Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Nov. 14, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'SCRIPSAMERICA, INC. | ' |
Entity Central Index Key | '0001521476 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-14 | ' |
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 | ' | 136,605,958 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2014 | ' |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (Unaudited) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Current Assets | ' | ' |
Cash | $1,200,099 | $47,293 |
Accounts receivable trade, net of allowance for deductions of $510,025 and $0, respectively | 3,213,760 | 0 |
Receivable - contract packager, net of allowance of $81,631 and $408,150, respectively | 1,120,231 | 1,088,598 |
Receivable - related party commissions | 64,562 | 24,223 |
Inventory | 728,164 | 0 |
Intangible asset, net | 4,000 | 0 |
Prepaid expenses and other current assets | 114,565 | 329,673 |
Total Current Assets | 6,445,381 | 1,489,787 |
Property and Equipment, net | 58,532 | 0 |
Other Assets | ' | ' |
Investment | 278,265 | 276,956 |
Intangible Assets | 538,000 | 0 |
Other Assets | 14,720 | 14,720 |
Total | 830,985 | 291,676 |
TOTAL ASSETS | 7,334,898 | 1,781,463 |
Current Liabilities | ' | ' |
Line of credit | 0 | 99,222 |
Accounts payable and accrued expenses | 2,475,221 | 226,570 |
Purchase order financing - related party | 1,020,096 | 1,037,494 |
Term loans payable | 407,379 | 0 |
Term loan payable - related party | 100,746 | 0 |
Deferred Revenue | 418,540 | 0 |
Royalty payable | 44,579 | 0 |
Royalty payable - related party | 18,149 | 5,302 |
Stock to be issued | 0 | 273,947 |
Current portion of long - term debt - related party | 131,053 | 122,529 |
Convertible notes payable | 0 | 289,839 |
Derivative liability | 0 | 1,133,393 |
Total Current Liabilities | 4,615,763 | 3,188,296 |
Non-Current Liabilities | ' | ' |
Preferred stock dividends payable | 250,320 | 187,740 |
Convertible notes payable - related parties | 106,109 | 120,738 |
Convertible notes payable - net of discounts $0 and $168,273 respectively | 548,231 | 628,795 |
Long-term debt, less current portion - related parties | 130,904 | 230,287 |
Total Non-Current Liabilities | 1,035,564 | 1,167,560 |
Total Liabilities | 5,651,327 | 4,355,856 |
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; 250,000,000 shares authorized; 136,166,625 and 91,792,839 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively | 136,166 | 91,794 |
Additional paid-in capital | 14,831,788 | 10,046,457 |
Accumulated deficit | -13,952,015 | -13,609,078 |
Total Stockholders'Equity (Deficit) of ScripsAmerica, Inc. | 1,015,939 | -3,470,827 |
Noncontrolling interest | -375,368 | -146,566 |
Total Equity (Deficit) | 640,571 | -3,617,393 |
TOTAL LIABILITIES AND EQUITY (DEFICIT) | $7,334,898 | $1,781,463 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Current Assets | ' | ' |
Allowance for accounts receivable trade | $510,025 | $0 |
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 | 250,000,000 | 250,000,000 |
Common stock shares issued | 136,166,625 | 91,792,839 |
Common stock shares outstanding | 136,166,625 | 91,792,839 |
Convertible Notes Payable [Member] | ' | ' |
Current Assets | ' | ' |
Discount on convertible notes payable | 0 | 168,273 |
Contract Packager [Member] | ' | ' |
Current Assets | ' | ' |
Allowance for accounts receivable trade | $81,631 | $408,150 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Income Statement [Abstract] | ' | ' | ' | ' |
Product revenues - net | $12,644,130 | $0 | $16,768,055 | $150,499 |
Revenues net, from contract packager | 128,892 | 56,642 | 371,810 | 285,144 |
Commission fees | 44,391 | 16,625 | 202,128 | 16,625 |
Total net revenues | 12,817,413 | 73,267 | 17,341,993 | 452,268 |
Cost of Goods Sold | ' | ' | ' | ' |
Product | 1,052,931 | 0 | 1,453,660 | 210,540 |
Royalty expense | 160,037 | 30,600 | 362,990 | 213,945 |
Total Cost of Goods Sold | 1,212,968 | 30,600 | 1,816,650 | 424,485 |
Gross Profit | 11,604,445 | 42,667 | 15,525,343 | 27,783 |
Selling, General and Administrative Expenses | 9,889,393 | 575,063 | 13,962,163 | 1,695,057 |
Selling, General and Administrative Expenses share-based compensation issued for services | 135,652 | 2,074,367 | 1,082,240 | 3,214,472 |
Allowance for recoveries of receivable - contract packager | -81,631 | -27,210 | -244,893 | 1,183,789 |
Total Operating Expenses | 9,943,414 | 2,622,220 | 14,799,510 | 6,093,318 |
Net Income (Loss) from Operations | 1,661,031 | -2,579,553 | 725,833 | -6,065,535 |
Other Income (Expenses), net | ' | ' | ' | ' |
Interest expense | -87,717 | -59,907 | -203,493 | -286,455 |
Financing costs | -26,926 | 0 | -850,758 | 0 |
Loss from derivatives issued with debt greater than carrying value | 0 | -544,053 | 0 | -887,474 |
Gain (loss) on revaluation of derivatives | 0 | 795,555 | -511,911 | -672,903 |
Amortization of debt discount | 0 | -233,517 | -110,916 | -447,523 |
Gain (Loss) on extinguishment of debt | -28,931 | 299,709 | 555,014 | 417,674 |
Income from equity investments | 0 | 0 | 1,309 | 0 |
Total Other Income (Expenses), net | -143,574 | 257,787 | -1,120,755 | -1,876,681 |
Net Income (Loss) Before Provision for Income taxes | 1,517,457 | -2,321,766 | -394,922 | -7,942,216 |
Provision for Tax Expense | 0 | 0 | 0 | 0 |
Net Income (Loss) | 1,517,457 | -2,321,766 | -394,922 | -7,942,216 |
Net Loss Attributed to noncontrolling interest | -28,931 | 0 | -114,565 | 0 |
Net Income (Loss) Attributed to ScripsAmerica, Inc. | 1,546,388 | -2,321,766 | -280,357 | -7,942,216 |
Preferred Stock Dividend | -20,860 | -20,860 | -62,580 | -62,580 |
Net Income (Loss) Available to Common Shareholders | $1,525,528 | ($2,342,626) | ($342,937) | ($8,004,796) |
Net Income (Loss) Per Common Share | ' | ' | ' | ' |
Basic | $0.01 | ($0.03) | $0 | ($0.13) |
Diluted | $0.01 | ($0.03) | $0 | ($0.13) |
Weighted Average Number of Common Shares | ' | ' | ' | ' |
Basic | 135,881,121 | 70,641,911 | 124,435,629 | 63,442,789 |
Diluted | 161,280,997 | 70,641,911 | 149,835,505 | 63,442,789 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statement of Changes in Stockholders' Deficit (USD $) | Common Stock | Additional Paid-In Capital | Retained Earnings (Deficit) | Stockholders Deficit ScripsAmerica [Member] | Deficit Noncontrolling [Member] | Total |
Beginning Balance, Amount at Dec. 31, 2013 | $91,794 | $10,046,457 | ($13,609,078) | ($3,470,827) | ($146,566) | ($3,617,393) |
Beginning Balance, Shares at Dec. 31, 2013 | 91,792,839 | ' | ' | ' | ' | ' |
Common stock issued for cash, Shares | 27,299,202 | ' | ' | ' | ' | ' |
Common stock issued for cash, Amount | 27,299 | 1,522,320 | ' | 1,549,619 | ' | 1,549,619 |
Common stock issued for services - BOD, Shares | 88,000 | ' | ' | ' | ' | ' |
Common stock issued for services - BOD, Amount | 68 | 9,352 | ' | 9,440 | ' | 9,440 |
Common stock issued for conversion of convertible Notes payable, Shares | 9,009,937 | ' | ' | ' | ' | ' |
Common stock issued for conversion of convertible Notes payable, Amount | 9,010 | 1,240,277 | ' | 1,249,287 | ' | 1,249,287 |
Common stock issued for services - non employees, Shares | 4,427,614 | ' | ' | ' | ' | ' |
Common stock issued for services - non employees, Amount | 4,427 | 529,540 | ' | 533,967 | ' | 533,967 |
Dividends for convertible preferred stock | ' | ' | -62,580 | -62,580 | ' | -62,580 |
Common stock options issued for services | ' | 12,973 | ' | 12,973 | ' | 12,973 |
Common stock issued for royalty payment, Shares | 921,203 | ' | ' | ' | ' | ' |
Common stock issued for royalty payment, Amount | 921 | 105,860 | ' | 106,781 | ' | 106,781 |
Common stock options issued for services - employees | ' | 465,916 | ' | 465,916 | ' | 465,916 |
Common stock issued for debt financing charges, Shares | 1,740,550 | ' | ' | ' | ' | ' |
Common stock issued for debt financing charges, Amount | 1,740 | 222,281 | ' | 224,021 | ' | 224,021 |
Common stock issued in settlement agreement, Shares | 887,280 | ' | ' | ' | ' | ' |
Common stock issued in settlement agreement, Amount | 887 | 124,494 | ' | 125,381 | ' | 125,381 |
Common stock warrants issued for financing costs | ' | 552,318 | ' | 552,318 | ' | 552,318 |
Distribution taken from noncontrolling interest | ' | ' | ' | ' | -114,237 | -114,237 |
Net Loss | ' | ' | -280,357 | -280,357 | -114,565 | -394,922 |
Ending Balance, Amount at Sep. 30, 2014 | $136,166 | $14,831,788 | ($13,952,015) | $1,015,939 | ($375,368) | $640,571 |
Ending Balance, Shares at Sep. 30, 2014 | 136,166,625 | ' | ' | ' | ' | ' |
Condensed_Consolidated_Stateme2
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Cash Flows from Operating Activities | ' | ' |
Net Loss | ($394,922) | ($7,942,216) |
Adjustments to reconcile net loss to net cash provided by (used in) by operating activities: | ' | ' |
Income from equity method investee | -1,309 | 0 |
Amortization of discount on convertible notes payable | 110,916 | 447,523 |
Loss from derivatives issued with debt | 0 | 887,474 |
Depreciation expense | 2,349 | 0 |
Amortization of licenses | 8,000 | 0 |
Amortization of loan fees | 8,000 | 125,224 |
Common stock issued for services | 543,407 | 3,007,783 |
Common stock issued for payment of royalty fees | 106,781 | 235,845 |
Common stock issued for finance fees | 66,000 | 0 |
Options issued for services - Employees | 465,916 | 206,689 |
Options issued for services - Directors | 12,973 | 0 |
Warrants issued for settlement fee | 552,318 | 0 |
Change in derivative liability | 511,911 | 672,903 |
Reserve on receivable - Trade | -94,044 | 0 |
Reserve on receivable - Contract packager | -244,893 | 1,357,790 |
Gain on extinguishment of debt | -555,014 | -417,674 |
Allowance for deductions and chargebacks | 510,025 | -11,399 |
Accounts receivable - trade | -3,629,739 | 290,742 |
Accounts receivable - related party | -40,339 | -42,449 |
Receivable - Contract packager | 213,259 | -559,167 |
Prepaid expenses and other current assets | -59,902 | 143,524 |
Inventory | -453,154 | 0 |
Deferred revenue | 418,540 | 0 |
Accounts payable and accrued expenses | 2,166,121 | 172,131 |
Cash provided by (used in) operating activities | 223,200 | -1,425,277 |
Cash Flows from Investing Activities | ' | ' |
Acquisition of businesses | -175,000 | 0 |
Purchase of property and equipment | -60,880 | 0 |
Cash used in investing activities | -235,880 | 0 |
Cash Flows from Financing Activities | ' | ' |
Payments under bank line of credit, net | -99,222 | -40,059 |
Proceeds from Issuance of common stock | 1,675,000 | 245,697 |
Proceeds from term loan, net | 20,648 | 0 |
Proceeds from convertible notes payable | 114,750 | 1,372,867 |
Payments for convertible notes payable | -141,837 | 0 |
Proceeds from notes payable from stockholder | 250,000 | 0 |
Proceeds from note payable - related party | 75,000 | 0 |
Payments on notes payable from stockholder | -121,269 | 0 |
Payments on note payable - related party | -14,269 | 0 |
Proceeds from PO financing from related party, net | -17,398 | 328,169 |
Payments to factor, net | 0 | -141,725 |
Payments on convertible notes payable | -321,482 | -242,734 |
Payments on convertible note payable - related party | -49,339 | 0 |
Payments on note payable - related party | -90,859 | -83,067 |
Payments to members of noncontrolling interest | -114,237 | 0 |
Cash provided by financing activities | 1,165,486 | 1,439,148 |
Net Increase in Cash | 1,152,806 | 13,871 |
Cash - Beginning of period | 47,293 | 13,513 |
Cash - End of period | 1,200,099 | 27,384 |
Cash Paid: | ' | ' |
Interest | 135,474 | 128,446 |
Noncash financing and investing activities: | ' | ' |
Accrued Preferred Dividend payable | 62,580 | 62,580 |
Investments - Main Ave Pharmacy | -300,000 | -154,000 |
Financing - loans obtain for Main Ave Pharmacy | 300,000 | 0 |
Conversion of note payable for common stock | $694,273 | $274,968 |
1_Organization_and_Business
1. Organization and Business | 9 Months Ended |
Sep. 30, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Organization and Business | ' |
The accompanying financial statements reflect financial information of ScripsAmerica, Inc. (the “Company”, “ScripsAmerica”, “us”, “we” or “our”). | |
ScripsAmerica, Inc. was incorporated in the State of Delaware on May 12, 2008. Since inception, the Company’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. The end users included 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 Corporation (“McKesson”), the largest pharmaceutical distributor in North America, and a few other major pharmaceutical distributors. | |
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 was 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 specialty pharmacy business. | |
Specifically, we have developed a branded over the counter (“OTC”) product called “RapiMed” (www.rapimeds.com), which is a children’s pain reliever and fever reducer which is in the process of being launched in Hong Kong through our sales and distribution consortium Global Pharma Hub Inc. (“Global Pharma”), and which we hope to launch in retail outlets in North America upon obtaining financing sometime in 2016. 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. In February 2014, we entered into a management agreement with a New Jersey pharmacy, Main Avenue Pharmacy, Inc. (“MAVP”), that specializes in predominantly topical pain and scar creams and since we will have significant controlling interest , the Company consolidates the financial activities of this specialty pharmacy. We acquired 100% ownership of MAVP in the fourth quarter 2014. | |
The accompanying unaudited interim condensed consolidated financial statements of the Company, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements of ScripsAmerica, Inc. and related notes thereto contained in the Company’s Form 10-K for the year ended December 31, 2013 filed with the SEC on April 15, 2014. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. |
2_Liquidity_and_Business_Risks
2. Liquidity and Business Risks | 9 Months Ended |
Sep. 30, 2014 | |
Risks and Uncertainties [Abstract] | ' |
Liquidity and Business Risks | ' |
