UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D. C. 20549
Form
10-K
[X]
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2014
OR
[ ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the transition period from ________ to ________
Commission
File Number: 333-130446
PRAXSYN
CORPORATION
(Exact
Name of Registrant as Specified in Its Charter)
Nevada
|
|
20-3191557 |
(State
or other jurisdiction of |
|
(I.
R. S. Employer |
incorporation or organization) |
|
Identification
No.) |
1803
Sky Park Circle, Suite A, Irvine, CA 92614
(Address
of principal executive offices and zip code)
(949)
777-6112
(Registrant’s
telephone number)
Securities
registered under Section 12(b) of the Exchange Act: None
Securities
registered under Section 12(g) of the Exchange Act: Common Stock
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ]
No [X]
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(b) of the Act. Yes [X] No
[ ]
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and no
disclosure will be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” an “accelerated filer,” a “non-accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
[ ]
Large accelerated Filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Smaller reporting company
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The
aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2014,
the last business day of the registrant’s most recently completed second fiscal quarter, based on the last sales price of
the issuer’s common stock as reported on the OTCQB of the OTC Markets Group’s quotation and trading system was $12,448,211.
Shares of common stock held by each current executive officer and director and by each person who is known by the registrant to
own 5% or more of the outstanding common stock have been excluded from this computation in that such persons may be deemed to
be affiliates of the registrant. This determination of affiliate status is not a conclusive determination for other purposes.
The
number of shares outstanding of the registrant’s Common Stock as of April 10, 2015 was 577,107,157 shares.
DOCUMENTS
INCORPORATED BY REFERENCE
NONE.
Praxsyn
Corporation
(Formerly
Known As The PAWS Pet Company, Inc.)
FORM
10-K INDEX
CAUTIONARY
STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
This
report includes statements that may constitute “forward-looking” statements within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements other than statements of historical facts, including, without limitation, statements
regarding future financial position, business strategy, budgets, projected sales, projected costs, and management objectives,
are forward-looking statements. Terminology such as “may,” “will,” “expects,” “intends,”
“plans,” “projects,” “estimates,” “anticipates,” or “believes” or
the negative thereof, any variation thereon or similar terminology are intended to identify forward-looking statements.
These
forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially and adversely
from the results proposed in such statements. Important factors that could cause actual results to differ from our expectations
include, but are not limited to: the costs and availability of financing; our ability to maintain adequate liquidity; our ability
to execute our business plan; our ability to control costs; our ability to attract and retain customers; general economic conditions;
competitive pricing pressures; governmental regulation; weather conditions; and statements of assumption underlying any of the
foregoing, as well as other factors set forth under “Item 7 — Management’s Discussions and Analysis of Financial
Condition and Results of Operations” in this report.
Readers
are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this report.
All forward-looking statements are qualified in their entirety by the foregoing cautionary statements. We assume no duty to update
or revise our forward-looking statements based on changes in our expectations or events after the date hereof.
The
terms “Praxsyn Corporation,” the “Company,” “management,” “we,” “us,”
and “our” in this Annual Report on Form 10-K are meant to refer collectively to Praxsyn Corporation and its subsidiaries,
formerly known as The PAWS Pet Company, Inc.
PART
I
ITEM
1. BUSINESS.
Description
of Business
Praxsyn
Corporation (the “Company”) is a health care company dedicated to providing medical practitioners with medications
and services for their patients. Through our retail pharmacy facility in Irvine, California, we currently formulate healthcare
practitioner-prescribed medications to serve patients who experience chronic pain. Our focus with these products is on non-narcotic
and non-habit forming medications using therapeutic and preventative agents for pain management. In addition, we prepare innovative
products that address erectile dysfunction and metabolic issues, and other ancillary products. Our products are either picked
up directly at our pharmacy facility or shipped to patients covered under the California workers’ compensation system as
well as preferred provider (“PPO”) contracts. Billings are made to, and collections received from, the insurance companies
which cover the patients.
Corporate
History
We
were incorporated in the State of Illinois on June 5, 2005 as American Antiquities, Inc. (“AAI”). AAI purchased antiques
and collectible items for resale, accepted items on consignment, and sold items through various auctions and third party internet
websites.
On
August 13, 2010, we completed a reverse acquisition transaction through a share exchange with Pet Airways, Inc. (Florida) (“PAI”)
whereby we acquired 100% of the issued and outstanding capital stock of PAI in exchange for 25,000,000 shares of our common stock,
which constituted approximately 73% of our issued and outstanding capital stock on a post-acquisition basis as of and immediately
after the consummation of the acquisition. As a result of the acquisition, PAI became our wholly-owned subsidiary and their controlling
stockholders became our controlling stockholders. Also, upon completion of the acquisition, we changed our name from AAI to Pet
Airways, Inc. and commenced trading on the OTC QB under the symbol “PAWS”. PAI provided flight services for pet travel,
selling the services through a reservation system it had developed. In 2013, we discontinued the operations of PAI.
On
February 23, 2012, we acquired 100% of the issued and outstanding capital stock of Impact Social Networking, Inc. (“ISN”)
in exchange for 7,394,056 shares of our common stock. ISN owned a number of technology assets that had not reached technical feasibility
at the time of the acquisition. Following, the acquisition, we commenced a program of developing technologies for pet owners and
pet caregivers. In September 2012, we closed the social media application.
On
March 9, 2013, we entered into a Securities Exchange Agreement whereby we issued 80,000 shares of our Series B Preferred Stock
to the members of Advanced Access Pharmacy Services, LLC (“AAPS”) in exchange for 100% of the outstanding units
of limited liability company membership interests of AAPS. AAPS was created to exploit specific
niche opportunities in wholesale and retail pharmacies, with the intent to focus on workers’ compensation and in-office
physician pharmacy distribution as well as the limited purchase and collection of pharmaceutical and services related receivables.
We accelerated our efforts to pursue this line of business with our 2014 merger described below.
2014
Merger
On
December 31, 2013, we entered into a First Amended Securities Exchange Agreement (“SEA”) with Mesa Pharmacy, Inc.
(“Mesa”), a wholly-owned subsidiary of Pharmacy Development Corporation (“PDC”), to acquire all of Mesa.
On March 20, 2014, we replaced the SEA by entering into an Agreement and Plan of Merger (the “Merger”) with PDC whereby
we agreed to acquire all the issued and outstanding shares of PDC in exchange for 500,000 shares of our Series D Preferred Stock.
Each share of Series D preferred stock is convertible into 1,000 shares of our common stock. On
March 26, 2014, we changed our name to Praxsyn Corporation and on March 31, 2014, the Merger closed. Immediately subsequent
to this transaction, the PDC control group (which includes Mesa) owned approximately 40% of our issued and outstanding common
stock on a diluted basis. In addition, the Series D preferred shares are the only preferred shares with voting rights. With these
voting rights, the PDC control group controlled approximately 63% of our voting power on a diluted basis after the acquisition.
Products
We
offer a variety of product lines which cover, but are not limited to, pain management, erectile dysfunction and metabolic therapies.
The products, which are formulated to specific patient needs, are typically in the form of transdermal creams, patches and oral
capsules. The products are prepared in our Irvine, California facility, which is a licensed retail pharmacy, using FDA-approved
USP grade ingredients and are only available to patients with a prescription from a licensed healthcare practitioner. Following
is a description of key attributes or components of our product lines.
Pain
Medications
These
medications are customized to meet specific patient needs, and are non-narcotic and free from opioid analgesics and avoid many
side effects associated with narcotic and opioid based pain medications. The products are applied topically and are absorbed into
the blood stream using a transdermal vehicle, with patients benefiting from any of three categories of pain relief; neuropathic,
anti-inflammatory and circulatory. The transdermal delivery system also reduces or eliminates certain side effects which are often
associated with oral medications including such effects as drowsiness, gastrointestinal disorders, nausea, constipation, gerd,
and ulcers. The predominant therapeutic drug classes used are:
|
1. |
Non-Steroidal
Anti-Inflammatory Agents – used to treat pain and redness, swelling, and inflammation from medical conditions such as
arthritis, menstrual cramps and other types of short-term pain. They block the inflammatory cascade and cyclooxynenases by
inhibiting prostaglandin and thromboxane production and leads to a reduction in pain. |
|
|
|
|
2. |
Muscle
Relaxants/Anti-Spastic Agents – thought to work by decreasing excitatory neurotransmitter release. |
|
|
|
|
3. |
Corticosteroids
– interfere with the natural production of substances in the body that cause swelling, inflammation and pain. |
Erectile
Dysfunction Medications
These
medications are customized to meet specific patient needs by using natural alternative treatments such as:
|
1. |
Vitamins
– select agents relax and dilate blood vessels to enhance blood flow and promote erections. |
|
|
|
|
2. |
Anti-oxidants
– similar to vitamins, anti-oxidants act to support an erection by relaxing blood vessels. |
Metabolic
Medications
These
medications are customized to meet specific patient needs by using natural alternative treatments such as:
|
1. |
Vitamins
– studies show a positive correlation between vitamin supplementation and weight loss. The mechanism(s) of action are
unique to each compound, including increasing circulation, promoting DNA repair, maintaining the proper function of cells,
and enhancing carbohydrate, lipid, and protein metabolism. |
|
|
|
|
2. |
Anti-Oxidants
– these agents protect the body’s cells from being damaged by free radicals.
This leads to better functioning cells, which leads to better and more efficient
energy production. The end result is increased quality of metabolism, which helps
the body convert fats and sugars into energy. |
|
|
|
|
3. |
Amino
Acids – the building blocks of protein and muscle. Select amino acids such as methionine have been shown to alleviate
liver dysfunction, asthma, and improve wound healing. |
|
|
|
|
4. |
Fatty
Acids – important for cell membrane development and neurotransmitter synthesis. Certain fatty acids have the ability
to enhance athletic performance, reduce cholesterol, protect the liver, and lower blood pressure. |
Marketing
and Distribution
We
are a party to consulting agreements with a number of marketing consultants who market our products to licensed healthcare practitioners
who treat patients covered under a variety of workers’ compensation and Preferred Provider Organization (“PPO”)
insurance programs. While referrals from our marketing consultants are similar for our workers’ compensation and PPO programs,
each program has other features which are vastly different, as described below:
Workers’
Compensation – once a prescription is received, we verify the validity of the workers compensation claim for the patient
for whom the prescription was issued in the particular state of residence. We then invoice the patient’s insurance company
based on the applicable state’s approved fee schedules. The invoice takes the form of a lien against an ultimate workers
compensation award which is made once the workers’ compensation case reaches finalization, so that once an award has been
determined, our invoice will be negotiated and paid. This process may take as little as thirty days or as long as several years.
In a small percentage of cases, no award is made or our lien is dismissed and we receive no payment. During the time a workers’
compensation case is ongoing, we may have to attend legal hearings, file liens to securitize claims, negotiate before worker’s
compensation administrative judges, resolve liens with stipulations and orders for defendants to pay, and transmit demands to
settle liens filed with the adjuster or defense attorneys. A majority of our invoices are ultimately settled for a percentage
of the amount billed and we record our revenue at the estimated collection percentage.
PPO
– upon receiving a prescription under a particular insurance company’s PPO program, we determine the amount approved
for payment. We then decide whether we will fill the prescription and, if filled, the approved amount is invoiced. In some instances
we do the billing and collection and in other instances, these services are done by a third party billing company. Collections
are typically received within 30 to 60 days of invoicing and predominantly at the billed amount.
Industry/Competition
Pharmacy
compounding dates back to the early origins of pharmacy practice and over the last couple of decades has seen a dramatic increase,
most likely due to the perceived health benefits offered in this unique industry. Pain management, erectile dysfunction, metabolic
therapies, bio-identical hormone therapy, skin health, beauty and aging are just some of the areas for which compounding pharmacies
create products. We currently engage in a niche of the industry specializing in pain management, erectile dysfunction and metabolic
therapies. The larger box stores such as Rite Aid, CVS and Walgreens do not normally compound medications or fill prescriptions
for workers compensation patients. These stores often focus on the sundries as a profit base and are not considered competitors
in our specific niche. Our customized pain management creams are formulated in cooperation with the practitioner and pharmacist
in order to meet the specific pain needs of a patient. There are presently very few pharmacies that compound products to serve
workers’ compensation patients. This has been, and continues to be, a significant aspect of our business and is difficult
to service because of complex billing and collection issues as well as the lengthy period of time it takes to receive payment.
Notwithstanding the foregoing, there are many compounding pharmacies in existence, some with significantly greater resources than
we have. Our products are not proprietary and can be formulated by any of our competitors. We compete mainly on the quality and
consistency of our products and on service to the licensed healthcare practitioners who treat patients.
Regulation
Our
industry is subject to various levels of regulation including both the state and Federal levels. Pharmacies like ours that compound
products for the treatment of a patient’s specific needs, known as traditional compounding, are regulated by each state
Board of Pharmacy in which we are licensed. While quality standards have been created by Pharmacy Compounding Accreditation Board
(the “PCAB”), accreditation is not mandatory.
We
are not subject to oversight by the U.S. Food and Drug Administration. In November 2013, the Drug Quality and Security Act was
enacted. This legislation clarified the conditions under which certain compounded drug products would be exempted from FDA oversight.
The Act contains a number of clarifications for exemption including instances where a given patient’s prescribing practitioner
determines the product makes a “significant difference” for the patient.
Intellectual
Property
We
have no intellectual property.
Employees
As
of the date of this report, we employ 66 full-time and 9 part-time employees. We are not a party to any collective bargaining
agreements and we believe that our relationship with our employees is good.
ITEM
1A. RISK FACTORS.
We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide
the information under this item.
ITEM
1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM
2. DESCRIPTION OF PROPERTY.
We
do not own any real property. We lease 7,343 square feet of space in Irvine, California which includes our pharmacy operations
and our executive/administrative offices, and our lease expires September 30, 2016. Monthly payments under the lease are currently
$9,127.
ITEM
3. LEGAL PROCEEDINGS.
From
time to time, we are involved in legal proceedings, claims, and litigation that occur in connection with our business. We routinely
assess our liabilities and contingencies in connection with these matters based upon the latest available information and, when
necessary, we seek input from our third-party advisors when making these assessments. Described below are material pending legal
proceedings (other than ordinary routine litigation incidental to our business), material proceedings known to be contemplated
by governmental authorities, other proceedings arising under federal, state, or local environmental laws and regulations (including
governmental proceedings involving potential fines, penalties, or other monetary sanctions in excess of $10,000) and such other
pending matters that we determine to be appropriate.
Nokley
Group LLC
In
February 2014, we were served with a complaint from Nokley Group LLC (“Nokley”) for breach of contract under a Fee
and First Right of Refusal Agreement dated May 25, 2012 between our company and Nokley. In the complaint, which was filed in Nevada,
Nokley stated, among other things, that we sold certain of our accounts receivable to factoring organizations without offering
Nokley first right of refusal which they allege was required under the agreement. While we estimate we would have cross-complaints
against Nokley that would significantly mitigate any potential damages, we first filed a motion to dismiss based on improper venue.
On July 31, 2014, our Company and Nokley agreed to dismiss the action without prejudice, and to have each party to bear its own
attorney fees and costs.
The
Company estimates that the potential range of exposure for this matter, if refiled in a proper venue, is $17,000 to $30,000. As
of December 31, 2014, we have accrued the minimum amount of potential exposure under our estimation that a loss would be probable.
MedCapGroup
LLC
In
May 2014, we were served with a complaint from MedCapGroup LLC (“MedCap”) for breach of contract, breach of covenant
of good faith and fair dealing, intentional misrepresentation, fraud in the inducement, and deceptive trade practices under a
November 2012 Healthcare Accounts Receivable Purchase Agreement between our company and MedCap. MedCap alleged in its complaint
that because we sell our accounts receivable based on dates of service, and not by patient, that only the original purchaser of
a patient’s claims controls all payments and settlement negotiations with the insurer. As a result, MedCap alleged that
we had misrepresented the collectability of certain accounts receivable they had purchased from us and that they had therefore
been damaged. While we estimate we have significant defenses against MedCap’s complaint, we first filed a motion to dismiss
based on improper venue. On July 30, 2014, our motion to dismiss was granted.
In
November 2014, MedCap filed a complaint in the US District Court of Nevada similar to that discussed above. In December 2014,
we counterclaimed against MedCap for intentional and negligent interference of contract based on their agency relationship with
David Brown, the broker/collector retained by MedCap to collect on the accounts receivable they purchased. In addition, third
party complaint along with our answer to bring Mr. Brown into this litigation. We believe we have significant defenses to this
complaint and intend to defend it vigorously.
Andrew
Warner
On
September 16, 2014, a former officer of the Company, Andrew Warner, filed a lawsuit against us in the Superior Court of California,
Santa Clara (Case No. 114CV270653). In the lawsuit, Mr. Warner is alleging that we breached an oral contract for management services
performed by Mr. Warner, by not paying him certain monies for those services. In the complaint, he is asking for damages of approximately
$300,000. We believe that this action is without merit, and will defend it vigorously.
Trestles
Pain Specialists
On
March 11, 2015, we filed a lawsuit in the Superior Court of California, Orange County (Case No. 30-2015-00776389) against Trestles
Pain Specialists, LLC (“TPS”), John Garbino and David Fish. We first allege that TPS breached the terms of the consulting
services agreement due to lack of performance by TPS of the agreed upon services. Second, we allege that we were fraudulently
induced into entering into the consulting services agreement due to the misrepresentation made by Mr. Garbino that Mr. Fish, who
has some unsettling issues that were of concern to us, was not an owner of TPS. Had we known that Mr. Fish did have a stake in
TPS, we would not have entered into the consulting services agreement. We allege in the complaint that TPS, Mr. Garbino, and Mr.
Fish owe us damages to us in excess of $1,500,000. In addition we are seeking rescission of the consulting services agreement
so that all moneys paid would be refunded to us.
Judgments
and Orders
In
prior years, a number of judgments and orders were obtained against Pet Airways, Inc. as detailed below. In connection with the
2014 Merger discussed above, two former officers of our Company agreed to purchase our interest in Pet Airways which was meant
to relieve us of the Pet Airways debts and judgments. As such, we believe that any obligations of Pet Airways rests with the two
former officers of our Company and not with us. Notwithstanding the foregoing, we have included certain amounts in our balance
sheets in the accompanying consolidated financial statements in the category Liabilities of Discontinued Operations in connection
with these matters.
Sky
Way Enterprises
In
April 2012, a judgment was entered against Pet Airways in Circuit Court in and for Palm Beach County, Florida by Sky Way Enterprises,
Inc. in the sum of $187,827 for services rendered, damages, including costs, statutory interest and attorneys’ fees. We
have recorded a liability of $198,500 at December 31, 2014 in connection with this matter.
Suburban
Air Freight
On
March 4, 2013, a judgment was entered against Pet Airways in District Court of Douglas County, Nebraska by Suburban Air Freight
in the sum of $87,491 for services rendered, including statutory interest and attorneys’ fees. In August 2014, Suburban
moved to enforce the judgment against Praxsyn in Orange County, California and in November 2014, the Orange County court vacated
Suburban’s motion to enforce judgment as it did not arise in any transaction with Praxsyn. We have recorded a liability
of $90,532 at December 31, 2014 in connection with this matter.
