PINX:MITD Mit Holding Inc Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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United States

Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2012

 

OR

 

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

 

Commission File No: 333-13679

 

MIT HOLDING, INC.

(Exact name of registrant as specified in its charter)

 

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

 

351 Commercial Drive, Suite A & B, Savannah, GA 31406

(Address of principal executive office) (Zip Code)

 

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

 

37 West Fairmont Avenue, Suite 202, Savannah, GA 31406

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 [X]

 

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 May 21, 2012 was 81,400,811

 

 

 

 
 

 

MIT HOLDING, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED March 31, 2012

 

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 8
     
Item 4T: Controls and Procedures 8
     
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

 

2
 

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

  Page
   
Financial Statements (Unaudited)  
   
Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011 F-1
   
Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011 F-2
   
Consolidated Statement of Stockholders’ Equity (Deficiency) for the three months ended March 31, 2012 F-3
   
Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2010 F-4
   
Notes to Consolidated Financial Statements F-5 - F-22

 

3
 

 

MIT HOLDING, INC.

CONSOLIDATED BALANCE SHEETS

UNAUDITED AND UNREVIEWED

 

   March 31, 2012   December 31, 2011 
ASSETS        
CURRENT ASSETS          
Cash and cash equivalents  $82,344   $52,569 
Accounts receivable, net of allowance for doubtful accounts of $436,145 and $1,241,477, respectively   736,148    758,680 
Inventories   161,365    119,610 
Employee advances   1,862    1,862 
Prepaid expenses and other current assets   39,686    39,686 
           
Total current assets   1,021,405    972,407 
           
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $129,373 and $126,373, respectively   34,222    34,222 
           
OTHER ASSETS          
Note receivable from purchaser of discontinued operations   400,000    400,000 
Non-compete agreement, net of accumulated amortization of $137,925 and $97,929, respectively   18,746    28,746 
           
Total other assets   418,746    428,746 
           
TOTAL ASSETS  $1,474,373   $1,435,375 
           
LIABILITIES AND STOCKHOLDERS' DEFCICIENCY          
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $2,751,211   $2,575,827 
Current portion of long-term debt   182,422    183,422 
           
Total current liabilities   2,933,633    2,759,249 
           
Long-term debt   713,721    718,516 
 Common stock subject to mandatory redemption; 5,000,000 shares issuable at December 31, 2010 (Note F)   250,000    250,000 
Estimated liability for equity-based financial instruments with characteristics of liabilities:          
Series A Convertible Preferred stock (1,796.73 and 1,796.73 shares issued and outstanding at March 31, 2012 and December 31, 2010, respectively)   151,738    113,804 
Warrants   5,213    5,718 
           
TOTAL LIABILITIES   4,054,305    3,847,287 
           
STOCKHOLDERS' DEFICIENCY          
Preferred stock, $0.000001 par value; 5,000,000 shares authorized, 1,796.73 and 1,796.73 shares issued and outstanding at March 31, 2012 and December 31, 2010, respectively (included in liabilities)   

 

 

    - 
Common stock, $0.000001 par value; 250,000,000 shares authorized, 81,400,811 and 81,400,811 shares issued and outstanding and to be issued at March 31, 2012 and December 31, 2011, respectively   81    81 
Additional paid-in capital   7,444,972    7,444,973 
Accumulated deficit   (10,024,985)   (9,856,966)
           
Total stockholders' deficiency   (2,579,932)   (2,411,912)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY  $1,474,373   $1,435,375 

 

The accompanying notes are an integral part of these statements

 

F-1
 

 

MIT HOLDING, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

UNAUDITED AND UNREVIEWED

 

   March 31, 2012   March 31, 2011 
         
Revenue          
           
Sales and services rendered  $1,205,515   $5,084,052 
           
Cost of medical supplies   563,245    3,709,296 
           
Gross profit   642,270    1,374,756 
           
Operating Expenses
          
Salaries and payroll cost   343,143    964,486 
Selling, general and administrative   357,891    853,012 
Provision for doubtful accounts   -    - 
Depreciation and amortization   9,999    22,249 
           
Total operating expenses   711,033    1,839,747 
           
Income (loss) from operations   (68,763)   (464,991 
           
Other income (expense):          
Income (expense) from revaluation of equity-based financial instruments with characteristics of liabilities at fair values   (37,429)   (35,395)
Interest expense   (61,826)   (67,428)
           
           
Income (loss) before provision for income taxes   (168,020)   (567,814)
           
Provision for income taxes   -    - 
           
Net income (loss)   (168,020)   (567,814)
           
Increase in cumulative dividends payable on Series A Preferred Stock   26,950    25,655 
           
Net income (loss) attributable to common stockholders  $(194,970)  $(593,496))
           
Net loss per common share:          
Basic and diluted  $(0.00)  $(0.01)
           
Weighted average number of common shares outstanding:          
Basic and diluted   81,400,811    54,945,682 

 

The accompanying notes are an integral part of these statements.

 

F-2
 

 

MIT HOLDING, INC.