At September 30, 2014, the Company had approximately $1.2 million in cash, approximately $6.4 million in current assets and approximately $4.6 million in current liabilities for a working capital of approximately $1.8 million. For the three months period ending September 30, 2014, we earned approximately $1.5 million in operating income and we expect to continue to have positive income from our operations. At September 30, 2014 our accumulated deficit is approximately $13.9 million, but 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 will be sufficient to support the working capital requirements, debt service, applicable debt maturity requirements, and operating expenses through September 30, 2015. | |
We completed the development of a children’s pain relief rapid orally disintegrating 80 mg and 160 mg tablets for OTC products and due to the significant costs needed for a successful launch of RapiMed® we do not anticipate launching RapiMed® in the United States within the next 15 months. In January 2014, the Company formed a sales and distribution consortium (formerly referred to as a joint venture entity), Global Pharma Hub, Inc., for the licensing, marketing and distribution of our pediatric RapiMed® acetaminophen in foreign markets, with the initial target market being Hong Kong. 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, as of November 14, 2014, no shipments have been made. The Company’s ability to obtain regulatory approval and launch RapiMed® in the United States is highly dependent upon management’s ability to (i) equal or exceed the planned operating cash flows, (ii) maintain continued availability on the existing line of credit and (iii) obtain additional financing or capital to fund and reduce the Company’s debt service obligations coming due and its operating expenses in addition to the normal regulatory and marketing risks expected. |
3_Summary_of_Significant_Accou
3. Summary of Significant Accounting Policies | 9 Months Ended | ||
Sep. 30, 2014 | |||
Accounting Policies [Abstract] | ' | ||
Summary of Significant Accounting Policies | ' | ||
a. Principles of Consolidation - The condensed consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained. All inter-company accounts and transactions have been eliminated in consolidation. For investments which are considered to be a Variable Interest Entity (VIE), the Company would be considered the primary beneficiary of the VIE if 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. 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. | |||
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 and our specialty pharmacy business is recognized when product is shipped from a contract packager or our pharmacy to our customers’ warehouses or directly to a patient, and is adjusted for anticipated charge backs from our customers which include inventory credits, discounts or volume incentives. 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. | |||
Our specialty pharmacy revenue is not recognized until the patient receives the filled prescription. We will prepare and fill a prescription that has been approved by an insurance provider, ship the filled prescription to the patient and upon confirmation of receipt of the prescription by patient will recognize revenue. Any prescription in which patient has not received product but we may have been reimbursed by the insurance provider is recorded at deferred revenue. As of September 30, 2014, deferred balance is $418,540. | |||
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 “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 WholesaleRx which is DEA and State-licensed to store and distribute controlled substances. Per our amended agreement the Company is to earn a 14% commission fee on the gross profit (sales less cost of goods sold, freight in and credits and allowances) of products shipped to independent pharmacies. | |||
d. Accounts Receivable Trade, net - Accounts receivable are stated at estimated net realizable value. These receivables are from our specialty pharmacy, in which we only ship prescription products to patients upon payment approval by the patients’ insurance company. Payments are usually received within 30 days of the product being shipped. As of September 30, 2014, $510,025 has been recorded as an allowance for insurance company deductions and chargebacks. As of September 30, 2014 and December 31, 2013, no allowance for doubtful accounts was deemed necessary. | |||
e. Property and Equipment - Property and equipment are stated at cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets. Maintenance costs that do not significantly extend the useful lives of the respective assets and repair costs are charged to operating expense as incurred. | |||
f. Intangible assets - The Company amortizes the cost of intangibles over their useful lives unless such lives are deemed indefinite. Intangible assets with indefinite lives are not amortized; however, they are tested annually for impairment and written down to fair value if required. | |||
We review the carrying values of property and equipment and long-lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Such events or circumstances include the following: | |||
o | significant declines in an asset’s market price; | ||
o | significant deterioration in an asset’s physical condition; | ||
o | significant changes in the nature or extent of an asset’s use or operation; | ||
o | significant adverse changes in the business climate that could impact an asset’s value, including adverse actions or assessments by regulators; | ||
o | accumulation of costs significantly in excess of original expectations related to the acquisition or construction of an asset; | ||
o | current-period operating or cash flow losses combined with a history of such losses or a forecast that demonstrates continuing losses associated with an asset’s use; and | ||
o | expectations that it is more likely than not that an asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. | ||
If impairment indicators are present, we determine whether an impairment loss should be recognized by testing the applicable asset or asset group’s carrying value for recoverability. This test requires long-lived assets to be grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, the determination of which requires judgment. We estimate the undiscounted future cash flows expected to be generated from the use and eventual disposal of the assets and compare that estimate to the respective carrying values in order to determine if such carrying values are recoverable. This assessment requires the exercise of judgment in assessing the future use of, and projected value to be derived from, the eventual disposal of the assets to be held and used. If the carrying value of the assets is not recoverable, then we record a loss for the difference between the assets’ fair value and respective carrying value. We believe our current assumptions and estimates are reasonable and appropriate. Unanticipated events and changes in market conditions, however, could affect such estimates, resulting in the need for an impairment charge in future periods | |||
g. Receivable - Contract Packager - The Company has receivables from Marlex Pharmaceuticals, Inc. (“Contract Packager”), in the amount of $1,201,231 and $1,088,598 at September 30, 2014 and December 31, 2013, respectively. This receivable consists of revenue earned for U.S. government sales and monthly payments due from the settlement agreement entered into on September 6, 2013. Under the September 6, 2013 settlement agreement, the Company is entitled to recover $408,150 of these receivables of which $326,524 has been recovered as of September 30, 2014. | |||
h. Receivable - related party - WholesaleRx, the pharmaceutical aggregator which is DEA and State-licensed to store and distribute controlled substances in which we have a 14% investment, is an entity from which we recognize Commission fees when earned on shipments of generic pharmaceutical and OTC products. The receivable consists of PO financing, and revenue earned for commission sales agreement entered into in November 1, 2013 (as subsequently amended by oral agreements). In August 2014, WholesaleRx stopped providing the necessary information for recording the commission fees and stopped making payments on the open receivables. Subsequent to September 30, 2014, the Company has filed legal action (see footnote #7 below for details) and as further disclosed in note 7, does not believe a reserve on this receivable is warranted at September 30, 2014. | |||
i. Inventory - Inventories represent purchased finished products at P.I.M.D. International LLC’s (“PIMD”) inventory location and at a third party manufacturer’s warehouse location. Raw materials represent the cost of purchased material use to make our compounded prescription products at our MAVP location. Both finished products and raw material costs are stated at the lower of cost or market determined by the first in, first out method. | |||
k. 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, 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. | |||
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 historically has a high 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. | |||
l. 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, and notes payable approximate their fair values due to their short-term maturities. It was impracticable to estimate the fair value of the Company’s investment (see notes 7). However, management believes 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 3 for fair value of derivative liabilities. | |||
m. Advertising Expenses - The Company expenses advertising costs as incurred. The Company incurred advertising expenses in the amount of $0 and $63,000 for the three month period ended September 30, 2014 and 2013, respectively, and $29,017 and 267,413 for the nine months ended September 30, 2014 and 2013, respectively. | |||
n. Stock-Based Compensation - Compensation expense is recognized for the fair value of all share-based payments issued to employees and consultants. As of September 30, 2014 and December 31, 2013, the Company issued 10,450,000 and 5,015,000, respectively for employee stock options that required calculating the fair value using a pricing model such as the Black-Scholes pricing model. See Note 13 for fair value of these employee stock options. | |||
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. If the options or warrants are for future services, they are revalued at each reporting period unless there is a significant incentive for non-performance. 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 (although we do not anticipate paying dividends in the foreseeable future), | ||
· | the risk free interest rate for the expected option or warrant term, and | ||
· | the expected forfeiture rate. | ||
o. Earnings (Loss) Per Share - Basic 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. As of September 30, 2014, common stock equivalents consisted of preferred stock convertible into 5,980,504 shares of common stock, warrants convertible into 5,228,572 shares, options convertible into 10,450,000 shares and notes payable convertible into 3,740,800 shares of common stock. | |||
p. Reclassification - Certain reclassifications have been made to the 2013 financial statements to conform to the interim 2014 condensed financial statements presentation. These reclassifications had no effect on net loss or cash flows as previously reported. | |||
q. Recent Accounting Pronouncements – Management does not believe that any recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. |
4_Revenues_net_from_Contract_P
4. Revenues net, from Contract Packager and Commission Fees | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Other Income and Expenses [Abstract] | ' | ||||||||||||||||
Revenues net, from Contract Packager and Commission Fees | ' | ||||||||||||||||
The Company previously had an agreement with its Contract Packager, which was superseded by an amended agreement entered into on September 6, 2013. Under this September 6th agreement the Company is entitled to receive a percentage of the Contract Packager’s profit, defined as the net of financing charges and royalties. Since the Company is 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 contracts were: | |||||||||||||||||
Three month sales as of September 30, | Nine month sales as of September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Sales from US government contract | $ | 3,519,621 | $ | 1,005,606 | $ | 10,726,464 | $ | 4,269,931 | |||||||||
Cost on US government, per agreement | 3,390,729 | 948,964 | 10,354,654 | 3,984,787 | |||||||||||||
Revenue - net, from contract packager | $ | 128,892 | $ | 56,642 | $ | 371,810 | $ | 285,144 | |||||||||
In August 2013, the Company entered into an agreement with a pharmaceutical aggregator (“WholesaleRx”) which began shipping generic pharmaceutical and OTC products to independent pharmacies. Under this agreement, which was amended on November 1, 2013, and then, subsequently amended by oral agreements, the Company received a commission of 14% on gross margins of pharmaceutical products sold. | |||||||||||||||||
Three month sales as of September 30, | Nine month sales as of September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Sales - WholesaleRx | $ | 356,154 | $ | 188,232 | $ | 1,845,591 | $ | 188,232 | |||||||||
Cost | 318,296 | 171,607 | 1,649,996 | 171,607 | |||||||||||||
Commission Revenue | $ | 37,858 | $ | 16,625 | $ | 195,595 | $ | 16,625 | |||||||||
In August 2014, the Company also entered into two other commission revenue agreements with independent pharmacy which generated commission revenue of $6,533 for the three and nine months period ended September 30, 2014. |
5_Inventory
5. Inventory | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
5. Inventory | ' | ||||||||
Inventory consists of the following: | |||||||||
As of | As of | ||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Finished product at subcontract - RapiMed® | $ | 275,010 | $ | – | |||||
Finished product at PIMD, net of discounts | 11,691 | – | |||||||
Raw material at Main Avenue Pharmacy | 441,463 | – | |||||||
Total Inventory | $ | 728,164 | $ | – | |||||
No inventory reserves or lower of cost or market adjustments are considered necessary at September 30, 2014 since all products are less than 12 months in age. The finished goods product at subcontractor is for product to be sold once we get approval from Hong Kong regulators (see note 10). |
