Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Apr. 08, 2014 | Jun. 30, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'SCRIPSAMERICA, INC. | ' | ' |
Entity Central Index Key | '0001521476 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-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 | ' | 125,610,436 | ' |
Entity Public Float | ' | ' | $17,916,716 |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current Assets | ' | ' |
Cash | $47,293 | $13,513 |
Accounts receivable trade, net of allowance for charge backs of $105,443 | 0 | 290,531 |
Receivable - contract packager, net of allowance of $408,150 and $0, respectively | 1,088,598 | 1,579,051 |
Receivable - related party | 24,223 | 0 |
Prepaid expenses and other current assets | 329,673 | 198,820 |
Total Current Assets | 1,489,787 | 2,081,915 |
Property and Equipment | 0 | 69,650 |
Other Assets | ' | ' |
Investments | 276,956 | 0 |
Other Assets | 14,720 | 200,000 |
Total | 291,676 | 200,000 |
TOTAL ASSETS | 1,781,463 | 2,351,565 |
Current Liabilities | ' | ' |
Line of credit | 99,223 | 40,059 |
Accounts payable and accrued expenses | 226,570 | 101,520 |
Purchase order financing - related party | 1,037,494 | 578,280 |
Obligation due to factor | 0 | 141,725 |
Royalty payable | 5,302 | 42,000 |
Royalty payable - related party | 0 | 10,500 |
Stock to be issued | 273,947 | 0 |
Current portion of long-term debt - related parties | 122,529 | 112,021 |
Convertible notes payable - net of discount $259,396 and $50,918 respectively | 289,839 | 64,832 |
Derivative liability | 1,133,393 | 94,477 |
Total Current Liabilities | 3,188,296 | 1,185,414 |
Non-Current Liabilities | ' | ' |
Preferred stock dividends payable | 187,740 | 104,300 |
Convertible notes payable - related parties | 120,738 | 130,000 |
Convertible notes payable - net of discounts $168,273 and 0 respectively | 628,795 | 719,400 |
Long-term debt, less current portion - related party | 230,287 | 352,816 |
Total Non-Current Liabilities | 1,167,560 | 1,306,516 |
Total Liabilities | 4,355,856 | 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; 91,792,839 and 56,404,972 shares issued and outstanding as of December 31, 2013 and 2012, respectively | 91,794 | 56,405 |
Additional paid-in capital | 10,046,457 | 1,090,772 |
Accumulated deficit | -13,609,078 | -2,330,542 |
Total Stockholders' Deficit of ScripsAmerica, Inc. | -3,470,827 | -1,183,365 |
Deficit Attributed to Noncontrolling interest | -146,566 | 0 |
Total Stockholders' Deficit | -3,617,393 | -1,183,365 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $1,781,463 | $2,351,565 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current Assets | ' | ' |
Charge backs on accounts receivable | $105,443 | $105,443 |
Contract packager, net of allowance receivable | 408,150 | 0 |
Current Liabilities | ' | ' |
Discount on convertible notes payable, Current | 259,396 | 50,918 |
Discount on convertible notes payable, Non Current | $168,273 | $0 |
Stockholders' Deficit | ' | ' |
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 | 91,792,839 | 56,404,972 |
Common stock shares outstanding | 91,792,839 | 56,404,972 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Net revenues | ' | ' |
Product revenues - net of contract adjustments | $152,650 | $3,762,677 |
Revenues net, from contract packager | 333,638 | 152,517 |
Commission fees - related party | 69,902 | 0 |
Total net revenues | 556,190 | 3,915,194 |
Cost of Goods Sold | ' | ' |
Product | 210,540 | 3,331,846 |
Royalty expense | 285,547 | 52,500 |
Total Cost of Goods Sold | 496,087 | 3,384,346 |
Gross Profit | 60,103 | 530,848 |
Selling, General and Administrative Expenses | 2,432,540 | 1,861,374 |
Share-base compensation issued for services | 3,791,909 | 177,773 |
Provision for contract packager receivable | 1,129,368 | 0 |
Research and Development | 0 | 37,524 |
Total Operating Expenses | 7,353,817 | 2,076,671 |
Loss from Operations | -7,293,714 | -1,545,823 |
Other Income (Expenses), net | ' | ' |
Interest expense | -332,947 | -225,247 |
Loss from derivatives issued with debt greater than carrying value | -1,179,737 | 0 |
Financing costs | -971,840 | 0 |
Loss on revaluation of derivatives | -1,288,623 | -6,750 |
Amortization of debt discount | -785,170 | -40,833 |
Gain on extinguishment of debt | 636,670 | 0 |
Income from equity investments | 1,956 | 0 |
Total Other Income (Expenses), net | -3,919,691 | -272,830 |
Loss Before Provision for Income taxes | -11,213,405 | -1,818,653 |
Provision for Tax Expense | 0 | 43,179 |
Net Loss | -11,213,405 | -1,861,832 |
Loss attributed to noncontrolling interest | -18,309 | 0 |
Net Loss Attributable to ScripsAmerica, Inc. | -11,195,096 | -1,861,832 |
Net Loss Available to Common Shareholders | ($11,278,536) | ($1,945,272) |
Loss Per Common Share | ' | ' |
Basic and Diluted | ($0.17) | ($0.04) |
Weighted Average Number of Common Shares | ' | ' |
Basic and Diluted | 68,119,715 | 55,140,192 |
Consolidated_Statements_of_Cha
Consolidated Statements of Changes in Stockholders' Deficit (USD $) | Common Stock | Subscription Receivable | Additional Paid-In Capital | Retained Earnings (Deficit) | Stockholders' Deficit Scrips America | Deficit Noncontrolling | Total |
Beginning Balance, Amount at Dec. 31, 2011 | $52,522 | ($170,800) | $494,487 | ($385,270) | ($9,061) | ' | ($9,061) |
Beginning Balance, Shares at Dec. 31, 2011 | 52,521,684 | ' | ' | ' | ' | ' | ' |
Payment received for stock subscription | ' | 170,800 | ' | ' | 170,800 | ' | 170,800 |
Common stock issued for cash, Shares | 300,000 | ' | ' | ' | ' | ' | ' |
Common stock issued for cash, Amount | 300 | ' | 29,700 | ' | 30,000 | ' | 59,700 |
Common stock issued for services - BOD, Shares | 124,000 | ' | ' | ' | ' | ' | ' |
Common stock issued for services - BOD, Amount | 124 | ' | 34,356 | ' | 34,480 | ' | 68,836 |
Common stock issued for services - employees, Shares | 114,288 | ' | ' | ' | ' | ' | ' |
Common stock issued for services - employees, Amount | 114 | ' | 19,886 | ' | 20,000 | ' | 39,886 |
Common stock issued for conversion of convertible Notes payable, Shares | 2,000,000 | ' | ' | ' | ' | ' | 250,000 |
Common stock issued for conversion of convertible Notes payable, Amount | 2,000 | ' | 248,000 | ' | 250,000 | ' | 498,000 |
Common stock issued for services - non employees, Sharees | 1,345,000 | ' | ' | ' | ' | ' | ' |
Common stock issued for services - non employees, Amount | 1,345 | ' | 229,755 | ' | 231,100 | ' | 460,855 |
Dividends for convertible preferred stock | ' | ' | ' | -83,440 | -83,440 | ' | -166,880 |
Warrants issued for services | ' | ' | 34,588 | ' | 34,588 | ' | 69,176 |
Net Loss | ' | ' | ' | -1,861,832 | -1,861,832 | ' | -1,861,832 |
Ending Balance, Amount at Dec. 31, 2012 | 56,405 | ' | 1,090,772 | -2,330,542 | -1,183,365 | ' | -1,183,365 |
Ending Balance, Shares at Dec. 31, 2012 | 56,404,972 | ' | ' | ' | ' | ' | ' |
Common stock issued for cash, Shares | 4,854,952 | ' | ' | ' | ' | ' | ' |
Common stock issued for cash, Amount | 4,855 | ' | 526,253 | ' | 531,108 | ' | 531,108 |
Common stock issued for services - BOD, Shares | 136,000 | ' | ' | ' | ' | ' | ' |
Common stock issued for services - BOD, Amount | 136 | ' | 35,064 | ' | 35,200 | ' | 35,200 |
Common stock issued for conversion of convertible Notes payable, Shares | 11,456,639 | ' | ' | ' | ' | ' | 333,633 |
Common stock issued for conversion of convertible Notes payable, Amount | 11,457 | ' | 2,765,834 | ' | 2,777,291 | ' | 2,777,291 |
Common stock issued for services - non employees, Sharees | 9,177,027 | ' | ' | ' | ' | ' | ' |
Common stock issued for services - non employees, Amount | 9,177 | ' | 3,377,935 | ' | 3,387,112 | ' | 3,387,112 |
Dividends for convertible preferred stock | ' | ' | ' | -83,440 | -83,440 | ' | -83,440 |
Common stock options issued for services | ' | ' | 439,829 | ' | 439,829 | ' | 439,829 |
Common stock issued for debt and payables, Shares | 8,690,000 | ' | ' | ' | ' | ' | ' |
Common stock issued for debt and payables, Amount | 8,690 | ' | 1,294,810 | ' | 1,303,500 | ' | 1,303,500 |
Common stock issued for royalty payment, Shares | 1,339,616 | ' | ' | ' | ' | ' | ' |
Common stock issued for royalty payment, Amount | 1,340 | ' | 345,463 | ' | 346,803 | ' | 346,803 |
Common stock retired for services previously provided, Shares | -600,000 | ' | ' | ' | ' | ' | ' |
Common stock retired for services previously provided, Amount | -600 | ' | -75,900 | ' | -76,500 | ' | -76,500 |
Common stock issued for warrants in a cashless conversion, Shares | 333,633 | ' | ' | ' | ' | ' | ' |
Common stock issued for warrants in a cashless conversion, Amount | 334 | ' | -334 | ' | ' | ' | ' |
Common stock options issued for services - Directors | ' | ' | 246,731 | ' | 246,731 | ' | 246,731 |
Noncontrolling interest beginning balance | ' | ' | ' | ' | ' | -8,607 | -8,607 |
Distribution taken from noncontrolling interest | ' | ' | ' | ' | ' | -119,650 | -119,650 |
Net Loss | ' | ' | ' | -11,195,096 | -11,195,096 | -18,309 | -11,213,405 |
Ending Balance, Amount at Dec. 31, 2013 | $91,794 | ' | $10,046,457 | ($13,609,078) | ($3,470,827) | ($146,566) | ($3,617,393) |
Ending Balance, Shares at Dec. 31, 2013 | 91,792,839 | ' | ' | ' | ' | ' | ' |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Cash Flows from Operating Activities | ' | ' |
Net Loss | ($11,213,405) | ($1,861,832) |
Adjustments to reconcile net loss to net cash used by operating activities: | ' | ' |
Income from equity method investee | -1,956 | 0 |
Amortization of discount on convertible notes payable | 785,170 | 38,892 |
Loss from derivatives issued with debt | 1,179,737 | 0 |
Amortization of loan fees | 263,973 | 0 |
Common stock issued for services | 3,191,812 | 174,530 |
Common stock issued for payment of royalty fees | 346,803 | 0 |
Common stock issued for finance fees | 761,818 | 0 |
Options issued for services | 439,829 | 0 |
Options issued for services - Directors | 246,731 | 3,243 |
Change in derivative liability | 1,288,623 | 6,750 |
Change in deferred Income tax provision | 0 | 41,200 |
Reserve on receivable - Contract packager | 1,385,000 | 743,503 |
Recovery of bad debt | -81,632 | 0 |
Gain on extinguishment of debt | -636,670 | 0 |
Allowance for chargebacks | -11,399 | 53,805 |
Loss for property and equipment disposal | 69,650 | 0 |
Change in operating assets and liabilities | ' | ' |
Accounts receivable - trade | 253,485 | -139,696 |
Accounts receivable - related party | 24,222 | 0 |
Receivable - Contract packager | -667,336 | -1,640,155 |
Prepaid expenses and other current assets | 143,134 | -10,125 |
Accounts payable and accrued expenses | 428,157 | 118,400 |
Cash used in operating activities | -1,804,254 | -2,471,485 |
Cash Flows from Investing Activities | ' | ' |
Purchase of Investment | -150,000 | 0 |
Proceeds from note receivable | 0 | 6,055 |
Cash provided by investing activities | -150,000 | 6,055 |
Cash Flows from Financing Activities | ' | ' |
Payments under bank line of credit, net | 59,164 | 40,059 |
Proceeds from Issuance of common stock | 531,108 | 30,000 |
Proceeds for stock to be issued | 50,925 | 0 |
Proceeds from convertible notes payable | 1,579,867 | 435,150 |
Proceeds (Payments) from convertible notes payable - related party | -9,262 | 50,000 |
Proceeds from note payable - related party | 0 | 500,001 |
Payments for PO financing from related party, net | 437,964 | 878,867 |
Payments to factor, net | -141,725 | 141,725 |
Payments on convertible notes payable | -288,336 | -200,000 |
Payments on note payable - related party | -112,021 | -35,164 |
Payments to members of noncontrolling interest | -119,650 | 0 |
Collection of stock subscription receivable | 0 | 170,800 |
Cash provided by financing activities | 1,988,034 | 2,011,438 |
Net Increase (Decrease) in Cash | 33,780 | -453,992 |
Cash - Beginning of period | 13,513 | 467,505 |
Cash - End of period | 47,293 | 13,513 |
Cash Paid: | ' | ' |
Interest | 192,732 | 186,474 |
Noncash financing and investing activities: | ' | ' |
Accrued Preferred Dividend payable | 83,440 | 83,440 |
Conversion of note payable for common stock | 979,554 | 250,000 |
Reduction in loan receivable from contract packager in exchange for inventory | 0 | 250,000 |
Purchase order direct financing in exchange for inventory | 0 | 300,587 |
Purchase of manufacturing equipment | 0 | 69,650 |
Stock issued for inventory advance | $275,010 | $0 |
1_ORGANIZATION_AND_BUSINESS
1. ORGANIZATION AND BUSINESS | 12 Months Ended |
Dec. 31, 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. Since our inception, ScripsAmerica’s business model has evolved significantly. Through March 2013, and to a lesser extent into early 2014, the Company primarily provided pharmaceutical distribution services to a wide range of end users across the health care industry through major pharmaceutical distributors in North America, such as McKesson Corporation and Cardinal Health. The end users include retail, hospitals, long-term care facilities and government and home care agencies. The majority of the Company’s revenue from this model came from orders facilitated by McKesson, the largest pharmaceutical distributor in North America, and a few other clients. | |
However, we had no exclusive contract with McKesson and the Company’s other pharmaceutical distributors to utilize our services and our margins became compressed. As a result, in 2013 the business of providing these pharmaceutical distribution services became curtailed and we are now primarily focused on generating revenue through (1) the marketing, sale and distribution of our RapiMed® products, (2) our services to the independent pharmacy distribution business and (3) our entry into the compounding pharmacy business. Specifically, we have developed a branded OTC product called “RapiMed” (www.rapimeds.com), which is a children’s pain reliever and fever reducer currently launched in China though our joint venture entity Global Pharma Hub, and which we hope to launch in retail outlets in North America sometime in 2014. We have also entered into agreements with third parties pursuant to which we receive fees based on a formula tied to the gross profit on sales of pharmaceutical products to independent pharmacies by such third parties. Lastly, on February 20, 2014 we entered into an agreement with a New Jersey compounding pharmacy that specializes in topical pain creams, pursuant to which we manage their business operations in exchange for a percentage of the pharmacy’s total revenue. |
2_LIQUIDITY_BUSINESS_RISK_AND_
2. LIQUIDITY, BUSINESS RISK AND GOING CONCERN | 12 Months Ended |
Dec. 31, 2013 | |
Risks and Uncertainties [Abstract] | ' |
NOTE 2 - LIQUIDITY, BUSINESS RISK AND GOING CONCERN | ' |
At December 31, 2013, the Company had approximately $47,000 in cash and incurred a loss from operations of approximately $7.3 million, of which approximately $5.1 million of the loss was due to non-cash charges and also had an accumulated deficit of $13.6 million. Further business with our largest customer in 2012 was stopped during 2013 which reduced our revenue by $3.3 million from 2012. After taking into consideration our 2014 interim results to date and current projections for the remainder of 2014, management believes that the Company’s cash flow from operations, coupled with recent financings are not sufficient to support the working capital requirements, debt service, applicable debt maturity requirements, and operating expenses through December 31, 2014. The Company’s ability to continue as a going concern is highly dependent upon (i) management’s ability to re-establish its business model and equal or exceed its planned operating cash flows (ii), maintain continued availability on its line of credit and the ability to obtain additional financing or capital to fund its debt service obligations coming due and operating expenses. | |