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)

 

   Common Stock, $0.000001 par value   Additional
paid - in
   Accumulated   Total
Stockholders’
 
   Shares   Amount   Capital   Deficit   (Deficiency) 
                     
Balance at December 31, 2009   51,734.571   $52   $6,258,962   $(8,606,035)  $(2,347,021)
                          
Issuance of common stock for services in first quarter 2010   320,000    -    12,400    -    12,400 
                             
Conversion of preferred stock into common stock in third quarter 2010   200,000    -    8,000    -    8,000 
                          
Net income for the year ended December 31, 2010   -    -         78,832    78,832 
                          
Balance at December 31, 2010   52,254,571    52    6,279,362    (8,527,203)   (2,247,789)
Unaudited and unreviewed:                         
Issuance of common stock for services in first quarter 2011   42,000    -    1,470    -    1,470 
                          
Issuance of common stock for services in third quarter 2011   29,104,240    29    1,164,141    -    1,164,170 
Net loss for the year ended December 31, 201   -    -         (1,329,763)   (1,329,763)
Balance at December 31, 2011   81,400,811    81    7,444,973    (9,856,966)   (2,411,912)
Net loss for the three months ended March 31, 2012   -    -         (168,020)   (168,020)
Balance at March 31, 2012   81,400,811   $81   $7,444,973   $(10,024,986)  $(2,579,932)

 

The accompanying notes are an integral part of these statements.

 

F-3
 

 

MIT HOLDING, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE

THREE MONTHS ENDED MARCH 31, 2012 AND 2011

UNAUDITED AND UNREVIEWED

 

   March 31, 2012   March 31, 2011 
OPERATING ACTIVITIES          
Net income (loss)  $(168,120)  $(567,814)
Adjustments to reconcile net income (loss) to cash provided by operating activities:          
Income from revaluation of equity-based financial instruments with characteristics of liabilities at fair values   37,429    35,395 
Depreciation and amortization   9,999    22,249 
Issuance of common stock for services          
Amount due from lender   -    50,000 
Changes in operating assets and liabilities:          
Accounts receivable   22,532    (734,871)
Inventories   (41,754)   (163,345)
Prepaid expenses and other current assets   -    938 
Employee advances   -    (15,179)
Accounts payable and accrued expenses   175,484    1,371,417)
Net cash provided by operating activities   35,571    (1,210)
INVESTING ACTIVITIES          
Capital expenditures        (49,131)
           
Net cash used for investing activities        (49,131)
           
FINANCING ACTIVITIES          
Proceeds from debt   -    - 
Repayment of debt   (5,795)   (39,541)
           
Net cash used for financing activities   (5,795)   (39,541)
           
NET INCREASE (DECREASE) IN CASH   29,775    (89,882)
           
CASH BALANCE BEGINNING OF PERIOD   52,568    180,489 
           
CASH BALANCE END OF PERIOD  $82,344   $90,607 
           
Supplemental Disclosures:          
Interest  $61,827   $67,428 
Taxes  $-   $- 
Non-cash Financing Activities:          
Conversion of accounts payable to fixed rate term note due Cardinal Health on March 31, 2011  $-   $305,728 
   $-   $- 

 

The accompanying notes are an integral part of these statements.

 

F-4
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

NOTE A – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

1.Nature of Operations/ Basis of Presentation

 

Nature of Operations

 

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

 

Effective January 21, 2011, MITRX Corporation (“MITRX”) (a wholly owned subsidiary incorporated in South Carolina on December 30, 2010) acquired the equity interests National Direct Home Pharmacy, Inc. (“NDHP”), operator of a mail order pharmacy, and Palmetto Long Term Care Pharmacy, LLC (“PLTC”), operator of a long term care pharmacy. Both entities operate from Columbia, South Carolina.

 

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

 

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

 

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

 

F-5
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

NOTE A – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in conformity with accounting principles

generally accepted in the United States of America.

 

2.Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of MIT Holdings, Inc and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

 

3.Use of estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted 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.

 

4.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 March 31, 2012 and December 31, 2009.

 

5.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.

 

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.

 

F-6
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

NOTE A – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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

 

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 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.

 

10.Stock-Based Compensation

 

Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (“ASC”) 718, “Compensation- Stock Compensation”.

 

F-7
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

NOTE A – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

In addition to requiring supplemental disclosures, ASC 718, Compensation – Stock Compensation, addresses the accounting for share-based payment transactions in which a company receives goods in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. FASB ASC 718 focuses primarily on accounting for transactions in which a company obtains employee services in share-based payment transactions.

 

References to the issuances of restricted stock refer to stock of a public company issued in private placement transactions to individuals who are eligible to sell all or some of their shares of restricted Common Stock pursuant to Rule 144 promulgated under the Securities Act of 1933 (“Rule 144”), subject to certain limitations. In general, pursuant to Rule 144, a stockholder who is not an affiliate and has satisfied a six-month holding period may sell all of his restricted stock without restriction, provided that the Company has current information publicly available. Rule 144 also permits, under certain circumstances, the sale of restricted stock, without any limitations, by a non-affiliate of the Company that has satisfied a one-year holding period.