6_Prepaid_Expenses_And_Other_C
6. Prepaid Expenses And Other Current Assets | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Prepaid Expense and Other Assets, Current [Abstract] | ' | ||||||||
Prepaid Expenses And Other Current Assets | ' | ||||||||
Prepaid expenses and other current assets consist of the following: | |||||||||
As of | As of | ||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Prepayment for product to be manufactured | $ | – | (a) | $ | 275,000 | ||||
Prepaid insurances | 56,396 | 25,400 | |||||||
Deferred financing costs, net | 19,700 | 27,575 | |||||||
Prepaid, other | 5,984 | 1,698 | |||||||
Advances to WholesaleRx | 32,485 | – | |||||||
Total prepaid expenses and other current assets | $ | 114,565 | $ | 329,673 | |||||
(a) | Funds provided for production of RapiMed® tablets by third party manufacturer. The production was completed and the tablets were reclassified as inventory in June 2014, and remain so classified. | ||||||||
7_Investments_in_WholesaleRx
7. Investments in WholesaleRx | 9 Months Ended |
Sep. 30, 2014 | |
Equity Method Investments and Joint Ventures [Abstract] | ' |
Investments in WholesaleRx | ' |
As of September 30, 2014, the Company has a 14% non-controlling ownership interest in WholesaleRx. WholesaleRx represents over 700 such independent pharmacy operators. WholesaleRx is 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 are sent to them COD which eliminates any accounts receivable realization issues. Prior to November 1, 2013, the Company and WholesaleRx had an oral agreement pursuant to which the Company secured third party financing to fund WholesaleRx’s purchase orders. The Company would receive 12.5% of 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). | |
Per the November 1, 2013 agreement the Company agreed to make an equity investment of $400,000 for 12,000 shares, (which would represent a 20% ownership interest in WholesaleRx) and to provide purchase order financing. WholesaleRx would pay the Company, on or before the 15th calendar day of each month, 14% of the gross profit (as described above) for the prior calendar month. If WholesaleRx is late in paying such 14% fee, then the amount owed will accrue interest at the rate of 18% per annum until paid. The subscription amount was to be paid in three installments, $150,000 upon execution of the agreement, $125,000 on December 31, 2013 which was paid in January 2014 and $125,000 on February 15, 2014, which was not paid due to the November 1, 2013 amendment. | |
Subsequent to November 1, 2013, the Company and WholesaleRx made certain changes to the agreement, whereby the Company’s investment was modified to $275,000, and the Company’s ownership interest was modified to 14%, and the Company’s monthly fee was reduced to 14% of the gross profit for the preceding month if the purchase order financing was used during such prior month but only 8% if the purchase order financing was not used in such prior month. The subsequent amendments to the arrangement have not been reduced to a formal, written agreement and some of the arrangements are oral amendments. | |
As of August 6, 2014, WholesaleRx stopped making payments to the Company and stopped providing the required financial information for calculation of the 14% fee. Accordingly, on October 8, 2014 the Company filed a Complaint in the State of Delaware for the unpaid amounts owing. At the same time, the Company joined with a 40% shareholder, giving them a 54% voting interest and they have jointly filed a derivative action in the Tennessee courts seeking return to the Company of funds alleged to have been improperly withdrawn by management, a 40% shareholder. In addition, the two shareholders (including the Company) have called a shareholders meeting with the intent to change the Board of directors and management. Based on these actions and current information available the Company does not believe the investment to be impaired. | |
On November 10, 2014, new management was installed as a result of the Board meeting. No significant assets were reduced and with the change of management our current agreement will resume, consequently no reserve for our outstanding receivable or reserve for our investment was considered necessary as of September 30, 2014. | |
This investment was originally accounted for under the equity method because the Company expected the investment to exceed 20%. The Company’s initial investment of $275,000 was increased for the equity earnings of our 14% interest from the date of initial investment to March 31, 2014, to a total of $278,265. It was originally anticipated that the investment would be 20% or possibly greater so we had recorded the investment using the equity method but circumstances have changed. As of September 30, 2014, we had no access to WholesaleRx’s records and the Company is continuing to recording this investment using the cost method. |
8_PIMD_International_LLC
8. P.I.M.D International, LLC | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
8. P.I.M.D International,LLC | ' | ||||||||
P.I.M.D. International, LLC (“PIMD”), a start-up limited liability company based in, and proposing to do business in, Florida, is considered to be a Variable Interest Entity (VIE). Our determination that PIMD is a variable interest entity (VIE) was based on the fact that 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: (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. The Company receives a majority of PIMD’s expected profits and losses. We also will provide the primary financing for inventory purchases through related parties. | |||||||||
The assets and liabilities and revenues and expenses of PIMD have been included in the accompanying condensed consolidated financial statements. During 2014 the non-controlling interest in PIMD made a distribution of $114,237, and in 2013 also made a distribution of $119,650 to the shareholders of PIMD. In nine months period ending September 30, 2014, the loss recorded to the statement of operations was $114,565 for a cumulative loss of $132,875. The total equity attributed to the non-controlling interest is a deficit of $375,368 at September 30, 2014. | |||||||||
In December, 2013, the Company revised an October 2013 purchase agreement to acquire 90% of the Membership Units in PIMD. 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 from 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 the Company to PIMD were converted to a loan and the relationship between PIMD and the Company became a Sourcing and Marketing Agreement. Implex Corporation (“Implex”), owned by the Company’s legal counsel and a shareholder, 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. | |||||||||
PIMD unaudited financial information is as follows: | |||||||||
P.I.M.D Statement of Operations | For the three | For the nine | |||||||
months ended | months ended | ||||||||
30-Sep-14 | 30-Sep-14 | ||||||||
Product revenue-net | $ | 65,900 | $ | 72,700 | |||||
Cost of Goods Sold | $ | 42,600 | $ | 48,500 | |||||
Gross Profit | $ | 23,300 | $ | 24,200 | |||||
Operating Costs and Expenses: | |||||||||
Selling, General and Administrative | $ | 52,200 | $ | 138,800 | |||||
Net Loss | $ | (28,900 | ) | $ | (114,600 | ) | |||
As of | As of | ||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Current assets | $ | 47,000 | $ | 31,000 | |||||
Total assets | $ | 130,000 | $ | 31,000 | |||||
Liabilities | $ | 505,000 | $ | 177,000 | |||||
Stockholders' Equity | $ | (375,000 | ) | $ | (146,000 | ) | |||
Implex, a related party, borrowed $272,000 from the Company 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 five year period. Implex entered into a “Business Development and Retention Agreement” with PIMD to assist PIMD with the development of its business. |
9_Business_Combination_and_Int
9. Business Combination and Intangible Assets | 9 Months Ended |
Sep. 30, 2014 | |
Business Combinations [Abstract] | ' |
Business Combination and Intangible Assets | ' |
On January 29, 2014, Implex, which is owned by our legal counsel and related party, Richard C. Fox, entered into a stock purchase agreement to acquire from MAVP, located in Clifton, New Jersey, for $550,000. The purchase price was paid in installments and paid in full as of June 30, 2014. Since the Company will have significant controlling interest via related party relationships and will be the primary beneficiary, the Company consolidated financial activities of MAVP. Subsequently in October 2014, the Implex ownership interest in MAvP was transferred to the Company for no additional consideration as the Company previously reflected 100% of the purchase price through VIE consolidation. The Company now owns 100% of the assets and outstanding common stock of MAvP. | |
Under the purchase agreement with the seller, Implex acquired the workforce (3 employees) and the applicable state pharmacy licenses but the purchase did not include cash, receivables or any existing customer lists of the owner. It also excluded any existing liabilities prior to January 29, 2014. The total purchase price of $550,000 was preliminary allocated to MAvP’s net tangible and intangible assets based on the estimated fair value as of January 29, 2014. Excess purchase consideration, if any, was allocated to goodwill. This preliminary valuation determined that there were two intangible assets acquired, were the licenses with an estimated value of $12,000 and a one year life and licenses that have an indefinite life. As a result, $538,000 was allocated to indefinite intangible assets. The Company amortized the intangible assets for the licenses beginning in March 2014 and has recorded an amortization expense of $8,000 as of September 30, 2014. Intangible assets with indefinite lives are not amortized; however, they are tested annually for impairment and when events or circumstances indicate change in fair value. | |
The payment of the purchase price of $550,000 is as follows: The initial installment payment of $475,000 was made via a $175,000 payment directly from the Company on Implex’s behalf and $300,000 in borrowings obtained by Implex, 250,000 from a current stockholder and $50,000 from a related party (See note 10 for note details). A $60,000 installment payment was made in April 2014 and the final payments were made in June 2014. MAvP is a specialty pharmacy which is licensed to prepare and fill prescriptions via a topical cream format versus pill format. MAvP was basically a dormant business and had no significant sales prior to the acquisition in 2014, and MAvP was acquired for its Pharmacist and license. Since the Company has significant controlling interest via related party relationships and will be the primary beneficiary, the Company has consolidated the financial activities of MAvP from the date of MAvP acquisition. | |
The Company’s condensed consolidated financial statements for the nine months ended September 30, 2014 include the results of MAVP since the date of acquisition. The entire product revenue and product cost of sales in the September 30, 2014 statement of operations is related to MAVP. Because there were not significant operations in 2013 and because the 2014 operations prior to the acquisitions on January 29, 2014, were not material, proforma financial information for 2013 and 2014 is not deemed necessary. No material transactions in 2013 or prior to acquisition so no proforma is required as it is represents actual operations. | |
On February 20, 2014, Implex and MAVP, 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 MAVP, 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”). 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 MAVP. | |
The original agreement date February 20, 2014 has been amended so that Scrips for its management services provided by the amended Business Management Agreement, effective April 1, 2014, ScripsAmerica will receive 100% of the profits and losses of MAVP as defined by GAAP for profits and losses and since ScripsAmerica has controlling interest in Implex, management has consolidated the accounts and activities of MAVP from January 29, 2014 through September 30, 2014. |
10_Foreign_Sales_Consortium_fo
10. Foreign Sales Consortium (formerly referred as Joint Venture Agreements) | 9 Months Ended | ||
Sep. 30, 2014 | |||
Investments, All Other Investments [Abstract] | ' | ||
Joint Venture Agreements | ' | ||
In January 2014, the Company formed a sales and distribution consortium with Forbes Investments, Ltd. (and its assigns) and Sterling, LLC (and its assigns) for the purpose of marketing, supplying and distributing RapiMed® in foreign markets. Global Pharma was chosen to be the distributor. The initial market is to be in China, where Global Pharma began marketing RapiMed®. The ownership of Global Pharma 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 consortium although a final, binding contract is in process of being prepared for signature. | |||
In January 2014, we entered into an exclusive license and marketing agreement that allows Global Pharma to be the exclusive distributor of RapiMed® as well as our registered trade mark “MELTS IN YOUR CHILD'S MOUTH” worldwide other than the U.S. Global Pharma must meet minimum sales quotas terms 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 entered into 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 third 12 months. | ||
On February 22, 2014, Global Pharma entered into an exclusive sub-licensing agreement with Jetsaw Pharmaceutical, Inc. for 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 Canadian 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. | ||
As of September 30, 2014, no funds have been provided by any partner, no losses or income generated and this consortium is still in the development stage. |
11_Accounts_payable_and_accrue
11. Accounts payable and accrued expenses | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Payables and Accruals [Abstract] | ' | ||||||||
10. Accounts payable and accrued expenses | ' | ||||||||
Accounts payable and accrued expenses consist of the following: | |||||||||
30-Sep-14 | 31-Dec-14 | ||||||||
Accounts payable and general accruals | $ | 713,586 | $ | 226,570 | |||||
Accrued commission expense | $ | 1,587,693 | – | ||||||