These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern. 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 and cannot be expected based on past results. | |
We completed the development of a children’s pain relief rapid orally disintegrating 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 orally disintegrating products. In January 2014, the Company formed a joint venture entity, Global Pharma Hub, Inc., for the licensing, marketing and distribution of our pediatric RapiMed® acetaminophen in China. On March 10, 2014, we received a $200,000 purchase order for our children’s pain relief rapid orally disintegrating 80mg tablets from Global Pharma Hub for the China market. However, we estimate that we will need approximately $1.5 million of incremental funding to launch RapiMed® products in the United States. The funding for launching the rapid orally disintegrating products in the U.S. 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 | 12 Months Ended | ||
Dec. 31, 2013 | |||
Accounting Policies [Abstract] | ' | ||
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||
A summary of significant accounting policies follows: | |||
a. Principles of Consolidation - The consolidated financial statements include the accounts of the Company and all of its subsidiary in which a controlling interest is maintained. All significant inter-company accounts and transactions have been eliminated in consolidation. Investments in entities in which the Company does not have a controlling financial interest, but over which we have significant influence are accounted for using the equity method. Investments in which we do not have the ability to exercise significant influence are accounted for using the cost method. For those consolidated subsidiaries where Company ownership is less than 100%, the outside stockholders’ interests are shown as non-controlling interest. Our equity investment is classified in Investments on the balance sheet. | |||
b. 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. | |||
c. Revenue Recognition – Product revenue associated with our pharmaceutical distribution services 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 revenue from our contract packager 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. | |||
Commission fees are recognized when 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 20% commission on the gross profit (sales less cost of goods sold, freight in and credits and allowances) of products shipped to independent pharmacies on or after November 1, 2013 and 12.5% commission on gross profit of products shipped to independent pharmacies prior to November 1, 2013. | |||
d. Research and Development - Expenditures for research and development (“R & D”) associated with contract research and development provided by third parties are expensed, as incurred. The Company had charges of $0 and $37,524 for research and development expenses for the years ended December 31, 2013 and 2012, respectively. | |||
e. Accounts Receivable Trade, net - Accounts receivable are stated at estimated net realizable value net of the sales allowance due to charge backs. The Chargeback reserve at December 31, 2013 was zero because we did not have any receivable associated with McKesson and we no longer sell product to McKesson. 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 December 31, 2013 and 2012 no allowance for doubtful accounts was deemed necessary. | |||
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 $105,443 to provide for an allowance for charge backs, for a net accounts receivable balance of $290,531. | |||
f. 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. In December 2013, it was discovered that a potential supplier of product who physically had the equipment which we had purchased in 2012, had gone bankrupt. It was determined that the equipment was unrecoverable and, consequently, we wrote-off the assets and expensed $69,650 to the statement of operations. | |||
g. Receivable – Contract Packager - The Company has receivables from Marlex Pharmaceuticals, Inc. (Contract Packager), in the amount of $1,088,598 and $1,579,051 at December 31, 2013 and 2012, respectively. As of December 31, 2013, this receivable consists of PO financing, revenue earned for U.S. government sales and monthly payments due under the settlement agreement entered into on September 6, 2013 (see Note 10). The 2012 receivable consists of the following: a) receivables relating to sales with a government agency in the amount of $772,809, b) the Company’s payment of $600,000 to a vendor for the product to be manufactured on behalf of our Contract Packager, and c) the Company’s advance of $206,241 to our Contract Packager for the purchase of product inventory. In the second quarter of 2013, the Company fully reserved and expensed $1,210,999 which was the remaining balance. Per the September 6, 2013 settlement agreement, the Company is entitled to recover $408,150 of which $81,632 has been recovered during 2013. Consequently the reserved amount has been offset against the allotment and since collectability is still not certain on the remaining receivable, we have fully reserved it as of December 31, 2013. | |||
h. Receivable – related party – WholesaleRx in which we have a 14% investment where we recognized Commission fees when 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. The receivable consists of PO financing, and revenue earned for commission sales agreement entered into in November 1, 2013. No reserve for un-collectability due to short history and no prior bad debts. | |||
i. 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. | |||
In 2013, we entered into an agreement with a company that represents over 700 pharmacy independent operations. Under this agreement, this partner company 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. | |||
j. 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 December 31, 2013 and 2012. | |||
k. Income Taxes - The Company provides for income taxes using the 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 $2,015,200 and $597,591 against deferred tax assets at December 31, 2013 and 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 December 31, 2013 and 2012. | |||
l. Derivative Financial Instruments - Derivative financial instruments consist of financial instruments or other contracts that contain a notional amount and one or more underlying values (e.g. interest rate, security price or other variable) that 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. These contracts require 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. | |||
m. 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 investments approximate fair value because the investments were made in 2013 and the carrying value includes the Company’s share of the investee’s earnings from the date of acquisition. (See Note 8.) 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 13 for fair value of derivative liabilities. | |||
n. Advertising Expenses - The Company expenses advertising costs as incurred. The Company incurred advertising expenses in the amount of $371,786 and $62,875 for the years ended December 31, 2013 and 2012, respectively. | |||
o. 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 financial statements. | |||
p. Stock-Based Compensation – Compensation expense is recognized for the fair value of all share-based payments issued to employees. As of December 31, 2013, the Company has issued 1,320,000 employee stock options that would require calculating the fair value using a pricing model such as the Black-Scholes pricing model, see note 15 for fair value. As of December 31, 2012, the Company had 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. | ||
q. Cost of Goods Sold – In fiscal year 2012 and for the first half of fiscal year 2013, the Company purchases all of its products from one supplier, Marlex Pharmaceuticals Inc., a related party at various contracted prices. Raw materials were re-packaged by Marlex. Upon shipment of product, the Company is charged the contracted price for services provided to ship the product. Cost of goods consists of raw material costs, re-packaging costs and shipping and handling. The Company financed the purchase of inventory based on confirmed purchase orders via a revolving finance agreement, provided by a related party (see notes 6 and 10 below). Beginning is August 2013 we added a second source for supplying our pharmaceutical product needs. These purchases are also financed based on confirmed purchase orders via a revolving finance agreement, provided by a related party. | |||
r. Earnings Per Share - Basic net income (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, options, 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. For details on number of common stock equivalents see Note 18 below. | |||
s. Reclassification - Certain amounts in the financial statements as of and for the year ended December 31, 2012 have been reclassified for comparative purposes to conform to the presentation in the financial statements as of and for the year ended December 31, 2013. | |||
t. New Accounting Pronouncements – | |||
On July 18, 2013, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-11, “ Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ” (“ASU 2013-11”). ASU 2013-11 states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward, except as follows. The unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets to the extent (i) a net operating loss carryforward, a similar tax loss or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, or (ii) the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax assets for such purpose. The amendments in ASU 20103-11 are effective prospectively for interim and annual reporting periods beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact on our financial position, results of operations or cash flows. | |||
In December 2011, the FASB issued ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities,” and in January 2013 issued ASU No. 2013-01, “Clarifying the Scope of Disclosures About Offsetting Assets and Liabilities.” These standards create new disclosure requirements regarding the nature of an entity’s rights of setoff and related arrangements associated with its derivative instruments, repurchase agreements, and securities lending transactions. Certain disclosures of the amounts of certain instruments subject to enforceable master netting arrangements would be required, irrespective of whether the entity has elected to offset those instruments in the statement of financial positions. ASU 2011-11 and ASU 2013-01 are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption of ASU 2011-11 did not have a material impact on the Company’s financial position or results of operations. | |||
Management does not believe there would have been a material effect on the accompanying financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period. |
4_ACCOUNTS_RECEIVABLE_TRADE_NE
4. ACCOUNTS RECEIVABLE TRADE, NET | 12 Months Ended |
Dec. 31, 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 fiscal year ended December 31, 2013 and 2012, were $5,069 and $48,948 respectively. | |
As of December 31, 2013, there were no open receivables sold to a factor. 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 balance sheet. |
5_REVENUES_NET_FROM_CONTRACT_P
5. REVENUES NET, FROM CONTRACT PACKAGER AND COMMISSION FEES | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Business Combinations [Abstract] | ' | ||||||||
5. REVENUES NET, FROM CONTRACT PACKAGER AND COMMISSION FEES | ' | ||||||||
In September 2012, the Company announced that our Contract Packager, secured an 8-year, $79 million pharmaceutical distribution contract with the U.S. government. On September 30, 2012, our Contract Packager began shipping its first order on this distribution contract with the U.S. government. | |||||||||
The Company had a Joint Operating Agreement with the Contract Packager which was superseded by an agreement entered into on September 6, 2013 (see Note 10). Under this September 6th agreement, the Company is entitled 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 U.S. government contacts were: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Sales from U.S. government contract | $ | 6,433,644 | $ | 1,173,207 | |||||
Cost on U.S. government, per agreement | 6,100,006 | 1,020,690 | |||||||
Revenues net, from contract packager | $ | 333,638 | $ | 152,517 | |||||
In August 2013, we entered into an agreement with a pharmaceutical partner which began shipping generic pharmaceutical and OTC products to independent pharmacies. Under the master agreement with our pharmaceutical partner, we received a commission of 12.5% on gross margins of pharmaceutical products shipped prior to November 1, 2013 and 20% on the gross margin of pharmaceutical products shipped after November 1, 2013. During 2013, this commission structure generated commission revenue of $69,902. |
6_RECEIVABLE_AND_OTHER_ASSETSC
6. RECEIVABLE AND OTHER ASSETS-CONTRACT PACKAGER | 12 Months Ended |
Dec. 31, 2013 | |
Receivables [Abstract] | ' |
NOTE 6. RECEIVABLE AND OTHER ASSETS-CONTRACT PACKAGER | ' |
Beginning in fiscal year 2011, the Company loaned money to the 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 December 31, 2013, and 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 of the purchase of the Contract Packager, the loan receivable would be eliminated. Management had determined that the outstanding balance should be fully reserved as of December 31, 2012 and was written off in the quarter ending September 30, 2013. | |
As of December 31, 2013, the outstanding receivable balance is $1,088,598 which consists of a receivable for PO financing revenue earned on U.S. government sales and monthly payments. | |
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 recorded a reserved against this deposit since there was 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 17). This deposit was written off in the quarter ending September 30, 2013 (see Note 8). |
7_RECEIVABLE_RELATED_PARTY
7. RECEIVABLE - RELATED PARTY | 12 Months Ended |
Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ' |
Note 7 - RECEIVABLE- RELATED PARTY | ' |
WholesaleRx in which we have a 14% investment where we recognized Commission fees when 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. The receivable consists of PO financing, and revenue earned for commission sales agreement entered into in November 1, 2013. The balances at December 31, 2013 is $24,223 . No reserve for un-collectability was deemed. |
8_EQUITY_INVESTMENTS
8. EQUITY INVESTMENTS | 12 Months Ended |
Dec. 31, 2013 | |
Equity Method Investments and Joint Ventures [Abstract] | ' |
8. EQUITY INVESTMENTS | ' |
WholesaleRx | |
As of December 31, 2013, the Company has a 14% non-controlling ownership interest in WholesaleRx, Inc., which represents over 700 such independent pharmacy operations and is a DEA and State-licensed to store and distribute controlled substances (which are drugs that have the potential for abuse or dependence and are regulated under the federal Controlled Substances Act). WholesaleRx orders the goods from the manufacturers and has them shipped to its warehouse facility. WholesaleRx then ships the goods to the pharmacies in the bottles as received by the manufacturer. Upon receiving orders from the pharmacies, goods will be sent to them COD which will eliminate any accounts receivable issues. Prior to November 1, 2013, the Company and WholesaleRx had an oral agreement to pursuant to which the Company secured third party financing to fund WholesaleRx’s purchase orders and the Company in consideration of which the Company would receive 12.5% of the WholesaleRx’s “gross profit” for the prior month (which gross profit would consist of (i) sales to all customers minus (ii) cost of goods sold, freight in (to WholesaleRx), credits and allowances). Under the November 1 Agreement, ScripsAmerica agreed to provide purchase order financing to WholesaleRx and purchased a 20% equity stake in WholesaleRx. 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 (as described above) 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. | |
