| Basis of Presentation and Significant Accounting Policies | 3. BASIS OF PRESENTATION AND SIGNIFICANT
ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation
S-X and do not include all the information and disclosures required by accounting principles generally accepted in the United States
of America. The Company has made estimates and judgments affecting the amounts reported in our consolidated financial statements
and the accompanying notes. The actual results experienced by the Company may differ materially from our estimates. The consolidated
financial information is unaudited but reflects all normal adjustments that are, in the opinion of management, necessary to provide
a fair statement of results for the interim periods presented. These consolidated financial statements should be read in conjunction
with the consolidated financial statements in the Companys Annual Report on Form 10-K for the year ended December 31, 2014,
filed with the Securities and Exchange Commission on April 15, 2015. The consolidated balance sheet as of December 31, 2014 was
derived from the Companys audited 2014 financial statements contained in the above referenced Form 10-K. Results of the
three and nine months ended September 30, 2015, are not necessarily indicative of the results to be expected for the full year
ending December 31, 2015. Principles of Consolidation The consolidated financial
statements include accounts of TMP and its wholly owned subsidiary, CCPI (collectively referred to as the Company Cash Equivalents The Company considers all
highly liquid investments with a remaining maturity of three months or less when purchased to be cash equivalents. The recorded
carrying amounts of the Companys cash and cash equivalents approximate their fair value. As of September 30, 2015 and December
31, 2014, the Company had no cash equivalents. Accounting 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 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.
The Companys critical accounting policies that involve significant judgment and estimates include revenue recognition, share
based compensation, recoverability of accounts receivable, intangibles, valuation of derivatives, and valuation of deferred income
taxes. Actual results could differ from those estimates. Revenue Recognition TMP markets and sells medical
foods through employed sales representatives, independent distributors, and pharmacies. Product sales are invoiced upon shipment
at Average Wholesale Price ( AWP Physician Direct Sales Model Distributor Direct Sales Model Physician Managed Model Hybrid Model As a courtesy to our physician clients,
our general practice has been to extend the rapid pay discount from our Physician Managed and Hybrid models beyond the initial
term of the invoice until the invoice is paid and not to apply a late payment fee to the outstanding balance. Due to substantial uncertainties
as to the timing and collectability of revenues derived from our Physician Managed and Hybrid models, which can take in excess
of five years to collect, we have determined that these revenues do not meet the criteria for recognition, in accordance with The
Financial Accounting Standards Board ( FASB ASC Revenue Recognition ASC 605 The Company has entered
into an agreement with Cambridge Medical Funding Group, LLC ( CMFG WC Transfers of Financial Assets CMFG #1 WC Receivable
Purchase Assignment Model CMFG #1 During the nine months
ended September 30, 2015 and 2014, the Company issued billings to Physician Managed and Hybrid model customers aggregating $2.0
million and $2.4 million, respectively, which were not recognized as revenues or accounts receivable in the accompanying consolidated
financial statements at the time of such billings. Direct costs associated with the above billings are expensed as incurred. Direct
costs associated with all billings, aggregating $367,090 and $375,832, respectively, were expensed in the accompanying consolidated
financial statements at the time of such billings. In accordance with the Companys revenue recognition policy, the Company
recognized revenues from customers under these models aggregating $1,944,203 and $2,523,244 during the nine months ended September
30, 2015 and 2014, based on cash collections during the respective periods. As of September 30, 2015, we had approximately $6.6
million in unrecorded accounts receivable that potentially will be recorded as revenue in the future as our CCPI subsidiary secures
claims payments on behalf of our PMM and Hybrid Customers. All unpaid invoices underlying claims assigned to CMFG pursuant to CMFG
#1 are excluded from unrecorded accounts receivable. CCPI receives no revenue
in the Physician Direct or Distributor Direct models because it does not provide collection and billing services to these customers.
In the Physician Managed and Hybrid models CCPI has a billing and claims processing service agreement with the physician. The billing
and claims processing agreement includes a service fee that is based upon a percentage of collections on all claims. Because fees
are only earned by CCPI upon collection on the claim, and the fee is not determinable until the amount of the collection is known,
CCPI recognizes revenue at the time claims are paid. Under CMFG #1 the Company recognizes revenue related to CCPIs services
upon receipt of the 20% advance payment from CMFG. No returns of products are allowed except for
products damaged in shipment, which historically have been insignificant. The rapid pay discounts
to the AWP amount offered to the physician or distributor vary based upon the expected payment term from the physician or distributor.
