Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 14, 2013 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'SCRIPSAMERICA, INC. | ' |
Entity Central Index Key | '0001521476 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 78,887,928 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2013 | ' |
Condensed_Balance_Sheets_Unaud
Condensed Balance Sheets (Unaudited) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Current Assets | ' | ' |
Cash | $27,384 | $13,513 |
Accounts receivable trade, net of allowance for charge backs of $0 and $105,443, respectively | 11,188 | 290,531 |
Receivable - contract packager, net of allowance | 980,428 | 1,579,051 |
Other receivable - Pharmaceutical partner | 42,449 | 0 |
Prepaid expenses and other current assets | 243,236 | 198,820 |
Total Current Assets | 1,304,685 | 2,081,915 |
Property and Equipment | 69,650 | 69,650 |
Other Assets | 0 | 200,000 |
TOTAL ASSETS | 1,374,335 | 2,351,565 |
Current Liabilities | ' | ' |
Line of credit | 0 | 40,059 |
Accounts payable and accrued expenses | 197,818 | 101,520 |
Purchase order financing - related party | 927,699 | 578,280 |
Obligation due to factor | 0 | 141,725 |
Royalty payable | 36,000 | 42,000 |
Royalty payable - related party | 9,000 | 10,500 |
Convertible notes payable - related parties | 130,000 | 0 |
Current portion of long - term debt - related parties | 119,814 | 112,021 |
Convertible notes payable - net of discount $797,945 and $50,918 respectively | 975,742 | 64,832 |
Derivative liability | 1,384,898 | 94,477 |
Total Current Liabilities | 3,780,971 | 1,185,414 |
Non-Current Liabilities | ' | ' |
Preferred stock dividends payable | 166,880 | 104,300 |
Convertible notes payable - related parties | 0 | 130,000 |
Convertible notes payable | 17,743 | 719,400 |
Long-term debt, less current portion - related parties | 261,956 | 352,816 |
Total Non-Current Liabilities | 446,579 | 1,306,516 |
Total Liabilities | 4,227,550 | 2,491,930 |
Series A Convertible preferred stock - $.001 par value; 10,000,000 shares authorized, 2,990,252 issued and outstanding | 1,043,000 | 1,043,000 |
Stockholders' Deficit | ' | ' |
Common stock - $0.001 par value; 150,000,000 shares authorized; 72,163,069 and 56,404,972 shares issued and outstanding as of September 30, 2013, and December 31, 2012, respectively | 72,164 | 56,405 |
Additional paid-in capital | 6,366,958 | 1,090,772 |
Accumulated deficit | -10,335,337 | -2,330,542 |
Total Stockholders' Deficit | -3,896,215 | -1,183,365 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $1,374,335 | $2,351,565 |
Condensed_Balance_Sheets_Unaud1
Condensed Balance Sheets (Unaudited) (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Statement of Financial Position [Abstract] | ' | ' |
Charge backs on accounts receivable | $0 | $105,443 |
Discount on convertible notes payable | $797,945 | $50,918 |
Series A Convertible Preferred stock par value (in Dollars per share) | $0.00 | $0.00 |
Series A Convertible Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Series A Convertible Preferred stock, shares issued | 2,990,252 | 2,990,252 |
Series A Convertible Preferred stock, shares outstanding | 2,990,252 | 2,990,252 |
Common stock par value (in Dollars per share) | $0.00 | $0.00 |
Common stock shares authorized | 150,000,000 | 150,000,000 |
Common stock shares issued | 72,163,069 | 56,404,972 |
Common stock shares outstanding | 72,163,069 | 56,404,972 |
Condensed_Statements_of_Operat
Condensed Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Income Statement [Abstract] | ' | ' | ' | ' |
Product revenues - net of contract adjustments | $0 | $1,014,472 | $150,499 | $3,522,251 |
Revenues net, from contract packager | 56,642 | 0 | 285,144 | 0 |
Commission fees | 16,625 | 0 | 16,625 | 0 |
Total net revenues | 73,267 | 1,014,472 | 452,268 | 3,522,251 |
Cost of Goods Sold | ' | ' | ' | ' |
Product revenues | 0 | 907,328 | 210,540 | 2,948,528 |
Royalty expense | 30,600 | 0 | 213,945 | 0 |
Total Cost of Goods Sold | 30,600 | 907,328 | 424,485 | 2,948,528 |
Gross Profit | 42,667 | 107,144 | 27,783 | 573,723 |
Selling, General and Administrative Expenses | 575,063 | 429,695 | 1,695,057 | 705,277 |
Share-base compensation issued for services | 2,074,367 | 19,680 | 3,214,472 | 140,380 |
Allowance for receivable - contract packager | -27,210 | 0 | 1,183,789 | 0 |
Research and Development | 0 | 5,555 | 0 | 31,968 |
Total Operating Expenses | 2,622,220 | 454,930 | 6,093,318 | 877,625 |
Loss from Operations | -2,579,553 | -347,786 | -6,065,535 | -303,902 |
Other Income (Expenses), net | ' | ' | ' | ' |
Interest expense | -59,907 | -61,245 | -286,455 | -86,190 |
Loss from derivatives issued with debt greater than carrying value | -544,053 | 0 | -887,474 | 0 |
Gain (loss) on revaluation of derivatives | 795,555 | 0 | -672,903 | 0 |
Amortization of debt discount | -233,517 | 0 | -447,523 | -55,269 |
Gain on extinguishment of debt | 299,709 | 0 | 417,674 | 0 |
Total Other Income (Expenses), net | 257,787 | -61,245 | -1,876,681 | -141,459 |
Loss Before Provision (Benefit) for Income taxes | -2,321,766 | -409,031 | -7,942,216 | -445,361 |
Provision (Benefit) for Income Taxes | 0 | -108,000 | 0 | -125,621 |
Net Loss | -2,321,766 | -301,031 | -7,942,216 | -319,740 |
Preferred Stock Dividend | -20,860 | -20,860 | -62,580 | -83,440 |
Net Loss Available to Common Shareholders | ($2,342,626) | ($321,891) | ($8,004,796) | ($403,180) |
Basic and Diluted | ($0.03) | ($0.01) | ($0.13) | ($0.01) |
Basic and Diluted | 70,641,911 | 56,001,798 | 63,442,789 | 54,793,623 |
Condensed_Statements_of_Cash_F
Condensed Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Cash Flows from Operating Activities | ' | ' |
Net Loss | ($7,942,216) | ($319,740) |
Adjustments to reconcile net loss income to net cash used by operating activities: | ' | ' |
Amortization of discount on convertible notes payable | 447,523 | 2,083 |
Loss from derivatives issued with debt | 887,474 | 0 |
Amortization of loan fees | 125,224 | 0 |
Common stock issued for services | 3,007,783 | 67,594 |
Common stock issued for payment of royalty fees | 235,845 | 0 |
Options issued for services | 206,689 | 0 |
Change in derivative liability | 672,903 | 0 |
Change in deferred Income tax provision (benefit) | 0 | -127,600 |
Reserve on receivable - Contract packager | 1,385,000 | 0 |
Recovery of bad debt | -27,210 | 0 |
Gain on extinguishment of debt | -417,674 | 0 |
Allowance for chargebacks | -11,399 | 0 |
(Increase) decrease in: | ' | ' |
Accounts receivable - trade | 290,742 | -281,584 |
Receivable - Contract packager | -559,167 | -530,982 |
Receivable - Pharmaceutical partner | -42,449 | 0 |
Inventory | 0 | -9,400 |
Prepaid expenses and other current assets | 143,524 | -17,646 |
Accounts payable and accrued expenses | 172,131 | 27,912 |
Cash used in operating activities | -1,425,277 | -1,189,363 |
Cash Flows from Investing Activities | ' | ' |
Proceeds from note receivable | 0 | 6,055 |
Purchase of equipment | 0 | -66,184 |
Cash provided by investing activities | 0 | -60,129 |
Cash Flows from Financing Activities | ' | ' |
Payments under bank line of credit, net | -40,059 | 0 |
Proceeds from Issuance of common stock | 245,697 | 30,000 |
Proceeds from convertible notes payable | 1,372,867 | 383,000 |
Proceeds from convertible notes payable - related party | 0 | 50,000 |
Proceeds from note payable - related party | 0 | 500,001 |
Payments for PO financing from related party, net | 328,169 | 0 |
Payments to factor, net | -141,725 | 0 |
Payments on convertible notes payable | -242,734 | -200,600 |
Payments on note payable - related party | -83,067 | -8,673 |
Collection of stock subscription receivable | 0 | 170,800 |
Cash provided by financing activities | 1,439,148 | 924,528 |
Net Increase (Decrease) in Cash | 13,871 | -324,964 |
Cash - Beginning of period | 13,513 | 467,505 |
Cash - End of period | 27,384 | 142,541 |
Cash Paid: | ' | ' |
Interest | 128,446 | 121,389 |
Noncash financing and investing activities: | ' | ' |
Accrued Preferred Dividend payable | 62,580 | 62,580 |
Conversion of note payable for common stock | 1,444,348 | 250,000 |
Stock issued for investment | $154,000 | $0 |
1_Organization_and_Business
1. Organization and Business | 9 Months Ended |
Sep. 30, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
NOTE 1 - Organization and Business | ' |
The accompanying financial statements reflect financial information of ScripsAmerica, Inc., (the “Company” or “ScripsAmerica” or “we” or “our”). | |
ScripsAmerica, Inc was incorporated in the State of Delaware on May 12, 2008 and is a provider of efficient pharmaceutical supply chain management services ranging from strategic sourcing to delivering niche generic pharmaceuticals to market. ScripsAmerica’s primary focus is on the development, branding and distribution of rapidly dissolving drug formulations for Over the Counter (OTC) drugs, vitamins and supplements. Specifically, we have developed a branded OTC product called “RapiMed” which is a children’s pain reliever and fever reducer currently set for launch in retail outlets across North America in the first half of 2014. | |
Since our inception, ScripsAmerica’s business model has evolved significantly. Initially, the Company primarily provided pharmaceutical distribution services to a wide range of end users across the health care industry through the pharmaceutical distributors in North America. End users include retail, hospitals, long-term care facilities and government and home care agencies. The majority of our revenue from this model came from orders facilitated by McKesson, the largest pharmaceutical distributor in North America, and a few other clients. However, because we had no exclusive contract with McKesson to utilize our services and the margins began to shrink, we exited the business of providing these pharmaceutical distribution services and are now primarily focused on generating revenue through our RapiMed and other Quickmelt technology products and our re-entry established independent pharmacy distribution model. | |
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements of ScripsAmerica, Inc. and related notes thereto contained in the Company’s Form 10-K for the year ended December 31, 2012 filed with the SEC on April 15, 2013. Certain information and note disclosure normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. | |
2_Liquidity_Business_Risk_And_
2. Liquidity, Business Risk And Going Concern | 9 Months Ended |
Sep. 30, 2013 | |
Risks and Uncertainties [Abstract] | ' |
NOTE 2 - Liquidity, Business Risk And Going Concern | ' |
At September 30, 2013, the Company had approximately $27,000 in cash and incurred a loss from operations of approximately $6.1 million, of which approximately $4.4 million of the loss was non-cash related. The Company’s cash expenditures are projected to be approximately $110,000 a month on a continuing operating basis. Included in these cash expenditures are approximately $13,000 a month in interest costs. After taking into consideration our interim results and current projections, management believes that the Company’s cash flow from operations, coupled with recent financing’s may not be sufficient to support the working capital requirements, debt service and applicable debt maturity requirements through the next twelve month period ending September 30, 2014. This raises substantial doubt regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is highly dependent upon (i) management’s ability to achieve its planned operating cash flows (ii), maintain continued availability on its line of credit and the ability to obtain alternative financing to fund capital requirements and/or debt obligations coming due. The accompanying financial statements do not include any adjustments that may result from the outcome of this uncertainty. Although the Company has successfully obtained various funding and financing in the past, future financing and funding options may be challenging in the current environment. | |
We completed the development of a children’s pain relief orally disintegrating rapidly dissolving 80 mg and 160 mg tablets for OTC products. In the second quarter of 2013, we signed a supply agreement with a generic manufacturer for the production of these rapid dissolving products. However, we estimate that we will need approximately $1.5 million of incremental funding to launch these products. The funding for launching the rapid dissolving products is expected to come from the sale of equity securities, or debt financing. However, such financing has not yet been secured. |
3_Summary_of_Significant_Accou
3. Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2013 | |
Accounting Policies [Abstract] | ' |
NOTE 3 - Summary of Significant Accounting Policies | ' |
A summary of significant accounting policies follows: | |
a. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |
b. Revenue Recognition - Revenue is recognized when product is shipped from a contract packager to our customers’ warehouses, and is adjusted for anticipated charge backs from our customers which include inventory credits, discounts or volume incentives. These charge back costs are received monthly from our customers’ and the sales revenue and accounts receivables are reduced accordingly based on historical experience, customer contract programs, product pricing trends and the mix of products shipped. | |
Purchase orders from our customers generate our shipments, provide persuasive evidence that an arrangement exists and that the pricing is determinable. The credit worthiness of our customers assures that collectability is reasonably assured. | |
We also recognize a portion of our revenue on a net basis according to ASC 605-45, Revenue Recognition: Principal Agent Considerations. Since we are not deemed to be the principal in these sales transactions we do not report the transaction on a gross basis in our statement of operations. These sales transactions relate to a contract that a Contract Packager has obtained with a government agency. The revenue is reported in a separate line in the statement of operations as “Product revenues net from Contract Packager”, and the gross sales are reduced by the cost of sales fees from our Contract Packager. | |
We also recognize revenue for a commission fee earned on shipments of generic pharmaceutical and OTC products by our pharmaceutical partner, which is a DEA and State-licensed to store and distribute controlled substances. Per our agreement with our pharmaceutical partner, the Company will earn a 12.5% commission on the gross margin of products shipped to independent pharmacies. | |
c. Research and Development - Expenditures for research and development associated with contract research and development provided by third parties are expensed, as incurred. The Company had charges of $0 and $5,555 for research and development expenses for the three months ended September 30, 2013 and 2012, respectively, and $0 and $31,968 for the nine months ended September 30, 2013 and 2012, respectively. | |
d. Accounts Receivable Trade, net - Accounts receivable are stated at estimated net realizable value net of the sales allowance expected through charge backs. Management provides for uncollectible amounts through a charge to earnings and a credit to an allowance for bad debts based on its assessment of the current status of individual accounts and historical collection information. Balances that are deemed uncollectible after management has used reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable. As of September 30, 2013 and December 31, 2012 no allowance for doubtful accounts has been recorded. | |
The Company entered into an accounts receivable factoring facility agreement in June 2012. As of December 31, 2012, gross receivables were $395,974 of which $141,725 was sold to a factor, and has been included in the liabilities section in the balance sheet. Gross accounts receivable was reduced by $105,443, to provide for an allowance for charge backs, for a net accounts receivable balance of $290,531. Chargeback reserve at September 30, 2013 was zero because we no longer have sales with McKesson. | |
e. Property and Equipment - Property and equipment are stated at cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets. Maintenance costs, which do not significantly extend the useful lives of the respective assets and repair costs are charged to operating expense as incurred. The assets purchased in 2012 have not been put into operations as of September 30, 2013, and, as a result, no depreciation was recorded in 2013 and 2012. | |
f. Receivable – Contract Packager - The Company has receivables from Marlex Pharmaceuticals, Inc. (Contract Packager), in the amount of $980,428 and $1,579,051 at September 30, 2013 and December 31, 2012, respectively. As of September 30, 2013, this receivable consists of receivable for PO financing, revenue earned for DLA sales and monthly payments per the settlement agreement (see Note 9). The Company had a receivable for in the amount of $1,210,999 which was fully reserved and expensed in second quarter 2013. | |
g. Customer, Product, and Supplier Concentrations – For the first four months of 2013 and the entire 2012 fiscal year we sold our products directly to a wholesale drug distributor who, in turn, supplies products to pharmacies, hospitals, governmental agencies, and physicians. The Company used one Contract Packager exclusively for all of its warehouse, customer service, distribution, and labeling services for the first four months of 2013 and entire 2012 fiscal year. In September 2013, the Company added a second supplier of products. | |
We have recently partnered with a group that represents over 700 pharmacy independent operations. We will order the goods from the manufacturers and have them shipped to our pharmaceutical partner, which is DEA and State-licensed to store and distribute controlled substances. The goods will be shipped to the pharmacies in the bottles as received by the manufacturer so that this will become a “pick-n-pack” operation. | |
h. Concentration in Cash -. We maintain cash at financial institutions and, at times, balances may exceed federally insured limits. We have never experienced any losses related to these balances. All of our non-interest bearing cash balances were fully insured at September 30, 2013 and December 31, 2012. | |
i. Income Taxes - The Company provides for income taxes using an asset and liability based approach for reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and the tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets to the amounts expected to be realized. The Company had a full valuation allowance of $1,278,000 and $597,591 against deferred tax assets as of September 30, 2013 and December 31, 2012, respectively. | |
The Company also complies with the provisions of Accounting for Uncertainty in Income Taxes. The accounting regulation prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. The Company classifies any assessment for interest and/or penalties as other expenses in the financial statements, if applicable. There were no uncertain tax positions at September 30, 2013 and December 31, 2012. | |
