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EX-31.1 - MIT Holding, Inc.ex31-1.htm
EX-32.1 - MIT Holding, Inc.ex32-1.htm
EX-31.2 - MIT Holding, Inc.ex31-2.htm
EX-32.2 - MIT Holding, Inc.ex32-2.htm

 

 

 

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 June 30, 2015

 

OR

 

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

 

Commission File No: 333-13679

 

MIT HOLDING, INC.

(Exact name of registrant as specified in its charter)

 

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

 

11835 W. Olympic Blvd, Suite 1235E, Los Angeles, CA 90064

(Address of principal executive office) (Zip Code)

 

Registrant's telephone number: (310) 312-6888

 

N/A

 

Former name, former address and former fiscal year,

(if changed since last report)

 

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

 

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

  Smaller reporting company [X]
    (Do not check if a smaller reporting company)

 

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 June 30, 2015 was 96,259,621.

 

 

 

 
   

 

MIT HOLDING, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED June 30, 2015

 

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 7
     
Item 4T: Controls and Procedures 7
     
PART II – OTHER INFORMATION  
   
Item 1: Legal Proceedings 8
     
Item 1A: Risk Factors 8
     
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 8
     
Item 3: Defaults Upon Senior Securities 8
     
Item 4: Removed and Reserved 8
     
Item 5: Other Information 8
     
Item 6: Exhibits 8

 

2
   

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

Page
   
Financial Statements (Unaudited)  
 
Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014 F-1
 
Consolidated Statements of Operations for the six months ended June 30, 2015 and 2014 F-2
 
Consolidated Statements of Operations for the three months ended June 30, 2015 and 2014 F-3
 
Consolidated Statement of Stockholders’ Equity (Deficiency) for the six months ended June 30, 2015 F-4
 
Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014 F-5
 
Notes to Consolidated Financial Statements F-6 - F-22

 

3
   

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

MIT HOLDING, INC.

CONSOLIDATED BALANCE SHEETS

 

   June 30, 2015    December 31, 2014  
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $33,149   $4,192 
Accounts receivable, net of allowance for doubtful accounts of $286,853 and $208,269, respectively   286,853    208,269 
Inventories   -    - 
Employee advances   -    - 
Prepaid expenses and other current assets   -    - 
           
Total current assets   320,002    212,461 
           
PROPERTY AND EQUIPMENT, net of accumulated depreciation   8,042    6,900 
           
OTHER ASSETS          
Note receivable from purchaser of discontinued operations Originally $4,000,000   400,000    400,000 
           
Total other assets   400,000    400,000 
           
TOTAL ASSETS  $728,044   $619,361 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY          
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $2,719,914   $2,859,828 
Current portion of long-term debt   1,673,146    1,690,516 
           
Total current liabilities   4,393,060    4,550,344 
           
Long-term debt   -    - 
Common stock subject to mandatory redemption; 5,000,000 shares issuable at December 31, 2010 (Note F)   -    - 
Estimated liability for equity-based financial instruments with characteristics of liabilities:          
Series A Convertible Preferred stock (179.67 and 179.67 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively)   151,738    151,738 
Warrants   5,213    5,213 
           
TOTAL LIABILITIES   4,550,011    4,707,295 
           
STOCKHOLDERS’ DEFICIENCY          
Preferred stock, $0.000001 par value; 5,000,000 shares authorized, 179.67 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively (included in liabilities)   -    - 
Series B Preferred stock, $0.000001 par value 1,100,000 shares authorized. 1,100,000 shares outstanding at June 30, 2015 and December 31, 2014, respectively ( See Note Q)   1    1 
Common stock, $0.000001 par value; 250,000,000 shares authorized, 96,259,621 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively   206    206 
Additional paid-in capital   8,692,906    8,692,906 
Accumulated deficit   (12,515,080)   (12,781,047)
           
Total stockholders’ deficiency   (3,821,967)   (4,087,934)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY  $728,044   $619,361 

 

UNAUDITED AND UNREVIEWED

 

The accompanying notes are an integral part of these statements.

