UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q


(Mark One)





x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended September 30, 2010





o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT





For the transition period from ________________ to _______________





000-52621


(Commission file number)





Midas Medici Group Holdings, Inc.


(Exact name of registrant as specified in its charter)





Delaware

37-1532843(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)








445 Park Avenue, 20th Floor


New York, New York 10022


(Address of principal executive offices)





(212) 792-0920


(Issuer's telephone number)





N/A


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





Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o





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 during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files.   Yes o    No o





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small 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 o
Accelerated filer  oNon-accelerated filer   o  (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  o  No x





There were 2,566,516 shares of the issuer's common stock issued and outstanding as of November 12, 2010.








1











MIDAS MEDICI GROUP HOLDINGS, INC.


Index











PART I.
FINANCIAL INFORMATION
Page

NumberItem 1.
Financial StatementsCondensed Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009
3Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2010 and 2009 (Unaudited)
4Condensed Consolidated Statement of Stockholders’ Deficit for the nine months ended September 30, 2010 (Unaudited)
5Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009 (Unaudited)
6Notes to Condensed Consolidated Financial Statements (Unaudited)
7Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
19Item 3.
Quantitative and Qualitative Disclosures about Market Risk
26Item 4.
Controls and Procedures
26PART II.
OTHER INFORMATIONItem 1.
Legal Proceedings
27Item1A.
Risk Factors
27Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
27Item 3.
Defaults Upon Senior Securities
27Item 4.
Reserved
27Item 5.
Other Information
27Item 6.
Exhibits
27SIGNATURES

28








2








Midas Medici Group Holdings, Inc. and Subsidiaries


Condensed Consolidated Balance Sheets






September 30, 2010

(Unaudited)


December 31, 2009(Note 4)ASSETSCurrent assets:Cash and cash equivalents

$
19,068


$
64,093Accounts receivable, net of allowance for doubtful accounts of $110,996 and $125,041, respectively


146,599



300,394Prepaid expenses and other current assets


16,483



9,650Total current assets


182,150



374,137Property and equipment, net


8,369



17,893Other assets


1,763



2,697Total assets

$
192,282


$
394,727LIABILITIES AND DEFICITCurrent liabilities:Accounts payable and accrued expenses

$
2,101,703


$
1,527,588Revolving credit facilities


179,263



171,804Deferred revenue


137,296



149,372Current portion of long-term debt


322,106



484,415Current portion of capital lease obligations


7,549



11,899Preferred stock dividends payable - stated


42,187



178,208Total current liabilities


2,790,104



2,523,286Long-term debt, less current portion


750,419



333,536Capital lease obligations, less current portion


853



5,869Total liabilities


3,541,376



2,862,691Commitments and contingenciesDeficit:Deficit of Midas Medici Group Holdings, Inc. and Subsidiaries:Preferred stock, par value $0.001; 10,000,000 shares authorized; no shares issued as of September 30, 2010 and December 31, 2009


-



-Common stock, $0.001 par value; 40,000,000 authorized; issued 2,991,516 and outstanding 2,566,516 shares at September 30, 2010; issued 2,735,516 and outstanding 2,310,516 shares at December 31, 2009


2,992



2,736Additional paid-in capital


1,499,246



(82,637
)Accumulated deficit


(4,705,337
)


(2,309,048
)Treasury stock, at cost; 425,000 shares at September 30, 2010 and December 31, 2009


(40
)


(40
)Accumulated other comprehensive income


5,493



6,867Total stockholders' deficit of Midas Medici Group Holdings, Inc. and Subsidiaries


(3,197,646
)


(2,382,122
)Non-controlling interest


(151,448
)


(85,842
)Total deficit


(3,349,094
)


(2,467,964
)Total liabilities and deficit

$
192,282


$
394,727See the accompanying notes to unaudited condensed consolidated financial statements





3




Midas Medici Group Holdings, Inc. and SubsidiariesCondensed Consolidated Statements of Operations and Comprehensive Loss(Unaudited)   Three Months Ended September 30,


Nine Months Ended September 30,2010


2009


2010


2009Revenues

$
242,226


$
837,404


$
900,980


$
2,566,962Cost of services


97,676



506,153



528,491



1,445,193Gross margin


144,550



331,251



372,489



1,121,769Operating expenses:Selling, general and administrative


726,410



820,474



2,720,295



1,784,968Depreciation and amortization


2,939



4,421



10,356



13,835Total operating expenses


729,349



824,895



2,730,651



1,798,803Operating loss


(584,799
)


(493,644
)


(2,358,162
)


(677,034
)Other income (expense):Interest income


1



1



2



2Interest expense


(39,552
)


(19,791
)


(98,531
)


(62,855
)Total other income (expense)


(39,551
)


(19,790
)


(98,529
)


(62,853
)Loss before income taxes


(624,350
)


(513,434
)


(2,456,691
)


(739,887
)Provision for income taxes


695



-



5,204



2,077Net loss


(625,045
)


(513,434
)


(2,461,895
)


(741,964
)Less: Net loss attributable to the non-controlling interest


17,523



69,634



65,606



71,041Net loss attributable to common stockholders of Midas Medici Group Holdings, Inc. and Subsidiaries


(607,522
)


(443,800
)


(2,396,289
)


(670,923
)Preferred stock dividends and dividend accretionPreferred stock stated dividends


-



(41,708
)


-



(109,958
)Preferred stock dividend accretion


-



(30,377
)


-



(203,109
)Net loss applicable to common stockholders of Midas Medici Group Holdings, Inc. and Subsidiaries

$
(607,522
)

$
(515,885
)

$
(2,396,289
)

$
(983,990
)Net loss per common share (basic and diluted)

$
(0.24
)

$
(0.32
)

$
(0.95
)

$
(0.64
)Weighted average number of common shares (basic and diluted)


2,566,516



1,600,037



2,517,754



1,531,736Comprehensive loss:Net loss

$
(625,045
)

$
(513,434
)

$
(2,461,895
)

$
(741,964
)Foreign currency translation (loss) gain


(2,451
)


(4,882
)


(1,374
)


11,242Total comprehensive loss


(627,496
)


(518,316
)


(2,463,269
)


(730,722
)Comprehensive loss attributable to the non-controlling interest


17,523



69,634



65,606



71,041Comprehensive loss attributable to Midas Medici Group Holdings, Inc. and Subsidiaries

$
(609,973
)

$
(448,682
)

$
(2,397,663
)

$
(659,681
)See the accompanying notes to unaudited condensed consolidated financial statements


4








Midas Medici Group Holdings, Inc. and SubsidiariesCondensed Consolidated Statement of Stockholders' Deficit(Unaudited)


Common Stock


Additional Paid-in Capital



Accumulated

Deficit


Treasury Stock


Accumulated Other Comprehensive Income


Total Stockholders' Deficit


Non-Controlling Interest


Total DeficitShares


Amount









Shares


AmountBalance - January 1, 2010


2,735,516


$
2,736


$
(82,637
)

$
(2,309,048
)


425,000


$
(40
)

$
6,867


$
(2,382,122
)

$
(85,842
)

$
(2,467,964
)Sales of common stock


256,000



256



1,279,744



















1,280,000







1,280,000Stock-based compensation










302,139



















302,139







302,139Foreign currency translation


























(1,374
)


(1,374
)






(1,374
)Loss attributed to non-controlling interest






























-



(65,606
)


(65,606
)Net loss attributable to Midas Medici Group Holdings, Inc. and Subsidiaries














(2396,289
)














(2,396,289
)






(2,396,289
)Balance - September 30, 2010


2,991,516


$
2,992


$
1,499,246


$
(4,705,337
)


425,000


$
(40
)

$
5,493


$
(3,197,646
)

$
(151,448
)

$
(3,349,094
)
  See the accompanying notes to unaudited condensed consolidated financial statements





5





Midas Medici Group Holdings, Inc. and Subsidiaries


Condensed Consolidated Statements of Cash Flows


(Unaudited)




Nine Months Ended September 30,2010


2009Cash flows from operating activities:Net loss

$
(2,461,895
)

$
(741,964
)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization


10,356



13,835Stock-based compensation


302,139



196,375Changes in operating assets and liabilities, net of effects of consolidation of Utilipoint International, Inc:Accounts receivable


157,160



150,795Prepaid expenses and other current assets


(6,280
)


20,074Accounts payable and accrued expenses


572,961



319,705Deferred revenue


(14,872
)


25,813Net cash used in operating activities


(1,440,431
)


(15,367
)Cash flows from investing activities:Additions to property and equipment


(824
)


(1,081
)Net cash acquired from acquisition


-



16,482Net cash provided by (used in)  investing activities


(824
)


15,401Cash flows from financing activities:Net borrowings (payments) on revolving credit facilities


7,459



(163,062
)Principal payments on capital lease obligations


(9,366
)


(12,639
)Principal payments on notes payable


(268,229
)


(97,260
)Proceeds from notes payable


522,803



212,046Proceeds from issuance of common stock


1,280,000



25,000Distribution/dividend to preferred stockholders


(136,022
)


-Net cash provided by (used in) financing activities


1,396,645



(35,915
)Effect of exchange rate changes on cash and cash equivalents


(415
)


3,670Net decrease in cash and cash equivalents


(45,025
)


(32,211
)Cash and cash equivalents at beginning of period


64,093



144,546Cash and cash equivalents at end of period

$
19,068


$
112,335Supplemental disclosure of cash flow information:Cash paid during the period for:Interest

$
52,983


$
55,350Taxes

$
5,204


$
2,077Supplemental disclosure of non-cash financing and investing activities:Property and equipment acquired under capital leases

$
-


$
1,884


See the accompanying notes to unaudited condensed consolidated financial statements





6








MIDAS MEDICI GROUP HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





NOTE 1 - DESCRIPTION OF BUSINESS





Midas Medici Group Holdings, Inc., formerly Mondo Acquisition I, Inc. (“Midas Medici”, the “Company”), was incorporated in the State of Delaware on October 30, 2006 for the purpose of raising capital that was intended to be used in connection with its business plans which included a possible merger, acquisition or other business combination with an operating business. On May 15, 2009, Mondo Management Corp., the then sole shareholder, and Midas Medici Group, Inc. entered into a Purchase Agreement. Pursuant to the Purchase Agreement, Mondo Management Corp. sold to Midas Medici Group 1,000,000 previously issued and outstanding shares of Mondo Management Corp.'s restricted common stock, comprising 100% of the issued and outstanding capital stock of Mondo Management Corp. The execution of the Purchase Agreement resulted in a change in control of the Company, both in its shareholding and management. Effective May 22, 2009, the Company changed its name to Midas Medici Group Holdings, Inc.