Alyce
Tognotti
On
March 6, 2013, an order was issued by the labor commissioner of the State of California for Pet Airways, Inc., to pay a former
employee Alyce Tognotti wages and penalties in the sum of $17,611 for services rendered, including penalties, statutory interest
and liquidated damages. We have recorded a liability of $18,771 at December 31, 2014 in connection with this matter.
AFCO
Cargo
On
May 31, 2013, a motion for final judgment was filed against our subsidiary, Pet Airways, Inc., in Circuit Court in and for Broward
County, Florida by AFCO Cargo BWI, LLC in the sum of $31,120 for services rendered, including statutory interest and attorneys’
fees. We have recorded a liability of $32,331 at December 31, 2014 in connection with this matter.
ITEM
4. MINE SAFETY DISCLOSURES.
Not
applicable.
PART
II
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our
stock is currently quoted under the symbol “PXYN” on the OTC QB for trading. The OTC QB market tier of the OTC market
helps investors identify companies that are current in their reporting obligations with the Securities and Exchange Commission
(the “SEC”). OTC QB securities are quoted on OTC Markets Group’s quotation and trading system. Our stock previously
traded under the symbol “PAWS”. The following table sets forth, for the calendar quarters indicated, the high and
low bid prices of our common stock. These quotations reflect inter-dealer prices, without mark-up, mark-down or commission, and
may not represent actual transactions.
YEAR
ENDED DECEMBER 31, 2014
QUARTER
ENDED | |
HIGH | | |
LOW | |
March 31, 2014 | |
$ | 0.20 | | |
$ | 0.01 | |
June 30, 2014 | |
$ | 0.14 | | |
$ | 0.05 | |
September 30, 2014 | |
$ | 0.10 | | |
$ | 0.04 | |
December 31, 2014 | |
$ | 0.08 | | |
$ | 0.03 | |
YEAR
ENDED DECEMBER 31, 2013
QUARTER
ENDED | |
HIGH | | |
LOW | |
March 31, 2013 | |
$ | 0.08 | | |
$ | 0.00 | |
June 30, 2013 | |
$ | 0.08 | | |
$ | 0.02 | |
September 30, 2013 | |
$ | 0.13 | | |
$ | 0.01 | |
December 31, 2013 | |
$ | 0.04 | | |
$ | 0.01 | |
On
April 10, 2015, the closing per share price for our common stock was $0.04.
Holders
of Common Stock
As
of April 10, 2015, we had approximately 183 record holders of our common stock including one street name holder Cede & Co.
On October 9, 2014 we mailed a notice to our shareholders notifying them of our intention to change our state of incorporation
from Illinois to Nevada. According to the records from that mailing, there were 1,711 shareholders comprising the Cede & Co.
street name holdings, which number changes from day to day based on market activity.
Dividends
We
have never paid dividends on our stock and have no plans to pay dividends in the near future. We intend to reinvest earnings,
when and if obtained, in the continued development and operation of our business. We cannot assure you that we will ever pay dividends.
Whether we pay any cash dividends in the future will depend on our financial condition, results of operations and other factors
our Board of Directors will consider.
Securities
Authorized for Issuance under Equity Compensation Plans
The
Company has a Stock Incentive Plan (the “Plan”). Under the Plan, at December 31, 2014 and 2013, the Company had 4,000,000
shares reserved for the issuance of stock options to employees, officers, directors and outside advisors. Under the Plan, the
options may be granted to purchase shares of the Company’s common equity at fair market value, as determined by the Company’s
Board of Directors, at the date of grant.
Plan
Category | |
Number
of securities to be issued upon
exercise of
outstanding options, warrants and rights
(a) | | |
Weighted-average
exercise price of
outstanding options, warrants and rights
(b) | | |
Number
of securities remaining
available for
future issuance under equity compensation plans
(excluding securities
reflected in column(a))
(c) | |
Equity compensation plans not approved by shareholders | |
| 367,000 | | |
$ | 0.16 | | |
| 3,633,000 | |
Sales
of Unregistered Securities
There
were no unregistered sales of securities during the period covered by this report that were not previously reported in a Quarterly
Report on Form 10-Q or a Current Report on Form 8-K.
ITEM
6. SELECTED FINANCIAL DATA.
We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide
the information under this item.
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward
Looking Statements
Our
Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are
forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international,
national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth;
our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and
introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity;
competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes
in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability
to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange
Commission.
Although
the forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based
on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks
and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking
statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other
reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition,
and results of operations and prospects.
Summary
of Business
We
are a health care company dedicated to providing medical practitioners with medications and services for their patients. Through
our retail pharmacy facility in Irvine, California, we currently formulate healthcare practitioner-prescribed medications to serve
patients who experience chronic pain. Our focus is on non-narcotic, and non-habit forming medications using therapeutic and preventative
agents for pain management. In addition, we prepare innovative products that address erectile dysfunction and metabolic issues,
and other ancillary products.
Management’s
Plan of Operations
In
2013, we generated pretax income of approximately $770,000. Effective March 31, 2014, we completed the Merger with PDC. While
we recorded a pretax loss for 2014 of $12,568,463, we also took advantage of additional production capacity to increase our net
revenues and improve our operating results as the year went along. Our 2014 operating results can be summarized:
| |
Twelve
Months Ended
12/31/14 | |
| |
| |
Net revenues | |
$ | 66,598,896 | |
Pretax income (loss): | |
| | |
Amount prior to one-time charges | |
$ | 5,934,282 | |
One-time stock-based marketing expense | |
| (11,391,301 | ) |
One-time warrant modification expense | |
| (7,111,444 | ) |
Total pretax income (loss) | |
$ | (12,568,463 | ) |
In
addition to the two one-time expenses shown above, there are two significant influences to the 2014 operating results. First,
our revenue recognition, as discussed in Note 2 to the accompanying consolidated financial statements, is based on our estimate
of the net realizable value of our customer billings. We invoiced most of our customers, those which are insurance companies for
workers compensation cases, in accordance with the fees permitted according to the State of California fee schedule. This is our
gross billing. Given the nature of our industry and the reimbursement environment in which we operate, our estimate of the net
realizable value of our billings is often less than the gross billing we are allowed to charge. We have recorded our revenue based
on historical collection trends. Second, we have had to finance our operations by selling our accounts receivable (recorded at
net realizable value) to a number of factors. The cost of factoring, which we record as interest expense, can be quite high –
anywhere from 70% to 75% of the gross accounts receivable billing.
These
two influences have a material adverse impact on our operating results, but also offer a major opportunity for profit growth as
we move forward. In August 2014, we formed a subsidiary named NexGen Med Solutions, LLC, which we expect will allow us to expand
our accounts receivable collection effort, both internally and externally. We believe this will allow us to improve our collections,
increase the net realizable value of our gross billing revenues, and reduce our dependency on factoring. In addition we continue
to seek more conventional financing which will allow us to move away from factoring and reduce our interest expense. Finally,
we continue to seek new markets for our products which will diversify our business, increase profitability and improve shareholder
value. While there is no certainty that we will be able to achieve these goals, Management is hopeful we will be successful.
Critical
Accounting Policies
Our
consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States,
which requires us to make estimates and assumptions in certain circumstances that affect amounts reported. In preparing these
consolidated financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration
to materiality. We believe that of our significant accounting policies (more fully described in notes to the consolidated financial
statements), as described below are particularly important to the portrayal of our results of operations and financial position
and may require the application of a higher level of judgment by our management, and as a result are subject to an inherent degree
of uncertainty.
Use
of Estimates
Financial
statements prepared in accordance with accounting principles generally accepted in the United States require management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. The most significant estimates made by management are
revenue recognition along with the related allowance for doubtful accounts and contractual receivables, the allocation of accounts
receivable between current and long-term, the value of stock-based compensation awards, the amount of potential legal settlements
and contingencies, the fair market value of assets and liabilities of Praxsyn and the realization of deferred tax assets. Actual
results could differ from those estimates. Management performs a periodic retrospective review of estimates and modifies assumptions
as deemed appropriate.
Revenue
Recognition
We
sell compounding pharmaceutical products directly through our pharmacy and record the associated revenues using the net method,
as required under ASC 954-605-25, Health Care Entities – Revenue Recognition. Compounding prescription revenue is recorded
at established billing rates less estimated contractual adjustments with each respective insurance carrier. Net revenues represent
the amount each respective insurance company and the California Workers Compensation Fund are expected to pay us. We recognize
revenue when persuasive evidence of an arrangement exists, product delivery has occurred, the sales price is fixed or determinable,
and collection is probable. Our pharmacy revenues are recognized when both the compounding prescriptions and customer shipment
services are performed.
Stock
Based Compensation
We
account for our share-based compensation in accordance with ASC 718-20, Stock-based Compensation. Stock-based compensation cost
is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite
vesting period.
We
have issued warrants exercisable into our common stock and preferred stock as compensation to debt holders. The fair value of
each warrant is estimated on the date of grant using the Black-Scholes pricing model. Assumptions are determined at the time of
grant. No warrants were granted during the years ended December 31, 2014 and 2013.
The
assumptions used in the Black Scholes models referred to above are based upon the following data: (1) the expected life of the
warrant is estimated by considering the contractual term of the warrant. (2) The expected stock price volatility of the underlying
shares over the expected term of the warrant is based upon historical share price data. (3) The risk free interest rate is based
on published U.S. Treasury Department interest rates for the expected terms of the underlying warrants. (4) Expected dividends
are based on historical dividend data and expected future dividend activity. (5) The expected forfeiture rate is based on historical
forfeiture activity and assumptions regarding future forfeitures based on the composition of current grantees.
Accruals
for Contingent Liabilities
We
make estimates of liabilities that arise from various contingencies for which values are not fully known at the date of the accrual
or during the periodic financial planning and analysis cycle. These contingencies may include, but are not limited, to accruals
for reserves for costs and awards involving legal settlements, cost associated with planned changes in workforce or operating
levels, costs associated with reduced flight services from Suburban, the building out of leased premises, vacating leased premises
or abandoning leased equipment, and costs involved with the discontinuance of a segment of a business. Events may occur that are
resolved over a period of time or on a specific future date. Management makes estimates using the facts available of the probability
of the outcomes and range of cost, if measurable, of these occurrences and charges them to expense in the appropriate periods.
If the ultimate resolution of any event is different than management’s estimate caused by a change in facts or material
operating assumptions, compensating entries to earnings may be required.
Results
of Operations
Comparison
of the Year Ended December 31, 2014 to the Year Ended December 31, 2013
Net
Revenues and Cost of Net Revenues
Net
revenues for 2014 were $66,598,896 compared to $6,988,536 for the comparable period in 2013. The increase of $59.6 million was
primarily attributable to a number of factors. With additional production capacity and, with increased marketing efforts, the
number of prescriptions we filled grew substantially. Another factor in the increased net revenues was a reformulation of our
compounding product which comprises the primary source of our revenues. This resulted in an approximate tripling of our per case
gross revenues. These factors were somewhat offset by a decrease in our revenue recognition percentage from 46% of gross billings
in 2013 to 43% in 2014, which was based on our analysis of historical collections. For the year ended December 31, 2014, our cost
of net revenues was $3,586,164 (5.4% of net revenues) compared to $694,180 (9.9% of net revenues) for the same period in 2013.
The decrease in cost of sales as a percentage of revenue from 2013 to 2014 was mainly attributable to the reformulation of our
compounding product, somewhat offset by a reduction in our revenue recognition percentage. In addition, in the 2013 period, there
was a higher percentage of labor in the cost of net revenues due to the fixed nature of certain of those costs along with a substantially
lower volume.
Selling
and Marketing Expense
Our
selling and marketing expense for year ended December 31, 2014 was $33,761,058, $11,391,301 of which was stock-based. For the
comparable period in 2013, selling and marketing expense was $1,790,841, none of which was stock-based. The stock-based expense
results mainly from the issuance of Series D Preferred shares to TPS under our January 23, 2014 agreement with them. See Note
1 to the accompanying consolidated financial statements. The remaining increase of $21 million results from increased qualified
prescription referral fees, mainly payable to TPS, on significantly higher net revenues.
General
and Administrative Expense
Our
general and administrative expense for the year ended December 31, 2014 was $3,185,628, $102,277 of which was stock-based. For
the comparable period in 2013, general and administrative expense was $1,304,002, none of which was stock-based. The overall increase
of $1,881,626 results from additional costs for in-house personnel, consulting fees and other general overhead items needed to
support the significant increase in revenue.
Interest
Expense
Interest
expense for 2014 was $31,732,511. $29,694,558 of this amount was interest on factored accounts receivable and other factor-related
interest which resulted from net revenues for the year. In addition, 2014 included debt discount amortization of $733,220 and
other interest of $1,304,733. For the comparable period of 2013, interest expense was $2,390,931, which consisted of factoring-related
interest of $900,246, debt discount amortization of $154,176 and other interest of $1,336,509. Factoring-related interest expense
has increased significantly as a result of increased net revenues and factoring of the majority of the resulting accounts receivable.
Warrant
Modification Expense
On
March 17, 2014, all of the outstanding warrants of the PDC control group were exchanged for PDC common stock. The Company converted
all common and preferred warrants, whether expired or not, into common stock without consideration for the strike price upon the
terms and provisions set forth in the warrant agreements. The conversion resulted in an issuance of 155,823 Series D Preferred
shares. This conversion was treated as a modification of the exercise price of the warrants. Accordingly, the warrants were revalued
on the conversion date using the Black-Scholes option pricing model, resulting in
a loss of $7,111,444 being recorded. Subsequent to the March 17, 2014 conversion, no warrants for the PDC control group remained
outstanding.
Gain
on Extinguishment of Debt
During
the year ended December 31, 2014, the gain on extinguishment of debt totaled $225,193. For further detail, see Note 14 to accompanying
consolidated financial statements. There was no gain or loss on extinguishment of debt in 2013.
Liquidity
and Capital Resources
The
report of our independent registered public accounting firm on the consolidated financial statements for the year ended December
31, 2014 contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern as a
result of recurring losses and negative cash flows. The consolidated financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that would
be necessary if we are unable to continue as a going concern.
As
of December 31, 2014, our principal source of liquidity is from the factoring of accounts receivable that result from the sale
of our prescription products. During 2014 and 2013, we received proceeds of $26,063,518 and $1,358,759, respectively, from factoring.
At December 31, 2014, we had cash of $1,222,084 and a working capital deficit of nearly $3.3 million. This compares to the cash
of $37,494 and a working capital deficit of $5.9 million as of December 31, 2013. The improvement in the working capital deficit
comes despite the assumption of nearly $2.2 million of net current liabilities in the merger discussed in Note 1 to the accompanying
consolidated financial statements.
Financings
We
do not currently maintain a line of credit or term loan with any commercial bank or other financial institution. To date in 2014,
we have factored nearly all of our receivables under a non-recourse agreements. In prior years, we issued a number of notes payable
and used the proceeds to fund operations. While we have recently established our own collections company, we will need to complete
additional financing transactions in order to transition from factoring to in-house collections. Financing transactions, if any,
may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even if we
are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to generate sufficient
revenue, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if the Company
issues additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may
have rights, preferences or privileges senior to those of existing holders of our capital stock. If additional financing is not
available or is not available on acceptable terms, we may have to continue factoring our receivables.
Cash
Flows
The
following table sets forth our cash flows for the years ended December 31:
| |
2014 | | |
2013 | | |
Change | |
Operating activities | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | (12,354,399 | ) | |
$ | 230,061 | | |
$ | (12,584,460 | ) |
Change in non-cash items | |
| 48,560,584 | | |
| 1,895,944 | | |
| 46,664,640 | |
Change in working capital | |
| (59,923,558 | ) | |
| (3,858,104 | ) | |
| (56,065,454 | ) |
Total | |
| (23,717,373 | ) | |
| (1,732,099 | ) | |
| (21,985,274 | ) |
Investing activities | |
| 417,309 | | |
| (4,000 | ) | |
| 421,309 | |
Financing activities | |
| 24,484,654 | | |
| 1,448,042 | | |
| 23,036,612 | |
Total | |
$ | 1,184,590 | | |
$ | (288,057 | ) | |
$ | 1,472,647 | |
Operating
Activities
The
change in non-cash items primarily includes warrant modification expense, gain on extinguishment of debt, stock issued for services
rendered, loss on accounts receivables sold to factor, depreciation and amortization, loss on disposal of property and equipment,
amortization of debt discount, amortization of debt issuance costs, and deferred tax provision. The change in working capital
is mainly related to increases in accounts receivable partially offset by an increase in associated accrued marketing expense.
Investing
Activities
Cash
used in investing activities consists of capital expenditures, along with cash acquired in connection with the merger.
Financing
Activities
Cash
provided from the sale of accounts receivable to factor was $26,063,518 and $1,358,759 in 2014 and 2013, respectively. In addition,
the 2014 period includes borrowings from related parties offset by repayment of notes payable (to both related and non-related
parties) and the repurchase of our stock. The 2013 period includes borrowings from related parties and repayment of non-related
party notes payable.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital
resources that is material to investors. See also Note 3 to the financial statements.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide
the information under this item.
ITEM
8. CONSOLIDATED FINANCIAL STATEMENTS.
The
audited consolidated financial statements of the Company, the Notes thereto and the Report of Independent Registered Public Accounting
Firm thereon required by this item appears in this report on the pages indicated in the following index:
Report
of Independent Registered Public Accounting Firm
The
Board of Directors and Shareholders
Praxsyn
Corporation and Subsidiaries
We
have audited the accompanying consolidated balance sheets of Praxsyn Corporation and subsidiaries (formerly The Paws Pet Company)
(collectively the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations,
stockholders’ deficit, and cash flows for the years then ended. These consolidated financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based
on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement. The Company is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Praxsyn Corporation and subsidiaries as of December 31, 2014 and 2013, and the results of their operations
and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States
of America.