 

F-1
   

 

MIT HOLDING, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

UNAUDITED AND UNREVIEWED

 

   June 30, 2015    June 30, 2014  
           
Revenue          
           
Sales and services rendered  $851,724   $473,153 
           
Cost of medical supplies   219,999    160,913 
           
Gross profit   631,725    312,240 
           
Operating Expenses          
Salaries and payroll cost   14,390    160,612 
Selling, general and administrative   294,893    175,012 
Provision for doubtful accounts   -    - 
Depreciation and amortization   -    - 
           
Total operating expenses   309,283    335,624 
           
Income (loss) from operations   322,442    (23,384)
           
Other income (expense):          
Income (expense) from revaluation of equity-based financial instruments with characteristics of liabilities at fair values   -      
Interest expense   (56,475)   (123,900)
           
Income (loss) before provision for income taxes   265,967    (147,284)
           
Provision for income taxes   -      
           
Net income (loss)   265,967    (147,284)
           
Increase in cumulative dividends payable on Series A Preferred Stock   -    - 
           
Net income (loss) attributable to common stockholders  $265,967   $(147,284)
           
Net income (loss) per common share:          
Basic and diluted  $0.00   $(0.00)
           
Weighted average number of common shares outstanding:          
Basic and diluted   96,259,621    33,347,541 

 

The accompanying notes are an integral part of these statements.

 

F-2
   

 

 

MIT HOLDING, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2015 AND 2014

UNAUDITED AND UNREVIEWED

 

   June 30, 2015   June 30, 2014 
         
Revenue          
           
Sales and services rendered  $361,870   $263,171 
           
Cost of medical supplies   8,066    78,722 
           
Gross profit   353,804    184,449 
           
Operating Expenses          
Salaries and payroll cost   9,590    62,078 
Selling, general and administrative   68,592    101,479 
Provision for doubtful accounts        - 
Depreciation and amortization        - 
           
Total operating expenses   78,182    163,557 
           
Income (loss) from operations   275,622    20,892 
           
Other income (expense):          
Income (expense) from revaluation of equity-based financial instruments with characteristics of liabilities at fair values          
Interest expense   -    (62,450)
           
Income (loss) before provision for income taxes   275,622    (41,558)
           
Provision for income taxes   -    - 
           
Net income (loss)   275,622    (41,558)
           
Increase in cumulative dividends payable on Series A Preferred Stock   -    - 
Net income (loss) attributable to common stockholders  $275,622   $(41,558)
           
Net income(loss) per common share:          
Basic and diluted  $0.00   $(0.00)
           
Weighted average number of common shares outstanding:          
Basic and diluted   96,259,621    34,826,521 

 

The accompanying notes are an integral part of these statements.

 

F-3
   

 

MIT HOLDING, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY

FOR THE SIX MONTHS ENDED JUNE 30, 2015

(UNAUDITED AND UNREVIEWED)

 

   Series B Preferred Stock Shares   $0.000001 par value Amount   Common Stock Shares   $0.000001 par value Amount   Additional Paid in Capital   Accumulated Deficit   Total Stockholder’s (Deficiency) 
Balance at December 31, 2012             8,826,081    88    7,582,166    (10,999,853)   (3,417,599)
                                    
Issuance of common stock for services in first quarter of 2013             3,584,520    35    107,501         107,536 
                                    
Issuance of Series B Preferred stock for services in second quarter of 2012   1,100,000    1              79,999         80,000 
                                    
Issuance of common stock for services in second quarter 2013             16,500,000    16    494,984         495,000 
                                    
Net loss for the twelve months ended December 31, 2013             -    -         (1,554,662)   (1,554,662)
                                    
Balance at December 31, 2013   1,100,000    1    28,910,601    140    8,264,650    (12,554,515)   (4,289,725)
                                    
Issuance of common stock for Settlement of liabilities in second quarter 2014             5,915,920    6    59,153         59,159 
                                    
Issuance of common stock for Settlement of liabilities in fourth quarter of 2014             64,133,100    61    369,105         369,167 
                                    
Net loss for the twelve months ended December 31, 2014             -    -         (226,533)   (226,533)
                                    
Balance at December 31, 2014   1,100,000    1    96,259,621    206    8,692,906    (12,781,047)   (4,087,934)
                                    
Net income for the six months ended June 30, 2015                     -       -               265,967        265,967  
                                                         
Balance at June 30, 2015     1,100,000       1       96,259,621       206       8,692,906       (12,515,080 )     (3,821,967 )

 

The accompanying notes are an integral part of these statements.