Per the November 1, 2013 agreement with WholesaleRx the Company agreed to make an equity investment of $400,000 for 12,000 shares, which will represent 20% ownership interest in WholesaleRx. The subscription amount is to be paid in three installments ($150,000 upon execution of the agreement, $125,000 on December 31, 2013 (and was paid in January 2014) and $125,000 on February 15, 2014, which has not been made as of April 10, 2014). | |
This investment is accounted for under the equity method because the Company exercises significant influence but does not exercise control. Our initial investment of $275,000 was increased for the equity earnings of our 14% interest in WholesaleRx to $276,956. WholesaleRx’s unaudited financial information as of December 31, 2013 is as follows: (i) Current assets are approximately $137,000 of which inventory was valued at $72,000; (ii) Total assets were approximately $160,000; (iii) Total liabilities were approximately $19,000; and (iv) Stockholders’ equity was approximately $141,000. | |
P.I.M.D International, LLC | |
The Company is the primary beneficiary of P.I.M.D. International, LLC (“PIMD”), a start-up limited liability company based in, and proposing to do business in, Florida and Variable Interest Entity (VIE. Our determination PIMD investment is a variable interest entity (VIE) was based on the fact PIMD’s equity at risk is insufficient to finance its activities. The Company would be considered the primary beneficiary of the VIE as it has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant or the right to receive benefits from the VIE that could potentially be significant. ScripsAmerica receives a majority of its expected profits and losses. We also will provide be the primary financing for inventory purchases through related parties. Our loan receivable of $272,000 with Implex Corporation and PIMD’s loan payable was eliminated in the accompanying consolidated financial statements. The assets and liabilities and revenues and expenses of PIMD have been included in the accompanying consolidated financial statements. At November 1, 2013, PIMD’s beginning capital was $41,000 and they had accumulated deficit of $49,607. During December 2013 the non-controlling interest made a distribution of $119,650, making the total equity attributed to non-controlling interest to be a deficit of $146,566. | |
Details of the loan agreement are as follows: In December, 2013, the Company revised an October 2013 purchase agreement to acquire 90% of the Membership Units in P.I.M.D. International, LLC (“PIMD”), a start-up limited liability company based in, and proposing to do business in, Florida. Although founded approximately 4 years ago, PIMD has had no sales, but has the necessary licenses for operation of a drug wholesale operation. The purchase of the Membership Units in PIMD was subject to certain conditions precedent, of which the most important was that the Company obtain the necessary licenses from Florida (and the DEA) for the ownership of a drug distribution company like PIMD. However, it was determined that securing the licenses was going to require a substantially longer period of time than the parties had anticipated. Consequently, in order to preserve the business opportunity, it was necessary to change the structure of the relationship. Accordingly, the original purchase agreement was cancelled and voided. The funds already advanced by ScripsAmerica to PIMD were converted to a loan and the relationship between PIMD and ScripsAmerica became a Sourcing and Marketing Agreement. Implex Corporation, owned by the Company’s legal counsel, who is a Florida resident, has stepped in to assist with any licensing issues. The Company believes that if licensing is required it will be that of Implex, based in Florida and with a Florida owner. | |
Under this Sourcing and Marketing Agreement, which the Company entered into with PIMD in December 2013, the Company will assist PIMD by helping PIMD to (1) secure advantageous sources of drugs and (2) secure marketing and sales assistance in selling the drugs. For these services, the Company will receive a “Sourcing and Marketing Fee” which is 45% of the “Calculated Basis” to be calculated under a formula in the Sourcing and Marketing Agreement. | |
The funds already advanced by ScripsAmerica to PIMD were converted to a loan. Implex, a related party, borrowed $272,000 from ScripsAmerica at an interest rate of 2% and it has re-loaned the funds to PIMD at an interest rate of 5%. Implex will keep the 3% differential. The Company’s loan to Implex and Implex’s loan to PIMD are both for a 5-year period. Implex will be entering into a “Business Development and Retention Agreement” with PIMD to assist PIMD with the development of its business. | |
Main Avenue Pharmacy, Inc. agreement with Implex Corporation a related party | |
On January 29, 2014, Implex Corporation, which is owned by our legal counsel, Richard C. Fox, entered into a stock purchase agreement with the owner to acquire the specialty pharmacy Main Avenue Pharmacy, Inc., located in Clifton, New Jersey, for $550,000. The purchase price will be paid in installments and the shares will be held by an escrow agent until the final payment is made. Under the purchase agreement, the final agreement is to be made on July 11, 2014 (unless extended by the parties). Since ScripsAmerica will have significant controlling interest via related party relationships and will be the primary beneficiary the company will consolidate financial activities of Main Avenue Pharmacy In. in first quarter 2014. | |
For details of this transactions see note 20. |
9_PREPAID_EXPENSES_AND_OTHER_C
9. PREPAID EXPENSES AND OTHER CURRENT ASSETS | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Prepaid Expense and Other Assets, Current [Abstract] | ' | ||||||||
Note 9 - PREPAID EXPENSES AND OTHER CURRENT ASSETS | ' | ||||||||
Prepaid expenses and other current assets consist of the following : | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Prepayment for product to be manufactured | 275,000 | – | |||||||
Prepaid insurances | 25,400 | 23,676 | |||||||
Deferred financing costs, net | 27,575 | 38,076 | |||||||
Prepaid consulting | – | 114,268 | |||||||
Prepaid other | 1,698 | 22,800 | |||||||
TOTAL PREPAID EXPENSES AND OTHER CURRENT ASSETS | 329,673 | 198,820 | |||||||
10_CANCELLATION_OF_MATERIAL_DE
10. CANCELLATION OF MATERIAL DEFINITIVE AGREEMENT - CONTRACT PACKAGER | 12 Months Ended |
Dec. 31, 2013 | |
Cancellation Of Material Definitive Agreement - Contract Packager | ' |
Note 10 - CANCELLATION OF MATERIAL DEFINITIVE AGREEMENT - CONTRACT PACKAGER | ' |
On September 6, 2013, the Company and Marlex Pharmaceuticals, Inc., its former Contract Packager, entered into a settlement agreement 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 U.S. government, (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. The settlement agreement provided mutual releases, continued the U.S. government arrangement under modified terms, as well as a partial reimbursement over fifteen months for previous amounts due the Company. | |
This agreement provides Marlex with financing through a related party, Development 72 LLC, for the continuance of its pharmaceutical distribution contract with the U.S. government and for Marlex to make 15 monthly payments to the Company with respect to prior shipments under the U.S. government 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 U.S. government contract had been revised in terms of the rate and the number of bottles of product sold to the U.S. government for which the Company would receive revenue. | |
To protect our position with respect to the RapiMed® products we also terminated the Product Development, Manufacturing and Supply Agreement with the Contract Packager. All development costs through the date of the cancellation of this agreement have previously been expensed and paid. The Company subsequently entered into a manufacturing and supply contract directly with the manufacturer of this technology for the RapiMed® products; however, that agreement was terminated in the first quarter of 2014. | |
Pursuant to the September 6th settlement agreement, the principals of the Contract Packager returned 500,000 shares of common stock of the Company which were previously valued at $50,000, and which they had received under consulting agreements and another 400,000 shares of common stock of the Company issued to them that would be held as security for the payments due to the Company under this September agreement. In September 2013, the Company retired the 500,000 shares and reversed the consulting expense previously incurred through additional paid in capital. |
11_RELATED_PARTY_TRANSACTIONS
11. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ' |
11. RELATED PARTY TRANSACTIONS | ' |
In January 2013, the Company entered into consulting agreement with Implex Corporation, a consulting firm owned by the Company’s legal counsel. The initial agreement terms are for six months and the agreement shall automatically be renewed for a successive month period(s) until one party gives written notice to terminate the agreement thirty days prior to the next termination date. Fees are $25,000 per month and such fees shall be paid in shares of the Company’s common stock rather than cash so as to permit the Company to conserve cash. During 2013 the Company issued to Implex Corporation 824,956 shares of common stock at a fair value of $259,996. | |
During fiscal year 2013, the Company paid $120,000 in consulting fees and $23,231 for interest expense on loans to a consulting firm owned by the Company’s CEO and a note payable owned to the wife of the CEO. The Company also paid $178,000 in consulting fees to a consulting firm owned by the Company’s Chief Financial Officer. | |
During fiscal year 2012, the Company received payment of $6,055 from a stockholder, who is also an officer of the Company. As of December 31, 2012 and 2011, the outstanding balance is $0 and $6,055, respectively, and is classified as notes receivable - related party- net. | |
In 2012, the Company paid $120,000 in consulting fees and interest expense on loans to a consulting firm owned by the Company’s CEO. The Company issued 114,288 shares of common stock valued at $20,000 to the consulting firm owned by the CEO for services provided, and the Company accrued $5,000 for services provided in 2012 and accrued $4,000 for interest expense on a note payable to the wife of the CEO. The Company also paid $180,000 in consulting fees to a consulting firm owned by the Company’s Chief Financial Officer. | |
See note 12 for related party debt | |
See note 19 for purchase order financing with related party | |
12_DEBT
12. DEBT | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
NOTE 12. DEBT | ' | ||||||||
Debt consists of the following as of December 31, 2013 and 2012: | |||||||||
31-Dec-13 | 31-Dec-12 | ||||||||
Line of credit | 99,223 | 40,059 | |||||||
Debt with related party | 352,816 | 464,837 | |||||||
12% Fixed rate Convertible notes payable | 574,778 | 719,400 | |||||||
12% Fixed rate Convertible notes payable-related party | 120,738 | 130,000 | |||||||
8% variable convertible notes payable | 116,334 | 64,832 | |||||||
10% variable convertible notes payable | 179,291 | – | |||||||
12% variable convertible notes payable | 48,230 | – | |||||||
Total notes payable | 1,491,410 | 1,419,128 | |||||||
Less current maturities | 511,590 | 216,912 | |||||||
Long-term maturities | 979,820 | 1,202,216 | |||||||
Debt discounts consist of the following: | |||||||||
8% variable convertible notes payable | 286,166 | 50,918 | |||||||
10% variable convertible notes payable | 100,709 | – | |||||||
12% variable convertible notes payable | 40,794 | – | |||||||
427,669 | 50,918 | ||||||||
Line of Credit | |||||||||
In October 2013, the Company’s line of credit from Wells Fargo Bank was renewed. This line of credit will allow the Company to borrow up to a maximum of $100,000, at an interest rate of prime plus 6.25% (of 9% at December 31, 2013). The line is secured by a personal guarantee by the Company’s CEO. The outstanding borrowings under this line of credit at December 31, 2013 and 2012 were $99,222 and $40,059, respectively. The Company incurred interest expense under this line of credit of approximately $3,725 and $580 for the years ended December 30, 2013 and 2012, respectively. | |||||||||
Debt with related party | |||||||||
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® rapid orally disintegrating 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® rapid orally disintegrating 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 the manager of Development 72, Andrius Pranskevicius, is a member of the Company’s board of directors. There were no sales during 2013 and 2012 related to and therefore no royalties expensed or owed. | |||||||||
In the event of a default on our loan from Development 72, the interest rate on the loan will increase to 13% for as long as the default continues. 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 in its loan agreement with Development 72, 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 fiscal, 2013, was $37,289. The outstanding balance at December 31, 2013 and 2012, was $352,816 and $464,837, respectively with the current liability balance of $122,529 and $112,021, respectively. | |||||||||
12% Fixed rate Convertible notes payable | |||||||||
The Company has obtained loans in various amounts beginning in 2011, these notes currently have terms of no required principal payment until maturity which currently is January 30, 2015, and November 30, 2015. The principal portion of these notes can be converted into common stock at any time during the term of the loan at the rate of $0.17 per share at the option of the lender. These notes provides for interest only payments of 3%, payable quarterly (12% annually), in cash, or common stock of the Company at $0.17 per share, at the option of the lender. | |||||||||
In December 2013, the Company and the lenders mutually agreed to change the conversion rate for loans issued in 2012 from $.25 per share to $.17 per share and also agree to extend the maturity date from January 30, 2014 to January 30, 2015. In addition, for some of these loans by mutual consent the interest rate was decreased from 2% per month to 1% per month. The Company determined that the resulting modification of the these notes were not substantial in accordance with ASC 470-50, “Modification and Extinguishments.” During fiscal year 2013 the following activity occurred relating various notes in this category: the Company received $418,200 in cash for several new convertible promissory notes, the Company made $115,522 in principal payments, $229,400 of principal was converted into new notes with new terms which are disclose in the variable convertible description, $230,000 of principal was retired via a liability exchange for stock. The Company recorded interest expense for fiscals years 2013 and 2012, of $77,250 and $86,164, respectively. | |||||||||
