Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2014 | Jan. 22, 2016 | Jun. 30, 2014 | |
Document And Entity Information | |||
Entity Registrant Name | SCRIPSAMERICA, INC. | ||
Entity Central Index Key | 1,521,476 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2014 | ||
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? | No | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 139,097,969 | ||
Entity Public Float | $ 12,487,705 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,014 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Current Assets | ||
Cash | $ 454,215 | $ 47,293 |
Accounts receivable trade, net of allowance for deductions of $589,415 and $0 respectively | 3,128,951 | 0 |
Receivable - contract packager, net of allowance of $0 and $408,150, respectively | 0 | 1,088,598 |
Receivable - commissions | 113,647 | 0 |
Receivable - related party commissions | 0 | 24,223 |
Inventories | 735,763 | 0 |
Prepaid expenses and other current assets | 91,661 | 329,673 |
Total Current Assets | 4,524,237 | 1,489,787 |
Property and Equipment, net | 101,393 | 0 |
Other Assets | ||
Investments | 0 | 276,956 |
Intangible assets | 538,000 | 0 |
Other Assets, net | 480,406 | 14,720 |
Total | 1,018,406 | 291,676 |
TOTAL ASSETS | 5,644,036 | 1,781,463 |
Current Liabilities | ||
Line of credit | 0 | 99,222 |
Accounts receivable line of credit | 377,056 | 0 |
Accounts payable and accrued expenses | 4,873,166 | 226,570 |
Reserve for charge backs | 1,302,441 | 0 |
Purchase order financing - related party | 0 | 1,037,494 |
Royalty payable | 26,827 | 0 |
Royalty payable - related party | 5,520 | 5,302 |
Stock to be issued | 40,195 | 273,947 |
Current portion of long-term debt - related party | 134,024 | 122,529 |
Current portion of convertible notes payable - net of discounts of $0 and $259,396 respectively | 0 | 289,839 |
Derivative liabilities | 0 | 1,133,393 |
Total Current Liabilities | 6,759,229 | 3,188,296 |
Non-Current Liabilities | ||
Preferred stock dividends payable | 271,180 | 187,740 |
Note payable | 200,000 | 0 |
Note payable - related party | 100,000 | 0 |
Convertible notes payable - related parties | 112,669 | 120,738 |
Convertible notes payable, less current portion, net of discounts of $0 and $168,273 respectively | 559,852 | 628,795 |
Finance fee payable | 25,000 | 0 |
Long-term debt, less current portion - related party | 96,262 | 230,287 |
Total Non-Current Liabilities | 1,364,963 | 1,167,560 |
Total Liabilities | $ 8,124,192 | $ 4,355,856 |
Commitments and Contingencies | ||
Series A Convertible preferred stock - $0.001 par value; 10,000,000 shares authorized, 2,990,252 shares issued and outstanding (aggregate liquidation preference of $1,314,180 at December 31, 2014) | $ 1,043,000 | $ 1,043,000 |
Stockholders' Deficit | ||
Common stock - $0.001 par value; 250,000,000 and 150,000,000 shares authorized as of December 31, 2014 and 2013, respectively; 136,937,253 and 91,792,839 shares issued and outstanding as of December 31, 2014 and 2013, respectively | 136,937 | 91,794 |
Additional paid-in capital | 15,040,696 | 10,046,457 |
Accumulated deficit | (18,423,564) | (13,609,078) |
Total ScripsAmerica, Inc. Stockholders' Deficit | (3,245,931) | (3,470,827) |
Noncontrolling interest | (277,225) | (146,566) |
Total Stockholders' Deficit | (3,523,156) | (3,617,393) |
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT | $ 5,644,036 | $ 1,781,463 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Current Assets | ||
Allowance for accounts receivable | $ 589,415 | $ 0 |
Contract packager, net of allowance receivable | 0 | 408,150 |
Current Liabilities | ||
Discount on convertible notes payable | $ 0 | $ 427,669 |
Stockholders' Deficit | ||
Series A Convertible Preferred stock par value (in Dollars per share) | $ 0.001 | $ 0.001 |
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) | $ 0.001 | $ 0.001 |
Common stock shares authorized | 250,000,000 | 150,000,000 |
Common stock shares issued | 136,937,253 | 91,792,839 |
Common stock shares outstanding | 136,937,253 | 91,792,839 |
Convertible Debt [Member] | ||
Current Liabilities | ||
Discount on convertible notes payable | $ 0 | $ 259,396 |
Convertible Debt [Member] | ||
Current Liabilities | ||
Discount on convertible notes payable | $ 0 | $ 259,396 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Net revenues | ||
Product revenues - net | $ 30,093,692 | $ 152,650 |
Revenues net, from contract packager | 401,618 | 333,638 |
Commission fees | 359,346 | 69,902 |
Total net revenues | 30,854,656 | 556,190 |
Cost of Goods Sold | ||
Product | 2,764,568 | 210,540 |
Royalty expense | 492,999 | 285,547 |
Total Cost of Goods Sold | 3,257,567 | 496,087 |
Gross Profit | 27,597,089 | 60,103 |
Selling | 27,525,466 | 259,111 |
General and administrative expenses | 2,453,970 | 2,173,429 |
Selling, general and administrative expenses share-based compensation issued for services | 1,751,481 | 3,791,909 |
Allowance for and (recoveries of) receivable - contract packager | (326,524) | 1,129,368 |
Total Operating Expenses | 31,404,393 | 7,353,817 |
Loss from Operations | (3,807,304) | (7,293,714) |
Other Income (Expenses), net | ||
Interest expense | (311,179) | (332,947) |
Financing costs | (325,175) | (971,840) |
Loss from derivatives issued with debt greater than carrying value | 0 | (1,179,737) |
Change in fair value of deriviative liabilities | (65,493) | (1,288,623) |
Amortization of debt discount | (134,896) | (785,170) |
Gain on extinguishment of debt | 173,535 | 636,670 |
Write-off Wholesale Rx investment | (278,265) | 0 |
Income from equity investment | 1,309 | 1,956 |
Total Other Income (Expenses), net | (940,164) | (3,919,691) |
Loss Before Provision for Income taxes | (4,747,468) | (11,213,405) |
Provision for income taxes | 0 | 0 |
Net Loss | (4,747,468) | (11,213,405) |
Loss attributable to noncontrolling interest | (16,422) | (18,309) |
Net loss attributable to ScripsAmerica, Inc. | (4,731,046) | (11,195,096) |
Preferred stock dividend | (83,440) | (83,440) |
Net loss attributable to common shareholders | $ (4,814,486) | $ (11,278,536) |
Net loss per common share | ||
Basic | $ (.04) | $ (.17) |
Diluted | $ (0.04) | $ (0.17) |
Weighted average number of common shares outstanding | ||
Basic | 127,411,084 | 68,119,715 |
Diluted | 127,411,084 | 68,119,715 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Deficit - USD ($) | Common Stock | Additional Paid-In Capital | Retained Earnings (Deficit) | Stockholders' Deficit Scrips America | Deficit Noncontrolling | Total |
Beginning Balance, Shares at Dec. 31, 2012 | 56,404,972 | |||||
Beginning Balance, Amount at Dec. 31, 2012 | $ 56,405 | $ 1,090,772 | $ (2,330,542) | $ 1,183,365 | $ 0 | $ (1,183,365) |
Common stock issued for cash, Shares | 4,854,952 | |||||
Common stock issued for cash, Amount | $ 4,855 | 526,253 | 531,108 | 531,108 | ||
Common stock issued for services, Shares | 136,000 | |||||
Common stock issued for services, Value | $ 136 | 35,064 | 35,200 | 35,200 | ||
Common stock issued for conversion of convertible notes payable, Shares | 11,456,639 | |||||
Common stock issued for conversion of convertible notes payable, Amount | $ 11,457 | 2,765,834 | 2,777,291 | 2,777,291 | ||
Common stock issued for services - non employees, Shares | 9,177,027 | |||||
Common stock issued for services - non employees, Amount | $ 9,177 | 3,377,935 | 3,387,112 | 3,387,112 | ||
Common stock issued for debt and payables, Shares | 8,690,000 | |||||
Common stock issued for debt and payables, Amount | $ 8,690 | 1,294,810 | 1,303,500 | 1,303,500 | ||
Common stock issued for royalty payments, Shares | 1,339,616 | |||||
Common stock issued for royalty payments, Amount | $ 1,340 | 345,463 | 346,803 | 346,803 | ||
Common stock retired for services previously provided, Shares | (600,000) | |||||
Common stock retired for services previously provided, Amount | $ (600) | (75,900) | (76,500) | (76,500) | ||
Common stock issued for warrants in a cashless conversion, Shares | 333,633 | |||||
Common stock issued for warrants in a cashless conversion, Amount | $ 334 | (334) | ||||
Dividends for convertible preferred stock | (83,440) | (83,440) | (83,440) | |||
Common stock options issued for services - Directors | 246,731 | 246,731 | (246,731) | |||
Common stock options issued for services | 439,829 | 439,829 | 439,829 | |||
Noncontrolling interest beginning balance | (8,607) | (8,607) | ||||
Distribution to noncontrolling interest | (119,650) | (119,650) | ||||
Net Loss | (11,195,096) | (11,195,096) | (18,309) | (11,213,405) | ||
Ending Balance, Shares at Dec. 31, 2013 | 91,792,839 | |||||
Ending Balance, Amount at Dec. 31, 2013 | $ 91,794 | 10,046,457 | (13,609,078) | (3,470,827) | (146,566) | (3,617,393) |
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, Shares | 128,000 | |||||
Common stock issued for services, Value | $ 128 | 13,512 | 13,640 | 13,640 | ||
Common stock issued for services - employees, Shares | 74,000 | |||||
Common stock issued for services - employees, Amount | $ 74 | 6,946 | 7,020 | 7,020 | ||
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 | 4,764,312 | |||||
Common stock issued for services - non employees, Amount | $ 4,764 | 562,560 | 567,324 | 567,324 | ||
Common stock issued for royalty payments, Shares | 1,241,133 | |||||
Common stock issued for royalty payments, Amount | $ 1,241 | 138,352 | 139,593 | 139,593 | ||
Common stock issued for debt financing costs, Shares | 1,740,550 | |||||
Common stock issued for debt financing costs, Amount | $ 1,740 | 222,281 | 224,021 | 224,021 | ||
Common stock issued in settlement agreement for cash, Shares | 887,280 | |||||
Common stock issued in settlement agreement for cash, Amount | $ 887 | 124,494 | 125,381 | 125,381 | ||
Dividends for convertible preferred stock | (83,440) | (83,440) | (83,440) | |||
Common stock options issued for services - Directors | 97,521 | 97,521 | (97,521) | |||
Common stock options issued for services | 513,658 | 513,658 | 513,658 | |||
Common stock warrants issued for settlement agreement | 552,318 | 552,318 | 552,318 | |||
Distribution to noncontrolling interest | (114,237) | (114,237) | ||||
Net Loss | (4,731,046) | (4,731,046) | (16,422) | (4,747,468) | ||
Ending Balance, Shares at Dec. 31, 2014 | 136,937,253 | |||||
Ending Balance, Amount at Dec. 31, 2014 | $ 136,937 | $ 15,040,696 | $ (18,423,564) | $ (3,245,931) | $ (277,225) | $ (3,523,156) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Cash Flows from Operating Activities | ||
Net Loss | $ (4,747,468) | $ (11,213,405) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Income from equity method investee | (1,309) | (1,956) |
Amortization of discount on convertible notes payable | 134,896 | 785,170 |
Loss from derivatives issued with debt | 0 | 1,179,737 |
Depreciation expense | 9,750 | 0 |
Amortization of licenses | 12,000 | 0 |
Amortization of financing fees | 24,829 | 263,973 |
Common stock issued for services | 587,984 | 3,191,812 |
Common stock issued for payment of royalty fees | 139,593 | 346,803 |
Common stock issued for financing fees | 13,999 | 761,818 |
Options issued for services - employees | 513,658 | 439,829 |
Options issued for services - directors | 97,521 | 246,731 |
Warrants issued for settlement agreement | 552,318 | 0 |
Change in fair value of derivative liabilities | 65,493 | 1,288,623 |
(Recovery of) reserve on receivable - contract packager | (326,524) | 1,385,000 |
Recovery of bad debt | 0 | (81,632) |
Gain on extinguishment of debt | (173,535) | (636,670) |
Allowance for chargebacks | 1,302,441 | (11,399) |
Loss for property and equipment disposal | 0 | 69,650 |
Loss for write-off of investment in WholesaleRx | 278,265 | 0 |
Changes in operating assets and liabilities | ||
Accounts receivable - trade | (3,128,951) | 253,485 |
Receivable - related party commissions | 24,223 | 24,222 |
Receivables - Contract packager and commissions | 1,301,475 | (667,336) |
Prepaid expenses and other assets | 62,592 | 143,134 |
Inventories | (735,763) | 0 |
Accounts payable and other liabilities | 4,690,141 | 428,157 |
Cash provided by (used in) operating activities | 697,628 | (1,804,254) |
Cash Flows from Investing Activities | ||
Acquisition of businesses | (250,000) | (150,000) |
Purchase of property and equipment | (111,143) | 0 |
Cash used in investing activities | (361,143) | (150,000) |
Cash Flows from Financing Activities | ||
Payments under bank line of credit, net | (99,222) | 59,164 |
Payments under accounts receivable line of credit, net | (274,405) | 0 |
Proceeds from issuance of common stock | 1,675,000 | 531,108 |
Proceeds for stock to be issued | 40,195 | 50,925 |
Proceeds from term loan | 92,000 | 0 |
Payments on term loan | (100,000) | 0 |
Proceeds from convertible notes payable | 127,906 | 1,579,867 |
Payments on convertible notes payable - related party | (13,332) | (9,262) |
Proceeds from convertible note payable - related party | 5,263 | 0 |
Proceeds from notes payable from stockholder | 450,000 | 0 |
Payments on notes payable from stockholder | (184,676) | 0 |
Proceeds from notes payable - related party | 175,000 | 0 |
Payments on note payable - related party | (122,530) | 0 |
Payments for (proceeds from) PO financing from related party, net | (1,037,494) | 437,964 |
Payments to factor, net | 0 | (141,725) |
Payments on convertible notes payable | (452,096) | (288,336) |
Payments on note payable - related party | (36,935) | (112,021) |
Payments to member of noncontrolling interest | (114,237) | (119,650) |
Payments for financing costs | (60,000) | 0 |
Cash provided by financing activities | 70,437 | 1,988,034 |
Net Increase in Cash | 406,922 | 33,780 |
Cash - Beginning of year | 47,293 | 13,513 |
Cash - End of year | 454,215 | 47,293 |
Cash Paid: | ||
Interest | 225,332 | 192,732 |
Noncash financing and investing activities: | ||
Accrued preferred stock dividend payable | 83,440 | 83,440 |
Notes payable issued for purchase of Main Ave Pharmacy | 300,000 | 0 |
Conversion of note payable for common stock | 0 | 979,554 |
Stock issued for inventory advance | 0 | 275,010 |
Payments on notes payable and accrued interest from stockholder and related party from initial draw down on accounts receivable line of credit | 454,366 | 0 |
Payments on finance fees from initial draw down accounts receivable line of credit | 197,095 | 0 |
Issuance of common stock for amounts in stock to be issued | 210,022 | 0 |
Financing fees included in accounts payable and other liabilities | $ 50,000 | $ 0 |
1. ORGANIZATION AND BUSINESS
1. ORGANIZATION AND BUSINESS | 12 Months Ended |
Dec. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BUSINESS | ScripsAmerica, Inc, (“us”, “we”, “our” or the “Company”) was incorporated in the State of Delaware on May 12, 2008, and in 2014 had one wholly owned subsidiary, Main Avenue Pharmacy Inc. (“Main Avenue”) a Delaware Corporation. We also own 90% of PIMD International LLC. (“PIMD”), a Florida Limited Liability Company. We also included activity from Implex Corporation (“Implex”), which was owned by our legal counsel, a related party, for the first three fiscal quarters of 2014 until we acquired 100% ownership of Main Avenue from Implex. The accompanying consolidated financial statements reflect our financial information and that of Main Avenue and PIMD. On January 29, 2014, Implex entered into a stock purchase agreement to acquire Main Avenue. Since we exercised significant influence over the operations of Main Avenue through our related party relationship with Implex, and we were the primary beneficiary of the agreement, our consolidated financial statements included the operations of Main Avenue and Implex prior to October 2014. In October 2014, Implex’s ownership interest in Main Avenue was transferred to us, as such, we own 100% of the assets and outstanding common stock of Main Avenue. In December 2014, we acquired a 90% interest in PIMD. Prior to acquiring a 90% interest in PIMD, PIMD was consolidated as it was considered a variable interest entity (“VIE”). Since our inception in 2008, our business model has evolved significantly. Through March 2013, and to a lesser extent into early 2014, we primarily provided pharmaceutical distribution services to end users across the health care industry through major pharmaceutical distributors in North America. In 2013, the majority of our revenue came from orders facilitated by McKesson Corporation (“McKesson”). During 2014, we also entered into various supply agreements with independent pharmacies, which we service through PIMD, and we entered into agreements with third parties pursuant to which we receive a percentage of the gross profit on sales of pharmaceutical products. |
2. LIQUIDITY AND BUSINESS RISKS
2. LIQUIDITY AND BUSINESS RISKS | 12 Months Ended |
Dec. 31, 2014 | |
Risks and Uncertainties [Abstract] | |
LIQUIDITY AND BUSINESS RISKS | As of December 31, 2014, we had approximately $454,000 in cash, approximately $4,500,000 in current assets and approximately $6,800,000 in current liabilities for a negative working capital of approximately $2,300,000. For the year ended December 31, 2014, we incurred a loss of approximately $3,800,000 from operations and our net loss for the year was approximately $4,700,000. As of December 31, 2014, our accumulated deficit was approximately $18,400,000. Management believes that after taking into consideration our projections for 2015 and 2016, that our cash flows from operations will be sufficient to support the working capital requirements, debt service requirements, and operating expenses for the next twelve months. |
3. SUMMARY OF SIGNIFICANT ACCOU