j. Derivative Financial Instruments Arrangements - Derivative financial instruments, consist of financial instruments or other contracts that contain a notional amount and one or more underlying (e.g. interest rate, security price or other variable), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. Further, derivative financial instruments are initially, and subsequently, measured at fair value and recorded as liabilities or, in rare instances, assets. The Company generally does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has entered into various types of financing arrangements to fund its business capital requirements, including convertible debt and other financial instruments indexed to the Company’s own stock. These contracts require careful evaluation to determine whether derivative features embedded in host contracts require bifurcation and fair value measurement or, in the case of freestanding derivatives (principally warrants) whether certain conditions for equity classification have been achieved. In instances where derivative financial instruments require liability classification, the Company is required to initially and subsequently measure such instruments at fair value. Accordingly, the Company adjusts the fair value of these derivative components at each reporting period through a charge to income until such time as the instruments acquire classification in stockholders’ deficit. | |
Derivative financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period. The Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective measuring fair values. In selecting the appropriate technique, management considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as free-standing warrants, the Company generally uses the Black-Scholes-Merton option valuation technique because it embodies all of the requisite assumptions (including trading volatility, dividend yield, estimated terms and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of our common stock, which has a high-historical volatility. Since derivative financial instruments are initially and subsequently carried at fair values, our income (loss) will reflect the volatility in these estimate and assumption changes. | |
k. Fair Value Measurements - The Company follows the provision of ASC No. 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 clarifies that fair value is an estimate of the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date) and provides for use of a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels: | |
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities. | |
Level 2: Input other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company. | |
Level 3: Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability. | |
An asset or liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Availability of observable inputs can vary and is affected by a variety of factors. | |
The Company uses judgment in determining the fair value of assets and liabilities, and level 3 assets and liabilities involve greater judgment than level 1 and level 2 assets and liabilities. | |
The carrying values of accounts receivable, inventory, accounts payable and accrued expenses, royalty payable, obligation due factor, and notes payable approximate their fair values due to their short-term maturities. The carrying value of the Company’s long-term debt approximates fair value due to the borrowing rates currently available to the Company for loans with similar terms. See note 11 for fair value of derivative liabilities. | |
l. Advertising Expenses - The Company expenses advertising costs as incurred. The Company incurred advertising expenses in the amount of $63,000 and $34,399 for the three month period ended September 30, 2013 and 2012, respectively, and $267,413 and $99,062 for the nine months ended September 30, 2013 and 2012, respectively. | |
m. Shipping and Handling Cost – The Company expenses all shipping and handling costs as incurred. These costs are included in cost of sales on the accompanying condensed financial statements. | |
n. Stock-Based Compensation – Compensation expense is recognized for the fair value of all share-based payments issued to employees. As of December 31, 2012 and September 30, 2013, the Company has not issued any employee stock options that would require calculating the fair value using a pricing model such as the Black-Scholes pricing model. | |
For non-employees, stock grants issued for services are valued at either the invoiced or contracted value of services provided, or the fair value of stock at the date the agreement is reached, whichever is more readily determinable. For stock options and warrants granted to non-employees the fair value at the grant date is used to value the expense. In calculating the estimated fair value of its stock options and warrants, the Company used a Black-Scholes pricing model which requires the consideration of the following seven variables for purposes of estimating fair value: | |
· the stock option or warrant exercise price, | |
· the expected term of the option or warrant, | |
· the grant date fair value of our common stock, which is issuable upon exercise of the option or warrant, | |
· the expected volatility of our common stock, | |
· expected dividends on our common stock (we do not anticipate paying dividends in the foreseeable future), | |
· the risk free interest rate for the expected option or warrant term, and | |
· the expected forfeiture rate. | |
o. Earnings (Loss) Per Share - Basic earnings (loss) per common share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock warrants, convertible notes payable and Series A convertible preferred shares. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive. | |
p. Reclassification - Certain reclassifications have been made to the 2012 financial statements to conform to the interim 2013 condensed financial statements presentation. These reclassifications had no effect on net loss or cash flows as previously reported. | |
q. Recent Accounting Pronouncements – Management does not believe that any recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. |
4_Accounts_Receivable_Trade_ne
4. Accounts Receivable Trade, net | 9 Months Ended |
Sep. 30, 2013 | |
Receivables [Abstract] | ' |
NOTE 4 - Accounts Receivable Trade, net | ' |
The Company may at certain times during the year sell qualified receivables to a factor (United Capital Funding). This agreement allows the Company to sell its qualified accounts receivable with recourse in exchange for advances of funds equivalent to 83% of the value of receivables, leaving 17% of the receivables as a reserve by the factor for potential non-payment of the Company’s receivables. The factoring facility is for a term of one year, which was renewed in May 2013 and is cancellable by either party upon one month’s written notice, which provides a factoring line of up to $1,000,000. As collateral for the repayment of advances for receivables sold, the factor has a priority security interest in all present and future assets and rights of the Company. The factor has required that the Company notify all customers that all payments must be made to a lock-box controlled by the factor. The factoring fee is 2.2% every thirty days or 26.4% annually. Factoring fees charged to interest expense for the three month period ended September 30, 2013 and 2012, were $0 and $15,762 respectively. For the nine months period ended September 30, 2013 and 2012 factoring fees charged to interest expense were $5,069 and $31,872, respectively. | |
As of September 30, 2013, there were no open receivables sold to a factor and gross receivable balance was $11,188. As of December 31, 2012, gross accounts receivables were $395,974 of which $141,725 were sold to the factor and have been included in the liabilities section of the condensed balance sheet. |
5_Sales_Impact_Due_To_Net_Basi
5. Sales Impact Due To Net Basis Accounting And Commissions Earned | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Business Combinations [Abstract] | ' | ||||||||
NOTE 5 - Sales Impact Due To Net Basis Accounting And Commissions Earned | ' | ||||||||
In September 2012, the Company announced that our Contract Packager, secured an 8-year, $79 million pharmaceutical distribution contract with the Office of Health Affairs, a branch of the U.S. Department of Homeland Security, in conjunction with the Defense Logistics Agency (DLA). On September 30, 2012, our Contract Packager began shipping its first order on this distribution contract with the DLA. | |||||||||
A Joint Operating Agreement with the Contract Packager as amended on September 6, 2013 (see Note 9) enables the Company to receive a percentage of the Contract Packager’s profit, as defined, net of financing charges and royalties. Since we are not deemed to be the principal in these sales transactions we do not report these sales transactions on a gross basis in our condensed statements of operations. The revenue is reported separately in the condensed statements of operations as revenues net, from Contract Packager. The gross sales and cost of sales from this DLA contacts were: | |||||||||
Three month sales as of the September 30, 2013 | Nine month sales as of September 30, 2013 | ||||||||
Sales from DLA contract | $ | 1,005,606 | $ | 4,269,931 | |||||
Cost on DLA, per agreement | 948,964 | 3,984,786 | |||||||
Product revenue net from contract packager | $ | 56,642 | $ | 285,144 | |||||
In August 2013, our pharmaceutical partner began shipping generic pharmaceutical and OTC products to independent pharmacies. For the three months ended September 30, 2013 our partner had sales revenues of $188,232 which generated a gross profit of $132,993. Under our joint operating agreement with our pharmaceutical partner, we received a 12.5% commission on the gross margin which generated commission revenue of $16,625. | |||||||||
6_Receivable_Loan_Receivable_A
6. Receivable, Loan Receivable And Other Assets - Contract Packager | 9 Months Ended | |
Sep. 30, 2013 | ||
Receivables [Abstract] | ' | |
NOTE 6. Receivable, Loan Receivable And Other Assets - Contract Packager | ' | |
Beginning in fiscal year 2011, the Company loaned money to its Contract Packager in an unsecured, non-interest bearing loan which has no stipulated repayment terms as the loan was made pursuant to an oral agreement. The outstanding balance at September 30, 2013 and December 31, 2012, was $717,503 and $743,503 respectively. On September 14, 2012 the Company entered into a letter of intent agreement to purchase the Contract Packager. Upon closing on the letter of intent agreement the loan receivable would be eliminated. Management had determined that the outstanding balance should be fully reserved as of December 31, 2012. This loan was written off in the quarter ending September 30, 2013 (see Note 9). | ||
As of September 30, 2013, the outstanding receivable balance is $980,428 which consists of a receivable for PO financing, revenue earned on DLA sales and monthly payments (see Notes 5 and 15). | ||
The Company also had outstanding receivables from its Contract Packager which consist of receivables for DLA sales in the amount of $459,408 and inventory that was prepaid in the amount of $751,591 for a total amount of $1,210,999 as of September 30, 2013. Management has also determined that the outstanding balance should be fully reserved as of June 30, 2013, (see Note 14) which was written off in the quarter ending September 30, 2013 (see Note 9). | ||
The Company also had a $200,000 deposit in other assets as of December 31, 2012 which it considered a stand still fee and was to be applied towards future royalty payments. In March of 2013, the Company reserved against this deposit since there is uncertainty concerning the royalty agreement with its Contract Packager, as this amount may never be applied to future royalty payments or otherwise recovered (see Note 14). This deposit was written off in the quarter ending September 30, 2013 (see Note 9). |
7_Other_Receivable_Pharmaceuti
7. Other Receivable - Pharmaceutical Partner | 9 Months Ended |
Sep. 30, 2013 | |
Notes to Financial Statements | ' |
Note 7 - Other Receivable - Pharmaceutical Partner | ' |
During the three months period ended September 30, 2013, the Company loaned money to its pharmaceutical partner pursuant to an oral agreement. Terms agreed upon are that balances would be paid within 30 days and the interest rate charge are the same as Development 72, LLC (a related party) with an interest rate of 0.6% per 10 day period, 1.8% monthly and 21.6% annually. The outstanding balance at September 30, 2013 and December 31, 2012, was $42,449 and $0 respectively. |
8_Prepaid_Expenses_And_Other_C
8. Prepaid Expenses And Other Current Assets | 9 Months Ended |
Sep. 30, 2013 | |
Notes to Financial Statements | ' |
Note 8 - Prepaid Expenses And Other Current Assets | ' |
The balance at September 30, 2013, and December 31, 2012, was $243,236 and $198,820 respectively. As of September 30, 2013, they consist of $154,000 of non-cash payments for the issuance of 350,000 shares of our common stock for a potential future services (see Note 14), approximately $23,000 for insurance premiums, approximately $45,000 in non-cash payments of stock and warrants issued in prior years that are being amortized over a 3 to 5 year period, and approximately $21,000 in travel and other misc. expenses. As of December 31, 2012, they consist of approximately $108,000 from the issuance of common stock for services to be provided, $24,000, for insurance, and approximately $67,000 for debt issue costs associated with notes obtained in fiscal year 2012. |
9_Cancellation_Of_Material_Def
9. Cancellation Of Material Definitive Agreement - Acquisition Of Contract Packager | 9 Months Ended |
Sep. 30, 2013 | |
Notes to Financial Statements | ' |
Note 9 - Cancellation Of Material Definitive Agreement - Acquisition Of Contract Packager | ' |
On September 6, 2013, the Company and Marlex Pharmaceuticals, Inc, its former Contract Packager, pursuant to which the Company and its former Contract Packager resolved various disagreements that had arisen between the parties on various projects covered by written agreements between the Company and its former Contract Packager, namely (i) the Contract Packager’s agreement with the Office of Health Affairs, a branch of the U.S. Department of Homeland Security, in conjunction with the Defense Logistics Agency (DLA), (ii) the parties agreement with respect to the production and packaging of the Company’s RapiMed products and (iii) shares of the Company’s stock issued to the principals of the Contract Packager for consulting services, entered into a settlement agreement. The settlement agreement provided mutual releases, continued the DLA arrangement under modified terms, as well as a partial reimbursement over fifteen months for previous amounts due the Company (see Note 6). | |
This agreement provided that the Company will provide Marlex with financing through a related party, Development 72 LLC, for the continuance of its pharmaceutical distribution contract with the DLA and for the Contract Packager to make 15 monthly payments to the Company with respect to prior shipments under DLA contract (which had had stopped in May 2013 due to a dispute but have resumed in September 2013). The Company’s percentage of the profits under the DLA contract had been revised in terms of the rate and the number of bottles of product sold to the DLA for which the Company would receive payments. | |
To protect our position with respect to the RapiMed product we also terminated the Rapid Melt tablet agreement with the Contract Packager. All development costs through the date of this cancellation agreement have previously been expensed and paid. The Company subsequently entered into a manufacturing and supply contract directly with the manufacturer of this technology (see Note 14). | |
The principals of the Contract Packager have returned 500,000 shares of common stock of the Company which were previously valued at $50,000, which they had received under consulting agreements and another 400,000 shares issued to them that would be held as security for the payments due to the Company under this September agreement. A portion of the 400,000 shares would be released in equal amounts on a monthly basis as free trading shares to the principals of the Contract Packager. In September 2013, the Company retired the 500,000 shares and reversed the consulting expense previously incurred through additional paid in capital. | |
10_Debt
10. Debt | 9 Months Ended | |||||||||||||||
Sep. 30, 2013 | ||||||||||||||||
Debt Disclosure [Abstract] | ' | |||||||||||||||
NOTE 10. Debt | ' | |||||||||||||||
Debt consists of the following: | ||||||||||||||||
30-Sep-13 | 31-Dec-12 | |||||||||||||||
Convertible note - Vista | 1 | – | – | |||||||||||||
Convertible note - JMJ | 2 | a | 6,453 | – | ||||||||||||
Convertible note - Tonaquint | 3 | b | 46,055 | – | ||||||||||||
Convertible note - Gel | 4 | c | 3,670 | – | ||||||||||||
Convertible note - ILIAD | 5 | – | – | |||||||||||||
Convertible note - Auctus | 6 | x | – | 23,149 | ||||||||||||
Convertible note - Asher | 7 | y | – | 41,683 | ||||||||||||
Convertible note | 8 | 290,000 | 290,000 | |||||||||||||
Convertible note | 9 | – | 14,700 | |||||||||||||
Convertible note | 10 | – | 114,700 | |||||||||||||
Convertible note | 11 | 114,700 | 300,000 | |||||||||||||
Convertible note | 12 | 115,000 | – | |||||||||||||
Convertible note | 13 | 115,000 | – | |||||||||||||
Convertible note | 14 | 85,300 | – | |||||||||||||
Convertible note - Continental | 15 | – | – | |||||||||||||
Convertible note - IBC | 16 | d | 18,986 | – | ||||||||||||
Convertible note - JMJ | 17 | e | 12,301 | – | ||||||||||||
Convertible note - JMJ | 18 | f | 10,582 | – | ||||||||||||
Convertible note - JMJ | 19 | g | 8,356 | – | ||||||||||||
Convertible note - Vista | 20 | h | 10,993 | – | ||||||||||||
Convertible note - Gel | 21 | i | 16,712 | – | ||||||||||||
Convertible note - Group Holdings | 22 | j | 8,959 | – | ||||||||||||
Convertible note - Redwood | 23 | k | 8,342 | – | ||||||||||||
Convertible note - Caesar Capital | 24 | l | 14,815 | – | ||||||||||||
Convertible note - JSJ Investments | 25 | m | 12,500 | – | ||||||||||||
Convertible note - Vista | 26 | n | 6,856 | – | ||||||||||||
Convertible note - Beaufort Ventures | 27 | o | 22,404 | – | ||||||||||||
Convertible note - Iconic Holdings | 28 | p | 5,538 | – | ||||||||||||
Convertible note - Caesar Capital | 29 | q | 10,616 | – | ||||||||||||
Convertible note - ARRG Corp | 30 | r | 10,788 | – | ||||||||||||
Convertible note - Iconic Holdings | 31 | s | 7,442 | – | ||||||||||||
Convertible note - Typenex Co. | 32 | t | 17,743 | – | ||||||||||||
Convertible note - Beaufort Ventures | 33 | u | 11,202 | – | ||||||||||||
Convertible note - Hyde Park LLC | 34 | v | 1,315 | – | ||||||||||||
Convertible note - Vista | 35 | w | 857 | – | ||||||||||||
Convertible notes payable | 993,485 | 784,232 | ||||||||||||||
Less current maturities | (975,742 | ) | (64,832 | ) | ||||||||||||
Long-term debt | 17,743 | 719,400 | ||||||||||||||
Convertible note - Related party | 36 | 80,000 | 80,000 | |||||||||||||
Convertible note - Related party | 37 | 50,000 | 50,000 | |||||||||||||
Convertible note - Related party | 130,000 | 130,000 | ||||||||||||||
Term loan - Related party | 38 | 381,770 | 464,837 | |||||||||||||
Less current maturities | (119,814 | ) | (112,021 | ) | ||||||||||||
Long-term debt | 261,956 | 352,816 | ||||||||||||||
Line-of-Credit | 39 | – | 40,059 | |||||||||||||
Total Loan and notes payable | 1,505,255 | 1,419,128 | ||||||||||||||
Less current maturities | (1,225,556 | ) | (216,912 | ) | ||||||||||||
Long-term debt | 279,699 | 1,202,216 | ||||||||||||||
Value of discounts : | 30-Sep-13 | 31-Dec-12 | ||||||||||||||
JMJ | a | 6,747 | ||||||||||||||
Tonaquint | b | 25,035 | ||||||||||||||
GEL | c | 1,330 | ||||||||||||||
IBC | d | 26,014 | ||||||||||||||
JMJ | e | 12,699 | ||||||||||||||