12% Fixed rate Convertible notes payable-related party | |||||||||
The Company obtained loans in the amount of $80,000 in 2011 from a company owned by ScripsAmerica Company’s president and CEO. There is no required principal payment on the note until maturity which is January 30, 2015. 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 $0.17 per share at the option of the lender. These notes provides for interest only payments of 3%, payable quarterly (12% annually), in cash, or common stock of the Company at $0.17 per share, at the option of the lender. | |||||||||
In December 2013, the Company and the lender mutually agreed to change the conversion rate from $.25 per share to $.17 per share and also agree to extend the maturity date from January 30, 2014 to January 30, 2015. In 2012 by mutually consent the interest rate was changed from 2% per month to 1% per month effective October 1, 2012. As of December 31, 2013 and 2012 the principal balance is $80,000. The Company recorded interest expense for fiscals years 2013 and 2012, of $9,600 and $16,000, respectively. | |||||||||
In 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 $0.17 per share, at the option of the lender. There is no required principal payment on the note until maturity which is January 30, 2015. 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 $0.17 per share at the option of the lender. The note can be extended by mutual consent of the lender and the Company. In December 2013, the Company and the lender mutually agreed to change the conversion rate from $.25 per share to $.17 per share and also agree to extend the maturity date from January 30, 2014 to January 30, 2015. The Company determined that the resulting modification of these notes were not substantial in accordance with ASC 470-50, “Modification and Extinguishments.” 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. In December 2013 the Company made a cash principal payment in the amount of $9,262. As of December 31, 2013 and 2012 the principal balance is $40,738 and $50,000, respectively. The Company recorded interest expense for fiscals years 2013 and 2012, of $6,000,and $16,000, respectively. As of December 31, 2012, the Company has accrued $10,500 in royalties. In fiscal 2013 the Company issued 224,944 shares of its common stock for payment of royalty expense and recorded a royalty expense of $57,580. Collateral for this loan also includes 200,000 shares of the Company’s common stock. | |||||||||
6% Variable Convertible notes payable | |||||||||
During fiscal year 2013, the Company entered into three securities purchase agreement with a lender pursuant to which the leader purchased a 6% convertible note. The Company received $95,300 in cash for three 6% convertible note payable with a principal amounts totaling 110,000. These notes did not include a discount, but $14,700 was paid directly to a third party on the Company’s behalf. The accrued interest and principal were due one year from the issuance date. 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. | |||||||||
During fiscal year 2013 the lender converted $110,000 of principal into 1,235,868 shares of our common stock valued at $246,941. In connection with these conversion the Company recorded a gain on extinguishment of $40,026 after taking into consideration the carrying value of the note and the corresponding embedded derivative liability related to the note on the conversion date. | |||||||||
8% Variable Convertible notes payable | |||||||||
During fiscal year 2012, the Company entered into two securities purchase agreement with lenders pursuant to which the leader purchased a 8% convertible note. The Company received $110,000 in cash for two 8% convertible note payable with a principal amounts totaling $115,750. These notes did not include a discount, but $5,750 was paid directly to a third party on the Company’s behalf. The accrued interest and principal were due six months and eight months from the issuance date. Since these notes had 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 we recorded the associated embedded derivative as a discount. The conversion price for one loan was equal to 35% of the lowest trading price of the Company’s common stock at the close of trading during the 10 trading day period prior to the date of the notice of conversion. The conversion price for the second loan was equal to 42% of the lowest trading price of the Company’s common stock at the close of trading during the 10 trading day period prior to the date of the notice of conversion. | |||||||||
During fiscal year 2013 the Company paid the sum of $167,365 to the holders of these notes for the principal of $115,750, accrued interest. These payments included a prepayment penalty charge of $51,615. The company extinguished the debt and the embedded derivative of which resulted in a gain on extinguishment of $103,170. | |||||||||
Also during fiscal year 2013 the Company entered into six new securities purchase agreements with various lenders to which the lenders purchased a 8% convertible note. The Company received $462,000 in cash for these 8% convertible notes payable with principal amounts equaling $547,500, some of these notes included a 10% discount the discount amounts equal $27,500 and fees totaling $58,000 were paid directly to third parties for legal and finder fees. The maturity dates for these notes range from six months to nineteen months from date of issuance. The conversion price for these notes is equal to a 40% to 65% discount to the lowest closing trading prices or an average of trading prices of the Company’s common stock at the close of trading during a 5 to 10 trading day period prior the date of the notice of conversion. For some of these note there is a prepayment charge range from 150% to 125% of the principal amount and accrued interest before a set period of time. | |||||||||
Since these notes have a convertible features 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 ranges between 161.6% to 200.7%, risk-free interest rate ranges between .07% to .12% and expected life of 12 to 11 months. The fair value of the derivative at the date issued amounted to $1,329,815 and was revalued at December 31, 2013 to be $606,112. The debt discount associated with this derivative is being amortized over the life of the notes. | |||||||||
In addition to obtaining new borrowings in 2013 lenders converted $237,526 of principal into 2,902,496 shares of our common stock valued at $971,103. Along with these stock conversions the Company paid the sum of $37,410 to the holders of these notes for the principal of $22,174, and accrued interest. These payments included a prepayment penalty charge of $15,236. The company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $238,015. | |||||||||
As of December 31, 2013 and 2012 the principal balance is $402,500 and $115,750 and the unamortized debt discount is $286,166 and $50,918, respectively. The Company recorded interest expense for fiscals years 2013 and 2012, of $112,593 and $36,809, respectively. The Company would have been required to issue 6,044,978 of common stock if the lenders converted on December 31, 2013. The Fair value of the derivative liability at December 31, 2013 and 2012 is $606,112 and $94,477, respectively | |||||||||
10% Variable Convertible notes payable | |||||||||
During fiscal year 2013 the Company entered into twelve new securities purchase agreements with various lenders to which the lenders purchased a 10% convertible note. The Company received $371,167 in cash for these 10% convertible notes payable with principal amounts equaling $405,000, some of these notes included a 10% discount the discount amounts equal $11,250 and fees totaling $22,583 were paid directly to third parties for legal and finder fees. The maturity dates for these notes range from six months to twelve months from date of issuance. The conversion price for these notes are equal to a 35% to 65% discount to the lowest closing trading prices or an average of trading prices of the Company’s common stock at the close of trading during a 5 to 20 trading day period prior the date of the notice of conversion. For some of these note there is a prepayment charge range from 150% to 125% of the principal amount and accrued interest before a set period of time. | |||||||||
Since these notes have a convertible features 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 ranges between 161.6% to 200.7%, risk-free interest rate ranges between .07% to .12% and expected life of 12 to 11 months. The fair value of the derivative at the date issued amounted to $631,361 and was revalued at December 31, 2013 to be $383,337. The debt discount associated with this derivative is being amortized over the life of the notes. | |||||||||
In addition to obtaining new borrowings in 2013 lenders converted $203,702 of principal into 2,654,353 shares of our common stock valued at $1,073,185. Along with these stock conversions the Company paid the sum of $53,339 to the holders of these notes for the principal of $52,468. These payments included a prepayment penalty charge of $871. The company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $204,091. | |||||||||
As of December 31, 2013 and 2012 the principal balance is $280,000 and the unamortized debt discount is $100,709. The Company recorded interest expense for fiscal years 2013 of $178,547. The Company would have been required to issue 4,484,138 of common stock if the lenders converted on December 31, 2013. The Fair value of the derivative liability at December 31, 2013, is $383,337. | |||||||||
12% Variable Convertible notes payable | |||||||||
During fiscal year 2013 the Company entered into seven new securities purchase agreements with various lenders to which the lenders purchased a 12% convertible note. The Company received $233,200 in cash for these 12% convertible notes payable with principal amounts equaling $263,000, some of these notes included a 10% discount the discount amounts equal $15,000 and fees totaling $14,800 were paid directly to third parties for legal and finder fees. The maturity dates for these notes range from three months to twelve months from date of issuance. The conversion price for these notes are equal to a range of 42.5% to 60% discount to the lowest closing trading prices or an average of trading prices of the Company’s common stock at the close of trading during a 5 to 20 trading day period prior the date of the notice of conversion. For some of these note there is a prepayment charge range from 25% to 125% of the principal amount and accrued interest before a set period of time. We did not incur any penalty costs during 2013 for conversion of 12% variable notes payable. | |||||||||
Since these notes have a convertible features 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 ranges used were between 161.6% to 187.9%, risk-free interest rate ranges between .07% to .12% and expected life of 12 to 11 months. The fair value of the derivative at the date issued amounted to $407,104 and was revalued at December 31, 2013 to be $143,944. The debt discount associated with this derivative is being amortized over the life of the notes. | |||||||||
In addition to obtaining new borrowings in 2013 lenders converted $198,326 of principal into 3,028,466 shares of our common stock valued at $655,239. The company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $124,500. | |||||||||
As of December 31, 2013, the principal balance is $89,025 and the unamortized debt discount is $40,795. The Company recorded interest expense for fiscal years 2013 of $116,348. The Company would have been required to issue 1,512,736 of common stock if the lenders converted on December 31, 2013. The Fair value of the derivative liability at December 31, 2013, is $143,944. |
13_DERIVATIVE_FINANCIAL_INSTRU
13. DERIVATIVE FINANCIAL INSTRUMENTS | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Investments, All Other Investments [Abstract] | ' | ||||||||
Note 13 - 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-Dec-13 | |||||||
Volatility | 61.7% - 63.7% | 110.4% - 228.5% | |||||||
Expected life (in years) | .5 – 2.5 | .03 – .6 | |||||||
Risk-free interest rate | .12% - .35% | .07% - .12% | |||||||
Dividend yield | 0.00% | 0.00% | |||||||
These derivative financial instruments are indexed to an aggregate of 13,176,251 shares and 702,852 shares of the Company’s common stock as of December 31, 2013 and December 31, 2012, respectively, and are carried at fair value using level 2 inputs. The balance at December 31, 2013 and December 31, 2012 was $1,333,393 and $94,477, respectively. | |||||||||
Activity during the current period is as follows: | |||||||||
Derivative liabilities at December 31, 2011 | $ | – | |||||||
New derivative liabilities issued in 2012 | 87,724 | ||||||||
Extinguishment | – | ||||||||
Revalue at reporting period | 6,753 | ||||||||
Derivative liabilities at December 31, 2012 | $ | 94,477 | |||||||
New derivative liabilities issued in 2013 | 2,590,688 | ||||||||
Extinguishment | (2,840,395 | ) | |||||||
Revalue at reporting period | 1,288,623 | ||||||||
Derivative liabilities at December 31, 2013 | $ | 1,133,393 | |||||||
The significant fluctuations in the revaluation of derivative liabilities at December 31, 2013 relate partially to the Company having sufficient trading activity to utilize the actual volatility of the trading of the Company’s common stock as an assumption when computing the fair value of derivative liabilities which were deemed to be sufficient trading activity commencing in January 2013. 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 12. |
14_CONVERTIBLE_PREFERRED_STOCK
14. CONVERTIBLE PREFERRED STOCK | 12 Months Ended |
Dec. 31, 2013 | |
Preferred Stock, Number of Shares, Par Value and Other Disclosures [Abstract] | ' |
NOTE 14. 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 December 31, 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 and as of April 10, 2014 has not exercise his right to do so. (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 a 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 consolidated balance sheets. Because we also had losses for 2012 and 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 $3,470,827 at December 31, 2013. Since we did not generate net income in fiscal years 2013 and 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 December 31, 2013 we have accrued $187,740 which is classified as a long-term liability in the 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. |
15_STOCKHOLDERS_DEFICIT
15. STOCKHOLDERS' DEFICIT | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||
NOTE 15 - STOCKHOLDERS' DEFICIT | ' | ||||||||||||||||
Common Stock | |||||||||||||||||
General | |||||||||||||||||
The preferred shares have a par value of $.001 per share, and the Company is authorized to issue 10,000,000 shares. The preferred stock of the Company shall be issued by the board of directors of the Company in one or more classes or one or more series within any class, and such classes or series shall have such voting powers, full or limited, or no voting powers, and such designations, preferences, limitations or restrictions as the board of directors of the Company may determine, from time to time. | |||||||||||||||||
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. | |||||||||||||||||
Issuances during 2013 | |||||||||||||||||