Accrued Ironridge expense (see note 17) | $ | 164,655 | – | ||||||
Deferred rent payable - PIMD | $ | 9,287 | – | ||||||
Total | $ | 2,475,221 | $ | 226,570 | |||||
12_Debt
12. Debt | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Debt | ' | ||||||||
Debt consists of the following as of September 30, 2014 and December 31, 2014: | |||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Line of credit | $ | – | 99,223 | ||||||
Debt with related party | 261,957 | 352,816 | |||||||
12% Fixed rate Convertible notes payable | 548,231 | 574,778 | |||||||
12% Fixed rate Convertible notes payable-related party | 106,109 | 120,738 | |||||||
8% variable convertible notes payable | – | 116,334 | |||||||
10% variable convertible notes payable | – | 179,291 | |||||||
12% variable convertible notes payable | – | 48,230 | |||||||
12% 1 year term loan | 128,731 | – | |||||||
12% 1 year term loan – related party | 25,746 | – | |||||||
24% 1 year term loan | 250,000 | – | |||||||
24% 1 year term loan – related party | 75,000 | – | |||||||
QuarterSpot – Term loan | 28,648 | – | |||||||
Total notes payable | 1,424,422 | 1,491,410 | |||||||
Less current maturities | 639,178 | 511,590 | |||||||
Long-term debt | $ | 785,244 | $ | 979,820 | |||||
Debt discounts consist of the following: | |||||||||
8% variable convertible notes payable | $ | – | $ | 286,166 | |||||
10% variable convertible notes payable | – | 100,709 | |||||||
12% variable convertible notes payable | – | 40,794 | |||||||
Total Discounts | $ | – | $ | 427,669 | |||||
Line of Credit | |||||||||
In October 2013, the Company’s line of credit from Wells Fargo Bank was renewed through October 2017. This line of credit allows the Company to borrow up to a maximum of $100,000, at an interest rate of prime plus 6.25% (9% at September 30, 2014). The line is secured by a personal guarantee by the Company’s CEO. The outstanding borrowings under this line of credit at September 30, 2014 and December 31, 2013 were $0 and $99,222, respectively. The Company incurred interest expense under this line of credit of approximately $0 and $937 and $146 and $2,406 for the three and nine months ended September 30, 2014 and 2013, 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®. 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 RapiMed®. 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 the first three quarters of 2014 and 2013 related to this and therefore no royalties were 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 expenses associated with this note for the three and nine month periods ended September 30, 2014 and 2013 were $6,360 and $21,123, $9,016 and $28,915, respectively. The outstanding balance at September 30, 2014 and December 31, 2013 was $261,957 and $352,816, respectively, with a current liability balance of $131,053 and $122,529, respectively. | |||||||||
12% Fixed Rate Convertible Notes Payable | |||||||||
The Company obtained loans in various amounts beginning in 2011. These notes currently have terms of no required principal payments until maturity which currently are April 1, 2016. In June of 2014 the owners of these notes agreed to extend the maturity dates to April 1, 2016 from 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 in shares of common stock of the Company at $0.17 per share, at the option of the lender. | |||||||||
During the nine month period ended September 30, 2014 the following activity occurred relating to various notes in this category: the Company received $114,750 in cash for several new convertible promissory notes; the Company made $149,830 in principal payments. The outstanding balance at September 30, 2014 and December 31, 2013, was $548,231 and $628,795, respectively, with the current liability balance $0 and $289,839, respectively. The Company recorded interest expense for the three and nine month period ended September 30, 2014, of $16,799 and $59,067, respectively, and for the three and nine month periods ended September 30, 2013, of $12,900 and $37,700, 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 the Company’s Chief Executive Officer. There is no required principal payment on the note until maturity which is April 1, 2016. The owner of this note agreed in June of 2014 to extend the maturity date to April 1, 2016 from 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 in shares of common stock of the Company at $0.17 per share, at the option of the lender. | |||||||||
As of September 30, 2014 and December 31, 2013 the principal balance of this note with our Chief Executive Officer was $80,000. The Company recorded interest expense for the three and nine month periods ended September 30, 2014 and 2013, of $2,400 and $7,200 and $2,400 and $7,200, respectively. | |||||||||
In 2012, the Company received $50,000 in cash for one convertible promissory note from a related party. The note provides for interest only payments of 3%, payable quarterly (12% annually), in cash, or in shares of 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 April 1, 2016. The owner of this note agreed to change the maturity date from 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. Our Contact Packager also co-signed this note. | |||||||||
Additionally, the Company shall pay to the lender under the 2012 $50,000 note 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. During the nine month period ended September 30, 2014, the Company made cash payments of $14,629 in principal and as of September 30, 2014 and December 31, 2013, the principal balance was $26,109 and $40,738, respectively. The Company recorded interest expense for three and nine month periods ended September 30, 2014 of $823 and $3,699, respectively. During the three and nine month periods ended September 30, 2014 the Company, made cash payments for royalty expense in the amount of $25,200 and $63,098, respectively, and issued 42,000 and 163,427, shares of its common stock, respectively, for payment of royalty expense, and recorded a royalty expenses, of $29,400 and $93,400, for the three and nine month periods ended September 30, 2014 respectively. | |||||||||
8% Variable Convertible Notes Payable | |||||||||
In fiscal year 2013 the Company entered into six new securities purchase agreements (as of September 30, 2014 no notes were outstanding and as of December 31, 2013 only four were still outstanding) with various lenders pursuant to which the lenders purchased an 8% convertible note. The Company received $462,000 in cash for these 8% convertible notes payable with the aggregate principal amount equaling $547,500. Some of these notes included (i) a 10% discount in the aggregate amount of $27,500, and (ii) fees totaling $58,000 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 ranging from 125% to 150% of the principal amount and accrued interest thereon if made prepayment is made 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 stock, the instrument includes an embedded derivative. The fair value of the derivative associated with these note was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility ranges between161.6% to 200.7%, risk-free interest rate ranges between 0.07% to 0.12% 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 these derivatives is being amortized over the life of the notes. | |||||||||
During the nine month period ended September 30, 2014 the following activity occurred relating to the various notes in this category: No new borrowings occurred. The Company paid the sum of $66,732 to a holder of one of these notes for the principal of $50,000. This cash payment of $66,732 included the accrued interest and a prepayment penalty charge. The Company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $81,792. Two lenders converted $125,000 of principal into 1,890,699 shares of our common stock valued at $368,606. The Company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $68,521. The Company also partially paid down the principal of a loan by making cash payments of $127,260 and issuing 2,039,864 of our common stock valued at $224,230. The Company recognized a gain for this extinguishment in the amount of $82,450. | |||||||||
As of September 30, 2014, and December 31, 2013 the principal balance was $0 and $402,500, respectively, and the unamortized debt discount was $0 and $286,166, respectively. The Company recorded interest expense for first quarter of 2014 and 2013 of $61,493 and $13,036, respectively. The Company would have been required to issue 0 and 6,044,978 of common stock if the lenders converted on September 30, 2014 and December 31, 2013, respectively. The fair value of the derivative liability at September 30, 2014 and December 31, 2013 was $0 and $606,112, respectively. | |||||||||
10% Variable Convertible Notes Payable | |||||||||
During the fiscal year 2013 the Company entered into twelve securities purchase agreements (as of September 30, 2014, no note was outstanding and as of December 31, 2013 only seven were still outstanding) with various lenders pursuant to which the lenders purchased a 10% convertible note. The Company received $371,167 in cash for these 10% convertible notes payable with the aggregate principal amount equaling $405,000. Some of these notes included (i) a 10% discount in the aggregate amount of $11,250 and (ii) fees totaling $22,583 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 ranging from 125% to 150% of the principal amount and accrued interest thereon if made prepayment is made before a set period of time. | |||||||||
Since these notes have 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 stock, 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 0.07% to 0.12% 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. | |||||||||
During the nine month period ended September 30, 2014 the following activity occurred relating various notes in this category: No new borrowing occurred. The Company paid $70,000 to a holder of one of these notes for the principal of $50,000. This cash payment of $70,000 included the accrued interest and a prepayment penalty charge. The Company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $98,390. Five lenders converted $178,750 of principal into 3,146,367 shares of our common stock valued at $408,028, and the Company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $169,323. One lender partially converted a note with a principal of $51,250 into 457,099 shares valued at $54,852 in our fiscal second quarter and in third quarter converted the remaining principal balance of $25,625 into 446,724 shares. | |||||||||
As of September 30, 2014 and December 31, 2013, the principal balance was $0 and $280,000, respectively, and the unamortized debt discount was $0 and $100,709, respectively. For the three and nine months period ended September 30, 2013, the Company recorded interest expense of $4,800 and $9,588, respectively. The Company would have been required to issue 0 and 4,484,138 shares of common stock if the lenders converted on September 30, 2014 and December 31, 2013, respectively. The fair value of the derivative liability at September 30, 2014 and December 31, 2013 was $0 and $383,337, respectively. | |||||||||
12% Variable Convertible Notes Payable | |||||||||
During fiscal year 2013 the Company entered into seven new securities purchase agreements (as of September 30, 2014 no notes were outstanding and as of December 31, 2013 only three were still outstanding) with various lenders pursuant to which the lenders purchased a 12% convertible note. The Company received $233,200 in cash for these 12% convertible notes payable with the aggregate principal amount of $263,000. Some of these notes included (i) a 10% discount in the aggregate amount of $15,000 and (ii) fees totaling $14,800 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 notes there is a prepayment charge ranging from 125% to 150% of the principal amount and accrued interest thereon if the payment is made 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 feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s common stock, 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 0.07% to 0.12% and expected life of 11 to 12 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. | |||||||||
During nine month period ended September 30, 2014 the following activity occurred relating various notes in this category: No new borrowings occurred. The Company paid the sum of $57,089 to a holder of one of these notes for the principal of $40,000. This cash payment of $57,089 included the accrued interest and a prepayment penalty charge. The Company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $57,249. A lender converted $25,000 of principal into 569,801 shares of our common stock valued at $68,376. The Company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $26,220. | |||||||||
As of September 30, 2014 and December 31, 2013, the principal balance of these notes was $0 and $89,025, respectively, and the unamortized debt discount was $0 and $40,795, respectively. The Company recorded interest expense for three and nine months periods ended September 30, 2014 of $200 and $15,794, respectively. For the three and nine month periods ended September 30, 2013, the Company recorded interest expense of $2,670 and $25,660, respectively. The Company would have been required to issue 0 and 1,512,736 of common stock if the lenders converted on September 30, 2014 and December 31, 2013, respectively. The fair value of the derivative liability at September 30, 2014 and December 31, 2013, is $0 and $143,944 respectively. | |||||||||
12% One Year Term Loan | |||||||||
To finance the purchase of MAvP, Implex Corporation, borrowed $250,000 from a stockholder of the Company in 2014. This loan bears interest at the rate of 12% per annum, with 12 equal monthly installments of interest and principal payments of $22,214 beginning April 1, 2014 and matures on May 1, 2015. Additionally, the Company shall pay to the lender a royalty of $25 on the first 10,000 prescriptions processed by MAvP during the preceding month (except that the first such payment shall include prescriptions processed since the initial closing on February 7, 2014) and $8 for all prescriptions thereafter. The Company has recorded a royalty expense of $61,795 and $93,895for the three and nine month period ended September 30, 2014, respectively. The Company on Implex’s behalf, paid $121,269 in principal payments and recorded interest expense of $13,306. The balance as of September 30, 2014 is $128,731. | |||||||||
