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COMMITMENTS AND CONTINGENCIES
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12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2013
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| 9. COMMITMENTS AND CONTINGENCIES | Operating Leases
The Company occupies buildings and retail space under operating lease agreements expiring on various dates through March 31, 2020, with monthly payments ranging from approximately $1,300 to $3,700. Certain leases include future rental escalations and renewal options. The Company recognizes rent expense on a straight-line basis for leases with rental escalation clauses.
Total rent expense for the years ended December 31, 2013 and 2012, was $205,177 and $125,667 respectively, and was included in selling, general and administrative expenses in the consolidated statement of operations.
Providing pharmacy services entails an inherent risk of medical and professional malpractice liability. The Company may be named as a defendant in such lawsuits and become subject to the attendant risk of substantial damage awards. The Company believes it possesses adequate professional and medical malpractice liability insurance coverage. There can be no assurance that the Company will not be sued, that any such lawsuit will not exceed our insurance coverage, or that it will be able to maintain such coverage at acceptable costs and on favorable terms.
From time to time, the Company may be involved in various claims, lawsuits, disputes with third parties, actions involving allegations of discrimination or breach of contract actions incidental to the normal operations of the business. In the opinion of management, the Company is not currently involved in any litigation which it believes could have a material adverse effect on the Company's financial position or results of operations.
On May 9, 2013, a lawsuit was filed by Coventry Enterprises, LLC (“Coventry”) in the United States District Court Southern District of York. The lawsuit arises from allegations that Assured Pharmacy breached its obligations under the $200,000 16% Senior Convertible Debenture due December 1, 2013 with Coventry Enterprises, LLC. Due to the Company’s financial condition, we have been unable to repay the $200,000 in principal and accrued interest due under the agreement. In November 2013, the parties entered into a Settlement Agreement and General Release which included a forbearance re stipulated judgment. The parties agree that as of December 6, 2013, before any application of any payments, we owe Coventry $280,679, which includes unpaid principal of $200,000, unpaid interest of $53,679 and unreimbursed attorney’s fees and costs of $27,000. The Company shall pay Coventry $280,679, plus interest at the rate of 16.0% per annum on the following schedule:
On August 23, 2013, AQR Opportunistic Premium Offshore Fund, L.P. and CNH Diversified Opportunities Master Account, L.P. filed a lawsuit against Assured Pharmacy in the Supreme Court of the State of New York. Plaintiffs submitted a Motion for Summary Judgment in Lieu of Complaint against defendants to recover money allegedly owed by Assured Pharmacy, Inc. under two 16% Convertible Debentures totaling $300,000 issued in and around 2011 in a private placement. Assured removed the action to the Southern District of New York. Assured plans to vigorously defend the claim.
On October 25, 2013, a lawsuit was filed by Westlake Gresham North, LLC in the Circuit Court of the State of Oregon. The lawsuit arises from allegations that Assured Pharmacy Gresham, Inc. and Assured Pharmacy, Inc. are in breach of contract of its lease agreement and is claiming $123,234 in damages. In December 2013, the parties entered into a Release and Settlement Agreement which included a Stipulated General Judgment with Money Award in the amount of $99,174. As part of the settlement, the Company is required to make monthly rent payments of $3,065 beginning with December 2013 rent and continuing until the lease expires or another tenant leases that space. The Company is also required to make a lump sum payment of $21,239 for past due rent by April 1, 2014.
On December 16, 2013 a lawsuit was filed by Ann Raffaele, in the Circuit Court of the State of Oregon for Multnomah County against Assured Pharmacy, Inc and our wholly-owned subsidiaries, Assured Pharmacies Northwest, Inc. and Assured Pharmacy Gresham, Inc. The lawsuit arises from allegations of medical negligence by Dr. Edward Goering, D.O. and Assure d Pharmacy. The plaintiff submitted a prayer for $1,500,000 in damages. Management believes that the allegations against are without merit and plans to vigorously defend this claim. We have $2,000,000 in insurance coverage for claims relating to pharmacy negligence. |
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