The Company issued 4,854,952 restricted shares of common stock for cash proceeds of $531,108 in various private subscription agreements during the fiscal year 2013. A significant portion of these issuances where part of securities purchase agreement with Seaside 88, L.P., the details of the transactions are as follows: | |||||||||||||||||
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. | |||||||||||||||||
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 its common stock for gross proceeds of $200,537, of which $7,500 was used to pay the legal fees for Seaside and $19,303 was paid for a finder’s fee. The Company also had closings on (i) December 4, 2013, at which the Company sold to Seaside 841,426 restricted shares of common stock for gross proceeds of $90,926 of which $2,500 was used to pay the legal fees for Seaside. (ii) January 6, 2014, at which the Company sold to Seaside 928,670 restricted shares of common stock for gross proceeds of $69,093 of which $2,500 was used to pay the legal fees for Seaside and (iii) February 4, 2014, at which the Company sold to Seaside 1,342,070 restricted shares of common stock for gross proceeds of $142,527 and (iv) on February 24, 2014 the Company issued 1,615,550 restricted shares of common stock for financing fees which were accrued and expense in 2013 | |||||||||||||||||
During the fiscal year 2013, the Company issued 9,177,027 restricted shares of its common stock to non-employees for services rendered during the year. These services were valued at $3,387,112 and the Company charged its operations in fiscal year 2013. | |||||||||||||||||
During the fiscal year 2013, the Company issued 333,633 restricted shares of its common stock in connection with conversion of 478,440 warrants in a cashless transaction. | |||||||||||||||||
During the fiscal year 2013, the Company issued 136,000 restricted shares of its common stock in connection with payment provided by members of the board of directors during the year. The Company charged its operations $35,200 in fiscal year 2013. | |||||||||||||||||
During the fiscal year 2013, the Company issued 1,339,616 restricted shares of its common stock to non-employees for payment of royalties. The payment of royalties was valued at $346,802. | |||||||||||||||||
On November 18, 2013, the Company issued 8,690,000 unrestricted shares of its common stock in a debt payment agreement whereas debt financing company (Ironridge) purchased from ScripsAmerica liabilities from our creditors previously incurred by the us. The liabilities and expenses paid on our behalf were valued at $755,658 and the Company recorded a Financing fee of $547,842. | |||||||||||||||||
During the fiscal year 2013, the Company issued 11,456,639 shares of its common stock for the conversion of approximately $1,805,000 of principal and interest of our convertible notes payable. | |||||||||||||||||
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. | |||||||||||||||||
Issuances during 2012 | |||||||||||||||||
The Company issued 300,000 restricted shares of common stock for cash proceeds of $30,000 during the fiscal year 2012. | |||||||||||||||||
In March 2012, the Company received payment for the balance of the outstanding subscription stock receivable, $170,800. This payment is related to an April 29, 2011 transaction where the Company agreed to issue 5,200,000 restricted shares of common stock to four purchasers for an aggregate purchase price of $176,000. The stock subscription receivable was recorded as a, contra equity account, in the equity section of the balance. The Company had received $5,200 in fiscal year 2011. | |||||||||||||||||
During the year ended December 31, 2012, the Company issued 1,345,000 restricted shares of its common stock to non-employees for services rendered during the year or to be rendered. These services were valued at $231,100 and the Company charged its operations $122,906 in fiscal year 2012. The unamortized amount of prepaid services at December 31, 2012 is $108,194. | |||||||||||||||||
During the year ended December 31, 2012, the Company issued 124,000 restricted shares of its common stock in connection with services provided by members of the board of directors during the fiscal year 2012. The Company charged its operations $34,480 in fiscal year 2012. | |||||||||||||||||
The Company issued 114,288 restricted shares of its common stock to the Company’s President and CEO for payment of his salary in lieu of cash compensation payments for services rendered during the year ended December 31, 2012. These services were valued at $20,000 and the Company charged this amount to operations in fiscal year 2012. | |||||||||||||||||
On March 12, 2012, the holders of a long-term note payable in the amount of $250,000 elected to convert the convertible note payable into 2,000,000 shares of the Company’s common stock. | |||||||||||||||||
Warrants | |||||||||||||||||
On August 15, 2012, the Company issued 228,572 common stock warrants to a third party for debt issue costs. These warrants have a strike price of $0.39, are 100% vested and have a contractual life of 5 years, expiring on August 14, 2017. The Company calculated the fair value of the warrants to be $34,588, using the Black-Scholes option pricing model. The fair value of $34,588 will be amortized over the life of the long term debt. The Company recorded a $3,243 in interest expense related to the amortization of the warrants for the year ended December 31, 2012. The assumptions used in computing the fair value are a closing stock price of $0.39, expected term of 2.5 years utilizing the “plain vanilla” method. Also since the Company does not have a history of stock prices over 5 years the Company used the expected volatility of three peer entities within our sector whose share or option price are publicly available, per Staff Accounting Bulletin topic 14 interpretations and guidance. The average of the three comparable companies was used to determine that the expected volatility of 63.7 %, while the risk free rate was estimated to be .35%. | |||||||||||||||||
Summary of our warrant activity and related information for 2013 and 2012 | |||||||||||||||||
Number of shares under warrants | Weighted Average Exercise price | Weighted Average Remaining Contractual term in Years | Aggregate Intrinsic Value | ||||||||||||||
Outstanding at December 31, 2011 | 478,440 | $ | 0.17 | 4.3 | $ | – | |||||||||||
Granted | 228,572 | $ | 0.39 | 4.6 | |||||||||||||
Exercised | – | ||||||||||||||||
Cancelled/expired | – | ||||||||||||||||
Outstanding at December 31, 2012 | 707,012 | $ | 0.24 | 3.7 | $ | 45,700 | |||||||||||
Granted | – | ||||||||||||||||
Exercised | (478,440 | ) | $ | 0.17 | |||||||||||||
Cancelled/expired | – | ||||||||||||||||
Outstanding at December 31, 2013 | 228,572 | $ | 0.39 | 3.6 | $ | – | |||||||||||
Vested and exercisable at December 31, 2013 | 228,572 | ||||||||||||||||
2012 | |||||||||||||||||
Fair value per warrant | $0.15 | ||||||||||||||||
Risk-free interest rate | .35% - 1.3% | ||||||||||||||||
Volatility | 63.70% | ||||||||||||||||
Terms in years | 2.5 | ||||||||||||||||
Dividend yield | 0% | ||||||||||||||||
Options | |||||||||||||||||
On September 11, 2013 the Company issued 2,000,000 options to a consultant for services provided. These options vested immediately and will expire 3 years from the date of issuance. The option price is $.15 and the fair value of these warrants is $249,335 which was expensed to selling, general and administrative. | |||||||||||||||||
On November 6, 2013 the Company issued 1,000,000 options to a consultant for services provided. These options vested immediately and will expire 3 years from the date of issuance. The option price is $.22 and the fair value of these warrants is $190,494 which was expensed to selling, general and administrative. | |||||||||||||||||
On October 15, 2013, the Company issued 1,320,000 options to members of the Board of directors for services provided. These options vested immediately and will expire 3 years from date of issuance. The option price is $.15 and the fair value of these warrants is $166,373 which was expensed to selling, general and administrative. | |||||||||||||||||
On December 18, 2013, the Company issued 60,000 options to members of the Board of directors for services provided. These options vested immediately and will expire 3 years from date of issuance. The option price is $.13 and the fair value of these warrants is $6,464 which was expensed to selling, general and administrative. | |||||||||||||||||
On December 31, 2013, the Company issued 635,000 options to members of the Board of directors for services provided. These options vested immediately and will expire 3 years from date of issuance. The option price is $.14 and the fair value of these warrants is $73,893 which was expensed to selling, general and administrative. | |||||||||||||||||
Number of shares under options | Weighted Average Exercise price | Weighted Average Remaining Contractual term in Years | Aggregate Intrinsic Value | ||||||||||||||
Outstanding at December 31, 2012 | – | $ | – | 0 | $ | – | |||||||||||
Granted | 5,015,000 | $ | 0.16 | 3 | |||||||||||||
Exercised | – | ||||||||||||||||
Cancelled/expired | – | ||||||||||||||||
Outstanding at December 31, 2013 | 5,015,000 | $ | 0.16 | 2.8 | $ | – | |||||||||||
Vested and exercisable at December 31, 2013 | 5,015,000 | ||||||||||||||||
2013 | |||||||||||||||||
Option fair value | $ 0.10 - $ 0.19 | ||||||||||||||||
Risk-free interest rate | .34% - .78% | ||||||||||||||||
Volatility | 190.06% | ||||||||||||||||
Terms in years | 3 | ||||||||||||||||
Dividend yield | 0% | ||||||||||||||||
16_INCOME_TAXES
16. INCOME TAXES | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||||||||||
16. INCOME TAXES | ' | ||||||||||||||||
As of December 31, 2013, the Company had a net operating loss carryforward of approximately $5,927,000 available to reduce future federal and state taxable income, expiring through 2033. We established valuation allowance of $2,015,200 and $597,591, or 100%, as of December 31, 2013 and 2012, respectively, of the deferred tax asset because of the uncertainty of the utilization of the operating losses in future periods. The allowance increased $1,417,609 and $597,591 during 2013 and 2012, respectively. | |||||||||||||||||
Future ownership changes may limit the future utilization of these net operating loss and research and development tax credit carry-forwards as defined by the Internal Revenue Code. We performed an analysis and determined that the Net operating losses and research and development expenses are not limited under Section 382. The net deferred tax asset has been fully offset by a valuation allowance due to our history of taxable losses and uncertainty regarding our ability to generate sufficient taxable income in the future to utilize these deferred tax assets. | |||||||||||||||||
The Company files federal and Delaware state income taxes. Currently, there are no tax examinations in progress, nor has the Company had any federal or state examinations since its inception in 2008. All of the Company’s tax years are subject to federal and state tax examination. | |||||||||||||||||
Our provision for income taxes at December 31, 2013 and 2012 consisted of the following | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Current | |||||||||||||||||
Federal | $ | – | $ | 41,200 | |||||||||||||
State | – | 1,797 | |||||||||||||||
Deferred | |||||||||||||||||
Federal | – | – | |||||||||||||||
Income Tax Expense | $ | – | $ | 43,179 | |||||||||||||
The effective tax rates differ from the statutory rates for 2012 and 2011 primarily due to the following: | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Amount | Effective Tax Rate | Amount | Effective Tax Rate | ||||||||||||||
Percentage | Percentage | ||||||||||||||||
Federal income tax liability (benefit) | $ | (3,794,531 | ) | -34 | % | $ | (618,542 | ) | -34 | % | |||||||
State taxes | – | 0 | % | 1,979 | 0.1 | % | |||||||||||
Permanent deductible expense | 1,700,633 | 15.2 | % | 62,151 | 3.4 | % | |||||||||||
Adjustment in valuation allowance | 2,093,898 | 18.8 | % | 587,591 | 19 | % | |||||||||||
Tax expense (benefit) | $ | – | 0 | % | $ | 43,179 | -2.4 | % | |||||||||
The components of the net deferred tax assets (liabilities) at December 31, 2013 and 2012 are as follows: | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Deferred Tax asset | |||||||||||||||||
Allowance for doubtful accounts | $ | 423,497 | $ | 252,791 | |||||||||||||
Net Operating Loss | 1,591,703 | 344,800 | |||||||||||||||
Total Deferred Tax asset | 2,015,200 | 597,591 | |||||||||||||||
Deferred Tax Liability | – | – | |||||||||||||||
Less Valuation Allowance | 2,015,200 | 597,591 | |||||||||||||||
Total Deferred tax asset | $ | – | $ | – | |||||||||||||
The Company periodically assesses the likelihood that it will be able to recover its deferred tax assets and determines if a valuation allowance is necessary. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income. As a result of this analysis the Company concluded that it is more likely than not that the Company will not recover the deferred tax asset and, accordingly, recorded a valuation allowance for the years ended December 31, 2013 and 2012. |
17_COMMITMENTS_AND_CONTINGENCI
17. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
NOTE 17 - 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 RapiMed® rapid orally disintegrating 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. In 2014, the Company terminated this agreement with the pharmaceutical manufacturer due to the manufacturer’s deteriorating financial condition. There were no obligations due to the third party at December 31, 2013 and through the termination date. | |
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 third quarter 2013 (see note 10). 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 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. There have been no shipments through December 31, 2013 applicable to this royalty payment. | |
The holder of a $320,000 note payable 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. During fiscal year 2013 the Company issued the holder of this note 1,114,672 shares of its common stock for payment of royalty expense. In addition a holder of a $50,000 note payable, 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 fiscal year 2013 the Company issued 224,944 shares of its common stock for payment of royalty expense. The Company has recorded a royalty expense of $304,290 for fiscal year 2013, respectively. | |
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 was expensed to selling, general and administrative through balance of 2013. 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 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. In January 2014 licensing agreements were entered into (see note 21 below Global Pharma Hub) and the 400,000 shares of ScripsAmerica’s common stock was issued at a value of $52,000. | |
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 were granted 100,000 stock options for each year served commencing in 2012. The chairman of the Board was granted 135,000 stock options for each year served. The effective date of the grants was October 7, 2013. The options vest immediately and the option exercise price was 110% of the market price on the grant date. Additionally, directors will also receive 10,000 options for each board meeting attended 5,000 options for each committee meeting attended. In fiscal year 2013 the Company issued 2,015,000 options that had a fair value of $246,731 which were expensed to the statement of operations (see note 13 option). | |