12% One Year Term Loan – Related Party | |||||||||
To finance the purchase of MAVP, Implex borrowed $50,000 from the wife of the Company’s Chief Executive Officer. This loan bears interest at the rate of 12% per annum, with 12 equal monthly installments of interest and principal payments of $4,412 beginning April 1, 2014 and matures on May 1, 2015. Additionally, the Company shall pay to the lender a royalty of $5 on the first 10,000 prescription processed by MAVP during the preceding month (except that the first such payment shall include prescriptions processed since the initial closing on February 7, 2014) and $2 for all prescription thereafter. The Company has recorded a royalty expense of $12,335 and $18,775 for the three and nine month periods ended September 30, 2014. The Company on Implex’s behalf paid $24,254 in principal payments and recorded interest expense of $2,658 and the balance as of September 30, 2014 is $25,746. | |||||||||
24% One Year Term Loan | |||||||||
On May 19, 2014, MAVP borrowed $250,000 from a stockholder of the Company in order to provide funding for inventory and payment of commission expenses. This loan bears interest at the rate of 24% per annum, interest payments are due monthly beginning July 1, 2014, and the principal payment is due at the maturity date of May 18, 2015, along with any outstanding interest payments. Additionally, the Company shall pay to the lender a royalty of $2 for each prescription processed by MAVP upon the commencement of the $8.00 royalty under the investment contract dated January 17, 2014, with Implex. The balance as of September 30, 2014 is $250,000. No royalty has been paid since this royalty clause does not require payment until prior notes are paid in full. | |||||||||
24% One Year Term Loan – Related Party | |||||||||
On May 19, 2014, MAVP borrowed $75,000 from the wife of the Company’s Chief Executive Officer in order to provide funding for inventory and payment of commission expenses. This loan bears interest at the rate of 24% per annum, interest payments are due monthly beginning July 1, 2014, and the principal payment is due at the maturity date of May 18, 2015 along with any outstanding interest payments. Additionally, the Company shall pay to the lender a royalty of $2 for each prescription processed by MAVP upon the commencement of the $8.00 royalty under the investment contract dated January 17, 2014, with Implex. The balance as of September 30, 2014 is $75,000. No royalty has been paid since this royalty clause is not effective until prior notes are paid in full. | |||||||||
QuarterSpot Term Loan | |||||||||
On March 17, 2014, the Company received $92,000 in cash for an 8.9% note payable with a principal amount of $100,000, and incurred fees totaling $8,000 which were paid directly to third parties for legal and broker fees. Beginning March 19, 2014 daily payments of $520.83 began and will continue until this loan is paid in full on or about December 17, 2014. As of September 30, 2014, the principal balance is $28,648 and the Company recorded interest expense for the three and nine months period ended September 30, 2014 of $2,897 and $9,456, respectively. |
13_Derivative_Financial_Instru
13. Derivative Financial Instruments | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Investments, All Other Investments [Abstract] | ' | ||||||||||||||||
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 : | 30-Sep-14 | 30-Jun-14 | 31-Mar-14 | 31-Dec-13 | |||||||||||||
Volatility | 135.00% | 133.60% | 132.9% -98.9% | 110.4% - 28.5% | |||||||||||||
Expected life (in years) | 0 | 0.11 | 0.4 – 0.9 | 0.03 – 0.6 | |||||||||||||
Risk-free interest rate | 0.10% | 0.10% | 0.10% - 0.13% | 0.07% -0.12% | |||||||||||||
Dividend yield | 0.00% | 0.00% | 0.00% | 0.00% | |||||||||||||
Activity during the current period is as follows: | |||||||||||||||||
Derivative liabilities at December 31, 2013 | $ | 1,133,393 | |||||||||||||||
New derivative liabilities issued in first quarter 2014 | – | ||||||||||||||||
Extinguishment | (1,318,853 | ) | |||||||||||||||
Revalue at reporting period | 512,790 | ||||||||||||||||
Derivative liabilities at March 31, 2014 | $ | 327,330 | |||||||||||||||
New derivative liabilities issued in second quarter 2014 | – | ||||||||||||||||
Extinguishment | $ | (310,791 | ) | ||||||||||||||
Revalue at reporting period | $ | (879 | ) | ||||||||||||||
Derivative liabilities at June 30, 2014 | $ | 15,660 | |||||||||||||||
Extinguishment | $ | (15,660 | ) | ||||||||||||||
Revalue at reporting period | $ | (0 | ) | ||||||||||||||
Derivative liabilities at September 30, 2014 |
14_Equity_Deficit
14. Equity (Deficit) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||
Equity (Deficit) | ' | ||||||||||||||||
General | |||||||||||||||||
The Company is authorized to issue 10,000,000 preferred shares with a par value of $.001 per share. 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 as a class or series is issued. | |||||||||||||||||
The Company is authorized to issue 250,000,000 common shares with a par value of $.001 per share. Each share is entitled to cast one vote for each share held at all stockholders’ meetings for all purposes, including the election of directors. The common stock does not have cumulative voting rights. | |||||||||||||||||
On March 26, 2014 the Board adopted a resolution to amend the Certificate of Incorporation of the Company to change the capital structure of the corporation by increasing the authorized shares of common stock of the Company from 150,000,000 to 250,000,000. On April 16, 2014, the increase in the authorized shares of common stock was approved by the written consent of shareholders holding a majority of the voting power of the Company’s outstanding capital stock (“Shareholder Consent”). On June 2, 2014, the Company filed its Certificate of Amendment to the Certificate of Incorporation to effect the increase in the number of shares authorized common stock. | |||||||||||||||||
On March 26, 2014, the Company’s board of directors approved the ScripsAmerica, Inc., Incentive Stock Plan (“SOP”). On April 16, 2014, the SOP was approved by the written consent of the Company’s shareholders. The SOP was designed to serve as incentive for retaining qualified and competent employees, officers and directors, and certain consultants and advisors. There are 6,000,000 shares authorized for issuance under the SOP. | |||||||||||||||||
The purchase price per share of a Common Stock option under the SOP plan shall not be less than 100 percent of the fair market value at the time the options are granted. The purchase price per share of Common Stock option under the SOP plan to a person who owns more than 10 percent of the voting power of the Corporation's voting stock shall not be less than 110 percent of the fair market value of such shares, at the time the options are granted. The total value of options granted, under the SOP, to any one person, shall not exceed any limit imposed by Section 422 or the rules and regulations promulgated by the Internal Revenue Service thereunder. Currently, the limitation is One Hundred Thousand Dollars ($100,000) in value in any one corporate fiscal year. | |||||||||||||||||
As of September 30, 2014, no options have been issued under the SOP. | |||||||||||||||||
Issuances during 2014 | |||||||||||||||||
During the nine months period ended September 30, 2014, the Company issued 27,299,202 restricted shares of common stock for cash proceeds of $1,549,619 in various private subscription agreements. Subscription price is issued in a range from $0.05 to $.0633 | |||||||||||||||||
During the nine months period ended September 30, 2014, the Company issued 4,427,614 restricted shares of its common stock to non-employees for services rendered during 2014. These services were valued at $533,967 and the Company charged its operations in 2014. | |||||||||||||||||
During the nine months period ended September 30, 2014, the Company issued 88,000 restricted shares of its common stock in connection with payments provided to members of the board of directors during 2014. The Company charged its operations $9,440 in 2014. | |||||||||||||||||
During the nine months period ended September 30, 2014, the Company issued 1,740,550 restricted shares of its common stock in connection with financing costs during 2014. The Company charged to financing cost in the statement of operations $224,021 in 2014. | |||||||||||||||||
Pursuant to its the settlement agreement with GEM Global Yield Fund Limited (as described below), (a) the Company sold 887,280 shares of its common stock to GEM 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. | |||||||||||||||||
During the nine months period ended September 30, 2014, the Company issued 756,400 restricted shares of its common stock to non-employees for payment of stock to be issued for cash received in 2013. | |||||||||||||||||
During the nine months period ended September 30, 2014, the Company issued 921,203 restricted shares of its common stock to non-employees for payment of royalties. The payment of royalties was valued at $106,782. | |||||||||||||||||
During the nine months period ended September 30, 2014, the Company issued 9,009,937 shares of its common stock for the conversion of approximately $623,446 of principal of our convertible notes payable. These shares have a fair value of $1,249,287. | |||||||||||||||||
On April 21, 2014, 250,000 common stock shares were returned to the Company by Sean R. Fitzgibbons and were cancelled by the Company. These shares were issued in 2013 and were valued at $32,500. The Company reversed the expense that was recorded to the statement of operation in 2013 and the second quarter of 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(a)(2) and/or rule 506 of Regulation D. The Registrant was expecting to 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, 2013 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 financing agreement entered into on October 11, 2013 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. 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 has been expensed in our first quarter earnings in 2014. | |||||||||||||||||
Pursuant to its the settlement agreement with GEM, (a) the Company sold 887,280 shares of its common stock to GEM 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. | |||||||||||||||||
Warrants | |||||||||||||||||
Summary of our warrants activity and related information as of September 30, 2014: | |||||||||||||||||
Number of shares under warrants | Weighted Average Exercise price | Weighted Average Remaining Contractual term in Years | Aggregate | ||||||||||||||
Intrinsic Value | |||||||||||||||||
Outstanding at December 31, 2013 | 228,572 | $ | 0.39 | 3.1 | $ | – | |||||||||||
Granted | 5,000,000 | $ | 0.55 | 4.5 | $ | – | |||||||||||
Exercised | – | ||||||||||||||||
Cancelled/expired | – | ||||||||||||||||
Outstanding at September 30, 2014 | 5,228,572 | $ | 0.14 | 4.2 | $ | – | |||||||||||
Vested and exercisable at September 30, 2014 | 5,228,572 | ||||||||||||||||
2014 | |||||||||||||||||
Option fair value | $0.11 | ||||||||||||||||
Risk-free interest rate | 1.65% | ||||||||||||||||
Volatility | 183% | ||||||||||||||||
Terms in years | 5 | ||||||||||||||||
Dividend yield | 0% | ||||||||||||||||
Options | |||||||||||||||||
On March 27, 2014, the Company issued 75,000 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 $.099 and the fair value of these warrants is $3,971 which was expensed to selling, general and administrative. | |||||||||||||||||
On April 25, 2014, Company issued 50,000 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 $.121 and the fair value of these options is $4,841 which was expensed to selling, general and administrative in the second quarter of 2014. | |||||||||||||||||
On April 25, 2014, the Company issued 5,010,000 employee options which have an excise price of $0.118, are exercisable immediately and expire on April 25, 2017. The Company’s Chief Executive officer received 2,510,000 options and the Chief Financial Officer received 2,500,000. The fair value of these options are $437,620 and were expensed in our second quarter of 2014. The fair value was determined by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 181.27% risk-free interest rate of .88% and an expected life of three years. | |||||||||||||||||
On June 23, 2014, the Company issued 250,000 employee options to an employee for services. These options have an excise price of $0.143, are exercisable immediately and expire on June 23, 2017, with a fair value of these options is $28,296 and were expensed to selling, general and administrative expenses in the second quarter of 2014. | |||||||||||||||||
On July 21, 2014, Company issued 50,000 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 $.132 and the fair value of these options is $4,161 which was expensed to selling, general and administrative in the third quarter of 2014. | |||||||||||||||||
Summary of options activity and related information as of September 30, 2014 | |||||||||||||||||
Number of shares under warrants | Weighted Average Exercise price | Weighted Average Remaining Contractual term in Years | Aggregate | ||||||||||||||
Intrinsic Value | |||||||||||||||||
Outstanding at December 31, 2013 | 5,015,000 | $ | 0.16 | 2.3 | $ | – | |||||||||||
Granted | 5,435,000 | $ | 0.12 | 2.6 | – | ||||||||||||
Exercised | – | ||||||||||||||||
Cancelled/expired | – | ||||||||||||||||
Outstanding at September 30, 2014 | 10,450,000 | $ | 0.14 | 2.3 | $ | – | |||||||||||
Vested and exercisable at September 30, 2014 | 10,450,000 | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
Option fair value | $0.079 - $.113 | $ 0.10 - $ 0.19 | |||||||||||||||
Risk-free interest rate | .82 - .88% | .34% - .78% | |||||||||||||||
Volatility | 177 - 183% | 186% - 195% | |||||||||||||||
Terms in years | 3 | 3 | |||||||||||||||
Dividend yield | 0% | 0% | |||||||||||||||
15_Commitments
15. Commitments | 9 Months Ended | ||||||
Sep. 30, 2014 | |||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||||