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2014 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | a. Principles of Consolidation b. Use of Estimates c. Revenue Recognition - Product Revenues – Specialty Pharmacy Due to the nature of the industry and the reimbursement environment in which we operate, certain estimates are required in order to record net revenues and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they may have to be revised or updated as additional information becomes available. It is possible that management’s estimates could change, which could have an impact on operations and cash flows. Specifically, the complexity of many billing arrangements and the uncertainty of reimbursement amounts for certain services from certain third-party payors may result in adjustments to amounts originally recorded. As of December 31, 2014, $1,302,441 has been recorded as a reserve for third-party payors deductions and chargebacks. We believe we have adequate allowances for contractual adjustments relating to all known third-party payors disputes. However, no assurance can be given with respect to such estimates of reimbursements and offsets or the ultimate outcome of any refund requests. Product Revenues – Pharmaceutical Distribution Services Product revenue associated with our pharmaceutical distribution services is recognized when the product is shipped from a contract packager to our customers’ warehouses, and is adjusted for anticipated chargebacks. The sales revenue is reduced accordingly based on historical experience, customer contract programs, product pricing trends and the mix of products shipped. Purchase orders from our customers 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. Revenues from Contract Packager We recognize revenue from our contract packager on a net basis according to Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 605-45, Revenue Recognition: Principal Agent Considerations. Commission Fees Commission fees are recognized when earned on shipments of generic pharmaceutical products by WholesaleRx, LLC (“WholesaleRx”), which is licensed by the Drug Enforcement Agency and sixteen states to store and distribute controlled substances. Under the terms of our amended agreement with WholesaleRx, we 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. Prior to November 1, 2013 amended agreement, we would receive 12.5% on the gross profits. (See Note 8 below for details on WholesaleRx). We also earn commission fees with various other pharmacies for shipments on generic pharmaceutical products in which we broker the costs from various supplies. Under this agreement we earned an agreed commission fee from the pharmacies. d. Research and Development e. Accounts Receivable Trade, Net - In addition to the allowance for future deductions, we examine other receivables and will record an allowance for doubtful receivables if deemed necessary. As of December 31, 2014 and 2013, no allowance for doubtful receivables was deemed necessary. In 2013, accounts receivable trade are stated at estimated net realizable value net of the sales allowance due to chargebacks. The chargeback reserve at December 31, 2013 was zero because we did not have any receivable associated with McKesson and we no longer sell product to McKesson. Management provides for uncollectible amounts through a charge to earnings and a credit to an allowance for bad debts based on its assessment of the current status of individual accounts and historical collection information. Balances that are deemed uncollectible after management has used reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable. f. Property and Equipment - g. Intangible Assets h. Long-Lived Assets · significant declines in an asset’s market price; · significant deterioration in an asset’s physical condition; · significant changes in the nature or extent of an asset’s use or operation; · significant adverse changes in the business climate that could impact an asset’s value, including adverse actions or assessments by regulators; · accumulation of costs significantly in excess of original expectations related to the acquisition or construction of an asset; · 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 · 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. i. Receivable - Contract Packager j. Receivable - Related Party Commissions k. Inventories - l. Deferred Financing Costs m . Customer, Product, and Supplier Concentrations n. Income Taxes We also comply with the provisions of ASC 740 which prescribes a recognition threshold and measurement process for recording in the consolidated financial statements uncertain tax positions taken or expected to be taken in a tax return. We classify any assessment for interest and/or penalties as the other expenses in the consolidated financial statements, if applicable. There were no uncertain tax positions at December 31, 2014 and 2013. o. Derivative Financial Instruments Derivative financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period. We estimate 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, we generally use 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. p . Fair Value Measurements Fair Value Measurements and Disclosures Level 1: Level 2: Level 3: 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. We use 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 receivables, inventories, accounts payable and accrued expenses, royalty payable, and short-term debt approximate their fair values due to their short-term maturities. Management believes the carrying values of our lines of credit and long-term debt approximates fair value due to the borrowing rates currently available to us for loans with similar terms. See Note 15 for the fair value of derivative liabilities. q. Advertising Expenses r. Shipping and Handling Costs s. Cash – Concentration t. Stock-Based Compensation For non-employees, stock grants issued for services are valued at either the invoiced or contracted value of services rendered, 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 disincentive for non-performance. In calculating the estimated fair value of our stock options and warrants, we used a Black-Scholes pricing model which requires the consideration of the following 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 shares, which is issuable upon exercise of the option or warrant; · the expected volatility of our common shares; · expected dividends on our common shares (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. u. Cost of Goods Sold – For the first half of fiscal year 2013, the Company purchased all of its products from one supplier, Marlex Pharmaceuticals Inc., a related party, at various contracted prices. Raw materials were re-packaged by Marlex. Upon shipment of product, the Company was charged the contracted price for services provided to ship the product. Cost of goods consisted of raw material costs, re-packaging costs and shipping and handling. The Company financed the purchase of inventory based on confirmed purchase orders via a revolving finance agreement, provided by a related party. Beginning in August 2013, we added a second source for supplying our pharmaceutical product needs. These purchases are also financed based on confirmed purchase orders via a revolving finance agreement, provided by a related party. v. Selling Expenses – w. Noncontrolling Interest - x. Earnings (Loss) Per Share y. Recent Accounting Pronouncements – Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements. z. Reclassifications - |
4. INVENTORIES
4. INVENTORIES | 12 Months Ended |
Dec. 31, 2014 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | Inventories consist of the following: December 31, 2014 December 31, 2013 Finished product at PIMD, net discounts $ 191,908 $ – Raw material at Main Avenue Pharmacy 543,855 – Total Inventory $ 735,763 $ – No inventory reserves or lower of cost or market adjustments are considered necessary as of December 31, 2014. |
5. PREPAID EXPENSES AND OTHER C
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS | 12 Months Ended |
Dec. 31, 2014 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | Prepaid expenses and other current assets consist of the following: December 31, 2014 December 31, 2013 Prepayment for product to be manufactured $ – (a) $ 275,000 Prepaid insurance 46,271 25,400 Deferred financing costs, net 17,075 27,575 Prepaid royalty 28,315 – Prepaid other – 1,698 Total prepaid expenses and other current assets $ 91,661 $ 329,673 (a) Funds provided for production of RapiMed® tablets by third party manufacturer. The production was completed and the tablets totaling $275,000 were reclassified as inventory in June 2014, but in December 2014, the tablets were deemed unsaleable and $114,480 was expensed to cost of goods sold in the consolidated statement of operations . |
6. PROPERTY AND EQUIPMENT, Net
6. PROPERTY AND EQUIPMENT, Net | 12 Months Ended |
Dec. 31, 2014 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT, Net | Property and equipment consist of the following: December 31, 2014 December 31, 2013 Machinery and equipment $ 103,415 $ 1,975 Furniture and fixtures 9,703 – Software 5,909 5,909 119,027 7,884 Less: accumulated depreciation (17,634 ) (7,884 ) $ 101,393 $ – Depreciation expense for the year ended December 31, 2014, was $9,750 and prior to 2014, the assets were fully depreciated. |
7. RECEIVABLES - RELATED PARTIE
7. RECEIVABLES - RELATED PARTIES | 12 Months Ended |
Dec. 31, 2014 | |
Related Party Transactions [Abstract] | |
RECEIVABLES- RELATED PARTIES | We recognized commission fees from WholesaleRx, when earned on shipments of generic pharmaceutical products. The receivable consists of PO financing and revenue earned pursuant to a commission sales agreement entered into on November 1, 2013. The balance as of December 31, 2014 is $97,047 which was deemed uncollectable and as such, was fully reserved at December 31, 2014. The balance at December 31, 2013 is $24,223. No reserve for uncollectability was deemed. As of December 31, 2014 and 2013, the outstanding receivable balance for receivable – contract packager is $0 and $1,088,598, respectively, which consists of a receivable for purchase order financing, revenue earned on U.S. government sales and monthly payments. See Note 21 for details on purchase order financing. |
8. INVESTMENTS IN WHOLESALERX
8. INVESTMENTS IN WHOLESALERX | 12 Months Ended |
Dec. 31, 2014 | |
Equity Method Investments and Joint Ventures [Abstract] | |
INVESTMENTS IN WHOLESALERX | As of December 31, 2014, we held a 14% non-controlling ownership interest in WholesaleRx. 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 the purchaser COD which eliminates any accounts receivable realization issues. Prior to November 1, 2013, we operated under an oral agreement with WholesaleRx pursuant to which we secured third party financing to fund WholesaleRx’s purchase orders. Under the oral agreement, we would receive 12.5% of WholesaleRx’s “gross profit” for the prior month (gross profit would consist of (i) sales to all customers minus (ii) cost of goods sold, freight in (to WholesaleRx), credits and allowances). Under the terms of the November 1, 2013 agreement, we agreed to make an equity investment of $400,000 for 12,000 shares, representing 20% ownership interest in WholesaleRx. Additionally, we agreed to provide purchase order financing. WholesaleRx is obligated to pay us 14% of the gross profit of the prior calendar month, on or before the 15th calendar day of each month. Under the terms of the agreement, late payments 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 11, 2013 amendment. In August 2014, WholesaleRx stopped making payments and failed to provide the required financial information for calculation of the 14% fee owed to us. Accordingly, on October 8, 2014, we filed an action for the unpaid amounts owed to us. At the same time, we joined with a 40% shareholder of WholesaleRx, giving them a 54% voting interest. We jointly filed a derivative action in Tennessee seeking the return to WholesaleRx the funds alleged to have been improperly withdrawn by a member of its management, who is also its 40% shareholder. On November 10, 2014, we and the other 40% shareholder approved the removal of WholesaleRx’s Board of Directors and management. On November 10, 2014, WholesaleRx’s controlling stockholders elected new management. The investment was originally accounted for under the equity method because we expected the investment to exceed 20%. Our initial investment of $275,000 was increased for the equity in 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 December 31, 2014, we had no access to WholesaleRx’s records and have taken legal action in 2015 and as such, we determined the value of this investment to be $0. Our investment of $275,000 plus recorded income of $3,265 was expensed to other expense in the consolidated statement of operations during the year ended December 31, 2014. In November 2015, WholesaleRx’s management proposed a settlement to payoff the receivable balance of $143,569, which was written off in 2014, and a tentative agreement obligates WholesaleRx to pay us $6,000 monthly until the receivable amount is paid. To date, we have received an aggregate of $12,000. |
9. P.I.M.D. INTERNATIONAL, LLC
9. P.I.M.D. INTERNATIONAL, LLC | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
P.I.M.D. INTERNATIONAL, LLC | P.I.M.D. International, LLC (“PIMD”), is a Florida Limited Liability Company and was previously considered a VIE. Our determination that PIMD was a VIE was based on the fact that PIMD’s equity at risk is insufficient to finance its activities. We would be considered the primary beneficiary of the VIE as we have 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. We received a majority of PIMD’s expected profits and losses. We also planned to provide financing for PIMD’s inventory purchases through related parties. PIMD’s assets, liabilities and revenues have been included in the accompanying consolidated financial statements. During 2014, the non-controlling interest in PIMD made a distribution of $114,237, and in 2013 made a distribution of $119,650 to the shareholders of PIMD. For the years ended December 31, 2014 and 2013, we recorded losses of $16,422 and $18,309 in the consolidated statements of operations resulting in a cumulative loss of $34,731 and $18,309, respectively. The total equity attributed to the non-controlling interest is a deficit of $277,225 and $146,566 as of December 31, 2014 and 2013, respectively. During December, 2013, we revised an October 2013 purchase agreement to acquire 90% of the Membership Units in PIMD. The purchase of the Membership Units in PIMD was subject to certain conditions precedent, of which the most important was that we obtain the necessary licenses from the State of Florida (and from the DEA) for the ownership of a drug distribution company like PIMD. However, we determined that securing the licenses would require substantially more time than anticipated. Consequently, in order to preserve the business opportunity and the cancelled agreement, the funds we previously advanced to PIMD, were converted to a loan and we entered into a Sourcing and Marketing Agreement with PMID. Implex Corporation (“Implex”), owned by our legal counsel, Richard C. Fox, a related party, and our shareholder, agreed to assist us with procuring required licenses. In April 2014, PIMD received a license from the DEA to receive, store and ship 3 through Schedule 5 formulary pharmaceuticals. PIMD is currently licensed in sixteen states and will continue to apply for additional state licenses throughout the US. On December 1, 2014, we exercised our option with PIMD and Implex to complete the acquisition of 90% of PIMD. Implex, a related party, borrowed $272,000 from us and it has re-loaned the funds to PIMD. Our loan to Implex and Implex’s loan to PIMD were both for a five year period. As of December 31, 2014, the loan has since been reclassified into equity and is eliminated in consolidation of our financial statements. |
10. BUSINESS COMBINATION AND IN
10. BUSINESS COMBINATION AND INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2014 | |
Business Combinations [Abstract] | |
BUSINESS COMBINATION AND INTANGIBLE ASSETS | On January 29, 2014, Implex entered into a stock purchase agreement to acquire Main Avenue for $550,000. The purchase price was paid in installments and paid in full as of June 30, 2014. Since we exercised significant influence over the operations of Main Avenue through our related party relationship with Implex, and we were the primary beneficiary of the agreement, our consolidated financial activities prior to October 2014 included those of Main Avenue and Implex. In October 2014, Implex’s ownership interest in Main Avenue was transferred to us for no additional consideration as we previously reflected 100% of the purchase price through VIE consolidation. As such, we own 100% of the assets and outstanding common stock of Main Avenue. Under the purchase agreement, Implex acquired the workforce (three employees) and the applicable state pharmacy licenses but did not purchase Main Avenue’s cash, receivables or any existing customer lists. The purchase excluded liabilities prior to January 29, 2014. The total purchase price of $550,000 was allocated to Main Avenue’s identifiable intangible assets based on the estimated fair value as of January 29, 2014. This valuation determined that there were two intangible assets acquired, which were the licenses with an estimated value of $12,000 and a one year life and licenses that have indefinite lives. As a result, $538,000 was allocated to indefinite-lived intangible assets. We amortized the intangible assets for the licenses beginning in March 2014 and have recorded an amortization expense of $12,000 as of December 31, 2014. Intangible assets with indefinite lives are not amortized; however, they are tested annually for impairment or when events or circumstances indicate change in fair value. We paid the purchase price of $550,000 as follows: The initial installment payment of $475,000 was made with a $175,000 payment from us on Implex’s behalf, $300,000 in borrowings obtained by Implex, $250,000 from a current stockholder and $50,000 from a related party (see Note 14 for details). A $60,000 installment payment was made in April 2014 and the final payment was made in June 2014. Main Avenue was a dormant business and had no significant sales prior to the acquisition in 2014, and was acquired for its pharmacist and other licenses. Since we had a significant controlling interest and were a related party who was the primary beneficiary, we consolidated the financial activities of Main Avenue from the date of the Main Avenue acquisition. Our consolidated financial statements for the year ended December 31, 2014 include the results of Main Avenue since the date of the stock purchase agreement between Implex and Main Avenue. The entire product revenue and product cost of goods sold in the statement of operations is related to Main Avenue. Because Main Avenue did not have significant operations in 2013 and because the 2014 operations prior to the acquisition on January 29, 2014, were not material, presentation of proforma financial information for 2013 and 2014 is not deemed necessary. The acquisition of Main Avenue was not individually significant and we did not incur material acquisition expenses related to the acquisition of Main Avenue. On February 20, 2014, Implex and Main Avenue pharmacy, 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 engaged the Company to manage the day to day business operations of Main Avenue. The Company’s day to day management responsibilities included financial management but excluded any matters related to licensing and those responsibilities which require Federal or state licensure (“Licensing Matters”). Implex was responsible for managing Licensing Matters. The Company also provided funding (as a loan or advance), to the extent not covered by the funds of the pharmacy, to pay all costs and expenses incurred in the operation of Main Avenue. The original agreement dated February 20, 2014 was amended so that for its management services provided by the amended Business Management Agreement, effective April 1, 2014, ScripsAmerica would receive 100% of the profits and losses of Main Avenue as defined by GAAP for profits and losses and since ScripsAmerica exercised significant control over Main Avenue and Implex, management consolidated the accounts and activities of Implex and Main Avenue from January 29, 2014. |