Operating Lease - In November our subsidiary PIMD (see note 19) entered into a 25 month operating lease for a distribution facility in Doral Florida. The lease begins January 1, 2014 and expires January 31, 2016, monthly rent is $4,585 for the first thirteen months with the first month free and $4,724 for the last twelve months. The total minimum lease payments are $111,714, for 2014, $50,441 for 2015, $56,548, and for 2016 the are $4,724. |
18_EARNINGS_PER_COMMON_SHARE
18. EARNINGS PER COMMON SHARE | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||
18. EARNINGS PER COMMON SHARE | ' | ||||||||||||
The basic earnings per share or loss per share is computed using the weighted average number of common shares outstanding. The assumed exercise of common stock equivalents were excluded from the calculation of diluted net loss per common share for the years ended December 31 2013 and 2012 because their inclusion would have been anti-dilutive. As of December 31, 2013, common stock equivalents consisted of preferred stock convertible into 5,980,504 shares, warrants convertible into 228,572 shares, options convertible into 5,015,000 shares and notes payable convertible into 16,016,229 shares of common stock. As of December 31, 2012, common stock equivalents consisted of preferred stock convertible into 5,980,504 shares, warrants convertible into 707,012 shares and notes payable convertible into 4,220,452 shares of common stock. | |||||||||||||
For the Year Ended December 31, 2013 | |||||||||||||
Income | Shares | Per Share | |||||||||||
(Numerator) | (Denominator) | Amount | |||||||||||
Net Loss attributed to ScripsAmerica, Inc. | $ | (11,195,096 | ) | ||||||||||
Preferred stock dividends | (83,440 | ) | |||||||||||
Net Loss attributable to common stockholders | $ | (11,278,536 | ) | ||||||||||
Basic loss per common share | $ | (11,278,536 | ) | 68,119,715 | $ | (0.17 | ) | ||||||
Diluted earnings per common share | $ | (11,278,536 | ) | 68,119,715 | $ | (0.17 | ) | ||||||
For the Year Ended December 31, 2012 | |||||||||||||
Income | Shares | Per Share | |||||||||||
(Numerator) | (Denominator) | Amount | |||||||||||
Net Loss | $ | (1,861,832 | ) | ||||||||||
Preferred Stock Dividend | (83,440 | ) | |||||||||||
Basic loss per common share | $ | (1,945,272 | ) | 55,140,192 | $ | (0.04 | ) | ||||||
Effect of dilutive securities - notes payable | – | – | – | ||||||||||
Diluted earnings per common share | $ | (1,945,272 | ) | 55,140,192 | $ | (0.04 | ) | ||||||
19_PURCHASE_ORDER_FINANCING_WI
19. PURCHASE ORDER FINANCING WITH RELATED PARTY | 12 Months Ended |
Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ' |
NOTE 19 - 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 fiscal year 2013, the Company financed $5,114,321 of its purchase orders and incurred an interest expense of $73,232. As of December 31, 2013 and 2012, the unpaid purchase order finance balance was $1,037,494 and $578,280, respectively, and accrued fees and interest are $24,192 and $8,280, respectively. |
20_CONCENTRATIONS
20. CONCENTRATIONS | 12 Months Ended |
Dec. 31, 2013 | |
Risks and Uncertainties [Abstract] | ' |
NOTE 20 - CONCENTRATIONS | ' |
During the fiscal year 2013 the Company purchased product from two suppliers, and in 2012 the Company purchased 100% of its product packaging from its Contract Packager. A disruption in the availability of product packaging from the Company’s suppliers could cause a possible loss of sales, which could affect operating results adversely. | |
During the year ended December 31, 2013, the Company derived approximately $403,000, or 73%, of its revenue from two customers, of this total one customer accounted for 61% and the other accounted for 12%. During the year ended December 31, 2012, the Company derived approximately $3,524,000 or 90% of its revenue from two customers, of this total one customer accounted for 74% and the other accounted for 16%. | |
As of December 31, 2012, the Company had two customers in our accounts receivable – trade, one customer accounted for $175,054, or 60% of the Company’s accounts receivable balance of $290,531. |
21_SUBSEQUENT_EVENTS
21. SUBSEQUENT EVENTS | 12 Months Ended | ||
Dec. 31, 2013 | |||
Subsequent Events [Abstract] | ' | ||
NOTE 21 - SUBSEQUENT EVENTS | ' | ||
From January 1, 2014 to April 1 2014, the Company issued 33,817,597 shares of common stock for the following transactions: a) We issued 19,207,420 shares of common stock in a private subscription sale , for $1,009,067 in cash, b) 642,703 shares for payment of royalty expense valued at $79,233, c) 2,531,400 shares for services performed and to be performed, valued at $306,768, d) 6,622,504 shares for conversion of $416,895 of principal for various convertible notes payable, of which the fair value of stock issued was $957,117, e) 32,000 shares were issued to members of the Board of Directors for services provided, and f) As part of our securities purchase agreement with Seaside (see note 17) We issued the following shares in 2014:(i) January 6, 2014, sold to Seaside 928,670 restricted shares of common stock for gross proceeds of $69,093 of which $2,500 was used to pay the legal fees for Seaside and (ii) February 4, 2014, sold to Seaside 1,342,070 restricted shares of common stock for gross proceeds of $142,528 and (iii) on February 24, 2014 we issued 1,615,550 restricted shares of common stock for financing fees which were expensed in 2013. (iv) we issued 925,153 restricted shares of common stock for gross proceeds of $58,200, g) on January we issued 887,7820 restricted shares for $125,381 in cash as part of a settlement agreement with GEM see cancellation agreement below in this note for details | |||
In January 2014, the Company formed Global Pharma Hub, Inc. with Forbes Investments, Ltd. (and its assigns) and Sterling, LLC (and its assigns) for the purpose of marketing, supplying and distributing OTC products as RapiMed® orally dissolving tablets in foreign markets. The initial market is in China, where Global Pharma Hub began marketing and distributing our RapiMed® children’s acetaminophen in China. The ownership of Global Pharma Hub, Inc. is as follows: (a) the Company owns 37%, (b) Forbes Investments, Ltd. owns 37% and (c) Sterling, LLC owns 26%. Forbes Investment, Ltd. is based in Shenzhen, China. The parties have a written understanding of this joint venture although a final, binding contract is in process of being prepared for signature. | |||
SCRIPSAMERICA, INC. | |||
Notes to Consolidated Financial statements | December 31, 2013 and 2012 | ||
In January 2014, we entered into an exclusive world-wide licensing agreement with Global Pharma Hub for the marketing and distribution of our children’s pain reliever and fever reducer OTC product called RapiMed® in all countries except the United States. The license will allow Global Pharma Hub to market and distribute the children’s acetaminophen orally dissolving tablets under our registered trademark, RapiMed® as well as our registered trade mark “MELTS IN YOUR CHILD'S MOUTH”. In order to keep the license agreement, Global Pharma Hub must meet minimum sales quotas terms which are as follows: | |||
1 | $500,000 in purchase orders during first 12 months of License Agreement; | ||
2 | $1,400,000 in purchase orders during second 12 months; and | ||
3 | $2,400,000 in purchase orders during the third 12 months. | ||
Global Pharma Hub signed an exclusive sub-licensing agreement for RapiMed in the territory of Hong Kong on January 28, 2014, with NYJJ Hong Kong Ltd. to generate initial and ongoing orders for the product following its registration approval by the Hong Kong government. The minimum sales quotas terms of the exclusive Hong Kong sub-licensing agreement are as follows: | |||
1 | $550,000 in purchase orders during first 12 months; | ||
2 | $1,500,000 in purchase orders during the second 12 months; and | ||
3 | $2,500,000 in purchase orders during the third12 months | ||
On February 22, 2014, Global Pharma Hub signed an exclusive sub-licensing agreement with Jetsaw Pharmaceutical, Inc. the marketing and distribution of RapiMed® pediatric acetaminophen in the territory of Canada for an initial term of three years. The minimum sales quotas terms of the exclusive Hong Kong sub-licensing agreement are as follows: | |||
1 | $120,000 in purchase orders during first 12 months; | ||
2 | $220,000 in purchase orders during the second 12 months; and | ||
3 | $320,000 in purchase orders during the third 12 months. | ||
Main Ave Pharmacy Management agreement: | |||
On January 29, 2014, Implex Corporation, which is owned by our legal counsel, Richard C. Fox, entered into a stock purchase agreement with the owner to acquire the specialty pharmacy Main Avenue Pharmacy, Inc., located in Clifton, New Jersey, for $550,000. The purchase price will be paid in installments and the shares will be held by an escrow agent until the final payment is made. Under the purchase agreement, the final agreement is to be made on July 11, 2014 (unless extended by the parties). | |||
On February 20, 2014, Implex Corporation and Main Avenue Pharmacy, Inc., the specialty pharmacy being acquired by Implex, entered into a Business Management Agreement with ScripsAmerica, effective as of February 7, 2014. Under this agreement, Implex has engaged the Company to manage the day to day business operations of Main Avenue Pharmacy, subject to the directives of Implex. The Company’s day to day management responsibilities includes financial management but excludes any matters related to licensing and those responsibilities which require Federal or state licensure (“Licensing Matters”). Prior to the final closing, the Licensing Matters will be handled by Main Avenue Pharmacy’s owner and after the final closing Implex will be responsible for managing Licensing Matters. The Company will also provide funding (as a loan or advance), to the extent not covered by the funds of the pharmacy, to pay all costs and expenses incurred in the operation of Main Avenue Pharmacy. | |||
Implex will be entitled to make monthly draws on the first day of each month, as owner of Main Avenue Pharmacy, as follows: (i) commencing on April 1, 2014 and continuing to, and including, March 1, 2015, $47,003 plus $30 for each prescription processed by Main Avenue Pharmacy during the preceding month (except that the first such payment shall include prescriptions processed since the initial closing on February 7, 2014); (ii) commencing on April 1, 2015 and continuing to, and including, March 1, 2016, $8,827 plus $30 for each prescription processed by Main Avenue Pharmacy during the preceding month; (iii) commencing on April 1, 2016 and continuing thereafter plus $30 for each prescription processed by Main Avenue Pharmacy during the preceding month and (iv) commencing on the 10,001 prescription processed by Main Avenue Pharmacy the rate will be reduced to $10 for each prescription processed by Main Avenue Pharmacy during the preceding month. | |||
For the management services provided by the ScripsAmerica under this Business Management Agreement, Implex will pay us a combined monthly Management and Financing Fee. This combined fee will be equal to 97% of the Calculation Basis (receipts from paid invoices less Implex’s monthly draw and various expenses of Main Avenue Pharmacy). Since ScripsAmeica will have controlling interest in Implex management plans to consolidate activities of Main Ave into our financial statements in first quarter 2014. | |||
Cancellation of GEM Agreement | |||
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 regulator. 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. | |||
On January 14, 2014, the Company entered into a settlement agreement with GEM Global, 590 Partners, LLC and the GEM Group, pursuant to which, among other things, the parties agreed to declare null and void and of no further effect the October 2013 financing agreement as well as any other negotiated but unsigned documents between and/or among the parties. In addition, in connection with such voiding, the GEM Warrants were cancelled and the Company issued to each of GEM Global and 590 Partners, LLC (i) a warrant exercisable to purchase 1,000,000 shares of common stock at an exercise price of $0.41, (ii) a warrant exercisable to purchase 750,000 shares of common stock at an exercise price of $0.55 and (iii) a warrant exercisable to purchase 750,000 shares of common stock at an exercise price of $0.75 (collectively, the “New GEM Warrants”). All of the New GEM Warrants expire on January 14, 2019 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 New GEM Warrants. The New GEM Warrants do have price protection features. Additionally, in the event that the closing price of the Company’s common stock is equal to or greater than 160% of the exercise price of the applicable New GEM Warrant for 22 consecutive trading days, then such New GEM Warrant will automatically be cancelled 30 days after the Company delivers notice of such cancellation to GEM Global and 590 Partners. However, each of GEM Global and 590 Partners may exercise their New GEM Warrant in full after the notice from the Company but prior to the cancellation date. | |||
The fair value of these 5.0 million warrants on January 14, 2014, was $552,318 using the Black-Sholes model with the following assumptions: Volatility 182.9%, 5 year life, risk free rate of 1.65% and zero dividend rate. This fair value of $552,318 will be expensed in our first quarter earnings in 2014. | |||
Pursuant to its the settlement agreement with GEM, (a) the Company sold 887,280 to GEM 887,280 restricted shares of common stock for a purchase price of $125,381, and (b) GEM concurrently assigned to Steve Urbanski the right to receive the 887,280 shares of the Company's common stock upon the receipt by the Company of the purchase price (net of $15,211 which was paid to GEM's legal counsel). The Company issued the 887,280 shares to Mr. Urbanski on January 22, 2014. |
3_SUMMARY_OF_SIGNIFICANT_ACCOU1
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||
Dec. 31, 2013 | |||
Accounting Policies [Abstract] | ' | ||
Principles of Consolidation | ' | ||
The consolidated financial statements include the accounts of the Company and all of its subsidiary in which a controlling interest is maintained. All significant inter-company accounts and transactions have been eliminated in consolidation. Investments in entities in which the Company does not have a controlling financial interest, but over which we have significant influence are accounted for using the equity method. Investments in which we do not have the ability to exercise significant influence are accounted for using the cost method. For those consolidated subsidiaries where Company ownership is less than 100%, the outside stockholders’ interests are shown as non-controlling interest. Our equity investment is classified in Investments on the balance sheet. | |||
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 | ' | ||
Product revenue associated with our pharmaceutical distribution services 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 revenue from our contract packager 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. | |||
Commission fees are recognized when 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 20% commission on the gross profit (sales less cost of goods sold, freight in and credits and allowances) of products shipped to independent pharmacies on or after November 1, 2013 and 12.5% commission on gross profit of products shipped to independent pharmacies prior to November 1, 2013. | |||
Research and Development | ' | ||
Expenditures for research and development (“R & D”) associated with contract research and development provided by third parties are expensed, as incurred. The Company had charges of $0 and $37,524 for research and development expenses for the years ended December 31, 2013 and 2012, respectively. | |||