The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed
in Note 2 of the consolidated financial statements, the Company has incurred losses and used cash in operating activities. These
factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with
respect to these matters are discussed in Note 2. The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
dbbmckennon |
|
April
15, 2015 |
|
Newport
Beach, California |
|
PRAXSYN
CORPORATION
(FORMERLY
THE PAWS PET COMPANY)
CONSOLIDATED
BALANCE SHEETS
| |
December
31, 2014 | | |
December
31, 2013 | |
| |
| | |
| |
Assets | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 1,222,084 | | |
$ | 37,494 | |
Accounts receivable, net of allowance | |
| 10,134,743 | | |
| 3,564,770 | |
Inventories | |
| 201,639 | | |
| 13,441 | |
Other current assets | |
| 15,981 | | |
| 20,230 | |
Total current assets | |
| 11,574,447 | | |
| 3,635,935 | |
Property and equipment, net | |
| 79,543 | | |
| 27,782 | |
Accounts receivable, long-term | |
| 4,139,543 | | |
| 983,440 | |
Debt issuance cost, net | |
| — | | |
| 24,361 | |
Other assets | |
| 7,549 | | |
| 5,879 | |
Deferred tax asset | |
| 902,941 | | |
| 248,455 | |
Total assets | |
$ | 16,704,023 | | |
$ | 4,925,852 | |
| |
| | | |
| | |
Liabilities and Shareholders’ Equity (Deficit) | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 482,648 | | |
$ | 191,002 | |
Other accrued liabilities | |
| 1,088,299 | | |
| 187,502 | |
Accrued interest | |
| 1,573,467 | | |
| 1,011,414 | |
Accrued marketing | |
| 5,896,197 | | |
| 1,411,493 | |
Notes payable to related parties | |
| 199,067 | | |
| 406,664 | |
Notes payable, current portion | |
| 3,676,492 | | |
| 5,639,594 | |
Settlement liabilities | |
| 70,000 | | |
| 248,000 | |
Liabilities of discontinued operations | |
| 961,831 | | |
| — | |
Deferred tax liability | |
| 897,433 | | |
| 459,411 | |
Total current liabilities | |
| 14,845,434 | | |
| 9,555,080 | |
Notes payable, non-current | |
| 226,755 | | |
| — | |
Total liabilities | |
| 15,072,189 | | |
| 9,555,080 | |
| |
| | | |
| | |
Commitments and contingencies (Note 10) | |
| | | |
| | |
| |
| | | |
| | |
Shareholders’ equity (deficit): | |
| | | |
| | |
Preferred stock, no par value, 10,000,000 shares authorized: | |
| | | |
| | |
Series D – 332,336 and 174,184 issued and outstanding at December 31,
2014 and 2013, respectively; liquidation preference $13,293,440 and $6,967,360 | |
| — | | |
| — | |
Series B – 63,838 and none issued and outstanding at December 31, 2014
and 2013, respectively; liquidation preference $1,915,140 and $0 | |
| — | | |
| — | |
Series C – 20 and none issued and outstanding at December 31, 2014
and 2013, respectively; liquidation preference $2,000 and $0 | |
| — | | |
| — | |
Series A – none issued and outstanding at December 31, 2014 and 2013,
respectively; liquidation preference $0 and $0 | |
| — | | |
| — | |
Common stock, no par value: 1,400,000,000 shares authorized, 451,889,263
and no shares issued and outstanding at December 31, 2014 and 2013, respectively | |
| — | | |
| — | |
Additional paid-in capital | |
| 54,239,832 | | |
| 35,624,371 | |
Accumulated deficit | |
| (52,407,998 | ) | |
| (40,053,599 | ) |
Treasury stock at cost, 389,623 shares at December
31, 2014 and 2013, respectively | |
| (200,000 | ) | |
| (200,000 | ) |
Total shareholders’ equity (deficit) | |
| 1,631,834 | | |
| (4,629,228 | ) |
Total liabilities and shareholders’ equity (deficit) | |
$ | 16,704,023 | | |
$ | 4,925,852 | |
See
accompanying Notes to Consolidated Financial Statements.
PRAXSYN
CORPORATION
(FORMERLY
THE PAWS PET COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS
| |
Year Ended December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Net revenues | |
$ | 66,598,896 | | |
$ | 6,988,536 | |
| |
| | | |
| | |
Cost of net revenues | |
| 3,586,164 | | |
| 694,180 | |
| |
| | | |
| | |
Gross profit | |
| 63,012,732 | | |
| 6,294,356 | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
Selling and marketing – stock-based | |
| 11,391,301 | | |
| — | |
Selling and marketing – non stock-based | |
| 22,369,757 | | |
| 1,790,841 | |
Total selling and marketing | |
| 33,761,058 | | |
| 1,790,841 | |
General and administrative – stock-based | |
| 102,277 | | |
| — | |
General and administrative – non stock-based | |
| 3,083,351 | | |
| 1,304,002 | |
Total general and administrative | |
| 3,185,628 | | |
| 1,304,002 | |
Total operating expenses | |
| 36,946,686 | | |
| 3,094,843 | |
Operating income | |
| 26,066,046 | | |
| 3,199,513 | |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
Interest expense | |
| (31,732,511 | ) | |
| (2,390,931 | ) |
Warrant modification expense | |
| (7,111,444 | ) | |
| — | |
Gain on extinguishment of debt | |
| 225,193 | | |
| — | |
Other, net | |
| (15,747 | ) | |
| (38,359 | ) |
Other income (expense), net | |
| (38,634,509 | ) | |
| (2,429,290 | ) |
| |
| | | |
| | |
Income (loss) before income taxes | |
| (12,568,463 | ) | |
| 770,223 | |
Provision (benefit) for income taxes | |
| (214,064 | ) | |
| 540,162 | |
| |
| | | |
| | |
Net income (loss) | |
$ | (12,354,399 | ) | |
$ | 230,061 | |
| |
| | | |
| | |
Income (loss) per common share - basic | |
$ | (0.05 | ) | |
$ | 0.00 | |
Income (loss) per common share - diluted | |
$ | (0.05 | ) | |
$ | 0.00 | |
| |
| | | |
| | |
Weighted average number of common shares used in basic calculations | |
| 268,948,521 | | |
| — | |
Weighted average number of common shares used in diluted calculations | |
| 268,948,521 | | |
| 175,729,583 | |
See accompanying Notes
to Consolidated Financial Statements.
PRAXSYN
CORPORATION
(FORMERLY
THE PAWS PET COMPANY)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
| |
Series
D
Preferred Stock | | |
Series
B
Preferred Stock | | |
Series
C
Preferred Stock | | |
Series
A
Preferred Stock | | |
Common
Stock | | |
Additional
Paid-In | | |
Accumulated | | |
Related
Party | | |
Treasury | | |
Total
Stockholders’
Equity | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Receivable | | |
Stock | | |
(Deficit) | |
Balance — December 31, 2012 | |
| 172,510 | | |
$ | — | | |
| — | | |
$ | — | | |
| — | | |
$ | — | | |
| — | | |
$ | — | | |
| — | | |
$ | — | | |
$ | 35,459,066 | | |
$ | (40,283,660 | ) | |
$ | (108,243 | ) | |
$ | — | | |
$ | (4,932,837 | ) |
Stock issued to settle debt | |
| 2,489 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 273,548 | | |
| — | | |
| — | | |
| — | | |
| 273,548 | |
Stock exchanged for note payable | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (200,000 | ) | |
| (200,000 | ) |
Stock exchanged for related party receivable | |
| (815 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (108,243 | ) | |
| — | | |
| 108,243 | | |
| — | | |
| — | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 230,061 | | |
| — | | |
| — | | |
| 230,061 | |
Balance — December 31, 2013 | |
| 174,184 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 35,624,371 | | |
| (40,053,599 | ) | |
| — | | |
| (200,000 | ) | |
| (4,629,228 | ) |
Shares retained in merger and net liabilities assumed | |
| — | | |
| — | | |
| 72,415 | | |
| — | | |
| 1,245 | | |
| — | | |
| — | | |
| — | | |
| 287,582,556 | | |
| — | | |
| (2,185,778 | ) | |
| — | | |
| — | | |
| — | | |
| (2,185,778 | ) |
Repurchase and cancellation of stock | |
| (7,549 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (506,000 | ) | |
| — | | |
| — | | |
| — | | |
| (506,000 | ) |
Stock issued for services: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
TPS | |
| 166,664 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 10,391,301 | | |
| — | | |
| — | | |
| — | | |
| 10,391,301 | |
Other | |
| 8,279 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,100,000 | | |
| — | | |
| — | | |
| — | | |
| 1,100,000 | |
Total | |
| 174,943 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 11,491,301 | | |
| — | | |
| — | | |
| — | | |
| 11,491,301 | |
Stock issued to cancel warrants | |
| 155,823 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 7,111,444 | | |
| — | | |
| — | | |
| — | | |
| 7,111,444 | |
Stock issued to settle debt | |
| 2,599 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 53,036,707 | | |
| — | | |
| 2,064,757 | | |
| — | | |
| — | | |
| — | | |
| 2,064,757 | |
Beneficial conversion feature | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 637,460 | | |
| — | | |
| — | | |
| — | | |
| 637,460 | |
Series D Preferred stock conversions | |
| (1,000 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,000,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Series B Preferred stock conversions | |
| — | | |
| — | | |
| (8,577 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 85,770,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Series C Preferred stock conversions | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,225 | ) | |
| — | | |
| — | | |
| — | | |
| 24,500,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Stock options expense | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,277 | | |
| — | | |
| — | | |
| — | | |
| 2,277 | |
Cancellation of TPS Series D shares | |
| (166,664 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (12,354,399 | ) | |
| — | | |
| — | | |
| (12,354,399 | ) |
Balance — December
31, 2014 | |
| 332,336 | | |
$ | — | | |
| 63,838 | | |
$ | — | | |
| 20 | | |
$ | — | | |
| — | | |
$ | — | | |
| 451,889,263 | | |
$ | — | | |
$ | 54,239,832 | | |
$ | (52,407,998 | ) | |
$ | — | | |
$ | (200,000 | ) | |
$ | 1,631,834 | |
See
accompanying Notes to Consolidated Financial Statements.
PRAXSYN
CORPORATION
(FORMERLY
THE PAWS PET COMPANY)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
| |
Year
Ended December 31, | |
| |
2014 | | |
2013 | |
Cash flows from operating activities: | |
| | | |
| | |
Net income (loss) | |
$ | (12,354,399 | ) | |
$ | 230,061 | |
Adjustments to reconcile net income (loss) to net cash used in operating
activities: | |
| | | |
| | |
Warrant modification expense | |
| 7,111,444 | | |
| — | |
Gain on extinguishment of debt | |
| (225,193 | ) | |
| — | |
Loss on exchange and conversion of notes payable | |
| — | | |
| 247,096 | |
Loss from derivative accounting included in other expense | |
| 17,347 | | |
| — | |
Stock issued for services rendered | |
| 11,491,301 | | |
| — | |
Loss on accounts receivables sold to factor treated as interest expense | |
| 29,598,765 | | |
| 873,201 | |
Depreciation and amortization | |
| 15,942 | | |
| 9,110 | |
Loss on disposal of property and equipment | |
| 5,184 | | |
| — | |
Amortization of debt discount | |
| 733,220 | | |
| 154,176 | |
Amortization of debt issuance costs | |
| 24,361 | | |
| 73,799 | |
Stock option expense | |
| 2,277 | | |
| — | |
Deferred tax provision (benefit) | |
| (214,064 | ) | |
| 538,562 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (65,388,360 | ) | |
| (6,171,378 | ) |
Inventories | |
| (188,198 | ) | |
| 2,597 | |
Other current assets | |
| 2,580 | | |
| 59,880 | |
Accounts payable | |
| (59,166 | ) | |
| 1,448,959 | |
Accrued liabilities | |
| 319,584 | | |
| 239,374 | |
Accrued interest | |
| 1,075,298 | | |
| 570,464 | |
Accrued marketing | |
| 4,484,704 | | |
| — | |
Settlement liabilities | |
| (170,000 | ) | |
| (8,000 | ) |
Net cash used in operating activities | |
| (23,717,373 | ) | |
| (1,732,099 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Capital expenditures | |
| (67,703 | ) | |
| (4,000 | ) |
Cash acquired in connection with reverse merger | |
| 485,012 | | |
| — | |
Net cash provided by (used in) investing activities | |
| 417,309 | | |
| (4,000 | ) |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from sale of accounts receivable to factor | |
| 26,063,518 | | |
| 1,358,759 | |
Repurchase and cancellation of stock | |
| (506,000 | ) | |
| — | |
Repayment of notes payable | |
| (812,867 | ) | |
| (14,881 | ) |
Borrowings from related parties | |
| 246,767 | | |
| 104,164 | |
Repayments to related parties | |
| (506,764 | ) | |
| — | |
Net cash provided by financing activities | |
| 24,484,654 | | |
| 1,448,042 | |
| |
| | | |
| | |
Increase (decrease) in cash and cash equivalents | |
| 1,184,590 | | |
| (288,057 | ) |
Cash and cash equivalents at beginning of year | |
| 37,494 | | |
| 325,551 | |
Cash and cash equivalents at end of year | |
$ | 1,222,084 | | |
$ | 37,494 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information: | |
| | | |
| | |
Cash paid for interest | |
$ | 220,035 | | |
$ | 478,157 | |
Cash paid for income taxes | |
$ | — | | |
$ | 1,600 | |
Supplemental disclosure of non-cash investing and financing activities: | |
| | | |
| | |
Common stock issued in exchange for cancellation of
note payable | |
$ | 2,064,757 | | |
$ | 321,667 | |
Conversion of accrued interest into note payable | |
$ | 20,833 | | |
$ | 67,839 | |
Creation of obligations through settlements | |
$ | 500,000 | | |
$ | 200,000 | |
Stock exchanged for related party receivable | |
$ | — | | |
$ | 108,243 | |
Net liabilities assumed from reverse merger | |
$ | 2,185,778 | | |
$ | — | |
See
accompanying Notes to Consolidated Financial Statements.
PRAXSYN
CORPORATION
(FORMERLY
THE PAWS PET COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business
Business
Praxsyn
Corporation (the “Company” or “Praxsyn”) is a health care company dedicated to providing medical practitioners
with medications and services for their patients. Through our retail pharmacy facility in Irvine, California, we currently formulate
healthcare practitioner-prescribed medications to serve patients who experience chronic pain. Our focus with these products is
on non-narcotic and non-habit forming medications using therapeutic and preventative agents for pain management. In addition,
we prepare innovative products that address erectile dysfunction and metabolic issues, and other ancillary products. Our products
are either picked up directly at our pharmacy facility or shipped to patients covered under the California workers’ compensation
system, as well as preferred provider (“PPO”) contracts. Billings are made to, and collections received from, the
insurance companies which cover the patients.
Merger
On
December 31, 2013, we entered into a First Amended Securities Exchange Agreement (“SEA”) with Mesa Pharmacy, Inc.
(“Mesa”), a wholly-owned subsidiary of Pharmacy Development Corporation (“PDC”), to acquire all of Mesa.
On March 20, 2014, we replaced the SEA by entering into an Agreement and Plan of Merger (the “APM”) with PDC whereby
we agreed to acquire all the issued and outstanding shares of PDC in exchange for 500,000 shares of our Series D Preferred Stock.
Each share of Series D preferred stock is convertible into 1,000 shares of our common stock. On January 23, 2014, we entered into
an agreement with our primary marketing consultant, Trestles Pain Management Specialists, LLC (“TPS”), whereby we
agreed to issue 166,664 (or approximately one-third of the 500,000 shares) of our Series D Preferred Stock issued in connection
with the APM. The TPS shares were committed in exchange for future marketing services with our Company on a performance basis.
At September 30, 2014, 166,664 shares had been earned by, and deemed issued to, TPS with no shares remaining to be earned and
issued. Additionally, in accordance with the APM, certain of our convertible promissory notes were exchanged for new convertible
promissory notes, convertible into shares of Series D Preferred Stock at the rate of one (1) share of Series D Preferred Stock
for each One Hundred Dollars ($100) of unpaid principal and interest. The APM closed on March 31, 2014 (the “Acquisition
Date”). Effective December 31, 2014, TPS determined that they would cancel their Series D shares so they would no longer
be outstanding.
For
accounting purposes, this transaction was treated as a
reverse-acquisition in accordance with Accounting Standards Codification (“ASC”)
805, Business Combinations, since control of our Company passed
to the PDC shareholders. We determined for accounting
and reporting purposes that PDC is the acquirer because of the significant holdings and influence of its control group (which
includes Mesa) before and after the acquisition. Immediately subsequent to this transaction, the PDC control group owned approximately
40% of our issued and outstanding common stock on a diluted basis. In addition, the Series D preferred shares are the only preferred
shares with voting rights. With these voting rights, the PDC control group controlled approximately 63% of our voting power on
a diluted basis after the acquisition. Additionally, the PDC control group, pre-acquisition, was significantly larger than Praxsyn
in terms of assets and operations. Finally, the future operations of the PDC control group will be our Company’s primary
operations and more indicative of the operations of the consolidated entity on a going forward basis.
Accordingly,
the consolidated assets and liabilities of PDC are reported at historical costs and the historical consolidated results of operations
of PDC will be reflected in our filings subsequent to the acquisition as a change in reporting entity. The assets and liabilities
of Praxsyn are reported at their carrying value, which approximated their fair value, on the Acquisition Date and no goodwill
was recorded. Praxsyn’s results of operations are included from the Acquisition Date. The following is a schedule of Praxsyn’s
assets and liabilities at the Acquisition Date:
Assets: | |
| | |
Cash | |
$ | 485,012 | |
Fixed assets | |
| 5,184 | |
Total assets | |
| 490,196 | |
Liabilities: | |
| | |
Accounts payable | |
| 362,582 | |
Accrued expenses | |
| 588,401 | |
Accrued interest | |
| 96,362 | |
Convertible debentures | |
| 666,798 | |
Liabilities of discontinued operations | |
| 961,831 | |
Total liabilities | |
| 2,675,974 | |
Net liabilities assumed | |
$ | (2,185,778 | ) |
The
following is our pro-forma revenue and earnings information for 2014 and 2013 assuming both our Company and PDC had been combined
as of January 1, 2013. Amounts have been rounded to the nearest thousand and are unaudited:
| |
2014
| | |
2013 | |
Sales, net | |
$ | 66,599,000 | | |
$ | 6,989,000 | |
Net loss from continuing operations | |
$ | (21,122,000 | ) | |
$ | (6,323,000 | ) |
Net loss | |
$ | (21,125,000 | ) | |
$ | (6,359,000 | ) |
Net loss per share – basic and diluted | |
$ | (0.08 | ) | |
$ | (0.06 | ) |
2. Basis
of Presentation and Significant Accounting Policies
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles
(“GAAP”) as promulgated in the United States of America.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of PDC, including Mesa and NexGen, for the years ended December
31, 2014 and 2013, and Praxsyn as of the acquisition date of March 31, 2014. All significant intercompany transactions have been
eliminated in consolidation. Management makes estimates and assumptions that affect the amounts reported in the consolidated financial
statements and footnotes. Actual results could differ from those estimates.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. Since inception,
management has funded operations primarily through proceeds received in connection with factoring of accounts receivable on a
nonrecourse basis from two primary factors, issuances of notes payable, and through sales of common stock. Also, our 2014 business
was concentrated within the workers compensation market for which the collection of payments on receivables may be delayed for
a significant period depending on various factors. Additionally during 2014, we were dependent upon a few third party marketing
services, one of them being a related party, and we derived almost 100% of our revenues from customers referred by the marketing
services. During the years ended 2014 and 2013, we incurred a net loss of $12,354,399, and generated net income of $230,061, respectively.
$11,491,301 of the net loss during the 2014 period consisted of stock-based expenses.
There are two additional influences to the
losses we have reported in 2014. First, our revenue recognition, as discussed in Note 2, is based on our estimate of the net realizable
value of each of our customer billings. We invoiced most of our customers, those which are insurance companies for workers compensation
cases, in accordance with the fees permitted according to the State of California fee schedule. This is our gross billing. Given
the nature of our industry and the reimbursement environment in which we operate, our estimate of the net realizable value of
our billings is often less than the gross billing we are allowed to charge. We have recorded our revenue based on historical collection
trends. Second, we have had to finance our operations by selling our accounts receivable (recorded at net realizable value) to
a number of factors. The cost of factoring, which we record as interest expense, can be quite high – anywhere from 70% to
75% of the gross accounts receivable billing.