JMJ | f | 16,918 | ||||||||||||||
JMJ | g | 16,644 | ||||||||||||||
Vista | h | 16,507 | ||||||||||||||
GEL | i | 33,288 | ||||||||||||||
Group Holdings | j | 21,041 | ||||||||||||||
Redwood | k | 16,658 | ||||||||||||||
Caesar Capital | l | 37,685 | ||||||||||||||
JSJ Investments | m | 12,500 | ||||||||||||||
Vista | n | 20,644 | ||||||||||||||
Beaufort Ventures | o | 27,596 | ||||||||||||||
Iconic Holdings | p | 20,712 | ||||||||||||||
Caesar Capital | q | 51,884 | ||||||||||||||
ARRG Corp | r | 51,712 | ||||||||||||||
Iconic Holdings | s | 43,808 | ||||||||||||||
Typenex | t | 209,757 | ||||||||||||||
Beaufort Ventures | u | 38,798 | ||||||||||||||
Hyde Park LLC | v | 38,685 | ||||||||||||||
Vista | w | 51,283 | ||||||||||||||
Auctus | x | 29,601 | ||||||||||||||
Asher | y | 21,317 | ||||||||||||||
797,945 | 50,918 | |||||||||||||||
(1) On January 21, 2013, the Company entered into a securities purchase agreement with Vista Capital Investments LLC (“Vista”) pursuant to which Vista purchased from the Company a 10% convertible note. The Company received $22,500 in cash for a 10% convertible note payable with a principal amount of $27,500, which note included a 10% discount, and we paid a $2,500 finder’s fee. The accrued interest and principal are due on the maturity date of January 21, 2014. After 90 days from issuance there is a pre-payment fee of 150% of the principal amount outstanding and interest due. The conversion price is the lesser of (a) $0.25 or (b) the amount equal to 60% of the lowest trading price of the Company’s common stock at the close of trading during the 20 trading day period prior to the date of the notice of conversion. Collateral for this loan also includes 3,000,000 shares of the Company’s common stock. | ||||||||||||||||
On July 11, 2013 Vista converted $16,180 of principal and outstanding interest into 179,778 shares of our common stock valued at $174,384 and on June 20, 2013, Vista converted $14,400 of principal into 200,000 shares of our common stock valued at $68,000. As of September 30, 2013 this note was completely converted and the Company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $20,367 during the nine months ended September 30, 2013. | ||||||||||||||||
(2) On January 31, 2013, the Company entered into a securities purchase agreement with JMJ Financial (“JMJ”) pursuant to which JMJ purchased a 12% convertible note. The Company received $67,500 in cash for a 12% convertible note payable with a principal amount of $82,500, which note included a 10% discount and we paid a $7,500 finder’s fee. The accrued interest and principal are due on the maturity date of January 31, 2014. The Company may repay this note at any time on or before 90 days from the issuance date and at such time the Company shall not owe or pay any interest on the note. The conversion price is the lesser of (a) $0.21 or (b) the amount equal to 60% of the lowest trading price of the Company’s common stock at the close of trading during the 25 trading day period prior to the date of the notice of conversion. Collateral for this loan also includes 9,000,000 shares of the Company’s common stock. | ||||||||||||||||
During the three months period end September 30, 2013, JMJ converted $69,300 of principal into 500,000 shares of our common stock valued at $149,000. In connection with the partial conversion the Company recorded a gain on extinguishment of $47,149 after taking into consideration the carrying value of the note and the corresponding embedded derivative liability related to the note on the conversion date. As of September 30, 2013 the outstanding principal is $13,200. Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative at September 30, 2013 is $18,704. The Company would have been required to issue 183,333 shares of common stock if JMJ converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 18% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(3) On February 18, 2013, the Company entered into a securities purchase agreement with Tonaquint, Inc (“Tonaquint”) pursuant to which Tonaquint purchased an 8% convertible note. The Company received $67,500 in cash for an 8% convertible note payable with a principal amount of $92,500. The note included a 10% discount, we paid a $7,500 finder’s fee and we agreed to pay $10,000 to cover the investor’s legal fees. The accrued interest and principal are due on the maturity date of December 18, 2013. The Company can prepay the note at any time before the maturity date but must pay a 135% of the principal amount outstanding and interest due. The conversion price is equal to 65% of the average of the three lowest trading prices of the Company’s common stock at the close of trading during the 20 trading day period prior to the date of the notice of conversion. | ||||||||||||||||
During the month of September 2013, Tonaquint converted $21,410 of principal into 251,000 shares of our common stock valued at $48,692. In connection with the partial conversion the Company recorded a gain on extinguishment of $14,263 after taking into consideration the carrying value of the note and the corresponding embedded derivative liability related to the note on the conversion date. As of September 30, 2013 the outstanding principal balance was $71,090. Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative at September 30, 2013 is $48,245. The Company would have been required to issue 698,101 shares of common stock if Tonaquint converted on September 30, 2013 | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 1.83% per month (or 22% per annum), compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(4) On March 20, 2013, the Company entered into a securities purchase agreement with GEL Properties (“GEL”) pursuant to which GEL purchased a 6% convertible note. The Company received $17,600 in cash for a 6% convertible note payable with a principal amount of $20,000. The note did not include a discount, but $2,400 was paid directly to a third party on the Company’s behalf. The accrued interest and principal are due on the maturity date of March 20, 2014. There is a prepayment charge of 150% of the principal amount outstanding and interest due. The conversion price is equal to 70% of the lowest trading price of the Company’s common stock at the close of trading during the 5 trading day period prior to the date of the notice of conversion. | ||||||||||||||||
On September 24, 2013, GEL converted $15,000 of principal into 150,000 shares of our common stock valued at $24,000. In connection with the partial conversion the Company recorded a gain on extinguishment of $8,827 after taking into consideration the carrying value of the note and the corresponding embedded derivative liability related to the note on the conversion date. As of September 30, 2013 the outstanding principal balance is $5,000. Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative at September 30, 2013 is $6,020. The Company would have been required to issue 59,524 shares of common stock if GEL converted on September 30, 2013 | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 24% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(5) On April 8, 2013, the Company converted the balances from loans of a creditor into a new $131,700 10% convertible note payable. This new note has a 10% debt discount of $11,470, incurred professional fees of $5,000 increasing the note balance to $131,700. The accrued interest and principal are due on the maturity date of September 8, 2013. There is a no prepayment charge. The conversion price is equal to 65% of the average of the three lowest trading price of the Company’s common stock of trading during the 20 trading day period prior to the date of the notice of conversion. | ||||||||||||||||
During three months ended June 30, 2013 the creditor converted $80,982 of the note’s principal note into 607,798 shares of the Company’s common stock valued at $200,749. In connection with the conversion of debt the Company recorded a loss on extinguishment of $44,126. | ||||||||||||||||
On July 11, 2013, the holders of the note converted $26,234 of principal into 307,550 shares of our common stock valued at $298,323. In connection with the partial conversion the Company recorded a gain on extinguishment of $16,561 after taking into consideration the carrying value of the note and the corresponding embedded derivative liability related to the note on the conversion date. On August 5, the Company paid $26,380 to retire this note, after taking into consideration the carrying value of the note and corresponding derivative liability related to the note on the conversion date the Company recorded a gain on extinguishment of $147,087. | ||||||||||||||||
(6) On October 22, 2012, the Company entered into a securities purchase agreement with Auctus Private Equity Fund (“Auctus”) pursuant to which Auctus purchased from the Company an 8% convertible note in the principal amount of $52,750. The Company received gross proceeds of $50,000 from the sale of this note of which $2,750 was used to pay the investor’s legal fees recorded as a discount. | ||||||||||||||||
On or after April 20, 2013 and until the maturity date or the full payment of the note (whichever is later), the principal and all accrued but unpaid interest and any other amounts due under the note are convertible into shares of the Company’s common stock. The conversion price is at a 35% discount to the average of the five lowest trading prices of the Company’s common stock at the close of trading during the 10 trading day period prior to the date Auctus delivers its notice of conversion. Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares management had recorded the associated embedded derivative as a discount. | ||||||||||||||||
The note was due on July 22, 2013 and accrued interest at the rate of 8% per annum. The note was subject a prepayment penalty of $24,054 plus the sum of the principal, accrued but unpaid interest. On April 19, 2013, the Company prepaid the sum of $76,804 to the holder of this $52,750 convertible note payable. The Company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $51,915. | ||||||||||||||||
(7) On August 6, 2012, the Company entered into a securities purchase agreement with Asher Enterprises Inc. (“Asher”) pursuant to which Asher purchased from the Company an 8% convertible note in the principal amount of $63,000 (the “Note”). The Company received net proceeds of $60,000 from the sale of the Note (and $3,000 was used to pay the legal fees). | ||||||||||||||||
Because the conversion price was variable and represents a 42% discount to the average of the five lowest trading prices of the Company’s common stock at the close of trading during the 10 trading day period prior to the date Asher delivers its notice of conversion the Company bifurcated the embedded feature and recorded a derivative liability. | ||||||||||||||||
The note was due on May 8, 2013 and accrued interest at the rate of 8% per annum. The note was subject a prepayment penalty of $27,321 plus the sum of the principal, accrued but unpaid interest. On February 1, 2013, the Company prepaid the debt at a penalty and relieved the derivative for $90,561. The extinguishment of this debt resulted in a gain of $51,255. | ||||||||||||||||
(8) On May 7, 2012, the Company received $320,000 in cash for one convertible promissory note payable. In September 2012 the Company prepaid $30,000 of the principal and by mutual consent the holder of the note and the Company agreed to reduce the monthly interest expense to 1% from 2%, in cash, or common stock of the Company at $0.25 per share, at the option of the lender effective July 2012. The maturity date of this note was also extended two months until January 7, 2014. There is no required principal payment on the note until maturity. The note can be extended by mutual consent of the lender and the Company. Our Contract Packager also co-signed this note. In addition, on December 18, 2012, by mutual consent with the Company the lender agreed to reduce the royalty payment to 1.8% on the first $10 million of sales of a generic prescription drug under distribution contracts with Federal government agencies and 0.09% on the next $15 million of such sales. Payments for royalties will be paid quarterly commencing December 31, 2012, and as of December 31, 2012, the Company had accrued $42,000 in royalties. In first quarter 2013 the Company issued 455,556 shares of its common stock as payment for the royalty expense and the Company recorded an expense of $70,000 in the quarter and in the second quarter 2013 the Company issued another 125,628 shares of its common stock as payment for the royalty expense, for the six months ended June 30 2013 the company has recorded royalty expense of $132,730. Collateral for this loan also includes 1,400,000 shares of the Company’s common stock. Interest expense for the three months and nine months ended September 30, 2013 and 2012 was $8,581 and $28,800 and $25,742 and $47,880, respectively. The balance of this 1% note at September 30, 2013 is $290,000. | ||||||||||||||||
(9) On March 12, 2012 the Company prepaid the sum of $85,300 to the holder of a $100,000 convertible note payable, leaving a balance of $14,700. By mutual consent the maturity date was extended from November 23, 2012 to January, 30, 2014 and the interest rate was decreased from 2% per month to 1% per month. The principal portion of this convertible notes can be converted into common stock at any time at the rate of $.25 per share at the option of the lender. On April 8 2013 the creditor sold the remaining balance to another creditor for $14,700 This note was converted into stock during the three month period ended June 30, 2013, see convertible note 5. | ||||||||||||||||
(10) On March 12, 2012 the Company prepaid the sum of $85,300 to the holder of a $200,000 convertible note payable, leaving a balance of $114,700. By mutual consent the maturity date was extend from November 23, 2012 to January 30, 2014 and the interest rate was decreased from 2% per month to 1% per month. The principal portion of this convertible note was convertible into common stock at any time at the rate of $.25 per share at the option of the lender. On April 8, 2013, the original creditor sold the balance of this note to another creditor and the Company converted the balance of this $114,700 12% convertible note payable to a 8% convertible note payable with a principal amount of $114,700. The accrued interest and principal are due on the maturity date of April 15, 2014. The conversion price is equal to 60% of the average of the lowest trading price of the Company’s common stock of trading during the 10 trading day period prior to the date of the notice of conversion. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares which we have deemed to be an instrument which requires us to value an embedded derivative. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note, the debt discount was valued at $114,700 and the Company expensed the difference of $40,224 to interest expense. | ||||||||||||||||
During the three month period ended June 30, 2013 the creditor converted $97,200 of the note’s principal note into 909,856 shares of the Company’s common stock and on June 4, 2013 the company paid the creditor $22,030 to extinguish the remaining balance. The extinguishment of debt resulted in a gain on extinguishment of $17,478. | ||||||||||||||||
(11) On March 12, 2012 the holder of two other convertible notes, totaling $300,000, agreed to extend the maturity dates of these notes to January 30, 2014 and agreed to reduce the interest rate from 2% per month to 1% per month. The principal portion of this convertible notes can be converted into common stock at any time at the rate of $.25 per share at the option of the lender. On March 20, 2013 the Company converted $40,000 of a $100,000 1% per month convertible note into a new $40,000 6% annual convertible note with a variable conversion rate resulting in a loss on extinguishment of $2,422, see (6) above for details. On April 8 2013 the Company converted $60,000 of a $260,000 1% per month convertible note into a new $60,000 (part of a $131,700 note) 10% annual convertible note with a variable conversion rate see (5) above for details. Also on April 18, 2013 $85,300 of the remaining $200,000 1% per monthly convertible note with a fixed conversion rate was converted into a new $85,300 with a variable conversion rate see note (11-1) below. The balance of this 1% fixed rate note at September 30, 2013 is $114,700. | ||||||||||||||||
(11-1) On April 18, 2013, the Company converted $85,300 balance of a 12% convertible note payable to a 12% convertible note payable with a principal amount of $114,700. The note did not include a discount and the accrued interest and principal are due on the maturity date of January 30, 2014. There is a no prepayment charge. The conversion price is equal to 60% of the of the lowest closing trading price of the Company’s common stock of trading during the 10 trading day period prior to the date of the notice of conversion. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares which we have deemed to be an instrument which requires us to value an embedded derivative. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was recorded at $85,300 and the Company expensed the difference of $14,753 to interest expense. | ||||||||||||||||
During the three month period end June 30, 2013 the creditor converted note’s entire principal and interest for 1,114,419 shares of the Company’s common stock valued at $185,001. The Company extinguished the debt and the embedded derivative resulting in a gain on extinguishment of $34,087. | ||||||||||||||||
(12) On April 8, 2013 the Company entered into a securities purchase agreement in which the Company received $103,200 in cash for a 12% convertible note payable with a principal balance of $115,000. The note did not include a discount but we did pay an $11,800 fee for services. The interest shall be paid monthly in the amount of $1,115. The principal portion of this convertible note can be converted into common stock at any time at the rate of $.18 per share at the option of the lender. The Company incurred interest expense for the three months and nine months ended September 30, 2013, $3,450 and $6,588, respectively. The balance of this note at September 30, 2013 is $115,000. | ||||||||||||||||
(13) On April 8, 2013 the Company entered into a securities purchase agreement in which the Company received $114,700 in cash for a 12% convertible note payable with a principal balance of $115,000. The note did not include a discount and the interest shall be paid monthly in the amount of $1,115. The principal portion of this convertible note can be converted into common stock at any time at the rate of $.18 per share at the option of the lender. The Company incurred interest expense for the three months and nine months ended September 30, 2013, $3,450 and $6,588, respectively. The balance of this note at September 30, 2013 is $115,000. | ||||||||||||||||
(14) On April 29, 2013 the Company entered into a securities purchase agreement in which the Company received $85,300 in cash for a 12% convertible note payable with a principal balance of $85,300. The note did not include a discount and the interest shall be paid monthly in the amount of $850. The principal portion of this convertible note can be converted into common stock at any time at the rate of $.18 per share at the option of the lender. The Company incurred interest expense for the three months and nine months ended September 30, 2013, $2,550 and $4,289, respectively. The balance of this note at September 30, 2013 is $85,300. | ||||||||||||||||