 

11.Advertising Costs

 

Advertising costs are expensed as incurred. Advertising expense totaled $ 112,844 for the year ended March 31, 2012 and $ 21,348 for the year ended December 31, 2011.

 

12.Income Taxes

 

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

 

13.Net Income (Loss) per Common Share

 

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

 

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

 

F-8
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

NOTE A – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

For the years ended March 31, 2012 and 2011, diluted weighted average number of common shares outstanding exclude 3,593,460 (2009: 3,793,460) shares issuable on conversion of Series A Preferred Stock, 600,000 shares issuable on exercise of outstanding options and 8,418,780 shares issuable on exercise of outstanding warrants.

 

14.Reclassifications

 

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

 

15.Recent Accounting Pronouncements

 

Effective for interim and annual periods ending after September 15, 2009, the FASB Accounting Standards Codification (the “Codification”) is the single source of authoritative literature of U.S. generally accepted accounting principles (“GAAP”). The Codification consolidates all authoritative accounting literature into one internet-based research tool, which supersedes all preexisting accounting and reporting standards, excluding separate rules and other interpretive guidance released by the SEC. New accounting guidance is now issued in the form of Accounting Standards Updates, which update the Codification. The adoption of the Codification did not result in any change in the Company’s significant accounting policies.

 

F-9
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

NOTE A – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

In August 2009, the FASB issued an update to ASC 820. This Accounting Standards Update ("ASU") No. 2009-5, Measuring Liabilities at Fair Value ("ASU 2009-5") amends the provisions in ASC 820 related to the fair value measurement of liabilities and clarifies for circumstances in which a quoted price in an active market for the identical liability is not available. ASU 2009-5 is intended to reduce potential ambiguity in financial reporting when measuring the fair value of liabilities. ASU 2009-5 was effective for the Company in the first quarter of fiscal year 2010. ASU 2009-5 concerns disclosure only. The adoption of ASU 2009-5 did not have a material effect on the Company's consolidated financial statements.

 

In December 2009, the FASB issued Accounting Standards Update ("ASU") 2009-17, which codifies SFAS No. 167, Amendments to FASB Interpretation No. 46(R) issued in June 2009. ASU 2009-17 requires a qualitative approach to identifying a controlling financial interest in a variable interest entity ("VIE"), and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. ASU 2009-17 is effective for annual reporting periods beginning after November 15, 2009. The adoption of ASU 2009-17 did not have a material effect on the Company's financial statements.

 

In January 2010, the FASB issued ASU 2010-6, Improving Disclosures About Fair Value Measurements, which requires reporting entities to make new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements. ASU 2010-6 is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. The Company believes that the adoption of ASU 2010- 6 will not have a material effect on its consolidated financial statements.

 

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

 

NOTE B—GOING CONCERN

 

At March 31, 2012, the company had negative working capital of $1,185,879 and a stockholders’ deficiency of $2,247,789. From inception the Company has incurred an accumulated deficit of $8,527,203. These factors raise substantial doubt as the Company’s ability to continue as a going concern. There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company’s existing stockholders.

 

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

 

F-10
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

 

NOTE C—RESERVED

 

NOTE D – ACCOUNTS RECEIVABLE

 

Accounts receivable consist of:

 

   March 31, 
   2012   2011 
Ambulatory care  $338,361   $663,651 
Infusions   433,532    467,238 
Durable medical equipment   130,761    184,525 
MITRX   -    1,310,117 
Wholesale   -    - 
           
Total   902,654    2,625,531 
           
Allowance for doubtful accounts   (166,506)   (436,145)
           
Net  $736,148   $2,189,386 

 

The allowance for doubtful accounts changed as follows:

 

   Year Ended March 31, 
   2012   2011 
Balance, beginning of year  $238,515   $508,179 
Provision for doubtful accounts   -    - 
Writeoffs   (72,009)   (72,574)
           
Balance, end of year  $166,506   $436,145 

 

F-11
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

NOTE E – INVENTORIES

 

Inventories consist of:

 

   March 31, 
   2012   2011 
Ambulatory care  $56,477   $86,791 
Infusions   80,682    52,674 
Durable medical equipment   24,205    34,716 
MitRx   -    348,302 
           
Total  $161,364   $522,483 

 

NOTE F – NON-COMPETE AGREEMENT

 

Non-compete agreement consists of:

 

   March 31, 
   2012   2011 
Consideration to seller of Infusion and Ambulatory (and Company's chief operating officer) attributable to non-compete agreement executed May 10, 2005  $200,000   $200,000 
           
Accumulated amortization   (181,254)   (137,925)
           
Net  $18,746   $62,075 

 

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

 

F-12
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

NOTE G – LONG-TERM DEBT

 

The Company’s debt is as follows:

 