 

F-4
   

 

MIT HOLDING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

UNAUDITED AND UNREVIEWED

 

   June 30, 2015   June 30, 2014 
OPERATING ACTIVITIES          
Net income (loss)  $265,967   $(147,284)
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   -      
Issuance of common stock for services   -    769,070 
Changes in operating assets and liabilities:          
Accounts receivable   (78,584)   (38,597)
Inventories   -    17,721 
Prepaid expenses and other current assets   -    (14,500)
Employee advances   -      
Accounts payable and accrued expenses   (139,914)   (589,679)
Net cash provided (used) by operating activities   47,469    (3,269)
           
INVESTING ACTIVITIES          
Capital expenditures   (1,142)   - 
           
Net cash used for investing activities   (1,142)   - 
           
FINANCING ACTIVITIES          
Repayment of debt   (17,370)   (6,000)
           
Net cash used for financing activities   (17,370)   (6,000)
           
NET INCREASE (DECREASE) IN CASH   28,957    (9,269)
           
CASH BALANCE BEGINNING OF PERIOD   4,192    38,336 
           
CASH BALANCE END OF PERIOD  $33,149   $29,067 
           
Supplemental Disclosures:          
Interest  $56,475   $61,450 
Taxes  $-   $- 

 

The accompanying notes are an integral part of these statements.

 

F-5
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

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 it’s affiliations and contractors, prepares intravenous medication for home infusion by the patient, administers intravenous infusions, provides medical management services, and contracts ambulatory centers where therapies are administered and sells and rents home medical equipment.

 

Our current name and business operations have been preceded by historical name changes and changes in our capitalization.

 

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

 

Our Company was formerly known as Convention All Holdings, Inc. On May 2, 2007, we then 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., 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. (“MIT International”).

 

In May 2007 we changed our ticker symbol on the OTC Bulletin Board to MITD.OB.

 

F-6
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

UNAUDITED AND UNREVIEWED

 

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

 

1. 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 Holding, 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 June 30, 2015 and December 31, 2014.

 

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-7
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

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-8
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

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 $ 4,160 for the period ended June 30, 2015 and $ $ 26,736 for the year ended December 31, 2014.

 

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-9
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

UNAUDITED AND UNREVIEWED

 

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

 

For the six months ended June 30, 2015 and 2014, diluted weighted average number of common shares outstanding exclude 3,593,460 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-10
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

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 June 30, 2015, the company had negative working capital of $4,073,058 and a stockholders’ deficiency of $3,821,967. From inception the Company has incurred an accumulated deficit of $12,515,080. 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-11
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

UNAUDITED AND UNREVIEWED

 

NOTE C – RESERVED

 

NOTE D – ACCOUNTS RECEIVABLE

 

Accounts receivable consist of:

 

   June 30, 2015   December 31, 2014 
Ambulatory/Infusion/DME  $495,121   $550,296 
           
Total   284,128    566,360 
           
Allowance for doubtful accounts   (208,268)   (342,027)
           
Net  $286,853   $208,269 

 

The allowance for doubtful accounts changed as follows:

 

   June 30, 2015   December 31, 2014 
Balance, beginning of year  $208,268   $342,027 
Provision for doubtful accounts   -    - 
Writeoffs          
           
Balance, June 30,2015  $208,268   $342,027 

 

F-12
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

UNAUDITED AND UNREVIEWED

 

NOTE E – INVENTORIES

 

Inventories consist of:

 

   June 30, 2015   December 31, 2014 
Ambulatory/Infusion/DME  $-   $128,906 
           
Total  $-   $128,906 

 

NOTE F – NON-COMPETE AGREEMENT

 

Non-compete agreement consists of:

 

   June 30, 2015   December 31, 2014 
Consideration to seller of Infusion and Ambulatory attributable to non-compete agreement executed May 10, 2005  $200,000   $200,000 
           
Accumulated amortization   (200,000)   (200,000)
           