11. FOREIGN SALES CONSORTIUM (F
11. FOREIGN SALES CONSORTIUM (FORMERLY REFERRED TO AS JOINT VENTURES AGREEMENT) | 12 Months Ended |
Dec. 31, 2014 | |
Investments, All Other Investments [Abstract] | |
Foreign Sales Consortium | In January 2014, we formed Forbes Investments, Ltd. (“Forbes Investments”) and Sterling, LLC (“Sterling”) to market, supply and distribute RapiMed® in foreign markets. Global Pharma, a related party, was chosen to be the distributor. The initial market is to be in Hong Kong, China. The ownership of Global Pharma is as follows: (a) we own 37%, (b) Forbes Investments owns 37% and (c) Sterling owns 26%. Forbes Investments is based in Shenzhen, China. In January 2014, we entered into an exclusive license and marketing agreement whereby Global Pharma became the exclusive distributor of RapiMed® in the United States. Additionally, Global Pharma was granted the use of our registered trade mark “MELTS IN YOUR CHILD'S MOUTH” worldwide. Other than in the U.S., Global Pharma was required to 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 sublicensing agreement with NYJJ Hong Kong Ltd. on January 28, 2014 to generate initial and ongoing orders in Hong Kong upon registration approval by the government of China. The minimum sales quotas terms of the exclusive 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® in 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 December 31, 2014, no funds have been provided by any partner, no losses or income generated and this consortium will not be needed since we terminated our efforts to commercialize RapiMed®. |
12. OTHER ASSETS
12. OTHER ASSETS | 12 Months Ended |
Dec. 31, 2014 | |
Current Assets | |
OTHER ASSETS | Other assets consist of the following: December 31, 2014 December 31, 2013 Prepayment for product to be manufactured (a) $ 160,520 $ – Accounts receivable line of credit deferred financing costs 300,766 – Other 19,120 14,720 Total prepaid expenses and other current assets $ 480,406 $ 14,720 (a) The balance of $160,520 is due from the third party manufacturer and has been reclassified to other assets due to the expected time frame of return of funds. |
13. ACCOUNTS PAYABLE AND ACCRUE
13. ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 12 Months Ended |
Dec. 31, 2014 | |
Payables and Accruals [Abstract] | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | Accounts payable and accrued expenses consist of the following: December 31, 2014 December 31, 2013 Accounts payable and general accruals $ 676,467 $ 16,548 Accrued commissions and billing expense 4,003,088 – Accrued Ironridge expense (see Note 23) 164,655 210,022 Finance fee payable 25,000 – Deferred rent 3,956 – Total $ 4,873,166 $ 226,570 |
14. DEBT
14. DEBT | 12 Months Ended |
Dec. 31, 2014 | |
Debt Disclosure [Abstract] | |
DEBT | Debt consists of the following as of December 31, 2014 and 2013: December 31, 2014 December 31, 2013 Line of credit – Wells Fargo $ – $ 99,222 Line of credit - Triumph 377,056 – Debt with related party 230,286 352,816 12% Fixed rate convertible notes payable 559,852 574,778 12% Fixed rate convertible notes payable-related party 112,669 120,738 8% variable convertible notes payable – 116,334 10% variable convertible notes payable – 179,291 12% variable convertible notes payable – 48,230 12% note payable 200,000 – 12% note payable – related party 100,000 – Total notes payable 1,579,863 1,491,410 Less current maturities 511,080 511,590 Long-term debt $ 1,068,783 $ 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 – Wells Fargo In October 2013, our line of credit from Wells Fargo Bank was renewed through October 2017. This line of credit allowed us to borrow up to a maximum of $100,000, at an interest rate of prime plus 6.25% (9.5% as of December 31, 2014). The line of credit was secured by a personal guarantee from our former Chief Executive Officer. The outstanding borrowings under this line of credit as of December 31, 2014 and 2013 were $0 and $99,222, respectively. We incurred interest expense under this line of credit of approximately $341 and $3,725 during the years ended December 31, 2014 and 2013, respectively. In July 2015, this line of credit was terminated with the bank in connection with Mr. Schneiderman’s resignation. (see Note 26 for details). Line of Credit – Triumph On December 8, 2014, Main Avenue entered into an agreement for a revolving line of credit facility with Triumph Community Bank, N.A. d/b/a Triumph Healthcare Finance (“Triumph”). The agreement is for a term of three years. The facility covers, and is both secured through a lockbox account arrangement and limited by, the accounts receivable of the pharmacy, as well as being secured by a security interest in all of the other assets of Main Avenue. Main Avenue may draw against the line of credit, up to a maximum of $4,000,000, as accounts receivable are developed from the filling of prescriptions for the specialty drugs and may continue to draw as the then outstanding line is reduced by the payment of the previously financed receivables. The amount drawn cannot exceed 85% of the accounts receivable. The interest rate is variable, being calculated as the Base Rate plus the Margin (3%). The Base Rate is the greater of the Prime Rate or the Floor Rate (3.25%). As of December 31, 2014, the interest rate was 6.25% per annum. On December 9, 2014, our initial borrowing was in the amount of $2,882,908. Main Avenue received $2,231,447 in cash and $197,095 was paid directly to third parties for various financing fees covering origination, legal, audit and finder fees. These fees were recorded as prepaid financing fees and will be amortized using the straight-line method which approximates the effective interest method over the next 36 months. Also, four outstanding notes with principal and accrued interest balances totaling $454,366 were paid directly to the two holders of the notes, including $357,805 which was paid to a shareholders for two notes which had principal balances of $250,000 and $65,324, and $96,561 paid to a related party for two notes which had principal balances of $75,000 and $13,065. The agreement has a facility fee of $50,000 payable as follows: $25,000 payable on December 8, 2015 and $25,000 on the secondary anniversary on December 8, 2016. This fee is included in the finance fee accrual which is being amortized over the term of this agreement. The agreement has an early termination fee of $120,000 if terminated before the first anniversary of the closing date, $60,000 to the second anniversary closing date and $20,000 until the day immediately prior to December 8, 2017. The agreement has an unused line fee of 0.75% per annum payable in arrears on the first day of each month, calculated on the difference between the average daily balance and the total facility limit. The agreement contains certain customary and financial covenants that must be met each fiscal quarter beginning with the quarterly period ended December 31, 2014. Financial covenants are as follows: (a) Minimum Debt Service Coverage Ratio (as defined) shall be at least 1.10 to 1.0, (b) Minimum Current Ratio (as defined) shall be at least 1.10 to 1.0 and (c) Minimum Tangible net worth (as defined) of $2,500,000. As of December 31, 2014, we were not in compliance with these covenants and have obtained a waiver from Triumph which has cured the events of default (see Note 26). On January 5, 2016, as part of the waiver, Triumph amended and modified covenants as follows: : (a) Minimum Debt Service Coverage Ratio (as defined) shall be at least 1.10 to 1.0, (b) Minimum Current Ratio (as defined) shall be at least 0.85 to 1.0 (c) Minimum Tangible net worth (as defined) of 100,000 at December 31, 2015 increasing $50,000 per quarter until reaching $300,000, (d) Minimum EBITDA (as defined) shall be at least $10,000 per quarter, and (e) added concentration limits (as defined) percent on the total accounts receivable deemed eligible. The outstanding borrowings under this line of credit as of December 31, 2014 were $377,056. We incurred interest expense under this line of credit of $8,320 and recorded a finance fee expense of $6,329 during the year ended December 31, 2014, related to the amortization of deferred financing fees. Debt with Related Party On August 15, 2012, we entered into a four year term loan agreement in the amount of $500,001 with Development 72, LLC (“Development 72”), a Limited Liability Company, a company controlled by Andrius Pranskevicius, a member of our Board of Directors and 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. We 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 our assets. In addition to the monthly loan repayments during the 48 month period ending August 15, 2016, and regardless if the related debt is prepaid in full, we will pay to Development 72 a royalty equal to one percent (1%) of all revenues that we receive from our sale or distribution of RapiMed®. The royalty payments will be made quarterly and are subject to a fee for late payment or underpayment. There were no sales of RapiMed® during the years ended December 31, 2014 and 2013, and therefore, no royalties were paid 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) our bankruptcy or dissolution or (iv) a change in control of the Company or an acquisition of an entity or business by us without the affirmative vote of Andrius Pranskevicius as a member of our Board of Directors. We are subject to various negative covenants in our loan agreement with Development 72, including but not limited to (i) restrictions on secured loans (subject to certain exceptions), (ii) judgments against us in excess of $25,000, (iii) prepayment of any of our long-term debt other than promissory notes held by certain of our investors and (iv) repurchases by us of outstanding shares of our common stock. The loan agreement also provides certain financial covenants which limit the amount of indebtedness we may incur until the loan is repaid and restricts the payment of any dividends on our capital stock except for dividends payable with respect to our outstanding shares of Series A Preferred Stock. Interest expense associated with this note for the years ended December 31, 2014 and 2013 was $26,781 and $37,289, respectively. The total outstanding balance on this loan as of December 31, 2014 and 2013 was $230,286 and $352,816, respectively, with current maturities balance of $134,024 and $122,529, respectively. 12% Fixed Rate Convertible Notes Payable We obtained loans in various amounts beginning in 2011. In June 2014, the owners of these notes agreed to extend the maturity dates from January 30, 2015 and November 30, 2015 to April 1, 2016. The holders of these notes may elect to convert the principal and interest outstanding into shares of our common stock at the price of $0.17 per share at any time during the term of the note. These notes provide for interest only payments of 3%, payable quarterly (12% annually) in cash, or common stock of the Company at $0.17 per share, at the option of the holder. During the year ended December 31, 2014, the following activity occurred relating to various notes in this category: we received $127,906 in cash for several new convertible promissory notes and we made $142,832 in principal payments. During the year ended December 31, 2013, the following activity occurred relating various notes in this category: we received $418,200 in cash for several new convertible promissory notes, we made $115,522 in principal payments, $229,400 of principal was converted into new notes with new terms which are disclosed in the variable convertible description, and $230,000 of principal was retired by exchanging it for our common stock. The outstanding balance as of December 31, 2014 and 2013, was $559,852 and $574,778. The current maturities balances as of December 31, 2014 and 2013 were $0 and $289,839, respectively. In December 2013, we agreed with the lenders to change the conversion rate for loans issued in 2012 from $0.25 per share to $0.17 per share and also agree to extend the maturity date from January 30, 2014 to January 30, 2015. In addition, for some of these loans by mutual consent the interest rate was decreased from 2% per month to 1% per month. We determined that the resulting modification of these notes were not substantial in accordance with ASC 470-50, “ Modification and Extinguishments For one of the notes in this category we are also obligated to pay the holder of the note a 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 $15,000,000 of such sales. Payments for royalties were made monthly and quarterly. During the years ended December 31, 2014 and 2013, we made payments for this royalty as follows: cash payments in the amount of $253,604 and $22,000, respectively, we issued 1,041,885 shares of common stock that had a value of $116,736 in 2014 and issued 1,114,672 shares of common stock that have value of $276,890 in 2013. For the fiscal year 2014, we recorded gross royalty expenses of $370,340 which was offset by reimbursement of $165,704 from the contract packager per the 2013 agreement for a net royalty expense of $204,636 and for fiscal year 2013 we recorded a royalty expense associated with this note of $246,710. The contract with the Federal government agencies expired December 31, 2014, and no more royalty expense is expected related to this particular note. We recorded interest expense of $72,927 and $77,250, associated with these notes for the years ended December 31, 2014 and 2013, respectively. 12% Fixed Rate Convertible Notes Payable-Related Party We obtained loans in the amount of $80,000 from a company owned by our former Chief Executive Officer. We are not required to make a principal payment on the note until maturity, which is April 1, 2016. In June 2014, the holder of the note agreed to extend the maturity date from January 30, 2015 to April 1, 2016. At the option of the holder, the principal and interest due under the note can be converted into our common stock at any time during the term of the note at the rate of $0.17 per share. These notes provide for interest only payments of 3%, payable quarterly (12% annually) in cash, or common stock of the Company at $0.17 per share, at the option of the holder. As of both December 31, 2014 and 2013 the principal balance of the note with our former Chief Executive Officer was $80,000. We recorded interest expense of $9,600 for each of the years ended December 31, 2014 and 2013. In 2012, we received $50,000 in cash for a convertible promissory note from the wife of our former Chief Executive Officer . The note provides for interest only payments of 3%, payable quarterly (12% annually), in cash, or in shares of our common stock at $0.17 per share, at the option of the holder. There is no required principal payment due 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. Marlex Pharmaceuticals also co-signed this note. At December 31, 2014 and 2013, the principal balance was $32,669 and $40,738, respectively. The Company recorded interest expense of $4,500 and $6,000 for fiscal years 2014 and 2013, respectively. We are also obligated to pay a royalty of 0.9% to the holder on the first $25,000,000 of sales of generic prescription drugs under distribution contracts with federal government agencies. Royalties are required to be paid quarterly. During the years ended December 31, 2014 and 2013, we made payments for this royalty as follows: cash payments in the amount of $91,400 and $14,400 ($10,500 was accrued in 2012), respectively, we issued 199,248 shares of common stock that had a value of $22,857 in 2014 and issued 224,944 shares of common stock that had a value of $53,680 in 2013. For the fiscal year 2014, we recorded a royalty expense of $114,257 associated with this note and for fiscal year 2013, we recorded a royalty expense of $57,580 associated with this note. The contract with the Federal government agencies expired December 31, 2014, and no more royalty expense is expected related to this particular note. 6% Variable Convertible notes payable During fiscal year 2013, the Company entered into three securities purchase agreements with a lender pursuant to which the lender purchased 6% convertible notes. The Company received $95,300 in cash for three 6% convertible notes payable with principal amounts totaling $110,000. These notes did not include a discount, but $14,700 was paid directly to a third party on the Company’s behalf. The accrued interest and principal were due one year from the issuance date. The conversion price was equal to 70% of the lowest trading price of the Company’s common stock at the close of trading during the five day trading period prior to the date of the notice of conversion. During fiscal year 2013 the lender converted $110,000 of principal into 1,235,868 shares of our common stock valued at $246,941. In connection with this conversion the Company recorded a gain on extinguishment of $40,026 after taking into consideration the carrying value of the note and the corresponding embedded derivative liability related to the note on the conversion date. 8% Variable Convertible Notes Payable During fiscal year 2013, the Company paid to the holders of 8% notes entered into in fiscal year 2012, the sum of $167,365, for the principal of $115,750 and accrued interest. These payments included a prepayment penalty charge of $51,615. The Company extinguished the debt and the embedded derivative of which resulted in a gain on extinguishment of $103,170. In fiscal year 2013, we entered into six new securities purchase agreements with various lenders pursuant to which the lenders purchased 8% convertible note. We received $462,000 in cash for these 8% convertible notes payable with 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 ranged from six months to nineteen months from date of issuance. The conversion price for these notes was equal to a 40% to 65% discount of the lowest closing trading prices or an average of trading prices of our common stock at the close of trading during a 5 to 10 trading day period prior to the date of the notice of conversion. For some of these notes, there was a prepayment charge ranging from 125% to 150% of the principal amount and accrued interest thereon if prepayment was made before a set period of time. Since these notes had a convertible feature with a significant discount and could have resulted in the note principal being converted to a variable number of our common stock, the instrument included an embedded derivative. The fair value of the derivative associated with these notes was determined by using the Black-Scholes pricing model with the following assumptions during 2013: 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 11 to 12 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 was being amortized over the life of the notes. In 2013 lenders converted $237,526 of principal into 2,902,496 shares of our common stock valued at $971,103. Along with these stock conversions the Company paid the sum of $37,410 to the holders of these notes for the principal of $22,174, and accrued interest. These payments included a prepayment penalty charge of $15,236. The company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $238,015. During the year ended December 31, 2014, we did not enter into any new borrowings and extinguished all debt in this category. We 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. We extinguished the debt and the embedded derivative liability which resulted in a gain on extinguishment of $43,102. Two note holders converted $125,000 of principal and accrued interest of $7,665 into 1,890,699 shares of our common stock valued at $368,606. We extinguished the debt and the embedded derivative liability which resulted in a loss on extinguishment of $30,395. We also partially paid down the principal of a loan by making cash payments of $127,261 and issuing 2,039,864 shares of our common stock valued at $224,231 for principal of $100,239 and accrued interest of $27,022. We recognized a gain for this extinguishment in the amount of $96,226. As of December 31, 2014, and 2013, the principal balances were $0 and $402,500, respectively, and the unamortized debt discounts were $0 and $286,166, respectively. We recorded interest expense for the years ended December 31, 2014 and 2013 of $17,454 and $112,593, respectively. We also recorded $65,180 to interest expense related to the amortization of the debt discount in 2014. The fair value of the derivative liability at December 31, 2014 and 2013 was $0 and $606,112, respectively. 