   March 31,   March 31, 
   2012   2011 
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 $410,000, respectively) MIT’s Co-Chairman and Co-President, Walter H.C. Drakeford (“Drakeford”) whom is also the Company’s Chief Financial Officer, Secretary and Director sat on the same Board of Directors with a financing entity in which the president of Globank is involved in.  $708,727   $625,727 
           
Cardinal Health 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   187,416    245,386 
           
Total   896,143    871,113 
           
Current portion of debt   182,422    81,522 
           
Long – term debt  $713,721   $789,521 

 

At March 31, 2012, the debt is due as follows:

 

Year ending December 31,    
2012   89,623 
2013   97,353 
2014   1,038,007 
Total   1,335,821 
Less unamortized debt discounts   (410,000)
Net  $925,821 

 

F-13
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

NOTE G – LONG-TERM DEBT (continued)

 

On December 31, 2010, the Company entered into a Loan and Security Agreement (the “New Loan”) with Globank Corp. (“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. The $537,727 increase in principal was applied as follows:

 

Company satisfaction of accrued interest payable on Original Note  $322,727 
Company satisfaction of Renewal Fee due to Globank   160,000 
Company satisfaction of attorney fees   5,000 
Company receipt of New Loan proceeds on January 24, 2011   50,000 
      
Total  $537,727 

 

Also, pursuant to the New Loan, the Company agreed to issue Globank 5,000,000 restricted shares of its common stock (which occurred January 19, 2011)(the “Stock”) and Globank agreed not to transfer the Stock without the Company’s prior written consent and appointed the Company’s Chairman of the Board as its proxy with respect to the Stock for all voting purposes to December 31, 2013. The Company is to redeem the Stock no later than January 1, 2014 for an amount equal to $250,000 (“Minimum Stock Redemption Amount”) plus 50% of the excess of the Payoff Value (based on the average closing sales price of the Stock for the 5 consecutive trading days immediately preceding the Payoff Date) over

$250,000, if any. The New Loan also provides for anti-dilution rights to Globank whereby Globank is to be issued additional shares of Company common stock if the Company issues additional shares to another person or entity (so that Globank retains the same percentage of stock ownership). The Stock has been reflected at the Minimum Stock Redemption Amount of $250,000 as “Common Stock Subject to Mandatory Redemption” within liabilities in the consolidated balance sheet at March 31, 2012.

 

The Renewal Fee of $160,000 and the Minimum Redemption Amount of $250,000 have been reflected as debt discounts in the consolidated balance sheet at March 31, 2012 and will be amortized over the term of the New Note and recognized as interest expense.

  

 

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:

 

F-14
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

   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”.

 

The fair values of the financial instruments consisted of:

 

   March 31, 2012   December 31, 2011 
   Common       Common     
   Shares   Fair   Shares   Fair 
   Equivalent   Value   Equivalent   Value 
Series A Convertible Preferred Stock   3,593,460   $71,869    3,793,460   $151,738 
Warrants   8,168,780    817    8,168,780    25,323 
                     
Total financial instruments   11,762,240   $72,686    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 March 31, 2012:

 

F-15
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

   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, 2011   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, 2010   11,762,240    153,541 
Revaluation credited to operations   -    (80,855)
Balance, December 31,2010   11,762,240,    72,686, 
Revaluation credited to operations        35,395 
Balance, March 31, 2012   11,762,240   $108,081 

 

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 March 31, 2012 and December 31, 2009, there are 1,796.73 and 1,896.73 shares of Series A Preferred Stock issued and outstanding, respectively. Holders of Series A Preferred Stock are entitled at any time to convert their shares of Series A Preferred Stock into Common Stock, without any further payment therefore. Each share of Series A Preferred Stock is initially convertible into 2,000 shares of Common Stock, equivalent to a Conversion Price of $0.50 per share. The number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock is subject to adjustment upon the occurrence of certain events, including, among others, a stock split, reverse stock split or combination of MIT's Common Stock; an issuance of Common Stock or other securities of MIT as a dividend or distribution on the Common Stock; a reclassification, exchange or substitution of the Common Stock; or a capital reorganization of MIT. In the event that MIT issues any additional shares of its Common Stock following the Offering, the Conversion rate will be that number of shares of Common Stock equal to $1,000 divided by the price per share at which MIT issues Common Stock in such offering. At our option, following the effectiveness of a registration statement registering the shares of Common Stock issuable upon the conversion of the Series A Preferred Stock and the exercise of the Warrants, if the price of the Common Stock trades above 300% of the Conversion Price per share during any period of 30 consecutive trading days and the average trading volume is at least 50,000 shares per day, for such 30 day period, each share of Series A Preferred Stock can be automatically converted into Common Stock at the Conversion Rate then in effect.

 

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

 

F-16
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

NOTE I – PREFERRED STOCK (Continued)

 

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 $386,297 and $295,831 at March 31, 2012 and December 31, 2009, respectively.