Accounts Receivable Trade, net | ' | ||
Accounts receivable are stated at estimated net realizable value net of the sales allowance due to charge backs. The Chargeback reserve at December 31, 2013 was zero because we did not have any receivable associated with McKesson and we no longer sell product to McKesson. 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 December 31, 2013 and 2012 no allowance for doubtful accounts was deemed necessary. | |||
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 $105,443 to provide for an allowance for charge backs, for a net accounts receivable balance of $290,531. | |||
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. In December 2013, it was discovered that a potential supplier of product who physically had the equipment which we had purchased in 2012, had gone bankrupt. It was determined that the equipment was unrecoverable and, consequently, we wrote-off the assets and expensed $69,650 to the statement of operations. | |||
Receivable - Contract Packager | ' | ||
The Company has receivables from Marlex Pharmaceuticals, Inc. (Contract Packager), in the amount of $1,088,598 and $1,579,051 at December 31, 2013 and 2012, respectively. As of December 31, 2013, this receivable consists of PO financing, revenue earned for U.S. government sales and monthly payments due under the settlement agreement entered into on September 6, 2013 (see Note 10). The 2012 receivable consists of the following: a) receivables relating to sales with a government agency in the amount of $772,809, b) the Company’s payment of $600,000 to a vendor for the product to be manufactured on behalf of our Contract Packager, and c) the Company’s advance of $206,241 to our Contract Packager for the purchase of product inventory. In the second quarter of 2013, the Company fully reserved and expensed $1,210,999 which was the remaining balance. Per the September 6, 2013 settlement agreement, the Company is entitled to recover $408,150 of which $81,632 has been recovered during 2013. Consequently the reserved amount has been offset against the allotment and since collectability is still not certain on the remaining receivable, we have fully reserved it as of December 31, 2013. | |||
Receivable - related party | ' | ||
WholesaleRx in which we have a 14% investment where we recognized Commission fees when 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. The receivable consists of PO financing, and revenue earned for commission sales agreement entered into in November 1, 2013. No reserve for un-collectability due to short history and no prior bad debts. | |||
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. | |||
In 2013, we entered into an agreement with a company that represents over 700 pharmacy independent operations. Under this agreement, this partner company 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. | |||
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 December 31, 2013 and 2012. | |||
Income Taxes | ' | ||
The Company provides for income taxes using the 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 $2,015,200 and $597,591 against deferred tax assets at December 31, 2013 and 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 December 31, 2013 and 2012. | |||
Derivative Financial Instruments | ' | ||
Derivative financial instruments consist of financial instruments or other contracts that contain a notional amount and one or more underlying values (e.g. interest rate, security price or other variable) that 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. These contracts require 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 investments approximate fair value because the investments were made in 2013 and the carrying value includes the Company’s share of the investee’s earnings from the date of acquisition. (See Note 8.) 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 13 for fair value of derivative liabilities. | |||
Advertising Expenses | ' | ||
The Company expenses advertising costs as incurred. The Company incurred advertising expenses in the amount of $371,786 and $62,875 for the years ended December 31, 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 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, 2013, the Company has issued 1,320,000 employee stock options that would require calculating the fair value using a pricing model such as the Black-Scholes pricing model, see note 15 for fair value. As of December 31, 2012, the Company had 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. | ||
Cost of Goods Sold | ' | ||
In fiscal year 2012 and for the first half of fiscal year 2013, the Company purchases all of its products from one supplier, Marlex Pharmaceuticals Inc., a related party at various contracted prices. Raw materials were re-packaged by Marlex. Upon shipment of product, the Company is charged the contracted price for services provided to ship the product. Cost of goods consists of raw material costs, re-packaging costs and shipping and handling. The Company financed the purchase of inventory based on confirmed purchase orders via a revolving finance agreement, provided by a related party (see notes 6 and 10 below). Beginning is August 2013 we added a second source for supplying our pharmaceutical product needs. These purchases are also financed based on confirmed purchase orders via a revolving finance agreement, provided by a related party. | |||
Earnings Per Share | ' | ||
Basic net income (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, options, 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. For details on number of common stock equivalents see Note 18 below. | |||
Reclassification | ' | ||
Certain amounts in the financial statements as of and for the year ended December 31, 2012 have been reclassified for comparative purposes to conform to the presentation in the financial statements as of and for the year ended December 31, 2013. | |||
New Accounting Pronouncements | ' | ||
On July 18, 2013, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-11, “ Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ” (“ASU 2013-11”). ASU 2013-11 states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward, except as follows. The unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets to the extent (i) a net operating loss carryforward, a similar tax loss or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, or (ii) the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax assets for such purpose. The amendments in ASU 20103-11 are effective prospectively for interim and annual reporting periods beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact on our financial position, results of operations or cash flows. | |||
In December 2011, the FASB issued ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities,” and in January 2013 issued ASU No. 2013-01, “Clarifying the Scope of Disclosures About Offsetting Assets and Liabilities.” These standards create new disclosure requirements regarding the nature of an entity’s rights of setoff and related arrangements associated with its derivative instruments, repurchase agreements, and securities lending transactions. Certain disclosures of the amounts of certain instruments subject to enforceable master netting arrangements would be required, irrespective of whether the entity has elected to offset those instruments in the statement of financial positions. ASU 2011-11 and ASU 2013-01 are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption of ASU 2011-11 did not have a material impact on the Company’s financial position or results of operations. | |||
Management does not believe there would have been a material effect on the accompanying financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period. |
5_REVENUES_NET_FROM_CONTRACT_P1
5. REVENUES NET, FROM CONTRACT PACKAGER AND COMMISSION FEES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Business Combinations [Abstract] | ' | ||||||||
Gross sales and cost of sales from DLA contacts | ' | ||||||||
The gross sales and cost of sales from this U.S. government contacts were: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Sales from U.S. government contract | $ | 6,433,644 | $ | 1,173,207 | |||||
Cost on U.S. government, per agreement | 6,100,006 | 1,020,690 | |||||||
Revenues net, from contract packager | $ | 333,638 | $ | 152,517 |
9_PREPAID_EXPENSES_AND_OTHER_C1
9. PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Prepaid Expense and Other Assets, Current [Abstract] | ' | ||||||||
Prepaid expenses and other current | ' | ||||||||
Prepaid expenses and other current assets consist of the following : | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Prepayment for product to be manufactured | 275,000 | – | |||||||
Prepaid insurances | 25,400 | 23,676 | |||||||
Deferred financing costs, net | 27,575 | 38,076 | |||||||
Prepaid consulting | – | 114,268 | |||||||
Prepaid other | 1,698 | 22,800 | |||||||
TOTAL PREPAID EXPENSES AND OTHER CURRENT ASSETS | 329,673 | 198,820 |
12_DEBT_Tables
12. DEBT (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Debt consists | ' | ||||||||
Debt consists of the following as of December 31, 2013 and 2012: | |||||||||
31-Dec-13 | 31-Dec-12 | ||||||||
Line of credit | 99,223 | 40,059 | |||||||
Debt with related party | 352,816 | 464,837 | |||||||
12% Fixed rate Convertible notes payable | 574,778 | 719,400 | |||||||
12% Fixed rate Convertible notes payable-related party | 120,738 | 130,000 | |||||||
8% variable convertible notes payable | 116,334 | 64,832 | |||||||
10% variable convertible notes payable | 179,291 | – | |||||||
12% variable convertible notes payable | 48,230 | – | |||||||
Total notes payable | 1,491,410 | 1,419,128 | |||||||
Less current maturities | 511,590 | 216,912 | |||||||
Long-term maturities | 979,820 | 1,202,216 | |||||||
Debt discounts consist of the following: | |||||||||
8% variable convertible notes payable | 286,166 | 50,918 | |||||||
10% variable convertible notes payable | 100,709 | – | |||||||
12% variable convertible notes payable | 40,794 | – | |||||||
427,669 | 50,918 | ||||||||
13_DERIVATIVE_FINANCIAL_INSTRU1
13. DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended | ||||||||
Dec. 31, 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-Dec-13 | |||||||
Volatility | 61.7% - 63.7% | 110.4% - 228.5% | |||||||
Expected life (in years) | .5 – 2.5 | .03 – .6 | |||||||
Risk-free interest rate | .12% - .35% | .07% - .12% | |||||||
Dividend yield | 0.00% | 0.00% | |||||||
Derivative liabilities | ' | ||||||||
Derivative liabilities at December 31, 2011 | $ | – | |||||||
New derivative liabilities issued in 2012 | 87,724 | ||||||||
Extinguishment | – | ||||||||
Revalue at reporting period | 6,753 | ||||||||
Derivative liabilities at December 31, 2012 | $ | 94,477 | |||||||
New derivative liabilities issued in 2013 | 2,590,688 | ||||||||
Extinguishment | (2,840,395 | ) | |||||||
Revalue at reporting period | 1,288,623 | ||||||||
Derivative liabilities at December 31, 2013 | $ | 1,133,393 |
15_STOCKHOLDERS_DEFICIT_Tables
15. STOCKHOLDERS' DEFICIT (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||
Summary of warrant activity | ' | ||||||||||||||||
Summary of our warrant activity and related information for 2013 and 2012 | |||||||||||||||||
Number of shares under warrants | Weighted Average Exercise price | Weighted Average Remaining Contractual term in Years | Aggregate Intrinsic Value | ||||||||||||||
Outstanding at December 31, 2011 | 478,440 | $ | 0.17 | 4.3 | $ | – | |||||||||||
Granted | 228,572 | $ | 0.39 | 4.6 | |||||||||||||
Exercised | – | ||||||||||||||||
Cancelled/expired | – | ||||||||||||||||
Outstanding at December 31, 2012 | 707,012 | $ | 0.24 | 3.7 | $ | 45,700 | |||||||||||
Granted | – | ||||||||||||||||
Exercised | (478,440 | ) | $ | 0.17 | |||||||||||||
Cancelled/expired | – | ||||||||||||||||
Outstanding at December 31, 2013 | 228,572 | $ | 0.39 | 3.6 | $ | – | |||||||||||
Vested and exercisable at December 31, 2013 | 228,572 | ||||||||||||||||
Warrant Exercise price per share | ' | ||||||||||||||||
2012 | |||||||||||||||||
Fair value per warrant | $0.15 | ||||||||||||||||
Risk-free interest rate | .35% - 1.3% | ||||||||||||||||
Volatility | 63.70% | ||||||||||||||||
Terms in years | 2.5 | ||||||||||||||||
Dividend yield | 0% | ||||||||||||||||
Summary of Options activity | ' | ||||||||||||||||
Number of shares under options | Weighted Average Exercise price | Weighted Average Remaining Contractual term in Years | Aggregate Intrinsic Value | ||||||||||||||
Outstanding at December 31, 2012 | – | $ | – | 0 | $ | – | |||||||||||
Granted | 5,015,000 | $ | 0.16 | 3 | |||||||||||||
Exercised | – | ||||||||||||||||
Cancelled/expired | – | ||||||||||||||||
Outstanding at December 31, 2013 | 5,015,000 | $ | 0.16 | 2.8 | $ | – | |||||||||||
Vested and exercisable at December 31, 2013 | 5,015,000 | ||||||||||||||||
Options Exercise price per share | ' | ||||||||||||||||
2013 | |||||||||||||||||
Option fair value | $ 0.10 - $ 0.19 | ||||||||||||||||
Risk-free interest rate | .34% - .78% | ||||||||||||||||
Volatility | 190.06% | ||||||||||||||||
Terms in years | 3 | ||||||||||||||||
Dividend yield | 0% | ||||||||||||||||
16_INCOME_TAXES_Tables
16. INCOME TAXES (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||||||||||
Provision for income taxes | ' | ||||||||||||||||
Our provision for income taxes at December 31, 2013 and 2012 consisted of the following | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Current | |||||||||||||||||
Federal | $ | – | $ | 41,200 | |||||||||||||
State | – | 1,797 | |||||||||||||||
Deferred | |||||||||||||||||
Federal | – | – | |||||||||||||||
Income Tax Expense | $ | – | $ | 43,179 | |||||||||||||
Effective tax rates | ' | ||||||||||||||||
The effective tax rates differ from the statutory rates for 2012 and 2011 primarily due to the following: | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Amount | Effective Tax Rate | Amount | Effective Tax Rate | ||||||||||||||
Percentage | Percentage | ||||||||||||||||
Federal income tax liability (benefit) | $ | (3,794,531 | ) | -34 | % | $ | (618,542 | ) | -34 | % | |||||||
State taxes | – | 0 | % | 1,979 | 0.1 | % | |||||||||||
Permanent deductible expense | 1,700,633 | 15.2 | % | 62,151 | 3.4 | % | |||||||||||
Adjustment in valuation allowance | 2,093,898 | 18.8 | % | 587,591 | 19 | % | |||||||||||
Tax expense (benefit) | $ | – | 0 | % | $ | 43,179 | -2.4 | % | |||||||||
Net deferred tax assets (liabilities) | ' | ||||||||||||||||
The components of the net deferred tax assets (liabilities) at December 31, 2013 and 2012 are as follows: | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Deferred Tax asset | |||||||||||||||||
Allowance for doubtful accounts | $ | 423,497 | $ | 252,791 | |||||||||||||
Net Operating Loss | 1,591,703 | 344,800 | |||||||||||||||
Total Deferred Tax asset | 2,015,200 | 597,591 | |||||||||||||||
Deferred Tax Liability | – | – | |||||||||||||||
Less Valuation Allowance | 2,015,200 | 597,591 | |||||||||||||||
Total Deferred tax asset | $ | – | $ | – |
18_EARNINGS_PER_COMMON_SHARE_T
18. EARNINGS PER COMMON SHARE (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||
EARNINGS PER COMMON SHARE | ' | ||||||||||||
For the Year Ended December 31, 2013 | |||||||||||||
Income | Shares | Per Share | |||||||||||
(Numerator) | (Denominator) | Amount | |||||||||||
Net Loss attributed to ScripsAmerica, Inc. | $ | (11,195,096 | ) | ||||||||||
Preferred stock dividends | (83,440 | ) | |||||||||||