Net  $-   $- 

 

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

 

F-13
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

UNAUDITED AND UNREVIEWED

 

NOTE G – LONG-TERM DEBT

 

The Company’s debt at June 30, 2015 and December 31, 2014 is as follows:

 

   June 30, 2015   Dec. 31, 2014 
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 Chairman and President, Walter H.C. Drakeford (“Drakeford”) whom is also the Company’s Secretary and Director sat on the same Board of Directors with a financing entity in which the president of Globank is involved in.  $955,727   $955,727 
           
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 former Chief Executive Officer, William C. Parker   134,305    154,863 
           
Smith Medical – installment loan, interest at 12%, due in monthly installments of principal and interest of $5,212 through December 28,2013 , secured by Company assets and guaranty of the Company’s former Chief Executive, William C. Parker   -    - 
           
Notes Payable to former employees of the company for past wages and other obligations   207,704    207,704 
           
Metro Medical – installment loan, interest at 12% due in monthly installments of principal and interest of $20,000 through August 20,2014, secured by Company assets and guaranty of the Company’s former Chief Executive Officer, William C. Parker   375,410    372,222 
           
Total   1,673,146    1,690,516 
           
Current portion of debt   1,673,146    1,690,516 
           
Long – term debt  $-   $- 

 

F-14
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

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, 2014. 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 December 31, 2014. ALL STOCK RESTRICTIONS HAVE BEEN REMOVED BY MIT.

 

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 December 31, 2014 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-15
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

UNAUDITED AND UNREVIEWED

 

   Common
Shares
Equivalent
   Fair
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 non-excluded 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 re-measures 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:

 

   June 30, 2015   December 31, 2014 
   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 

 

F-16
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

UNAUDITED AND UNREVIEWED

 

Below is a reconciliation of the change in the fair values of the financial instruments from January 1, 2009 through June 30, 2015:

 

   Common
Shares
Equivalent
   Fair Value 
Balance, January 1, 2009   11,962,240   $333,802 
Revaluation credited to operations   -    (164,271)
Balance, March 31, 2009   11,962,240    169,531 
Revaluation charged to operations   -    789,139 
Balance, June 30, 2009   11,962,240    958,670 
Revaluation credited to operations   -    (403,695)
Balance, September 30, 2009   11,962,240    554,975 
Revaluation credited to operations   -    (377,914)
Balance December 31, 2009   11,962,240    177,061 
Revaluation charged to operations        332,169 
Balance March 31, 2010   11,962,240    509,230 
Revaluation credited to operations   -    (295,050)
Balance June 30, 2010   11,962,240    214,180 
Conversion of Series A Convertible Preferred Stock   (200,000)   (8,000)
Revaluation credited to operations   -    (52,639)
Balance September 30, 2010   11,762,240    153,541 
Revaluation credited to operations   -    (80,855)
Balance, December 31,2011   11,762,240    72,686 
Revaluation credited to operations        35,395 
Balance, June 30, 2015   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, 2015 and December 31, 2013, there are 179.7 and 179.7 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 200 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 179.7 shares issued and outstanding as of June 30, 2015 (December 31,2014: $1,896,730 for the 179.7 shares issued and outstanding).

 

F-17
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

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 63.5 units (comprised of 63.5 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 $386,297 at June 30, 2015 and December 31, 2014 respectively.

 

On October 12, 2012, the Board of Directors authorized 1,100,000 shares of Series B preferred stock, at a par value of $0.000001. During the 2nd Quarter 2013, 1,100,000 shares were issued (550,000 each) to two separate vendors in settlement of $80,000 in debt occurred for prior services. See Note O

 

NOTE J – ISSUANCE OF COMMON STOCK

 

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 63.5 units (comprised of 63.5 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 $386,297 at June 30, 2015 and December 31, 2014 respectively.

 

On October 12, 2012, the Board of Directors authorized 1,100,000 shares of Series B preferred stock, at a par value of $0.000001. During the 2 nd Quarter 2013, 1,100,000 shares were issued (550,000 each) to two separate vendors in settlement of $80,000 in debt occurred for prior services. See Note O

 

On February 22, 2013 the Company issued a total of 3,584,520 shares of common stock to various vendors providing legal and consulting services valued at .003 cents per share.