10% Variable Convertible Notes Payable During the fiscal year 2013, we entered into twelve securities purchase agreements (as of December 31, 2014, no note was outstanding and as of December 31, 2013, seven notes were still outstanding) with various lenders pursuant to which the lenders purchased a 10% convertible note. We 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 ranged from six to twelve months from date of issuance. The conversion price for these notes were equal to a 35% to 65% discount of the lowest closing trading prices or an average of trading prices of our common stock at the close of trading during a 5 to 20 trading day period prior to the date of the notice of conversion. For some of these notes, there was a prepayment charge ranging from 125% to 150% of the principal amount and accrued interest thereon if prepayment were made before a set period of time. Since these notes had a convertible feature with a significant discount and could have resulted in the note principal being converted to a variable number of our common shares, the instrument included 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 during 2013: no dividend yield, expected volatility ranged between 161.6% to 200%, 7%, 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 $631,361 and was revalued at December 31, 2013 to be $383,337. The debt discount associated with this derivative was being amortized over the life of the notes. During the year ended December 31, 2014, we did not enter into any new borrowings. We paid $70,000 to a holder of one note with an original principal amount of $50,000. This cash payment of $70,000 included the accrued interest of $5,000 and a prepayment penalty charge. We extinguished the debt and the embedded derivative liability which resulted in a gain on extinguishment of $51,361. Four holders converted $230,000 of principal and accrued interest of $15,650 into 4,050,190 shares of our common stock valued at $529,888, and we extinguished the debt and the embedded derivative liability which resulted in a loss on extinguishment of $18,062. In 2013 lenders converted $198,326 of principal into 3,028,466 shares of our common stock valued at $655,239. The company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $124,500. As of December 31, 2014 and 2013, the principal balance was $0 and $280,000, respectively, and the unamortized debt discount was $0 and $100,709, respectively. We recorded interest expense for the years ended December 31, 2014 and 2013 of $10,786 and $178,547, respectively. Additionally, we recorded amortization of the debt discount of $61,455 in fiscal 2014 to interest expense. The fair value of the derivative liability at December 31, 2014 and 2013 was $0 and $383,337, respectively. 12% Variable Convertible Notes Payable During the year ended December 31, 2013, we entered into seven new securities purchase agreements with various lenders pursuant to which the lenders purchased a 12% convertible note. We 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 ranged from three months to twelve months from the date of issuance. The conversion price for these notes were equal to a range of 42.5% to 60% discount to the lowest closing trading prices or an average of trading prices of our common stock at the close of trading during a 5 to 20 trading day period prior to the date of the notice of conversion. For some of these notes there was a prepayment charge ranging from 125% to 150% of the principal amount and accrued interest thereon if the payment was made before a set period of time. We did not incur any penalty costs during 2013 for conversion of the 12% variable notes payable. Since these notes had a convertible feature with a significant discount and could have resulted in the note principal being converted to a variable number of our common stock, the instrument included 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 during 2013: no dividend yield, expected volatility ranges used were between 161.6% to 187.9%, risk-free interest rates ranging 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 was being amortized over the life of the notes. During the year ended December 31, 2014, we did not enter into any new borrowings. We 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 of $3,089 and a prepayment penalty charge. We extinguished the debt and the embedded derivative liability which resulted in a gain on extinguishment of $33,620. Two holders converted $49,025 of principal and accrued interest of $6,111 into 1,029,184 shares of our common stock valued at $126,562. We extinguished the debt and the embedded derivative liability which resulted in a loss on extinguishment of $2,317. As of December 31, 2014 and 2013, the principal balance of these notes was $0 and $89,025, respectively, and the unamortized debt discount was $0 and $40,795, respectively. We recorded interest expense for the years ended December 31, 2014 and 2013 of $5,591 and $116,348, respectively. Additionally we recorded amortization of the debt discount of $8,260 in fiscal 2014 to interest expense. The fair value of the derivative liability at December 31, 2014 and 2013, is $0 and $143,944, respectively. 12% Note Payable On November 18, 2014, Main Avenue borrowed $200,000 from a stockholder in order to provide funding for inventory. This loan bears interest at the rate of 12% per annum, interest payments are due monthly beginning in December 2014, and on December 31, 2014, by mutual consent, the maturity date was changed from February 18, 2015, to January 30, 2016, for the principal payment along with any outstanding interest payments. Additionally, we shall pay to the lender a royalty of $6.67 for every box of pain patches sold for a period of 90 days beginning November 18, 2014. We recorded interest expense of $2,800 for the year ended December 31, 2014. We recorded a royalty expense of $527 for the pain patches sold in November and December 2014. The balance as of December 31, 2014 is $200,000. 12% Note Payable – Related Party On November 18, 2014, Main Avenue borrowed $100,000 from the wife of our former Chief Executive Officer in order to provide funding for inventory. This loan bears interest at the rate of 12% per annum. Interest payments are due monthly beginning in December 2014, and on December 31, 2014, by mutual consent, the maturity date was changed from February 18, 2015, to January 30, 2016, for the principal payment along with any outstanding interest payments. Additionally, we shall pay to the lender a royalty of $3.33 for every box of pain patches sold for a period of 90 days beginning November 18, 2014. We recorded interest expense for the year ended December 31, 2014 of $1,400. We recorded a royalty expense of $263 for the pain patches sold in November and December 2014. The note balance as of December 31, 2014 is $100,000. 12% One Year Term Loan To finance the purchase of Main Avenue, Implex borrowed $250,000 from a stockholder in 2014. This loan bore 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 maturing on May 1, 2015. Additionally, we shall pay to the lender a royalty of $25 on the first 10,000 prescriptions processed by Main Avenue 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. We have recorded a royalty expense of $162,995 for the year ended December 31, 2014. This loan was paid in full on December 9, 2014. We paid $184,676 in principal payments on Implex’s behalf and with proceeds from our initial borrowings with the Triumph line of credit, paid the balance of $65,324. We recorded interest expense of $13,306 for the year ended December 31, 2014. 12% One Year Term Loan – Related Party To finance the purchase of Main Avenue, Implex borrowed $50,000 from the wife of our former Chief Executive Officer. This loan bore 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, we are obligated to pay to the lender a royalty of $5 on the first 10,000 prescriptions processed by Main Avenue 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 prescriptions thereafter. We recorded a royalty expense of $32,595 for the year ended December 31, 2014. This loan was paid in full on December 9, 2014, and we paid $36,935 in principal payments on Implex’s behalf with proceeds from our initial borrowings with the Triumph line of credit, and paid the balance of $13,065. We recorded interest expense of $2,658 for the year ended December 31, 2014. 24% One Year Term Loan On May 19, 2014, Main Avenue borrowed $250,000 from a stockholder in order to provide funding for inventory and payment of commission expenses. This loan bore interest at the rate of 24% per annum. Interest payments were due monthly beginning July 1, 2014, and the principal payment was due at the maturity date of May 18, 2015, along with any outstanding interest payments. Additionally, we shall pay to the lender a royalty of $2 for each prescription processed by Main Avenue upon the commencement of the $8 royalty under the investment contract dated January 17, 2014, with Implex. This loan was paid in full on December 9, 2014, with proceeds from our initial borrowings with the Triumph line of credit. We recorded interest expense of $30,000 for the year ended December 31, 2014. No royalty has been paid or earned since this royalty clause is not effective until prior notes are paid in full. 24% One Year Term Loan – Related Party On May 19, 2014, Main Avenue borrowed $75,000 from the wife of our former Chief Executive Officer in order to provide funding for inventory and payment of commission expenses. This loan bore interest at the rate of 24% per annum. Interest payments were due monthly beginning July 1, 2014, and the principal payment was due at the maturity date of May 18, 2015 along with any outstanding interest payments. Additionally, we shall pay to the lender a royalty of $2 for each prescription processed by Main Avenue upon the commencement of the $8 royalty under the investment contract dated January 17, 2014, with Implex. This loan was paid in full on December 9, 2014, with proceeds from our initial borrowings with the Triumph line of credit. We recorded interest expense of $9,000 for the year ended December 31, 2014. No royalties have been paid or earned since this royalty clause is not effective until prior notes are paid in full. QuarterSpot Term Loan On March 17, 2014, we 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. Daily payments of $520.83 began on March 19, 2014 and continued until the loan was paid in full on December 17, 2014. We recorded interest expense of $8,039 for the year ended December 31, 2014. |
15. DERIVATIVE FINANCIAL INSTRU
15. DERIVATIVE FINANCIAL INSTRUMENTS | 12 Months Ended |
Dec. 31, 2014 | |
Investments, All Other Investments [Abstract] | |
DERIVATIVE FINANCIAL INSTRUMENTS | Derivative liabilities consisted of convertible notes with features that could have resulted in the note principal and accrued interest being converted to a variable number of our 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: Years ended December 31, 2014 Years ended December 31, 2013 Volatility 98.1% -193.3% 110.4% -228.5% Expected life (in years) 0.01 – 1.05 0.03 – 0.6 Risk-free interest rate 0.00% -0.12% 0.07% -0.12% Dividend yield 0.00 % 0.00 % These derivative financial instruments were indexed to an aggregate of 0 shares and 13,176,251 shares of our common stock as of December 31, 2014, and 2013 respectively, and were carried at fair value using level 3 inputs. The derivatives liabilities balance at December 31, 2014 and 2013 was $0 and $1,133,393, respectively. Activity during the years ended December 31, 2014 and 2013 is as follows: Derivative liabilities at December 31, 2012 $ 94,477 New derivative liabilities issued in 2013 2,590,688 Extinguishment (2,840,395 ) Change in fair value 1,288,623 Derivative liabilities at December 31, 2013 1,133,393 New derivative liabilities issued in 2014 – Extinguishment (1,198,886 ) Change in fair value 65,493 Derivative liabilities at December 31, 2014 $ – The significant fluctuations in the revaluation of derivative liabilities on December 31, 2013 relate partially to us having sufficient trading activity to utilize the actual volatility of the trading of our common stock as an assumption when computing the fair value of derivative liabilities which were deemed to be sufficient trading activity commencing in January 2013. We had previously estimated the volatility assumption by averaging the volatility of three similar entities which resulted in a lower volatility. All convertible notes with features that were accounted for as derivative liabilities were extinguished during 2014. |
16. CONVERTIBLE PREFERRED STOCK
16. CONVERTIBLE PREFERRED STOCK | 12 Months Ended |
Dec. 31, 2014 | |
Preferred Stock, Number of Shares, Par Value and Other Disclosures [Abstract] | |
CONVERTIBLE PREFERRED STOCK | Convertible Preferred Stock On April 1, 2011, the Company issued 2,990,252 shares of convertible preferred stock (“Series A Preferred stock”) for $1,043,000 to a related party. The Series A Preferred stock has the following rights, preferences, powers, privileges, and restrictions: (a) 8% dividend (appropriately adjusted to reflect any stock splits); the dividends shall accrue and are payable quarterly when the Company has positive equity and earnings per Delaware General Corporation Law. (b) Preferential payments of the assets available for distribution to its stockholders by reason of their ownership in an amount equal to the Series A Preferred stock Original Issue price ($0.1744). (c) Voting rights - one vote for the number equal to the number of whole shares of common stock and shall be entitled to elect one director of the Corporation. (d) Rights to Convert – Each share of Series A Preferred stock shall be convertible, at the option of the holder at any time and from time to time without the payment of additional consideration by the holder into such number of fully paid and non-assessable shares of common stock as determined by dividing the Original Issue price by the Conversion price in effect at the time of the conversion. The conversion price is initially equal to $0.1744 and can be adjusted any time if the Company issues non-exempted common shares at a price below $0.1744. At December 31, 2014 and 2013 these convertible preferred stock shares can be converted into 5,980,504 shares of the Company’s common stock. (e) The owner of the Series A Preferred stock can waive its right to adjust the conversion price at his choosing and on December 29, 2015 approved a permanent waiver to fix the conversion price to $0.1744. The waiver eliminates the holder’s ability to reduce the conversion price upon a subsequent issuance of common stock at a lower price than $0.1744. (f) Exempted securities – no anti-dilution protection for shares issued to employees, directors or consultants or advisors if the issuance is approved by the Board. The Company has reviewed the rights and privileges of the convertible preferred stock and determined the liquidation preference requires the Company to redeem the preferred shares at the original issuance price as a result of either a voluntary or involuntary liquidation event, as defined. The Company has determined this preference meets the requirement that the potential redemption is outside of the control of the Company. As a result, the convertible preferred stock has been recorded outside of permanent equity in the accompanying consolidated balance sheets in accordance with the appropriate accounting guidance. Because we also had losses for 2014 and 2013 and have an accumulated deficit, under Section 174 of the Delaware General Corporation Law our directors cannot declare a dividend without incurring personal liability. However, in accordance with privileges of the Series A Preferred stock, as noted above, the Company shall continue to accrue dividends regardless of declaration by the Board of Directors. We had a stockholders’ deficit of $3,245,931 and $3,470,827 at December 31, 2014 and 2013, respectively. Since we did not generate net income in fiscal years 2014 and 2013, our board of directors will not be able to declare a dividend nor will we be able to pay the dividend owed to the Series A Preferred stockholder, and as such, dividends will be accrued. As of December 31, 2014 and 2013 we have accrued $271,180 and $187,740, respectively, which is classified as a long-term liability in the consolidated balance sheets. We will not be able to declare any dividends to our common stockholders until the accrued dividends owed to the Series A Preferred stockholder have been paid. |
17. STOCKHOLDERS' DEFICIT
17. STOCKHOLDERS' DEFICIT | 12 Months Ended |