On August 21, 2009, Midas Medici and Utilipoint International, Inc. (“Utilipoint”), entered into a reverse merger transaction, which resulted in Midas Medici being the “legal acquirer” and Utilipoint the “accounting acquirer”. The prospective filings with the Securities and Exchange Commission (the “SEC”) included the historical financial results of Utilipoint as of and for the periods ended December 31, 2009 and 2008 and Midas Medici, and its subsidiaries only as of and for the period commencing August 21, 2009, the date of the reverse merger.





Pursuant to the Merger Agreement, an aggregate of 1,348,516 shares of Midas Medici were issued to Utilipoint shareholders in exchange for 42,191 Utilipoint shares (which represents 100% of the then outstanding shares). This includes 21,523 shares of Utilipoint Series A Preferred Stock that were converted into 687,922 Midas Medici common shares. Further, all outstanding Utilipoint options were exchanged for 172,597 Midas Medici options in accordance with the Midas Medici stock option program, adopted on July 27, 2009. Immediately after the closing of the acquisition and as of December 31, 2009, an aggregate of 2,310,516 shares of common stock were outstanding. Hence, the 1,348,516 shares represented approximately 58% of the outstanding shares of Midas Medici.





At the closing of the Merger Agreement on August 21, 2009, Midas Medici ceased to be a shell company. Any reference to “Company”, “Midas Medici”, “we” or “our” after August 21, 2009, refers to Midas Medici Group Holdings, Inc. together with our wholly-owned subsidiary Utilipoint and its subsidiaries.





References herein to Utilipoint common shares has been retrospectively adjusted to reflect the exchange ratio of 31.962187 Midas Medici common shares for each share of Utilipoint common stock in accordance with the Merger Agreement.





Utilipoint, together with its subsidiaries, is a utility and energy consulting, and issues analysis firm. Utilipoint offers public issues and regulatory management, advanced metering infrastructure and meter data management, rates and demand response, utility energy and technology, trading and risk management, and energy investment services. Utilipoint provides its services to energy companies, utilities, investors, regulators, and industry service providers primarily in North America and Europe. Utilipoint also serves select clients in Asia, South America, Africa and the Middle East. Utilipoint is incorporated under the laws of the State of New Mexico and is headquartered in Albuquerque, New Mexico, with two domestic regional offices in Tulsa, Oklahoma and Houston, Texas,. Utilipoint also has a wholly owned subsidiary, Utilipoint, s.r.o., in the Czech Republic and maintains its international operations through its office in Brno, Czech Republic.





In July 2009, Utilipoint acquired a controlling interest in The Intelligent Project, LLC (“IP”). IP is a research and advisory services firm addressing the challenges that utilities face in advancing and solving electricity consumers’ needs related to the Smart Grid. IP is headquartered in West Lafayette, Indiana. The acquisition of IP was accounted for as a combination of entities under common control. As such, expenditures amounting to $177,603 for the period from January 1, 2009 through the date of acquisition have been included in the consolidated statements of operations and comprehensive loss as if the acquisition had occurred on January 1, 2009 (See Note 11 – Related Party Transactions).





The accompanying unaudited condensed consolidated financial statements present on a consolidated basis the accounts of Midas Medici Group Holdings, Inc and subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.




7





NOTE 2 – PLAN OF MERGER





On April 30, 2010, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Consonus Technologies, Inc. (“Consonus”) and MMGH Acquisition Corp., a wholly-owned subsidiary of the Company (the “Merger Sub”).  Pursuant to the Merger Agreement, at the closing of the Merger Agreement, Merger Sub will merge with and into Consonus and Consonus will become the Company’s wholly-owned subsidiary.





The merger will be accounted for using the acquisition method of accounting for financial reporting purposes. In a merger transaction, the acquisition method requires the identification of the acquiring entity. Consonus has been identified as the acquiring entity, and Midas as the acquired entity for accounting purposes. Under acquisition accounting, the assets and liabilities of an acquired company (Midas) as of the effective time of the acquisition are recorded at their respective fair values and added to those of the acquiring company (Consonus). Financial statements issued after the consummation of an acquisition accounted for as a purchase would reflect such values and not be restated retroactively to reflect the historical financial position or results of operations of the acquired company. The historical financial statements of the surviving corporation will be those of the accounting acquirer (Consonus) and comparative statements of the surviving corporation will be those of the accounting acquirer (Consonus) rather than the legal acquirer (Midas).





The Merger Agreement contemplates that at the closing, each Consonus stockholder, will receive, in exchange for each share of Consonus common stock held or deemed to be held by such stockholder immediately prior to the closing of the merger, the right to receive 1.33, referred to as the “Exchange Ratio” shares of the Company. The merger agreement also provides that each outstanding option and  warrant, or obligation to issue warrants, of Consonus will be exchanged for options and warrants of  the Company as would be issuable pursuant to the Exchange Ratio, with a pro rata adjustment to the exercise price. Additionally, all outstanding stock appreciation rights of Consonus shall be exchanged for stock appreciation rights of the Company at the Exchange Ratio.





The closing of the merger will occur no later than the second business day after the satisfaction or waiver of the conditions provided in the merger agreement or on such other date as the parties may agree. The closing of the merger is subject to the fulfillment of certain conditions, including, (i) stockholders of Consonus must have approved and adopted the merger agreement, (ii) the S-4 registration statement must have been declared effective by the Securities and Exchange Commission, (iii) all representations and warranties of each party must be true and correct, (iv) each party must have complied in all material respects with all covenants and agreements required to be performed in connection with the merger agreement.





The merger agreement may be terminated at any time prior to the completion of the merger agreement in accordance with the provisions outlined in the Merger Agreement.





Certain stockholders of Consonus holding in the aggregate 1,893,515 or 58.7% of the issued and outstanding shares of Consonus as of September 30, 2010, including certain members of its board of directors and mangement, in their capacities as stockholders of Consonus, have separately entered into voting agreements with Consonus in which they have agreed to vote all shares of Consonus capital stock that they beneficially owned as of the date of their respective agreements, and that they subsequently acquire, in favor of the merger, against any matter that would result in a breach of the merger agreement by Consonus and against any proposal made in opposition to, or in competition with, the consummation of the merger and the other transactions contemplated by the merger agreement.





KLI and its affiliates own an aggregate of 2,056,507 shares, representing 56.5% of the outstanding common stock of  Consonus. Nana Baffour, the CEO and Co-Executive Chairman of the Company and Johnson M. Kachidza, President, CFO and Co-Executive Chairman of the Company are each managing principals of KLI. In addition, Messrs. Baffour and Kachidza are members of the Board of Directors of Consonus and Mr. Baffour is Executive Chairman of Consonus. KLI owns 120,113 shares representing 4.7% of the outstanding common stock of the Company. In addition, Messrs Baffour and Kachidza, individually and through entities which they control own in the aggregate 1,261,734 shares representing 46.8% of the outstanding common stock of the Company. Upon the consummation of the merger, KLI will beneficially own 2,855,267 or 38.6% of the outstanding shares of the combined company. In addition, Mssrs. Baffour and Kachidza will beneficially own 3,996,888 or 53.1% of the outstanding shares of the combined company.





NOTE 3 – LIQUIDITY AND BASIS OF PRESENTATION





Our unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business and, accordingly, no adjustments have been made to recorded amounts that might result from this uncertainty. Our accumulated deficit at September 30, 2010 was $4,705,337, and we incurred a net loss of $2,461,895 for the nine months ended September 30, 2010. On September 30, 2010, we had working capital deficit of $2,607,954. Historically, Utilipoint has funded its operations with cash obtained mainly from its stockholders and third-party financings.





As of September 30, 2010, the Company was not in compliance with the tangible net worth covenant and was also in default on its revolving line of credit facility (the "Credit Facility") with Proficio Bank. The credit facility matured on October 14, 2010 and was paid in full on November 2, 2010.





We expect that our cash flow from operations, reduction in expenses related to the merger with Consonus, growth of revenue and our customer base resulting from realigning our business will allow us to meet our anticipated cash requirements for the next twelve months, excluding any additional funding we will need to pursue our acquisition strategy. Such acquisitions, if entered into, will be funded by the sale of additional debt or equity securities or additional bank financing. The sale of additional equity securities could result in additional dilution to our stockholders, and there can be no assurance that we will be successful in raising those additional funds on terms that are acceptable to us. Any acquisitions we undertake may be funded through other forms of debt, such as publicly issued or privately placed senior or subordinated debt.




8





NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 (a)           General
 
 The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q, and therefore, do not include all the information necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America.
 
 In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2010. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated December 31, 2009 financial statements and footnotes thereto included in the Company’s SEC Form 10-K. The December 31, 2009 balance sheet has been derived from those statements.
 
 (b)            Revenue Recognition
 
 The Company’s primary revenue streams and the basis on which revenue is recognized for each are as follows:
 
 Fixed-Price Contracts
 Fixed price contracts are projects where services are provided at an agreed upon price for defined deliverables. On occasion, clients with fixed price contracts will require an accounting of all hours worked on a project at an agreed upon hourly rate to accompany an invoice.
 
 Bundled Service Agreements (“BSAs”)
 BSAs are packages of services that clients subscribe to, typically on an annual contract basis. The services typically include a combination of the following:
 
 •      Access to subject matter experts as needed, by telephone
 •      Discounted fees for the Company's events
 •      Advertising space on the IssueAlert® e-publication
 •      One to three reports and/or whitepapers on industry topics
 •      Briefings on industry trends and research findings
 
 BSAs also include annual memberships in the Advanced Metering Infrastructure and Meter Data Management (“AMI MDM”) forum and corporate contracts. The AMI MDM forum is designed for electric, water, and/or gas utilities, regulators, utility governing boards, independent system operators and consumer advocacy groups to come together and discuss meter data management successes, problems, issues, interfaces and best practices.Corporate contracts are characterized by an annual contract for a pre-defined amount of market research hours.  Clients of this service receive access to the Company’s directory and InfoGrid products. The primary service is the block of hours purchased.
 