 

NOTE J – ISSUANCE OF COMMON STOCK

 

On March 31, 2009, the Board of Directors authorized the issuance of a total of 850,000 shares of common stock to Board Members and key employees valued at a price of $0.03 per share, or $25,500 total. On December 31, 2009, the Board of Directors authorized the issuance of a total of 2,139,937 shares of common stock to Board Members valued at prices ranging from $0.04 per share to $0.76 per share, or $148,352 total. The Company included the $173,582 estimated fair value of the shares in selling, general and administrative expenses in the statement of operations for the year ended December 31, 2009 and increased common stock and additional paid-in capital by the same amount.

 

On February 24, 2010, the Board of Directors authorized the issuance of a total of 320,000 shares of common stock to Board Members and key employees valued at a price of $0.04 per share, or $12,400 total. The Company included the $12,400 estimated fair value of the shares in selling, general and administrative expenses in the statement of operations for the year ended March 31, 2012 and increased the common stock and additional paid-in capital by the same amount.

 

On July 5, 2010, a holder of 100 shares of Series A Convertible Preferred Stock converted the 100 shares of Series A Convertible Preferred Stock into 200,000 shares of common stock. The Company reported the $8,000 estimated fair value of the common shares as a reduction of the “estimated liability for equity-based financial instruments with characteristics of liabilities” and increased common stock and additional paid-capital by the same amount.

 

NOTE K – STOCK OPTIONS AND COMMON STOCK PURCHASE WARRANTS

 

A summary of stock options and warrants activity for the years ended March 31, 2012 and 2009 follows:

 

   Common Shares Equivalent 
   Stock     
   Options   Warrants 
Outstanding at December 31, 2008   600,000    8,418,780 
Granted and issued   -    - 
Exercised   -    - 
Forfeited/expired/cancelled   -    - 
           
Outstanding at December 31, 2009   600,000    8,418,780 
Granted and issued   -    - 
Exercised        - 
Forfeited/expired/cancelled   -    - 
           
Outstanding at December 31, 2010   600,000    8,418,780 

 

F-17
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

 

UNAUDITED AND UNREVIEWED

 

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

 

Stock options outstanding at March 31, 2012 and 2010 are:

 

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

 

Common stock purchase warrants outstanding at March 31, 2012 and March 31, 2011 are:

 

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

 

NOTE L – INCOME TAXES

 

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

 

   Year Ended   Year Ended 
   March 31, 2012   March 31, 2011 
         
Expected income tax expense (benefit) at 34%  $26,803   $(422,846)
Non-deductible stock-based compensation   4,216    59,110 
Non-taxable income from revaluation of equity-based financial instruments with characteristics of liabilities at fair values   (32,768)   (53,292)
Change in valuation allowance   1,749    417,028 
           
Provision for income taxes  $-   $- 

 

F-18
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

UNAUDITED AND UNREVIEWED

 

March 31, 2012

NOTE L – INCOME TAXES (continued)

 

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

 

   March 31, 2012   March 31, 2011 
         
Allowance for doubtful accounts  $166,506   $422,102 
Net operating loss carryforward   1,178,039    927,152 
Total   1,351,003    1,349,254 
Less valuation allowance   (1,351,003)   (1,349,254)
Net deferred income tax assets  $-   $- 

 

Based on management’s present assessment, the Company has not yet determined it to be more likely than not a deferred income tax asset of up to approximately $1,351,003 attributable to the future utilization of the net operating loss carryforwards and other timing differences of approximately $3,973,539 as of March 31, 2012 will not be realized. Accordingly, the Company has maintained a 100% allowance against the deferred tax asset in the financial statements at March 31, 2012. The Company will continue to review this valuation allowance and make adjustments as appropriate. The $3,464,820 net operating loss carryforward expires $1,743,693 in year 2028, $983,226 in year 2029 and $737,901 in year 2030.

 

NOTE L – OPERATING SEGMENTS

 

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

 

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

 

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

 

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

 

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

 

MITRX Corporation is a specialty pharmacy that MIT acquired the operations of on January 21, 2011 that consisits of Palmetto Long Term Care Pharmacy which provides prescriptions to long term care patients in skilled nursing facilities and long term care facilities.

 

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

 

F-19
 

  

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

NOTE M – OPERATING SEGMENTS (Continued)

 

The following tables show the summarized financial information of the Company’s reportable segments at March 31, 2012 and 2009 and for the years then ended:

 

For the three months ended March 31,

 

   Medical                     
   Infusion   International/   Ambulatory   DME   MITRX   Combined 
   - MIT   Provector   Care             
2012                              
Revenue  $741.523   $-   $366,020   $97,972   $-   $1,205,515 
Income (loss) from operations   62,301    (118,040)   (30,728)   (17,704)        (68,764)
Depreciation and amortization   9,999    -    -    -    -    9,999 
Assets  $1,011,104   $-   $332,369   $130,845    -   $1,474,372 
                               
2011                              
Revenue  $535.958   $-   $885,068   $77,375   $3,584,651   $5,084,052 
Income (loss) from operations   (85,805)   (102,682)   205,749    (9,088)   (472,739)   (464,991)
Depreciation and amortization   9,999    -    -    -    12,250    22,249 
Assets  $576,977   $-   $532,369   $132,013    14,906,973   $16,148,332 

 

NOTE N - COMMITMENTS AND CONTINGENCIES

 

Employment Agreements

 

Pursuant to an Employment Agreement with the Company’s chief executive officer effective June 30, 2006 and expiring June 30, 2011, the Company is obligated to pay its chief executive officer a salary of $250,000 per year.