Dec. 31, 2014 | |
Equity [Abstract] | |
STOCKHOLDERS' DEFICIT | General We are authorized to issue 250,000,000 common shares with a par value of $0.001 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 of Directors adopted a resolution to amend our Certificate of Incorporation to increase the authorized shares of common stock 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 our voting power of our outstanding capital stock (“Shareholder Consent”). On June 2, 2014, we filed our Certificate of Amendment to the Certificate of Incorporation to effect the increase in the number of shares of authorized common stock. We are authorized to issue 10,000,000 preferred shares, $0.001 par value per share. Our preferred stock may be issued by our Board of Directors 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 may determine, from time to time as a class or series is issued. On March 26, 2014, our Board of Directors approved the “ScripsAmerica, Inc. Incentive Stock Plan” (“SOP”). On April 16, 2014, the SOP was approved by the written consent of our shareholders. The SOP is designed to serve as an 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 common stock options issued under the SOP shall not be less than 100% of the fair market value at the time the options are granted. The purchase price per option under the SOP to a person who owns more than 10% of our voting power of our voting stock shall not be less than 110% 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 $100,000 in value in our fiscal year. As of December 31, 2014, no options were issued under the SOP. Issuances During 2014 We issued 22,891,119 restricted shares of common stock for cash proceeds of $1,209,360 in various private subscription agreements. The subscription price of the shares issued ranged from $0.05 to $0.07. On November 4, 2013, we entered into a securities purchase agreement with Seaside 88, LP. (“Seaside”) pursuant to which we sold Seaside restricted shares of our common stock. During the year ended December 31, 2014, we sold 4,408,083 restricted common shares to Seaside for gross proceeds of $342,759 of which $2,500 was used to pay Seaside’s legal fees. During the year ended December 31, 2014, we issued 4,764,312 restricted shares of our common stock to non-employee consultants for services rendered during 2014. These shares were valued at $567,324. During the year ended December 31, 2014, we issued 128,000 restricted shares of our common stock in connection with payments for services provided by members of the Board of Directors during 2014. These shares were valued at $13,640. During the year ended December 31, 2014, we issued 74,000 restricted shares of our common stock in connection with payments for services rendered by employees during 2014. These shares were valued at $7,020. During the year ended December 31, 2014, we issued 1,740,550 restricted shares of our common stock valued at $224,021 in connection with financing costs. In 2014, we charged $13,999 to financing costs in the consolidated statement of operations and $210,022 was offset with the accrual for stock to be issued for Ironridge at December 31, 2013. On January 22, 2014, pursuant to our settlement agreement with GEM Global Yield Fund Limited (“GEM Global”), (see below) (a) we sold 887,280 shares of our 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 our common stock upon the receipt, by us, of the purchase price. We issued the 887,280 shares to Mr. Urbanski on January 22, 2014. During the year ended December 31, 2014, we issued 1,241,133 restricted shares of our common stock to non-employees, including a related party, for payment of royalties. The value of the shares issued for payment of royalties was $139,593. During the year ended December 31, 2014, we issued 9,009,937 shares of our common stock for the conversion of $504,264 of principal and accrued interest of $56,448 related to our convertible notes payable. The fair value of the shares issued was $1,249,287. Issuances During 2013 We issued 4,854,952 restricted shares of common stock for cash proceeds of $531,108 in various private subscription agreements during the fiscal year 2013. On November 4, 2013, we entered into a securities purchase agreement with Seaside pursuant to which we agreed to sell, and Seaside agreed to purchase, up to seven million (7,000,000) restricted shares of our common stock in one or more closings. The number of shares to be purchased at each closing will be equal to ten percent (10%) of the aggregate trading volume of shares of our common stock during normal trading hours for the 20 consecutive trading days prior to each closing. The purchase price for the shares to be purchased by Seaside at each closing will be equal to sixty percent (60%) of the average of “daily average stock price” for the five (5) trading days preceding the date of the closing. The “daily average stock price” for a trading day is equal to the quotient of (a) the sum of the highest and lowest sale price for the trading day divided by (b) two. We had an initial closing under the securities purchase agreement on November 4, 2013, at which we sold to Seaside 1,152,514 restricted shares of our common stock for gross proceeds of $200,537, of which $7,500 was used to pay the legal fees for Seaside and $19,303 was paid for a finder’s fee. On December 4, 2013, we sold to Seaside 841,426 restricted shares of common stock for gross proceeds of $90,926 of which $2,500 was used to pay the legal fees for Seaside. During the fiscal year 2013, we issued 9,177,027 restricted shares of our common stock to non-employees for services rendered during the year. These services were valued at $3,387,112 and we charged our operations in fiscal year 2013. During the fiscal year 2013, we issued 333,633 restricted shares of our common stock in connection with conversion of 478,440 warrants in a cashless transaction. During the fiscal year 2013, we issued 136,000 restricted shares of our common stock in connection with payment provided by members of the Board of Directors during the year. We charged our operations $35,200 in fiscal year 2013. During the fiscal year 2013, we issued 1,339,616 restricted shares of our common stock to non-employees for payment of royalties. The payment of royalties was valued at $346,802. On November 18, 2013, we issued 8,690,000 unrestricted shares of our common stock in an agreement whereby a debt financing company (Ironridge) purchased certain of our liabilities from our creditors. The liabilities and expenses paid on our behalf were valued at $755,658 and we recorded a financing fee of $547,842. During the fiscal year 2013, we issued 11,456,639 shares of our common stock for the conversion of approximately $1,805,000 of principal and interest of our convertible notes payable. In 2013, we retired 600,000 shares of our common stock that was previously issued in 2012 and 2013. The value was determined to be $76,500. We received and retired 500,000 shares from Marlex Pharmaceuticals as part of a settlement agreement (See Note 9). These shares were valued at $50,000 in 2012 when issued and we reversed the consulting expense for this value. 100,000 shares issued in September 2013 were also returned and retired during the third of quarter 2013. Cancellation of GEM Global Agreement On October 11, 2013, we entered into a financing agreement with GEM Global and a related party to provide funding to us of up to $2,000,000. Under the terms of the financing agreement, we were able to sell restricted shares of our common stock to GEM Global, subject to the satisfaction of certain conditions, at a purchase price to be negotiated between us and GEM Global pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D. On January 14, 2014, we entered into a settlement agreement with GEM Global, 590 Partners, LLC (“590 Partners”) 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 settlement agreement, warrants which were to be issued to GEM as part of the original financing agreement but were not issued, were cancelled and we issued to GEM Global and 590 Partners (i) a warrant exercisable to purchase an aggregate of 1,000,000 shares of common stock at an exercise price of $0.41 per share, (ii) a warrant exercisable to purchase an aggregate of 750,000 shares of our common stock at an exercise price of $0.55 per share, and (iii) a warrant exercisable to purchase an aggregate of 750,000 shares of our common stock at an exercise price of $0.75 per share (collectively, the “New GEM Warrants”). All of the New GEM Warrants expire on January 14, 2019 and are only exercisable on a cash basis. Additionally, we 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 our common stock is equal to or greater than 160% of the exercise price of the applicable New GEM Warrants for 22 consecutive trading days, then such New GEM Warrants will automatically be cancelled 30 days after we deliver notice of such cancellation to GEM Global and 590 Partners. However, each of GEM Global and 590 Partners may exercise their New GEM Warrants in full after the notice from us but prior to the cancellation date. The Company has determined there is no value to this feature. The fair value of these warrants to purchase 5,000,000 shares of common stock on January 14, 2014 was determined to be $552,318 using the Black-Scholes model with the following assumptions: Volatility 182.9%, five year life, risk free rate of 1.65% and zero dividend rate. The fair value of the warrants of $552,318 was expensed and included in general and administrative expenses in the accompanying consolidated statement of operations. Warrants Summary of our warrants activity and related information as of December 31, 2014 and 2013: Number of Shares Under Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Term in Years Aggregate Outstanding at December 31, 2012 707,012 $ 0.24 3.7 $ 45,700 Granted – Exercised (478,440 ) $ 0.39 3.1 $ – Cancelled/expired – Outstanding at December 31, 2013 228,572 $ 0.17 Granted 5,000,000 $ 0.55 5.0 Exercised – Cancelled/expired – Outstanding at December 31, 2014 5,228,572 $ 0.55 4.0 $ – Vested and exercisable at December 31, 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 Issued 2014 On March 27, 2014, we issued 75,000 options to members of the Board of Directors for services rendered. These options vested immediately and will expire three years from date of issuance. The options are exercisable at the price of $0.099 per share. The fair value of these options is $3,971, which was expensed to general and administrative expenses. On April 25, 2014, we issued 50,000 options to members of the Board of Directors for services rendered. These options vested immediately and will expire three years from date of issuance. The options are exercisable at the price of $0.121 per share. The fair value of these options is $4,841, which was expensed to general and administrative expenses. On April 25, 2014, we issued 5,010,000 employee options which have an exercise price of $0.118 per share. The options are exercisable immediately and expire on April 25, 2017. Our former Chief Executive Officer received 2,510,000 options and the Chief Financial Officer received 2,500,000. The fair value of these options are an aggregate of $437,620 and were expensed to general and administrative expenses. On June 23, 2014, we issued 250,000 employee options to an employee for services. These options have an exercise price of $0.143 per share, are exercisable immediately and expire on June 23, 2017. The fair value of these options is $28,296 and was expensed to general and administrative expenses. On July 21, 2014, we issued 50,000 options to members of the Board of Directors for services rendered. These options vested immediately and will expire three years from date of issuance. The options are exercisable at the price of $0.132 per share. The fair value of these options is $4,161 which was expensed to general and administrative expenses. On October 8, 2014, we issued 80,000 options to members of our Board of Directors and employees for services rendered. These options vested immediately and will expire three years from date of issuance. The options are exercisable at the price of $0.099 per share. The fair value of these options is $6,120 which we expensed to general and administrative expenses. On December 3, 2014, we issued 80,000 options to members of our Board of Directors and employees for service rendered. These options vested immediately and will expire three years from date of issuance. The options are exercisable at the price of $0.121 per share. The fair value of these options is $7,391 which was expensed to general and administrative expenses. On December 31, 2014, we issued 835,000 options to members of the Board of Directors and employees for services rendered. These options vested immediately and will expire three years from date of issuance. The options are exercisable at the price of $0.187 per share. The fair value of these options is $118,779 which was expensed to general and administrative expenses. Options Issued 2013 On September 11, 2013 we issued 2,000,000 options to a consultant for services rendered. These options vested immediately and expire three years thereafter. The options are exercisable at the price of $.15 per share. The fair value of these options is $249,335 which was expensed to general and administrative expenses. On November 6, 2013 we issued 1,000,000 options to a consultant for services rendered. These options vested upon issuance and expire three years thereafter. The options are exercisable at the price of $.22 per share. The fair value of these options is $190,494 which was expensed to general and administrative expenses. On October 15, 2013, we issued 1,320,000 options to members of our Board of Directors for services rendered. These options vested upon issuance and expire three years thereafter. The options are exercisable at the price of $.15 and the fair value of these options is $166,373 which was expensed to general and administrative expenses. On December 18, 2013, we issued 60,000 options to members of our Board of Directors for services rendered. These options vested upon issuance and expire three years thereafter. The options are exercisable at the price of $.13 per share. The fair value of these options is $6,464 which was expensed to general and administrative expenses. On December 31, 2013, we issued 635,000 options to members of the Board of Directors for services rendered. These options vested immediately and expire 3 years thereafter. The options are exercisable at the price of $.14 per share. The fair value of these options is $73,893 which we expensed to general and administrative expenses. Summary of options activity and related information as of December 31, 2014 and 2013: Number of Shares Under options Weighted Average Exercise Price Weighted Average Remaining Contractual Term in Years Aggregate Outstanding at December 31, 2012 – $ – – $ – Granted 5,015,000 $ 0.16 3.0 Exercised – Cancelled/expired – Outstanding at December 31, 2013 5,015,000 $ 0.16 2.8 $ – Granted 6,430,000 $ 0.13 3.0 Exercised – Cancelled/expired – Outstanding at December 31, 2014 11,445,000 $ 0.14 2.2 $ 367,090 2014 2013 Option fair value $0.053 - $0.142 $ 0.10 - $ 0.19 Risk-free interest rate 0.82% - 0.88% .34% - .78% Volatility 177% - 183% 186% - 195% Terms in years 3 3 Dividend yield 0% 0% |
18. EARNINGS (LOSS) PER COMMON
18. EARNINGS (LOSS) PER COMMON SHARE | 12 Months Ended |
Dec. 31, 2014 | |
Accounting Policies [Abstract] | |
EARNINGS (LOSS) PER COMMON SHARE | The basic earnings (loss)per share is computed using the weighted average number of common shares outstanding. The assumed exercise of common stock equivalents were excluded from the calculation of diluted net loss per common share for the years ended December 31, 2014 and 2013 because their inclusion would have been anti- dilutive. As of December 31, 2014, common stock equivalents consisted of preferred stock convertible into 5,980,504 shares, warrants exercisable into 5,228,572 shares, options exercisable into 11,445,000 shares and notes payable convertible into 3,956,006 shares of common stock. As of December 31, 2013, common stock equivalents consisted of preferred stock convertible into 5,980,504 shares, options convertible into 5,015,000 shares, warrants convertible into 228,572 shares and notes payable convertible into 16,016,229 shares of common stock. 2014 2013 Net loss attributable to ScripsAmerica, Inc. $ (4,731,046 ) $ (11,195,096 ) Preferred stock dividends (83,440 ) (83,440 ) Net loss attributable to common stockholders $ (4,814,486 ) $ (11,278,536 ) Basic : Weighted average shares outstanding-basic 127,411,084 68,119,715 Net loss per common share - basic $ (0.04 ) $ (0.17 ) Diluted : Weighted average shares outstanding-diluted 127,411,084 68,119,715 Net loss per common share - diluted $ (0.04 ) $ (0.17 ) |
19. INCOME TAXES
19. INCOME TAXES | 12 Months Ended |
Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | As of December 31, 2014, we had a net operating loss carryforward of approximately $5,795,800 available to reduce future federal taxable income expiring through 2034. We established valuation allowance of $3,386,200 and $2,015,200, or 100%, as of December 31, 2014 and 2013, respectively, of the deferred tax asset because of the uncertainty of the utilization of the operating losses in future periods. The allowance increased $1,371,000 and $1,417,609 during 2014 and 2013, respectively. Future ownership changes may limit the future utilization of these net operating loss and research and development tax credit carry forwards as defined by the Internal Revenue Code. We are in the process of performing an analysis to determine whether the net operating losses and research and development expenses are limited under Section 382. The net deferred tax asset has been fully offset by a valuation allowance due to our history of taxable losses and uncertainty regarding our ability to generate sufficient taxable income in the future to utilize these deferred tax assets. We file, or will file, a federal consolidated tax return for ScripsAmerica and Main Avenue post acquisition and Delaware state income taxes. PIMD and Implex file stand alone federal returns and various state tax returns. Currently, there are no tax examinations in progress, nor have we had any federal or state examinations since our inception in 2008. All of our tax years are subject to federal and state tax examination. Our provision for income taxes at December 31, 2014 and 2013 consisted of the following 2014 2013 Current Federal $ – $ – State – – Deferred – – Federal – – Income Tax expense $ – $ – The effective tax rates differ from the statutory rates for 2014 and 2013 primarily due to the following: 2014 2013 Amount Effective tax rate Percentage Amount Effective tax rate Percentage Federal income tax liability (benefit) $ (1,614,064 ) 34.0% $ (3,794,531 ) 34.0% State tax – 0.0% – 0.0% Permanent deductible expense 242,700 -5.1% 1,700,633 -15.2% Adjustment in valuation allowance 1,371,364 -28.9% 2,093,898 -18.8% Tax expense (benefit) $ – 0.0% $ – 0.0% The components of the net deferred tax assets (liabilities) at December 31, 2014 and 2013 are as follows: 2014 2013 Deferred Tax asset Allowance for doubtful accounts $ 612,100 $ 423,497 Other reserves and accruals 613,400 – Stock based compensation 207,800 – Net Operating Loss 1,970,600 1,591,703 Total Deferred Tax asset 3,403,900 2,015,200 Deferred Tax Liability Fixed assets – basis difference (17,700 ) – Less Valuation Allowance 3,386,200 2,015,200 Total Deferred tax asset $ – $ – We periodically assess the likelihood that we will be able to recover our deferred tax assets and determine if a valuation allowance is necessary. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income. As a result, we concluded that it is more likely than not that we will not recover the deferred tax asset and, accordingly, recorded a valuation allowance for the years ended December 31, 2014 and 2013. |