 The Company believes that the substance of BSAs, indicates that the purchaser pays for a service that is delivered over time.  As a result, revenue recognition occurs over the subscription period, or in the case of corporate contracts as the hours are utilized, reflecting the pattern of provision of service.
 
 Time and Materials Contracts (“T&M”)
 T&M are services billed at a set hourly rate.  Project related expenses are passed through at cost to clients.  Normally invoices occur on a monthly basis. The Company recognizes revenue as billed unless the project has a major deliverable(s) associated with it, in which case the revenue is deferred until the major deliverable(s) is provided.
  9
 
 Events and Sponsorships
 The Company hosts events such as conferences.  These events include revenues from sponsorships and registration fees which are recognized in the month of the event.  Revenues from sponsors of the AMI MDM forum are recognized over the annual subscription period, reflecting the pattern of provision of service.
 
 The Company’s deferred revenue consists primarily of amounts received from or billed to clients in conjunction with BSAs, T&M and fixed price contracts for which revenue is recognized over time or upon completion of contract deliverables.
 
 (c)           Use of Estimates
 
 The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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.  Significant estimates include: allowances for doubtful accounts, stock-based compensation expense assumptions, certain revenue recognition methodologies related to contract deliverables, valuation allowances for deferred tax assets, rates at which deferred tax assets and liabilities are expected to be recorded or settled, accruals for paid time off and the estimated labor utilization rate used to determine cost of services for the Company’s foreign subsidiary.
 
 (d)           Fair Value of Financial Instruments
 
 The carrying amounts of financial instruments, which include cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, other current liabilities, revolving credit facility and debt approximate their fair values due to their short maturities and variable interest rate on the revolving credit facility and fixed rates which approximate market rates on notes payable.
 
 (e)           Stock-Based Compensation
 
 The Company accounts for stock-based compensation arrangements in accordance with the provision of ASC 718-10 and ASC 505-50 “Stock Compensation and Equity Based Payments to Non-Employees.” ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods.  In accordance with ASC 505-50, “Equity-Based Payments to Non-Employees.”, the options granted to non-employees are re-measured as they vest and the resulting value is recognized as an adjustment against the Company’s net loss over the period during which the services are received.
 
 The Company uses the Black-Scholes option-pricing model as its method of valuation for share-based awards.  The Company’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to our expected stock price volatility over the term of the awards, and certain other market variables such as the risk free interest rate.
 
 (f)           Recently Issued Accounting Standards
 
 In October 2009, the Financial Accounting Standards Board (“FASB”) issued guidance on “Multiple Deliverable Revenue Arrangements,” updating ASC 605 “Revenue Recognition.” This standard provides application guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available. The guidance is effective for the fiscal year beginning on or after June 15, 2010, and will be applied prospectively to revenue arrangements entered into or materially modified after the effective date.  The Company is currently evaluating the requirements of this guidance and has not yet determined the impact of its adoption on the Company’s consolidated financial statements.
 
 In October 2009, the FASB issued ASC 985-605, “Software Revenue Recognition.” This guidance changes the accounting model for revenue arrangements that include both tangible products and software elements that are “essential to the functionality,” and scopes these products out of current software revenue guidance. The new guidance will include factors to help companies determine what software elements are considered “essential to the functionality.” The amendments will now subject software-enabled products to other revenue guidance and disclosure requirements, such as guidance surrounding revenue arrangements with multiple deliverables. The amendments in this guidance are effective prospectively for revenue arrangements entered into or materially modified in the fiscal years beginning on or after June 15, 2010. Early application is permitted. The Company is currently evaluating the requirements of this guidance and has not yet determined the impact of its adoption on the Company’s consolidated financial statements.
 
 Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.




10




NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES





At September 30, 2010 and December 31, 2009, accounts payable and accrued expenses consisted of the following:




September 30, 2010


December 31, 2009Accounts payable

$
997,338


$
682,719Accrued payroll and vacation


526,216



301,597Due to Knox Lawrence International, LLC


261,736



381,382Other accrued expenses


316,413



161,890$
2,101,703


$
1,527,588





NOTE 6 – NOTES PAYABLE





At September 30, 2010 and December 31, 2009, secured revolving credit facilities and other debt obligations consisted of the following:




September 30,

2010


December 31,

2009Secured revolving credit facilities:Proficio Bank

$
171,884


$
164,384Chase Bank


7,379



7,420179,263



171,804Related party notes


1,072,525



817,9511,251,788



989,755Current maturities of debt


501,369



656,219Long-term debt

$
750,419


$
333,536





1)
On October 14, 2009, the Company, entered into a revolving loan agreement with Proficio Bank (the “Loan Agreement”). Pursuant to the terms of the Loan Agreement, the Lender agreed to loan up to $500,000 (the “Loan”) to the Company. There was a balance of $171,884 outstanding at September 30, 2010. The Loan matured on October 14, 2010 and was paid in full on November 2, 2010.





2)
In July 2009, IP secured a revolving credit facility with Chase Bank. The credit facility allows IP to borrow up to $15,000 at an interest rate ranging from 13.24% to 19.24%.  Interest accrues at an annual percentage rate of 13.24% for purchases and 19.24% for cash advances and overdraft protection. As of September 30, 2010, the amount outstanding under this credit facility was $7,379.





3)
As of September 30, 2010 and December 31, 2009, the Company had unsecured notes payable due to current and former shareholders totaling $1,072,525 and $817,951, respectively.   The various notes accrue interest ranging from 4% to 12% per annum and were subordinated to obligations under the above credit facility borrowings.





Knox Lawrence International, LLC (“KLI”), a shareholder,  and an entity of which Nana Baffour, our CEO and Co-Executive Chairman and Johnson M. Kachidza, President, our CFO and Co-Executive Chairman are each managing principals, has provided financing including:





(i)
On December 31, 2008, Utilipoint issued a Senior Subordinated Debenture to KLI in the principal amount of $62,500. The Debenture provides for payment of interest in the amount of 10% per annum. The Debenture matures on December 31, 2013.  As of September 30, 2010 and December 31, 2009, the balance outstanding was $62,500.(ii)
On January 15, 2009, Utilipoint issued a Senior Subordinated Debenture to KLI in the principal amount of $10,000. The Debenture provides for payment of interest in the amount of 10% per annum and matures on January 15, 2014.  As of September 30, 2010 and December 31, 2009, the balance outstanding was $10,000.(iii)
On June 30, 2009, the Intelligent Project, LLC issued an unsecured promissory note to KLI IP Holding, Inc., a shareholder in The Intelligent Project, LLC, in the amount of $108,969. Interest on this note accrues at an annual percentage rate of 5%. The note matures on September 30, 2012. As of September 30, 2010 and December 31, 2009, the balance outstanding was $108,969.(iv)
On July 1, 2009, Utilipoint issued a Revolving Senior Subordinated Debenture to KLI. The Debenture provides for payment of interest in the amount of 10% per annum and matures on July 1, 2014.  As of September 30, 2010 and December 31, 2009, the balance outstanding was $568,950 and $137,067, respectively.





11




Officers and other affiliates of Utilipoint have provided the following financing including:





(i)
On January 1, 2006, Utilipoint issued a Senior Subordinated Debenture to Bruce R. Robinson Trust in the principal amount of $447,106. The Debenture provides for payment of interest in the amount of 12% per annum. On March 31, 2010, per terms of an extension agreement, the Debenture maturity date was extended to September 30, 2010. As of September 30, 2010 and December 31, 2009, the balance outstanding was $322,106 and $447,106, respectively.(ii)
An unsecured note bearing interest at a variable interest rate which was due on August 20, 2009 but extended through 2010. The outstanding balance was $0 and $16,309 as of September 30, 2010 and December 31, 2009, respectively.(iii)
An unsecured note bearing interest at 4% per annum which is due on May 4, 2010. The outstanding balance was $0 and $5,000 as of September 30, 2010 and December 31, 2009, respectively.(iv)
An unsecured note bearing interest at 10% per annum which is due on January 15, 2014. The outstanding balance was $0 and $15,000 as of September 30, 2010 and December 31, 2009, respectively.


In accordance with a separation agreement with a former executive, a $16,000 note payable which was originally due on September 23, 2009 was restructured on August 1, 2009 in connection with the resignation of the Company executive who holds the note. In accordance with terms of the separation agreement, the former Company executive agreed to an extension of terms.  As of September 30, 2010 and December 31, 2009, the balance outstanding was $0 and $16,000 respectively.





Interest expense on notes payable and the revolving credit facilities was $39,271 and $97,464 respectively for the three and nine months ended September 30, 2010 and $17,797 and $60,715 respectively for the three and nine months ended September 30, 2009.





NOTE 7 - STOCKHOLDERS’ DEFICIT





In accordance with the reverse merger transaction between the Company and Utilipoint on August 21, 2009 (refer to Note 1,  Description of Business), an aggregate of 1,348,516 shares with a par value of $.001 of Midas Medici were issued to Utilipoint shareholders in exchange for 42,191 Utilipoint shares (which represented 100% of the then outstanding shares). This included 21,523 shares of Utilipoint Series A Preferred Stock that were converted to 687,922 Midas Medici common shares. Further, all outstanding Utilipoint stock options at the time of the reverse merger were exchanged for 172,597 Midas Medici stock options in accordance with the Midas Medici stock option program, adopted on July 27, 2009. The shares of common stock issued in connection with the reverse merger were not registered with the Securities and Exchange Commission and are considered to be restricted securities.





As a result of the reverse merger, all references to common stock, preferred stock, share and per share amounts were retroactively restated to reflect the exchange ratio of 31.96217203 shares of Midas Medici’s common stock for 1 share of all of the classes of the Utilipoint’s common stock and preferred stock outstanding immediately prior to the merger as if the exchange had taken place as of the beginning of the earliest period presented.