 

Pursuant to an Employment Agreement with the Company’s chief operating officer effective May 10, 2005, as amended March 14, 2006, April 1, 2006, December 20, 2006, and June 7, 2007, the Company is obligated to pay its chief operating officer a salary of approximately $117,000 per year through May 10, 2010 and, on May 10, 2010, cash or common stock, at the option of the Company, equal to the amount (if any) by which $625,000 exceeds the sum of ( i ) the market value of the remainder of the 312,500 unsold shares issued to her on June 7, 2007 and ( ii) the proceeds, if any, received by her from the sale of any of the 312,500 shares. As part of the agreement, the Company’s chief operating officer has agreed not to compete with the Company for a period of three years after the sales of any shares of the Company. The agreement has been verbally extended and amended to defer the $625,000 common stock market value contingent liability of the Company until 2012.

 

Pursuant to an Employment Agreement with the Company’s pharmacist in charge effective May 10, 2005, as amended March 14, 2006, April 1, 2006, December 20, 2006, and June 7, 2007, the Company is obligated to pay its pharmacist in charge a salary of approximately $40,000 per year through May 10, 2010 and, on May 10, 2010, cash or common stock, at the option of the Company, equal to the amount (if any) by which $500,000 exceeds the sum of ( i ) the market value of the remainder of the 250,000 unsold shares issued to him on June 7, 2007 and ( ii) the proceeds, if any, received by him from the sale of any of the 250,000 shares. As part of the agreement, the pharmacist in charge has agreed not to compete with the Company for a period of three years after the sales of any shares of the Company. The agreement has been verbally extended and amended to defer the $500,000 common stock market value contingent liability of the Company until 2012.

 

F-20
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

UNAUDITED AND UNREVIEWED

 

NOTE O -COMMITMENTS AND CONTINGENCIES (continued)

 

Lease Agreements

 

The Company operates from two locations in Savannah, Georgia (under month to month verbal agreements at rents totaling approximately $8,200 per month) and from two locations in South Carolina (under written operating lease agreements expiring October 31, 2013 and April 30, 2012 at monthly rents ranging from $2,500 to $3,000 (for the first lease) and $800 to $824 (for the second lease), respectively). Rent expense for the years ended March 31, 2012 and 2009 was $116,722 and $ 111,300, respectively.

 

At March 31, 2012, future minimum rental commitments under all non-cancellable operating leases are due as follows:

 

Year ending December 31,    
     
2011  $40,648 
2012   39,296 
2013   30,000 
      
Total  $109,944 

 

Delinquent Payroll Tax Returns and Payments

 

The Company is delinquent in filing certain Federal and Georgia payroll tax returns resulting in the non-payment of the related withholdings and employer taxes. The delinquency and non-payments are for the quarterly periods ended December 31, 2009, March 31, 2011, June 30, 2010, and September 30, 2010.

 

The total amount of money owed (excluding potential late filing and late payment penalties) at March 31, 2012 is approximately $501,511 (which is included in “accounts payable and accrued expenses” in the accompanying consolidated balance sheet at March 31, 2012).

 

In October 2010, we retained the public accounting firm Drakeford and Drakeford to contact the Internal Revenue Service and the Georgia tax authority to negotiate various payment plans associated with the amounts owed. In connection therewith, we sent $60,000 to Drakeford and Drakeford for the sole purpose of satisfying portions of these payroll tax obligations. To the extent unused, Drakeford and Drakeford is required to return any unused portion to the Company. The $60,000 is included in “Prepaid expenses and other current assets” in the accompanying consolidated balance sheet at March 31, 2012.

 

Additionally, information returns were not filed with the Internal Revenue Service relating to monies paid totaling

approximately $120,000 in 2010 to certain personnel treated as independent contractors The Internal Revenue Service may recharacterize these payments as salaries and attempt to assess the Company for social security taxes , interest, and penalties.

 

Stock-Based Compensation Plan

 

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

 

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

 

F-21
 

 

MIT HOLDING, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012

 

UNAUDITED AND UNREVIEWED

 

NOTE P – RELATED PARTY TRANSACTIONS

 

During the years ended December 31, 2010 and 2009, the Company incurred consulting fees of $282,000 and $83,000, respectively, included within “Selling, general and administrative” expenses to a company that has a professional relationship with the Company’s Co-chairmen.

 

The Company has authorized the two Chief Executive Officers to receive payment by issuing the Company’s common stock at a thirty-five (35%) percent discount to market. The Board of Directors have authorized this action in order to conserve cash for it’s operations.

