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COMMITMENTS AND CONTINGENCIES | 3 Months Ended
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Mar. 31, 2014
Notes to Financial Statements |
COMMITMENTS AND CONTINGENCIES | Legal Matters 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, we may be involved in various claims, lawsuits, and disputes with third parties, actions involving allegations of discrimination or breach of contract actions incidental to the normal operations of the business. Providing pharmacy services entails an inherent risk of medical and professional malpractice liability. We may be named as a defendant in such lawsuits and thus become subject to the attendant risk of substantial damage awards. We believe that we have adequate professional and medical malpractice liability insurance coverage. There can be no assurance, however, that we will not be sued, that any such lawsuit will not exceed our insurance coverage, or that we will be able to maintain such coverage at acceptable costs and on favorable terms. On March 18, 2011, a lawsuit was filed by Tim Chandler, Jodi Marshall, Christie Garner, the Estate of Thomas Pike, Jr., and Angie Hernandez in the Circuit Court of the State of Oregon for Multnomah County against Payette Clinics, P.C., Scott Pecora, Kelly Bell, Penny Steers and our wholly-owned subsidiaries, Assured Pharmacies Northwest, Inc. and Assured Pharmacy Gresham, Inc. The lawsuit arose from allegations that nurse practitioners at Payette Clinics, P.C. prescribed the five plaintiffs controlled substances in amounts that were excessive under the appropriate medical standard of care. Only one of the plaintiffs, Tim Chandler, brought claims against our subsidiaries. Mr. Chandler’s claims against our subsidiaries were for negligence on the basis of allegations that our subsidiaries knew or had reason to know that the prescriptions fell below the standard of care applicable to the prescription of such controlled substances but nonetheless filled the prescriptions. The plaintiffs, as a whole, submitted a prayer for $7,500,000 in damages. Mr. Chandler only seeks “an amount to be proven at trial” for noneconomic damages and unnecessary expenses. Management believes that the allegations against our subsidiaries are without merit and plans to vigorously defend this claim. We have $2,000,000 in insurance coverage for claims relating to pharmacy negligence. This lawsuit has been stayed as a result of a co-defendant in this lawsuit (Payette Clinics, P.C.) having filed for bankruptcy. The bankruptcy has since been discharged and the automatic stay lifted. The state court stay was also lifted. On June 20, 2013, a Motion to Stay was filed and the court granted the defendants’ motion. All proceedings are now stayed until May 30, 2014. The Company has denied any liability and is vigorously defending this action. 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 moved the action to the Southern District of New York. Assured plans to vigorously defend the claim. 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 Assured Pharmacy. The plaintiff submitted a prayer for $1,500,000 in damages. Management believes that the allegations against the Company are without merit and plans to vigorously defend this claim. We have $2,000,000 in insurance coverage for claims relating to pharmacy negligence. On February 19, 2014, a lawsuit was filed by JS Barkats PLLC, in the Supreme Court of The State of New York for County of New York against Assured Pharmacy, Inc. and Robert DelVecchio, our Chief Executive Officer. The lawsuit arises from allegations of failing to remit legal fees due under written retainer agreements of $134,300 and failing to deliver 500,000 freely traded shares of the Company’s common stock pursuant to one of the retainer agreements. Management believes that the allegations against the Company are without merit and plans to vigorously defend this claim and is pursuing counter claims asking compensatory and punitive damages. Accounts Receivable Sold with Recourse In March 2014, the Company entered into a $600,000 Non-Disclosable Revolving Line of Credit Loan with Third Coast Bank SSB due on March 25, 2015. The loan is not subject to an interest rate, but is subject to service charges based on the amount of funds advanced. As of March 31, 2014, the Company had a net balance of $261,075 in accounts receivable that were sold with recourse, net of reserves required per the agreement.

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