 

On May 15, 2013, the Company issued 16,500,000 shares of common stock in exchange for services and debt.

 

On January 30, 2014, the company 5,915.920 shares in exchange in lieu of fees to directors and for accrued expenses.

 

On October 24, 2014, the company issued 5,800,000 shares for services performed.

 

On Dec 2, 2014, the company issued 55,633,100 shares for accrued expenses of the company.

 

F-18
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

UNAUDITED AND UNREVIEWED

 

NOTE K – STOCK OPTIONS AND COMMON STOCK PURCHASE WARRANTS

 

A summary of stock options and warrants activity for the years ended December 31, 2013 and December 31, 2014 and for the six months ended June 30, 2015 follows:

 

All options have expired as of August 12, 2012

 

   Common Shares Equivalent 
   Stock Options   Warrants 
Outstanding at December 31, 2013   60,000    8,418,780 
Granted and issued   -    - 
Exercised   -    - 
Forfeited/expired/cancelled   -    - 
           
Outstanding at December 31, 2014   60,000    8,418,780 
Granted and issued   -    - 
Exercised        - 
Forfeited/expired/cancelled   -    - 
           
Outstanding at June 30, 2015   60,000    8,418,780 

 

F-19
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

UNAUDITED AND UNREVIEWED

 

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

 

Stock options outstanding at June 30, 2015 and 2014 are:

 

All options have expired as of August 12, 2012.

 

Date Granted  Number
Outstanding
   Number
Exercisable
   Exercise
Price
   Expiration
Date
                
May 2, 2007   60,000    60,000   $0.50   May 2, 2012
                   
Totals   60,000    60,000         

 

Common stock purchase warrants outstanding at June 30, 2015 are:

 

All warrants have expired as of August 13, 2012.

 

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:

 

   Six Months Ended   Six Months Ended 
   June 30, 2015   June 30, 2014 
         
Expected income tax expense (benefit) at 34%  $90,429   $147,849 
Non-deductible stock-based compensation        107,535 
Non-taxable income from revaluation of equity-based financial instruments with characteristics of liabilities at fair values          
Change in valuation allowance   90,429    255,384 
           
Provision for income taxes  $-   $- 

 

F-20
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

UNAUDITED AND UNREVIEWED

 

NOTE L – INCOME TAXES (continued)

 

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

 

   June 30, 2015   December 31, 2014 
         
Allowance for doubtful accounts  $208,268   $358,091 
Net operating loss carryforward   4,698,489    2,422,594 
Total   4,906,757    2,780,685 
Less valuation allowance   (4,906,757)   (2,780,685)
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 June 30, 2015 will not be realized. Accordingly, the Company has maintained a 100% allowance against the deferred tax asset in the financial statements at June 30, 2015. 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 M – OPERATING SEGMENTS

 

The Company had four principal operating segments, which have been discontinued as of January 1, 2014.

 

F-21
   

 

MIT HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

UNAUDITED AND UNREVIEWED

 

NOTE N - COMMITMENTS AND CONTINGENCIES

 

Employment Agreements

 

As of June 30, 2015, there are no current Employment Agreements in effect.

 

Lease Agreements

 

The Company is headquartered in Los Angeles, California at 11835 W. Olympic Blvd, Suite 1235E. The Company’s administrative Offices are at 601 Jefferson Davis Hwy, Suite 201, Fredericksburg, VA 22401. Both locations are under month to month verbal agreements at rent totaling $2,142.50 per month

 

At December 31, 2014, future minimum rental commitments under all non-cancellable operating leases are due as follows: The Company has no written leases in place at this time.

 

Rent expense for the period ended June 30, 2015 and 2014 was $7,220 and $10,048 respectively.

 

Stock-Based Compensation Plan

 

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

 

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

 

NOTE O – RELATED PARTY TRANSACTIONS

 

During the six months ended June 30, 2015 and the year ended December 31, 2014 the company had no related party transactions.

 

NOTE P – SUBSEQUENT EVENTS

 

There are no additional subsequent events to report.

 

The accompanying notes are an integral part of these statements.

