BASIS OF PRESENTATION AND PLAN OF OPERATIONS

12 Months Ended

Dec. 31, 2013

1. BASIS OF PRESENTATION AND PLAN OF OPERATIONS

Organization

Assured Pharmacy, Inc. (“Assured Pharmacy” or the “Company”) was organized as a Nevada corporation on October 22, 1999, under the name Surforama.com, Inc. The Company is engaged in the business of providing pharmacy services to physicians and patients primarily in the treatment of chronic pain. The Company derives its revenue primarily from the sale of prescription drugs and primarily dispenses highly regulated pain medications and does not offer non-prescription drugs or health and beauty related products inventoried at traditional pharmacies. The majority of the Company's business is derived from repeat business from its customers.

The Company had two operating pharmacies as of the year ended December 31, 2013 and four operating pharmacies as of the year ended December 31, 2012. The pharmacies are located in Kirkland, Washington and Leawood, Kansas. In August 2013, as a result of our financial condition and inability to secure additional funding or significantly improve our liquidity position, management reevaluated its strategic plan. Management developed and implemented a plan to scale back operations as we could not continue to support the working capital needs of four pharmacies. As a result, management decided to close two pharmacies in order to reduce overall fixed pharmacy costs by 50% and concentrate our limited working capital to support the operations of the two remaining pharmacies we believe have the best prospects. Management considered several factors in determining which two pharmacies to close, including historical financial performance, regulatory costs, current sales prospects, geographic and physical location and strength of existing physician relationships. After consideration of these factors, management closed our Gresham and Riverside pharmacies on August 5, 2013 and August 8, 2013, respectively.

The Company’s common stock is traded on the OTC Market’s OTCQB quotation system under the ticker symbol APHY.

In June 2009, the Company filed a Certificate of Designation with the state of Nevada to designate 2,830 preferred shares as Series A Convertible Preferred Stock (“Series A Preferred”) and 7,745 shares as Series B Convertible Preferred Stock (“Series B Preferred”) from the 5,000,000 preferred shares authorized (see Note 5 for further details). In May 2010, the Company filed a Certificate of Designation with the state of Nevada to designate 813 preferred shares as Series C Convertible Preferred Stock (“Series C Preferred”). In November 2013, the Company filed a Certificate of Designation with the state of Nevada to designate 15,000 preferred shares as Series D Redeemable Convertible Preferred Stock.

In January 2010, the Company filed a Certificate of Amendment to Articles of Incorporation with the State of Nevada to increase the number of authorized common shares from 833,333 shares to 16,666,667 shares.

In May 2012, the Company’s Board of Directors (“the Board”) and a majority of the Company’s shareholders approved an Amended and Restated Articles of Incorporation effectuating an increase in the number of authorized common shares of the Company from 16,666,667 to 35,000,000. As required, a consent and waiver was obtained from the majority of the Series A and Series C Preferred holders in accordance with the certificate of designation.

In October 2013, we filed a Proxy Statement on Schedule 14A with the Securities and Exchange.

1.	Amend and restate the Articles of Incorporation of the Company to increase the authorized number of shares of Common stock available for issuance from 35,000,000 to 100,000,000.
2.	Create and designate a class of Preferred Stock called the “Series D Preferred Stock,” consisting of 15,000 shares of stock, par value $0.001 per share, and designate to such class of stock those rights as described in that certain Certificate of Designation.

The Board of Directors has submitted several actions to be taken by consent in lieu of a meeting in order to facilitate future financings.

In November 2013, the Board of Directors increased the Company’s authorized Common Stock from 35,000,000 to 100,000,000 to provide greater flexibility with respect to future transactions, including joint ventures, raising capital, acquisitions and other general corporate purposes. Each additional share of Common Stock authorized by the amendment to the Articles of Incorporation will have the same rights and privileges as each share of Common Stock currently authorized or outstanding. If this proposal is rejected, the Company may have insufficient authorized and unissued outstanding shares of Common Stock to take advantage of potential business opportunities.

The Company does not currently have any plans for the potential increase in the number of authorized shares available for issuance. The Series D Preferred Stock described below, designates that any one share of Series D Preferred Stock may, at the option of the holder, be converted at any time into 2,000 fully-paid and non-assessable shares of Common Stock.

The Board of Directors believes it to be in the best interest of the Company to create and designate a class of Preferred Stock called the “Series D Preferred Stock,” consisting of 15,000 shares of stock, par value $0.001 per share, and designate to such class of stock those rights and preferences as described in that certain Certificate of Designation, filed with the State of Nevada and in the Form 14A filed with the Securities and Exchange Commission on October 29, 2013 and is incorporated herein by reference.

The designation of the Series D Preferred Stock adversely alters and affects the rights of our Common Stockholders. Pursuant to the terms of the Series D Preferred Stock, the initial investor must approve certain corporate actions of the Company, regardless of the total Common Stock votes for or against such actions. Such actions include, but are not limited to: any increase or decrease in the authorized number of shares of Common Stock or Preferred Stock; the delisting of any of the Company’s securities from the OTCQB or any national securities exchange; any redemption or repurchase with respect to the Common Stock or Preferred Stock; any liquidation, dissolution or winding-up of the business and affairs of the Company; any material modification or deviation from the Company’s annual business plan and operating budget; any payment or declaration of a dividend or other distribution on any shares of Common Stock or Preferred Stock made by the Board of Directors; and any change in the principal business of the Company. In addition to the foregoing, holders of the Series D Preferred Stock have the right to elect one director of the Company so long as at least 35% of the Series D Preferred Stock is issued and outstanding.

Registration Statement

On November 13, 2012, we completed the registration of 2,292,067 shares of common stock, par value $0.001 per share, issuable upon exercise of warrants on Form S-1, as amended. We became a public company on November 14, 2012 and are subject to the reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s common stock began trading on the OTC Market’s OTC:QB quotation system under the ticker symbol “APHY”.

Reverse Stock Split

In March 2011, the Company’s Board approved an amended and restated certificate of incorporation effecting a 1 for 180 reverse stock split of the Company’s issued and outstanding shares of common stock, effective as of April 15, 2011. As required, a consent and waiver was obtained from the majority of the Series A Preferred holders in accordance with the certificate of designation.

Going Concern Considerations

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. As of December 31, 2013, the Company had an accumulated deficit of approximately $48.6 million and, recurring losses from operations. The Company also had negative working capital of approximately $1.7 million and debt with maturities within one year in the amount of approximately $800,000 as of December 31, 2013.

From January 1, 2014 through March 27, 2014, the Company has secured loans in the amount of $440,000 from Pinewood Trading Fund, LP, a related party and extended the maturity date of an aggregate total of $1,000,000 in convertible debentures from December 1, 2013 to June 30, 2016 and converted $252,417 in accrued interest due to convertible debenture holders into common stock at $0.60 per share. The Company intends to fund operations through raising additional capital through debt financing and equity issuances, increased sales, increased collection activity on past due other receivable balances and reduced expenses, which may be insufficient to fund its capital expenditures, working capital or other cash requirements for the year ending December 31, 2014. The Company is in negotiations with current debt holders to restructure and extend payment terms of the existing short term debt. The Company is seeking additional funds to finance its immediate and long-term operations. The successful outcome of future financing activities cannot be determined at this time and there is no assurance that if achieved, the Company will have sufficient funds to execute its intended business plan or generate positive operating results. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments related to recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

In response to these financial issues, management has taken the following actions:

·	The Company is seeking to renegotiate existing debt.

·	The Company is seeking investment capital.

·	The Company is aggressively targeting new physicians.