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COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS
 6 Months Ended
Jun. 30, 2014
Notes to Financial Statements  
NOTE 9. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

We are obligated under various operating leases for our facilities and certain equipment. The following is a schedule of approximate future minimum lease payments under operating leases having remaining terms in excess of one year as of June 30, 2014 for the calendar years ended December 31, 2014 and 2015 (in thousands):

 

2014   $ 80  
2015     104  
Thereafter     444  
         
Total   $ 628  

 

Rent expense approximated $16,000 and $85,000 for the six month periods ending June 30, 2014 and 2013 respectively.

 

Other future contractual obligations for agreements with initial terms greater than one year and agreements to purchase materials in the normal course of business are summarized as follows (in thousands):

 

Description   Years Ending December 31,  
    2014     2015     2016     2017     2018     Thereafter  
Purchase commitments     3,052       -       -       -       -       -  
Long-term debt     120       239       239       2,934       -       -  
Total   $ 3,172     $ 239     $ 239     $ 2,934     $ -     $ -  

 

We have a manufacturing agreement with our Bulgarian supplier which provides for certain contingent payments on our part if we terminate our arrangement prior to July 1, 2015. The remaining contingent liability for the calendar year ending December 31, 2014 is approximately $325,483. The agreement requires one year advance written notice of non-renewal.

 

Litigation

 

Stockholder Derivative Action

 

In September 2011, the Company was served in a purported stockholder derivative action (the “Derivative Action”) that was filed in the United States District Court for the Middle District of Florida (the “Court”) against the Company and certain of its present and former officers and directors. The complaint asserts, among other things, breach of fiduciary duties and bad faith in relation to the management of the Company’s business. The complaint seeks, among other things, unspecified compensatory damages and various forms of equitable relief. The allegations in the Derivative Action appear to be based largely on counterclaims previously asserted by Steven Livneh, a former director of the Company, in a prior litigation between the Company and Mr. Livneh which was settled.

 

On June 26, 2014, the Company entered into a Stipulation and Agreement of Settlement (“Stipulation of Settlement”) setting forth the terms of the settlement of the claims asserted against the Company in the Derivative Action. On July 7, 2014, the Court issued an Amended Order Preliminarily Approving Derivative Settlement and Providing for Notice (“Preliminary Order”) preliminarily approving the Stipulation of Settlement. The Preliminary Order set October 2, 2014 as the hearing date for final approval of the terms of the Stipulation of Settlement and approved the form of notice to stockholders (the “Notice”) and the form of summary notice to stockholders (the “Summary Notice”).  The Stipulation of Settlement remains subject to court approval, and requires the Company to make and/or codify certain corporate governance changes as more specifically described therein.  In addition, counsel for the plaintiffs will be entitled to request that the court award of attorney’s fees and expenses of up to $850,000, subject to court approval, which amount would be fully funded by insurance proceeds. Copies of the Preliminary Order, Stipulation of Settlement, Notice and Summary Notice have been previously filed with the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 16, 2014.

 

In the normal course of business, we are subject, from time to time, to legal proceedings, lawsuits and claims. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. If any of these matters arise in the future, it could affect the operating results of any one or more quarters.

 

We expense costs of litigation related to contingencies in the periods in which the costs are incurred.

 

Concentrations

 

Our ten largest customers accounted for approximately 60.7% and 59.0% of net revenues for the six months ended June, 2014 and 2013 respectively. For the six months ended June 30, 2014, National Distribution and Contracting, Inc. accounted for 10.5% of our sales, while for the same six month period ended in 2013, McKesson Medical Surgical accounted for 20.4% of our sales.