In February 2010, the Company completed a public offering totaling $1,280,000. The public offering included 256,000 shares of our common stock at a price of $5.00 per share. Certain of our affiliates converted outstanding liabilities of $250,000 in the offering, pursuant to which they purchased shares of our common stock at the public offering price of $5.00, which constitute part of the 256,000 shares sold in the offering.





Stock Issued and Outstanding – The total number of shares of capital stock which the Company shall have authority to issue is fifty million (50,000,000). These shares shall be divided into two classes with 40,000,000 shares designated as Common Stock at $.001 par value and 10,000,000 shares designated as Preferred Stock at $.001 par value (the “Preferred Stock”). The Preferred Stock of the Company shall be issued by the Board of Directors of the Company in one or more classes or one or more series within any class and such classes or series shall have such voting powers, full or limited, or no voting powers, and such designations, preferences, limitations or restrictions as the Board of Directors of the Company may determine, from time to time.





Holders of shares of Common Stock shall be entitled to cast one vote for each share held at all stockholders' meetings for all purposes, including the election of directors.




12





Shares issued and outstanding at September 30, 2010 and December 31, 2009 were:





September 30, 2010


December 31, 2009Common Stock issued


2,991,516



2,735,516Treasury shares held


(425,000
)


(425,000
)Common Stock outstanding


2,566,516



2,310,516





Preferred Stock Dividends - Prior to the merger transaction, Utilipoint was required to pay preferential cumulative dividends in cash to the holders of the Series A Preferred Stock as follows:





●
An annual dividend equal to 13% of the original purchase price, payable quarterly on October 31st, January 31st, April 30th and July 31st of each year commencing on October 31, 2007 (the “Quarterly Dividends”). This equated to $34,125 per quarter.





●
Commencing on January 31, 2010, and continuing on the last day of each month thereafter until July 23, 2010, a dividend equal to the monthly payment that would be payable on the Original Purchase Price based on a 24-month amortization schedule using a 13% annual interest rate (the “Monthly Dividends”).  This equated to $49,919 per month.





●
Upon the first to occur of the following: (i) a liquidation of Utilipoint; (ii) a change in control of the Board of Directors of Utilipoint; or (iii) the failure to convert the Series A Preferred Stock to Common Stock by July 23, 2010, a dividend equal to the Original Purchase Price less any portion of the Monthly Dividends that would be allocable to principal if the Monthly Dividends were treated as loan payments (the “Balloon Dividend”).  This equated to an $812,382 Balloon Dividend.





Series A Preferred Stock dividends were cumulative so that, if Utilipoint was unable to pay, or if the Board of Directors failed to declare Series A Preferred Stock dividend for any period, such Series A Preferred Stock dividends nevertheless accrued and were payable in subsequent periods.  Any payment of Series A Preferred Stock dividends by Utilipoint in any period  first were to be applied to any accrued but unpaid Series A Preferred Stock dividends for prior periods, in chronological order, and then to dividends due for that period.





As of September 30, 2010, dividends declared but not paid totaled $42,187. As of the acquisition date of August 21, 2009 and as of September 30, 2010, $238,875 of stated Series A Preferred Stock dividends had been paid to the preferred shareholders by KLI on behalf of Utilipoint. Refer to Note 11, Related Party Transactions - Utilipoint Preferred Dividends.





The discount resulting from the increasing rate feature of the Series A Preferred Stock dividend represented an unstated dividend cost that was being amortized over the three year period preceding payment of the Balloon Dividend using the effective interest method, by charging the imputed dividend cost against Additional Paid-in Capital.  The total stated dividends, whether or not declared, and unstated dividend cost combined represented a period’s total preferred stock dividend, which was deducted from net loss to arrive at net loss available to common shareholders.





Pursuant to the Merger Agreement, the 21,523 outstanding shares of Series A Preferred Stock were converted to 687,922 Midas Medici common shares (refer to Note 1, Description of Business).





Common Stock Dividends





The Company may declare dividends on the common stock. There has been no common stock dividends declared as of September 30, 2010. Under the terms of the Loan Agreement with Proficio Bank (refer to Note 6, Notes Payable), the Company is restricted from declaring or paying dividends without the prior written consent of the bank.





NOTE 8 - STOCK OPTIONS AND WARRANTS





On July 27, 2009, the Board approved the Midas Medici Group Holdings, Inc. 2009 Incentive Stock Option Plan (the “MMGH Option Plan”). The maximum number of shares that may be issued under the MMGH Option Plan is 650,000. However for a period of ten (10) years commencing January 1, 2010, the maximum number of shares issuable under the MMGH Option Plan shall be equal to 20% of the issued shares of the Company’s common stock on a fully diluted basis but shall not be less than 650,000. Pursuant to the MMGH Option Plan, incentive stock options or non-qualified options to purchase shares of common stock may be issued.  The MMGH Option Plan may be administered by our board of directors or by a committee to which administration of the MMGH Option Plan, or part of the MMGH Option Plan, may be delegated by our board of directors. Options granted under the MMGH Option Plan are not generally transferable by the optionee except by will, the laws of descent and distribution or pursuant to a qualified domestic relations order, and are exercisable during the lifetime of the optionee only by such optionee. Options granted under the MMGH Option Plan vest in such increments as is determined by our board of directors or designated committee. To the extent that options are vested, they must be exercised within a maximum of thirty days of the end of the optionee's status as an employee, director or consultant, or within a maximum of 12 months after such optionee's termination or by death or disability, but in no event later than the expiration of the option term. The exercise price of all stock options granted under the plan will be determined by our board of directors or designated committee. With respect to any participant who owns stock possessing more than 10% of the voting power of all classes of our outstanding capital stock, the exercise price of any incentive stock option granted must equal at least 110% of the fair market value on the grant date.





13





Stock option awards granted from the MMGH Option Plan are granted at the fair market value on the date of grant, vest over a period determined at the time the options are granted, ranging from zero to one year, and generally have a maximum term of ten years. Certain options provide for accelerated vesting if there is a termination of employment event for specified reasons set forth in certain employment agreements. When options are exercised, new shares of the Company’s common stock, par value $0.001 per share, are issued.





On July 27, 2009 the Company granted options to purchase an aggregate of 247,500 shares of common stock under the MMGH Plan with a weighted-average exercise price of $2.27.





On August 21, 2009, the Company completed an offer to exchange utilipoint stock options for Midas Medici stock options (the “Exchange”). All previously granted Utilipoint options were exchanged for new Midas Medici options with a lower exercise price on a one-for-thirty two basis. Options for an aggregate of 5,400 shares of Utilipoint’s common stock were exchanged. Options granted pursuant to the Exchange have an exercise price of $1.56 per share and vested on grant date. The outstanding Utilipoint options were exchanged for 172,597 Midas Medici options.





On August 21, 2009, we issued options to purchase 45,000 shares of our common stock to employees and one of our directors at an exercise price of $6.00 per share.





On October 26, 2009, we issued options to purchase 7,000 shares of our common stock to an employee at an exercise price of $6.00 per share.





As part of our initial public offering completed on February 22, 2010, the underwriter, National Securities Corporation received a warrant to acquire up to 12,800 shares of our common stock at an exercise price of $6.00 (120% of the offering price to the public in this offering). The warrant is exercisable on the first anniversary of the effective date of the prospectus and no more than five years from the effective date of the offering.





A summary of option activity under the MMGH Option Plan as of September 30, 2010, and changes during the period then ended is presented below:




Weighted-AverageWeighted-Average


Remaining


AggregateShares


Exercise Price


Contractual Term


Intrinsic ValueOutstanding at January 1, 2010


456,116


$
2.45Granted


-


$
-Exercised


-


$
-Forfeited or expired


(29,500
)

$
3.02Outstanding at September 30, 2010


426,616


$
2.41



4.2


$
1,053,855Expected to vest at September 30, 2010


426,616


$
2.41



4.2


$
1,053,855Exercisable at September 30, 2010


426,616


$
2.41



4.2


$
1,053,855





No new options were granted during the three and nine months ended September 30, 2010 and the three and nine months ended September 30, 2009. Options granted prior to this period were valued using the Black-Scholes-Merton option pricing model. As of September 30, 2010, no options have been exercised.





A summary of warrant activity and changes during the period then ended is presented below:





Weighted-AverageWeighted-Average


Remaining


AggregateShares


Exercise Price


Contractual Term


Intrinsic ValueOutstanding at January 1, 2010


-


$
-Granted


12,800


$
6.00Exercised


-


$
-Forfeited or expired


-


$
-Outstanding at September 30, 2010


12,800


$
6.00



4.4


$
-Expected to vest at September 30, 2010


12,800


$
6.00



4.4


$
-Exercisable at September 30, 2010


-


$
-



-


$
-





14




The fair value of each warrant grant is estimated on the grant date using the Black-Scholes-Merton option-pricing model, which incorporates a number of valuation assumptions noted in the following table, shown at their weighted-average values:





Expected dividend yield


0
%Risk-free rate


1.47
%Expected stock price volatility


94.02
%Expected term (years)


5.0





The expected volatility is calculated by using the average historical volatility of companies that management believes are representative of Midas Medici’s business and market capitalization.





The expected term represents the period that stock-based awards are expected to be outstanding based on the simplified method provided in ASC Topic 718, which averages an award’s weighted-average vesting period and expected term for share options and warrants. The Company will continue to use the simplified method until it has the historical data necessary to provide a reasonable estimate of expected life in accordance with ASC Topic 718, as amended by SAB 110. For the expected term, the Company used a simple average of the vesting period and the contractual term for options granted subsequent to January 1, 2006 as permitted by ASC Topic 718.





For equity awards to non-employees, the Company also applies the Black-Scholes-Merton option pricing model to determine the fair value of such instruments in accordance with ASC Topic 718 and the provisions of ASC Topic 505-50, “Equity-Based Payments to Non-Employees.” The options granted to non-employees are re-measured as they vest and the resulting value is recognized as an adjustment against the Company’s net loss over the period during which the services are received.