These two influences have had a material impact
on our operating results, but also offer a major opportunity for profit growth as we move forward. We have recently formed a subsidiary
named NexGen Med Solutions, LLC (“NexGen”), which we expect will allow us to expand our accounts receivables collection
effort. We believe this will allow us to improve our collections, increase the net realizable value of our gross billing revenues,
and reduce our dependency on factoring. In addition we continue to seek more conventional financing which will allow us to further
move away from factoring and reduce our interest expense. Finally, we continue to seek new markets for our transdermal creams
which will diversify our business, increase profitability and improve shareholder value. While there is no certainty that we will
be able to achieve these goals, Management is hopeful we will be successful.
In
addition, while Management believes our new PPO business will greatly improve our operating performance, we understand that we
will need additional accounts receivable factoring, or debt/equity financing to be able to fully implement our business plan.
Given the indicators described above, there is substantial doubt about our ability to continue as a going concern.
We
are attempting to find additional financing sources to build our operations to profitable levels, however, there is no assurance
we will be successful. The successful outcome of future activities cannot be determined at this time, and there are no assurances
that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results.
The
accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification
of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going
concern.
Use
of Estimates
Financial
statements prepared in accordance with accounting principles generally accepted in the United States require management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. The most significant estimates made by management are
revenue recognition along with the related allowance for doubtful accounts and contractual receivables, the allocation of accounts
receivable between current and long-term, the value of stock-based compensation awards, the amount of potential legal settlements
and contingencies, the fair market value of assets and liabilities of Praxsyn and the realization of deferred tax assets. Actual
results could differ from those estimates. Management performs a periodic retrospective review of estimates and modifies assumptions
as deemed appropriate.
Revenue
Recognition
We
sell our products directly through our pharmacy and record the associated revenues using the net method, as required under ASC
954-605-25, Health Care Entities – Revenue Recognition. Our prescription revenue is recorded at established billing rates
less estimated contractual adjustments with each respective insurance carrier. Net revenues represent the amount each respective
insurance company and the California Workers Compensation Fund are expected to pay us. We recognize revenue when persuasive evidence
of an arrangement exists, product delivery has occurred, the sales price is fixed or determinable, and collection is probable.
Our pharmacy revenues are recognized when both the compounding prescriptions and customer shipment services are performed.
Net
revenues consisted of the following for the years ended December 31, 2014 and 2013:
| |
2014
| | |
2013 | |
Gross revenues | |
$ | 156,853,777 | | |
$ | 15,551,345 | |
Less: estimated contractual and other adjustments | |
| (90,254,881 | ) | |
| (8,562,809 | ) |
Net revenues | |
$ | 66,598,896 | | |
$ | 6,988,536 | |
Shipping
and Handling
Shipping
and handling costs incurred are included in general and administrative expenses. The amount of revenue received for shipping and
handling is less than 0.5% of revenues for all periods presented.
Cash
Equivalents
We
consider all highly liquid, income bearing investments purchased with original maturities of three months or less to be cash equivalents.
Accounts
Receivable
Accounts
receivable represent amounts due from insurance companies, through various networks, for products delivered to patients. We record
an allowance for doubtful accounts and contractual reimbursements based on analyses of historical collections over the expected
period until such cases are closed or settled. Management also assess specific identifiable accounts considered at risk or uncollectible.
As discussed above, we have factored a significant amount of our accounts receivable. The difference between the estimated net
realizable value of accounts receivable, which we have recorded as net revenues, and the factored amounts has been recorded in
the consolidated statements of operations as interest expense.
Due
to the nature of the industry and the reimbursement environment in which we operate, certain estimates are required in order to
record net revenues and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they
may have to be revised or updated as additional information becomes available. It is possible that management’s estimates
could change, which could have an impact on operations and cash flows. Specifically, the complexity of many billing arrangements
and the uncertainty of reimbursement amounts for certain services from certain payers may result in adjustments to amounts originally
recorded.
Inventories
Inventories
are stated at the lower of cost (first-in, first-out method) or market. Our inventories consist of pharmaceutical ingredients
used within our compounding products. Our inventories for all periods presented are predominantly raw materials.
Property
and Equipment
Property
and equipment are recorded at historical cost and depreciated on a straight-line basis over their estimated useful lives. Leasehold
improvements are amortized on a straight-line basis over the lesser of the useful lives or the remaining term of the lease. For
tax purposes, accelerated tax methods are used. We expense all purchases of equipment with individual costs of under $1,000. Ordinary
maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized.
Debt
Issuance Costs
We
capitalize direct costs related to the issuance of debt, including finder’s fees, underwriting and legal costs. The debt
issuance costs are recorded as an asset and amortized as interest expense over the term of the related debt using the straight-line
method, which approximates the effective interest method. Upon the extinguishment of the related debt, any unamortized debt issuance
costs are expensed as interest expense.
Impairment
of Long-Lived Assets
We
review our long-lived assets in accordance with ASC 360-10-35, Impairment or Disposal of Long-Lived Assets. Under that directive,
long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely
independent of the cash flows of other assets and liabilities. Such group is tested for impairment whenever events or changes
in circumstances indicate that its carrying amount may not be recoverable. When such factors and circumstances exist, we compare
the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful
lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair
value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period
in which the determination is made.
Convertible
Debt and Warrants Issued with Convertible Debt
Convertible
debt is accounted for under the guidelines established by ASC 470, Debt with Conversion and Other Options and ASC 740, Beneficial
Conversion Features. We record a beneficial conversion feature (“BCF”) when convertible debt is issued with conversion
features at fixed or adjustable rates that are below market value when issued. If, however, the conversion feature is dependent
upon a condition being met or the occurrence of a specific event, the BCF will be recorded when the related contingency is met
or occurs. The BCF for the convertible instrument is recorded as a reduction, or discount, to the carrying amount of the convertible
instrument equal to the fair value of the conversion feature. The discount is then amortized to interest over the life of the
underlying debt using the effective interest method.
We
calculate the fair value of warrants issued with the convertible instruments using the Black-Scholes valuation method, using the
same assumptions used for valuing employee options for purposes of ASC 718, Compensation – Stock Compensation, except that
the contractual life of the warrant is used. Under these guidelines, we allocate the value of the proceeds received from a convertible
debt transaction between the conversion feature and any other detachable instruments (such as warrants) on a relative fair value
basis. The allocated fair value is recorded as a debt discount or premium and is amortized over the expected term of the convertible
debt to interest expense. For a conversion price change of a convertible debt issue, the additional intrinsic value of the debt
conversion feature, calculated as the number of additional shares issuable due to a conversion price change multiplied by the
previous conversion price, is recorded as additional debt discount and amortized over the remaining life of the debt.
For
modifications of convertible debt, we record the modification that changes the fair value of an embedded conversion feature, including
a BCF, as a debt discount which we amortize to interest expense over the remaining life of the debt. If modification is considered
substantial (i.e. greater than 10% of the carrying value of the debt), an extinguishment of debt is deemed to have occurred, resulting
in the recognition of an extinguishment gain or loss.
Fair
Value of Financial Instruments
We
utilize ASC 820-10, Fair Value Measurement and Disclosure, for valuing financial assets and liabilities measured on a recurring
basis. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for
inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by
requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in
valuing the asset or liability and are developed based on market data obtained from sources independent of our Company. Unobservable
inputs are inputs that reflect our Company’s assumptions about the factors market participants would use in valuing the
asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:
Level
1. Observable inputs such as quoted prices in active markets;
Level
2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level
3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
As of December
31, 2014 and December 31, 2013, we did not have any level 2 or 3 assets or liabilities.
Stock
Based Compensation
We
account for our share-based compensation in accordance with ASC 718-20, Stock-based Compensation. Stock-based compensation cost
is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite
vesting period.
We
have issued warrants exercisable into our common stock and preferred stock as compensation to debt holders. The fair value of
each warrant is estimated on the date of grant using the Black-Scholes pricing model. Assumptions are determined at the time of
grant. No warrants were granted during the years ended December 31, 2014 and 2013.
The
assumptions used in the Black Scholes models referred to above are based upon the following data: (1) The expected life of the
warrant is estimated by considering the contractual term of the warrant. (2) The expected stock price volatility of the underlying
shares over the expected term of the warrant is based upon historical share price data. (3) The risk free interest rate is based
on published U.S. Treasury Department interest rates for the expected terms of the underlying warrants. (4) Expected dividends
are based on historical dividend data and expected future dividend activity. (5) The expected forfeiture rate is based on historical
forfeiture activity and assumptions regarding future forfeitures based on the composition of current grantees.
Income
Taxes
We
account for income taxes in accordance with ASC 740-10, Income Taxes. We recognize deferred tax assets and liabilities to reflect
the estimated future tax effects, calculated at currently effective tax rates, of future deductible or taxable amounts attributable
to events that have been recognized on a cumulative basis in the consolidated financial statements. A valuation allowance related
to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.
ASC
740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements
and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure
and transition issues. We classify interest and penalties as a component of interest and other expenses. To date, there have been
no interest or penalties assessed or paid.
We
measure and record uncertain tax positions by establishing a threshold for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition
threshold at the effective date may be recognized or continue to be recognized.
Net
Income (Loss) Per Share
Basic
earnings per share is calculated by dividing income available to common stockholders by the weighted-average number of common
shares outstanding during each period. Diluted earnings per share is computed using the weighted average number of common and
dilutive common share equivalents outstanding during the period.
Concentrations,
Uncertainties and Other Risks
Cash
and cash equivalents - Cash and cash equivalents are maintained at financial institutions and, at times, balances may
exceed federally insured limits of $250,000 per institution that pays Federal Deposit Insurance Corporation (FDIC) insurance premiums.
We have never experienced any losses related to these balances.
Revenues
and accounts receivable - Financial instruments that potentially subject us to credit risk principally consist of receivables.
Amounts owed to us by insurance companies account for a substantial portion of the receivables. This risk is limited due to the
number of insurance companies comprising our customer base and their geographic dispersion. The risk is further limited by our
ability to factor our receivables. For the years ended December 31, 2014 and 2013, no single customer represented more than 10%
of revenues or accounts receivable, net.
The
majority of our accounts receivable arise from product sales and are primarily due from insurance companies. We monitor the financial
performance and creditworthiness of our customers so that we can properly assess and respond to changes in their credit profile.
Conditions in the normal course of business, including inherent variability of timing of cash receipts, have resulted in, and
may continue to result in, an increase in the average length of time that it takes to collect accounts receivable outstanding.
For accounts receivable that are held and not factored, we do not expect to have write-offs or adjustments to accounts receivable
which could have a material adverse effect on our consolidated financial position, results of operations or cash flows as the
portion which is deemed uncollectible is already taken into account when the revenue is recognized.
During
the years ended December 31, 2014 and 2013, revenues generated from sales of compounding pharmaceutical products primarily to
worker’s compensation patients located throughout Southern California represented nearly 100% of total revenues. At times
the collection on these receivables can take in excess of one year, during which we may attend legal hearings, file liens to securitize
claims, negotiate before worker’s compensation administrative judges, resolve liens with stipulations and orders for defendants
to pay, and transmit demands to settle liens filed with the adjuster or defense attorneys.
During
the years ended December 31, 2014 and 2013, we retained two principal consultants, one of which was TPS, to market our products
to licensed healthcare practitioners who treat patients covered under a variety of workers’ compensation insurance programs.
For each period presented, nearly 100% of our net revenue resulted from the consultants’ marketing efforts and fees for
the two consultants represented nearly all of our selling and marketing expense. In addition, on March 31, 2014, we added a representative
of TPS to our Board of Directors. Subsequent to December 31, 2014, our consulting agreement with TPS expired and we replaced them
with another marketing consultant. See Note 15 for further information. As a result, the TPS representative resigned from our
Board effective February 23, 2015. For the years ended December 31, 2014 and 2013, the consultants earned the following:
Year Ended: | | |
| | | |
|
December
31, 2014 | | |
$ | 33,745,106 | | |
Includes stock-based compensation of $11,391,301 |
December
31, 2013 | | |
$ | 1,790,761 | | |
Includes no stock-based compensation |
The
amounts payable to the consultants at December 31, 2014 and 2013 were $5,896,197 and $1,411,493, respectively.
The
pharmaceutical industry is highly competitive and regulated, and our future revenue growth and profitability is dependent on our
timely product development, ability to retain proprietary formulas, and continued compliance. The compounding, processing, formulation,
packaging, labeling, testing, storing, distributing, advertising and sale of our products are subject to regulation by one or
more U.S. and California agencies, including the Board of Pharmacy, the Food and Drug Administration, the Federal Trade Commission,
and the Drug Enforcement Administration as well as several other state and local agencies in localities in which our products
are sold. In addition, we compound and market certain of our products in accordance with standards set by organizations, such
as the United States Pharmacopeial Convention, Inc. We believe our policies, operations and products comply in all material respects
with existing regulations. Healthcare reform and a reduction in the coverage and reimbursement levels by insurance companies and
government agencies and/or a change in the regulations or compliance with related agencies and/or a disruption in our ability
to maintain our competitiveness may have a material impact on our consolidated financial position, results of operations, and
cash flows.
Vendors
- As of December 31, 2014 and 2013, two suppliers made up substantially 100% of our direct materials. Management believes
the loss of either supplier to this organization would have a material impact on our consolidated financial position, results
of operations, and cash flows. If our Company’s relationship with one of our vendors was disrupted, we could have temporary
difficulty filling prescriptions for worker’s compensation related drugs until a replacement wholesaler agreement was executed,
which would negatively impact our business.
For
the years ended December 31, 2014 and 2013, purchases made for pharmaceutical compounding materials obtained from these vendors
were $2,492,749, and $273,135, respectively. The amounts payable at December 31, 2014 and 2013 for such costs were $12,158 and
$58,594, respectively.
Recent
Accounting Pronouncements
In
May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts
with Customers,” which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition
guidance. The new standard requires a company to recognize revenue upon transfer of goods or services to a customer at an amount
that reflects the expected consideration to be received in exchange for those goods or services. ASU 2014-09 defines a five-step
approach for recognizing revenue which may require a company to use more judgment and make more estimates than under the current
guidance. This ASU will be effective for us starting in the first quarter of 2018. The new standard allows for two methods of
adoption: (a) full retrospective adoption, meaning the standard is applied to all periods presented, or (b) modified retrospective
adoption, meaning the cumulative effect of applying the new standard is recognized as an adjustment to the fiscal 2018 opening
retained earnings balance. We are in the process of determining the adoption method as well as the effects the adoption will have
on our consolidated financial statements.
In
August 2014, the FASB issued Accounting Standards Update No. 2014-15, “Presentation of Financial Statements—Going
Concern”, which requires management to evaluate, at each annual and interim reporting period, whether there are conditions
or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the
date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after
December 15, 2016 and interim periods thereafter. Early application is permitted. Management is still in the process of assessing
the impact of ASU 2014-15 on the Company’s consolidated financial statements.
There
are no other recently issued accounting pronouncements or standards updates that we have yet to adopt that are expected to have
a material effect on our consolidated financial position, results of operations, or cash flows.
3. Accounts
Receivable
Accounts
receivable consist of the following at:
| |
December
31, 2014 | | |
December 31, 2013 | |
Accounts receivable | |
$ | 36,364,280 | | |
$ | 10,814,161 | |
Allowance for doubtful accounts
and
contractual write-offs | |
| (22,089,994 | ) | |
| (6,265,951 | ) |
Subtotal | |
| 14,274,286 | | |
| 4,548,210 | |
Less: long-term portion | |
| (4,139,543 | ) | |
| (983,440 | ) |
Current portion | |
$ | 10,134,743 | | |
$ | 3,564,770 | |
We
have computed the long-term portion of our accounts receivable using amounts and timing historical collection information.
We
have sold a significant portion of our accounts receivable, in groups of receivables, to various factors on a non-recourse basis.
Prior to funding, the factor performs due diligence testing on a sampling of accounts receivable to determine that the accounts
meet their criteria for purchase. After funding, if it is determined that an account receivable does not meet their purchase criteria,
we will exchange it for a different account and pursue collection of the account returned. If we do not have a different account
to exchange with the factor, we would have to return the proceeds from an account that they are putting back to us. However, as
long as we continue to generate new accounts receivable, we are not at risk of having to return any factoring proceeds.
Under
the factoring agreements, we receive initial net proceeds ranging from 20% to 25% of the gross accounts receivable sold in each
group. The agreements also allow for our receipt of additional proceeds once the factors’ collections have reached a certain
collection benchmark for each group of receivables sold. In addition, for certain groups of receivables, we may also receive additional
proceeds upon the passage of eighteen months. Although we expect we may ultimately receive additional proceeds from our factors,
we will not record any additional receipts until such funds have actually been received. The difference between the recorded amount
of the accounts receivable and the amount received has been treated as interest expense.
We
have granted one factor a first security interest in all accounts receivable that have not been sold to another factor. In addition,
we provided the same factor with a first right of refusal to purchase future receivables.
During
the years ended December 31, 2014 and 2013, our factoring activity has been as follows:
| |
2014
| | |
2013 | |
Gross billing receivables sold | |
$ | 128,637,988 | | |
$ | 4,852,088 | |
Adjustment to net revenues (for estimated contractual and other adjustments) | |
| (72,879,912 | ) | |
| (2,620,128 | ) |
Interest expense for factored accounts receivable | |
| (29,694,558 | ) | |
| (873,201 | ) |
Proceeds received from factors | |
$ | 26,063,518 | | |
$ | 1,358,759 | |
4. Property
and Equipment, Net
Property
and equipment consist of the following at:
| |
December
31, 2014 | | |
December
31, 2013 | |
Machinery and equipment | |
$ | 27,229 | | |
$ | 22,629 | |
Computer equipment | |
| 31,473 | | |
| 13,406 | |
Furniture and fixtures | |
| 3,997 | | |
| 3,997 | |
Leasehold improvements | |
| 69,784 | | |
| 24,749 | |
| |
| 132,483 | | |
| 64,781 | |
Less: accumulated depreciation | |
| (52,940 | ) | |
| (36,999 | ) |
| |
$ | 79,543 | | |
$ | 27,782 | |
Depreciation
expense for 2014 and 2013 amounted to $15,942 and $9,110, respectively.