20. COMMITMENTS
20. COMMITMENTS | 12 Months Ended |
Dec. 31, 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 RapiMed® tablets. The royalty payments associated with this agreement have no minimum guarantee amounts and royalty payments will end only if the RapiMed® product line is sold to a third party. There have been no shipments through December 31, 2014 applicable to this royalty payment and we have discontinued our plan to launch RapiMed®. On October 15, 2013, the Board of Directors approved additional compensation to Board members in the form of issuance of stock options. Board members were granted 100,000 stock options for each year served commencing in 2012. The chairman of the Board was granted 135,000 stock options for each year served. The effective date of the grants was October 7, 2013. The options vest immediately and the option exercise price was 110% of the market price on the grant date. Additionally, Directors will also receive 10,000 options for each Board meeting attended 5,000 options for each committee meeting attended. In fiscal year 2013 we issued 2,015,000 options that had a fair value of $246,731 which were expensed to the consolidated statement of operations (see Note 17). On November 13, 2015, the Board of directors approved a change to the board members’ compensation for the first six months of 2016. Effective January 1, 2016, the new compensation for board members is $1,000 per month plus $3,000 worth of common stock or options to purchase common stock at the choice of the individual member. This new compensation fee replaces the prior fee of $1,500 a meeting and 10,000 options for each meeting attended. The board of director’s compensation will be evaluated sometime prior to July 1, 2016. On October 15, 2013, our Board of Directors approved a revised compensation plan for our former 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 December 31, 2014, the $4 million raise was not reached and consequently these conditions not effective. In July 2015, a settlement agreement was reached with our former CEO, (see Note 26 for details on settlement agreement). Subsequent to the board approval of this agreement with the CFO, in 2015, by mutual agreement, this compensation plan with our CFO was cancelled and no options were granted. Mr. Andrews was paid a salary of $189,000 in fiscal year 2014 and currently does not have a written contract. In connection with various notes payable that we have entered into, we are obligated to pay the holders of these notes royalty fees, see Note 14 for details concerning royalty fees and payments. Operating Lease - As of December 31, 2014, future minimum lease rental payments are as follows: 2015 $ 122,210 2016 82,088 2017 69,954 2018 72,053 2019 67,918 Total $ 414,223 |
21. PURCHASE ORDER FINANCING WI
21. PURCHASE ORDER FINANCING WITH RELATED PARTY | 12 Months Ended |
Dec. 31, 2014 | |
Related Party Transactions [Abstract] | |
PURCHASE ORDER FINANCING WITH RELATED PARTY | In June 2012, we entered into a purchase order finance agreement with Development 72, a related party. The agreement will allow us to borrow up to $1,200,000 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 years ended December 31, 2014 and 2013, we financed $9,942,240 and $5,114,321, respectively of our purchase orders and incurred interest expense of $40,400 and $73,232, respectively. As of December 31, 2014 and 2013, the unpaid purchase order balance was $0 and $1,037,494, respectively, and accrued fees and interest are $0 and $24,192, respectively. |
22. CONCENTRATIONS
22. CONCENTRATIONS | 12 Months Ended |
Dec. 31, 2014 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS | During the year ended December 31, 2014, we purchased product from four suppliers, and in 2013 from two suppliers. A disruption in the availability of raw materials from our suppliers could cause a possible loss of sales, which could affect operating results adversely. For the year ended December 31, 2014, no customer accounted for more than 10% of net revenues but two third-party payors account for over 80% of our net revenues. Should our contract be cancelled with these third-party payors it would have a significant impact on our future net revenues. On March 4, 2015, CVS/Caremark notified Main Avenue that it was terminating the provider agreement with Main Avenue. No basis for the termination was provided. In March 2015, the loss of CVS/Caremark represented approximately 45% of our revenues during 2014. For the year ended December 31, 2013, we derived approximately $403,000 or 73% of our revenue from two customers. As of December 31, 2014, we had two insurance third-party payors representing 87% of our accounts receivable. As of December 31, 2013, we had two customers representing 60% of our accounts receivable-related party. |
23. CONTINGENCIES
23. CONTINGENCIES | 12 Months Ended |
Dec. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENCIES | Ironridge In November 2013, we entered into an agreement with Ironridge Global IV, Ltd. (“Ironridge”) whereby we issued 8,690,000 shares of our common stock to Ironridge in settlement for bona fide claims owed to our creditors (the “Claim Amount”). The shares issued to Ironridge were unrestricted securities and exempt from registration under Section 3(a)(10) of the Securities Act of 1933, as amended. Under the terms of the transaction, the number of shares issuable to Ironridge is subject to an adjustment based on the trading price of our common shares 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 which were determined to be $766,238. On February 10, 2014, Ironridge made a request for, and we issued, an additional 1,615,550 shares of our common stock as a result of the adjustment provisions contained in the stipulation (the “Stipulation”) in the Court Order issued by the California State Court. We expensed these additional shares in December 2013, valued at $210,022, and on February 22, 2014 we issued 1,615,550 share of our common stock to Ironridge. On April 4, 2014, Ironridge requested an additional 1,646,550 common shares. We declined to issue these additional shares because Ironridge had already received approximately 10,305,550 common shares with a market value of approximately $1,300,000 in satisfaction of $766,238. On May 6, 2014, Ironridge submitted an ex parte application to the California State Court to compel the issuance of the 1,646,550 common shares, and the California State Court entered an order compelling us to issue the additional shares. The order also prohibits us from issuing or transferring new shares to third parties before issuing these shares. We appealed the court's decision. On the same day, we filed a notice of appeal with the California State Court’s order which automatically stayed the Court’s order. The matter is pending. We accrued the potential issuance of the shares to Ironridge and have expensed $164,655 to financing costs in the consolidated statement of operations for the year ended December 31, 2014. In October 2015, to stop a contempt action we issued the 1,646,550 shares which had been accrued at December 31, 2014. We have vigorously pursued an appeal, and reversal, of the California State Court order and are in litigation in California and New Jersey. On October 29, 2015, Ironridge in California, requested the issuance of an additional 87,000,000 shares under the formula set forth in the Stipulation. In New Jersey, Ironridge brought an action against Olde Monmouth, our transfer agent, to force it to issue shares or pay damages resulting from their refusal to issue the shares requested by Ironridge. We intervened and contested jurisdiction in New Jersey. The matter is pending as of the date of this report. We believe that we have a valid defense to the issuance of the 87,000,000 shares sought by Ironridge based upon usury laws and also violations under the California business code for unconscionable actions since Ironridge paid $766,238 of debt obligations and received a return of approximately $1,300,000. Since we believe we have a strong defense relating to the issuance of the additional 87,000,000 shares we did not account for these shares as an accrual. Legal fees associated with this defense will be expensed as incurred in the future. Pharmanostics On December 29, 2015, Pharmanostics Group, LLC, (“Pharmanostics”), a Florida limited liability company, filed a civil lawsuit in Broward County Florida seeking payment of $1,835,712 from Main Avenue. Pharmanostics was our former billing company in which we had an oral contract and they performed billing services for Main Avenue in 2014. On February 28, 2015, we terminated Pharmanostics’ services. Their services were no longer required since we can bill with our own in-house staff. We will vigorously defend with affirmative defenses and counter claims. We are also filing a counter suit for damages caused by Pharmanostics’ poor business practices. The Company considers this lawsuit to be frivolous and as such has not recorded any liability associated with it in the consolidated financial statements as of December 31, 2014. |
24. REVENUES NET, FROM CONTRACT
24. REVENUES NET, FROM CONTRACT PACKAGER AND COMMISSION FEES | 12 Months Ended |
Dec. 31, 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, as defined, 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 consolidated statements of operations. The revenue is reported separately in the consolidated statements of operations as “Revenues net, from Contract Packager”. The gross sales and cost of sales from this U.S. government contracts were: Year Ended December 31, 2014 2013 Sales from US government contract $ 11,571,732 $ 6,433,644 Cost on US government, per agreement 11,170,114 6,100,006 Revenue - net, from contract packager $ 401,618 $ 333,638 In August 2013, the Company entered into an agreement with a pharmaceutical aggregator (Wholesale Rx) which began shipping generic pharmaceutical and OTC products to independent pharmacies. Under this agreement, which was amended on November 1, 2013, we received a commission of of 12.5% on gross margin of pharmaceutical products shipped prior to November 1, 2013 and 20% on the gross margin of pharmaceutical products after November 1, 2013. This agreement was subsequently amended by oral agreements, the Company received a commission of 14% on gross margins of pharmaceutical products sold. Year Ended December 31, 2014 2013 Sales - Wholesale RX $ 1,845,591 $ 598,829 Cost 1,649,996 528,927 Commission Fees $ 195,595 $ 69,902 In August 2014, the Company also entered into two other commission revenue agreements with independent pharmacies which generated commission revenue of $163,751 for the year ended December 31, 2014. |
25. RELATED PARTY TRANSACTIONS
25. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2014 | |
Related Party Transactions [Abstract] | |
11. RELATED PARTY TRANSACTIONS | In January 2013, the Company entered into consulting agreement with Implex Corporation, a consulting firm owned by the CompanyÂ’s legal counsel. The initial agreement terms are for six months and the agreement shall automatically be renewed for a successive month period(s) until one party gives written notice to terminate the agreement thirty days prior to the next termination date. Fees are $25,000 per month and such fees shall be paid in shares of the CompanyÂ’s common stock rather than cash so as to permit the Company to conserve cash. During 2013, the Company issued to Implex Corporation 824,956 shares of common stock at a fair value of $259,996. During 2014, the Company made no payments to Implex Corporation for services or fees. During fiscal year 2014, the Company paid $145,000 in consulting fees and $27,178 for interest expense on loans to a consulting firm owned by the CompanyÂ’s former CEO and a note payable owned to the wife of the former CEO. The Company also paid $189,000 in consulting fees to a consulting firm owned by the CompanyÂ’s Chief Financial Officer. During fiscal year 2013, the Company paid $120,000 in consulting fees and $23,231 for interest expense on loans to a consulting firm owned by the CompanyÂ’s former CEO and a note payable owned to the wife of the former CEO. The Company also paid $178,000 in consulting fees to a consulting firm owned by the CompanyÂ’s Chief Financial Officer. The Company has entered into transactions with Mr. Adam Brosius, our interim president as of July 1, 2015 and newly approved president as of November 13, 2015. Mr. Brosius is also owner of Black Cat Consulting and Pharma Sales Group, privately held companies that provide marketing consulting and business to Main Avenue Pharmacy. In 2014, we paid Black Cat Consulting $51,017 in cash and issued 1,500,000 shares of our common stock, valued at $210,000 for consulting fees and incurred costs from Pharma Sales Group of $107,967 for consulting and commission fees. For fiscal year 2015, we paid Pharma Sales Group $17,964,247 for commission fees in which Pharma Sales Group paid to various marketing groups on our behalf. As our President, Mr. Brosius receives $8,000 per month and a travel allowance of $1,000 per month. We also reimbursed Mr. Brosius for various purchases of inventory and supplies using his personal credit card since our credit line was not large enough to support business activities required. See Note 14 for related party debt and royalties paid to a related party. See Note 17 for the details on the transactions with Steve Urbanski and GEM. See Note 21 for purchase order financing with related party. |
26. SUBSEQUENT EVENTS
26. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2014 | |
Subsequent Events [Abstract] | |
NOTE 21 - SUBSEQUENT EVENTS | From January 1, 2015 to date of this filing, we issued 2,501,303 shares of our common stock for the following transactions: · 1,390,303 common stock shares to consultants under a consulting and service agreement which were valued at $251,855; · 1,111,000 shares were issued to members of the Board of Directors for services rendered, valued at $200,440. On March 5, 2015, we entered into two non-binding letters of intent for the acquisition of an equity interest in third-party pharmacies which, if acquired, will expand our activities into approximately forty states, most of which are not currently serviced by Main Avenue. In September 2015, we notified both pharmacies of cancellation of intent for the acquisitions. On June 30, 2015, our then Chief Executive Officer, President and Secretary, Robert Schneiderman, resigned all positions he held with us. Upon the acceptance of Mr. Schneiderman’s resignation on June 30, 2015, Brian Ettinger, the Chairman of our Board of Directors became our Chief Executive Officer and Chairman of our Board of Directors and Adam Brosius became our President. On June 30, 2015, we entered into an agreement with Mr. Schneiderman that provides for the following terms: · We agreed to pay to Mr. Schneiderman, a severance of $144,000 in semi-monthly installments of $6,000, commencing in July 2015 until paid. In August 2015 these payments were suspended and we are currently in default. · Mr. Schneiderman will meet with our new management, as may be requested, at any mutually convenient time during regular business hours until the close of business on June 30, 2016 and provide such factual background information, documents, files, e-mails, computer files, etc. as may be requested by us. · We are obligated to repay two loans in the aggregate amount of $212,669 which mature in January 2016, each bearing simple interest at the rate of 12% per annum. We are required to make monthly payments of interest and pay the principal on the maturity date. · We would pay Andrea Schneiderman for loans made to Wholesale Rx of $19,214 which we paid on July 13, 2015. · We shall pay the credit card, also issued on the credit of and in the name of Mr. Schneiderman, which has been used by Main Avenue and which has an over-limit balance of $59,614. We are required to pay $30,000 of the total outstanding balance. As of the date of this Form 10-K, these balances have not been paid. · Until December 31, 2015, Mr. Schneiderman may sell up to 100,000 shares of our common stock per week, and may accumulate any unsold amount from week to week for a maximum of ten (10) weeks or a total of 1,000,000 shares. · For a period of nine months after his termination, Mr. Schneiderman may sell up to 150,000 shares each week, and may accumulate any unsold amount from week to week for a maximum of ten 10 weeks or an aggregate of 1,500,000 shares. · Upon the sale of all or any part of the accumulated share total, Mr. Schneiderman may either sell up to 150,000 shares and/or accumulate the difference between the amount sold and the 150,000 share cap. · Mr. Schneiderman shall place sell orders of his shares at a price, of not less than one-half of the difference between the highest bid and the lowest offer. · After such nine month period, there shall be no further volume restriction, but for a further period of three months all sell orders shall be placed at a price, at the time of placing such order, of no less than one-half of the difference between the highest bid and the lowest offer. · Private transactions are not limited or affected by the dribble out provisions applicable to Mr. Schneiderman’s public sales. On April 10, 2015, we created a wholly owned subsidiary, DispenseDoc, Inc. This new subsidiary will provide services for our new pharmacy dispensing program with individual doctors. On July 21, 2015, we created a wholly owned subsidiary, Pharmacy Administration, Inc. This new subsidiary would provide billing and administrative services to other independent pharmacies. On January 5, 2016, the Company and Triumph entered into amendment no. 1 to the revolving line of credit facility. The amendment was entered into to waive all events of default as a result of the financial covenant violations as described in Note 14 for the period December 31, 2014 through September 30, 2015. The amendment also amended the defined terms of the financial covenants beginning with the three month period ended December 31, 2015. The Company was required to pay a $15,000 modification fee in connection with the amendment. |