 

 

NOTE O – SUBSEQUENT EVENTS

 

There are no subsequent events to report.

 

The accompanying notes are an integral part of these statements

 

F-22
 

 

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 distributes wholesale drugs, prepares intravenous medication for home infusion by the patient, operates ambulatory centers 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 Savannah. Our distribution of wholesale drugs has historically accounted for the majority of our revenues, although this was not the case in the quarter ended March 31, 2011, and is not anticipated to be a significant area of growth on the immediate future

 

MIT in 2008 expended substantial effort to obtain approvals and certification for ProVector™, a proprietary product developed by Dr. Thomas M. Kollars, Jr. (“Dr. Kollars”) in connection with Georgia Southern University Research & Services Foundation, Inc (“GSURSF”). This product could potentially eradicate the spread of certain mosquito-borne infectious diseases including malaria, dengue fever and West Nile virus. MIT intends to market ProVector™ through Mitprov Corp, its international distribution channels to developing nations.

 

Critical Accounting Policies

 

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

 

Our significant accounting policies are summarized in Note 1 to our audited financial statements for the year ended December 31, 2009. 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.

 

Advertising Cost

 

Advertising cost is expensed as incurred.

 

4
 

 

Estimates

 

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

 

New Accounting Pronouncements

 

New accounting statements issued, and adopted by the Company, include the following:

 

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”). This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. We are currently evaluating the impact on our consolidated financial statements of SFAS 157, which will become effective for us on January 1, 2008 for financial assets and January 1, 2009 for non-financial assets.

 

In February 2007, the Financial Accounting Standards Board issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. SFAS No. 159 amends SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of SFAS No. 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. SFAS No. 159 applies to all entities, including not-for-profit organizations. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 applies to all entities with available-for-sale and trading securities. Some requirements apply differently to entities that do not report net income. This statement is effective as of the beginning of each reporting entity’s first fiscal year that begins after November 15, 2007. The Company has not yet determined the effect of SFAS No. 159 on its financial position, operations or cash flows.

 

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” It will require an acquirer to recognize, at the acquisition date, the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at their full fair values as of that date. In a business combination achieved in stages (step acquisitions), the acquirer will be required to remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss in earnings. The acquisition-related transaction and restructuring costs will no longer be included as part of the capitalized cost of the acquired entity but will be required to be accounted for separately in accordance with applicable generally accepted accounting principles in the U.S. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.

 

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements.” The statement clarifies the definition of a non-controlling (or minority) interest and requires that non-controlling interests in subsidiaries be reported as a component of equity in the consolidated statement of financial position and requires that earnings attributed to the non-controlling interests be reported as part of consolidated earnings and not as a separate component of income or expense. However, it will also require expanded disclosures of the attribution of consolidated earnings to the controlling and non-controlling interests on the face of the consolidated income statement. SFAS No. 160 will require that changes in a parent’s controlling ownership interest, that do not result in a loss of control of the subsidiary, are accounted for as equity transactions among shareholders in the consolidated entity therefore resulting in no gain or loss recognition in the income statement. Only when a subsidiary is deconsolidated will a parent recognize a gain or loss in net income. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008, and will be applied prospectively except for the presentation and disclosure requirements that will be applied retrospectively for all periods presented. The Company is currently evaluating the impact of SFAS No. 160 to its financial position and results of operations.

 

5
 

 

Results of Operations

 

Comparison of three months ended March 31, 2012 to three months ended March 31, 2011 .

 

Revenues

 

Consolidated revenues for the quarter ended March 31, 2012 were $1,205,515 as compared to $5,084,052 for the quarter ended March 31, 2011 , representing an decrease of $3,146,124 or 76.3%. The decrease in sales and all expense catergories is due to the discontinued operations of MITRX that were included in the three months ended March 31, 2011. Revenues exclusive of discontinued operations decreased $293,885 from $1,499,401 for the same period last year. Consolidated cost of sales for the quarter ended March 31, 2012 were $563,245 or 46.7% of sales as compared to cost of sales for the quarter ended March 31, 2011 of $3,709,370 or 73.0% of sales. This resulted in a gross profit for this quarter of $642,270 or 53.3% as compared to gross profit for the same quarter in 2011 of $1,374,682 or 27.0%. Cost of Sales exclusive of discontinued operations decreased $142,677 from $705,923 or a decrease of 20.2%. Decreases in Ambulatory revenues was due to decreased referrals and reimbursement rates due to changes in Health Care Laws. Increases in revenue in the Home Infusion and Durable Medical Equipment divisions were realized creating minor offsets. The decrease in the costs of good sold for the quarter were due to decreased sales with profit margins remaining virtually unchanged. Utilization of mail order drugs on some higher priced therapies whereby medicines are sent to MIT but billed directly to the payor continue to keep our overall costs low.

 

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

 

 

Medical Infusion Technologies-“MIT”

 

MIT Wholesale-“Wholesale”

  

Medical Infusion Tech,DME-“DME”

 

MIT Ambulatory Care Center-“Ambulatory Care”

 

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

 

“MITRX” is a discontinued operation specializing in Long Term Care Facilities.