Commitments | ' | ||||||
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 September 30, 2014 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. 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. During the nine months ended September 30, 2014, the Company also made cash payments for royalty expense associated with one of the notes in the amount of $175,572 and issued 757,776 shares of its common stock which have a fair value of $87,819 for payment of royalty expense and recorded a royalty expense of $263,391 to the statement of operation for the nine months period ended September 30, 2014. For the nine months ended September 30, 2013 the Company issued 513,834 shares of common stock as payment for the royalty expense and the Company recorded an expense of $213,945. | |||||||
On October 15, 2013, our 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 the market price on the date granted with a one year vesting period. As of August 13, 2014, the $4 million raise has not been reached and consequently these conditions are not effective. | |||||||
Operating Lease - We entered into two long-term lease for rented space. In April 2014, MAVP entered into a 36 month operating lease for store/production facility in Clifton, NJ. The lease expires on March 31, 2016, the monthly rent is $2,231.67 for the first 12 months with a 3% increase in year 2 and another 3% increase in year 3, for a total minimum payments over the life of the lease of $82,774. In October 2014, MAVP also leased additional space for a monthly rental fee of $1,000 per month, this lease expires September 30, 2015. In November, 2013 PIMD 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 and $4,724 for the last twelve months. Payments did not begin until April 2014, the total minimum payments over the life of the lease is $111,714. | |||||||
As of September 30, 2014, future minimum lease rental payments are as follows: | |||||||
2014 | $ | 25,684 | |||||
2015 | $ | 92,654 | |||||
2016 | $ | 42,376 | |||||
2017 | $ | 7,103 | |||||
Total | $ | 167,817 | |||||
16_Purchase_Order_Financing_Wi
16. Purchase Order Financing With Related Party | 9 Months Ended |
Sep. 30, 2014 | |
Related Party Transactions [Abstract] | ' |
Purchase Order Financing With Related Party | ' |
In June 2012, the Company entered into a purchase order finance agreement with Development 72, a major stockholder of the Company which is controlled by a member of the Board of Directors. The agreement will allow the Company to borrow up to $1.2 million on a case by case basis, at an interest rate of 0.6% per 10 day period, 1.8% monthly and 21.6% annually. During the nine months period ended September 30, 2014 and 2013, the Company financed $9,244,000 and $3,218,129, respectively of its purchase orders and incurred an interest expense of $83,040 and $81,016, respectively. As of September 30, 2014 and December 31, 2013, the unpaid purchase order finance balance was $1,020,096 and $906,448 respectively, and accrued fees and interest are $12,096 and $21,249, respectively. |
17_Concentrations
17. Concentrations | 9 Months Ended |
Sep. 30, 2014 | |
Risks and Uncertainties [Abstract] | ' |
Concentrations | ' |
During the nine month period ended September 30, 2014, the Company purchased product from four suppliers, and in 2013 from two suppliers. A disruption in the availability of raw materials from the Company’s suppliers could cause a possible loss of sales, which could affect operating results adversely. | |
For the three and nine months period ended September 30, 2014, no customer accounted for more than 10% of revenue. For the three month period ended September 30, 2013, the Company derived approximately $73,000 or 100% of its revenue from two customers. For the nine month period ended September 30, 2013, the Company derived revenue from two customers with one customer accounting for 97% of the revenue. | |
As of September 30, 2014, the Company had one customer representing 100% of our accounts receivable-related party. As of December 31, 2013, the Company had one customer representing 100% of our accounts receivable-related party. |
18_Contingencies
18. Contingencies | 9 Months Ended |
Sep. 30, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Contingencies | ' |
The Company issued to Ironridge Global IV, Ltd. (“Ironridge”) 8,690,000 shares of its common stock in settlement of bona fide claims against the Company which were purchased by Ironridge from various creditors of the Company (the “Claim Amount”). The shares issued to Ironridge were freely tradable and exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 3(a)(10) of the Securities Act. Pursuant to the court order issued by the California Superior Court for the County of Los Angeles (“California State Court”) on November 8, 2013, the shares of the Company’s common stock were deemed issued in settlement of the claims (subject to certain adjustments based on the future trading value of the stock) when delivered to Ironridge. The number of shares issued to Ironridge is subject to an adjustment based on the trading price of our stock such that the value of the shares is sufficient to cover the Claim Amount, a 10% agent fee amount and Ironridge’s reasonable legal fees and expenses (the “Final Amount”), which was determined to be $766,238. | |
On February 10, 2014, Ironridge made a request for, and we issued, an additional 1,615,550 shares of the Registrant’s common stock as a result of the adjustment provisions under the stipulation in the term sheet. | |
On April 4, 2014, Ironridge requested even more shares pursuant to the added adjustment provisions under the stipulation in the court order issued by the California State Court. This time their request was for an additional 1,646,550 shares of the Company’s common stock. We declined to issue these additional shares because Ironridge had already received, to that date, approximately 10,305,550 shares of free trading stock with a market value of approximately $1.2 million (based on the closing stock price on May 6, 2012), in settlement of a Final Amount of $766,238. The shares issued to Ironridge represent a premium of 48% to the Final Amount. | |
On May 6, 2014, Ironridge submitted an ex parte application to the California State Court to compel the issuance of the 1,646,550 shares requested from the Company on April 4, 2014, and the California State Court without a hearing entered an order to compel the Company to issue the additional shares. On the same day, we filed a notice of appeal with the California State Court’s order. The appeal automatically stays enforcement of the California State Court’s May 6th order. | |
We believe that Ironridge is not entitled to additional shares as it has received a significant premium on the Final Amount which Ironridge itself had declared to the California State Court served as the basis of the adjustment mechanism for the number of shares issued based on the Company’s stock price. We will vigorously pursue the appeal, and reversal, of the California State Court order. | |
We accrued the potential issuance of these shares and have expensed $164,655 to financing costs in the financial statement as of September 30, 2014, as well as reversing 1,646,550 shares of the Company’s common stock. |
19_Subsequent_Events
19. Subsequent Events | 9 Months Ended |
Sep. 30, 2014 | |
Subsequent Events [Abstract] | ' |
Subsequent Events | ' |
From October 1, 2014 to November 12, 2014, the Company issued 439,333 shares of common stock for the following transactions: We issued a) 119,000 common stock shares for payment of royalty expense valued at $10,710, b) 238,333 common stock shares to consultants under a consulting agreements with regard to investor relations services, which were valued at $21,450, c) 62,000 common stock shares to various employees for services provided valued at $5,580, and d) 20,000 shares were issued to members of the Board of Directors for services provided, valued at $1,800. | |
In October 2014 the Company, which had previously owned 49% of MAvPby assumption of all of Implex’s responsibilities to the lenders, obtained the other 51% from Implex and, accordingly, is now the owner of 100% of the issued and outstanding stock of that compounding pharmacy. The Implex ownership interest in MAvP was transferred to the Company for no additional consideration as the Company previously reflected 100% of the purchase price through VIE consolidation. The Company now owns 100% of the assets and outstanding common stock of MAvP. |
3_Summary_of_Significant_Accou1
3. Summary of Significant Accounting Policies (Policies) | 9 Months Ended | ||
Sep. 30, 2014 | |||
Accounting Policies [Abstract] | ' | ||
Principles of Consolidation | ' | ||
Principles of Consolidation - The condensed consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained. All inter-company accounts and transactions have been eliminated in consolidation. For investments which are considered to be a Variable Interest Entity (VIE), the Company would be considered the primary beneficiary of the VIE if 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. 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. | |||
Use of Estimates | ' | ||
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||
Revenue Recognition | ' | ||
Revenue Recognition - Product revenue associated with our pharmaceutical distribution services and our specialty pharmacy business is recognized when product is shipped from a contract packager or our pharmacy to our customers’ warehouses or directly to a patient, and is adjusted for anticipated charge backs from our customers which include inventory credits, discounts or volume incentives. 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. | |||
Our specialty pharmacy revenue is not recognized until the patient receives the filled prescription. We will prepare and fill a prescription that has been approved by an insurance provider, ship the filled prescription to the patient and upon confirmation of receipt of the prescription by patient will recognize revenue. Any prescription in which patient has not received product but we may have been reimbursed by the insurance provider is recorded at deferred revenue. As of September 30, 2014, deferred balance is $418,540. | |||
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 “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 WholesaleRx which is DEA and State-licensed to store and distribute controlled substances. Per our amended agreement the Company is to earn a 14% commission fee on the gross profit (sales less cost of goods sold, freight in and credits and allowances) of products shipped to independent pharmacies. | |||
Accounts Receivable Trade, net | ' | ||
Accounts Receivable Trade, net - Accounts receivable are stated at estimated net realizable value. These receivables are from our specialty pharmacy, in which we only ship prescription products to patients upon payment approval by the patients’ insurance company. Payments are usually received within 30 days of the product being shipped. As of September 30, 2014, $510,025 has been recorded as an allowance for insurance company deductions and chargebacks. As of September 30, 2014 and December 31, 2013, no allowance for doubtful accounts was deemed necessary. | |||
Property and Equipment | ' | ||
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 that do not significantly extend the useful lives of the respective assets and repair costs are charged to operating expense as incurred. | |||
Intangible assets | ' | ||
Intangible assets - The Company amortizes the cost of intangibles over their useful lives unless such lives are deemed indefinite. Intangible assets with indefinite lives are not amortized; however, they are tested annually for impairment and written down to fair value if required. | |||
We review the carrying values of property and equipment and long-lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Such events or circumstances include the following: | |||
o | significant declines in an asset’s market price; | ||
o | significant deterioration in an asset’s physical condition; | ||
o | significant changes in the nature or extent of an asset’s use or operation; | ||
o | significant adverse changes in the business climate that could impact an asset’s value, including adverse actions or assessments by regulators; | ||
o | accumulation of costs significantly in excess of original expectations related to the acquisition or construction of an asset; | ||
o | current-period operating or cash flow losses combined with a history of such losses or a forecast that demonstrates continuing losses associated with an asset’s use; and | ||
o | expectations that it is more likely than not that an asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. | ||
If impairment indicators are present, we determine whether an impairment loss should be recognized by testing the applicable asset or asset group’s carrying value for recoverability. This test requires long-lived assets to be grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, the determination of which requires judgment. We estimate the undiscounted future cash flows expected to be generated from the use and eventual disposal of the assets and compare that estimate to the respective carrying values in order to determine if such carrying values are recoverable. This assessment requires the exercise of judgment in assessing the future use of, and projected value to be derived from, the eventual disposal of the assets to be held and used. If the carrying value of the assets is not recoverable, then we record a loss for the difference between the assets’ fair value and respective carrying value. We believe our current assumptions and estimates are reasonable and appropriate. Unanticipated events and changes in market conditions, however, could affect such estimates, resulting in the need for an impairment charge in future periods. | |||
Receivable - Contract Packager | ' | ||
Receivable - Contract Packager - The Company has receivables from Marlex Pharmaceuticals, Inc. (“Contract Packager”), in the amount of $1,201,231 and $1,088,598 at September 30, 2014 and December 31, 2013, respectively. This receivable consists of revenue earned for U.S. government sales and monthly payments due from the settlement agreement entered into on September 6, 2013. Under the September 6, 2013 settlement agreement, the Company is entitled to recover $408,150 of these receivables of which $326,524 has been recovered as of September 30, 2014. | |||