The total value of the stock option and warrants awards is expensed ratably over the vesting period of the option. As of September 30, 2010, total unrecognized compensation cost related to stock option and warrants awards, to be recognized as expense subsequent to September 30, 2010 was $8,891, and the related weighted-average period over which it is expected to be recognized was approximately one (1) year.





265,000 options vested during the three and nine months ended September 30, 2010 and 161,616 options vested during the three and nine months ended September 30, 2009. Stock-based compensation in the amount of $89,903 and $302,139 was expensed for the three and nine months ended September 30, 2010, respectively and $196,375 for the three and nine months ended September 30, 2009.





NOTE 9 - CONCENTRATION RISKS





(a)             Credit Concentration





Our demand deposits are placed with major financial institutions.  Management believes the Company is not exposed to undue credit risk for any demand deposits that may, from time to time, exceed the Federally insured limits.





(b)             Revenue and Accounts Receivable Concentration





No customer accounted for more than 10% of total revenue for the nine months ended September 30, 2010. Three customers accounted for 30% of revenue for the nine months ended September 30, 2009.





As of September 30, 2010, two customers accounted for approximately 55% of the total outstanding net accounts receivable and as of December 31, 2009 three customers accounted for approximately 51% of the total outstanding net accounts receivable.





NOTE 10 - LOSS PER COMMON SHARE





In August 2009, Utilipoint's Series A preferred Shares were converted into 687,922 shares of common stock as part of the merger transaction. Prior to the conversion, the Preferred Shares were not included in the basic or diluted net loss per share since the Company included the impact of the preferred dividends and discount accretion as adjustments to arrive at the net loss applicable to common stockholders during the period  from January 1, 2009 to the date of the merger transaction. After the conversion date, which was the same as the date of the merger, those shares were included in the basic and diluted net loss per share. The written put options issued July 23, 2007 for the purchase of 191,390 shares of Common Stock, which were subsequently cancelled as of the reverse merger between Midas Medici and Utilipoint on August 21, 2009, and any other outstanding options and warrants were not included in the computation of diluted net loss per share because the inclusion of such shares would have an anti-dilutive effect on the net loss applicable to common stockholders.




15





Basic loss per share has been computed by dividing net loss available to common stockholders by the weighted average number of shares of Common Stock, adjusted as noted above, outstanding during each period.  Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding.  The following table sets forth the computation of basic and diluted loss per share for the three and nine months ended September 30, 2010 and 2009:




Three Months Ended September 30,


Nine Months Ended September 30,Net loss attributable to common stockholders of Midas Medici Group Holdings, Inc. and Subsidiaries


(607,522
)


(443,800
)


(2,396,289
)


(670,923
)Preferred stock dividends and dividend accretionPreferred stock stated dividends


-



(41,708
)


-



(109,958
)Preferred stock dividend accretion


-



(30,377
)


-



(203,109
)Net loss applicable to common stockholders of Midas Medici Group Holdings, Inc. and Subsidiaries

$
(607,522
)

$
(515,885
)

$
(2,396,289
)

$
(983,990
)Net loss per common share (basic and diluted)

$
(0.24
)

$
(0.32
)

$
(0.95
)

$
(0.64
)Weighted average number of common shares (basic and diluted)


2,566,516



1,600,037



2,517,754



1,531,736


NOTE 11 - RELATED PARTY TRANSACTIONS





On February 22, 2010, the Company completed an initial public offering of 256,000 shares of our common stock. Certain of our affiliates converted outstanding liabilities of $250,000 in the offering, pursuant to which they purchased shares of our common stock at the public offering price of $5.00, which constitute part of the 256,000 shares sold in the offering.





Revenues from Consonus Technologies, Inc., a company controlled by KLI, were $25,000 and $0 for the nine months ended September 30, 2010 and 2009, respectively.  Nana Baffour, our CEO and Co-Executive Chairman and Johnson M. Kachidza, our President, CFO and Co-Executive Chairman are each managing principals of KLI.





In July 2009, Utilipoint acquired a controlling interest in IP. The acquisition was accounted for as a combination of entities under common control. IP was founded on March 10, 2009, by KLI IP Holding, Inc. and David Steele, the current president of Utilipoint and former President of a predecessor KLI portfolio company. Nana Baffour, our CEO and Co-Executive Chairman, was the managing member of IP prior to the acquisition. IP’s management committee consisted of Nana Baffour, Johnson Kachidza, David Steele and Ken Globerman. Prior to the acquisition, David Steele, a managing director of IP was also a senior managing director of Utilipoint. From inception to when IP was acquired, its operations were funded through loans provided by KLI. Prior to its acquisition, IP was controlled by KLI IP Holding Inc., which held a 75% interest in IP. KLI IP Holding, Inc. is controlled by Nana Baffour and Johnson Kachidza, who held a 60% interest.





16





In connection with the acquisition of IP:





1)
Utilipoint entered into a capital commitment agreement with IP for an amount of up to $200,000. IP will be able to make capital requests on the capital commitment agreement for initial financing. Utilipoint received a 60% interest in IP as a result of signing the capital contribution agreement. As of September 30, 2010, Utilipoint had provided no capital under the capital commitment agreement.





2)
The existing members of IP will provide services to Utilipoint in exchange for options to purchase an aggregate of 44,747 shares of the common stock of the Company that are fully-vested on the date of grant and that have a strike price equal to the fair market value of the Company’s common stock on the date of grant. The stock options for the individuals will be granted pursuant to the equity compensation plan that was adopted by the Company effective as of May 1, 2009. All of the stock options will have a term of five years and a cashless exercise option. The Consulting Agreement provides that KLI IP Holding Inc. will provide consulting services to the Company in connection with the joint business and marketing efforts of the Company and IP. In exchange for its services KLI IP Holding Inc. received Company stock options.





The Stock Options Agreement provides that, in consideration of the services being provided to the Company by IP and KLI IP Holding Inc., the Company shall issue stock options in such amounts as set forth below. The stock options will be fully-vested upon issuance and will have an exercise price equal to the fair market value of the Company Common Stock on the grant date ($1.56). The stock options will have a term of five years and a cashless exercise option.





In accordance with the merger, the above outstanding Utilipoint options were exchanged for Midas Medici options in accordance with the Midas Medici stock option program, adopted on July 27, 2009.





·
KLI IP Holding Inc. – options to purchase 27,168 shares


·
IP management shareholders – options to purchase 17,579 shares





3)
The Company will provide certain management services to IP in exchange for reasonable compensation.





4)
For a period of two (2) months ending September 1, 2009, KLI will agree to purchase up to $100,000 of the common stock of the Company at a per share purchase price of $1.56 per share. KLI will also agree to lend up to $100,000 pursuant to a Revolving Senior Subordinated Debenture for a period of five (5) years ending July 1, 2014.





Utilipoint Management Fees





Effective with the acquisition of Utilipoint, management fees to KLI of $25,000 per quarter are no longer applicable. At September 30, 2010, there were no outstanding management fees due to KLI.





Utilipoint Preferred Dividends





The net assets of Utilipoint acquired by the Company on August 21, 2009 included preferred dividends payable to KLI.  KLI assumed the obligation to pay the preferred dividends to UTP International, LLC (“UTPI”) on Utilipoint’s behalf as per the former Utilipoint preferred shareholders’ agreement. Utilipoint’s obligation for preferred dividends therefore became an obligation to KLI. At September 30, 2010 and December 31, 2009, outstanding dividends payable due to KLI totaled $42,187 and $178,208, respectively.





Expense Reimbursement Agreement


On August 7, 2009, the Company entered into an expense reimbursement agreement (the “Reimbursement Agreement”) with KLI. Pursuant to the Reimbursement Agreement, KLI is authorized to incur up to $350,000 in certain expenses and obligations on behalf of the Company and the Company agreed to reimburse KLI for such expenses and obligations promptly after delivery of invoices for such expenses. The Reimbursement Agreement has a term of one year, subject to earlier termination upon 30 days’ written notice by either party. KLI also allocates expenses for rent and office services to the Company.





Incurred and allocated expenses related to office rent, office services and professional fees totaling $64,091 and $326,693 for the three and nine months ended September 30, 2010, respectively and $0 for the three and nine months ended September 30, 2009. For the nine months ended September 30, 2010, the Company reimbursed KLI $332,361. The balance of $261,736 and $267,404 at September 30, 2010 and December 31, 2009, respectively, is a component of "Accrued Expenses" on the condensed consolidated balance sheets. The expenses are a component of “Selling, general and administrative” operating expenses on the consolidated statements of operations and comprehensive loss.





17





NOTE 11 - INCOME TAXES





Utilipoint International, Inc. is a C-corporation, cash basis taxpayer.   The Intelligent Project LLC has elected to be treated under the Internal Revenue Code as a partnership.  Accordingly, all income taxes relating to their profits and losses are the responsibility of the members.  Utilipoint, s.r.o. is established in the Czech Republic and incurs corporation income taxes at the rate of approximately 20%.





Deferred income taxes reflect the tax consequences in future years for differences between the tax bases of assets and liabilities and their basis for financial reporting purposes.  Temporary differences giving rise to the deferred tax assets and liabilities relate in part to accrual-to-cash adjustments, as the Company follows the accrual basis of accounting for financial reporting but the cash basis for tax purposes.  Deferred tax assets arise from net operating losses, and from temporary differences in depreciation and amortization and from equipment leases capitalized on the financial statements but treated as operating leases for tax purposes.  A deferred tax liability arises from the net income of a wholly owned foreign corporation (Utilipoint s.r.o.), which becomes taxable in the United States upon repatriation of the funds.  Deferred tax assets and liabilities were calculated using the graduated rates anticipated in the year’s tax assets and liabilities are anticipated to reverse.  The reversal of timing differences requires significant estimation; accordingly, deferred tax assets and liabilities may reverse at tax rates significantly different than anticipated.





As a result of operating losses incurred for tax purposes, the Company has no current liability for federal or state income taxes in those years (other than minimum state taxes due regardless of income).