 

F-22
   

 

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

 

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 it’s affiliations and contractors, MIT prepares intravenous medication for home infusion by the patient, administers intravenous infusions, provides medical management services, ambulatory center where therapies are administered and sells and rents home medical equipment.

 

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, 2014. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

 

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.

 

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.

 

4
   

 

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.

 

Results of Operations

 

Comparison of six months ended June 30, 2015 and 2014.

 

Revenues

 

Consolidated revenues for the six months ended June 30, 2015 were $851,724 as compared to $473,153 for the six months ended June 30, 2014, representing an increase of $378,571. The increase in sales and all expense categories is due to the increase in referrals and the execution of subcontractor services for the six months ended June 30, 2015. Consolidated cost of sales for the six months ended June 30, 2015 were $219,999 or 25.83% of sales as compared to cost of sales for the six ended June 30, 2014 of $160,913 or 34.01% of sales. This resulted in a gross profit for this period of $631,725 or 74.17% as compared to gross profit for the same period in 2014 of $312,240 or 65.99%. The increase in revenue was due to increased referrals and the use of subcontractors. The increase in the costs of good sold for the quarter, were due to increased 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 had four principal operating segments, which have been discontinued as of January 1, 2014.

 

5
   

 

Operating Expenses

 

Total operating expenses decreased $26,341 or 7.85% to $309,283 for the six months ended June 30, 2015, from $335,624 for the same period in 2014. The decrease in operating expense is attributable to the decrease in costs associated with usage of subcontractors. The major components of operating expense exclusive of discontinued operations include:

 

  Salaries and payroll related costs decreased from $160,612 to $14,390 for the six months ended June 30, 2015 or a reduction of 91.04% over the six months ended June 30, 2014. The decrease was due primarily to reductions in personnel in various departments that reduced costs while switching to using subcontractors while maintaining the quality of services performed.
     
 

Selling, general and administrative expenses increased $119,881 or 68.50% to $294,893 for the six months ended June 30, 2015 as compared to $175,012 for the same period in 2014. The company has been able to reduce spending levels as a percentage of sales. 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. Accounting and legal fees $18,583; payroll costs were $14,390; rent expense was $7,220; office expense was $1,998 and telephone expenses were $4,100. Additional expenses included contract labor expense of $4,300.

     
  Depreciation and amortization was $0 for the quarter ended June 30, 2015 as compared to $0 for the same period in 2014.

 

Income from Operations

 

Income from operations increased $345,826 from $(23,384) in 2014 to $322,442 in 2015. The increase was attributable to the increase in gross profit resulting from higher revenues and the decrease in operating expenses as a percentage of sales as discussed above.

 

Net income (Loss)

 

Net income increased 413,251 from a net loss of ($147,284) in 2014 to a net income of $265,967 in 2015. The increase is attributable to increase in the revenues and a decrease in overhead expenses for the period.

 

Liquidity and Capital Resources

 

As of June 30, 2015, we had cash of $33,149 as compared to $4,192 at December 31, 2014. As of June 30, 2015 we had a working capital deficit of $4,073,058. For the six months ended June 30, 2015, net cash provided by operating activities aggregated $47,469 as compared to cash used by operating activities of 3,269 for the six months ended June 30, 2014. Cash used by financing activities was $17,370 which was used to reduce creditor balances.

 

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As of June 30, 2015, we were funded primarily through operations and a term loan with Globank. On August 1, 2008, we received a term loan from Globank, Inc. in the amount of $500,000 which bears interest at the rate of 14.9% per annum. The term loan from Globank, Inc. matures on January 31, 2015.

 

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, 2015,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 June 30, 2015, we were engaged in litigation in the normal course of business.

 

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, Walter H.C. Drakeford and Principal Financial Officer, Tommy J. Duncan, 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 not effective since the financials have not been audited, 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 June 30, 2015, 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.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

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

 

Item 1A. Risk Factors

 

Not applicable.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Removed and Reserved.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

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

 

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

 

* Filed herewith

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

 

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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: August 24, 2015 By: /s/ Walter H. C. Drakeford
    Walter H. C. Drakeford, Chairman and
    Chief Executive Officer

 

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