3. SUMMARY OF SIGNIFICANT ACC33
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2014 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | a. Principles of Consolidation |
Use of Estimates | b. Use of Estimates |
Revenue Recognition | c. Revenue Recognition - Product Revenues – Specialty Pharmacy Due to the nature of the industry and the reimbursement environment in which we operate, certain estimates are required in order to record net revenues and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they may have to be revised or updated as additional information becomes available. It is possible that management’s estimates could change, which could have an impact on operations and cash flows. Specifically, the complexity of many billing arrangements and the uncertainty of reimbursement amounts for certain services from certain third-party payors may result in adjustments to amounts originally recorded. As of December 31, 2014, $1,302,441 has been recorded as a reserve for third-party payors deductions and chargebacks. We believe we have adequate allowances for contractual adjustments relating to all known third-party payors disputes. However, no assurance can be given with respect to such estimates of reimbursements and offsets or the ultimate outcome of any refund requests. Product Revenues – Pharmaceutical Distribution Services Product revenue associated with our pharmaceutical distribution services is recognized when the product is shipped from a contract packager to our customers’ warehouses, and is adjusted for anticipated chargebacks. The sales revenue is reduced accordingly based on historical experience, customer contract programs, product pricing trends and the mix of products shipped. Purchase orders from our customers 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. Revenues from Contract Packager We recognize revenue from our contract packager on a net basis according to Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 605-45, Revenue Recognition: Principal Agent Considerations. Commission Fees Commission fees are recognized when earned on shipments of generic pharmaceutical products by WholesaleRx, LLC (“WholesaleRx”), which is licensed by the Drug Enforcement Agency and sixteen states to store and distribute controlled substances. Under the terms of our amended agreement with WholesaleRx, we 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. Prior to November 1, 2013 amended agreement, we would receive 12.5% on the gross profits. (See Note 8 below for details on WholesaleRx). We also earn commission fees with various other pharmacies for shipments on generic pharmaceutical products in which we broker the costs from various supplies. Under this agreement we earned an agreed commission fee from the pharmacies. |
Research and Development | d. Research and Development |
Accounts Receivable Trade, net | e. Accounts Receivable Trade, Net - In addition to the allowance for future deductions, we examine other receivables and will record an allowance for doubtful receivables if deemed necessary. As of December 31, 2014 and 2013, no allowance for doubtful receivables was deemed necessary. In 2013, accounts receivable trade are stated at estimated net realizable value net of the sales allowance due to chargebacks. The chargeback reserve at December 31, 2013 was zero because we did not have any receivable associated with McKesson and we no longer sell product to McKesson. Management provides for uncollectible amounts through a charge to earnings and a credit to an allowance for bad debts based on its assessment of the current status of individual accounts and historical collection information. Balances that are deemed uncollectible after management has used reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable. |
Property and Equipment | f. Property and Equipment - |
Intangible Assets | g. Intangible Assets |
Long-Lived Assets | h. Long-Lived Assets · significant declines in an asset’s market price; · significant deterioration in an asset’s physical condition; · significant changes in the nature or extent of an asset’s use or operation; · significant adverse changes in the business climate that could impact an asset’s value, including adverse actions or assessments by regulators; · accumulation of costs significantly in excess of original expectations related to the acquisition or construction of an asset; · 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 · 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 | i. Receivable - Contract Packager |
Receivable - Related Party Commissions | j. Receivable - Related Party Commissions |
Inventories | k. Inventories - |
Deferred Financing Costs | l. Deferred Financing Costs |
Customer, Product, and Supplier Concentrations | m . Customer, Product, and Supplier Concentrations |
Income Taxes | n. Income Taxes We also comply with the provisions of ASC 740 which prescribes a recognition threshold and measurement process for recording in the consolidated financial statements uncertain tax positions taken or expected to be taken in a tax return. We classify any assessment for interest and/or penalties as the other expenses in the consolidated financial statements, if applicable. There were no uncertain tax positions at December 31, 2014 and 2013. |
Derivative Financial Instruments | o. Derivative Financial Instruments Derivative financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period. We estimate 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, we generally use 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 | p . Fair Value Measurements Fair Value Measurements and Disclosures Level 1: Level 2: Level 3: An asset or liabilityÂ’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. We use 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 receivables, inventories, accounts payable and accrued expenses, royalty payable, and short-term debt approximate their fair values due to their short-term maturities. Management believes the carrying values of our lines of credit and long-term debt approximates fair value due to the borrowing rates currently available to us for loans with similar terms. See Note 15 for the fair value of derivative liabilities. |
Advertising Expenses | q. Advertising Expenses |
Shipping and Handling Cost | r. Shipping and Handling Costs |
Cash - Concentration | s. Cash – Concentration |
Stock-Based Compensation | t. Stock-Based Compensation For non-employees, stock grants issued for services are valued at either the invoiced or contracted value of services rendered, 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 disincentive for non-performance. In calculating the estimated fair value of our stock options and warrants, we used a Black-Scholes pricing model which requires the consideration of the following 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 shares, which is issuable upon exercise of the option or warrant; · the expected volatility of our common shares; · expected dividends on our common shares (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. |
Cost of Goods Sold | u. Cost of Goods Sold – For the first half of fiscal year 2013, the Company purchased all of its products from one supplier, Marlex Pharmaceuticals Inc., a related party, at various contracted prices. Raw materials were re-packaged by Marlex. Upon shipment of product, the Company was charged the contracted price for services provided to ship the product. Cost of goods consisted of raw material costs, re-packaging costs and shipping and handling. The Company financed the purchase of inventory based on confirmed purchase orders via a revolving finance agreement, provided by a related party. Beginning in August 2013, we added a second source for supplying our pharmaceutical product needs. These purchases are also financed based on confirmed purchase orders via a revolving finance agreement, provided by a related party. |
Selling Expenses | v. Selling Expenses – |
Noncontrolling Interest | w. Noncontrolling Interest |
Earnings (Loss) Per Share | x. Earnings (Loss) Per Share |
Recent Accounting Pronouncements | y. Recent Accounting Pronouncements – Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements. |
Reclassifications | z. Reclassifications - |
4. INVENTORIES (Tables)
4. INVENTORIES (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Inventory Disclosure [Abstract] | |
Inventories | December 31, 2014 December 31, 2013 Finished product at PIMD, net discounts $ 191,908 $ – Raw material at Main Avenue Pharmacy 543,855 – Total Inventory $ 735,763 $ – |
5. PREPAID EXPENSES AND OTHER35
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid expenses and other current assets | December 31, 2014 December 31, 2013 Prepayment for product to be manufactured $ – (a) $ 275,000 Prepaid insurance 46,271 25,400 Deferred financing costs, net 17,075 27,575 Prepaid royalty 28,315 – Prepaid other – 1,698 Total prepaid expenses and other current assets $ 91,661 $ 329,673 |
6. PROPERTY AND EQUIPMENT, Net
6. PROPERTY AND EQUIPMENT, Net (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | December 31, 2014 December 31, 2013 Machinery and equipment $ 103,415 $ 1,975 Furniture and fixtures 9,703 – Software 5,909 5,909 119,027 7,884 Less: accumulated depreciation (17,634 ) (7,884 ) $ 101,393 $ – |
12. OTHER ASSETS (Tables)
12. OTHER ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Current Assets | |
Other Assets | December 31, 2014 December 31, 2013 Prepayment for product to be manufactured (a) $ 160,520 $ – Accounts receivable line of credit deferred financing costs 300,766 – Other 19,120 14,720 Total prepaid expenses and other current assets $ 480,406 $ 14,720 |
13. ACCOUNTS PAYABLE AND ACCR38
13. ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Payables and Accruals [Abstract] | |
Acccounts payable and accrued expenses | Accounts payable and accrued expenses consist of the following: December 31, 2014 December 31, 2013 Accounts payable and general accruals $ 676,467 $ 16,548 Accrued commissions and billing expense 4,003,088 – Accrued Ironridge expense (see Note 23) 164,655 210,022 Finance fee payable 25,000 – Deferred rent 3,956 – Total $ 4,873,166 $ 226,570 |
14. DEBT (Tables)
14. DEBT (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Debt Disclosure [Abstract] | |
Debt consists | December 31, 2014 December 31, 2013 Line of credit – Wells Fargo $ – 99,222 Line of credit - Triumph 377,056 – Debt with related party 230,286 352,816 12% Fixed rate convertible notes payable 559,852 574,778 12% Fixed rate convertible notes payable-related party 112,669 120,738 8% variable convertible notes payable – 116,334 10% variable convertible notes payable – 179,291 12% variable convertible notes payable – 48,230 12% note payable 200,000 – 12% note payable – related party 100,000 – Total notes payable 1,579,863 1,491,410 Less current maturities 511,080 511,590 Long-term debt $ 1,068,783 $ 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 |
15. DERIVATIVE FINANCIAL INST40
15. DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Fair value of the embedded derivative | Years ended December 31, 2014 Years ended December 31, 2013 Volatility 98.1% -193.3% 110.4% -228.5% Expected life (in years) 0.01 – 1.05 0.03 – 0.6 Risk-free interest rate 0.00% -0.12% 0.07% -0.12% Dividend yield 0.00 % 0.00 % |
Derivative liabilities | Derivative liabilities at December 31, 2012 $ 94,477 New derivative liabilities issued in 2013 2,590,688 Extinguishment (2,840,395 ) Change in fair value 1,288,623 Derivative liabilities at December 31, 2013 1,133,393 New derivative liabilities issued in 2014 – Extinguishment (1,198,886 ) Change in fair value 65,493 Derivative liabilities at December 31, 2014 $ – |
17. STOCKHOLDERS' DEFICIT (Tabl
17. STOCKHOLDERS' DEFICIT (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Equity [Abstract] | |
Summary of warrant activity | Number of Shares Under Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Term in Years Aggregate Outstanding at December 31, 2012 707,012 $ 0.24 3.7 $ 45,700 Granted – Exercised (478,440 ) $ 0.39 3.1 $ – Cancelled/expired – Outstanding at December 31, 2013 228,572 $ 0.17 Granted 5,000,000 $ 0.55 5.0 Exercised – Cancelled/expired – Outstanding at December 31, 2014 5,228,572 $ 0.55 4.0 $ – Vested and exercisable at December 31, 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 Options activity | Number of Shares Under options Weighted Average Exercise Price Weighted Average Remaining Contractual Term in Years Aggregate Outstanding at December 31, 2012 – $ – – $ – Granted 5,015,000 $ 0.16 3.0 Exercised – Cancelled/expired – Outstanding at December 31, 2013 5,015,000 $ 0.16 2.8 $ – Granted 6,430,000 $ 0.13 3.0 Exercised – Cancelled/expired – Outstanding at December 31, 2014 11,445,000 $ 0.14 2.2 $ 367,090 |
Options Exercise price per share | 2014 2013 Option fair value $0.053 - $0.142 $ 0.10 - $ 0.19 Risk-free interest rate 0.82% - 0.88% .34% - .78% Volatility 177% - 183% 186% - 195% Terms in years 3 3 Dividend yield 0% 0% |
18. EARNINGS (LOSS) PER COMMO42
18. EARNINGS (LOSS) PER COMMON SHARE (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Accounting Policies [Abstract] | |
EARNINGS LOSS PER COMMON SHARE | 2014 2013 Net loss attributable to ScripsAmerica, Inc. $ (4,731,046 ) $ (11,195,096 ) Preferred stock dividends (83,440 ) (83,440 ) Net loss attributable to common stockholders $ (4,814,486 ) $ (11,278,536 ) Basic : Weighted average shares outstanding-basic 127,411,084 68,119,715 Net loss per common share - basic $ (0.04 ) $ (0.17 ) Diluted : Weighted average shares outstanding-diluted 127,411,084 68,119,715 Net loss per common share - diluted $ (0.04 ) $ (0.17 ) |
19. INCOME TAXES (Tables)
19. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | |
Provision for income taxes | 2014 2013 Current Federal $ – $ – State – – Deferred – – Federal – – Income Tax expense $ – $ – |
Effective tax rates | 2014 2013 Amount Effective tax rate Percentage Amount Effective tax rate Percentage Federal income tax liability (benefit) $ (1,614,064 ) 34.0% $ (3,794,531 ) 34.0% State tax – 0.0% – 0.0% Permanent deductible expense 242,700 -5.1% 1,700,633 -15.2% Adjustment in valuation allowance 1,371,364 -28.9% 2,093,898 -18.8% Tax expense (benefit) $ – 0.0% $ – 0.0% |
Net deferred tax assets (liabilities) | 2014 2013 Deferred Tax asset Allowance for doubtful accounts $ 612,100 $ 423,497 Other reserves and accruals 613,400 – Stock based compensation 207,800 – Net Operating Loss 1,970,600 1,591,703 Total Deferred Tax asset 3,403,900 2,015,200 Deferred Tax Liability Fixed assets – basis difference (17,700 ) – Less Valuation Allowance 3,386,200 2,015,200 Total Deferred tax asset $ – $ – |
20. COMMITMENTS (Tables)
20. COMMITMENTS (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future Minimum Lease Rental Payments | 2015 $ 122,210 2016 82,088 2017 69,954 2018 72,053 2019 67,918 Total $ 414,223 |
24. REVENUES NET, FROM CONTRA45
24. REVENUES NET, FROM CONTRACT PACKAGER AND COMMISSION FEES (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Business Combinations [Abstract] | |
Gross sales and cost of sales from DLA contacts | Year Ended December 31, 2014 2013 Sales from US government contract $ 11,571,732 $ 6,433,644 Cost on US government, per agreement 11,170,114 6,100,006 Revenue - net, from contract packager $ 401,618 $ 333,638 |
Schedule of commission fees | Year Ended December 31, 2014 2013 Sales - Wholesale RX $ 1,845,591 $ 598,829 Cost 1,649,996 528,927 Commission Fees $ 195,595 $ 69,902 |
1. ORGANIZATION AND BUSINESS (D
1. ORGANIZATION AND BUSINESS (Details Narrative) | 12 Months Ended |
Dec. 31, 2014 | |
PIMD | |
Business Acquisition | 90.00% |
Main Avenue Pharmacy | |
Business Acquisition | 100.00% |
2. LIQUIDITY AND BUSINESS RIS47
2. LIQUIDITY AND BUSINESS RISKS (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Risks and Uncertainties [Abstract] | |||
Allowance for future deductions, reserved against accounts receivable | $ 589,415 | $ 0 | |
Cash | 454,215 | 47,293 | $ 13,513 |
Current Assets | 4,524,237 | 1,489,787 | |
Current Liabilities | 6,759,229 | 3,188,296 | |
Net Loss | (4,731,046) | (11,195,096) | |
Working capital, net | (2,300,000) | ||
Accumulated deficit | $ (18,423,564) | $ (13,609,078) |
3. SUMMARY OF SIGNIFICANT ACC48
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Accounting Policies [Abstract] | ||
Deferred revenue | $ 0 | $ 0 |
Reserve for third-party payors deductions and chargebacks | 1,302,441 | 0 |
Research and development expenses | 0 | 0 |
Allowance for doubtful receivables | 589,415 | 0 |
Receivables from Marlex Pharmaceuticals, Inc. Contract Packager | 0 | 1,088,598 |
Settlement receivables collected | 326,524 | |
Valuation allowance deferred tax assets | 3,386,200 | 2,015,200 |
Uncertain tax positions | 0 | 0 |
Advertising expenses | 29,018 | $ 371,786 |
Cash restricted funds | $ 275,525 | |
Stock options granted to employees and directors | 6,430,000 | 5,015,000 |
Noncontrolling interests' share of net loss | $ 16,422 | $ 18,309 |
4. INVENTORIES (Details)
4. INVENTORIES (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Inventory Disclosure [Abstract] | ||
Finished product at PIMD, net discounts | $ 191,908 | $ 0 |
Raw material at Main Avenue Pharmacy | 543,855 | 0 |
Total Inventory | $ 735,763 | $ 0 |
5. PREPAID EXPENSES AND OTHER50
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Prepaid Expense and Other Assets, Current [Abstract] | ||
Prepayment for product to be manufactured | $ 0 | $ 275,000 |
Prepaid insurances | 46,271 | 25,400 |
Deferred financing costs, net | 17,075 | 27,575 |
Prepaid royalty | 28,315 | 0 |
Prepaid other | 0 | 1,698 |
Total prepaid expenses and other current assets | $ 91,661 | $ 329,673 |
5. PREPAID EXPENSES AND OTHER51
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details Narrative) | 12 Months Ended |
Dec. 31, 2014USD ($) | |
Prepaid Expense and Other Assets, Current [Abstract] | |
Value of Inventory, product manufactured | $ 275,000 |
Cost of goods sold for unsaleable inventory | 114,480 |
Balance due from third party manufacturer | $ 160,520 |
6. PROPERTY AND EQUIPMENT, Ne52
6. PROPERTY AND EQUIPMENT, Net (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Property, Plant and Equipment [Abstract] | ||
Machinery and equipment | $ 103,415 | $ 1,975 |