5. Notes
Payable and Accrued Interest
Notes
payable and accrued interest consisted of the following at:
| |
December 31, 2014 | | |
December 31, 2013 | |
| |
Principal
| | |
Accrued Interest | | |
Principal | | |
Accrued Interest | |
Non-related parties: | |
| | | |
| | | |
| | | |
| | |
2007 – 2009 convertible notes | |
$ | 315,000 | | |
$ | 124,334 | | |
$ | 497,000 | | |
$ | 78,083 | |
Profit sharing notes | |
| 175,000 | | |
| 527,012 | | |
| 675,000 | | |
| 383,163 | |
Secured bridge notes | |
| 449,275 | | |
| 86,945 | | |
| 449,275 | | |
| 72,901 | |
2012 convertible promissory notes | |
| 2,288,250 | | |
| 706,384 | | |
| 3,299,875 | | |
| 410,174 | |
Promissory notes | |
| 350,722 | | |
| 3,507 | | |
| 817,366 | | |
| 5,793 | |
Convertible debentures | |
| 325,000 | | |
| 114,110 | | |
| — | | |
| — | |
Less: unamortized discount | |
| — | | |
| — | | |
| (98,922 | ) | |
| — | |
Subtotal – non-related parties | |
| 3,903,247 | | |
| 1,562,292 | | |
| 5,639,594 | | |
| 950,114 | |
Related parties: | |
| | | |
| | | |
| | | |
| | |
2007 – 2009 convertible notes | |
| — | | |
| — | | |
| 152,500 | | |
| 43,300 | |
2012 Convertible promissory notes | |
| — | | |
| — | | |
| 150,000 | | |
| 18,000 | |
Promissory notes | |
| 146,667 | | |
| 7,414 | | |
| — | | |
| — | |
Convertible note | |
| 52,400 | | |
| 3,761 | | |
| — | | |
| — | |
Notes payable to Officer | |
| — | | |
| — | | |
| 104,164 | | |
| — | |
Subtotal – related parties | |
| 199,067 | | |
| 11,175 | | |
| 406,664 | | |
| 61,300 | |
Total | |
| 4,102,314 | | |
| 1,573,467 | | |
| 6,046,258 | | |
| 1,011,414 | |
Current portion | |
| (3,875,559 | ) | |
| (1,573,467 | ) | |
| (6,046,258 | ) | |
| (1,011,414 | ) |
Long-term portion | |
$ | 226,755 | | |
$ | — | | |
$ | — | | |
$ | — | |
2007
– 2009 Convertible Notes
The
2007 – 2009 Convertible Notes were initially issued in 2007 to 2009 to a series of individuals, including a related party
who is a relative of the founder of the PDC control group. These notes are unsecured. The non-related party notes in this category
bear interest rates ranging from 18% to 33% per annum.
On
March 31, 2014, we entered into a Note Conversion Agreement with a shareholder and holder of one of the 2007 – 2009 Convertible
Notes with a principal amount of $100,000. Under the conversion agreement, the principal was converted into 1,505 shares of Series
D Preferred Stock and we issued a new Unsecured Promissory Note for the remaining balance of accrued and unpaid interest totaling
$20,833 which has been repaid as of December 31, 2014. See Promissory Notes section below. As a result of this
transaction, we recorded a loss on extinguishment of debt of $100,000 during 2014.
On
September 19, 2014, we repaid principal and interest on notes in this category with face value totaling $95,000. In connection
with this transaction, we recorded a gain on extinguishment of debt of $182.
On
September 30, 2014, we entered into a Settlement Agreement and Mutual Release with the related party note holder referred to above.
Under the agreement, we settled notes in this category with face value totaling $152,500 along with a 2012 Convertible Promissory
note (see below) with a face value of $150,000. Under the settlement agreement, we paid the note holder $302,500 in full settlement
of the notes, including accrued interest, and recorded a gain on extinguishment of debt in the amount of $99,704 and eliminated
$143,517 in derivative liability (related to the 2012 Convertible Promissory note), which was recorded as a gain upon extinguishment.
All
notes in this category, which were originally written on PDC, contained a provision allowing for conversion into common stock
only if PDC became a public entity. This conversion provision allowed for the conversion of all unpaid principal and accrued interest
at the rate of the average closing price of the common stock for the 10 days prior to conversion. Upon finalization of the merger
on March 31, 2014 as discussed in Note 1, the remaining notes in this category were rewritten with the following changes (i) the
conversion feature was modified to allow for conversion into one (1) share of Series D Preferred Stock for each One Hundred Dollars
($100) of unpaid principal and interest and (ii) the maturity date of the notes was changed to allow for future payment of principal
and accrued interest when our company’s resources would allow. The modification of the conversion feature created a beneficial
conversion feature (“BCF”) of $322,785 and, in accordance with the requirements of ASC 470-50, we have recorded that
amount as a loss on extinguishment of debt during 2014.
Because
these notes were previously past-due and now have no fixed maturity date, we have reflected them as current liabilities at each
balance sheet date in the accompanying consolidated financial statements.
Profit
Sharing Notes
The
Profit Sharing Notes were initially issued in 2010 with a term of four (4) years. In lieu of interest, the notes called for monthly
payments ranging from 0.1% to 5% of the cash receipts from prescription sales. These notes are collateralized by all receivables
generated by sales of prescriptions.
On
March 10, 2014, as amended on May 1, 2014, we finalized a settlement agreement with All American T.V., Inc./John Casorio (“AATV”),
a shareholder and a holder of one of the 2010 Profit Sharing Notes under which we, among other things, agreed to repay the note
and accrued interest for a total payment of $600,000. Based on the finalized settlement agreement, we reclassified this note to
Settlement Liabilities in 2014 (see Note 6). In connection with the settlement agreement, we recorded a gain on extinguishment
of debt during 2014 in the amount of $180,973.
At
both December 31, 2014 and 2013, these Profit Sharing Notes are past-due and are reflected as current liabilities at each balance
sheet date. There have been no demands for repayment or claims of default.
Secured
Bridge Notes
These
Secured Bridge Notes were initially issued in 2010 and 2011 and were to be repaid at the time of a major funding from a specified
funding source. Certain of the notes accrue interest at one-time flat-rates ranging from 15% to 22.5% and others at an annual
rate of 15% per annum. The notes are collateralized by all receivables generated by sales of prescriptions. At both December 31,
2014 and 2013, these 2010 and 2011 Secured Bridge Notes are reflected as current liabilities at each balance sheet date since
funding from the funding source was never obtained.
2012
Convertible Promissory Notes
These
Convertible Promissory Notes were issued during the second half of 2012, and have a term of four (4) years. One of these notes
was issued to a related party, a relative of the founder of the PDC control group. All of these notes bear interest at 18% per
annum. Each note including, accrued interest, may be converted at the option of the note holder at any time on or after the second
anniversary of the note into an amount of our common shares calculated by dividing the amount to be converted by 95% of the average
daily volume weighted average price of our common stock during the five days immediately prior to the date of conversion.
On
March 31, 2014, we entered into a Note Conversion Agreement with the holder of a 2012 Convertible Promissory Note in the principal
amount of $124,750, whereby the 2012 Convertible Promissory Note and accrued and unpaid interest of $20,584 was exchanged for
1,094 shares of our Series D Preferred Stock. No gain or loss was recorded in connection with this transaction.
On
September 30, 2014, we entered into a Settlement Agreement and Mutual Release with the related party holder of a 2012 Convertible
Promissory Note. See 2007 – 2009 Convertible Notes section above.
On
October 10, 2014, we entered into Settlement Agreement and Mutual Release agreements with three of these noteholders holding notes
with face values totaling $886,875. Under the agreements, we agreed to the following in full satisfaction of amounts owed them
under their notes, inclusive of accrued interest: (1) the issuance of 30,074,105 shares of our restricted common stock and (2)
the issuance of a Promissory Note (see section below) with a principal balance of $65,756. The new note bears interest
at 12% per annum and is payable over twelve months with monthly payments of $5,842, which includes interest. We valued the shares
issued in connection with these transactions at their market price as of October 10, 2014, their date of issuance, and recorded
a gain of $30,959 in connection therewith.
During
the second half of 2014, the notes in this category became convertible. Based on the requirements of ASC 815, we determined that
as each note reached its convertibility date, a derivative liability was triggered, the amounts of which we calculated using the
Black-Scholes valuation method with the following range of assumptions:
Stock price per share | |
| $0.04000
to $0.06200 | |
Exercise price per share | |
| $0.03770
to $0.05759 | |
Time to maturity in years | |
| 1.75
to 2.00 | |
Annual risk-free interest rate | |
| 0.47%
to 0.58% | |
Annualized volatility | |
| 250%
to 283% | |
Effective
December 31, 2014, the remaining notes in this category were amended to include a minimum conversion price of $2.00 per share,
thereby eliminating the derivative liability accounting requirement. During 2014, in connection with these amended notes and their
convertibility, we recorded a net expense of $458,192 with the offset to additional paid-in capital for debt settled during the
period. The net expense consisted of the following:
| |
(Income)
Expense | |
Interest expense (debt discount amortization) | |
$ | 634,299 | |
(Gain) loss on extinguishment of debt | |
| (193,454 | ) |
Other expense | |
| 17,347 | |
| |
$ | 458,192 | |
At
both December 31, 2014 and 2013, we reflected these 2012 convertible promissory notes as current liabilities, either in accordance
with their terms or because we were in default of the interest payments required under the notes.
Subsequent
to December 31, 2014, we made a full and final settlement for a note with principal value of $110,500 note, inclusive of accrued
interest, for $110,500.
Promissory
Notes
The
Promissory Notes consist of the following at:
| |
December
31, 2014 | | |
December 31, 2013 | |
Non-related parties: | |
| | | |
| | |
Note dated November 18, 2013 | |
$ | — | | |
$ | 772,366 | |
Notes dated October 10, 2014 | |
| 350,722 | | |
| — | |
Note dated January 1, 2014 | |
| — | | |
| 45,000 | |
Subtotal | |
| 350,722 | | |
| 817,366 | |
Related parties: | |
| | | |
| | |
Note dated February 20, 2014 | |
| 96,667 | | |
| — | |
Note dated March 11, 2014 | |
| 50,000 | | |
| — | |
Subtotal | |
| 146,667 | | |
| — | |
| |
$ | 497,389 | | |
$ | 817,366 | |
On
November 18, 2013, we issued a Secured Promissory Note with a principal amount of $772,366. This note, which was issued in exchange
for previous notes payable and accrued interest, had a term of five (5) years, bore interest at 18% per annum, and required monthly
payments of $19,613. The note was secured by certain of our accounts receivable. On October 10, 2014 we entered into a Settlement
Agreement and Mutual Release with the noteholder under which we made the following payments in full satisfaction of amounts owed
under the notes, inclusive of accrued interest: (1) a cash payment of $150,000, (2) the issuance of 10,807,000 shares of our restricted
common stock, and (3) the issuance of a note payable with a principal balance of $300,000 ($290,151 as of December 31, 2014).
The new note bears interest at 12% per annum and is payable over four years with monthly payments of $7,900, which includes interest.
In addition, the collateral remains the same. We valued the shares issued in connection with these transactions at their market
price as of October 10, 2014, their date of issuance, and recorded a loss of $23 in connection therewith. The aggregate amount
of principal payments due under this note for each of the future years ending December 31, 2015, 2016, 2017, and 2018 are $63,395,
$71,435, $80,495, and $74,825, respectively.
As
described in the 2012 Convertible Promissory Notes section above, we issued a Promissory Note with a principal balance
of $65,756 ($60,571 as of December 31, 2014).
At
December 31, 2013, we were in default of the monthly payment requirement and reflected this note as a current liability at that
balance sheet date. As of December 31, 2014, we are in compliance of the provisions of the new note and have reflected its long-term
portion as such at that balance sheet date.
Effective
December 31, 2013, we issued an Unsecured Promissory Note for $45,000. This note had a term of six months, had no stated interest
rate, and was repayable in monthly payments of $7,500. As of December 31, 2014, this note had been repaid.
On
February 20, 2014 we issued an Unsecured Promissory Note for $96,667 to a company whose Managing Member is a shareholder. This
note, which had a stated interest rate of 0.5% per month (6% per annum), was repayable in thirty (30) days. We issued a similar
Unsecured Promissory Note for $50,000 to the same company on March 11, 2014. The second note contained the same interest rate
as the first and was also payable in thirty (30) days. The notes are past due as of December 31, 2014. Subsequent to December
31, 2014, we made a full and final settlement of the $50,000 note, inclusive of accrued interest, for $50,000.
With
the exception of the one note described above, we reflected these Promissory Notes as current liabilities as of December 31, 2014
and 2013 either in accordance with their terms or because we were in default of our payment obligations.
Convertible
Debentures
The
Convertible Debentures were assumed March 31, 2014 as a result of the Merger discussed in Note 1. The convertible debentures,
which bear interest at 8% per annum, were due in August 2013 and are therefore past due. They are convertible into shares of our
common stock at the rate of $0.50 per share. There was no activity with respect to these convertible debentures during 2014.
Convertible
Note (Related Party)
On
March 5, 2014, we issued a convertible note in the amount of $42,500 to a shareholder. The convertible note, which has a stated
interest rate of 6% per annum, was to be repaid in April 2014 and is therefore past due. The note is convertible at the option
of the note holder into 260 shares of Series B Preferred Stock. As of December 31, 2014, the total principal amount outstanding
for this note was $52,400.
Notes
Payable to Officers
These
unsecured notes resulted from advances made in 2013 and 2014, primarily by our Pharmacist in Charge. All amounts, which were due
with no stated interest, have been repaid by December 31, 2014.
6. Settlement
Liabilities
Settlement
liabilities consist of the following at:
| |
December
31, 2014 | | |
December 31, 2013 | |
Myhill | |
$ | 70,000 | | |
$ | 200,000 | |
Primary Care | |
| — | | |
| 48,000 | |
Subtotal | |
$ | 70,000 | | |
$ | 248,000 | |
Myhill
On
August 28, 2012, we received a claim from Roger Saxton, Loren Myhill, Lucas Myhill, Beryl Myhill, and Ann Marie Kaumo (collectively
the “Myhill Litigants”) seeking $358,433 for delayed public entry and illiquidity stemming from an investment made
by the Myhill Litigants. On January 6, 2014, we entered into a Settlement and Mutual General Release Agreement with the Myhill
Litigants under which they agreed to release all claims against us and relinquish all shares of PDC they owned in exchange for
$200,000, $20,000 of which was payable on execution of the settlement agreement and the remainder payable at $10,000 per month
over the following 18 months. In connection with this transaction, the $200,000 has been recorded as Treasury Stock.
The
settlement agreement requires Counsel for the Plaintiffs to hold the PDC stock certificates during pendency of the payout period.
During such period, Plaintiffs shall have no right to vote such shares, transfer such shares, or encumber such shares, and will
not be entitled to receive cash dividends or stock dividends or any distributions based on ownership of such shares. The Plaintiffs
shall return each of their stock certificates to the Company with a full executed stock power sufficient to transfer such shares.
In the event of any transaction by the Company, including merger or buyout, that results in Plaintiffs’ shares of PDC to
be converted to shares of another entity, such obligations and restrictions stated herein shall apply to such new or different
shares.
Primary
Care
In
December 2009, we entered into an agreement with Primary Care Management Services (“Primary Care”) under which Primary
Care would provide services consisting of billing to and collection from various insurance carriers for our products. Primary
Care was to be compensated by a rate equaling two percent of the amounts billed on our behalf. In April 2012, we entered into
a settlement agreement with Primary Care, who by that time had billed in excess of $10 million which it had been unable to collect.
Under the settlement agreement, we agreed to pay Primary Care $92,000, $20,000 of which was payable immediately and the remainder
payable at $2,000 per month over the following 36 months.
On
May 15, 2014 we entered into a new settlement agreement with Primary Care under which we paid them $40,000 in full satisfaction
of all remaining amounts owed them. In connection with this new settlement agreement, we recorded a gain on extinguishment of
debt in the amount of $8,000 during 2014.
Forte
Capital
This
obligation was assumed March 31, 2014 in the amount of $289,398 as a result of the Merger discussed in Note 1. The obligation
arose from a March 2014 agreement with Forte Capital Partners, LLC under which we agreed to repay amounts outstanding under a
14% convertible debenture with a total of 14,351,322 shares of our common stock, issuable in six monthly installments of 2,391,887
shares beginning in March 2014. 2,391,887 shares were issued prior to the merger discussed in Note 1 and 11,959,435 were issued
post-merger. As of December 31, 2014, we have issued all shares required under the agreement with Forte Capital and no further
amounts are owed.
AATV
As
discussed in Note 5, on May 1, 2014, we finalized a settlement agreement with AATV. Under the finalized agreement, we agreed to
pay AATV $1,100,000 for the following:
|
● |
$600,000
for the full repayment of principal and accrued interest on a Profit Sharing Note, $100,000 of which was paid in March 2014
(see Note 5). |
|
|
|
|
● |
$500,000
for the repurchase of 7,504 Series D Preferred shares, representing the amount of AATV’s original investment (see Note
8). |
As
of December 31, 2014, we had paid all amounts owed under our obligation to AATV.
7. Liabilities
of Discontinued Operations
Liabilities
of discontinued operations totaling $961,831 represent the liabilities of our interest in our subsidiary Pet Airways, Inc. and
consist of the following as of December 31, 2014:
Accrued airline leases | |
$ | 360,679 | |
Other accrued liabilities | |
| 376,924 | |
Amounts owed to credit card merchants | |
| 102,315 | |
Unearned revenue | |
| 121,913 | |
Total | |
$ | 961,831 | |
On
March 26, 2014, prior to the reverse acquisition by us on March 31, 2014, former management issued 60,000,000 common shares to
a company controlled by two former officers of our Company in exchange for the former officers’ agreement to purchase our
interest in Pet Airways and to forgive their unpaid wages. The former officers’ agreement to purchase our interest in Pet
Airways was meant to relieve us of these debts. As of December 31, 2014, the former officers had not fulfilled their obligation
to purchase our interest in Pet Airways, and other matters between the parties are in dispute.
We
have endeavored to resolve our disputes with the former officers, including their fulfillment of their obligation to purchase
the interest in Pet Airways, but to date have been unsuccessful. During the fourth quarter of 2014, we agreed to participate in
non-binding mediation for the matters in dispute. If we are unable to come to a satisfactory resolution through this process,
we will likely pursue litigation.
Because
of the foregoing factors, we have continued to recognize these liabilities in the accompanying consolidated balance sheets.
8. Capital
Stock
Common
Stock
We
are authorized to issue 1,400,000,000 shares of no par value common stock. The holders of common stock are entitled to one vote
per share on all matters submitted to a vote of stockholders and are not entitled to cumulate their votes in the election of directors.
The holders of common stock are entitled to any dividends that may be declared by the Board of Directors out of funds legally
available therefore subject to the prior rights of holders of any outstanding shares of preferred stock and any contractual restrictions
against the payment of dividends on common stock. In the event of liquidation or dissolution of our Company, holders of common
stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any
outstanding shares of preferred stock. Holders of common stock have no preemptive or other subscription rights and no right to
convert their common stock into any other securities.
During
2014, we issued a total of 53,036,707 common shares to settle debt. Certain of these shares were issued under agreements made
by previous management prior to the merger discussed in Note 1. 11,959,435 shares were issued to a Forte Capital as discussed
in Note 6 and 196,167 shares were issued to a vendor for pre-merger services provided. The remaining shares were issued in connection
with agreements to settle debt as discussed in Note 5.
Preferred
Stock
We
are authorized to issue 10,000,000 shares of no par value preferred stock and as of December 31, 2014 have designated four (4)
series of preferred stock whose rights are described below.