(15) On April 8, 2013, the Company entered into a securities purchase agreement with Continental Equities, LLC (“Continental”) pursuant to which Continental purchased from the Company a 12% convertible note. The Company received $28,200 in cash for a 12% convertible note payable with a principal amount of $33,000. The note did not include a discount, but we did pay a $4,800 finder’s fee. The accrued interest and principal are due on the maturity date of April 15, 2014. The conversion price is equal to a 40% discount to the average of the three lowest trading prices of the Company’s common stock at the close of trading during the 10 trading day period prior the date of the notice of conversion. There is a prepayment charge of 140% of the principal amount at any time 90 days of the effective date and 150% of the principal amount outstanding and interest due at any time 91 days until 179 days and no rights to prepayment after 180 days. Collateral for this loan also includes 3,000,000 shares of the Company’s common stock. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 161.4% to 166.5%, risk-free interest rate of .12% and expected life of 12 and 10 months. The fair value of the derivative at the date issued amounted to $44,549. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $33,000 and the Company expensed the difference of $11,549 to interest expense. | ||||||||||||||||
On September 24, 2013, Continental received payment for extinguishment of this note from a third party in the amount of $52,140. The Company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $55,264 and included a prepayment fee of $17,380. The Company issued a new convertible note to the third party see note 35 below for details. | ||||||||||||||||
(16) On April 29, 2013, the Company entered into a securities purchase agreement with IBC Funds, LLC (“IBC”) pursuant to which IBC purchased from the Company a 10% convertible note. The Company received $45,000 in cash for a 12% convertible note payable with a principal amount of $45,000. The accrued interest and principal are due on the maturity date of April 29, 2014. The conversion price is equal to the lesser of $0.25 or a 40% discount to the average of the three lowest trading prices of the Company’s common stock at the close of trading during the 10 trading day period prior the date of the notice of conversion. There is a prepayment charge of 25% of the principal amount at any time 30 days of the effective date and 150% of the principal amount outstanding and interest due at any time 31 days until 179 days and 200% any time 180 days after the effective date. Collateral for this loan also includes 2,000,000 shares of the Company’s common stock. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 157.2% to 165.1%, risk-free interest rate of .12% and expected life of 12 and 10 months. The fair value of the derivative at the date issued amounted to $50,505 and was revalued at September 30, 2013 to be $50,465. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $45,000 and the Company expensed the difference of $5,505 to interest expense. | ||||||||||||||||
The Company would have been required to issue 500,000 shares of common stock if IBC converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. The default payment shall be 125% of the outstanding principal, plus accrued but unpaid interest but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(17) On April 24, 2013, the Company entered into a securities purchase agreement with JMJ Financial (“JMJ”) pursuant to which JMJ purchased a 12% convertible note. The Company received $22,500 in cash for a 12% convertible note payable with a principal amount of $25,000, which note included a 10% discount. The accrued interest and principal are due on the maturity date of April 24, 2014. The Company may repay this note at any time on or before 90 days from the issuance date and at such time the Company shall not owe or pay any interest on the note. The conversion price is the lesser of (a) $0.21 or (b) the amount equal to 60% of the lowest trading price of the Company’s common stock at the close of trading during the 25 trading day period prior to the date of the notice of conversion. Collateral for this loan also includes 9,000,000 shares of the Company’s common stock. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 158.2% to 166.5%, risk-free interest rate of .12% and expected life of 12 and 10 months. The fair value of the derivative at the date issued amounted to $41,093 and was revalued at September 30, 2013 to be $37,143. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $25,000 and the Company expensed the difference of $16,093 to interest expense. | ||||||||||||||||
The Company would have been required to issue 347,222 shares of common stock if JMJ converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 18% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(18) On June 4, 2013, the Company entered into a securities purchase agreement with JMJ Financial (“JMJ”) pursuant to which JMJ purchased a 12% convertible note. The Company received $25,000 in cash for a 12% convertible note payable with a principal amount of $27,500, which note included a 10% discount. The accrued interest and principal are due on the maturity date of June 4, 2014. The Company may repay this note at any time on or before 90 days from the issuance date and at such time the Company shall not owe or pay any interest on the note. The conversion price is the lesser of (a) $0.21 or (b) the amount equal to 60% of the lowest trading price of the Company’s common stock at the close of trading during the 25 trading day period prior to the date of the notice of conversion. Collateral for this loan also includes 9,000,000 shares of the Company’s common stock. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 161.9% to 163.5%, risk-free interest rate of .12% and expected life of 12 and 11 months. The fair value of the derivative at the date issued amounted to $61,464 and was revalued at September 30, 2013 to be $41,730. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $27,500 and the Company expensed the difference of $33,964 to interest expense. The Company would have been required to issue 381,944 shares of common stock if JMJ converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 18% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(19) On June 27, 2013, the Company entered into a securities purchase agreement with JMJ Financial (“JMJ”) pursuant to which JMJ purchased a 12% convertible note. The Company received $22,500 in cash for a 12% convertible note payable with a principal amount of $25,000, which note included a 10% discount. The accrued interest and principal are due on the maturity date of June 27, 2014. The Company may repay this note at any time on or before 90 days from the issuance date and at such time the Company shall not owe or pay any interest on the note. The conversion price is the lesser of (a) $0.21 or (b) the amount equal to 60% of the lowest trading price of the Company’s common stock at the close of trading during the 25 trading day period prior to the date of the notice of conversion. Collateral for this loan also includes 9,000,000 shares of the Company’s common stock. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 163.8% to 163.5%, risk-free interest rate of .12% and expected life of 12 months. The fair value of the derivative at the date issued amounted to $143,473 and was revalued at September 30, 2013 to be $38,338. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $25,000 and the Company expensed the difference of $118,473 to interest expense. The Company would have been required to issue 347,222 shares of common stock if JMJ converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 18% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(20) On May 29, 2013, the Company entered into a securities purchase agreement with Vista Capital Investments LLC (“Vista”) pursuant to which Vista purchased from the Company a 10% convertible note. The Company received $25,000 in cash for a 10% convertible note payable with a principal amount of $27,500, which note included a 10% discount. The accrued interest and principal are due on the maturity date of May 29, 2014. After 90 days from issuance there is a pre-payment fee of 150% of the principal amount outstanding and interest due. The conversion price is the lesser of (a) $0.25 or (b) the amount equal to 60% of the lowest trading price of the Company’s common stock at the close of trading during the 20 trading day period prior to the date of the notice of conversion. Collateral for this loan also includes 3,000,000 shares of the Company’s common stock. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 162.3% to 163.6%, risk-free interest rate of .12% and expected life of 12 and 11 months. The fair value of the derivative at the date issued amounted to $49,987 and was revalued at September 30, 2013 to be $41,503. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $27,500 and the Company expensed the difference of $22,487 to interest expense. | ||||||||||||||||
The Company would have been required to issue 381,944 shares of common stock if Vista converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 10% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(21) On May 31, 2013, the Company entered into a securities purchase agreement with GEL, Properties, LLC (“GEL”) pursuant to which GEL purchased from the Company a 6% convertible note. The Company received $42,500 in cash for a 6% convertible note payable with a principal amount of $50,000. We did pay $7,500 for professional fees. The accrued interest and principal are due on the maturity date of May 14, 2014. The conversion price is equal to a 30% discount to the lowest closing trading prices of the Company’s common stock at the close of trading during the 5 trading day period prior the date of the notice of conversion. The conversion price may be adjusted downward if, within 3 business days of the transmittal of the notice, the Company’s common stock has a closing bid which is 5% or lower than that set forth in the notice of conversion. There is a prepayment charge of 150% of the principal amount and accrued interest with a 5 day written notification. Collateral for this loan also includes 2,060,000 shares of the Company’s common stock. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 161.6% to 163.5%, risk-free interest rate of .12% and expected life of 12 to 11 months. The fair value of the derivative at the date issued amounted to $46,683 and was revalued at September 30, 2013 to be $44,337. The debt discount associated with this derivative is being amortized over the life of the note. | ||||||||||||||||
The Company would have been required to issue 455,927 shares of common stock if GEL converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. . This note shall thereafter accrue interest at the rate of 24% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(22) On June 13, 2013, the Company entered into a securities purchase agreement with Group 10 Holdings, LLC (“Holdings”) pursuant to which Holdings purchased from the Company a 12% convertible note. The Company received $30,000 in cash for a 12% convertible note payable with a principal amount of $30,000. The accrued interest and principal are due on the maturity date of June 14, 2014. The conversion price is equal to a 45% discount to the lowest closing trading prices of the Company’s common stock at the close of trading during the 20 trading day period prior the date of the notice of conversion. There is a prepayment charge of 125% of the principal amount at any time 30 days of the effective date and 150% of the principal amount outstanding and interest due at any time 31 days until 179 days and 200% any time after 180 days. Collateral for this loan also includes 1,000,000 shares of the Company’s common stock. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 163.6% to 163.8%, risk-free interest rate of .12% and expected life of 12 months. The fair value of the derivative at the date issued amounted to $62,928 and was revalued at September 30, 2013 to be $38,650. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $30,000 and the Company expensed the difference of $32,928 to interest expense. | ||||||||||||||||
The Company would have been required to issue 363,636 shares of common stock if Holdings converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 125% of the outstanding principal and accrued interest, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(23) On June 13, 2013, the Company entered into a securities purchase agreement with Redwood Management, LLC (“Redwood”) pursuant to which Redwood purchased from the Company a 10% convertible note. The Company received $23,750 in cash for a 10% convertible note payable with a principal amount of $25,000. The note included a 5% discount of $1,250. The accrued interest and principal are due on the maturity date of December 10, 2013. The conversion price is equal to a 45% discount to the lowest trading prices of the Company’s common stock of trading market during the 10 trading day period prior the date of the notice of conversion. There is a prepayment charge of 130% of the principal amount, along with accrued interest at any time upon seven days written notice to the holder. Collateral for this loan also includes 1,000,000 shares of the Company’s common stock. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 160.9% to 154.9%, risk-free interest rate of .12% and expected life of 6 and 5 months. The fair value of the derivative at the date issued amounted to $47,539 and was revalued at September 30, 2013 to be $42,394. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $25,000 and the Company expensed the difference of $22,539 to interest expense. The Company would have been required to issue 378,788 shares of common stock if Redwood converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 120% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(24) On June 17, 2013, the Company entered into a securities purchase agreement with Caesar Capital Group, LLC (“Caesar”) pursuant to which Caesar purchased from the Company a 8% convertible note. The Company received $50,000 in cash for a 8% convertible note payable with a principal amount of $52,500. We did pay a $2,500 finder’s fee. The accrued interest and principal are due on the maturity date of December 17, 2013. The conversion price is equal to the lesser of $.18 per share or a 40% discount to the average of the three lowest trading prices of the Company’s common stock at the close of trading during the 10 trading day period prior the date of the notice of conversion. There is a prepayment charge of 120% of the principal amount at any time 90 days of the effective date and 130% of the principal amount outstanding and interest due at any time 91 days until 179 days and no rights to prepayment after 180 days. Collateral for this loan also includes 2,000,000 shares of the Company’s common stock. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 159.3% risk-free interest rate of .12% and expected life of 6 months. The fair value of the derivative at the date issued amounted to $77,406 and was revalued at September 30, 2013 to be $40,825. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $50,000 and the Company expensed the difference of $24,906 to interest expense. The Company would have been required to issue 558,511 shares of common stock if Caesar converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 28% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(25) On July 1, 2013, the Company entered into a securities purchase agreement with JSJ Investments (“JSJ”) pursuant to which JSJ purchased from the Company a 10% convertible note. The Company received $25,000 in cash for a 10% convertible note payable with a principal amount of $25,000. The accrued interest and principal are due on the maturity date of December 31, 2013. The conversion price is equal to a 40% discount to the average of the three lowest trading prices of the Company’s common stock at the close of trading during the 10 trading day period prior the date of the notice of conversion. There is a prepayment charge of 125% of the principal amount at any time before maturity date. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 159.3% risk-free interest rate of .07% and expected life of 6 months. The fair value of the derivative at the date issued amounted to $70,320 and was revalued at September 30, 2013 to be $26,229. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $25,000 and the Company expensed the difference of $45,320 to interest expense. The Company would have been required to issue 328,947 shares of common stock if Caesar converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 10% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(26) On July 1, 2013, the Company entered into a securities purchase agreement with Vista Capital Investments LLC (“Vista”) pursuant to which Vista purchased from the Company a 10% convertible note. The Company received $25,000 in cash for a 10% convertible note payable with a principal amount of $27,500, which note included a 10% discount. The accrued interest and principal are due on the maturity date of July 1, 2014. After 90 days from issuance there is a pre-payment fee of 150% of the principal amount outstanding and interest due. The conversion price is the lesser of (a) $0.25 or (b) the amount equal to 60% of the lowest trading price of the Company’s common stock at the close of trading during the 20 trading day period prior to the date of the notice of conversion. Collateral for this loan also includes 3,000,000 shares of the Company’s common stock. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 163.4% risk-free interest rate of .12% and expected life of 12 months. The fair value of the derivative at the date issued amounted to $125.873 and was revalued at September 30, 2013 to be $42,259. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $25,000 and the Company expensed the difference of $100,873 to interest expense. The Company would have been required to issue 381,944 shares of common stock if Vista converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 10% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(27) On July 20, 2013, the Company entered into a securities purchase agreement with Beaufort Ventures PLC (“Beaufort”) pursuant to which Beaufort purchased from the Company a 10% convertible note. The Company received $45,000 in cash for a 10% convertible note payable with a principal amount of $50,000. We did pay a $5,000 finder’s fee. The accrued interest and principal are due on the maturity date of January 10, 2014. The conversion price is equal to a 40% discount to the lowest trading prices of the Company’s common stock at the close of trading during the 10 trading day period prior the date of the notice of conversion. There is a prepayment charge of 120% of the principal amount outstanding and interest due at any time prior to maturity date. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 161.8% risk-free interest rate of .07% and expected life of 6 months. The fair value of the derivative at the date issued amounted to $127,438 and was revalued at September 30, 2013 to be $50,803. