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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2014
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| Summary Of Significant Accounting Policies Policies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principles of Consolidation | The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated. |
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| Use of Estimates | The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Significant estimates and assumptions involved include the collectability of accounts receivable, accounting for stock-based compensation and other stock-based payments, convertible debt issuances, the valuation of the deferred tax asset, inventory, warrant liability and long-lived assets valuation. Actual results could materially differ from these estimates. |
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| Risks and Uncertainties | The Company operates in a highly competitive industry that is subject to intense competition. The Company faces risks and uncertainties relating to its ability to successfully implement its business strategy. Among other things, these risks include the ability to develop and sustain revenue growth; managing and expanding operations; competition; attracting, retaining and motivating qualified personnel; maintaining and developing new strategic relationships; and the ability to anticipate and adapt to the changing markets and any changes in government regulations.
As a result, the Company may be subject to the risk of delays in obtaining (or failing to obtain) regulatory clearance and other uncertainties, including financial, operational, technological, regulatory and other risks associated with an emerging business, including the risk of business failure.
The Company’s pharmacies are subject to licensing and regulation by the health, sanitation, safety, building and fire agencies in the state or municipality where located. Difficulties or failures in obtaining or maintaining the required licensing and/or approvals could prevent the continued operations of such pharmacies. Management believes that the Company is operating in compliance with all applicable laws and regulations. |
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| Revenue Recognition | The Company recognizes revenue from prescriptions dispensed on an accrual basis when the product is delivered to or picked up by the customer. Payments are received directly from the customer at the point of sale, or the customers’ insurance provider is billed electronically. For third party medical insurance and other claims, authorization to ensure payment is obtained from the customer’s insurance provider before the medication is dispensed to the customer. Authorization is obtained for these sales electronically and a corresponding authorization number is issued by the customers’ insurance provider. |
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| Discontinued Operations | Discontinued operations include our Gresham and Riverside pharmacies that were closed in August 2013 due to our Company’s financial condition. 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. These closures met the discontinued operations criteria and, accordingly, are included in discontinued operations for all periods presented. |
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| Accounts Receivable and Allowances | The Company’s accounts receivable consist of amounts due from third party medical insurance carriers, pharmacy benefit management companies, patients and credit card processors. Management periodically reviews the accounts receivable to assess collectability and estimate potential doubtful accounts. Accounts receivable are written-off after collection efforts have been completed in accordance with the Company’s policies. The doubtful accounts allowance reduces the carrying value of the account receivable.
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. The credit facility allows for the sale of receivables at collectible value less a 10% reserve to be maintained based on the outstanding balance of receivables sold. The loan is secured by the Company’s accounts receivable and is guaranteed by Pinewood Trading Fund, LP, a related party. The Company recorded the sale of the accounts receivable by reducing the accounts receivable for the accounts receivable sold with recourse, net of the 10% reserve required.
In June 2014, the Company entered into a modification of the $600,000 Non-Disclosable Revolving Line of Credit due March 25, 2015 whereby the Revolving Line of Credit was increased to $1,200,000 and the maturity date was extended to June 5, 2015.
The Company’s accounts receivables are detailed as follows:
The provision for bad debts for the six months ended June 30, 2014 and 2013 was $18,912 and $9,564, respectively. |
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| Stock-based Compensation | The Company issues options and restricted shares of common stock to employees and consultants. Stock option and restricted share awards are granted at the fair market value of the Company’s common stock on the date of grant.
The Company records all share-based payments at fair value. The total applicable compensation cost is amortized on a straight-line basis over the requisite service period, which is generally the vesting period.
For the six months ended June 30, 2014 and 2013, the Company recognized $99,937 and $426,778, respectively, in compensation expense which is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. |
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| Reclassification | Certain prior year amounts have been reclassified to conform to the 2014 financial statement presentation. The reclassifications did not affect net loss attributable to the Company, cash flows, assets, liabilities or equity for the periods presented. |
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| Basic and Diluted Loss per Common Share | The Company computes loss per common share using Accounting Standards Codification (“ASC”) 260 “Earnings Per Share.” Basic loss per share is computed by dividing net loss applicable to common shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts, such as stock options and warrants to issue common stock, were exercised or converted into common stock. Because the Company has incurred net losses and there are no dilutive potential common shares, basic and diluted loss per common share are the same. |
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| Recent Accounting Pronouncements | In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exist, which is included in ASC Topic 740 (Income Taxes). ASU 2013-11 requires an entity to net its liability for unrecognized tax positions against a net operating loss carryforward, a similar tax loss or a tax credit carryforward when settlement in this manner is available under the tax law. The provisions of this new guidance are effective for reporting periods beginning after December 15, 2013. The guidance is not expected to have a material impact on our statement of operations, financial position, or cash flows.
In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”) which amended the FASB’s guidance for reporting discontinued operations and disposals of components of an entity under Accounting Standards Codification Subtopic 250-20. The guidance as amended by ASU 2014-08 raises the threshold for a disposal to qualify as a discontinued operation by requiring that a disposal representing a strategic shift that has (or will have) a major effect on an entity’s financial results or a business activity classified as held for sale be reported as such. The amendments also expand the disclosure requirements regarding the assets, liabilities, revenues and expenses of discontinued operations and add new disclosure requirements for individually significant dispositions that do not qualify as discontinued operations. The amendments are effective prospectively for fiscal years beginning after December 15, 2014, and interim reporting periods within those years (early adoption is permitted only for disposals that have not been previously reported). The implementation of the amended guidance is not expected to have a material impact on the Company’s consolidated financial statements.
In June 2014, the FASB issued ASU No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period (“ASU 2014-12”). ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This ASU further clarified that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. ASU 2014-12 is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements. |
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