None.


Item 3.   Defaults upon Senior Securities.


None.

 

Item 4.  Mine Safety Disclosures


N/A.


Item 5.  Other Information.


None.


Item 6.   Exhibits.



Exhibit No.:

Description:

31.1

Certification by William G. Forhan, Principal Executive Officer of Medytox Solutions Inc., pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended

31.2

Certification by Jace Simmons, Chief Financial Officer of Medytox Solutions Inc., pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended

32.1

Certification by William G. Forhan, Principal Executive Officer of Medytox Solutions Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification by Jace Simmons, Chief Financial Officer of Medytox Solutions Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





24


SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




       Medytox Solutions, Inc.


 

 

 

 

Date:  8/14/2012

 By: 

/s/ William G. Forhan

 

 


 

William G. Forhan, CEO, and Chairman

(Principal Executive Officer)


 

 





 

Date:  8/14/2012

By

/s/ Jace Simmon                                    


 



Jace Simmons, Chief Financial Officer


 



25


XOTC:MMMS Medytox Solutions Inc Quarterly Report 10-Q Filling

Medytox Solutions Inc XOTC:MMMS Stock - Get Quarterly Report SEC Filing of Medytox Solutions Inc XOTC:MMMS stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

Content Partners
XOTC:MMMS Medytox Solutions Inc Quarterly Report 10-Q Filing - 6/30/2012
Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol |  Title Star Rating |  Category |  Total Assets |  Top Holdings |  Top Sectors |  Symbol |  Name Title |  Date |  Author |  Collection |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol / Ticker |  Title Star Rating |  Category |  Total Assets |  Symbol / Ticker |  Name Title |  Date |  Author |  Collection |  Popularity |  Interest Title |  Date |  Company |  Symbol |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Title |  Date |  Company |  Symbol |  Interest |  Popularity

Previous: XOTC:MMMS Medytox Solutions Inc Quarterly Report 10-Q Filing - 3/31/2012  |  Next: XOTC:MMTC Micro Imaging Technology Inc Insider Activity 3 Filing - 4/20/2012