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $50,000 and the Company expensed the difference of $77,438 to interest expense. The Company would have been required to issue 555,556 shares of common stock if Beaufort converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 20% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(28) On July 15, 2013, the Company entered into a securities purchase agreement with Iconic Holdings, LLC (“Iconic”) pursuant to which Iconic purchased from the Company a 10% convertible note. The Company received $22,500 in cash for a 10% convertible note payable with a principal amount of $26,250. We did pay a $3,750 finder’s fee. The accrued interest and principal are due on the maturity date of July 14, 2013. The conversion price is equal to a 40% discount to the average of the three lowest trading prices of the Company’s common stock at the close of trading during the 10 trading day period prior the date of the notice of conversion. There is a prepayment charge of 120% of the principal amount at any time within 90 days of the effective date, 125% of the principal and outstanding interest any time 91 to 150 days of the effective date and 130% of the principal amount outstanding and interest due at any time 151 days until 180 days and no rights to prepayment after 180 days. . | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 187.6% risk-free interest rate of .12% and expected life of 12 months. The fair value of the derivative at the date issued amounted to $40,381 and was revalued at September 30, 2013 to be $38,140. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $26,250 and the Company expensed the difference of $14,131 to interest expense. The Company would have been required to issue 345,395 shares of common stock if Iconic converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 20% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(29) On July 30, 2013, the Company entered into a securities purchase agreement with Caesar Capital Group, LLC (“Caesar”) pursuant to which Caesar purchased from the Company an 8% convertible note. The Company received $60,000 in cash for an 8% convertible note payable with a principal amount of $62,500 and we did pay a $2,500 finder’s fee. The accrued interest and principal are due on the maturity date of July 30, 2014. The conversion price is equal to the lesser of $.264 per share or a 40% discount to the average of the three lowest trading prices of the Company’s common stock at the close of trading during the 10 trading day period prior the date of the notice of conversion. There is a prepayment charge of 120% of the principal amount at any time 330 days of the effective date. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 188.5% risk-free interest rate of .12% and expected life of 12 months. The fair value of the derivative at the date issued amounted to $115,975 and was revalued at September 30, 2013 to be $91,219. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $62,500 and the Company expensed the difference of $53,475 to interest expense. The Company would have been required to issue 822,368 shares of common stock if Caesar converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 28% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(30) On July 29, 2013, the Company entered into a securities purchase agreement with ARRG CORP. (“ARRG”) pursuant to which ARRG purchased from the Company an 8% convertible note. The Company received $60,000 in cash for an 8% convertible note payable with a principal amount of $62,500. The note did not include a discount, but we did pay a $2,500 finder’s fee. The accrued interest and principal are due on the maturity date of July 29, 2014. The conversion price is equal to the lesser of $.264 per share or a 40% discount to the average of the three lowest trading prices of the Company’s common stock at the close of trading during the 10 trading day period prior the date of the notice of conversion. There is a prepayment charge of 120% of the principal amount at any time within 330 days of the effective date. There is no right to prepayment after 331 days. Collateral for this loan also includes 1,562,000 shares of the Company’s common stock. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 188.7% risk-free interest rate of .12% and expected life of 12 months. The fair value of the derivative at the date issued amounted to $128,968 and was revalued at September 30, 2013 to be $91,154. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $62,500 and the Company expensed the difference of $66,468 to interest expense. The Company would have been required to issue 822,368 shares of common stock if ARRG converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 28% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(31) On August 8, 2013, the Company entered into a securities purchase agreement with Iconic Holdings, LLC (“Iconic”) pursuant to which Iconic purchased from the Company a 10% convertible note. The Company received $45,000 in cash for a 10% convertible note payable with a principal amount of $51,250. We paid $6,250 for professional fees. The accrued interest and principal are due on the maturity date of August 8, 2014. The conversion price is equal to 60% of the average of the three lowest market trades of the Company’s common stock during the 10 trading day period prior to the date of the notice of conversion. There is a prepayment charge of 20% premium of the principal amount and interest at any time before 90 days from issuance, a 30% premium of the principal amount outstanding and interest due at any time 91 days until 150 days of the effective date and 40% premium of the principal amount outstanding and interest due at any time 151 days until 180 days and after 180 this note may not be prepaid without prior consent of the holder. Collateral for this loan also includes 750,000 shares of the Company’s common stock | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 187.5% risk-free interest rate of .12% and expected life of 12 months. The fair value of the derivative at the date issued amounted to $58,266 and was revalued at September 30, 2013 to be $74,952. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $51,250 and the Company expensed the difference of $7,016 to interest expense. The Company would have been required to issue 674,342 shares of common stock if Iconic converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 20% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(32) On August 16, 2013, the Company entered into a securities purchase agreement with Typenex Co. Investments LLC (“Typenex”) pursuant to which Typenex purchased from the Company an 8% convertible note. The Company received $180,000 in cash for an 8% convertible note payable with a principal amount of $227,500. We did incur a discount fee of $20,000 and paid a fee of $7,500 and a finder’s fee of $20,000. The accrued interest and principal are due on the maturity date of March 16, 2015. The conversion price is equal to a 35% discount to the average of the three lowest volume-weighted average trading prices of the Company’s common stock at the close of trading during the 20 trading day period prior the date of the notice of conversion. There is a prepayment charge of 135% of the principal amount outstanding and interest due at any time prior to maturity date. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 185.4% risk-free interest rate of .12% and expected life of 19 months. The fair value of the derivative at the date issued amounted to $336,177 and was revalued at September 30, 2013 to be $343,460. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $227,500 and the Company expensed the difference of $128,677 to interest expense. The Company would have been required to issue 2,812,562 shares of common stock if Beaufort converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 22% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(33) On August 20, 2013, the Company entered into a securities purchase agreement with Beaufort Ventures PLC (“Beaufort”) pursuant to which Beaufort purchased from the Company a 10% convertible note. The Company received $45,000 in cash for a 10% convertible note payable with a principal amount of $50,000. We did pay a $5,000 finder’s fee. The accrued interest and principal are due on the maturity date of February 20, 2014. The conversion price is equal to a 40% discount to the lowest trading prices of the Company’s common stock at the close of trading during the 10 trading day period prior the date of the notice of conversion. There is a prepayment charge of 120% of the principal amount outstanding and interest due at any time prior to maturity date. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 203.0% risk-free interest rate of .07% and expected life of 6 months. The fair value of the derivative at the date issued amounted to $56,037 and was revalued at September 30, 2013 to be $52,023. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $50,000 and the Company expensed the difference of $6,037 to interest expense. The Company would have been required to issue 555,556 shares of common stock if Beaufort converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 20% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(34) On September 18, 2013, the Company entered into a securities purchase agreement with Hyde Park LLC (“Hyde”) pursuant to which Hyde purchased from the Company a 12% convertible note. The Company received $37,500 in cash for a 12% convertible note payable with a principal amount of $40,000. We did pay a $2,500 finder’s fee. The accrued interest and principal are due on the maturity date of September 18, 2014. The conversion price is equal to a 42.5% discount to the lowest trading prices of the Company’s common stock at the close of trading during the 20 trading day period prior the date of the notice of conversion. There is a prepayment charge of 25% of the principal amount and interest at any time before 30 days from issuance, a 35% premium of the principal amount outstanding and interest due at any time 31 days until 179 days of the effective date and 45% of the principal amount outstanding and interest due at any time after 180 days from the effective date. Collateral for this loan also includes 1,500,000 shares of the Company’s common stock | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 187.9% risk-free interest rate of .12% and expected life of 12 months. The fair value of the derivative at the date issued amounted to $55,661 and was revalued at September 30, 2013 to be $54,788. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $40,000 and the Company expensed the difference of $15,661 to interest expense. The Company would have been required to issue 496,894 shares of common stock if Hyde converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 18% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(35) On September 24, 2013, the Company entered into a securities purchase agreement with Vista Capital Investments LLC (“Vista”) pursuant to which Vista purchased from the Company a 12% convertible note. On behalf of the Company Vista prepared a $33,000 convertible note paying Continental $52,140. The Company issued to Vista for a 12% convertible note payable with a principal amount of $52,140. The accrued interest and principal are due on the maturity date of December 31, 2013. The conversion price is the lesser of (a) $0.25 or (b) the amount equal to 60% of the lowest trading price of the Company’s common stock at the close of trading during the 20 trading day period prior to the date of the notice of conversion. | ||||||||||||||||
Since this note has a convertible feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 239.0% risk-free interest rate of .12% and expected life of 3 months. The fair value of the derivative at the date issued amounted to $81,097 and was revalued at September 30, 2013 to be $71,516. The debt discount associated with this derivative is being amortized over the life of the note, but since the derivative liability at date of issuance was greater than the principal amount of the note the debt discount was valued at $52,140 and the Company expensed the difference of $28,957 to interest expense. | ||||||||||||||||
The Company would have been required to issue 724,167 shares of common stock if Vista converted on September 30, 2013. | ||||||||||||||||
This note contains a cross-default provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 10% per annum, compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. | ||||||||||||||||
(36) In March 2012, the Company and lender, a company owned by the Company’s president and CEO, mutually agreed to extend the maturity date of $80,000 of notes to January 30, 2014 and decrease the interest rate from 2% per month to 1% per month effective October 1, 2012. The principal portion of this convertible note can be converted into common stock at any time at the rate of $.25 per share at the option of the lender. Interest expense for the three months and nine months period ended September 30, 2013 and 2012, was $800,and $2,400 and $1,600 and $4,800, respectively. | ||||||||||||||||
(37) On May 1, 2012, the Company received $50,000 in cash for one convertible promissory note payable from a related party. The note provides for interest only payments of 3%, payable quarterly (12% annually), in cash, or common stock of the Company at $0.25 per share, at the option of the lender. There is no required principal payment on the note until maturity which is January 30, 2014. The principal portion of the note can be converted into common stock at any time during the term of the loan at the rate of $0.25 per share at the option of the lender. The note can be extended by mutual consent of the lender and the Company. Our Contact Packager also co-signed this note. Additionally, the Company shall pay to the lender a royalty of 0.9% on the first $25 million of sales of a generic prescription drug under distribution contracts with Federal government agencies. Payments for royalty will be paid quarterly beginning December 31, 2012. As of December 31, 2012, the Company has accrued $10,500 in royalties. In first quarter 2013 the Company issued 130,555 shares of its common stock for payment of royalty expense and recorded a royalty expense of $17,500 for the first quarter 2013. In the second quarter of 2013 the Company issued 29,139 shares of its common stock for payment of royalty expense and recorded a royalty expense of $21,535. Interest recorded in the three months and nine months period ended as of September 30, 2013 was $1,500 and $4,500, respectively. Collateral for this loan also includes 200,000 shares of the Company’s common stock. | ||||||||||||||||
(38) On August 15, 2012, the Company entered into a four year term loan agreement in the amount of $500,001 with Development 72, LLC (a related party) for the purpose of funding the inventory purchases of RapiMed rapidly dissolving formulation products. This loan bears interest at the rate of 9% per annum, with 48 equal monthly installments of interest and principal payments of $12,443 and matures on August 15, 2016. The Company may prepay the loan, in full or in part, subject to a prepayment penalty equal to 5% of the amount of principal being prepaid. The loan is secured by the assets of the Company. | ||||||||||||||||
In addition to the monthly loan repayments, during the 48 month period ending August 15, 2016, and regardless if the loan is prepaid in full, the Company will pay to Development 72 a royalty equal to one percent (1%) of all revenues that the Company receives from the Company’s sale or distribution of its RapiMed rapidly dissolving formulation products. The royalty payments will be made quarterly and are subject to a fee for late payment or underpayment | ||||||||||||||||
Development 72 is a related party because it is the holder of record of 2,990,252 shares of the Company’s Series A Preferred Stock which is convertible into 5,980,504 shares of the Company’s common stock (representing approximately 11% of the outstanding shares). In addition, the manager of development 72, Andrius Pranskevicius, is a member of the Company’s board of directors. | ||||||||||||||||
In the event of a default, the interest rate on the loan will increase to 13% for as long as the default continues. Under the term loan, a default will occur upon (i) non-payment of a monthly installment or non-performance under the note or loan agreement, which is not cured within ten (10) days of written notice of such non-payment or nonperformance from Development 72, (ii) a materially false representation or warranty made to Development 72 in connection with the loan, (iii) a bankruptcy or dissolution of the Company or (iv) a change of control of the Company or an acquisition of an entity or business by the Company without the affirmative vote of Andrius Pranskevicius as a member of the Company’s board of directors. | ||||||||||||||||
The Company is subject to various negative covenants, including but not limited to (i) restrictions on secured loans (subject to certain exceptions), (ii) judgments against the Company in excess of $25,000, (iii) prepayment of any long-term debt of the Company other than promissory notes held by certain investors in the Company, and (iv) repurchases by the Company of outstanding shares of its common stock. | ||||||||||||||||
The loan agreement also provides certain financial covenants which limit the amount of indebtedness the Company may incur until the loan is repaid and restricts the payment of any dividends on its capital stock except for dividends payable with respect to the Company’s outstanding shares of its Series A Preferred Stock. | ||||||||||||||||
Interest expense associated with this note for the three months and nine months period ended September 30, 2013, was approximately $9,016 and $28,915. The outstanding balance at September 30, 2013 and December 31, 2012, was $381,770 and $464,837, respectively with the current liability balance of $119,814 and $112,021, respectively. | ||||||||||||||||
(39) On October 19, 2011, the Company was approved for a line of credit from Wells Fargo Bank. This line of credit will allow the Company to borrow up to a maximum of $85,000, at an interest rate of prime plus 1% through June 30, 2012, and prime plus 6.25% annually after June 30, 2012. The line is secured by a personal guarantee by the Company’s CEO. During the year ended December 31, 2012, the Company borrowed funds under this line of credit ranging from $10,000 to $65,000. The outstanding borrowings under this line of credit at September 30, 2013 and December 31, 2012 are $0 and $40,059, respectively. The Company incurred interest expense under this line of credit of approximately $937 and $2,406 and $147 and $1,100 for the three months and nine months period ended September 30, 2013 and 2012, respectively. | ||||||||||||||||
OTHER | ||||||||||||||||
On March 20, 2013, the Company received $35,200 in cash for the sale of a 12% annual interest convertible note with a principal amount of $40,000. We paid $2,000 to cover the investor’s legal fees and $2,800 was paid directly to a third party on the Company’s behalf. Interest was payable monthly in the amount of $400. The unpaid interest and principal were due on the maturity date of March 20, 2014. On April 8, 2013, the Company converted this $40,000 1% per month convertible note into a 6% annual convertible note with a variable conversion rate. During April 2013, the creditor converted this $40,000 note into 257,942 shares of the Company’s common stock valued at $82,224. |