Series
D Preferred Stock - on December 30, 2013, we filed a Certificate of Designations with the State of Illinois under which
we designated 500,000 shares of Preferred Stock as Series D Preferred Stock (the “Series D Preferred”). The following
describes certain information with respect to the Series D Preferred Stock:
Ranking
– The Series D Preferred ranks, with respect to rights upon liquidation, dissolution or winding-up of the affairs
of our Company (collectively “Liquidation”), (i) senior to the Common Stock, (ii) equal to the Series B Preferred
Stock, (iii) senior to any and all other classes or series of our Preferred Stock whether authorized now, or at any time in the
future, unless any such subordination to any other class or series of Preferred Stock, is expressly agreed to, pursuant to an
affirmative vote or written consent of holders of at least sixty-seven percent (67%) of the Series D Preferred issued and outstanding
at the time of any such vote or written consent, and (iv) junior to any and all existing and future indebtedness of the Company.
Right
of Conversion – Any holder of Series D Preferred shall have the right to convert any or all of the their Series
D Preferred into a number of fully paid and non-assessable shares of common stock at the rate of 1,000 common shares for each
share of Series D Preferred. No conversion will be allowed which would cause the common share beneficial ownership of the holder
and its affiliates to exceed 4.9% of our issued and outstanding common shares after such conversion unless such provision is waived
by the holder with 61 days’ notice.
Dividends
– Series D Preferred shall not be entitled to dividends.
Liquidation
– In the event of any Liquidation, holders of Series D Preferred shall be entitled to $40 per share. If upon any
Liquidation, our remaining assets are insufficient to pay the Series D Preferred holders the full $40 per share to which they
are entitled, then the remaining assets shall be distributed on a pro rata basis to all holders of the Series D Preferred and
any other class of our capital stock that ranks equal to the Series D Preferred.
The
repurchased and cancelled shares consist mainly of 7,504 shares repurchased in connection with the AATV settlement agreement.
See Notes 5 and 6.
The
shares issued for services consist of 166,664 shares issued to TPS as described in Note 1 and 8,279 shares issued to other service
providers. All of these share issuances were valued at the market price of the common equivalent shares as of the date earned.
In connection with their issuance, we made the following charges to expense for the year ended December 31, 2014:
Selling and marketing | |
$ | 11,391,301 | |
General and administrative | |
| 100,000 | |
| |
$ | 11,491,301 | |
Although
the TPS shares were validly issued in accordance with our agreement with them, as the end of 2014 approached, they determined
that they did not want to incur the potential tax liability that would be associated with the fair market value of shares issued.
Effective December 31, 2014, TPS returned the shares to us for cancellation and we did not adjust the expense previously recorded.
On
March 17, 2014, all of the outstanding warrants of the PDC control group were exchanged for PDC Series D Preferred Shares. The
Company converted all common and preferred warrants, whether expired or not, into without consideration for the strike price upon
the terms and provisions set forth in the warrant agreements. The conversion resulted in an issuance of 155,823 Series D Preferred
shares. This conversion was treated as a modification of the exercise price of the warrants. Accordingly, the warrants were revalued
on the conversion date using the Black-Scholes option pricing model, resulting in
a loss of $7,111,444 being recorded during the year ended December 31, 2014. Subsequent to the March 17, 2014 conversion, no warrants
for the PDC control group remained outstanding.
As
discussed in Note 5, on March 31, 2014, we settled certain notes payable and issued a total of 2,599 Series D Preferred shares
in connection therewith. 1,505 and 1,094 shares were issued in connection with the settlements of a 2007-2009 Convertible Note
and a 2012 Convertible Promissory Note, respectively.
Series
B Preferred Stock - on March 15, 2013, we filed a Certificate of Designations with the State of Illinois under which we
designated 80,000 shares of our Preferred Stock as Series B Preferred Stock (the “Series B Preferred”). The following
describes certain information with respect to the Series B Preferred Stock:
Ranking
– The Series B Preferred has the same ranking as the Series D Preferred described above.
Right
of Conversion – Any holder of Series B Preferred shall have the right to convert each of their Series B Preferred
shares into a number of fully paid and non-assessable shares of common stock calculated as follows: 0.001% of the number of shares
of the our Common Stock that would be issued and outstanding after the hypothetical conversion and issuance of all of the outstanding
shares of any and all classes of convertible stock and/or any and all other convertible debt instruments, options and/or warrants
outstanding at the time of conversion (the “Series B Conversion Ratio”). In no event shall the Series B Conversion
Ratio be less than 4,300 shares of common stock for each Series B Preferred share and more than 10,000 shares of Common Stock
for each Series B Preferred share. No conversion will be allowed which would cause the common share beneficial ownership of the
holder and its affiliates to exceed 4.9% of our issued and outstanding common shares after such conversion unless such provision
is waived by the holder with 61 days’ notice.
Dividends
– Series B Preferred shall not be entitled to dividends.
Liquidation
– In the event of any liquidation, dissolution or winding-up of the affairs of our Company (collectively, a “Liquidation”),
holders of Series B Preferred shall be entitled to $30 per share. If upon any Liquidation, our remaining assets are insufficient
to pay the Series B Preferred holders the full $30 per share to which they are entitled, then the remaining assets shall be distributed
on a pro rata basis to all holders of the Series B Preferred and any other class of our capital stock that ranks equal to or higher
than the Series B Preferred.
Series
C Preferred Stock - on May 15, 2013, we filed a Certificate
of Designations with the State of Illinois under which we designated 50,000 shares of our Preferred Stock as Series C Preferred
Stock (the “Series C Preferred”). The following describes certain information with respect to the Series C Preferred
Stock:
Ranking
– The Series C Preferred ranks, with respect to rights upon Liquidation, (i) senior to the Common Stock, The Series
A Preferred Stock and any and all other classes or series of our Preferred Stock whether authorized now, or at any time in the
future, unless any such subordination to any other class or series of Preferred Stock, is expressly agreed to, pursuant to an
affirmative vote or written consent of holders of at least sixty-seven percent (67%) of the Series C Preferred issued and outstanding
at the time of any such vote or written consent, (ii) junior to the Series D Preferred and Series B Preferred, and (iii) junior
to any and all existing and future indebtedness of the Company.
Right
of Conversion – Any holder of Series C Preferred shall have the right to convert each of their Series C Preferred
shares into a number of fully paid and non-assessable shares of common stock calculated as follows: the face value of Series C
preferred shares (calculated at $100 per share) divided by ninety percent (90%) of the lowest closing price for our common stock,
as quoted on any exchange or market upon which the common stock is traded over the sixty (60) calendar days preceding the date
of conversion (the “Series C Conversion Rate”). In no event shall the Series C Conversion Rate be less 10,000 shares
of common stock for each Series C Preferred share and more than 20,000 shares of Common Stock for each Series C Preferred share.
No conversion will be allowed which would cause the common share beneficial ownership of the holder and its affiliates to exceed
4.9% of our issued and outstanding common shares after such conversion unless such provision is waived by the holder with 61 days’
notice.
Dividends
– Series C Preferred shall not be entitled to dividends.
Liquidation
– In the event of any Liquidation, holders of Series C Preferred shall be entitled to $100 per share after payments
have been made to holders of the Series D Preferred and Series B Preferred. If upon any Liquidation, our remaining assets are
insufficient to pay the Series C Preferred holders the full $100 per share to which they are entitled, then the remaining assets
shall be distributed on a pro rata basis to all holders of the Series C Preferred and any other class of our capital stock that
ranks equal to or higher than the Series C Preferred.
Series
A Preferred Stock - on May 27, 2011, we filed a Certificate of Designations with the State of Illinois under which we
designated 500 shares of our Preferred Stock as Series A Preferred Stock (the “Series A Preferred”). The following
describes certain information with respect to the Series A Preferred Stock:
Ranking
– The Series A Preferred ranks, with respect to rights upon Liquidation, (i) senior to the Common Stock, (ii) junior
to the Series D Preferred, Series B Preferred, and Series C Preferred and (iii) junior to any and all existing and future indebtedness
of the Company.
Right
of Conversion – The Series A Preferred is not convertible into any of our capital stock.
Dividends
– Series A Preferred shall be entitled to dividends at the rate of 10% per annum which are payable upon redemption
of the Series A Preferred. So long as any shares of Series A Preferred are outstanding, no dividends or other distributions may
be paid or declared to any securities which are junior to the Series A Preferred other than dividends or other distributions payable
on the common stock solely in the form of additional shares of common stock. After payment of dividends at the annual rate set
forth above, any additional dividends declared shall be distributed ratably among all holders of the Series A Preferred and common
stock in proportion to the number of shares of common stock that would be held by each such holder of Series A Preferred as if
the Series A Preferred were converted into common stock by taking the Series A Liquidation Value (as defined below) divided by
the market price of one share of common stock on the date of distribution.
Liquidation
– In the event of any Liquidation, any payments to holders of Series A Preferred shall be made only after Liquidation
payments have been made to holders of the Series D Preferred, the Series C Preferred and Series B Preferred. After such payments
have been made, our remaining assets shall be paid to holders of the Series A Preferred up to the amount of $10,000 per Series
A Preferred share plus any accrued but unpaid dividends (the “Series A Liquidation Value”). Any remaining assets shall
be distributed on a pro rata basis to both the Series A Preferred shareholders and the common shareholders as if the Series A
Preferred were converted into common stock.
Redemption
– The Company may redeem any or all of the Series A Preferred at any time at a redemption price per share equal
to the Series A Liquidation Value.
Warrants
On
December 31, 2014, we had outstanding warrants to purchase 43,424,989 of our common shares. The warrants, the majority of which
were issued under a June 3, 2011 securities purchase agreement, expire at various dates through June 3, 2016 and are exercisable
at various per share prices ranging from $0.01 to $1.02.
Stock
Incentive Plans
Under
our 2010 Stock Incentive Plan (the “2010 Plan”), options to purchase 4,000,000 shares of our common stock had been
approved and reserved for grants to employees, officers, directors and outside advisors at fair market value on the date of grant.
At December 31, 2014, we had 367,000 option shares outstanding at an average exercise price of $0.16 per share and 3,633,000 option
shares available for grant.
Under
our 2012 Stock Incentive Plan (the “2012 Plan”), we had 10,000,000 common shares and shares underlying stock options
approved and reserved for the issuance to employees, officers, directors and outside advisors. At December 31, 2014, the Company
had issued 6,170,950 common shares under the 2012 Plan and have 3,829,050 common shares available for issuance.
Both
the 2010 Plan and the 2012 Plan expire after 10 years.
9. Other
Related Party Information
Following
is a summary of total cash compensation, including base salary, bonus and other cash compensation for employees related to Edward
Kurtz, our CEO, for the years ended December 31, 2014 and 2013:
Twelve
months ended December 31, 2014 | | |
$ | 772,332 | |
Twelve months ended
December 31, 2013 | | |
$ | 445,540 | |
A
relative of our former Pharmacist in Charge was a consultant to the Company providing management consulting and other business
advisory services. During the years ended December 31, 2014 and 2013, the consultant’s fees totaled $39,000 and $78,000,
respectively.
10. Commitments
and Contingencies
Leases
Our
facilities, consisting of approximately 7,343 square feet of space, are located in Irvine, California under a rental agreement
that expires on September 30, 2016. The rental agreement includes operating expenses such as common area maintenance, property
taxes and insurance. Total rent expense, which is reflected in general and administrative expenses in the accompanying consolidated
statements of operations, was $83,805 and $53,444 during the years ended December 31, 2014 and 2013, respectively. Future minimum
lease payments under operating leases are as follows: $104,191 for the year ended December 31, 2015 and $80,278 for the year ended
December 31, 2016.
In
connection with certain prior operations which have been discontinued, we have recorded liabilities totaling $360,679 related
to abandoned leases in the accompanying consolidated balance sheets under Liabilities of Discontinued Operations. See Note 7.
Other
Commitments and Contingencies
There
are various other pending legal commitments and contingencies involving our Company, principally first right of refusal conflicts,
material breach of contract, and committed shares with consultants that were never issued. While it is not feasible to predict
the outcome of such commitments, threats, and potential liabilities, in our opinion, either the likelihood of loss is remote or
any reasonably possible loss associated with the resolution of such obligations is not expected to be material to our financial
position, results of operations or cash flows either individually or in the aggregate. In the opinion of our legal counsel, we
have filed cross complaints which should mitigate some or our potential liability.
HIPAA
– The Health Insurance Portability and Accountability Act (“HIPAA”) was enacted on August 21, 1996,
to assure health insurance portability, reduce healthcare fraud and abuse, guarantee security and privacy of health information,
and enforce standards for health information. Organizations are required to be in compliance with HIPAA provisions by April 2005.
Effective August 2009, the Health Information Technology for Economic and Clinical Health Act (“HITECH Act”) was introduced
imposing notification requirements in the event of certain security breaches relating to protected health information. Organizations
are subject to significant fines and penalties if found not to be compliant with the provisions outlined in the regulations. The
Company continues to be in compliance with HIPAA as of December 31, 2014.
Our
decision to obtain insurance coverage is dependent on market conditions, including cost and availability, existing at the time
such decisions are made. We have evaluated our risks and has determined that the cost of obtaining product liability insurance
outweighs the likely benefits of the coverage that is available and, as such, has no insurance for certain product liabilities
effective May 1, 2006.
We
believe that there are no compliance issues associated with applicable pharmaceutical laws and regulations that would have a material
adverse effect on us.
11. Litigation
We
are involved in various lawsuits and claims regarding shareholder derivative actions, third-party billing agency actions, negligent
misrepresentation, and breach of contract, that arise from time to time in the ordinary course of our business.
Nokley
Group LLC
In
February 2014, we were served with a complaint from Nokley Group LLC (“Nokley”) for breach of contract under a Fee
and First Right of Refusal Agreement dated May 25, 2012 between our company and Nokley. In the complaint, which was filed in Nevada,
Nokley stated, among other things, that we sold certain of our accounts receivable to factoring organizations without offering
Nokley first right of refusal which they allege was required under the agreement. While we estimate we would have cross-complaints
against Nokley that would significantly mitigate any potential damages, we first filed a motion to dismiss based on improper venue.
On July 31, 2014, our Company and Nokley agreed to dismiss the action without prejudice, and to have each party to bear its own
attorney fees and costs.
The
Company estimates that the potential range of exposure for this matter, if refiled in a proper venue, is $17,000 to $30,000. As
of December 31, 2014, we have accrued the minimum amount of potential exposure under our estimation that a loss would be probable.
MedCapGroup
LLC
In
May 2014, we were served with a complaint from MedCapGroup LLC (“MedCap”) for breach of contract, breach of covenant
of good faith and fair dealing, intentional misrepresentation, fraud in the inducement, and deceptive trade practices under a
November 2012 Healthcare Accounts Receivable Purchase Agreement between our company and MedCap. MedCap alleged in its complaint
that because we sell our accounts receivable based on dates of service, and not by patient, that only the original purchaser of
a patient’s claims controls all payments and settlement negotiations with the insurer. As a result, MedCap alleged that
we had misrepresented the collectability of certain accounts receivable they had purchased from us and that they had therefore
been damaged. While we estimate we have significant defenses against MedCap’s complaint, we first filed a motion to dismiss
based on improper venue. On July 30, 2014, our motion to dismiss was granted.
In
November 2014, MedCap filed a complaint in the US District Court of Nevada similar to that discussed above. In December 2014,
we counterclaimed against MedCap for intentional and negligent interference of contract based on their agency relationship with
David Brown, the broker/collector retained by MedCap to collect on the accounts receivable they purchased. In addition, third
party complaint along with our answer to bring Mr. Brown into this litigation. At of this date, we cannot reasonably estimate
a potential range of loss with respect to this matter, however we believe we have significant defenses to this complaint, intend
to defend it vigorously, and believe that there no loss that is probable.
Andrew
Warner
On
September 16, 2014, a former officer of the Company, Andrew Warner, filed a lawsuit against us in the Superior Court of California,
Santa Clara (Case No. 114CV270653). In the lawsuit, Mr. Warner is alleging that we breached an oral contract for management services
performed by Mr. Warner, by not paying him certain monies for those services. In the complaint, he is asking for damages of approximately
$300,000. We believe that this action is without merit, and will defend it vigorously and believe that no loss is probable.
Trestles
Pain Specialists
On
March 11, 2015, we filed a lawsuit in the Superior Court of California, Orange County (Case No. 30-2015-00776389) against Trestles
Pain Specialists, LLC (“TPS”), John Garbino and David Fish. We first allege that TPS breached the terms of the consulting
services agreement due to lack of performance by TPS of the agreed upon services. Second, we allege that we were fraudulently
induced into entering into the consulting services agreement due to the misrepresentation made by Mr. Garbino that Mr. Fish, who
has some unsettling issues that were of concern to us, was not an owner of TPS. Had we known that Mr. Fish did have a stake in
TPS, we would not have entered into the consulting services agreement. We allege in the complaint that TPS, Mr. Garbino, and Mr.
Fish owe us damages to us in excess of $1,500,000. In addition we are seeking rescission of the consulting services agreement
so that all monies paid would be refunded to us. On April 6, 2015, TPS filed a lawsuit in the Superior Court of California, Orange
County (Case No. 30-2015-00781113) against us, in which they assert several claims including but not limited to breach of contract,
breach of oral contract and various other claims. We believe such allegations are without merit, and we will vigorously proceed
with our causes of action and defenses, in this litigation.
Judgments
and Orders
In
prior years, a number of judgments and orders were obtained against Pet Airways, Inc. as detailed below. In connection with the
2014 Merger discussed above, two former officers of our Company agreed to purchase our interest in Pet Airways which was meant
to relieve us of the Pet Airways debts. As such, we believe that any obligations of Pet Airways rests with the two former officers
of our Company and not with us. Notwithstanding the foregoing, we have included certain amounts in our balance sheets in the accompanying
consolidated financial statements in the category Liabilities of Discontinued Operations in connection with these matters.
Sky
Way Enterprises
In
April 2012, a judgment was entered against Pet Airways in Circuit Court in and for Palm Beach County, Florida by Sky Way Enterprises,
Inc. in the sum of $187,827 for services rendered, damages, including costs, statutory interest and attorneys’ fees. We
have recorded a liability of $198,500 within Liabilities of discontinued operations at December 31, 2014 in connection with this
matter.
Suburban
Air Freight
On
March 4, 2013, a judgment was entered against Pet Airways in District Court of Douglas County, Nebraska by Suburban Air Freight
in the sum of $87,491 for services rendered, including statutory interest and attorneys’ fees. In August 2014, Suburban
moved to enforce the judgment against Praxsyn in Orange County, California and in November 2014, the Orange County court vacated
Suburban’s motion to enforce judgment as it did not arise in any transaction with Praxsyn. We have recorded a liability
of $90,532 within Liabilities of discontinued operations at December 31, 2014 in connection with this matter.
Alyce
Tognotti
On
March 6, 2013, an order was issued by the labor commissioner of the State of California for Pet Airways, Inc., to pay a former
employee Alyce Tognotti wages and penalties in the sum of $17,611 for services rendered, including penalties, statutory interest
and liquidated damages. We have recorded a liability of $18,771 within Liabilities of discontinued operations at December 31,
2014 in connection with this matter.