As a result of net losses incurred and because the likelihood of being able to utilize these losses is not presently determinable, the Company has recorded a valuation allowance to fully reserve its deferred tax asset.  If in the future the Company were to determine that it would be able to realize its deferred tax assets in excess of its net recorded amount, an adjustment would increase income in such period or, if such determination were made in connection with an acquisition, an adjustment would be made in conjunction with the allocation of the purchase price.





NOTE 12 - SUBSEQUENT EVENTS





On October 28, 2010, the Company entered into Amendment and Waiver No. 1 (the “Amendment”) to the Merger Agreement with Consonus and MMGH Acquisition Corp., a wholly-owned subsidiary of the Company. Pursuant to the Amendment, the Company waived the provisions of Section 4.1 of the Merger Agreement in connection with certain transactions consummated by Consonus related to the sale of certain assets by Consonus. In addition, the Company consented to and waived provisions of Section 4.1 of the Merger Agreement to permit payment of dividends by Consonus. Also, pursuant to the Amendment, Consonus agreed to pay all costs and expenses incurred by the Company in connection with the merger transaction, the Merger agreement and S-4 registration statement.





18





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





FORWARD LOOKING STATEMENTS





Some of the statements contained in this Form 10-Q that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 10-Q, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:





•
Our ability to attract and retain management,





•
Our ability to raise capital when needed and on acceptable terms and conditions;





•
The intensity of competition; and





•
General economic conditions.





All written and oral forward-looking statements made in connection with this Form 10-Q that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.





The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.





References in this Form 10-Q to “we”, “us”, “our” and similar words refer to the Company and its wholly-owned subsidiary Utilipoint International, Inc., unless the context indicates otherwise, and prior the closing of the acquisition, these terms refer to Midas Medici Group Holdings, Inc.





Overview





Midas Medici was incorporated in the State of Delaware on October 30, 2006 under the name Mondo Acquisition I, Inc. From inception until the acquisition of Utilipoint in August 2009, the Company was engaged in organizational efforts and obtaining initial financing. The Company was formed as a vehicle to pursue a business combination through the acquisition of, or merger with, an operating business. On May 15, 2009, the Company, Mondo Management Corp., the Company’s then sole shareholder, and Midas Medici Group, Inc. entered into a Purchase Agreement.  Pursuant to the Purchase Agreement, Mondo Management Corp. sold to Midas Medici Group, Inc. 1,000,000 previously issued and outstanding shares of the Company's restricted common stock, comprising 100% of the issued and outstanding capital stock of the Company. The execution of the Purchase Agreement resulted in a change in control of the Company, both in its shareholding and management. Effective May 22, 2009, the Company changed its name to Midas Medici Group Holdings, Inc.





On August 21, 2009, Midas Medici completed a reverse merger with Utilipoint, a New Mexico corporation which resulted in Midas Medici being the “legal acquirer” and Utilipoint the “accounting acquirer”. The acquisition was effected pursuant to a Merger Agreement dated August 10, 2009 by and among the Company, Utilipoint and Utilipoint Acquisition Company. Pursuant to the Merger Agreement, an aggregate of 1,348,516 shares of Midas Medici were issued to Utilipoint shareholders in exchange for 42,191 Utilipoint shares (which represents 100% of the then outstanding shares). This includes 21,523 Utilipoint Series A Preferred Stock that were converted to 687,922 Midas Medici common shares. Further, all outstanding Utilipoint options were exchanged for 172,597 Midas Medici options in accordance with the Midas Medici stock option program, adopted on July 27, 2009. Immediately after the closing of the acquisition and as of September 30, 2010, an aggregate of 2,310,516 shares of common stock were outstanding. Hence, the 1,348,516 shares represented approximately 58% of the outstanding shares of Midas Medici. The shares of common stock issued in connection with the reverse merger were not registered with the Securities and Exchange Commission and are considered to be restricted securities.





Prior to its reverse merger transaction with Utilipoint, the Company was a “ shell entity” based on its business activities. Under SEC Rule 12b-2 under the Securities Act of 1933, as amended (the “Securities Act”), the Company also qualified as a “shell entity” because it had no or nominal assets (other than cash) and no or nominal operations.  On August 21, 2009, the Company ceased to be a “shell entity”.





19





Utilipoint, the Company’s wholly-owned subsidiary, provides custom research and management, technology and policy consulting services to utilities, investors, regulators, and energy industry service providers both domestically and internationally. These services are provided using multi-disciplinary teams with deep subject matter expertise, highly analytical methodologies, primary research and technology-enabled tools. Utilipoint helps clients conceive, develop, implement and improve Smart Grid and other energy solutions that address the efficiency, reliability and security of the generation, transmission, and distribution of electricity to end users. Utilipoint has 17 employees, including many whom we believe are recognized leaders in their respective fields. As of September 30, 2010, more than 50% of professional staff held post-graduate degrees in such diverse fields as economics, engineering, business administration, information technology, law, life sciences and public policy. Utilipoint’s senior managers have considerable industry and project management experience and an average tenure of more than 20 years in the industry. We believe this diverse pool of intellectual capital enables us to assemble multi-disciplinary teams that can provide creative solutions to our clients’ most pressing problems.





During fiscal year 2009, Utilipoint served 146 clients. Utilipoint’s clients include utilities, investors, regulators, and energy industry service providers such as vendors to utilities, both domestically and internationally, including companies such as General Electric, Electronic Data Systems (EDS), SAP, Eskom Holdings, Union Fenosa SA, ICAP Energy, International Power, Alliance Data and several other blue chip utility companies. Utilipoint concentrates its business activity throughout the United States and Canada, and Europe and also serves select clients in Asia, South America, Africa and the Middle East.





Utilipoint is headquartered in Albuquerque, New Mexico, with two domestic regional offices in Tulsa, Oklahoma and Houston, Texas. It maintains international operations through its office in Brno, Czech Republic.





Through our wholly-owned subsidiary, Utilipoint, we provide our services along seven practice areas: (1) Smart Meter Deployment; (2) Energy Investments & Business Planning; (3) CommodityPoint; (4) Meter-to-Cash; (5) Pricing & Demand Response; (6) Public & Regulatory Issues Management; and (7) Intelligent Project.  We believe increased demand for electricity, infrastructure under-investment and grid deterioration and an evolving regulatory environment has created opportunities for us.





Mergers and Acquisitions





A key element of our growth strategy is to pursue acquisitions. We plan to continue to acquire businesses if and when opportunities arise. We expect future acquisitions to also be accounted for as purchases and therefore generate goodwill and other intangible assets. We expect to incur additional debt for future acquisitions and, in some cases, to use our stock as acquisition consideration in addition to, or in lieu of, cash. Any issuance of stock may have a dilutive effect on our stock outstanding.





The Intelligent Project.  On July 1, 2009, Utilipoint, our wholly-owned subsidiary, acquired a majority interest in The Intelligent Project, LLC (“IP”), a research and advisory services firm addressing the challenges that utilities face in advancing and solving electricity consumers’ needs related to the Smart Grid. Utilipoint’s acquisition of IP was accounted for as a combination between entities under common control. As part of the transaction, Utilipoint entered into a capital commitment agreement with Intelligent Project for an amount up to $200,000 to support its initial financing. No advances have been made under this agreement as of September 30, 2010. Utilipoint will also provide certain management services to Intelligent Project in exchange for reasonable compensation. Further, the existing members of IP will provide services to Utilipoint in exchange for options to purchase an aggregate of 17,579 shares of the common stock of Midas Medici that were fully-vested on the date of grant. No options have been issued as of September 30, 2010.





Utilipoint. On August 21, 2009, Midas Medici completed a reverse merger with Utilipoint, a New Mexico corporation which resulted in Midas Medici being the “legal acquirer” and Utilipoint the “accounting acquirer”. The acquisition was effected pursuant to an Acquisition Agreement dated August 10, 2009 by and among the Company, Utilipoint and Utilipoint Acquisition Co. Pursuant to the Acquisition Agreement, an aggregate of 1,348,516 shares of Midas Medici were issued to Utilipoint shareholders in exchange for 42,191 Utilipoint shares (which represented 100% of the then outstanding shares). Further, all outstanding Utilipoint options were exchanged for 172,597 Midas Medici options in accordance with the Midas Medici stock option program, adopted on July 27, 2009. Immediately after the closing of the acquisition and as of September 30, 2010, an aggregate of 2,310,516 shares of Midas Medici common stock are outstanding. Hence, the 1,348,516 shares represented approximately 58% of the outstanding shares of Midas Medici. The shares of common stock issued in connection with the acquisition were not registered with the Securities and Exchange Commission and are considered to be restricted securities. KLI, KLI IP Holding, Inc. and UTP International LLC, stockholders of Utilipoint, received an aggregate of 889,444 shares of our common stock, and options to purchase 27,168 shares of our common stock at the closing of the Merger in exchange for 27,828 shares of Utilipoint and 850 options of Utilipoint. Prior to the merger, KLI, owned 6,305 shares (14.9%) of Utilipoint of which 4,855 were acquired on July 23, 2007, 1,250 were acquired on December 31, 2008 and 200 were acquired on January 15, 2009.  KLI IP Holding, Inc. owned 0 shares or 0% of Utlipoint and UTP International LLC owned 21,523 preferred shares (51%) of Utilipoint which were acquired on July 23, 2007.  At the closing of the merger, the preferred shares were converted into common shares (51% of Utilipoint) at a ratio of one preferred share for one common share.In exchange for their shares of Utilipoint, each of KLI, KLI IP Holding, Inc. and UTP International LLC received, 201,522 shares, 0 shares and 687,922 shares of Midas Medici, respectively, in connection with the acquisition of Utilipoint by Midas Medici. KLI IP Holding, Inc. received 27,168 options to acquire shares of Midas Medici at the closing of the merger. Each of these entities has no operations and their sole business is their current ownership of our shares acquired at the closing of the merger. UTP International LLC is a wholly owned subsidiary of KLI.  Prior to the merger, KLI and its affiliates owned an aggregate of 65.9% of Utilipoint and upon the consummation of the merger owns 38.5% of Midas Medici, which in turn owns 100% of Utilipoint. Nana Baffour, our CEO and Co-Executive Chairman and Johnson Kachidza, our President, CFO and Co-Executive Chairman are co-founders and Managing Principals of KLI. Messrs. Baffour and Kachidza are the principal shareholders of KLI, KLI IP Holding, Inc. and each own 373.5 membership units or 37.35% of KLI, 150 shares or 30% of KLI IP Holding, Inc., no membership units or 0% of UTP International, LLC and have an indirect ownership in UTP International, LLC through KLI.





