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MMMS > SEC Filings for MMMS > Form 10-Q/A on 19-Nov-2012All Recent SEC Filings

Show all filings for MEDYTOX SOLUTIONS, INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q/A for MEDYTOX SOLUTIONS, INC.


19-Nov-2012

Quarterly Report

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

Forward-Looking Statements

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

and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Report.

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

Overview

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

During 2010 and 2011 the casino representative business was minimal. As of June 30, 2011, Company management decided to reorganize the operations of the Company as a holding company, under the name "Medytox Solutions, Inc.", to acquire and manage a number of companies in the medical services sector.

As of September 30, 2012, we operate a medical testing laboratory, a medical billing service, a marketing firm for medical monitoring software and services and corporate offices. The operations of the casino representative business are immaterial and do not constitute a separate segment.

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

Results of Operations

For the Three Months Ended September 30, 2012 and 2011

Revenues

Revenues for the three months ended September 30, 2012 were $8,278,056 compared to $2,558,578 for the three months ended September 30, 2011. The increase is due to the fact that our new laboratory and business model were fully operational in the quarter ended September 30, 2012. Our new laboratory and business model had just started in August of the third quarter of 2011.

Operating expenses

Operating expenses have increased during the three months ended September 30, 2012 to $5,601,704 from $1,273,206 for the same period in 2011. The increase is due to a new business model that increases both revenues and expenses.

Net Income

Net income for the three months ended September 30, 2012 was $834,576 compared to $820,450 for the three months ended September 30, 2011. The slight increase in income is net of a reversal of $974,656 in prior year income from our Trident subsidiary. All the net income from this disputed subsidiary has been reserved as deferred revenue due to ongoing litigation.

For the Nine Months Ended September 30, 2012 and 2011

Revenues

Revenues for the nine months ended September 30, 2012 were $11,958,786 compared to $2,563,344 for the nine months ended September 30, 2011. The increase is due to the fact that our new business model started in August of 2011. The current nine months contain the activity for nine months while the nine months in 2011 only show two months of the new business model.

Operating expenses

Operating expenses increased during the nine months ended September 30, 2012 to $11,291,756 from $1,328,002 for the same period in 2011. The increase is due to a new business model that increases both revenues and expenses. In addition, the Company incurred legal expenses regarding the Trident litigation and other matters totaling approximately $285,000 and recorded accrued sales commissions totaling $260,290 relating to collections in 2012.

Net Income (Losses)

Net operating loss for the nine months ended September 30, 2012 was $(247,284) compared to an income of $770,420 for the nine months ended September 30, 2011.
The difference in income is due to the reversal of $974,656 in prior year income from our Trident subsidiary. All the net income from this disputed subsidiary has been reserved as deferred revenue due to ongoing litigation in the current period.

Liquidity and Capital Resources

Going Concern

At September 30, 2012, we had $935,220 in cash on hand and a stockholders' deficit of $(1,257,780). Our new business model has resulted in income for the three months ended September 30, 2012 and a minor loss for the nine months ended September 30, 2012. Based on the trends in revenues from the new business model and the resources on hand, the Company believes substantial doubt no longer exists as to its ability to continue as a going concern.

Cash status

The Company's cash position was $935,220 and $97,103 at September 30, 2012 and December 31, 2011, respectively. Accounts receivable on September 30, 2012 were $3,039,173 compared to $1,619,727 on December 31, 2011.

Assets

At September 30, 2012, we had total assets of $6,093,012 compared to $3,933,080 on December 31, 2011. The increase in assets is due to an overall accumulation of increases in cash, accounts receivable and property and equipment.

Liabilities

Our total liabilities were $7,350,792 at September 30, 2012 compared to $5,127,701 at December 31, 2011. The increase was primarily due to increases in accounts payable and income tax liabilities. The income tax liabilities reported are net of approximately $2,000,000 in deferred tax assets.

Total Stockholders' Deficit

Our stockholders' deficit was $(1,257,780) at September 30, 2012 compared to $(1,194,621) at December 31, 2011. The increase is primarily due to the current income offset by the allocation of income to minority interest from the reversal of the prior year income in the Trident subsidiary.

Deferred Compensation

As of September 30, 2012, senior management had deferred compensation of approximately $290,000 from operations prior to June 30, 2011 and $65,609 from operations thereafter.

Critical Accounting Policies

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

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

Revenue Recognition

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

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

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

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

Use of Estimates

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

Fair Value Measurement

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

*

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

*

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

*

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

Fair value of financial instruments

The carrying amounts reported in the balance sheet for cash, accounts receivable, accounts payable and accrued expenses, and loans payable approximate their fair market value based on the short-term maturity of these instruments.

Accounts Receivable

Accounts receivable represent amounts due from customers in the ordinary course of business from sales activities in each of the Company's market segments. The Company considers accounts more than 90 days old to be past due. The Company uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance. A portion of the receivables is with governmental payers and is subject to periodic review and adjustment.

Impairment of Long-Lived Assets

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

Other Intangible Assets

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

Earnings per Share

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

Stock Based Compensation

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

Accounting for Warrants, Options and Freestanding Derivative Financial Instruments

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

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

Income taxes

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

Item 3.

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