Receivable - related party | ' | ||
Receivable - related party - WholesaleRx, the pharmaceutical aggregator which is DEA and State-licensed to store and distribute controlled substances in which we have a 14% investment, is an entity from which we recognize Commission fees when earned on shipments of generic pharmaceutical and OTC products. The receivable consists of PO financing, and revenue earned for commission sales agreement entered into in November 1, 2013 (as subsequently amended by oral agreements). In August 2014, WholesaleRx stopped providing the necessary information for recording the commission fees and stopped making payments on the open receivables. Subsequent to September 30, 2014, the Company has filed legal action (see footnote #7 below for details) and as further disclosed in note 7, does not believe a reserve on this receivable is warranted at September 30, 2014. | |||
Inventory | ' | ||
Inventory - Inventories represent purchased finished products at P.I.M.D. International LLC’s (“PIMD”) inventory location and at a third party manufacturer’s warehouse location. Raw materials represent the cost of purchased material use to make our compounded prescription products at our MAVP location. Both finished products and raw material costs are stated at the lower of cost or market determined by the first in, first out method. | |||
Derivative Financial Instruments | ' | ||
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, 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. | |||
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 historically has a high 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 | ' | ||
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, and notes payable approximate their fair values due to their short-term maturities. It was impracticable to estimate the fair value of the Company’s investment (see notes 7). However, management believes 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 3 for fair value of derivative liabilities. | |||
Advertising Expenses | ' | ||
Advertising Expenses - The Company expenses advertising costs as incurred. The Company incurred advertising expenses in the amount of $0 and $63,000 for the three month period ended September 30, 2014 and 2013, respectively, and $29,017 and 267,413 for the nine months ended September 30, 2014 and 2013, respectively. | |||
Stock-Based Compensation | ' | ||
Stock-Based Compensation - Compensation expense is recognized for the fair value of all share-based payments issued to employees and consultants. As of September 30, 2014 and December 31, 2013, the Company issued 10,450,000 and 5,015,000, respectively for employee stock options that required calculating the fair value using a pricing model such as the Black-Scholes pricing model. See Note 13 for fair value of these employee stock options. | |||
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. If the options or warrants are for future services, they are revalued at each reporting period unless there is a significant incentive for non-performance. 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 (although we do not anticipate paying dividends in the foreseeable future), | ||
· | the risk free interest rate for the expected option or warrant term, and | ||
· | the expected forfeiture rate. | ||
Earnings (Loss) Per Share | ' | ||
Earnings (Loss) 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. As of September 30, 2014, common stock equivalents consisted of preferred stock convertible into 5,980,504 shares of common stock, warrants convertible into 5,228,572 shares, options convertible into 10,450,000 shares and notes payable convertible into 3,740,800 shares of common stock. | |||
Reclassification | ' | ||
Reclassification - Certain reclassifications have been made to the 2013 financial statements to conform to the interim 2014 condensed financial statements presentation. These reclassifications had no effect on net loss or cash flows as previously reported. | |||
Recent Accounting Pronouncements | ' | ||
Recent Accounting Pronouncements – Management does not believe that any recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. |
4_Revenues_net_from_Contract_P1
4. Revenues net, from Contract Packager and Commission Fees (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Other Income and Expenses [Abstract] | ' | ||||||||||||||||
Sales from U.S. government contracts | ' | ||||||||||||||||
Three month sales as of September 30, | Nine month sales as of September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Sales from US government contract | $ | 3,519,621 | $ | 1,005,606 | $ | 10,726,464 | $ | 4,269,931 | |||||||||
Cost on US government, per agreement | 3,390,729 | 948,964 | 10,354,654 | 3,984,787 | |||||||||||||
Revenue - net, from contract packager | $ | 128,892 | $ | 56,642 | $ | 371,810 | $ | 285,144 | |||||||||
Schedule of commission revenue | ' | ||||||||||||||||
Three month sales as of September 30, | Nine month sales as of September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Sales - WholesaleRx | $ | 356,154 | $ | 188,232 | $ | 1,845,591 | $ | 188,232 | |||||||||
Cost | 318,296 | 171,607 | 1,649,996 | 171,607 | |||||||||||||
Commission Revenue | $ | 37,858 | $ | 16,625 | $ | 195,595 | $ | 16,625 |
5_Inventory_Tables
5. Inventory (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Inventory (Tables) | ' | ||||||||
As of | As of | ||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Finished product at subcontract - RapiMed® | $ | 275,010 | $ | – | |||||
Finished product at PIMD, net of discounts | 11,691 | – | |||||||
Raw material at Main Avenue Pharmacy | 441,463 | – | |||||||
Total Inventory | $ | 728,164 | $ | – |
Recovered_Sheet1
6. Prepaid Expenses and Other Current Assets (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Prepaid Expense and Other Assets, Current [Abstract] | ' | ||||||||
Schedule of prepaid expenses and other current assets | ' | ||||||||
As of | As of | ||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Prepayment for product to be manufactured | $ | – | (a) | $ | 275,000 | ||||
Prepaid insurances | 56,396 | 25,400 | |||||||
Deferred financing costs, net | 19,700 | 27,575 | |||||||
Prepaid, other | 5,984 | 1,698 | |||||||
Advances to WholesaleRx | 32,485 | – | |||||||
Total prepaid expenses and other current assets | $ | 114,565 | $ | 329,673 |
8_PIMD_InternationalLLC_Tables
8. P.I.M.D International,LLC (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
VIE financial information | ' | ||||||||
P.I.M.D Statement of Operations | For the three | For the nine | |||||||
months ended | months ended | ||||||||
30-Sep-14 | 30-Sep-14 | ||||||||
Product revenue-net | $ | 65,900 | $ | 72,700 | |||||
Cost of Goods Sold | $ | 42,600 | $ | 48,500 | |||||
Gross Profit | $ | 23,300 | $ | 24,200 | |||||
Operating Costs and Expenses: | |||||||||
Selling, General and Administrative | $ | 52,200 | $ | 138,800 | |||||
Net Loss | $ | (28,900 | ) | $ | (114,600 | ) | |||
As of | As of | ||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Current assets | $ | 47,000 | $ | 31,000 | |||||
Total assets | $ | 130,000 | $ | 31,000 | |||||
Liabilities | $ | 505,000 | $ | 177,000 | |||||
Stockholders' Equity | $ | (375,000 | ) | $ | (146,000 | ) | |||
11_Accounts_payable_and_accrue1
11. Accounts payable and accrued expenses (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Payables and Accruals [Abstract] | ' | ||||||||
Schedule of accounts payable and accrued expenses | ' | ||||||||
30-Sep-14 | 31-Dec-14 | ||||||||
Accounts payable and general accruals | $ | 713,586 | $ | 226,570 | |||||
Accrued commission expense | $ | 1,587,693 | – | ||||||
Accrued Ironridge expense (see note 17) | $ | 164,655 | – | ||||||
Deferred rent payable - PIMD | $ | 9,287 | – | ||||||
Total | $ | 2,475,221 | $ | 226,570 |
12_Debt_Tables
12. Debt (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Schedule of debt | ' | ||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Line of credit | $ | – | 99,223 | ||||||
Debt with related party | 261,957 | 352,816 | |||||||
12% Fixed rate Convertible notes payable | 548,231 | 574,778 | |||||||
12% Fixed rate Convertible notes payable-related party | 106,109 | 120,738 | |||||||
8% variable convertible notes payable | – | 116,334 | |||||||
10% variable convertible notes payable | – | 179,291 | |||||||
12% variable convertible notes payable | – | 48,230 | |||||||
12% 1 year term loan | 128,731 | – | |||||||
12% 1 year term loan – related party | 25,746 | – | |||||||
24% 1 year term loan | 250,000 | – | |||||||
24% 1 year term loan – related party | 75,000 | – | |||||||
QuarterSpot – Term loan | 28,648 | – | |||||||
Total notes payable | 1,424,422 | 1,491,410 | |||||||
Less current maturities | 639,178 | 511,590 | |||||||
Long-term debt | $ | 785,244 | $ | 979,820 | |||||
Debt discounts consist of the following: | |||||||||
8% variable convertible notes payable | $ | – | $ | 286,166 | |||||
10% variable convertible notes payable | – | 100,709 | |||||||
12% variable convertible notes payable | – | 40,794 | |||||||
Total Discounts | $ | – | $ | 427,669 |
13_Derivative_Financial_Instru1
13. Derivative Financial Instruments (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ||||||||||||||||
Assumptions used on derivatives | ' | ||||||||||||||||
As of : | 30-Sep-14 | 30-Jun-14 | 31-Mar-14 | 31-Dec-13 | |||||||||||||
Volatility | 135.00% | 133.60% | 132.9% -98.9% | 110.4% - 28.5% | |||||||||||||
Expected life (in years) | 0 | 0.11 | 0.4 – 0.9 | 0.03 – 0.6 | |||||||||||||
Risk-free interest rate | 0.10% | 0.10% | 0.10% - 0.13% | 0.07% -0.12% | |||||||||||||
Dividend yield | 0.00% | 0.00% | 0.00% | 0.00% | |||||||||||||
Derivative liabilities | ' | ||||||||||||||||
Derivative liabilities at December 31, 2013 | $ | 1,133,393 | |||||||||||||||
New derivative liabilities issued in first quarter 2014 | – | ||||||||||||||||
Extinguishment | (1,318,853 | ) | |||||||||||||||
Revalue at reporting period | 512,790 | ||||||||||||||||
Derivative liabilities at March 31, 2014 | $ | 327,330 | |||||||||||||||
New derivative liabilities issued in second quarter 2014 | – | ||||||||||||||||
Extinguishment | $ | (310,791 | ) | ||||||||||||||
Revalue at reporting period | $ | (879 | ) | ||||||||||||||
Derivative liabilities at June 30, 2014 | $ | 15,660 | |||||||||||||||
Extinguishment | $ | (15,660 | ) | ||||||||||||||
Revalue at reporting period | $ | (0 | ) | ||||||||||||||
Derivative liabilities at September 30, 2014 |
14_Equity_Deficit_Tables
14. Equity Deficit (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||
Summary of warrant activity | ' | ||||||||||||||||
Number of shares under warrants | Weighted Average Exercise price | Weighted Average Remaining Contractual term in Years | Aggregate | ||||||||||||||
Intrinsic Value | |||||||||||||||||
Outstanding at December 31, 2013 | 228,572 | $ | 0.39 | 3.1 | $ | – | |||||||||||
Granted | 5,000,000 | $ | 0.55 | 4.5 | $ | – | |||||||||||
Exercised | – | ||||||||||||||||
Cancelled/expired | – | ||||||||||||||||
Outstanding at September 30, 2014 | 5,228,572 | $ | 0.14 | 4.2 | $ | – | |||||||||||
Vested and exercisable at September 30, 2014 | 5,228,572 | ||||||||||||||||
2014 | |||||||||||||||||
Option fair value | $0.11 | ||||||||||||||||
Risk-free interest rate | 1.65% | ||||||||||||||||
Volatility | 183% | ||||||||||||||||
Terms in years | 5 | ||||||||||||||||
Dividend yield | 0% | ||||||||||||||||
Summary of option activity | ' | ||||||||||||||||
Number of shares under warrants | Weighted Average Exercise price | Weighted Average Remaining Contractual term in Years | Aggregate | ||||||||||||||
Intrinsic Value | |||||||||||||||||
Outstanding at December 31, 2013 | 5,015,000 | $ | 0.16 | 2.3 | $ | – | |||||||||||
Granted | 5,435,000 | $ | 0.12 | 2.6 | – | ||||||||||||
Exercised | – | ||||||||||||||||
Cancelled/expired | – | ||||||||||||||||
Outstanding at September 30, 2014 | 10,450,000 | $ | 0.14 | 2.3 | $ | – | |||||||||||
Vested and exercisable at September 30, 2014 | 10,450,000 | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
Option fair value | $0.079 - $.113 | $ 0.10 - $ 0.19 | |||||||||||||||
Risk-free interest rate | .82 - .88% | .34% - .78% | |||||||||||||||
Volatility | 177 - 183% | 186% - 195% | |||||||||||||||
Terms in years | 3 | 3 | |||||||||||||||
Dividend yield | 0% | 0% |
15_Commitments_Tables
15. Commitments (Tables) | 9 Months Ended | ||||||
Sep. 30, 2014 | |||||||
Commitments Tables | ' | ||||||
Schedule of operating lease commitments | ' | ||||||
2014 | $ | 25,684 | |||||
2015 | $ | 92,654 | |||||
2016 | $ | 42,376 | |||||
2017 | $ | 7,103 | |||||
Total | $ | 167,817 |
3_Summary_of_Significant_Accou2
3. Summary of Significant Accounting Policies (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | 9 Months Ended | 12 Months Ended | 9 Months Ended | ||||||||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | |
Employee Stock Options [Member] | Employee Stock Options [Member] | Contract Packager [Member] | Contract Packager [Member] | Convertible Preferred Stock [Member] | Warrants [Member] | Options [Member] | Convertible Notes Payable [Member] | ||||||
Allowance for doubtful accounts | $0 | ' | $0 | ' | $0 | ' | ' | ' | ' | ' | ' | ' | ' |
Allowance for doubtful accounts, contract packager | 510,025 | ' | 510,025 | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' |
Accounts receivable | 3,213,760 | ' | 3,213,760 | ' | 0 | ' | ' | 1,201,231 | 1,088,598 | ' | ' | ' | ' |
Advertising expenses | $0 | $63,000 | $29,017 | $267,413 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options issued | ' | ' | ' | ' | ' | 10,450,000 | 5,015,000 | ' | ' | ' | ' | ' | ' |
Antidilutive shares | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5,980,504 | 5,228,572 | 10,450,000 | 3,740,800 |
Recovered_Sheet2
4. Revenues Net, From Contract Packager and Commission Fees (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Other Income and Expenses [Abstract] | ' | ' | ' | ' |
Sales from U.S. government contract | $3,519,621 | $1,005,606 | $10,726,464 | $4,269,931 |