11_Derivative_Financial_Instru
11. Derivative Financial Instruments | 9 Months Ended | |||||
Sep. 30, 2013 | ||||||
Investments, All Other Investments [Abstract] | ' | |||||
Note 11 - Derivative Financial Instruments | ' | |||||
Derivative liabilities consist of convertible notes with features that could result in the note principal being converted to a variable number of the Company’s common shares. The fair value of the embedded derivative associated with these notes was determined by using the Black-Scholes pricing model with the following assumptions: | ||||||
As of : | 31-Dec-12 | 31-Mar-13 | 30-Jun-13 | 30-Sep-13 | ||
Volatility | 61.7% - 63.7% | 38.9% - 169.4% | 38.9% - 179.4% | 159.3% - 252.9% | ||
Expected life (in years) | .5 – 2.5 | .27 – 1 | .19 – 1 | .25 – 1.6 | ||
Risk-free interest rate | .12% - .35% | .12% - .17% | .12% - .14% | .07% - .12% | ||
Dividend yield | 0.00% | 0.00% | 0.00% | 0.00% | ||
These derivative financial instruments are indexed to an aggregate of 13,176,251 and 702,852, respectively, shares of the Company’s common stock as of September 30, 2013 and December 31, 2012 and are carried at fair value using level 2 inputs. The balance at September 30, 2013 and December 31, 2012 was $1,384,898 and $94,477, respectively. | ||||||
Activity during the current period is as follows: | ||||||
Derivative liabilities at December 31, 2012 | $ | 94,477 | ||||
New derivative liabilities issued in first quarter 2013 | 205,384 | |||||
Extinguishment (note 10) | (98,321 | ) | ||||
Revalue at reporting period | 6,864 | |||||
Derivative liabilities at March 31, 2013 | $ | 208,404 | ||||
New derivative liabilities issued in second quarter 2013 | 1,004,732 | |||||
Extinguishment (note 10) | (781,411 | ) | ||||
Revalue at reporting period | 1,475,322 | |||||
Derivative liabilities at June 30, 2013 | $ | 1,907,047 | ||||
New derivative liabilities issued in third quarter 2013 | 1,196,194 | |||||
Extinguishment (note 10) | (471,455 | ) | ||||
Revalue at reporting period | (1,246,888 | ) | ||||
Derivative liabilities at September 30, 2013 | $ | 1,384,898 | ||||
The significant fluctuations in the revaluation of derivative liabilities at September 30, 2013 relate partially to the Company having sufficient trading activity to utilize the actual SCRC volatility as an assumption when computing the fair value of derivative liabilities. The Company had previously estimated the volatility assumption by averaging the volatility of three similar entities which resulted in a lower volatility. The increase in value of the volatility assumption has led to a higher valuation of derivative liabilities associated with the convertible notes payable, disclosed in Note 10. |
12_Convertible_Preferred_Stock
12. Convertible Preferred Stock | 9 Months Ended |
Sep. 30, 2013 | |
Preferred Stock, Number of Shares, Par Value and Other Disclosures [Abstract] | ' |
NOTE 12. Convertible Preferred Stock | ' |
Convertible Preferred Stock | |
On April 1, 2011 the Company issued 2,990,252 shares of convertible preferred stock (“Series A Preferred stock”) for $1,043,000 to a related party. The Series A Preferred stock has the following rights, preferences, powers, privileges, and restrictions: (a) 8% dividend (appropriately adjusted to reflect any stock splits); the dividends shall accrue and are payable quarterly when the Company has positive equity and earnings per Delaware General Corporation Law. (b) Preferential payments of the assets available for distribution to its stockholders by reason of their ownership in an amount equal to the Series A Preferred stock Original Issue price ($.1744). (c) Voting rights - one vote for the number equal to the number of whole shares of common stock and shall be entitled to elect one director of the Corporation. (d) Rights to Convert – Each share of Series A Preferred stock shall be convertible, at the option of the holder at any time and from time to time without the payment of additional consideration by the holder into such number of fully paid and non-assessable shares of common stock as determined by dividing the Original Issue price by the Conversion price in effect at the time of the conversion. The conversion price is initially equal to $.1744 and can be adjusted any time if the Company issues non-exempted common shares at a price below $.1744. At September 30, 2013 and December 31, 2012 these convertible preferred stock shares can be converted into 5,980,504 shares of the Company’s common stock. (e) the owner of the Series A Preferred stock can waive its right to adjust the conversion price at his choosing. (f) Exempted securities – no anti-dilution protection for shares issued to employees, directors or consultants or advisors if the issuance is approved by the Board. | |
The Company has reviewed the rights and privileges of the convertible preferred stock and determined the holders have a liquidation preference which requires the Company to redeem the preferred shares at the original issuance price as a result of either an voluntary or involuntary liquidation event, as defined. The Company has determined this preference meets the requirement that the potential redemption is outside of the control of the Company. As a result, the convertible preferred stock has to be recorded outside of permanent equity. | |
Since this Series A Preferred Stock has liquidation preference which is outside the control of the Company it was not recorded in the stockholders' deficit section but rather as mezzanine equity in the condensed balance sheets. Because we also had losses for 2012 and for the nine months ended September 30, 2013 and an accumulated deficit, under Section 174 of the Delaware General Corporation Law our directors cannot declare a dividend without incurring personal liability. However, in accordance with privileges of the Series A Preferred stock, as noted above, the Company shall continue to accrue dividends regardless of declaration by the Board of Directors. We had a stockholders’ deficit of $3,896,215 at September 30, 2013. Since we did not generate net income in the first three quarters of 2013 and fiscal year 2012, our board of directors will not be able to declare a dividend nor will we be able to pay the dividend owed to the Series A Preferred Stockholder, and as such, dividends will be accrued. As of September 30, 2013 we have accrued $166,880 which is classified as a long-term liability in the condensed balance sheet. We will not be able to declare any dividends to our common stockholders until the accrued dividends owed to the Series A Preferred Stockholder have been paid. | |
13_Stockholders_Deficit
13. Stockholders' Deficit | 9 Months Ended |
Sep. 30, 2013 | |
Equity [Abstract] | ' |
NOTE 13 - Stockholders' Deficit | ' |
Common Stock | |
General | |
The common stock shares have a par value of $.001 per share and the Company is authorized to issue 150,000,000 shares, each share shall be entitled to cast one vote for each share held at all stockholders’ meeting for all purposes, including the election of directors. The common stock does not have cumulative voting rights. | |
The Company issued 2,886,012 restricted shares of common stock for cash proceeds of $245,697 during the nine month period ended September 30, 2013. Of the total shares issued for cash in 2013, 400,000 of these shares were issue to a related party for cash proceeds of $8,000. | |
The Company issued 7,636,583 restricted shares of its common stock to non-employees for services rendered or to be rendered during the nine month period ended September 30, 2013. These services were valued at $3,007,783 and the Company charged its operations $125,175 in first quarter, $1,000,680 in second quarter and 1,881,928 in third quarter of 2013. Of the total shares issued for services in 2013, 600,000 of these shares were issue to a related party for services valued at $155,400. | |
The Company issued 673,528 restricted shares of its common stock to non-employees for payment of royalties due during the nine month period ended September 30, 2013. The payment of royalties was valued at $235,845. | |
The Company issued 4,478,341shares of its common stock for the conversion of $1,444,348 of principal and interest of our convertible notes payable during the nine month period ended September 30, 2013. | |
The Company issued 350,000 shares of its common stock for a prepaid service which will be expensed upon completion of the services, with this service valued at $154,000 during the nine month period ended September 30, 2013 (see Note 14). | |
The Company retired 600,000 shares of its common stock that was previously issued in 2012 and 2013. The value was determined to be $76,500. The Company received and retired 500,000 shares from the Contract Packager as part of a settlement agreement (see Note 9). These shares were valued at $50,000 in 2012 when issued and we reversed the consulting expense for this value . 100,000 shares issued in September 2013 were also returned and retired during the third quarter 2013. | |
Warrants | |
The Company issued 333,633 shares of its common stock for a cashless exercise of warrants during the three and nine month period ended September 30, 2013. The holders of the warrants forfeited 478,440 shares of common stock under the warrant in the cashless exercise. | |
No new warrants were issued during the three and nine month period ended September 30, 2013. | |
Options | |
On September 11, 2013 the Company issued 2,000,000 options to a consultant for services provided. The warrants vested immediately and will expire 3 years from the date of issuance. The option price is $.15 and the the fair value of these warrants is $206,689 which was expensed to professional fees during the third quarter of 2013. |
14_Commitments_and_Contingenci
14. Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
NOTE 14 - Commitments and Contingencies | ' |
In May 2013, the Company signed a “Development, Manufacturing and Supply Agreement” with a pharmaceutical manufacturer to develop and manufacture our 80mg and 160mg Acetaminophen Rapid melt tablets. The initial term of the agreement is two years with an option to a one five year contract extension. In addition to development and scale up costs, the Company will pay up to $150,000 to license the technology during the first two years. In order to maintain exclusivity rights for the technology the Company must purchase a minimum of 10,000,000 tablets each of the 80mg and 160mg tablets in the first year and 16,500,000 tablets for both 80mg 160mg in the second year. After the second year annual volume requirements need to be achieved for the Company to maintain exclusivity of the license. Upon approval of sample batches and stability testing the Company anticipates launching this orally disintegrating tablet in the first half of the year in 2014, but the timing will be dependent on funding and getting production of product approved. | |
The Company entered into a two year distribution agreement in which all Rapid Melt sales are subject to a 10% commission. The marketing and distribution rights are exclusive as long as sales quotas are achieved. | |
Previously, the Company had entered into a Product Development, Manufacturing and Supply Agreement with Marlex Pharmaceuticals, Inc (the Contract Manufacturer or Marlex) in March 2010. The Contract Manufacturer was to develop rapid melt tablets in accordance with the specifications of the agreement with the Company responsible for all associated costs with the proprietary rights owned by the Company. The Company and the Contract Manufacturer agreed upon a projected product cost to be paid to the Contract Manufacturer as well as 7% of gross profits for the term of the agreement. The Company can terminate this agreement and did so in the quarter ended September 30, 2013 (see note 9). All development costs through the date of notice have previously been expensed and paid. | |
The holders of a $250,000 convertible note which was converted into 2,000,000 shares of our common stock on March 12, 2012 (see Note 10) are entitled to a 4% royalty from the sales of our orally disintegrating rapidly dissolving 80mg and 160mg pain relief tablets. The royalty payments associated with this agreement have no minimum guarantee amounts and royalty payments will end only if the product line of Acetaminophen rapidly dissolving 80mg and 160mg tablets is sold to a third party. Shipments for this product are expected to occur in first half of year in 2014. | |
The holder of a $320,000 note (see note 10 #8) are entitled to a to 1.8% royalty payment on the first $10 million of sales of a generic prescription drug under distribution contracts with Federal government agencies and 0.09% on the next $15 million of such sales. Payments for royalties will be paid quarterly and as of December 31, 2012, the Company had accrued $42,000 in royalties. In the first quarter 2013 the Company issued 455,556 shares of its common stock as payment for the royalty expense and in the second quarter of 2013, the Company issued 58,278 shares of its common stock as payment for the royalty expense. In additions a holder of a $50,000 note payable (see note 10), a related party, is entitled to a 0.9% on the first $25 million of sales of a generic prescription drug under distribution contracts with Federal government agencies. The Company had accrued $10,500 in royalties as of December 31, 2012, and in first quarter 2013 the Company issued 130,555 shares of its common stock for payment of royalty expense. In the second quarter the Company issued 29,139 shares of its common stock for payment of royalty expense and the Company has recorded a royalty expense of $30,600 and $213,945 for the three months and nine months period ended September 30, 2013, respectively. | |
On September 27, 2012, the Company entered into a 12 month service/consulting agreement with Olympic Capital Group (“OCG”) for the purpose and intent to introduce the Company to sources which can help the Company grow its business through joint ventures, purchase orders, licensing and/or royalty agreements, marketing the Company’s products, and/or to sell its business. This agreement expired in October 2013. With respect to a,c,d,e,f, there were no obligations triggered up through the expiration date. | |
The fees associated with the OCG agreement are as follows: | |
a) To pay a cash consulting fee of 8% of the gross revenue derived by the Company for any transaction entered into from a source that OCG introduced. Such transaction are a joint venture, or a licensing or royalty agreement, or other agreement involving the sales or licensing or royalty or other revenue-producing agreement regarding the Company’s products or technology or services. | |
b) Consideration for OCG’s services, upon signing the consulting agreement to issue OCG a total of 150,000 restricted common stock shares. These shares were issued in October 2012. | |
c) In the event that the Company completes the transactions described in section (a) above, then, in the event that the Company subsequently is acquired or sells its assets, or mergers with another company, the Company agrees to pay a cash consulting fee equal to 6% of the purchase price. | |
d) If any transaction set forth in section (a) or (c) above consists of any payments to be made to the Company and/or shareholders or affiliates in the future, the Company agrees that a the consulting fee is due and payable to OCG and is payable upon receipt of such consideration. | |
e) When a transaction described in section (a), (c) or (d) above is completed, then in addition to the compensation described above the Company agrees to pay OCG a monthly consulting fee of $5,000 for a 24 month period beginning on the first day of the first month after the closing of the transaction. | |
f) Also when a transaction described in section (a), (c) or (d) above is completed, the Company agrees to an equity interest payment of 6% of the combined present and projected future value of the transaction, which value will be ascertained and delivered to the Company and OCG at least ten days before the closing of the proposed transaction. | |
In July of 2013, the Company entered into a memorandum of understanding (“MOU”) with a Forbes Investments LTD (“Forbes”) to provide future services. Upon the signing of this MOU agreement the Company issued 350,000 shares of our Company’s common stock to two parties of this agreement. The value of the common stock at issuance was $154,000 and this amount was recorded to prepaid and will be expensed once services have been provided. The MOU agreement has a 12 month exclusivity clause, a two-way break-up fee of $50,000 in cash or securities at 50% of market rate upon 30 day running average of termination. Upon successfully completing the goal of this agreement the two parties of this Forbes agreement are entitled to each receive 200,000 shares of ScripsAmerica’s common stock and also shall be entitled to receive 25,000 shares of our common stock per $250,000 financing arranged from any source up to $5 million during the first 12 months of this agreement. | |
On October 15, 2013, the Board of Directors approved a revised compensation plan for our CEO, Robert Schneiderman and our CFO, Jeffrey Andrews, contingent on the Company raising $4 million, via equity, debt or a combination of both. Contingent on raising the $4 million compensation would be as follows: CEO annual salary $200,000, CFO annual salary $192,000, and both would receive 50,000 options quarterly at 120% of our market price on the date granted with a one year vesting period. | |
On October 15, 2013, the Board of Directors approved additional compensation to Board members in the form of issuance of stock options. Board members shall be granted 100,000 stock options for each year served commencing in 2012. The chairman of the Board shall be granted 135,000 for each year served. The effective date is October 7, 2013, the options vest immediately and the option price will be 110% of the market price on the grant date. Additionally, for each board meeting attended 10,000 options will be granted and for each committee meeting, an additional 5,000 options will be granted. |
15_Purchase_Order_Financing_Wi
15. Purchase Order Financing With Related Party | 9 Months Ended |
Sep. 30, 2013 | |
Related Party Transactions [Abstract] | ' |
NOTE 15 - Purchase Order Financing With Related Party | ' |
In June 2012, the Company entered into a purchase order finance agreement with Development 72, a major stockholder of the Company which is controlled by a member of the Board of Directors. The agreement will allow the Company to borrow up to $1.2 million on a case by case basis, at an interest rate of 0.6% per 10 day period, 1.8% monthly and 21.6% annually. During the nine months ended June 30, 2013, the Company financed $3,218,129 of its purchase orders and incurred an interest expense of $59,767. As of September 30, 2013 and December 31, 2012, the unpaid purchase order finance balance was $906448 and $570,000, respectively, and accrued fees and interest are $21,249 and $8,280, respectively. |
16_Concentrations
16. Concentrations | 9 Months Ended |
Sep. 30, 2013 | |
Risks and Uncertainties [Abstract] | ' |
NOTE 16 - Concentrations | ' |
During the three month and nine month periods ended September 30, 2013, the Company purchased product from two suppliers, and in 2012 the Company purchased approximately 100% of its product packaging from our Contract Packager. A disruption in the availability of product packaging from these two suppliers could cause a possible loss of sales, which could adversely affect our operating results. | |