Furniture and fixtures | 9,703 | 0 |
Software | 5,909 | 5,909 |
Total property and equipment, gross | 119,027 | 7,884 |
Less: accumulated depreciation | (17,634) | (7,884) |
Total property and equipment, net | $ 101,393 | $ 0 |
6. PROPERTY AND EQUIPMENT, Ne53
6. PROPERTY AND EQUIPMENT, Net (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 9,750 | $ 0 |
7. RECEIVABLES - RELATED PART54
7. RECEIVABLES - RELATED PARTIES (Details Narrative) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Receivable - Related Party Details Narrative | ||
Uncollectible receivable, fully reserved | $ 97,047 | $ 24,223 |
Other Receivable - Pharmaceutical partner | $ 0 | $ 1,088,598 |
8. INVESTMENTS IN WHOLESALERX (
8. INVESTMENTS IN WHOLESALERX (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Investment value | $ 0 | $ 276,956 |
Write off of WholesaleRx investment | $ 278,265 | $ 0 |
Wholesale Rx | ||
Non-controlling ownership interest | 14.00% | |
Investment value | $ 0 | |
Write off of WholesaleRx investment | $ 268,265 |
9. P.I.M.D. INTERNATIONAL, LLC
9. P.I.M.D. INTERNATIONAL, LLC (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Distribution from non-controlling interest | $ (114,237) | $ (119,650) |
Noncontrolling net loss | 16,422 | 18,309 |
Equity in noncontrolling interest | (277,225) | (146,566) |
PIMD International | ||
Distribution from non-controlling interest | 114,237 | 119,650 |
Noncontrolling net loss | (16,422) | (18,309) |
Cumulative noncontrolling net loss | (34,731) | $ (18,309) |
Equity in noncontrolling interest | $ (277,225) |
10. BUSINESS COMBINATION AND 57
10. BUSINESS COMBINATION AND INTANGIBLE ASSETS (Details Narrative) - Main Avenue | 12 Months Ended |
Dec. 31, 2014USD ($) | |
Stock purchase agreement for acquisition | $ 550,000 |
Intangible assets allocated upon acquisition | 12,000 |
Indefinite-lived intangible assets | 538,000 |
Amortization expense, goodwill | $ 12,000 |
11. FOREIGN SALES CONSORTIUM 58
11. FOREIGN SALES CONSORTIUM (FORMERLY REFERRED TO AS JOINT VENTURES AGREEMENT) (Details Narrative) | 12 Months Ended |
Dec. 31, 2014 | |
Global Pharma | |
Ownership percentage in Global Pharma | 37.00% |
12. OTHER ASSETS (Details)
12. OTHER ASSETS (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Current Assets | ||
Prepayment for product to be manufactured (a) | $ 160,520 | $ 0 |
Accounts receivable line of credit deferred financing costs | 300,766 | 0 |
Other | 19,120 | 14,720 |
Total prepaid expenses and other current assets | $ 480,406 | $ 14,720 |
13. ACCOUNTS PAYABLE AND ACCR60
13. ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Payables and Accruals [Abstract] | ||
Accounts payable and general accruals | $ 676,467 | $ 16,548 |
Accrued commissions and billing expense | 4,003,088 | 0 |
Accrued Ironridge expense (see Note 23) | 164,655 | 210,022 |
Finance fee payable | 25,000 | 0 |
Deferred rent | 3,956 | 0 |
Total accounts payable and accrued expenses | $ 4,873,166 | $ 226,570 |
14. Debt (Details - Debt outsta
14. Debt (Details - Debt outstanding) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Line of credit | $ 0 | $ 99,222 |
Line of credit, related party | 377,056 | 0 |
Convertible notes payable - related party | 112,669 | 120,738 |
Note payable | 200,000 | 0 |
Note payable - related party | 100,000 | 0 |
Total notes payable | 1,579,863 | 1,491,410 |
Less: current maturities | 511,080 | 511,590 |
Long-term debt | 1,068,783 | 979,820 |
Unamortized discount | 0 | 427,669 |
Line Of Credit [Member] | ||
Line of credit | 0 | |
Line of credit, related party | 377,056 | |
Line of Credit - Wells Fargo | ||
Line of credit | 0 | 99,223 |
Debt with related party [Member] | ||
Debt with related party | 230,286 | |
Debt With Related Party [Member] | ||
Debt with related party | 352,816 | |
12% Fixed rate convertible notes payable | ||
Convertible notes payable | 559,852 | 574,778 |
12% Fixed rate convertible note payable related party [Member] | ||
Convertible notes payable - related party | 112,669 | 120,738 |
8% Variable Convertible Notes Payable [Member] | ||
Convertible notes payable | 0 | 116,334 |
Unamortized discount | 0 | 286,166 |
10% Variable Convertible Notes Payable [Member] | ||
Convertible notes payable | 0 | 179,291 |
Unamortized discount | 0 | 100,709 |
12% Variable Convertible Notes Payable [Member] | ||
Convertible notes payable | 0 | 48,230 |
Unamortized discount | 0 | 40,794 |
12% Note Payable [Member] | ||
Note payable | 200,000 | 0 |
12% Note Payable - Related Party [Member] | ||
Note payable - related party | $ 100,000 | $ 0 |
14. Debt (Details Narrative)
14. Debt (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Line of credit balance | $ 0 | $ 99,222 |
Line of credit - related party | 377,056 | 0 |
Finance fees paid | 325,175 | 971,840 |
Proceeds from convertible notes | 127,906 | 1,579,867 |
Payments on convertible notes | 452,096 | 288,336 |
Convertible note, current portion | 0 | 289,839 |
Convertible notes payable, related parties | 112,669 | 120,738 |
Common stock issued for royalty payments, Amount | 139,593 | 346,803 |
Royalty expense | 492,999 | 285,547 |
Gain on extinguishment of debt | 173,535 | 636,670 |
Common stock issued for conversion of convertible notes payable, Amount | 1,249,287 | 2,777,291 |
Unamortized debt discount | 0 | 427,669 |
Line of Credit - Wells Fargo | ||
Maximum borrowing capacity | $ 100,000 | |
Interest rate | Prime plus 6.25% | |
Interest rate | 9.00% | |
Maturity date | Oct. 31, 2017 | |
Line of credit balance | $ 0 | 99,223 |
Interest expense | 341 | 3,725 |
Line of Credit - Triumph | ||
Maximum borrowing capacity | $ 4,000,000 | |
Interest rate | 6.25% | |
Line of credit - related party | $ 377,056 | |
Interest expense | 8,320 | |
Finance fees paid | 6,329 | |
Debt with related party [Member] | ||
Face amount of debt | $ 5,000,001 | |
Interest rate | 9.00% | |
Maturity date | Aug. 15, 2016 | |
Interest expense | $ 26,781 | 37,289 |
Note payable balance | 230,286 | |
Note payable, current | $ 134,024 | |
Debt With Related Party [Member] | ||
Note payable balance | 352,816 | |
Note payable, current | 122,529 | |
12% Fixed rate convertible notes payable | ||
Maturity date | Apr. 1, 2019 | |
Interest expense | $ 72,927 | 77,250 |
Convertible note balance | 559,852 | 574,778 |
Convertible note, current portion | 0 | 289,839 |
Royalty payments made | $ 253,604 | $ 22,000 |
Common stock issued for royalty payments, Shares | 1,041,885 | 1,114,672 |
Common stock issued for royalty payments, Amount | $ 116,736 | $ 276,890 |
Royalty expense | 204,636 | 246,710 |
12% Fixed rate convertible note payable related party [Member] | ||
Convertible notes payable, related parties | 112,669 | 120,738 |
12% Fixed rate convertible note payable related party [Member] | Former Chief Executive Officer [Member] | ||
Face amount of debt | $ 80,000 | |
Maturity date | Apr. 1, 2016 | |
Interest expense | $ 9,600 | 9,600 |
Convertible note balance | 80,000 | 80,000 |
12% Fixed rate convertible note payable related party [Member] | Wife of former CEO | ||
Face amount of debt | $ 50,000 | |
Maturity date | Apr. 1, 2016 | |
Interest expense | $ 4,500 | 6,000 |
Convertible note balance | 32,669 | 40,738 |
12% Fixed rate convertible note payable related party [Member] | Other related party [Member] | ||
Royalty payments made | $ 91,400 | $ 14,400 |
Common stock issued for royalty payments, Shares | 199,248 | 224,944 |
Common stock issued for royalty payments, Amount | $ 22,857 | $ 53,680 |
Royalty expense | 114,257 | 57,580 |
6% Variable Convertible Notes Payable [Member] | ||
Gain on extinguishment of debt | $ 40,026 | |
Common stock issued for conversion of convertible notes payable, Shares | 1,235,868 | |
Common stock issued for conversion of convertible notes payable, Amount | $ 246,941 | |
8% Variable Convertible Notes Payable [Member] | ||
Interest expense | 17,454 | 112,593 |
Finance fees paid | 65,180 | |
Convertible note balance | 0 | 116,334 |
Note payable balance, gross including discount | 0 | 402,500 |
Unamortized debt discount | 0 | 286,166 |
Fair value of derviative | 0 | 606,112 |
8% Variable Convertible Notes Payable [Member] | Convertible Note 1 | ||
Gain on extinguishment of debt | 103,170 | |
10% Variable Convertible Notes Payable [Member] | ||
Interest expense | 10,786 | 178,547 |
Finance fees paid | 61,455 | |
Convertible note balance | 0 | 179,291 |
Note payable balance, gross including discount | 0 | 280,000 |
Unamortized debt discount | 0 | 100,709 |
Fair value of derviative | 0 | 383,337 |
12% Variable Convertible Notes Payable [Member] | ||
Interest expense | 5,591 | 116,348 |
Finance fees paid | 8,260 | |
Convertible note balance | 0 | 48,230 |
Note payable balance, gross including discount | 0 | 89,025 |
Gain on extinguishment of debt | (2,317) | |
Unamortized debt discount | $ 0 | 40,794 |
Fair value of derviative | $ 143,944 | |
12% Note Payable [Member] | ||
Interest rate | 12.00% | |
Maturity date | Jan. 30, 2016 | |
Interest expense | $ 2,800 | |
Note payable balance | 200,000 | |
Royalty expense | 527 | |
12% Note Payable - Related Party [Member] | ||
Face amount of debt | $ 100,000 | |
Interest rate | 12.00% | |
Maturity date | Jan. 30, 2016 | |
Interest expense | $ 1,400 | |
Note payable balance | 100,000 | |
Royalty expense | 263 | |
12% One Year Term Loan | ||
Face amount of debt | $ 250,000 | |
Interest rate | 12.00% | |
Interest expense | $ 13,306 | |
Note payable balance | 0 | |
Royalty expense | 162,995 | |
12% One Year Term Loan | Wife of former CEO | ||
Face amount of debt | $ 50,000 | |
Interest rate | 12.00% | |
Interest expense | $ 2,658 | |
Note payable balance | 0 | |
Royalty expense | 32,595 | |
24% 1 year term loan [Member] | ||
Face amount of debt | $ 250,000 | |
Interest rate | 24.00% | |
Interest expense | $ 30,000 | |
Note payable balance | 0 | |
24% 1 year term loan - Related Party[Member] | ||
Face amount of debt | $ 75,000 | |
Interest rate | 24.00% | |
Interest expense | $ 9,000 | |
Note payable balance | 0 | |
QuarterSpot Term Loan [Member] | ||
Face amount of debt | $ 100,000 | |
Interest rate | 8.90% | |
Interest expense | $ 8,039 | |
Note payable balance | $ 0 |
15. Derivative Financial Inst63
15. Derivative Financial Instruments (Details-Assumptions) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Minimum [Member] | ||
Volatility | 98.10% | 110.40% |
Expected life (in years) | 4 days | 11 days |
Risk-free interest rate | 0.00% | 0.07% |
Maximum [Member] | ||
Volatility | 193.30% | 228.50% |
Expected life (in years) | 1 year 18 days | 7 months 6 days |
Risk-free interest rate | 0.12% | 0.12% |
15. Derivative Financial Inst64
15. Derivative Financial Instruments (Details-Derivative Liabilities) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Derivative liabilities, Beginning | $ 1,133,393 | $ 94,477 |
New derivative liabilities issued | 0 | 2,590,688 |
Extinguishment | (1,198,886) | (2,840,395) |
Change in fair value | 65,493 | 1,288,623 |
Derivative liabilities, Ending | $ 0 | $ 1,133,393 |
15. Derivative Financial Inst65
15. Derivative Financial Instruments (Details Narrative) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Derivative Liabilities | $ 0 | $ 1,133,393 | $ 94,477 |
Fair Value, Inputs, Level 3 [Member] | |||
Derivative Liabilities | $ 0 | $ 1,133,393 |
16. CONVERTIBLE PREFERRED STO66
16. CONVERTIBLE PREFERRED STOCK (Details Narrative) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Preferred Stock, Number of Shares, Par Value and Other Disclosures [Abstract] | ||
Preferred stock dividends payable | $ 271,180 | $ 187,740 |
17. STOCKHOLDERS' DEFICIT (Deta
17. STOCKHOLDERS' DEFICIT (Details-Warrant activity) - Warrants [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Number of shares under warrants | ||
Number of shares under warrants Outstanding | 228,572 | 707,012 |
Number of shares under warrants Granted | 5,000,000 | |
Number of shares under warrants Exercised | (478,440) | |
Number of shares under warrants Outstanding | 5,228,572 | 228,572 |
Weighted Average Exercise Price | ||
Weighted Average Exercise price Outstanding, Beginning | $ .17 | $ 0.24 |
Weighted Average Exercise price Exercised | .55 | 0.39 |
Weighted Average Exercise price Outstanding, Ending | $ .55 | $ .17 |
Weighted Average Remaining Contractual Term | ||
Weighted Average Remaining Contractual term in Years Outstanding | 4 years | 3 years 8 months 12 days |
Weighted Average Remaining Contractual term in Years Granted | 5 years | |
Weighted Average Remaining Contractual term in Years Exercised | 3 years 1 month 6 days | |
Aggregate Intrinsic Value Outstanding | $ 45,700 | |
Vested and exercisable | 5,228,572 |
17. STOCKHOLDERS' DEFICIT (De68
17. STOCKHOLDERS' DEFICIT (Details-warrant assumptions) - Warrant [Member] | 12 Months Ended |
Dec. 31, 2014$ / shares | |
Fair value per warrant | $ 0.11 |
Risk-free interest rate | 1.65% |
Volatility | 183.00% |
Terms in years | 3 years |
Dividend yield | 0.00% |
17. STOCKHOLDERS' DEFICIT (De69
17. STOCKHOLDERS' DEFICIT (Details-Options outstanding) - Options - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Number of shares outstanding, beginning balance | 5,015,000 | |
Number of shares Exercised | 5,015,000 | |
Number of shares outstanding, ending balance | 11,445,000 | 5,015,000 |
Weighted Average Exercise price, beginning price | $ .16 | $ 0 |
Weighted Average Exercise price Granted | .13 | .16 |
Weighted Average Exercise price, ending price | $ .14 | $ .16 |
Weighted Average Remaining Contractual term in Years Outstanding | 2 years 2 months 12 days | 2 years 9 months 18 days |
Weighted Average Remaining Contractual term in Years grants | 3 years | 3 years |
Aggregate Intrinsic Value Outstanding | $ 367,090 |
17. STOCKHOLDERS' DEFICIT (De70
17. STOCKHOLDERS' DEFICIT (Details-Option assumptions) - Options | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Option fair value | $0.053-$0.142 | $0.10-$0.19 |
Risk-free interest rate, minimum | 0.82% | 0.34% |
Risk-free interest rate, maximum | 0.88% | 0.78% |
Volatility, minimum | 177.00% | 186.00% |
Volatility, maximum | 183.00% | 195.00% |
Terms in years | 3 years | 3 years |
Dividend yield | 0.00% | 0.00% |
18. EARNINGS (LOSS) PER COMMO71
18. EARNINGS (LOSS) PER COMMON SHARE (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Accounting Policies [Abstract] | ||
Net loss attributable to ScripsAmerica, Inc. | $ (4,731,046) | $ (11,195,096) |
Preferred stock dividend | (83,440) | (83,440) |
Net loss attributable to common stockholders | $ (4,814,486) | $ (11,278,536) |
Weighted average shares outstanding - basic | 127,411,084 | 68,119,715 |
Net loss per common share - basic | $ (.04) | $ (.17) |
Weighted average shares outstanding-diluted | 127,411,084 | 68,119,715 |
Net loss per common share - diluted | $ (0.04) | $ (0.17) |
19. INCOME TAXES (Details-Provi
19. INCOME TAXES (Details-Provision for income taxes) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Current | ||
Federal | $ 0 | $ 0 |
State | 0 | 0 |
Deferred | ||
Federal | 0 | 0 |
Income Tax Expense | $ 0 | $ 0 |
19. INCOME TAXES (Details-Recon
19. INCOME TAXES (Details-Reconcilation of income taxes) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Tax Disclosure [Abstract] | ||
Federal income tax liability (benefit) | $ (1,614,064) | $ (3,794,531) |
State taxes | 0 | 0 |
Permanent deductible expense | 242,700 | 1,700,633 |
Adjustment in valuation allowance | 1,371,364 | 2,093,898 |
Tax expense (benefit) | $ 0 | $ 0 |
Federal income tax liability (benefit) | 34.00% | 34.00% |
State tax | 0.00% | 0.00% |
Permanent deductible expense | (5.10%) | (15.20%) |
Adjustment in valuation allowance | 28.90% | (18.80%) |
Tax expense (benefit) | 0.00% | 0.00% |
19. INCOME TAXES (Details-Defer
19. INCOME TAXES (Details-Deferred tax assets) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Deferred Tax asset | ||
Allowance for doubtful accounts | $ 612,100 | $ 423,497 |
Other reserves and accruals | 613,400 | 0 |
Stock based compensation | 207,800 | 0 |
Net Operating Loss | 1,970,600 | 1,591,703 |
Total Deferred Tax asset | 3,403,900 | 2,015,200 |
Fixed assets - basis difference | (17,700) | 0 |
Less Valuation Allowance | 3,386,200 | 2,015,200 |
Total Deferred tax asset | $ 0 | $ 0 |
19. INCOME TAXES (Details Narra
19. INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Tax Disclosure [Abstract] | ||
Operating loss carryforwards | $ 7,033,000 | |
Carryforward expiration date | Dec. 31, 2034 | |
Valuation Allowance | $ 3,386,200 | $ 2,015,200 |
Increase in valuation allowance | $ 1,790,700 | $ 1,417,609 |
20. COMMITMENTS (Details)
20. COMMITMENTS (Details) | Dec. 31, 2014USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,015 | $ 122,210 |
2,016 | 82,088 |
2,017 | 69,954 |
2,018 | 72,053 |
2,019 | 67,918 |
Total | $ 414,223 |
21. PURCHASE ORDER FINANCING 77
21. PURCHASE ORDER FINANCING WITH RELATED PARTY (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ||
Purchase orders financed, balance | $ 0 | $ 1,037,494 |
Purchase orders financed | 9,942,240 | 5,114,321 |
Interest expense | 40,400 | 73,232 |
Accrued interest | $ 0 | $ 24,192 |
22. CONCENTRATIONS (Details Nar
22. CONCENTRATIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Revenues | Two Third Party Payors | ||
Concentration risk percentage | 80.00% | |
Revenues | Two Customers | ||
Concentration risk percentage | 73.00% | |
Revenues | $ 403,000 | |
Accounts Receivable [Member] | Two Third Party Payors | ||
Concentration risk percentage | 87.00% | |
Accounts Receivable [Member] | Two Customers | ||
Concentration risk percentage | 60.00% |
23. CONTINGENCIES (Details Narr
23. CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Litigation expense | $ 164,655 | $ 766,238 |
24. REVENUES NET, FROM CONTRA80
24. REVENUES NET, FROM CONTRACT PACKAGER AND COMMISSION FEES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Sales from U.S. government contract | $ 11,571,732 | $ 6,433,644 |
Cost on U.S. government, per agreement | 11,170,114 | 6,100,006 |
Revenues net, from contract packager | 401,618 | 333,638 |
Cost | 2,764,568 | 210,540 |
Commission Fees | 359,346 | 69,902 |
Independent Pharmacies | ||
Commission Fees | 163,751 | |
Wholesale Rx | ||
Sales - Wholesale RX | 1,845,591 | 598,829 |
Cost | 1,649,996 | 528,927 |
Commission Fees | $ 195,595 | $ 69,902 |
25. RELATED PARTY TRANSACTIONS
25. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Interest expense paid | $ 311,179 | $ 332,947 |
Stock issued for services, value | 7,020 | |
Former CEO | ||
Consulting fees | 145,000 | |
Interest expense paid | 27,178 | |
Chief Executive Officer [Member] | ||
Consulting fees | 120,000 | |
Interest expense paid | 23,231 | |
Chief Financial Officer | ||
Consulting fees | 178,000 | |
Black Cat Consulting | ||
Interest expense paid | $ 51,017 | |
Stock issued for services, shares | 1,500,000 | |
Stock issued for services, value | $ 210,000 | |
Pharma Sales Group | ||
Consulting fees | $ 107,967 |