The discounts are derived from the Companys experience of the collection rates from internal sources and updated for facts
and circumstances and known trends and conditions in the industry, as appropriate. As described in the various models, we recognize
provisions for rapid pay discounts in the same period in which the related revenue is recorded. We believe that our current provisions
appropriately reflect our exposure for rapid pay discounts. These rapid pay discounts have typically ranged from 40% to 88% of
AWP. Allowance for Doubtful Accounts Trade accounts receivable
are stated at the amount management expects to collect from outstanding balances. Currently, accounts receivable are comprised
of amounts due from our CMFG #1, distributor customers and other miscellaneous receivables. The carrying amounts of accounts receivable
are reduced by an allowance for doubtful accounts that reflects managements best estimate of the amounts that will not be
collected. The Company individually reviews all accounts receivable balances and based upon an assessment of current creditworthiness,
estimates the portion, if any, of the balance that will not be collected. An allowance is recorded for those accounts that are
determined to likely be uncollectible through a charge to earnings and a credit to a valuation allowance. Balances that remain
outstanding after we have used reasonable collection efforts will be written off. Based on an assessment as of September 30, 2015
and December 31, 2014, of the collectability of invoices, accounts receivable are presented net of an allowance for doubtful accounts
of $9,408 and $55,773, respectively. Inventory Valuation Inventory is valued at
the lower of cost (first in, first out) or market and consists primarily of finished goods of medical food products sold by the
Company. Property and Equipment Property and equipment
are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets.
Computer equipment is depreciated over three to five years. Furniture and fixtures are depreciated over five to seven years. Leasehold
improvements are amortized over the shorter of fifteen years or term of the applicable property lease. Maintenance and repairs
are expensed as incurred; major renewals and betterments that extend the useful lives of property and equipment are capitalized.
When property and equipment is sold or retired, the related cost and accumulated depreciation are removed from the accounts and
any gain or loss is recognized. Impairment of Long-Lived Assets The long-lived assets held
and used by the Company are reviewed for impairment no less frequently than annually or whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the
cost of any long-lived assets may be impaired, an evaluation of recoverability is performed. No impairment indicators existed at
September 30, 2015 and December 31, 2014, so no long-lived asset impairment was recorded. Intangible Assets Intangible assets with
finite lives, including patents and internally developed software (primarily the Companys PDRx Software), are stated at
cost and are amortized over their useful lives. Patents are amortized on a straight line basis over their statutory lives, usually
fifteen to twenty years. Internally developed software is amortized over three to five years. Intangible assets with indefinite
lives are tested annually for impairment, during the fiscal fourth quarter and between annual periods, and more often when events
indicate that an impairment may exist. If impairment indicators exist, the intangible assets are written down to fair value as
required. The Company has one intangible asset with an indefinite life which is a domain name for medical foods. Taking into account
the cyclical and non-recurring events that affected operations, the Company determined that no impairment indicators existed at
September 30, 2015, or December 31, 2014, so no intangible asset impairment was recorded for the three or nine months ended September
30, 2015, or the year ended December 31, 2014. Fair Value of Financial Instruments The Companys financial
instruments are accounts receivable, accounts payable, notes payable, and warrant derivative liability. The recorded values of
accounts receivable and accounts payable approximate their fair values based on their short term nature. Notes payable and notes
payable related parties are recorded at their issue value or if warrants are attached at their issue value less the proportionate
value of the warrant, which approximate their fair value. Warrants issued with ratcheting provisions are classified as derivative
liabilities and are revalued using the Black-Scholes model each quarter based on changes in the market value of our common stock
and unobservable level 3 inputs. The Company defines fair
value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable
inputs. The fair value hierarchy is based on three levels of inputs that may be used to measure fair value, of which the first
two are considered observable and the last is considered unobservable: Level 1: Quoted prices in active markets for
identical assets or liabilities. Level 2: Inputs other than Level 1 that are
observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilities. Level 3 assumptions: Unobservable inputs that
are supported by little or no market activity and that are significant to the fair value of the assets or liabilities including
liabilities resulting from imbedded derivatives associated with certain warrants to purchase common stock. Derivative Financial
Instruments Derivative liabilities
are recognized in the consolidated balance sheets at fair value based on the criteria specified in FASB ASC Topic 815-40 Derivatives
and Hedging Contracts in Entitys own Equity ASC 815-40 Derivatives and
Hedging Embedded Derivatives ASC 815-15 Income Taxes The Company determines
its income taxes under the asset and liability method. Under the asset and liability approach, deferred income tax assets and liabilities
are calculated and recorded based upon the future tax consequences of temporary differences by applying enacted statutory tax rates
applicable to future periods for differences between the financial statements carrying amounts and the tax basis of existing assets
and liabilities. Generally, deferred income taxes are classified as current or non-current in accordance with the classification
of the related asset or liability. Those not related to an asset or liability are classified as current or non-current depending
on the periods in which the temporary differences are expected to reverse. Valuation allowances are provided for significant deferred
income tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized. The Company recognizes
tax liabilities by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit
is recognized and also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in
interim periods, disclosure and transition. The minimum threshold is defined as a tax position that is more likely than not to
be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes,
based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that
is greater than fifty percent likely of being realized upon ultimate settlement. To the extent that the final tax outcome of these
matters is different than the amount recorded, such differences impact income tax expense in the period in which such determination
is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax
expense. U.S. GAAP also requires management to evaluate tax positions taken by the Company and recognize a liability if the Company
has taken uncertain tax positions that more likely than not would not be sustained upon examination by applicable taxing authorities.