 

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

 

“Ambulatory Care” administers the intravenous therapies to patients.

 

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

 

For the three months ended March 31,

 

   Medical                     
   Infusion   International/   Ambulatory   DME   MITRX   Combined 
   - MIT   Provector   Care             
2012                              
Revenue  $741.523   $-   $366,020   $97,972   $-   $1,205,515 
Income (loss) from operations   62,301    (118,040)   (30,728)   (17,704)        (68,764)
Depreciation and amortization   9,999    -    -    -    -    9,999 
Assets  $1,011,104   $-   $332,369   $130,845    -   $1,474,372 
                               
2011                              
Revenue  $535.958   $-   $885,068   $77,375   $3,584,651   $5,084,052 
Income (loss) from operations   (85,805)   (102,682)   205,749    (9,088)   (472,739)   (464,991)
Depreciation and amortization   9,999    -    -    -    12,250    22,249 
Assets  $576,977   $-   $532,369   $132,013    14,906,973   $16,148,332 

 

6
 

 

Operating Expenses

 

Total operating expenses decreased $74,769, or 9.5% to $711,033 for the quarter ended March 31, 2012, from $785,033 for the same period in 2011. The decrease in operating expense is attributable to the decrease in personnel costs. The major components of operating expense exclusive of discontinued operations include:

 

 

 

Salaries and payroll related costs decreased from $363,867 to $343,153. for the first quarter of 2012 or a reduction of 24.3% over the quarter ended March 31, 2010. The decrease was due primarily to changes in personnel in various departments that reduced costs while maintaining the quality of services performed.

 

 

 

Selling, general and administrative expenses decreased $20,724 or 5.7% to $343,143 for the quarter ended March 31, 2012 as compared to $363,867 for the same period in 2011. The company has been able to maintain spending levels at a modest rate with decreasing revenues and margins. Overhead items in all areas of operating expenses including advertising and marketing efforts and legal expenses have not changed materially. We anticipate these expenditures to remain flat over the next quarter and any increases that occur will be based on new spending to support an increase in sales from new opportunities in subsequent quarters. Other payroll and benefits costs were $33,033; consulting fees for the quarter were $51,861; insurance expense was $19,270; rent expense was $16,676; office expense was $9,022; legal and professional expenses were $6,498. Additional expenses included travel expense of $7,030; advertising of $3,001; auto expense of $11,215 and telephone expense of $9,164.

 

 

 

Depreciation and amortization unchanged $9,999 for the quarter ended March 31, 2012 as compared to $17,415 for the same period in 2011.

 

 

Income from Operations

 

Income from operations decreased ($76,438), or (996.1%), from $7,674 in 2011 to ($68,763) in 2012. The decrease was attributable to the $151,208 decrease in gross profit resulting from lower revenues and the $ 74,769 decrease in operating expenses discussed above.

 

Net income (Loss)

 

Net income (loss) decreased $35,442 from net loss of ($95,148 in 2011 to a net loss of ($168,019 in 2012. The decrease is attributable to decrease in the revenues 2012.

 

Liquidity and Capital Resources

 

As of March 31, 2012, we had cash of $82,344 as compared to $46,928 at March 31, 2011. As of March 31, 2012 we had a working capital deficit of $(1,912,328). For the three months ended March 31, 2012, net cash provided by operating activities aggregated $35,571 as compared to cash used by operating activities of ($1,210) for the three months ended March 31, 2011. Cash used by financing activities was $5,795 which was used to reduce creditor balances. As of December 31, 2011, we had cash of $52,564 as compared to a cash balance of $101,896 as of December 31, 2010.

 

7
 

 

As of March 31, 2012 , we were funded primarily through operations and a term loan with Globank. On August 1, 2008, we received a term loan from Globank, Corp. in the amount of $500,000 which bears interest at the rate of 60% per annum. The term loan from Globank, Corp. matures on July 31, 2010.

 

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.

 

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 March 31, 2012, we were not engaged in any litigation.

 

Unless we generate sufficient collections on our receivables, otherwise increase revenues or obtain financing through other means, our operations may be difficult to sustain.

 

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 March 31, 2012, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

INFLATION

 

Inflation has not had a material impact on our business.

 

8
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

9
 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, we are party to litigation that we consider to be a part of the ordinary course of our business. At present, we are not involved in any pending claims that we believe could reasonably be expected to have a material adverse effect on our business, financial condition, or results of operations.

 

Item 1A. Risk Factors

 

Not applicable.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Removed and Reserved .

 

Item 5. Other Information

 

None.

 

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

 

10
 

 

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: May 21, 2012 By: /s/ William C. Parker
    William C. Parker, co Chief Executive Officer
    (principal executive officer)
     
  By: /s/ Walter H. C. Drakeford
    Walter H. C. Drakeford, co Chief Executive Officer and
    the Principal Financial Officer
    (principal financial officer)

 

11
 

 

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