20





Also, Messrs. Baffour and Johnson Kachidza were directors of Utilipoint since August 2007. Mr. Baffour became Chairman of Utilipoint's board in August 2007. In August 2009, after the closing of the merger, Mr. Baffour was appointed as the CEO of Utilipoint.





KLI and its affiliates have had a close relationship with Utilipoint through their ownership interests and by virtue of the involvement of Messrs. Baffour and Johnson, who in addition to serving as our CEO and President, respectively, are also Managing Members of KLI and control KLI IP Holdings, Inc. and UTP International, LLC.





Pending Merger with Consonus Technologies, Inc.  On April 30, 2010, the Company entered into an Agreement and Plan of Merger with Consonus Technologies, Inc. and MMGH Acquisition Corp., a wholly-owned subsidiary of the Company.  For more information please refer to Amendment No. 3 on Form S-4 as filed with the Securities and Exchange Commission on November 5, 2010.





Realignment of the Business.Over the past few months management has been realigning the business, migrating from low margin fixed-price time and materials consulting projects to consulting projects based around products and services as well as high margin bundled services products providing data, analytics and packaged subscriptions. Pursuant to the April 30, 2010 announcement of the Company’s plans to merge with Consonus Technologies, Inc., the Company is realigning its practice areas to capitalize on this focus on higher margin consulting projects and data, analytics and packaged subscriptions.





Revenue





Our revenue is predominantly generated through time-and-materials contracts, bundled service agreements, fixed-price contracts, events and conferences, and other revenue. Our revenue mix varies from year to year due to numerous factors, including our business strategies and the procurement activities of our clients. Unless the content requires otherwise, we use the term “contracts” to refer to contracts and any task orders or delivery orders issued under a contract.





Under time-and-materials contracts, we are paid for labor at fixed hourly rates and generally reimbursed separately for allowable materials, other cost of services and out-of-pocket expenses. Under bundled service agreements, the customers sign one-year subscription agreements for a bundled set of analyst time and related services. Under fixed-price contracts, we perform specific tasks for a pre-determined price. Compared to time-and-materials and cost-based contracts, fixed-price contracts involve greater financial risk because we bear the full impact of labor and non-labor costs that exceed our estimates, in terms of costs per hour, number of hours, and all other costs of performance, in return for the full benefit of any cost savings. We therefore may generate more or less than the targeted amount of profit or, perhaps, a loss. Under revenue from our events and conferences; we solicit companies as event sponsors and individuals as conference attendees.  These events include revenues from sponsorships and registration fees.





Cost of services





Cost of services consist primarily of costs incurred to provide services to clients, the most significant of which are employee salaries and benefits, reimbursable project expenses associated with fringe benefits, all relating to specific client engagements. Cost of services also include the costs of subcontractors and outside consultants, third-party materials and any other related cost of services, such as travel expenses.





Selling, general and administrative





SG&A expenses include our management, facilities and infrastructure costs, as well as salaries and associated fringe benefits, not directly related to client engagements. Among the functions covered by these expenses are marketing, business and corporate development, bids and proposals, facilities, information technology and systems, contracts administration, accounting, treasury, human resources, legal, corporate governance and executive and senior management.





Results of Operations





The following discussion highlights results from our comparison of consolidated statements of operations for the periods indicated.





21





Three months ended September 30, 2010 compared to three months ended September 30, 2009 (dollars in thousands)





Revenues. Revenues for the three months ended September 30, 2010 were $242.2, compared to $837.4 for the three months ended September 30, 2009. The decrease in revenues was primarily due to the Company's clients and target customers cutting budgets for discretionary spending that account for the Company's core revenues sources as a result of the recent recessionary macroeconomic conditions and management’s realigning of the business via migrating from low margin, high risk fixed-price time and materials projects to consulting projects based on products and services,  as well as high margin bundled service products, providing data, analytics and packaged subscriptions.





Cost of services. Cost of services for the three months ended September 30, 2010 were $97.7, or 40.3% of revenue, compared to $506.2 or 60.4% of revenue, for the three months ended September 30, 2009. The increase in our margins, as a result of lower cost of services as a percentage of revenues, was primarily due to decreased direct expenses such as direct travel expenses and reduced utilization of consultant services.





Selling, general and administrative expenses. Selling, general and administrative expenses for the three months ended September 30, 2010 were $726.4, compared to $820.5 for the three months ended September 30, 2009. Selling, general and administrative expenses included expenses related to the preparation and filing of the Form S-4 registration statement filed on May 3, 2010 of $140.8 and stock-based compensation charges for the options granted under the MMGH Option Plan of $89.9.





Operating loss. For the three months ended September 30, 2010, losses from operations totaled $584.8, compared to an operating loss of $493.6 for the three months ended September 30, 2009. Loss from operations increased primarily due to reduced revenues combined with expenses related to the preparation and filing of the Form S-4 registration statement and stock-based compensation charges for the options granted under the MMGH Option Plan.





Interest and tax expense. For the three months ended September 30, 2010, interest expense was $39.6, compared to $19.8 for the three months ended September 30, 2009. Tax provisions were not material for either period.





Nine months ended September 30, 2010 compared to nine months ended September 30, 2009 (dollars in thousands)





Revenues. Revenues for the nine months ended September 30, 2010 were $901.0, compared to $2,567.0 for the nine months ended September 30, 2009. The decrease in revenues was primarily due to the Company's clients and target customers cutting budgets for discretionary spending that account for the Company's core revenues sources as a result of the recent recessionary macroeconomic conditions and management’s realigning of the business via migrating from low margin, high risk fixed-price time and materials projects to consulting projects based on products and services,  as well as high margin bundled service products, providing data, analytics and packaged subscriptions.





Cost of services. Cost of services for the nine months ended September 30, 2010 were $528.5, or 58.7% of revenue, compared to $1,445.2 or 56.3% of revenue, for the nine months ended September 30, 2009. The decrease in our margins, as a result of higher cost of services as a percentage of revenues, was primarily due to increased direct labor expenses for the nine months ended September 30, 2010 compared to the three months ended September 30, 2010.





Selling, general and administrative expenses. Selling, general and administrative expenses for the nine months ended September 30, 2010 were $2,720,295, compared to $1,785.0 for the nine months ended September 30, 2009. Selling, general and administrative expenses increased significantly primarily due to expenses related to the public offering of 256,000 shares of common stock that was completed on February 22, 2010 of $760.8 and stock-based compensation charges for the options granted under the MMGH Option Plan of $302.1.





Operating loss. For the nine months ended September 30, 2010, losses from operations totaled $2,358.2, compared to an operating loss of $677.0 for the nine months ended September 30, 2009. Loss from operations increased primarily due to reduced revenues combined with expenses related to the public offering of 256,000 shares of common stock that was completed on February 22, 2010, expenses related to the preparation and filing of a Form S-4 registration statement and stock-based compensation charges for the options granted under the MMGH Option Plan.





Interest and tax expense. For the nine months ended September 30, 2010, interest expense was $98.5, compared to $62.9 for the nine months ended September 30, 2009. Tax provisions were not material for either period.





22





Non-GAAP financial measure and reconciliation (EBITDA AND ADJUSTED EBITDA):





We define Adjusted EBITDA as operating income (loss) before interest, taxes, depreciation and amortization expenses, excluding non-cash stock-based compensation expense,  non-recurring merger costs and severance expense.   We use Adjusted EBITDA in our business operations to, among other things, evaluate the performance of our business, develop forecasts and measure our performance against those forecasts.





We believe that analysts and investors use Adjusted EBITDA as a supplementary measure to evaluate a company’s overall operating performance. However, Adjusted EBITDA has material limitations as an analytical tool and you should not consider Adjusted EBITDA in isolation, or as a substitute for analysis of our results as reported under GAAP. We believe that, with a full understanding of its limitations, adjusted EBITDA provides useful information regarding how our management views our business. In addition, it allows analysts, investors and other interested parties in the technology and energy consulting industries to facilitate company comparisons because it eliminates many differences caused by variations in capital structures (affecting interest expense), taxation, the life-cycle stage and “book basis” depreciation expense of facilities and equipment, as well as non-operating and one-time charges to earnings.





Adjusted EBITDA may not be directly comparable to similarly titled measures reported by other companies due to differences in accounting policies and items excluded or included in the adjustments. Our calculation of Adjusted EBITDA is not directly comparable to EBIT (earnings before interest and taxes) or EBITDA. In addition, Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; changes in, or cash requirements for, our working capital needs; our interest expense, or the cash requirements necessary to service interest or principal payments our outstanding debt; any cash requirements for the replacement of assets being depreciated or amortized, which will often have to be replaced in the future, even though depreciation and amortization are non-cash charges; and the fact that other companies in our industry may calculate adjusted EBITDA differently than we do which limits its usefulness as a comparative measure. Adjusted EBITDA is not intended to replace operating income, net income and other measures of financial performance reported in accordance with GAAP. Rather, Adjusted EBITDA is a measure of operating performance that you may consider in addition to those measures. Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using adjusted EBITDA as a supplementary measure.





Set forth below is a reconciliation of net loss to EBITDA to Adjusted EBITDA for the periods presented.




Three Months Ended


Nine Months EndedSeptember 30, 2010


September 30, 20102010


2009


2010


2009Reconciliation of Net Loss to EBITDA to Adjusted EBITDANet loss attributable to Midas Medici Group Holdings, Inc. and Subsidiaries

$
(607,522
)

$
(443,800
)

$
(2,396,289
)

$
(670,923
)Other expenses, net


39,551



19,790



98,529



62,853Provision (benefit) for income taxes


695



-



5,204



2,077Depreciation and amortization


2,939



4,421



10,356



13,835EBITDA


(564,337
)


(419,589
)


(2,282,200
)


(592,158
)Stock based compensation


89,903



196,375



302,139



196,375Non-recurring legal and professional fees related to merger and public offering costs of MMGH


140,776



-



760,812



-ADJUSTED EBITDA

$
(333,658
)

$
(223,214
)

$
(1,219,249
)

$
(395,783
)
  23





Liquidity and Capital Resources (dollars in thousands)





At September 30, 2010, we had cash and cash equivalents of $19.1 and working capital deficit of $2,608.0.