Cost on U.S. government, per agreement | 3,390,729 | 948,964 | 10,354,654 | 3,984,787 |
Revenues net, from contract packager | $128,892 | $56,642 | $371,810 | $285,144 |
Recovered_Sheet3
4. Revenues Net, From Contract Packager and Commission Fees (Details - Commissions) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Other Income and Expenses [Abstract] | ' | ' | ' | ' |
Sales-WholesaleRx | $356,154 | $188,232 | $1,845,591 | $188,232 |
Cost | 318,296 | 171,607 | 1,649,996 | 171,607 |
Commission Revenue | $37,858 | $16,625 | $195,595 | $16,625 |
5_Inventory_Details
5. Inventory (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Inventory Disclosure [Abstract] | ' | ' |
Finished product at subcontract - RapiMedB. | $275,010 | $0 |
Finished product at PIMD, net of discounts | 11,691 | 0 |
Raw material at Main Ave Pharmacy | 441,463 | 0 |
Total Inventory | $728,164 | $0 |
6_Prepaid_Expenses_And_Other_C1
6. Prepaid Expenses And Other Current Assets (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | |
Prepaid Expense and Other Assets, Current [Abstract] | ' | ' | |
Prepayment for product to be manufactured | $0 | [1] | $275,000 |
Prepaid insurances | 56,396 | 25,400 | |
Deferred financing costs, net | 19,700 | 27,575 | |
Prepaid other | 5,984 | 1,698 | |
Advances to WholesaleRx | 32,485 | 0 | |
Total prepaid expenses and other current assets | $114,565 | $329,673 | |
[1] | Funds provided for production of RapiMed tablets by third party manufacturer. The production was completed and the tablets were reclassified as inventory in June 2014, and remain so classified. |
7_Investments_Details_Narrativ
7. Investments (Details Narrative) (Wholesale Rx [Member]) | Sep. 30, 2014 |
Wholesale Rx [Member] | ' |
Noncontrolling interest percent | 14.00% |
8_PIMD_International_LLC_Detai
8. P.I.M.D. International, LLC (Details) (P.I.M.D International, LLC [Member], USD $) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | |
P.I.M.D International, LLC [Member] | ' | ' | ' |
Product revenue-net | $65,900 | $72,700 | ' |
Cost of goods sold | 42,600 | 48,500 | ' |
Gross Profit | 23,300 | 24,200 | ' |
Operating Costs and Expenses: | ' | ' | ' |
Selling, General and Administratinve | 52,200 | 138,800 | ' |
Net Loss | -28,900 | -114,600 | ' |
Current assets | 47,000 | 47,000 | 31,000 |
Total assets | 130,000 | 130,000 | 31,000 |
Liabilities | 505,000 | 505,000 | 177,000 |
Stockholders' Equity | ($375,000) | ($375,000) | ($146,000) |
8_PIMD_InternationalLLC_Detail
8. P.I.M.D International,LLC (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Net loss from noncontrolling interest | ($28,931) | $0 | ($114,565) | $0 | ' |
Equity attributable to noncontrolling interest | -375,368 | ' | -375,368 | ' | -146,566 |
P.I.M.D International, LLC [Member] | ' | ' | ' | ' | ' |
Distribution from noncontrolling interest | 119,650 | ' | 114,237 | ' | ' |
Net loss from noncontrolling interest | ' | ' | -114,565 | ' | ' |
Equity attributable to noncontrolling interest | $375,368 | ' | $375,368 | ' | ' |
8_Business_Combination_Details
8. Business Combination (Details Narrative) (Main Avenue Pharmacy [Member], USD $) | 9 Months Ended |
Sep. 30, 2014 | |
Main Avenue Pharmacy [Member] | ' |
Goodwill allocated upon purchase | $538,000 |
Amortization expense, goodwill | 8,000 |
Purchase price of acquisition | $550,000 |
Recovered_Sheet4
11. Accounts Payable and Accrued Expenses (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Payables and Accruals [Abstract] | ' | ' |
Accounts payable and general accruals | $713,586 | $226,570 |
Accrued commission expense | 1,587,693 | 0 |
Accrued Ironridge expense (see note 17) | 164,655 | 0 |
Deferred rent payable - PIMD | 9,287 | 0 |
Total | $2,475,221 | $226,570 |
12_Debt_Details_Debt_outstandi
12. Debt (Details - Debt outstanding) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Line of credit | $0 | $99,222 |
Convertible notes payable - related party | 106,109 | 120,738 |
Total notes payable | 1,424,422 | 1,491,410 |
Less: current maturities | 639,178 | 511,590 |
Long-term debt | 785,244 | 979,820 |
Line Of Credit [Member] | ' | ' |
Line of credit | 0 | 99,223 |
Debt with related party [Member] | ' | ' |
Debt with related party | 261,957 | ' |
Debt With Related Party [Member] | ' | ' |
Debt with related party | ' | 352,816 |
12% Fixed rate convertible notes payable | ' | ' |
Convertible notes payable | 548,231 | 628,795 |
12% Fixed rate convertible note payable related party [Member] | ' | ' |
Convertible notes payable - related party | 106,109 | 120,738 |
8% Variable Convertible Notes Payable [Member] | ' | ' |
Convertible notes payable | 0 | 402,500 |
10% Variable Convertible Notes Payable [Member] | ' | ' |
Convertible notes payable | 0 | 280,000 |
12% Variable Convertible Notes Payable [Member] | ' | ' |
Convertible notes payable | 0 | 89,025 |
12% One Year Term Loan [Member] | ' | ' |
Term loan | 128,731 | 0 |
12% One Year Term Loan - Related Party [Member] | ' | ' |
Term loan | 25,746 | 0 |
24% 1 year term loan [Member] | ' | ' |
Term loan | 250,000 | 0 |
24% 1 year term loan related party [Member] | ' | ' |
Term loan | 75,000 | 0 |
QuarterSpot Term Loan [Member] | ' | ' |
Term loan | $28,648 | $0 |
12_Debt_Details_Debt_discounts
12. Debt (Details - Debt discounts) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
8% Variable Convertible Notes Payable [Member] | ' | ' |
Debt discount | $0 | $286,166 |
10% Variable Convertible Notes Payable [Member] | ' | ' |
Debt discount | 0 | 100,709 |
12% Variable Convertible Notes Payable [Member] | ' | ' |
Debt discount | $0 | $40,794 |
12_Debt_Details_Narrative
12. Debt (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Line of credit balance | $0 | ' | $0 | ' | $99,222 |
Proceeds from convertible notes | ' | ' | 114,750 | 1,372,867 | ' |
Payments on convertible notes | ' | ' | 141,837 | 0 | ' |
Convertible note, current portion | 0 | ' | 0 | ' | 289,839 |
Royalty expense | 160,037 | 30,600 | 362,990 | 213,945 | ' |
Gain on extinguishment of debt | -28,931 | 299,709 | 555,014 | 417,674 | ' |
Note converted into stock, value | ' | ' | 1,249,287 | ' | ' |
Line Of Credit [Member] | ' | ' | ' | ' | ' |
Maximum borrowing capacity | 100,000 | ' | 100,000 | ' | ' |
Interest rate | ' | ' | 'Prime plus 6.25% | ' | ' |
Interest rate | 9.00% | ' | 9.00% | ' | ' |
Line of credit balance | 0 | ' | 0 | ' | 99,223 |
Interest expense | 0 | 146 | 937 | 2,406 | ' |
Debt With Related Party [Member] | ' | ' | ' | ' | ' |
Face amount of debt | 500,001 | ' | 500,001 | ' | ' |
Interest rate | 9.00% | ' | 9.00% | ' | ' |
Maturity date | ' | ' | 15-Aug-16 | ' | ' |
Interest expense | 6,360 | 21,123 | 9,016 | 28,915 | ' |
Note payable balance | 261,957 | ' | 261,957 | ' | 352,816 |
Current portion of note payable balance | 131,053 | ' | 131,053 | ' | 122,529 |
12% Fixed rate convertible notes payable | ' | ' | ' | ' | ' |
Interest expense | 16,799 | 12,900 | 59,067 | 37,700 | ' |
Proceeds from convertible notes | ' | ' | 114,750 | ' | ' |
Payments on convertible notes | ' | ' | 149,830 | ' | ' |
Convertible note balance | 548,231 | ' | 548,231 | ' | 628,795 |
Convertible note, current portion | 0 | ' | 0 | ' | 289,839 |
12% Fixed rate convertible note payable related party [Member] | Chief Executive Officer [Member] | ' | ' | ' | ' | ' |
Maximum borrowing capacity | 80,000 | ' | 80,000 | ' | ' |
Maturity date | ' | ' | 1-Apr-16 | ' | ' |
Interest expense | 2,400 | 2,400 | 7,200 | 7,200 | ' |
Convertible note balance | 80,000 | ' | 80,000 | ' | 80,000 |
12% Fixed rate convertible note payable related party [Member] | Other related party [Member] | ' | ' | ' | ' | ' |
Interest expense | 823 | ' | 3,699 | ' | ' |
Payments on convertible notes | ' | ' | 14,629 | ' | ' |
Convertible note balance | 26,109 | ' | 26,109 | ' | 40,738 |
Royalty payments made | 25,200 | ' | 63,098 | ' | ' |
Stock issued for royalty payments, shares issued | 42,000 | ' | 163,427 | ' | ' |
Royalty expense | 29,400 | ' | 93,400 | ' | ' |
8% Variable Convertible Notes Payable [Member] | ' | ' | ' | ' | ' |
Interest expense | 61,493 | 13,036 | ' | ' | ' |
Payments on convertible notes | ' | ' | 66,732 | ' | ' |
Convertible note balance | 0 | ' | 0 | ' | 402,500 |
Gain on extinguishment of debt | ' | ' | 81,792 | ' | ' |
Unamortized debt discount | 0 | ' | 0 | ' | 286,166 |
Fair value of derviative | 0 | ' | 0 | ' | 606,112 |
10% Variable Convertible Notes Payable [Member] | ' | ' | ' | ' | ' |
Interest expense | ' | 4,800 | ' | 9,588 | ' |
Convertible note balance | 0 | ' | 0 | ' | 280,000 |
Unamortized debt discount | 0 | ' | 0 | ' | 100,709 |
Fair value of derviative | 0 | ' | 0 | ' | 383,337 |
12% Variable Convertible Notes Payable [Member] | ' | ' | ' | ' | ' |
Interest expense | ' | 2,670 | ' | 25,660 | ' |
Convertible note balance | 0 | ' | 0 | ' | 89,025 |
Unamortized debt discount | 0 | ' | 0 | ' | 40,794 |
Fair value of derviative | 0 | ' | 0 | ' | 143,944 |
12% One Year Term Loan [Member] | ' | ' | ' | ' | ' |
Interest expense | ' | ' | 13,306 | ' | ' |
Term loan balance | 128,731 | ' | 128,731 | ' | 0 |
Payments on convertible notes | ' | ' | 59,730 | ' | ' |
Royalty expense | 61,795 | ' | 93,895 | ' | ' |
12% One Year Term Loan - Related Party [Member] | ' | ' | ' | ' | ' |
Term loan balance | 25,746 | ' | 25,746 | ' | 0 |
Royalty expense | 12,335 | ' | 18,775 | ' | ' |
24% 1 year term loan [Member] | ' | ' | ' | ' | ' |
Term loan balance | 250,000 | ' | 250,000 | ' | 0 |
24% 1 year term loan related party [Member] | ' | ' | ' | ' | ' |
Term loan balance | 75,000 | ' | 75,000 | ' | 0 |
QuarterSpot Term Loan [Member] | ' | ' | ' | ' | ' |
Interest expense | 2,895 | ' | 9,456 | ' | ' |
Term loan balance | $28,648 | ' | $28,648 | ' | $0 |
13_Derivative_Financial_Instru2
13. Derivative Financial Instruments (Details - Assumptions) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |
Sep. 30, 2014 | Mar. 31, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | |
Volatility | 135.00% | ' | 133.60% | ' |
Expected life in years | '0 years | '0.4-0.9 years | '.11 years | '0.03-0.6 years |
Risk-free interest rate | 0.10% | ' | 0.10% | ' |
Dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
Minimum [Member] | ' | ' | ' | ' |
Volatility | ' | 132.90% | ' | 110.40% |
Risk-free interest rate | ' | 0.10% | ' | 0.07% |
Maximum [Member] | ' | ' | ' | ' |
Volatility | ' | 98.90% | ' | 28.50% |
Risk-free interest rate | ' | 0.13% | ' | 0.12% |
13_Derivative_Financial_Instru3
13. Derivative Financial Instruments (Details - Activity) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 |
Convertible Debt [Member] | Convertible Debt [Member] | Convertible Debt [Member] | |||
Derivative liabilities, Beginning | $0 | $1,133,393 | $15,660 | $327,330 | $1,133,393 |
New derivative liabilities issued | ' | ' | 0 | 0 | 0 |
Extinguishment | ' | ' | -15,660 | -310,791 | -1,318,853 |
Revalue at reporting period | ' | ' | 0 | -879 | 512,790 |
Derivative liabilities, Ending | $0 | $1,133,393 | $0 | $15,660 | $327,330 |
14_Stockholders_Deficit_Detail
14. Stockholders' Deficit (Details-Warrant activity) (Warrants [Member], USD $) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Dec. 31, 2013 | |
Warrants [Member] | ' | ' |
Number of shares under warrants | ' | ' |
Number of shares under warrants Outstanding | 228,572 | ' |
Number of shares under warrants Granted | 5,000,000 | ' |
Number of shares under warrants Outstanding | 5,228,572 | 228,572 |
Vested and exercisable | $5,228,572 | ' |
Weighted Average Exercise Price | ' | ' |
Weighted Average Exercise price Outstanding, Beginning | $0.39 | ' |
Weighted Average Exercise price Granted | $0.55 | ' |
Weighted Average Exercise price Outstanding, Ending | $0.14 | $0.39 |
Weighted Average Remaining Contractual Term | ' | ' |
Weighted Average Remaining Contractual term in Years Outstanding | '4 years 6 months | '3 years 1 month 6 days |
Weighted Average Remaining Contractual term in Years Granted | '4 years 2 months 12 days | ' |
Aggregate Intrinsic Value Outstanding | $0 | $0 |
Fair value per warrant | $0.11 | ' |
Risk free interest rate | 1.65% | ' |
Volatility | 183.00% | ' |
Terms in years | '5 years | ' |
Dividend yield | 0.00% | ' |
14_Stockholders_Deficit_Detail1
14. Stockholders' Deficit (Details-Option Activity) (Options [Member], USD $) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Dec. 31, 2013 | |
Options [Member] | ' | ' |
Number of shares Outstanding | 5,015,000 | ' |
Number of shares Granted | 5,435,000 | ' |
Number of shares outstanding, ending balance | 10,450,000 | 5,015,000 |
Vested and exercisable | 10,450,000 | ' |
Weighted Average Exercise price Outstanding | $0.16 | ' |
Weighted Average Exercise price Granted | $0.12 | ' |
Weighted Average Exercise price ending balance | $0.14 | $0.16 |
Weighted Average Remaining Contractual term in Years Outstanding | '2 years 7 months 6 days | '2 years 3 months 18 days |
Weighted Average Remaining Contractual term in Years grants | '2 years 3 months 18 days | ' |
Aggregate Intrinsic Value Outstanding | $825 | ' |
Aggregate Intrinsic Value Granted | $825 | ' |
Option fair value | '$0.079-$.113 | '$0.10-$0.19 |
Risk-free interest rate, minimum | 0.82% | 0.34% |
Risk-free interest rate, maximum | 0.88% | 0.78% |
Volatility, minimum | 177.00% | 186.00% |
Volatility, maximum | 183.00% | 195.00% |
Terms in years | '3 years | '3 years |
Dividend yield | 0.00% | 0.00% |
15_Commitments_Details
15. Commitments (Details) (USD $) | Sep. 30, 2014 |
Commitments and Contingencies Disclosure [Abstract] | ' |
2014 | $25,684 |
2015 | 92,654 |
2016 | 42,376 |
2017 | 7,103 |
Total | $167,817 |
16_Purchase_Order_Financing_De
16. Purchase Order Financing (Details Narrative) (USD $) | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ' | ' | ' |
Purchase orders financed, balance | $1,020,096 | ' | $1,037,494 |
Purchase orders financed | 9,244,000 | 3,218,129 | ' |
Interest expense | 83,040 | 81,016 | ' |
Accrued interest | $12,096 | ' | $21,249 |
17_Concentrations_Details_Narr
17. Concentrations (Details Narrative) (One Customer, USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | |
Revenue [Member] | Revenue [Member] | Accounts Receivable [Member] | Accounts Receivable [Member] | |
Concentration credit risk | 100.00% | 97.00% | 100.00% | 100.00% |
Revenue | $73,000 | ' | ' | ' |