Management of the Company has evaluated tax positions taken by the Company and has concluded that as of September 30, 2015, there
are no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability that would require
disclosure in the financial statements. The Companys effective
tax rates were approximately 0% and 3% for the nine months ended September 30, 2015 and 2014, respectively. During 2013, the
Company decided to fully reserve its net deferred income tax assets by taking a full valuation allowance against these assets.
As a result of this decision, during the nine months ended September 30, 2015 and 2014, the Company did not recognize any income
tax benefit as a result of its net loss. Further, during the nine months ended September 30, 2014, the Company recognized $65,828
of income tax expense upon the final resolution of the Companys Federal and state income tax audits for years 2010 through
2012. Thus, during the nine months ended September 30, 2015 and 2014, the effective tax rate differed from the U.S. federal statutory
rate primarily due to the change in the valuation allowance and to a lesser extent, for the nine months ended June 30, 2014, upon
the recognition of income tax expense resulting from the Companys Federal and state income tax audits. The table below
shows the balances for the deferred income tax assets and liabilities as of the dates indicated.
September 30, 2015 December 31, 2014
Deferred income tax asset-short-term $ 1,556,656 $ 1,517,270
Allowance (1,556,656 ) (1,517,270 )
Deferred income tax asset-short-term, net
Deferred income tax asset-long-term 9,075,043 8,303,462
Deferred income tax liability-long-term (959,203 ) (1,074,928 )
Deferred income tax asset-long-term 8,115,840 7,228,534
Allowance (8,115,840 ) (7,228,534 )
Deferred income tax asset-long-term, net
Total deferred tax asset, net $ $ The ultimate realization
of deferred tax assets is dependent upon the existence, or generation, of taxable income in the periods when those temporary differences
and net operating loss carryovers are deductible. Management considers the scheduled reversal of deferred tax liabilities, taxes
paid in carryover years, projected future taxable income, available tax planning strategies, and other factors in making this assessment.
Based on available evidence, management believes it is more likely than not that all of the deferred tax assets will not be realized.
Accordingly, the Company has maintained a valuation allowance for the current year. At September 30,
2015, the Company had total domestic Federal and state net operating loss carryovers of approximately $10,425,000 and $13,091,000,
respectively. Federal and state net operating loss carryovers expire at various dates between 2021 and 2032. Under the Tax Reform
Act of 1986, as amended, the amounts of and benefits from net operating loss carryovers and research and development credits may
be impaired or limited in certain circumstances. Events which cause limitations in the amount of net operating losses that the
Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50%, as defined,
over a three year period. The Company does not believe that such an ownership change has occurred. Stock-Based Compensation The Company accounts
for stock option awards in accordance with FASB ASC Topic No. 718, Compensation-Stock Compensation The Companys
accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions
of FASB ASC Topic No. 505-50, Equity Based Payments to Non-Employees Loss per Common Share The Company utilizes
FASB ASC Topic No. 260, Earnings per Share Since the effects
of outstanding options, warrants and the conversion of convertible debt are anti-dilutive in all periods presented, shares of common
stock underlying these instruments have been excluded from the computation of loss per common share. The following sets
forth the number of shares of common stock underlying outstanding options, warrants and convertible debt as of September 30, 2015
and 2014:
September 30,
2015 2014
Warrants 4,699,372 4,919,372
Stock options 2,357,041 2,421,441
Convertible debentures 2,166,667
9,223,080 7,340,813 Debt Discounts The Company accounts
for debt discount according to ASC 470-20, Debt with Conversion and Other Options Research and Development Research and development
costs are expensed as incurred. In instances where we enter into clinical trial agreements with third parties for research and
development activities, we may prepay fees for services at the initiation of the contract. We record the prepayment as a prepaid
asset and amortize the asset into research and development expense over the period of time the contracted research and development
services are performed. Typically, we expensed 50% of the contract amount within the first two years of the contract and 50% over
the remainder of the record retention requirements under the contract based on our experience on how long the clinical trial service
is provided. At this time, no clinical trials are being conducted. Reclassifications Certain prior year
amounts have been reclassified for comparative purposes to conform to the current-year financial statement presentation. These
reclassifications had no effect on previously reported results of operations. Recent Accounting Pronouncements In May 2014,
the FASB issued Accounting Standards Update (ASU) No. 2014-09 Revenue from Contracts with Customers (Topic
606) Revenue
from Contracts with Customers (Topic 606) which In August 2014, the FASB
issued ASU No. 2014-15 Presentation of Financial StatementsGoing Concern (Subtopic 205-40): Disclosure of Uncertainties
about an Entitys Ability to Continue as a Going Concern. In January 2015, the FASB
issued ASU No. 2015-01, Extraordinary and Unusual Items In July 2015, the FASB
issued ASU No. 2015-11, Simplifying the Measurement of Inventory In August 2015, the FASB
issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit
Arrangements Simplifying the Presentation of
Debt Issuance Costs |