Net Loss attributable to common stockholders | $ | (11,278,536 | ) | ||||||||||
Basic loss per common share | $ | (11,278,536 | ) | 68,119,715 | $ | (0.17 | ) | ||||||
Diluted earnings per common share | $ | (11,278,536 | ) | 68,119,715 | $ | (0.17 | ) | ||||||
For the Year Ended December 31, 2012 | |||||||||||||
Income | Shares | Per Share | |||||||||||
(Numerator) | (Denominator) | Amount | |||||||||||
Net Loss | $ | (1,861,832 | ) | ||||||||||
Preferred Stock Dividend | (83,440 | ) | |||||||||||
Basic loss per common share | $ | (1,945,272 | ) | 55,140,192 | $ | (0.04 | ) | ||||||
Effect of dilutive securities - notes payable | – | – | – | ||||||||||
Diluted earnings per common share | $ | (1,945,272 | ) | 55,140,192 | $ | (0.04 | ) | ||||||
2_LIQUIDITY_BUSINESS_RISK_AND_1
2. LIQUIDITY, BUSINESS RISK AND GOING CONCERN (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Risks and Uncertainties [Abstract] | ' | ' |
Loss from operations | ($7,293,714) | ($1,545,823) |
Loss due to non-cash charges | $5,100,000 | ' |
3_SUMMARY_OF_SIGNIFICANT_ACCOU2
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Accounting Policies [Abstract] | ' | ' |
Research and development expenses | $0 | $37,524 |
Gross accounts receivable | ' | 395,974 |
Accounts receivable sold to a factor | 0 | 141,725 |
Property written off | 69,650 | ' |
Receivables from Marlex Pharmaceuticals, Inc. Contract Packager | 1,088,598 | 1,579,051 |
Valuation allowance deferred tax assets | 2,015,200 | 597,591 |
Advertising expenses | $371,786 | $62,875 |
4_ACCOUNTS_RECEIVABLE_TRADE_NE1
4. ACCOUNTS RECEIVABLE TRADE, NET (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Receivables [Abstract] | ' | ' |
Factoring fees | $5,069 | $48,948 |
Gross accounts receivable | ' | 395,974 |
Accounts receivable sold to a factor | $0 | $141,725 |
5_REVENUES_NET_FROM_CONTRACT_P2
5. REVENUES NET, FROM CONTRACT PACKAGER AND COMMISSION FEES (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Business Combinations [Abstract] | ' | ' |
Sales from U.S. government contract | $6,433,644 | $1,173,207 |
Cost on U.S. government, per agreement | 6,100,006 | 1,020,690 |
Revenues net, from contract packager | 333,638 | 152,517 |
Commission revenue | $69,902 | ' |
7_RECEIVABLE_RELATED_PARTY_Det
7. RECEIVABLE - RELATED PARTY (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Receivable - Related Party Details Narrative | ' | ' |
Other Receivable - Pharmaceutical partner | $24,223 | $0 |
8_EQUITY_INVESTMENTS_Details_N
8. EQUITY INVESTMENTS (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Equity attributed to non-controlling interest | ($146,566) | $0 |
WholesaleRx [Member] | ' | ' |
Non-controlling ownership interest | 14.00% | ' |
Current assets | 137,000 | ' |
Inventory | 72,000 | ' |
Total assets | 160,000 | ' |
Total liabilities | 19,000 | ' |
Stockholders' equity | 141,000 | ' |
P.I.M.D International, LLC [Member] | ' | ' |
Equity attributed to non-controlling interest | 146,566 | ' |
Distribution from non-controlling interest | $119,650 | ' |
9_PREPAID_EXPENSES_AND_OTHER_C2
9. PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Prepaid Expense and Other Assets, Current [Abstract] | ' | ' |
Prepayment for product to be manufactured | $275,000 | $0 |
Prepaid insurances | 25,400 | 23,676 |
Deferred financing costs, net | 27,575 | 38,076 |
Prepaid consulting | 0 | 114,268 |
Prepaid other | 1,698 | 22,800 |
TOTAL PREPAID EXPENSES AND OTHER CURRENT ASSETS | $329,673 | $198,820 |
11_RELATED_PARTY_TRANSACTIONS_
11. RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Interest expense paid | $332,947 | $225,247 |
Chief Financial Officer | ' | ' |
Consulting fees | 178,000 | ' |
Chief Executive Officer | ' | ' |
Consulting fees | 120,000 | ' |
Interest expense paid | $23,231 | ' |
12_DEBT_Details
12. DEBT (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Line of credit | $99,223 | $40,059 |
Debt with related party | 352,816 | 464,837 |
Convertible notes payable-related party | 120,738 | 130,000 |
Total notes payable | 1,491,410 | 1,419,128 |
Less current maturities | 511,590 | 216,912 |
Long-term maturities | 979,820 | 1,202,216 |
Debt discounts | 427,669 | 50,918 |
12% Fixed rate Convertible notes payable [Member] | ' | ' |
Total notes payable | 574,778 | 719,400 |
12% Fixed rate Convertible notes payable -related party [Member] | ' | ' |
Convertible notes payable-related party | 120,738 | 130,000 |
8% variable convertible notes payable [Member] | ' | ' |
Total notes payable | 116,334 | 64,832 |
Debt discounts | 286,166 | 50,918 |
10% Variable convertible notes payable [Member] | ' | ' |
Total notes payable | 179,291 | 0 |
Debt discounts | 100,709 | 0 |
12% Variable convertible notes payable [Member] | ' | ' |
Total notes payable | 48,230 | 0 |
Debt discounts | $40,794 | $0 |
12_DEBT_Details_Narrative
12. DEBT (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Line of credit maximum amount | $100,000 | ' |
Line of credit outstanding | 99,222 | 40,059 |
Debt outstanding | 979,820 | 1,202,216 |
Debt outstanding, current balance | 511,590 | 216,912 |
Proceeds from convertible notes | 1,579,867 | 435,150 |
Payments on convertible notes | 288,336 | 200,000 |
Royalty expense | 285,547 | 52,500 |
Gain on extinguishment of debt | 636,670 | 0 |
Unamortized debt discount | 259,396 | 50,918 |
Line of Credit [Member] | ' | ' |
Interest expense | 3,725 | 580 |
Debt with related party [Member] | ' | ' |
Interest expense | 37,289 | ' |
Debt outstanding | 352,816 | 464,837 |
Debt outstanding, current balance | 122,529 | 122,021 |
12% Fixed rate Convertible notes payable [Member] | ' | ' |
Interest expense | 77,250 | 86,164 |
Proceeds from convertible notes | 418,200 | ' |
Payments on convertible notes | 115,522 | ' |
Principal converted into new notes | 229,400 | ' |
Principal retired via liability exchange for stock | 230,000 | ' |
12% Fixed rate Convertible notes payable-related party [Member] | ' | ' |
Interest expense | 9,600 | 16,000 |
Debt outstanding | 80,000 | ' |
6% Variable Convertible notes payable [Member] | ' | ' |
Stock issued upon conversion of note, shares issued | 1,235,868 | ' |
Stock issued upon conversion of note, value | 246,941 | ' |
Stock issued upon conversion of note, principal converted | 110,000 | ' |
Gain on extinguishment of debt | 40,026 | ' |
12% Fixed rate Convertible notes payable-related party note 2 [Member] | ' | ' |
Interest expense | 6,000 | 16,000 |
Debt outstanding | 40,738 | 50,000 |
Payments on convertible notes | 9,262 | ' |
Royalties accrued | ' | 10,500 |
Royalty expense | 57,580 | ' |
Common stock issued for payment of royalties, shares issued | 224,944 | ' |
8% Variable Convertible Note Payable [Member] | ' | ' |
Interest expense | 112,593 | 36,809 |
Debt outstanding | 402,500 | 115,750 |
Gain on extinguishment of debt | 238,015 | ' |
Unamortized debt discount | 286,166 | 50,918 |
Fair value of derivative liability | 606,112 | 94,477 |
10% Variable Convertible Notes Payable [Member] | ' | ' |
Interest expense | 178,547 | ' |
Debt outstanding | 280,000 | ' |
Proceeds from convertible notes | 371,167 | ' |
Stock issued upon conversion of note, shares issued | 2,654,353 | ' |
Stock issued upon conversion of note, value | 1,073,185 | ' |
Stock issued upon conversion of note, principal converted | 203,702 | ' |
Gain on extinguishment of debt | 204,091 | ' |
Unamortized debt discount | 100,709 | ' |
Fair value of derivative liability | 383,337 | ' |
12% Variable Convertible Notes Payable [Member] | ' | ' |
Interest expense | 116,348 | ' |
Debt outstanding | 89,025 | ' |
Unamortized debt discount | 40,795 | ' |
Fair value of derivative liability | $143,944 | ' |
Recovered_Sheet1
13. Derivative Financial Instruments (Details-Assumptions) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Dividend yield | 0.00% | 0.00% |
Minimum [Member] | ' | ' |
Volatility | 61.70% | ' |
Expected life in years | '6 months | '11 days |
Risk-free interest rate | 0.12% | ' |
Maximum [Member] | ' | ' |
Volatility | 63.70% | ' |
Expected life in years | '2 years 6 months | '7 months 6 days |
Risk-free interest rate | 0.35% | ' |
Recovered_Sheet2
13. Derivative Financial Instruments (Details-Derivative Liabilities) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ' |
Derivative liabilities, Beginning | $94,477 | $0 |
New derivative liabilities issued in 2013 | 2,590,688 | 87,724 |
Extinguishment | -2,840,395 | 0 |
Revalue at reporting period | 1,288,623 | 6,753 |
Derivative liabilities, Ending | $1,133,393 | $94,477 |
13_Derivative_Financial_Instru2
13. Derivative Financial Instruments (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Derivative Liabilities | $1,133,393 | $94,477 | $0 |
Fair Value, Inputs, Level 2 [Member] | ' | ' | ' |
Derivative Liabilities | $1,333,393 | $94,477 | ' |
14_CONVERTIBLE_PREFERRED_STOCK1
14. CONVERTIBLE PREFERRED STOCK (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Preferred Stock, Number of Shares, Par Value and Other Disclosures [Abstract] | ' | ' | ' |
Stockholders' deficit | ($3,617,393) | ($1,183,365) | ($9,061) |
Convertible preferred stock shares | 5,980,504 | 5,980,504 | ' |
Preferred stock dividends payable | $187,740 | ' | ' |
15_STOCKHOLDERS_DEFICIT_Detail
15. STOCKHOLDERS' DEFICIT (Details-Warrant activity) (Warrant [Member], USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Warrant [Member] | ' | ' | ' |
Number of shares under warrants | ' | ' | ' |
Number of shares under warrants Outstanding | 707,012 | 478,440 | ' |
Number of shares under warrants Granted | ' | 228,572 | ' |
Number of shares under warrants Exercised | -478,440 | ' | ' |
Number of shares under warrants Cancelled/expired | ' | ' | ' |
Number of shares under warrants Outstanding | 228,572 | 707,012 | 478,440 |
Weighted Average Exercise Price | ' | ' | ' |
Weighted Average Exercise price Outstanding, Beginning | 0.24 | 0.17 | ' |
Weighted Average Exercise price Granted | ' | $0.39 | ' |
Weighted Average Exercise price Exercised | $0.17 | ' | ' |
Weighted Average Exercise price Outstanding, Ending | 0.39 | 0.24 | 0.17 |
Weighted Average Remaining Contractual Term | ' | ' | ' |
Weighted Average Remaining Contractual term in Years Outstanding | '3 years 7 months 6 days | '3 years 8 months 12 days | '4 years 3 months 18 days |
Weighted Average Remaining Contractual term in Years Granted | ' | '4 years 7 months 6 days | ' |
Aggregate Intrinsic Value Outstanding | ' | $45,700 | ' |
Vested and exercisable at December 31, 2013 | 228,572 | ' | ' |
15_STOCKHOLDERS_DEFICIT_Detail1
15. STOCKHOLDERS' DEFICIT (Details-warrant assumptions) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Dividend yield | 0.00% | 0.00% |
Warrant [Member] | ' | ' |
Fair value per warrant | ' | 0.15 |
Risk-free interest rate, minimum | ' | 0.35% |
Risk-free interest rate, maximum | ' | 1.30% |
Volatility | ' | 63.70% |
Terms in years | ' | '2 years 6 months |
Dividend yield | ' | 0.00% |
15_STOCKHOLDERS_DEFICIT_Detail2
15. STOCKHOLDERS' DEFICIT (Details-Options outstanding) (Options, USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Options | ' | ' |
Number of shares Outstanding | 5,015,000 | ' |
Number of shares Granted | 5,015,000 | ' |
Number of shares Exercised | ' | ' |
Number of shares Cancelled/expired | ' | ' |
Weighted Average Exercise price Outstanding | 5,015,000 | ' |
Weighted Average Exercise price Granted | $0.16 | ' |
Weighted Average Remaining Contractual term in Years Outstanding | '2 years 9 months 18 days | '0 years |
Weighted Average Remaining Contractual term in Years Granted | '3 years | ' |
Aggregate Intrinsic Value Outstanding | ' | ' |
Vested and exercisable at December 31, 2013 | 5,015,000 | ' |
15_STOCKHOLDERS_DEFICIT_Detail3
15. STOCKHOLDERS' DEFICIT (Details-Option assumptions) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Dividend yield | 0.00% | 0.00% |
Options | ' | ' |
Option fair value | '$0.10-$0.19 | ' |
Risk-free interest rate, minimum | 0.34% | ' |
Risk-free interest rate, maximum | 0.78% | ' |
Volatility | 190.06% | ' |
Terms in years | '3 years | ' |
Dividend yield | 0.00% | ' |
16_INCOME_TAXES_DetailsProvisi
16. INCOME TAXES (Details-Provision for income taxes) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Current | ' | ' |
Federal | $0 | $41,200 |
State | 0 | 1,797 |
Deferred | ' | ' |
Federal | 0 | 0 |
Income Tax Expense | $0 | $43,179 |
16_INCOME_TAXES_DetailsReconci
16. INCOME TAXES (Details-Reconcilation of income taxes) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Tax Disclosure [Abstract] | ' | ' |
Federal income tax liability (benefit) | ($3,794,531) | ($618,542) |
State taxes | -111,654 | 1,979 |
Permanent deductible expense | 1,700,633 | 62,151 |
Adjustment in valuation allowance | 2,093,898 | 587,591 |
Tax expense (benefit) | $0 | $43,179 |
Federal income tax liability (benefit),Effective Tax Rate | -34.00% | -34.00% |
State taxes,Effective Tax Rate | 0.00% | -0.10% |
Permanent deductible expense,Effective Tax Rate | 15.20% | 3.40% |
Adjustment in valuation allowance,Effective Tax Rate | 18.80% | 19.00% |
Tax expense (benefit),Effective Tax Rate | 0.00% | -2.40% |
16_INCOME_TAXES_DetailsDeferre
16. INCOME TAXES (Details-Deferred tax assets) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Deferred Tax asset | ' | ' |
Allowance for doubtful accounts | $423,497 | $252,791 |
Net Operating Loss | 1,591,703 | 344,800 |
Total Deferred Tax asset | 2,015,200 | 597,591 |
Deferred Tax Liability | 0 | 0 |
Less Valuation Allowance | 2,015,200 | 597,591 |
Total Deferred tax asset | $0 | $0 |
16_INCOME_TAXES_Details_Narrat
16. INCOME TAXES (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Tax Disclosure [Abstract] | ' | ' |
Operating loss carryforwards | $5,927,000 | ' |
Carryforward expiration date | 31-Dec-33 | ' |
Valuation Allowance | 2,015,200 | 597,591 |
Increase in valuation allowance | $1,417,609 | $597,591 |
17_COMMITMENTS_AND_CONTINGENCI1
17. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | Dec. 31, 2013 |
Commitments and Contingencies Disclosure [Abstract] | ' |
Operating lease commitment for 2014 | $111,714 |
Operating lease commitment for 2015 | 50,441 |
Operating lease commitment for 2016 | 56,548 |
Operating lease commitment for 2017 | 4,724 |
Total operating lease commitment | $223,427 |
18_EARNINGS_PER_COMMON_SHARE_D
18. EARNINGS PER COMMON SHARE (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income (Numerator) | ' | ' |
Net Loss | ($11,195,096) | ($1,861,832) |
Preferred stock dividends | -83,440 | -83,440 |
Net Loss Available to Common Shareholders | -11,278,536 | -1,945,272 |
Basic loss per common share, Amount | -11,278,536 | -1,945,272 |
Diluted earnings per common share, Amount | ($11,278,536) | ($1,945,272) |
Shares (Denominator) | ' | ' |
Basic loss per common share, Shares | 68,119,715 | 55,140,192 |
Diluted earnings per common share, Share | 68,119,715 | 55,140,192 |
Per Share Amount | ' | ' |
Basic loss per common share, Per Share | ($0.17) | ($0.04) |
Diluted earnings per common share, Per Share | ($0.17) | ($0.04) |
19_PURCHASE_ORDER_FINANCING_WI1
19. PURCHASE ORDER FINANCING WITH RELATED PARTY (Details Narratives) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Related Party Transactions [Abstract] | ' | ' |
Unpaid purchase order finance balance | $1,037,494 | $578,280 |
Accrued fees and interest | $24,192 | $8,280 |
20_CONCENTRATIONS_Details_Narr
20. CONCENTRATIONS (Details Narrative) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Revenues | Customer One | ' | ' |
Concentration risk percentage | 61.00% | 12.00% |
Revenues | CustomerTwoMember | ' | ' |
Concentration risk percentage | 74.00% | 16.00% |
Accounts Receivable | Customer One | ' | ' |
Concentration risk percentage | ' | 60.00% |