AFCO
Cargo
On
May 31, 2013, a motion for final judgment was filed against our subsidiary, Pet Airways, Inc., in Circuit Court in and for Broward
County, Florida by AFCO Cargo BWI, LLC in the sum of $31,120 for services rendered, including statutory interest and attorneys’
fees. We have recorded a liability of $32,331 within Liabilities of discontinued operations at December 31, 2014 in connection
with this matter.
We
record accruals for such contingencies when it is probable that a liability will be incurred and the amount of the loss can be
reasonably estimated. As of December 31, 2014 and 2013, we accrue for liabilities associated with certain litigation matters if
they are both probable and can be reasonably estimated. We have accrued for these matters and will continue to monitor each related
legal issue and adjust accruals for new information and further developments in accordance with ASC 450-20-25, Contingencies.
For these and other litigation and regulatory matters currently disclosed for which a loss is probable or reasonably possible,
we are unable to determine an estimate of the possible loss or range of loss beyond the amounts already accrued. These matters
can be affected by various factors, including whether damages sought in the proceedings are unsubstantiated or indeterminate;
scientific and legal discovery has not commenced or is not complete; proceedings are in early stages; matters present legal uncertainties;
there are significant facts in dispute; or there are numerous parties involved.
In
our opinion, based on our examination of these matters, our experience to date and discussions with counsel, the ultimate outcome
of legal proceedings, net of liabilities accrued in our consolidated balance sheet, is not expected to have a material adverse
effect on our consolidated financial position. However, the resolution in any reporting period of one or more of these matters,
either alone or in the aggregate, may have a material adverse effect on our consolidated results of operations and cash flows
for that period.
12.
Income Taxes
The
following table presents the current and deferred tax provision for federal and state income taxes for the years ended December
31:
| |
2014 | | |
2013 | |
Current tax provision: | |
| | | |
| | |
Federal | |
$ | — | | |
$ | — | |
State | |
| 2,400 | | |
| 1,600 | |
Total | |
| 2,400 | | |
| 1,600 | |
| |
| | | |
| | |
Deferred tax provision (benefit): | |
| | | |
| | |
Federal | |
| (178,142 | ) | |
| 426,654 | |
State | |
| (38,322 | ) | |
| 111,908 | |
Total | |
| (216,464 | ) | |
| 538,562 | |
| |
| | | |
| | |
Total provision (benefit) for
income taxes | |
$ | (214,064 | ) | |
$ | 540,162 | |
Reconciliations
of the U.S. federal statutory rate to the actual tax rate are as follows for the years ended December 31:
| |
2014 | | |
2013 | |
U.S. federal statuatory rate | |
| 34.0 | % | |
| 34.0 | % |
Effects of: | |
| | | |
| | |
State taxes, net of federal benefit | |
| 5.8 | % | |
| 8.8 | % |
Nondeductible
expenses | |
| (41.5 | )% | |
| 27.3 | % |
Effective tax provision (benefit)
rate | |
| (1.7 | )% | |
| 70.1 | % |
The
components of our deferred tax assets (liabilities) for federal and state income taxes consisted of the following as of December
31:
| |
2014 | | |
2013 | |
Current deferred income tax assets (liabilities) | |
| | | |
| | |
Accounts receivable | |
$ | (967,839 | ) | |
$ | (1,957,119 | ) |
Reserves
and accruals | |
| 70,406 | | |
| 1,497,708 | |
Total current deferred tax asset (liability) | |
| (897,433 | ) | |
| (459,411 | ) |
| |
| | | |
| | |
Non-current deferred tax asset (liability) | |
| | | |
| | |
Accounts receivable
| |
| (500,000 | ) | |
| | |
Net operating
losses | |
| 1,402,941 | | |
| 248,455 | |
Total non-current deferred tax asset | |
| 902,941 | | |
| 248,455 | |
Valuation
allowance | |
| — | | |
| — | |
| |
| | | |
| | |
Deferred income tax assets (liabilities) | |
$ | 5,508 | | |
$ | (210,956 | ) |
The
Company has net operating loss (“NOL”) carry forwards of approximately $3,275,000 and $562,000 at December 31, 2014
and 2013, respectively. The NOL carry forwards, if not utilized, will begin to expire in 2031.
As
a result of the Merger, the Company converted from reporting income under the cash basis to the accrual basis for income tax purposes.
The provision for income taxes includes the historical operations of PDC and Mesa Pharmacy, Inc. as well as Praxsyn Corporation
from March 31, 2014, the effective date of the Merger.
The
Company has identified the United States Federal tax returns as its “major” tax jurisdiction. The United States Federal
return years 2010 through 2014 are still subject to tax examination by the United States Internal Revenue Service; however, we
do not currently have any ongoing tax examinations. The Company is subject to examination by the California Franchise Tax Board
for the years ended 2010 through 2014 and currently does not have any ongoing tax examinations.
13. Income
(Loss) Per Share
Basic
and diluted income (loss) per share amounts were calculated by dividing net income (loss) by the weighted average number of common
shares outstanding. The numerators and denominators used to calculate basic and diluted income (loss) per share are as follows
for the years ended December 31, 2014 and 2013:
| |
2014
| | |
2013 | |
Numerator for income (loss) per share: | |
| | | |
| | |
Net
income (loss) attributable to common shareholders for basic income (loss) per share | |
$ | (12,354,399
| ) | |
$ | 230,061 | |
| |
| | | |
| | |
Net income
(loss) attributable to common shareholders for diluted income (loss) per share | |
$ | (12,354,399
| ) | |
$ | 230,061 | |
| |
| | | |
| | |
Denominator for income (loss) per share: | |
| | | |
| | |
Denominator - basic income (loss) per share –
weighted average shares | |
| 268,948,521 | | |
| — | |
Preferred stock: | |
| | | |
| | |
Series D | |
| — | | |
| 175,729,583 | |
Denominator
- diluted income (loss) per share | |
| 268,948,521 | | |
| 175,729,583 | |
The
following weighted-average shares of dilutive common share equivalents are not included in the computation of diluted income (loss)
per share, because their conversion prices exceeded the average market price or their inclusion would be anti-dilutive:
| |
2014
| | |
2013 | |
2007-2009 convertible notes | |
| 3,519,534 | | |
| — | |
2012 convertible notes | |
| 18,627,747 | | |
| — | |
Convertible debentures | |
| 487,500 | | |
| — | |
Convertible note – related party | |
| 2,144,110 | | |
| — | |
Preferred stock: | |
| | | |
| | |
Series D | |
| 408,111,049 | | |
| — | |
Series B | |
| 520,348,767 | | |
| — | |
Series C | |
| 7,297,260 | | |
| — | |
Options | |
| 367,000 | | |
| — | |
Warrants | |
| 43,424,989 | | |
| — | |
| |
| 1,004,327,956 | | |
| — | |
As
previously disclosed, 166,664 Series D Preferred shares were canceled effective December 31, 2014. In addition, effective December
31, 2014, a holder of Series B Preferred stock agreed not to convert 16,000 of his Series B Preferred shares (the “Locked-Up
Shares”) until April 1, 2016. If all dilutive securities had been exercised at December 31, 2014, excluding the Locked-Up
Shares, the total number of common shares outstanding would be approximately 1.359 billion which is below the 1.4 billion authorized.
14. Gain
(Loss) on Extinguishment of Debt
Gain
(loss) on extinguishment of debt for 2014 results from transactions in the following. There was no gain or loss on extinguishment
recorded during 2013.
| |
December
31, 2014 | |
Accounts payable | |
$ | (8,788 | ) |
Convertible notes – 2007-2009 and 2012 | |
| 45,031 | |
Profit sharing notes payable | |
| 180,973 | |
Promissory notes | |
| (23 | ) |
Settlement liabilities | |
| 8,000 | |
| |
$ | 225,193 | |
15. Subsequent
Events
Conversion
of Preferred Stock
Subsequent
to December 31, 2014, shareholders converted preferred stock into common stock as follows:
| |
Preferred
Shares | | |
Common
Shares | |
Series D Preferred | |
| 106,256 | | |
| 106,256,000 | |
Series B Preferred | |
| 1,850 | | |
| 18,500,000 | |
Conversion
of 2012 Convertible Promissory Notes
Subsequent
to December 31, 2014, a note holder converted $18,000 of his note ($13,000 in principal and $5,000 in accrued interest) into 461,894
shares of our common stock in accordance with the provisions of his note.
Agreements
with Consultants for Marketing Services
Subsequent
to December 31, 2014, our consulting agreement with TPS expired and we replaced them with another marketing consultant, Products
for Doctors (“P4D”), on substantially the same terms as the TPS agreement. As a result, the TPS representative resigned
from our Board effective February 23, 2015. The P4D and TPS agreements were mainly concentrated in the workers compensation market.
Additionally, subsequent to December 31, 2014, we entered into a consulting agreement with NHS Pharma Inc. (“NHS”)
under which NHS is to provide marketing services in the PPO market, a new market for us beginning in 2015.
Accounts
Receivable Factoring
Subsequent
to December 31, 2014, we factored gross billing accounts receivable of $15,735,235 and received proceeds of $3,147,047.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.
None.
ITEM
9A. CONTROLS AND PROCEDURES.
Disclosure
controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports
that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial
officers, as appropriate to allow timely decisions regarding required disclosure.
Disclosure
Controls and Procedures
Our
management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial
Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15(d)-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report pursuant
to Rule 13a-15(b) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and acting Chief Financial Officer
concluded that, as of December 31, 2014, subject to the inherent limitations noted in this Part II Item 9A, as of December 31,
2014 our disclosure controls and procedures were not effective due to the existence of material weaknesses in our internal controls
over financial reporting, as discussed below.
Management’s
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules
13a-15(e) and 15d – 15(e) under the Exchange Act as amended. Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial
statements for external purposes in accordance with generally accepted accounting principles in the United States of America (“U.S.
GAAP”).
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our
management assessed the effectiveness of our internal controls over financial reporting as of December 31, 2014 using criteria
established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) and SEC guidance on conducting such assessments. Our management has concluded that our internal
control over financial reporting was not effective as of December 31, 2014 due to material weaknesses in our internal controls.
A
material weakness is a control deficiency, or a combination of control deficiencies, that results in a more than remote likelihood
that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Our management, in consultation with our independent registered public accounting firm, concluded that material weaknesses existed
in the following areas as of December 31, 2014:
(1)
We have inadequate segregation of duties consistent with the control objectives including but not limited to the disbursement
process, transaction or account changes, account reconciliations and approval and the performance of bank reconciliations;
(2)
We do not have a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside
directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal
controls, approvals and procedures.
Management
believes the material weakness set forth in item 1 above did not have an effect on our financial results. However, management
believes that the lack of a functioning audit committee and a lack of a majority of outside directors on our board of directors
results in a lack of oversight in the establishment and monitoring of required internal controls and procedures, which could result
in a material misstatement in our consolidated financial statements in future periods.
Management’s
Remediation Initiatives
In
order to remedy the identified material weaknesses and other deficiencies and enhance our internal controls, management would
initiate, when funding permits, the following series of measures: 1) create a financial position that adequately segregates financial
duties consistent with control objectives; 2) hire staff technically proficient at applying U.S. GAAP to financial transactions
and reporting; and 3) appoint one or more outside directors to our board of directors who shall be appointed to an audit committee
resulting in a fully functioning audit committee who will perform the oversight in the establishment and monitoring of required
internal controls and procedures including but not limited to a) review and approval of significant transactions; b) selection
and approval of the services of the independent registered public accounting firm; and c) review and approval of the report of
the registered independent certified public accountants on the required periodic external reports.
This
annual report does not include an attestation report of our registered independent certified public accountants regarding internal
control over financial reporting. Management’s report was not subject to attestation by our registered independent certified
public accounting firm pursuant to rules adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act that permit
us to provide only management’s report in this annual report.
Changes
in Internal Control over Financial Reporting
There
have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) that occurred during the calendar quarter and for the year ended December 31, 2014 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM
9B. OTHER INFORMATION.
None.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The
following table sets forth the name, age and position of each of our executive officers and directors:
Name |
|
Age |
|
Position |
|
|
|
|
|
Edward F. Kurtz |
|
52 |
|
Chairman, Chief
Executive Officer, Chief Financial Officer and Director |
|
|
|
|
|
Kelly Reynolds |
|
46 |
|
Chief Administrative
Officer and Director |
|
|
|
|
|
Kimberly Brooks |
|
39 |
|
Secretary |
|
|
|
|
|
Evon L. Midei |
|
63 |
|
Director |
|
|
|
|
|
Jonathan Renkas,
M.D. |
|
47 |
|
Director |
|
|
|
|
|
John Garbino |
|
43 |
|
Former Director |
Business
Experience
We
believe that our board should be composed of individuals with sophistication and experience in many substantive areas that impact
our business. We believe the experience, qualifications, or skills in the following areas are most important: sales and marketing;
strategic planning; human resources and development practices; and board practices from other corporations. These areas are in
addition to the personal qualifications described in this section. We believe that all of our current board members possess the
professional and personal qualifications necessary for board service, and have highlighted particularly noteworthy attributes
of each Board member in the individual biographies below. The principal occupation and business experience, for at least the past
five years, of each current director is as follows.
Edward
F. Kurtz has been a business executive for over 25, years working as a General Manager and then a CEO of two successful companies
in Orange County, California. After selling his business in late 2007, a group of investors presented Mr. Kurtz the opportunity
to build a chain of pharmacies. Over the next two years, as Chief Operating Officer, he created and executed a plan that acquired
two existing pharmacies and built three new stores. In all, five retail pharmacies were under his control and management. The
eventual result was the merger of Pharmacy Development Corporation (“PDC-CA”) into PDC, INC., a wholly owned subsidiary
of the Company on March 31, 2014.
Kelly
Reynolds has worked in the pharmacy industry for over 5 years, and has over 10 years of experience in the medical administration
field including medical billing, data management and the management of the day-to-day operations. Ms. Reynolds is hands-on in
developing programs that sustain Mesa Pharmacy’s growth and has managed multiple retail pharmacies throughout her career.
In 2011, Ms. Reynolds developed an in-house worker’s compensation billing and collections department which allowed Mesa
Pharmacy to manage its claims in a cost-effective and efficient manner. She also developed a paperless program for Mesa Pharmacy
which improved patient security, as well as increasing the overall efficiency of the pharmacy. In addition, Ms. Reynolds is responsible
for implementing every database that Mesa Pharmacy utilizes, transforming Mesa Pharmacy into a nation-wide multi-network pharmacy.
Kimberly
Brooks has been a sole practitioner since August of 2011, where she works regularly with boards of directors and executive
management teams on entity formation, corporate governance, mergers and acquisitions and other general business transactional
issues. Her legal career began in Orange County, California in 2007, where she worked as an associate at a boutique law firm practicing
in general corporate transactional matters. For law school, she attended school in San Diego, CA, at Thomas Jefferson School of
Law graduating cum laude with a Juris Doctorate. For undergrad, she attended school in Northridge, California at California State
University Northridge, graduating cum laude with a B.A. in Psychology, with a minor in Woman’s Studies. She was admitted
to the State Bar of California on December 6, 2006.
Evon
L. Midei is a registered pharmacist with over 35 years’ experience in pharmacy operations, pharmacy management and executive
level hospital administration. Since 2011, Mr. Midei has served as independent consultant with Empire Pharmacy Consultations in
Miami, Florida, providing management and other operational consulting services to various pharmacy and healthcare organizations.
From 1995 to 2010, he was a pharmacist with CVS in Allentown, Pennsylvania. In 1996, he was Director of Operations for Raytel
Medical Corporation in Windsor, Canada. From 1982 to 1995, he was employed by St. Luke’s Hospital in Allentown, Pennsylvania,
where he initially was Risk Manager/Special Projects Administrator. During his tenure at the hospital, he rose to become Senior
Vice President and Chief Operating Officer, serving in such position from 1993 to 1995. In such capacity, he was responsible for
day to day operations of the hospital and its affiliated businesses. He also negotiated managed care contracts of all types with
manage care organizations, physicians, employers and government agencies. Prior to joining St. Luke’s, Mr. Midei occupied
various positions in the healthcare and pharmacy industry, including Pharmacist Manager of Thrift Drugs, in Bethlehem, Pennsylvania
from 1973 to 1979, where he managed all aspects of the operation of this multi-million dollar community pharmacy.
Jonathan
Renkas, M.D., is a practicing emergency room physician in the Chicago, Illinois area, where he has been affiliated with West
Suburban Medical Center since March 2013. Prior thereto, he was affiliated with various hospitals in Wisconsin and Indiana since
2006. From 2004 to 2006, he served as Senior Vice President and Chief Medical Officer of U.S. Asthma Care, based in Fort Worth,
Texas and contemporaneously as Utilization Management Medical Director of Midland Management Company. Since 2006, he has also
served on a consulting basis as Senior Quality Management Analyst for Sterling HealthCare Initiatives in Chicago, Illinois.
John
Garbino is one of the country’s leading experts in pharmaceutical sales. Over the last 14 years, he has held leadership
roles in the sales and marketing of pharmaceuticals to medical practitioners achieving unpatrolled success in sales volumes and
market penetration. After several similar positions, he was named Director of Sales and Marketing for Southwood Pharmaceuticals
where he directed the growth from $2,000,000 to over $40,000,000 annually and expanded sales to a nationwide client base. In 2005
he was made President of Comp Billing & Funding Inc., a new division of Southwood Pharmaceuticals, with the responsibility
to build the new Workers Compensation program, building it to $5,000,000 with the first 10 months. In conjunction with this program,
he built, trained and managed the sales team that grew the program to upwards of $20,000,000. He is currently the CEO of Trestles
Pain Management (“Trestles”) that acts as a pharmaceutical management consultant to the industry. Effective
February 23, 2015, Mr. Garbino has resigned as a member of the board of directors.
Directors
serve at the discretion of the board of directors. Executive officers are appointed by and serve at the discretion of the board
of directors.
Family
Relationships
Mr.
Kurtz, our Chairman, Chief Executive Officer and Chief Financial Officer and Ms. Reynolds, our Chief Administrative Officer are
brother-in-law and sister-in-law.
Compliance
with Section 16(a) of the Exchange Act
The
SEC has adopted rules relating to the filing of ownership reports under Section 16 (a) of the Exchange Act. Section 16(a) of the
Exchange Act requires our directors, officers and stockholders who beneficially own more than 10% of any class of our equity securities
registered pursuant to Section 12 of the Exchange Act to file initial reports of ownership and reports of changes in ownership
with respect to our equity securities with the SEC. However, we are not subject to the reporting requirements under Section 16(a),
and therefore any filings made in accordance with Section 16(a) are made on a voluntary basis.
Audit
Committee and Audit Committee Financial Expert
Due
to the size of our operation, members of the board of directors serve collectively as the Audit Committee and have primary responsibility
for monitoring the quality of internal financial controls and ensuring that the financial performance of our company is properly
measured and reported on. It receives and reviews reports from management and our auditors relating to the annual, periodic and
interim accounts and the accounting and internal control systems in use throughout our company.