The Company derived $73,267 or 100% of its revenue from two customers during the three months ended September 30, 2013, and derived approximately 97% of its revenue from two customers for the nine months ended September 30, 2013. During the three month period ended September 30, 2012, three customers accounted for 100% of the $1,014,000 in sales revenue. For the nine months period ended September 30, 2012 two customers accounted for approximately $3,099,600 or 88% of the total revenue. | |
As of September 30, 2013, one customer represented 100% of our accounts receivable. As of December 31, 2012, two customers represented 100% of accounts receivable – trade, of which one customer accounted for $175,054, or 60% of the Company’s accounts receivable balance of $290,531. |
17_Subsequent_Events
17. Subsequent Events | 9 Months Ended |
Sep. 30, 2013 | |
Subsequent Events [Abstract] | ' |
NOTE 17 - Subsequent Events | ' |
From October 1, 2013 to November 14, 2013, the Company issued 4,419,856 shares of common stock for the following transactions: a) 160,000 shares for payment of royalty expense valued at $40,000 b)1,045,333 shares for services performed and to be performed, valued at $278,273 c) 3,214,523 shares for conversion of a $132,000 convertible note payable. | |
On October 4, 2013, the Company entered into a securities purchase agreement with a company pursuant to which the company purchased from the Company a 10% convertible note. The Company received $47,500 in cash for a 10% convertible note payable with a principal amount of $50,000. The note included a discount of $2,500. The accrued interest and principal are due on the maturity date of April 4, 2014. The conversion price is equal to 55% of the lowest market prices on trades of the Company’s common stock during the 20 trading day period prior to the date of the notice of conversion. There is a prepayment charge of 130% of the principal amount. | |
On October 11, 2013, the Company entered into a financing agreement with GEM Global Yield Fund Limited ("GEM Global") and a related party to provide funding to the Company of up to $2 million. Under the terms of the financing agreement, the Company may sell restricted shares of its common stock to GEM Global, subject to the satisfaction of certain conditions, at a purchase price to be negotiated between the Company and GEM Global pursuant to section 4(2) and/or rule 506 of Regulation D. The Registrant will use the capital raised from the financing agreement primarily to fund the manufacturing and marketing of its RapiMed® children's pain reliever domestically and internationally, as well as for working capital. As of November 14 there were no shares issued for funding. | |
In connection with entering into the financing agreement, the Company issued to 590 Partners Capital, LLC (“590 Partners”) and GEM Global six (6) common stock purchase warrants to purchase collectively up to ten million (10,000,000) shares of the Company’s common stock. Each of GEM Global and 590 Partners received (i) a warrant exercisable to purchase 2,000,000 shares of common stock at an exercise price of $0.41, (ii) a warrant exercisable to purchase 1,500,000 shares of common stock at an exercise price of $0.55 and (iii) a warrant exercisable to purchase 1,500,000 shares of common stock at an exercise price of $0.75. All of the warrants expire on October 10, 2018 and are only exercisable on a cash basis (they do not contain any cashless exercise provisions). Additionally, the Company granted registration rights to 590 Partners and GEM Global to register the resale of the shares underlying the warrants. These warrants have price protection features and accordingly will require embedded derivative accounting which will establish a derivative liability. | |
On October 18, 2013, the Company entered into a purchase agreement with P.I.M.D. International, LLC (“PIMD”) and Vanessa Gonzalez, the sole member of PIMD (the “Seller”), pursuant to which the Company agreed to purchase 90% of the outstanding membership units from the Seller for a purchase price of $262,000. Upon the execution of the purchase agreement, the Company paid a deposit of $37,000 on the purchase price, of which (i) $25,000 is non-refundable unless the Company terminates the purchase agreement as a result of a material breach by the Seller or PIMD and (ii) $12,000 is refundable if the Seller terminates the purchase agreement or refuses or neglects to close. The balance of the purchase price of $225,000 will be paid at closing. | |
The closing will take place promptly upon the (a) Seller entering into an employment agreement satisfactory to the Company (which occurred on October 18, 2013) and (b) PIMD (with the Company as the 90% owner) has received governmental licenses from the (i) U.S. Drug Enforcement Agency (Controlled Substances Registration Certificate), (ii) Florida Department of Business and Professional Regulation (Prescription Drug Wholesale Distributor license) and (iii) the Florida Department of Health (acknowledgement of Seller as Certified Designated Representative). The Company expects that it will take 12 weeks to secure these licenses. | |
On October 23, 2013, the Company entered into a securities purchase agreement with a company pursuant to which the company purchased from the Company a 8% convertible note. The Company received $44,500 in cash for a 10% convertible note payable with a principal amount of $50,000. The note did not include a discount, but we paid $5,500 for professional fees. The accrued interest and principal are due on the maturity date of October 23, 2014. The conversion price is equal to 60% of the lowest VWAP prices on trades of the Company’s common stock during the 20 trading day period prior to the date of the notice of conversion. There is a prepayment charge of 130% of the principal amount. | |
On November 4, 2013, the Company entered into a securities purchase agreement with Seaside 88, L.P. ("Seaside") pursuant to which the Company agreed to sell, and Seaside agreed to purchase, up to seven million (7,000,000) restricted shares of the Company’s common stock in one or more closings. The number of shares to be purchased at each closing will be equal to ten percent (10%) of the aggregate trading volume of shares of the Company’s common stock during normal trading hours for the 20 consecutive trading days prior to each closing. The purchase price for the shares to be purchased by Seaside at each closing will be equal to sixty percent (60%) of the average of “daily average stock price” for the five (5) trading days preceding the date of the closing. The “daily average stock price” for a trading day is equal to the quotient of (a) the sum of the highest and lowest sale price for the trading day divided by (b) two. As of November 14, the requirements for closing have not yet occurred. | |
The Company had an initial closing under the securities purchase agreement on November 4, 2013, at which the Company sold to Seaside 1,152,514 restricted shares of common stock of the registrant for gross proceeds of $200,537, of which $7,500 was used to pay the legal fees for Seaside and $19,303.74 was paid for a finder’s fee. | |
On November 8, the Company entered into a written agreement with WholesaleRx (effective retroactively to November 1, 2013) pursuant to which the Company agreed to make an equity investment of $400,000 for 12,000 shares, which represents a 20% interest in Wholesale. The subscription amount will be paid in three installments ($150,000 upon execution of the agreement, $125,000 on December 31, 2013 and $125,000 on February 15, 2014). A proportionate number of the Shares would be released from escrow upon each payment, although the Company will have the full rights of a shareholder as to all 12,000 shares. The agreement also provides ScripsAmerica with a right of first refusal for (i) any proposed transfer of shares by the current owners of WholesaleRx and (ii) financing (debt or equity) by WholesaleRx. | |
The agreement also provided that ScripsAmerica would provide purchase order financing through a related third party financing source with which it has a pre-existing relationship. Under this arrangement, when WholesaleRx needs to fund the purchase of product to fill an order, ScripsAmerica would secure advances financing from the third party financing source and then turn around and lend the money directly to WholesaleRx, which must repay the advance from ScripsAmerica within 24 calendar days (which is six days before ScripsAmerica must repay the third party financing source). The loans from the Company to WholesaleRx are secured by certain assets of WholesaleRx (including any proceeds from such assets), and WholesaleRx has agreed to indemnify and hold the Company harmless for any claims, charges and demands resulting from or arising out of any purchase order financing. | |
In consideration for providing financing for WholesaleRx’s purchaser orders, and to cover the Company’s costs in administering the purchase order financing, WholesaleRx has agreed to pay the Company on or before the 15th calendar day of each month 20% of the gross profit (this in an increase from the current verbal agreement of a 12.5%) for the prior calendar month. If WholesaleRx is late in paying such 20% fee, then the amount owed will accrue interest at the rate of 18% per annum until paid. | |
3_Summary_of_Significant_Accou1
3. Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2013 | |
Accounting Policies [Abstract] | ' |
Use of Estimates | ' |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |
Revenue Recognition | ' |
Revenue is recognized when product is shipped from a contract packager to our customers’ warehouses, and is adjusted for anticipated charge backs from our customers which include inventory credits, discounts or volume incentives. These charge back costs are received monthly from our customers’ and the sales revenue and accounts receivables are reduced accordingly based on historical experience, customer contract programs, product pricing trends and the mix of products shipped. | |
Purchase orders from our customers generate our shipments, provide persuasive evidence that an arrangement exists and that the pricing is determinable. The credit worthiness of our customers assures that collectability is reasonably assured. | |
We also recognize a portion of our revenue on a net basis according to ASC 605-45, Revenue Recognition: Principal Agent Considerations. Since we are not deemed to be the principal in these sales transactions we do not report the transaction on a gross basis in our statement of operations. These sales transactions relate to a contract that a Contract Packager has obtained with a government agency. The revenue is reported in a separate line in the statement of operations as “Product revenues net from Contract Packager”, and the gross sales are reduced by the cost of sales fees from our Contract Packager. | |
We also recognize revenue for a commission fee earned on shipments of generic pharmaceutical and OTC products by our pharmaceutical partner, which is a DEA and State-licensed to store and distribute controlled substances. Per our agreement with our pharmaceutical partner, the Company will earn a 12.5% commission on the gross margin of products shipped to independent pharmacies. | |
Research and Development | ' |
Expenditures for research and development associated with contract research and development provided by third parties are expensed, as incurred. The Company had charges of $0 and $5,555 for research and development expenses for the three months ended September 30, 2013 and 2012, respectively, and $0 and $31,968 for the nine months ended September 30, 2013 and 2012, respectively. | |
Accounts Receivable Trade, net | ' |
Accounts receivable are stated at estimated net realizable value net of the sales allowance expected through charge backs. Management provides for uncollectible amounts through a charge to earnings and a credit to an allowance for bad debts based on its assessment of the current status of individual accounts and historical collection information. Balances that are deemed uncollectible after management has used reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable. As of September 30, 2013 and December 31, 2012 no allowance for doubtful accounts has been recorded. | |
The Company entered into an accounts receivable factoring facility agreement in June 2012. As of December 31, 2012, gross receivables were $395,974 of which $141,725 was sold to a factor, and has been included in the liabilities section in the balance sheet. Gross accounts receivable was reduced by $105,443, to provide for an allowance for charge backs, for a net accounts receivable balance of $290,531. Chargeback reserve at September 30, 2013 was zero because we no longer have sales with McKesson. | |
Property and Equipment | ' |
Property and equipment are stated at cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets. Maintenance costs, which do not significantly extend the useful lives of the respective assets and repair costs are charged to operating expense as incurred. The assets purchased in 2012 have not been put into operations as of September 30, 2013, and, as a result, no depreciation was recorded in 2013 and 2012. | |
Receivable - Contract Packager | ' |
The Company has receivables from Marlex Pharmaceuticals, Inc. (Contract Packager), in the amount of $980,428 and $1,579,051 at September 30, 2013 and December 31, 2012, respectively. As of September 30, 2013, this receivable consists of receivable for PO financing, revenue earned for DLA sales and monthly payments per the settlement agreement (see Note 9). The Company had a receivable for in the amount of $1,210,999 which was fully reserved and expensed in second quarter 2013. | |
Customer, Product, and Supplier Concentrations | ' |
For the first four months of 2013 and the entire 2012 fiscal year we sold our products directly to a wholesale drug distributor who, in turn, supplies products to pharmacies, hospitals, governmental agencies, and physicians. The Company used one Contract Packager exclusively for all of its warehouse, customer service, distribution, and labeling services for the first four months of 2013 and entire 2012 fiscal year. In September 2013, the Company added a second supplier of products. | |
We have recently partnered with a group that represents over 700 pharmacy independent operations. We will order the goods from the manufacturers and have them shipped to our pharmaceutical partner, which is DEA and State-licensed to store and distribute controlled substances. The goods will be shipped to the pharmacies in the bottles as received by the manufacturer so that this will become a “pick-n-pack” operation. | |
Concentration in Cash | ' |
We maintain cash at financial institutions and, at times, balances may exceed federally insured limits. We have never experienced any losses related to these balances. All of our non-interest bearing cash balances were fully insured at September 30, 2013 and December 31, 2012. | |
Income Taxes | ' |
The Company provides for income taxes using an asset and liability based approach for reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and the tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets to the amounts expected to be realized. The Company had a full valuation allowance of $1,278,000 and $597,591 against deferred tax assets as of September 30, 2013 and December 31, 2012, respectively. | |
The Company also complies with the provisions of Accounting for Uncertainty in Income Taxes. The accounting regulation prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. The Company classifies any assessment for interest and/or penalties as other expenses in the financial statements, if applicable. There were no uncertain tax positions at September 30, 2013 and December 31, 2012. | |
Derivative Financial Instruments Arrangements | ' |
Derivative financial instruments, consist of financial instruments or other contracts that contain a notional amount and one or more underlying (e.g. interest rate, security price or other variable), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. Further, derivative financial instruments are initially, and subsequently, measured at fair value and recorded as liabilities or, in rare instances, assets. The Company generally does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has entered into various types of financing arrangements to fund its business capital requirements, including convertible debt and other financial instruments indexed to the Company’s own stock. These contracts require careful evaluation to determine whether derivative features embedded in host contracts require bifurcation and fair value measurement or, in the case of freestanding derivatives (principally warrants) whether certain conditions for equity classification have been achieved. In instances where derivative financial instruments require liability classification, the Company is required to initially and subsequently measure such instruments at fair value. Accordingly, the Company adjusts the fair value of these derivative components at each reporting period through a charge to income until such time as the instruments acquire classification in stockholders’ deficit. | |
Derivative financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period. The Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective measuring fair values. In selecting the appropriate technique, management considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as free-standing warrants, the Company generally uses the Black-Scholes-Merton option valuation technique because it embodies all of the requisite assumptions (including trading volatility, dividend yield, estimated terms and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of our common stock, which has a high-historical volatility. Since derivative financial instruments are initially and subsequently carried at fair values, our income (loss) will reflect the volatility in these estimate and assumption changes. | |
Fair Value Measurements | ' |
The Company follows the provision of ASC No. 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 clarifies that fair value is an estimate of the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date) and provides for use of a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels: | |
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities. | |
Level 2: Input other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company. | |
Level 3: Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability. | |
An asset or liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Availability of observable inputs can vary and is affected by a variety of factors. | |
The Company uses judgment in determining the fair value of assets and liabilities, and level 3 assets and liabilities involve greater judgment than level 1 and level 2 assets and liabilities. | |
The carrying values of accounts receivable, inventory, accounts payable and accrued expenses, royalty payable, obligation due factor, and notes payable approximate their fair values due to their short-term maturities. The carrying value of the Company’s long-term debt approximates fair value due to the borrowing rates currently available to the Company for loans with similar terms. See note 11 for fair value of derivative liabilities. | |
Advertising Expenses | ' |