Cash flow used by operations was $1,440.4 and $15.4 for the nine months ended September 30, 2010 and 2009, respectively. The increase in cash flow used by operations resulted from the net loss from operations of $2,461.9 primarily due to legal and professional expenses related to the public offering of 256,000 shares of common stock that was completed on February 22, 2010 and preparation and filing of a Form S-4 registration statement filed on May 3, 2010 of 760.8, being offset by non-cash charges from stock-based compensation of $302.1.





Net cash provided (used in) by investing activities was ($0.8) and $15.4 for the nine months ended September 30, 2010 and 2009, respectively.





Cash provided by (used in) financing activities was $1,396.6 and ($35.9) for the nine months ended September 30, 2010 and 2009, respectively. The increase is the result of proceeds received from issuance of common stock of 256,000 shares of our common stock or $1,280 in connection with our initial public offering completed on February 22, 2010.





On October 14, 2009, the Company, entered into a revolving loan agreement with Proficio Bank (the “Loan Agreement”). Pursuant to the terms of the Loan Agreement, the Lender agreed to loan up to $500 (the “Loan”) to the Company which amounts will be evidenced by a Senior Secured Revolving Promissory Note. The Loan matures on October 14, 2010, unless earlier accelerated upon the occurrence of an event of default, as such term is defined in the loan agreement. Interest on the Loan is payable monthly in arrears commencing on November 1, 2009, at a rate which is equal to The Wall Street Journal prime rate plus 2.5%, or a minimum of 6.5%. In the event of default, as such term is defined in the Loan Agreement; the interest rate shall bear additional interest of 3%. The Loan is secured by all of our property, including, all our accounts, inventory, furniture, fixtures, equipment, leasehold improvements, chattel paper and general intangibles and all proceeds thereof. In connection with the Loan, in addition to the Loan Agreement, we entered into a Security Agreement with Proficio and the holders of the senior subordinate debentures issued by Utilipoint entered into a Subordination and Standstill Agreement. There was a balance of $171.9 outstanding at September 30, 2010. As of September 30, 2010, the Company was not in compliance with the tangible net worth covenant and was in default on its revolving line of credit facility with Proficio Bank. The loan matured on October 14, 2010 and was paid in full on November 2, 2010.





Our unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business and, accordingly, no adjustments have been made to recorded amounts that might result from the outcome of this uncertainty. Our accumulated deficit at September 30, 2010 was $4,705.3, and we incurred a net loss of $625.0 and $2,461.9 for the three and nine months ended September 30, 2010, respectively. On September 30, 2010, we had working capital deficit of $2,608.0. Historically, Utilipoint has funded its operations with cash obtained mainly from its stockholders and third-party financings.





Net proceeds of the Company’s initial public offering which was completed in February 2010, totaled $1,177.6 after taking into account underwriting discount and commissions of $102.4. The initial public offering included 256,000 shares of our common stock at a price of $5.00 per share. In addition, certain of our affiliates converted outstanding liabilities of $250 in the offering.





On April 30, 2010, the Company entered into an Agreement and Plan of Merger with Consonus Technologies, Inc. and MMGH Acquisition Corp., a wholly-owned subsidiary of the Company.





We expect that our cash flow from operations, reduction in expenses related to the merger with Consonus, growth of revenue and customer base resulting from realigning our business will allow us to meet our anticipated cash requirements for the next twelve months, excluding any additional funding we will need to pursue our acquisition strategy. Such acquisitions, if entered into, will be funded by the sale of additional debt or equity securities or additional bank financing. The sale of additional equity securities could result in additional dilution to our stockholders and there can be no guarantee that we will be successful in raising those additional funds on terms that are acceptable to us. Any acquisitions we undertake may be funded through other forms of debt, such as publicly issued or privately placed senior or subordinated debt. Our liquidity is affected by many factors, some based on the normal ongoing operations of the business and others related to the uncertainties of the industries in which we compete.





Our liquidity may also be adversely affected by the current economic conditions, including consumer spending, the ability to collect our accounts receivable and our ability to obtain working capital. There is no assurance that additional funds will be available on terms acceptable to the Company and its stockholders, or at all.





Impact of our initial public offering





In February 2010, we completed an initial public offering pursuant to which we sold 256,000 shares of common stock for gross proceeds of $1,280,000 (net proceeds available to the Company after deducting underwriting discount and commissions was $1,177,600). Over the long term, our results of operations will be affected by the costs of being a public entity, including changes in board and executive compensation, the costs of compliance with the Sarbanes-Oxley Act of 2002, the costs of complying with the Security Exchange Commission (“SEC”) requirements, and increased insurance, accounting and legal costs. These costs are not reflected in our historical results.





Realignment of our business over the last three quarters
  Management has focused its efforts on realigning the business. Management’s realignment efforts have been focused on migrating from lower margin, high risk, fixed price and time and materials projects to high margin consulting projects based on products and services, bundled service products, providing data, analytics and packaged subscriptions. The Company believes its realignment will result in a significant increase in revenues and profits as well was optimization of how it manages its resources.




24





Critical Accounting Policies and Significant Judgments and Estimates





Our discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We review our estimates on an ongoing basis, including those related to allowances for doubtful accounts, certain revenue recognition related to contract deliverables, valuation allowances for deferred tax assets, rates at which deferred tax assets and liabilities are expected to be recorded or settled, accruals for paid time off and the estimated labor utilization rate used to determine cost of services of our foreign subsidiary. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.





Our management believes the following accounting policies and estimates are most critical to aid you in understanding and evaluating our reported financial results.





Revenue Recognition





The Company’s primary revenue streams and the basis on which revenue is recognized for each are as follows:





Fixed-Price Contracts


Fixed price contracts are projects where services are provided at an agreed upon price for defined deliverables. On occasion, clients with fixed price contracts will require an accounting of all hours worked on a project at an agreed upon hourly rate to accompany an invoice.





Bundled Service Agreements (“BSAs”)


BSAs are packages of services that clients subscribe to, typically on an annual contract basis. The services typically include a combination of the following:





•      Access to subject matter experts as needed, by telephone


•      Discounted fees for the Company's events


•      Advertising space on the IssueAlert® e-publication


•      One to three reports and/or whitepapers on industry topics


•      Briefings on industry trends and research findings





BSAs also include annual memberships in the Advanced Metering Infrastructure and Meter Data Management (“AMI MDM”) forum and corporate contracts. The AMI MDM forum is designed for electric, water, and/or gas utilities, regulators, utility governing boards, independent system operators and consumer advocacy groups to come together and discuss meter data management successes, problems, issues, interfaces and best practices.Corporate contracts are characterized by an annual contract for a pre-defined amount of market research hours.  Clients of this service receive access to the Company’s directory and InfoGrid products. The primary service is the block of hours purchased.





The Company believes that the substance of BSAs, indicates that the purchaser pays for a service that is delivered over time.  As a result, revenue recognition occurs over the subscription period, or in the case of corporate contracts as the hours are utilized, reflecting the pattern of provision of service.





Time and Materials Contracts (“T&M”)


T&M are services billed at a set hourly rate.  Project related expenses are passed through at cost to clients.  Normally invoices occur on monthly basis. Utilipoint recognizes revenue as billed unless the project has a major deliverable(s) associated with it, in which case the revenue is deferred until the major deliverable(s) is provided.





Events and Sponsorships


The Company hosts events such as conferences.  These events include revenues from sponsorships and registration fees which are recognized in the month of the event.  Revenues from sponsors of the AMI MDM forum are recognized over the annual subscription period, reflecting the pattern of provision of service.





The Company’s deferred revenue consists primarily of amounts received from or billed to clients in conjunction with BSAs, T&M and fixed price contracts for which revenue is recognized over time or upon completion of contract deliverables.





Recent Accounting Pronouncements





See recently adopted and issued accounting standards in Part I, Item 1. Financial Statements, Note 4 and summary of significant accounting policies.





Effects of Inflation





We generally have been able to price our contracts in a manner to accommodate the rates of inflation experienced in recent years, although we cannot be sure that we will be able to do so in the future.





Off-Balance Sheet Arrangements





We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our stockholders.





25





Item 3.    Quantitative and Qualitative Disclosures about Market Risk.





Not applicable.





Item 4T   Controls and Procedures.





(a) Evaluation of Disclosure Controls and Procedures





We maintain "disclosure controls and procedures," as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.





The Company’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report and have concluded that the Company’s disclosure controls and procedures were not effective.  Based upon that evaluation and due to the material weakness existing in our internal controls as of December 31, 2009 (as described in the Company's Form 10-K) which has not been fully remediated as of September 30, 2010, we have concluded that as of September 30, 2010, our disclosure controls and procedures were not effective.





(b) Changes in internal controls





During our fiscal quarter ended September 30, 2010, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.





26





Part II.
OTHER INFORMATIONItem 1.
Legal ProceedingsNone.Item 1A.
Risk FactorsNot applicable.Item 2.
Unregistered Sales of Equity Securities and Use of ProceedsNone.Item 3.
Defaults Upon Senior SecuritiesNone.Item 4.
(Reserved)Item 5.
Other InformationNone.Item 6.
Exhibits





(a)
Exhibits





Exhibit Number

Description of Exhibit31.1

Certifications of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended31.2

Certifications of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended32.1

Certifications of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2

Certifications of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002








27














SIGNATURES





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.





Midas Medici Group Holdings, Inc.November 15, 2010
By:
/s/ Nana BaffourNana BaffourChief Executive Officer (Principal Executive Officer)/s/ Johnson KachidzaJohnson KachidzaChief Financial Officer (Principal Financial and Accounting Officer)