Our
Audit Committee also consults with our independent registered public accounting firm prior to the presentation of financial statements
to stockholders and, as appropriate, initiates’ inquiries into aspects of our financial affairs. Our Audit Committee is
responsible for establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal
accounting controls or auditing matters, and for the confidential, anonymous submission by our employees of concerns regarding
questionable accounting or auditing matters. The Audit Committee meets not less than quarterly and has unrestricted access to
our auditors.
Code
of Business Conduct and Ethics
Due
to our small size and limited number of persons comprising our management, we have not adopted a code of ethics that applies to
our principal executive officer, principal accounting officer, or persons performing similar functions.
Shareholder
Communications
We
have not implemented any formal procedures for shareholder communication with our board of directors. Any matter intended for
our board of directors, or for any individual member or members of our board of directors, should be directed to our corporate
secretary at Praxsyn Corporation (formerly known as The PAWS Pet Company, Inc.), 18011 Sky Park Circle, Suite N, Irvine, CA 92614.
In general, all shareholder communications delivered to the corporate secretary for forwarding to the board of directors or specified
members of the board of directors will be forwarded in accordance with shareholder’s instructions. However the corporate
secretary reserves the right to not forward to members of the board of directors any abusive, threatening or otherwise inappropriate
materials.
ITEM
11. EXECUTIVE COMPENSATION.
Summary
Compensation Table
Set
forth below is a summary of compensation for our principal executive officer and our two most highly compensated officers other
than our principal executive officer (collectively, the “named executive officers”) for our last two fiscal years.
There have been no annuity, pension or retirement benefits ever paid to our officers, directors or employees. With the exception
of reimbursement of expenses incurred by our named executive officers during the scope of their employment and unless expressly
stated otherwise in a footnote below, none of the named executive officers received other compensation, perquisites and/or personal
benefits in excess of $10,000.
| |
| | |
| | |
| | |
Stock | | |
All
Other | | |
| |
| |
| | |
Salary | | |
Bonus | | |
Awards | | |
Compensation | | |
Total | |
Name
and Principal Position | |
Year | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | |
Edward F. Kurtz, CEO, CFO (1) | |
| 2014 | | |
$ | 148,388 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 148,388 | |
| |
| 2013 | | |
$ | 97,313 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 97,313 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Kimberly Brooks, Secretary (2) | |
| 2014 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 115,061 | | |
$ | 115,061 | |
| |
| 2013 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Dan Wiesel, former CEO and former acting | |
| 2014 | | |
$ | 102,000 | | |
$ | — | | |
$ | — | | |
$ | 2,304,000 | | |
$ | 102,000 | |
CFO (3) (4) | |
| 2013 | | |
$ | 245,000 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 245,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Alysa Binder, former EVP and former Chief | |
| 2014 | | |
$ | 83,000 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 83,000 | |
Development Officer (3) (4) | |
| 2013 | | |
$ | 200,000 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 200,000 | |
(1) |
Mr.
Kurtz became our CEO on May 28, 2014 and our CFO on July 14, 2104. |
|
|
(2) |
Ms.
Brooks became our Secretary on May 28, 2014 and an employee on April 1, 2015. Prior to becoming an employee, Ms. Brooks performed
legal services for us and her compensation for those services is shown under All Other. |
|
|
(3) |
Mr.
Wiesel and Ms. Binder were terminated on May 28, 2014. Mr. Wiesel and Ms. Binder are husband and wife. |
|
|
(4) |
On
March 26, 2014 we issued 60,000,000 shares or our common stock to Watermark Inc., a company controlled by Mr. Wiesel. The
shares were issued in exchange for Mr. Wiesel’s and Ms. Binder’s agreement to purchase our interest in Pet Airways
and to forgive their unpaid wages and their value is shown under All Other. As of the date of this report, Mr. Wiesel and
Ms. Binder had not fulfilled their obligation to purchase our interest in Pet Airways, and other matters between the parties
are in dispute. |
We
have not entered into any employment agreements with our named executive officers.
Outstanding
Equity Awards at Year-End
As
of December 31, 2014, there were no outstanding vested awards owned by a former executive officer.
Director
Compensation
Effective
March 2011, the Company pays each non-employee director a fee of $1,500 for each “in-person” board or committee meeting
and $500 for every telephonic board or committee meeting. All directors are reimbursed for all reasonable expenses incurred in
connection with the performance of their respective duties as a director. Payments totaling $26,000 were made to directors during
the year ended December 31, 2014. No payments were made to directors during the year ended December 31, 2013.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The
following table sets forth certain information concerning the beneficial stock ownership of each class of our voting securities
as of the date of this report. The information is presented with respect to: (i) each person who is known to us to beneficially
own more than 5% of each class of our voting securities; (ii) each officer and director; and (iii) all directors and officers
as a group; based upon 577,107,157 shares of outstanding common stock and 226,080 shares of outstanding Series D Preferred Stock.
| |
Common
Stock | | |
Series
D Preferred Stock | |
Name
and Address of Beneficial Owners (1) (3) | |
Amount
and Nature of
Beneficial Ownership | | |
Percent
Ownership
of Class (2) | | |
Amount and
Nature of
Beneficial Ownership | | |
Percent
Ownership
of Class (2) | |
Officers and
Directors | |
| | | |
| | | |
| | | |
| | |
Edward F. Kurtz, CEO, CFO, Director | |
| -0- | | |
| 0.0 | % | |
| 7,500 | | |
| 3.3 | % |
Kelly Reynolds, Chief Administrative Officer, Director | |
| -0- | | |
| 0.0 | % | |
| 7,500 | | |
| 3.3 | % |
Jonathan Renkas, Director | |
| 10,000,000 | | |
| 1.7 | % | |
| -0- | | |
| 0.0 | % |
Evon Midei, Director | |
| 16,000,000 | | |
| 2.8 | % | |
| -0- | | |
| 0.0 | % |
Kimberly Brooks, Secretary | |
| -0- | | |
| 0.0 | % | |
| -0- | | |
| 0.0 | % |
All executive officers and directors as a group (4 persons) | |
| 26,000,000 | | |
| 4.6 | % | |
| -0- | | |
| 0.0 | % |
| |
| | | |
| | | |
| | | |
| | |
5% Owners | |
| | | |
| | | |
| | | |
| | |
Dan Wiesel and Alysa Binder (4) | |
| 77,923,273 | | |
| 13.5 | % | |
| -0- | | |
| 0.0 | % |
Socius CG II Ltd (5) | |
| 43,206,884 | | |
| 7.5 | % | |
| -0- | | |
| 0.0 | % |
Andrew Do
| |
| -0- | | |
| 0.0 | % | |
| 25,000 | | |
| 11.1 | % |
Ben Birch
| |
| -0- | | |
| 0.0 | % | |
| 17,733 | | |
| 7.8 | % |
Betty Konecny
| |
| -0- | | |
| 0.0 | % | |
| 18,192 | | |
| 8.1 | % |
My Tu Do
| |
| -0- | | |
| 0.0 | % | |
| 17,262 | | |
| 7.6 | % |
*Less
than 1%.
(1) |
c/o
our address, 18011 Sky Park Circle, Suite N, Irvine, CA 92614, unless otherwise noted. |
|
|
(2) |
Except
as otherwise indicated, we believe that the beneficial owners of common stock listed above, based on information furnished
by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where
applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities. Shares of common stock which may be owned as a result
of conversion or exercise within 60 days are deemed outstanding for purposes of computing the percentage of the person holding
such convertible securities but are not deemed outstanding for purposes of computing the percentage of any other person. |
|
|
(3) |
Our
Series B and Series C Preferred Stock, which are non-voting, are convertible into shares of our common stock at the rates
of 10,000 to one and 20,000 to one, respectively. Both the B and C Series contain a provision that limits the number of common
shares a holder may own subsequent to conversion to 4.9% of the outstanding common shares. |
|
|
(4) |
Dan
Wiesel and Alysa Binder are husband and wife and own their shares jointly with right of survivorship. |
|
|
(5) |
Includes
33,115,557 warrants. |
Equity
Compensation Plan Information
The
following is certain information about our equity compensation plans as of December 31, 2014.
| |
Number
of Securities to be
issued upon the exercise of options,
warrants and
rights | | |
Weighted
average exercise price of
outstanding options warrants and rights | | |
Number
of securities remaining available
for future issuance
under equity compensation plans
(excluding securities
reflected in column (a)) | |
Equity Compensation Plans not approved
by security holders | |
| 367,000 | | |
$ | 0.16 | | |
| 3,633,000 | |
Stock
Incentive Plan
In
2010, we adopted our Stock Incentive Plan (the “Plan”). Under the Plan we have 4,000,000 shares reserved for the issuance
of stock options to employees, officers, directors and outside advisors. Under the plan, the options may be granted to purchase
shares of our common stock at fair market value at the date of grant.
There
are options to purchase 367,000 shares under the Plan as of both December 31, 2014 and 2013.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
None.
Director
Independence
Pursuant
to Item 407 (a) (i) (ii) of regulation S-K promulgated under the Securities Act, we have adopted the definition of “independent
director” as set forth in Rules 5000 (a)(19) and 5605(a)(2) of the rules of the NASDAQ Stock Market. The independent directors
serving on our board presently are Jonathan Renkas and Evon Medei. Our board of directors has not created separately designated
standing committees. Officers are appointed annually by our board of directors and serve at the discretion of our board of directors.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
dbbmckennon
were our Independent Registered Public Accounting Firm that examined our consolidated financial statements for the years ended
December 31, 2014 and 2013.
Audit
Fees
Our
independent auditors billed us $166,425 and $22,000, respectively, for the examination of our annual consolidated financial statements
for the years ended December 31, 2014 and 2013 and the review of the consolidated financial statements included in each of our
interim reports during the years ended December 31, 2014 and 2013.
Tax
Fees
During
the fiscal year ended December 31, 2014, dbbmckennon billed us $11,250 for tax compliance and consultations. For the year ended
December 31, 2013, there were no fees billed by our independent auditors for tax compliance and consultations.
All
Other Fees
During
the years ended December 31, 2014 and 2013, there were no fees billed for products and services provided by our independent accountants.
Audit
Committee Approval
Our
board of directors serves as our audit committee. It approves the engagement of our independent auditors including the scope of
accounting services to be perform.
PART
IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
1.
Consolidated financial statements:
The
consolidated financial statements included in Item 8. Consolidated Financial Statements and Supplementary Data above are filed
as part of this annual report.
2.
Financial Statement Schedules:
There
are no consolidated financial statements schedules filed as part of this annual report, since the required information is included
in the consolidated financial statements, including the notes thereto, or the circumstances requiring inclusion of such schedules
are not present.
3.
Exhibits:
Exhibit No. |
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Description |
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3.1 |
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Amended and Restated Articles of Incorporation (incorporated
by reference to Exhibit 3.1 to the registration statement Form SB-2, File No. 333-130446, initially filed with the SEC on
December 19, 2005, as amended) |
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3.2 |
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Amended and Restated Bylaws (incorporated by reference to Exhibit
3.2 to registration statement Form SB-2, File No. 333-130446, initially filed with the SEC on December 19, 2005, as amended) |
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3.3 |
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Amendment to Articles of Incorporation (incorporated by reference
to Exhibit 3.1 to the current report on Form 8-K filed with the SEC on October 25, 2010) |
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3.4 |
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Amendment to Articles of Incorporation (incorporated by reference
to Exhibit 3.1 to the current report on Form 8-K filed with the SEC on July 20, 2012) |
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3.5 |
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Amendment to Articles of Incorporation (incorporated by reference
to Exhibit 3.1(i) and Exhibit 3.2(i) to the current report on Form 8-K filed with the SEC on January 27, 2015) |
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10.1 |
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Form of Share Exchange Agreement, dated as of June 25, 2010,
among the Registrant, Pet Airways, Inc., a Florida corporation (“PAWS”), the shareholders of PAWS, and Joseph
A. Merkel, Kevin T. Quinlan, and Bellevue Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the current report
on Form 8-K filed with the SEC on July 1, 2010) |
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10.2 |
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Form of 8% Convertible Debenture (incorporated by reference
to Exhibit 10.1 to the current report on Form 8-K filed with the SEC on August 17, 2010) |
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10.3 |
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Form of Subscription Agreement for 8% Convertible Debentures
and Share Purchase Warrants (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed with the SEC
on August 17, 2010) |
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10.4 |
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Form of Common Stock Subscription Agreement (incorporated by
reference to Exhibit 10.1 to the current report on Form 8-K filed with the SEC on November 9, 2010) |
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10.5 |
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Form of Share Exchange Agreement, dated as of February 23, 2012,
among the Registrant, The PAWS Pet Company, Inc, an Illinois corporation (“PAWS”), and all the shareholders of
Impact Social Networking Inc., a Georgia corporation, (incorporated by reference to Exhibit 2.1 to the current report on Form
8-K filed with the SEC on February 29, 2012) |
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10.6 |
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Form of Security Purchase Agreement, dated February 27, 2012
(incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed with the SEC on March 7, 2012) |
|
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10.7 |
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Form of 8% Convertible Promissory Note, dated as of February
27, 2012, (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed with the SEC on March 7, 2012) |
|
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10.8 |
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Form of Security Purchase Agreement, dated April 16, 2012 (incorporated
by reference to Exhibit 4.1 to the current report on Form 8-K filed with the SEC on April 26, 2012) |
10.9 |
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Form of 8% Convertible Promissory Note, dated as of April 16,
2012, (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed with the SEC on April 26, 2012) |
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10.9 |
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Stock Incentive Plan, dated as of February 9, 2012, (incorporated
by reference to Exhibit 4.1 to the Form S-8 filed with the SEC on April 26, 2012) |
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10.10 |
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Form of Subscription Agreement (incorporated by reference to
Exhibit 10.1 to the current report on Form 8-K filed with the SEC on June 19, 2012) |
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10.11 |
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Form of Subscription Agreement (incorporated by reference to
Exhibit 10.1 to the current report on Form 8-K filed with the SEC on July 7, 2012) |
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10.12 |
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Form of Security Purchase Agreement, dated July 17, 2012 (incorporated
by reference to Exhibit 4.1 to the current report on Form 8-K filed with the SEC on July 26, 2012) |
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10.13 |
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Form of 8% Convertible Promissory Note, dated as of July 17,
2012, (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed with the SEC on July 26, 2012) |
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10.14 |
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Securities Exchange Agreement dated March 9, 2013, (incorporated
by reference to Exhibit 10.1 to the current report on Form 8-K filed with the SEC on March 15, 2013) |
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10.15 |
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Exhibit B to the Securities Exchange Agreement dated March 9,
2013, (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed with the SEC March 15, 2013) |
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10.16 |
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Bellevue Securities Exchange Agreement 2011 Warrants effective
as of May 10, 2013, (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed with the SEC on June
7, 2013) |
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10.17 |
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Bellevue Settlement Agreement effective as of May 10, 2013,
(incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed with the SEC on June 7, 2013) |
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10.18 |
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Fantasy Securities Exchange Agreement 2010 Note effective as
of May 10, 2013, (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K filed with the SEC on June 7,
2013) |
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|
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10.19 |
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Fantasy Securities Exchange Agreement 2011 Warrants effective
as of May 10, 2013, (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K filed with the SEC on June
7, 2013) |
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10.20 |
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Fantasy Settlement Agreement effective as of May 10, 2013, (incorporated
by reference to Exhibit 10.5 to the current report on Form 8-K filed with the SEC on June 7, 2013) |
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10.21 |
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PDC Merger Agreement effective March 31, 2014 (incorporated
by reference to Exhibit 10.1 to the current report on Form 8-K filed with the SEC on April 1, 2014) |
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10.22 |
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Consulting Services Agreement effective January 23, 2014 (incorporated
by reference to Exhibit 10.1 to the quarterly report filed with the SEC on November 19, 2014) |
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10.23 |
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Amendment No. 1 to Exhibit A of the Consulting Services Agreement
effective June 1, 2014 (incorporated by reference to Exhibit 10.2 to the quarterly report filed with the SEC on November 19,
2014) |
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10.24 |
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Stock Purchase Agreement effective January 23, 2014 (incorporated
by reference to Exhibit 10.3 to the quarterly report filed with the SEC on November 19, 2014) |
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10.25 |
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Marketing Company Agreement effective January 26, 2015 (incorporated
by reference to Exhibit 10.2 to the current report on Form 8-K filed with the SEC on April 1, 2014) |
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10.26 |
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Script Processing Service Contract effective October 11, 2014
(incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed with the SEC on February 26, 2015) |
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16.1 |
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Letter from Cordovano and Honick LLP regarding the resignation
of the independent accountant (incorporated by reference to Exhibit 16.1 to the current report on Form 8-K filed with the
SEC on August 31, 2010) |
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21.1 |
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Subsidiaries of the Registrant.* |
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31.1 |
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Certification of Chief Executive Officer pursuant to Section
302, of the Sarbanes-Oxley Act of 2002.* |
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32.1 |
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Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
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101.INS |
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XBRL Instance Document** |
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101.SCH |
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XBRL Taxonomy Extension Schema Document** |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase Document** |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document** |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase Document** |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase Document** |
* Filed
herewith
**
In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this annual report on
Form 10-K shall be deemed “furnished” and not “filed”.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
Praxsyn
Corporation (Formerly Known As The PAWS Pet Company, Inc.) |
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By: |
/s/
Edward Kurtz |
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Edward
Kurtz |
|
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Chief
Executive Officer and Chief Financial Officer |
Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf
of the Registrant in the capacities and on the dates indicated.
Signatures |
|
Titles |
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Date |
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|
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By: |
/s/ Edward
Kurtz |
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Chairman, Chief Executive Officer and Chief Financial
Officer |
|
April 15, 2015 |
|
Edward Kurtz |
|
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By: |
/s/ Kelly Reynolds |
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Director |
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April 15, 2015 |
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Kelly Reynolds |
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|
|
By: |
/s/ Jonathan Renkas, M.D. |
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Director |
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April 15, 2015 |
|
Jonathan Renkas |
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|
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Exhibit 21.1
Subsidiaries
1. Mesa Pharmacy, Inc.
2. NexGen Med Solutions, LLC
Exhibit 31.1
SECTION 302 CERTIFICATION OF PRINCIPAL
EXECUTIVE OFFICER
PURSUANT TO SECURITIES EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ed Kurtz, Chief Executive Officer and Chief Financial
Officer, certify that:
1. |
I have reviewed this annual report on Form 10-K of PRAXSYN CORPORATION; |
|
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
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|
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b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Date: April 15, 2015
/s/ Ed Kurtz |
|
Ed Kurtz |
|
Chief Executive Officer and Chief Financial Officer |
|
Exhibit 32.1
PRAXSYN CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report on Form 10-K of PRAXSYN
CORPORATION (the “Company”) for the year ended December 31, 2014, as filed with the Securities and Exchange Commission
on the date hereof (the “Report”), I, Ed Kurtz, the Chief Executive Officer and Chief Financial Officer of the Company,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that, to
my knowledge:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in this Form 10-Q fairly presents,
in all material respects, the financial condition and results of operations of the Company.
IN WITNESS WHEREOF, I have executed this certificate as of
this 15th day of April, 2015.
/s/ Ed Kurtz |
|
Ed Kurtz |
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Chief Executive Officer and Chief Financial Officer |
|
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