The Company expenses advertising costs as incurred. The Company incurred advertising expenses in the amount of $63,000 and $34,399 for the three month period ended September 30, 2013 and 2012, respectively, and $267,413 and $99,062 for the nine months ended September 30, 2013 and 2012, respectively. | |
Shipping and Handling Cost | ' |
The Company expenses all shipping and handling costs as incurred. These costs are included in cost of sales on the accompanying condensed financial statements. | |
Stock-Based Compensation | ' |
Compensation expense is recognized for the fair value of all share-based payments issued to employees. As of December 31, 2012 and September 30, 2013, the Company has not issued any employee stock options that would require calculating the fair value using a pricing model such as the Black-Scholes pricing model. | |
For non-employees, stock grants issued for services are valued at either the invoiced or contracted value of services provided, or the fair value of stock at the date the agreement is reached, whichever is more readily determinable. For stock options and warrants granted to non-employees the fair value at the grant date is used to value the expense. In calculating the estimated fair value of its stock options and warrants, the Company used a Black-Scholes pricing model which requires the consideration of the following seven variables for purposes of estimating fair value: | |
· the stock option or warrant exercise price, | |
· the expected term of the option or warrant, | |
· the grant date fair value of our common stock, which is issuable upon exercise of the option or warrant, | |
· the expected volatility of our common stock, | |
· expected dividends on our common stock (we do not anticipate paying dividends in the foreseeable future), | |
· the risk free interest rate for the expected option or warrant term, and | |
· the expected forfeiture rate. | |
Earnings (Loss) Per Share | ' |
Basic earnings (loss) per common share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock warrants, convertible notes payable and Series A convertible preferred shares. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive. | |
Reclassification | ' |
Certain reclassifications have been made to the 2012 financial statements to conform to the interim 2013 condensed financial statements presentation. These reclassifications had no effect on net loss or cash flows as previously reported. | |
Recent Accounting Pronouncements | ' |
Management does not believe that any recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. | |
Recovered_Sheet1
5. Sales Impact due to net basis accounting and commissions earned (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Business Combinations [Abstract] | ' | ||||||||
Gross sales and cost of sales from DLA contacts | ' | ||||||||
The gross sales and cost of sales from this DLA contacts were: | |||||||||
Three month sales as of the September 30, 2013 | Nine month sales as of September 30, 2013 | ||||||||
Sales from DLA contract | $ | 1,005,606 | $ | 4,269,931 | |||||
Cost on DLA, per agreement | 948,964 | 3,984,786 | |||||||
Product revenue net from contract packager | $ | 56,642 | $ | 285,144 | |||||
10_Debt_Tables
10. Debt (Tables) | 9 Months Ended | |||||||||||||||
Sep. 30, 2013 | ||||||||||||||||
Debt Disclosure [Abstract] | ' | |||||||||||||||
Debt consists | ' | |||||||||||||||
Debt consists of the following: | ||||||||||||||||
30-Sep-13 | 31-Dec-12 | |||||||||||||||
Convertible note - Vista | 1 | – | – | |||||||||||||
Convertible note - JMJ | 2 | a | 6,453 | – | ||||||||||||
Convertible note - Tonaquint | 3 | b | 46,055 | – | ||||||||||||
Convertible note - Gel | 4 | c | 3,670 | – | ||||||||||||
Convertible note - ILIAD | 5 | – | – | |||||||||||||
Convertible note - Auctus | 6 | x | – | 23,149 | ||||||||||||
Convertible note - Asher | 7 | y | – | 41,683 | ||||||||||||
Convertible note | 8 | 290,000 | 290,000 | |||||||||||||
Convertible note | 9 | – | 14,700 | |||||||||||||
Convertible note | 10 | – | 114,700 | |||||||||||||
Convertible note | 11 | 114,700 | 300,000 | |||||||||||||
Convertible note | 12 | 115,000 | – | |||||||||||||
Convertible note | 13 | 115,000 | – | |||||||||||||
Convertible note | 14 | 85,300 | – | |||||||||||||
Convertible note - Continental | 15 | – | – | |||||||||||||
Convertible note - IBC | 16 | d | 18,986 | – | ||||||||||||
Convertible note - JMJ | 17 | e | 12,301 | – | ||||||||||||
Convertible note - JMJ | 18 | f | 10,582 | – | ||||||||||||
Convertible note - JMJ | 19 | g | 8,356 | – | ||||||||||||
Convertible note - Vista | 20 | h | 10,993 | – | ||||||||||||
Convertible note - Gel | 21 | i | 16,712 | – | ||||||||||||
Convertible note - Group Holdings | 22 | j | 8,959 | – | ||||||||||||
Convertible note - Redwood | 23 | k | 8,342 | – | ||||||||||||
Convertible note - Caesar Capital | 24 | l | 14,815 | – | ||||||||||||
Convertible note - JSJ Investments | 25 | m | 12,500 | – | ||||||||||||
Convertible note - Vista | 26 | n | 6,856 | – | ||||||||||||
Convertible note - Beaufort Ventures | 27 | o | 22,404 | – | ||||||||||||
Convertible note - Iconic Holdings | 28 | p | 5,538 | – | ||||||||||||
Convertible note - Caesar Capital | 29 | q | 10,616 | – | ||||||||||||
Convertible note - ARRG Corp | 30 | r | 10,788 | – | ||||||||||||
Convertible note - Iconic Holdings | 31 | s | 7,442 | – | ||||||||||||
Convertible note - Typenex Co. | 32 | t | 17,743 | – | ||||||||||||
Convertible note - Beaufort Ventures | 33 | u | 11,202 | – | ||||||||||||
Convertible note - Hyde Park LLC | 34 | v | 1,315 | – | ||||||||||||
Convertible note - Vista | 35 | w | 857 | – | ||||||||||||
Convertible notes payable | 993,485 | 784,232 | ||||||||||||||
Less current maturities | (975,742 | ) | (64,832 | ) | ||||||||||||
Long-term debt | 17,743 | 719,400 | ||||||||||||||
Convertible note - Related party | 36 | 80,000 | 80,000 | |||||||||||||
Convertible note - Related party | 37 | 50,000 | 50,000 | |||||||||||||
Convertible note - Related party | 130,000 | 130,000 | ||||||||||||||
Term loan - Related party | 38 | 381,770 | 464,837 | |||||||||||||
Less current maturities | (119,814 | ) | (112,021 | ) | ||||||||||||
Long-term debt | 261,956 | 352,816 | ||||||||||||||
Line-of-Credit | 39 | – | 40,059 | |||||||||||||
Total Loan and notes payable | 1,505,255 | 1,419,128 | ||||||||||||||
Less current maturities | (1,225,556 | ) | (216,912 | ) | ||||||||||||
Long-term debt | 279,699 | 1,202,216 | ||||||||||||||
Value of discounts : | 30-Sep-13 | 31-Dec-12 | ||||||||||||||
JMJ | a | 6,747 | ||||||||||||||
Tonaquint | b | 25,035 | ||||||||||||||
GEL | c | 1,330 | ||||||||||||||
IBC | d | 26,014 | ||||||||||||||
JMJ | e | 12,699 | ||||||||||||||
JMJ | f | 16,918 | ||||||||||||||
JMJ | g | 16,644 | ||||||||||||||
Vista | h | 16,507 | ||||||||||||||
GEL | i | 33,288 | ||||||||||||||
Group Holdings | j | 21,041 | ||||||||||||||
Redwood | k | 16,658 | ||||||||||||||
Caesar Capital | l | 37,685 | ||||||||||||||
JSJ Investments | m | 12,500 | ||||||||||||||
Vista | n | 20,644 | ||||||||||||||
Beaufort Ventures | o | 27,596 | ||||||||||||||
Iconic Holdings | p | 20,712 | ||||||||||||||
Caesar Capital | q | 51,884 | ||||||||||||||
ARRG Corp | r | 51,712 | ||||||||||||||
Iconic Holdings | s | 43,808 | ||||||||||||||
Typenex | t | 209,757 | ||||||||||||||
Beaufort Ventures | u | 38,798 | ||||||||||||||
Hyde Park LLC | v | 38,685 | ||||||||||||||
Vista | w | 51,283 | ||||||||||||||
Auctus | x | 29,601 | ||||||||||||||
Asher | y | 21,317 | ||||||||||||||
797,945 | 50,918 | |||||||||||||||
11_Derivative_Financial_Instru1
11. Derivative Financial Instruments (Tables) | 9 Months Ended | |||||
Sep. 30, 2013 | ||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | |||||
Fair value of the embedded derivative | ' | |||||
The fair value of the embedded derivative associated with these notes was determined by using the Black-Scholes pricing model with the following assumptions: | ||||||
As of : | 31-Dec-12 | 31-Mar-13 | 30-Jun-13 | 30-Sep-13 | ||
Volatility | 61.7% - 63.7% | 38.9% - 169.4% | 38.9% - 179.4% | 159.3% - 252.9% | ||
Expected life (in years) | .5 – 2.5 | .27 – 1 | .19 – 1 | .25 – 1.6 | ||
Risk-free interest rate | .12% - .35% | .12% - .17% | .12% - .14% | .07% - .12% | ||
Dividend yield | 0.00% | 0.00% | 0.00% | 0.00% | ||
Derivative liabilities | ' | |||||
Activity during the current period is as follows: | ||||||
Derivative liabilities at December 31, 2012 | $ | 94,477 | ||||
New derivative liabilities issued in first quarter 2013 | 205,384 | |||||
Extinguishment (note 10) | (98,321 | ) | ||||
Revalue at reporting period | 6,864 | |||||
Derivative liabilities at March 31, 2013 | $ | 208,404 | ||||
New derivative liabilities issued in second quarter 2013 | 1,004,732 | |||||
Extinguishment (note 10) | (781,411 | ) | ||||
Revalue at reporting period | 1,475,322 | |||||
Derivative liabilities at June 30, 2013 | $ | 1,907,047 | ||||
New derivative liabilities issued in third quarter 2013 | 1,196,194 | |||||
Extinguishment (note 10) | (471,455 | ) | ||||
Revalue at reporting period | (1,246,888 | ) | ||||
Derivative liabilities at September 30, 2013 | $ | 1,384,898 | ||||
3_Summary_of_Significant_Accou2
3. Summary of Significant Accounting Policies (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Accounting Policies [Abstract] | ' | ' | ' | ' | ' |
Research and development expenses | $0 | $5,555 | $0 | $31,968 | ' |
Gross accounts receivable | 11,188 | ' | 11,188 | ' | 395,974 |
Accounts receivable sold to a factor | ' | ' | ' | ' | 141,725 |
Advertising expenses | $63,000 | $34,399 | $267,413 | $99,062 | ' |
4_Accounts_Receivable_Trade_ne1
4. Accounts Receivable Trade, net (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Receivables [Abstract] | ' | ' | ' | ' | ' |
Factoring fees | $0 | $15,762 | $5,069 | $31,872 | ' |
Gross accounts receivable | 11,188 | ' | 11,188 | ' | 395,974 |
Aaccounts receivable sold to a factor | ' | ' | ' | ' | $141,725 |
5_Sales_Impact_Due_To_Net_Basi1
5. Sales Impact Due To Net Basis Accounting And Commissions Earned (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Business Combinations [Abstract] | ' | ' | ' | ' |
Sales from DLA contract | $1,005,606 | ' | $4,269,931 | ' |
Cost of sales on DLA | 948,964 | ' | 3,984,786 | ' |
Product revenue net from contract packager | $56,642 | $0 | $285,144 | $0 |
5_Sales_Impact_Due_To_Net_Basi2
5. Sales Impact Due To Net Basis Accounting And Commissions Earned (Details Nerrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
sales revenues | $73,267 | $1,014,472 | $452,268 | $3,522,251 |
Gross Profit | 42,667 | 107,144 | 27,783 | 573,723 |
Pharmaceutical Partner [Member] | ' | ' | ' | ' |
sales revenues | 188,232 | ' | ' | ' |
Gross Profit | 132,993 | ' | ' | ' |
Commision on gross margin | 12.50% | ' | ' | ' |
Commission revenue | $16,625 | ' | ' | ' |
6_Receivable_Loan_Receivable_A1
6. Receivable, Loan Receivable And Other Assets - Contract Packager (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Receivables [Abstract] | ' | ' |
Accounts recievable for po financing | $980,428 | ' |
Money loaned to contract packager | $717,503 | $743,503 |
7_Other_Receivable_Pharmaceuti1
7. Other Receivable - Pharmaceutical Partner (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Receivables [Abstract] | ' | ' |
Other Receivable - Pharmaceutical partner | $42,449 | $0 |
8_Prepaid_Expenses_And_Other_C1
8. Prepaid Expenses And Other Current Assets (DetailsNerrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Prepaid expenses and other current assets | $243,236 | $198,820 |
Non-cash payments for issuance of stock | ' | ' |
Prepaid expenses and other current assets | 154,000 | 108,000 |
Insurance premiums | ' | ' |
Prepaid expenses and other current assets | 23,000 | 24,000 |
Non-cash payments of stock and warrants | ' | ' |
Prepaid expenses and other current assets | 45,000 | ' |
Miscellaneous payments | ' | ' |
Prepaid expenses and other current assets | 21,000 | ' |
Debt issue costs | ' | ' |
Prepaid expenses and other current assets | ' | $67,000 |
10_Debt_Details
10. Debt (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 |
Convertible note - Vista | Convertible note - Vista | Convertible note - JMJ | Convertible note - JMJ | Convertible note - Tonaquint | Convertible note - Tonaquint | Convertible note - Gel | Convertible note - Gel | Convertible note - ILIAD | Convertible note - ILIAD | Convertible note - Auctus | Convertible note - Auctus | Convertible note - Asher | Convertible note - Asher | Convertible note - 8 | Convertible note - 8 | Convertible note - 9 | Convertible note - 9 | Convertible note - 10 | Convertible note - 10 | Convertible note - 11 | Convertible note - 11 | Convertible note - 12 | Convertible note - 12 | Convertible note - 13 | Convertible note - 13 | Convertible note - 14 | Convertible note - 14 | Convertible note - Continental | Convertible note - Continental | Convertible note - IBC | Convertible note - IBC | Convertible note - JMJ 2 | Convertible note - JMJ 2 | Convertible note - JMJ 3 | Convertible note - JMJ 3 | Convertible note - JMJ 4 | Convertible note - JMJ 4 | Convertible note - Vista 2 | Convertible note - Vista 2 | Convertible note - Gel 2 | Convertible note - Gel 2 | Convertible note - Group Holdings | Convertible note - Group Holdings | Convertible note - Redwood | Convertible note - Redwood | Convertible note - Ceasar Capital | Convertible note - Ceasar Capital | JSJ Investments [Member] | JSJ Investments [Member] | Convertible note - Vista 3 | Convertible note - Vista 3 | Beaufort Ventures | Beaufort Ventures | Iconic Holdings | Iconic Holdings | Caesar Capital 1 | Caesar Capital 1 | ARRG Corp | ARRG Corp | Iconic Holdings 1 | Iconic Holdings 1 | Typenex Co. | Typenex Co. | Beaufort Ventures 1 | Beaufort Ventures 1 | Hyde Park LLC | Hyde Park LLC | Vista 4 Member | Vista 4 Member | Related party 1 | Related party 1 | Related party 2 | Related party 2 | |||
Convertible note | $993,485 | $784,232 | ' | ' | $6,453 | ' | $46,055 | ' | $3,670 | ' | ' | ' | ' | $23,149 | ' | $41,683 | $290,000 | $290,000 | ' | $14,700 | ' | $114,700 | $114,700 | $300,000 | $115,000 | ' | $115,000 | ' | $85,300 | ' | ' | ' | $18,986 | ' | $12,301 | ' | $10,582 | ' | $8,356 | ' | $10,993 | ' | $16,712 | ' | $8,959 | ' | $8,342 | ' | $14,815 | ' | $12,500 | ' | $6,856 | ' | $22,404 | ' | $5,538 | ' | ' | $10,616 | $10,788 | ' | ' | $7,442 | $17,743 | ' | $11,202 | ' | $1,315 | ' | $857 | ' | ' | ' | ' | ' |
Less: Current maturities | -975,742 | -64,832 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Convertible notes - long term | 17,743 | 719,400 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Convertible debt - related party | 130,000 | 130,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 80,000 | 80,000 | 50,000 | 50,000 |
Term loan - related party | 381,770 | 464,837 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Less current maturities | -119,814 | -112,021 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Long term debt | 261,956 | 352,816 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Line of credit | 0 | 40,059 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total debt | 1,505,255 | 1,419,128 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Less current maturities | 1,225,556 | 216,912 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total long term debt | $279,699 | $1,202,216 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
11_Derivative_Financial_Instru2
11. Derivative Financial Instruments (Details) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended |
Mar. 31, 2013 | Jun. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | |
Dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
Minimum [Member] | ' | ' | ' | ' |
Volatility | 38.90% | 38.90% | 159.30% | 16.70% |
Expected life in years | '3 months 7 days | '2 months 9 days | '3 months | '6 months |
Risk-free interest rate | ' | 0.12% | 0.07% | ' |
Maximum [Member] | ' | ' | ' | ' |
Volatility | 169.40% | 169.40% | 252.90% | 63.70% |
Expected life in years | '1 year | '1 year | '1 year 7 months 6 days | '2 years 6 months |
Risk-free interest rate | ' | 0.14% | 0.12% | ' |
11_Derivative_Financial_Instru3
11. Derivative Financial Instruments (Details 1) (USD $) | 3 Months Ended | 6 Months Ended | 9 Months Ended |
Mar. 31, 2013 | Jun. 30, 2013 | Sep. 30, 2013 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ' | ' |
Derivative liabilities, Beginning | $94,477 | $94,477 | $94,477 |
New derivative liabilities issued in 2013 | 205,384 | 1,004,732 | 1,196,194 |
Extinguishment | -98,321 | -781,411 | -471,455 |
Revalue at reporting period | 6,864 | 1,475,322 | -1,246,888 |
Derivative liabilities, Ending | $208,404 | $1,907,047 | $1,384,898 |
11_Derivative_Financial_Instru4
11. Derivative Financial Instruments (Details Narrative) (USD $) | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 |
Derivative Liabilities | $1,384,898 | $1,907,047 | $208,404 | $94,477 |
Fair Value, Inputs, Level 2 [Member] | ' | ' | ' | ' |
Common stock | 13,176,251 | ' | ' | 702,852 |
12_Convertible_Preferred_Stock1
12. Convertible Preferred Stock (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Preferred Stock, Number of Shares, Par Value and Other Disclosures [Abstract] | ' | ' |
Stockholders' deficit | ($3,896,215) | ($1,183,365) |
Convertible preferred stock shares | 5,980,504 | 5,980,504 |
Preferred stock dividends payable | $166,880 | ' |
13_Stockholders_Deficit_DEFICI
13. Stockholders' Deficit (DEFICIT) (Details Narrative) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Restricted Stock Issued | 2,886,012 | ' |
Cash proceeds from issuance of restricted stock | $245,697 | ' |
Cash proceeds from shares issued to related party | 8,000 | ' |
Shares issued for convertible note - value | 1,444,348 | 250,000 |
Shares issued for convertible note - shares | 4,478,341 | ' |
Shares of common stock issued for prepaid service | 350,000 | ' |
Services provided amount expensed | 154,000 | ' |
Common stock warrants issued - shares | 333,633 | ' |
Non Employees [Member] | ' | ' |
Restricted shares issued for services - shares | 7,636,583 | ' |
Restricted shares issued for services - value | 3,007,783 | ' |
Shares issued to related party for services - shares | 600,000 | ' |
Shares issued to related party for services - value | 155,400 | ' |
Common stock issued as payment for the royalty expense | 673,528 | ' |
Payment of royalties | $235,845 | ' |
14_Commitments_and_Contingenci1
14. Commitments and Contingencies (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | |
Note Payable Two Member | Note Payable Two Member | Note Payable Two Member | |||||
Accrued royalties | ' | ' | ' | ' | ' | ' | $10,500 |
Royalty expense | $30,600 | $0 | $213,945 | $0 | $30,600 | $213,945 | ' |
15_Purchase_Order_Financing_Wi1
15. Purchase Order Financing With Related Party (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Related Party Transactions [Abstract] | ' | ' |
Unpaid purchase order finance balance | $906,448 | $570,000 |
Accrued fees and interest | $21,249 | $8,280 |
16_Concentrations_Details_Narr
16. Concentrations (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | |
Two Customer [Member] | Two Customer [Member] | Two Customer [Member] | Two Customer [Member] | Two Customer [Member] | One Customer [Member] | One Customer [Member] | |
Revenue from major customer - amount | $73,267 | $1,014,000 | ' | $3,099,600 | ' | ' | ' |
Revenue from major customer - percent | 100.00% | 100.00% | 97.00% | 88.00% | ' | ' | ' |
Account receivable from major customer - percent | ' | ' | ' | ' | 100.00% | 100.00% | 60.00% |
Account receivable from major customer amount | ' | ' | ' | ' | ' | ' | $175,054 |