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Document and Entity Information

v2.4.0.6
Document and Entity Information
6 Months Ended
Jun. 30, 2012
Aug. 14, 2012
Document Information [Line Items]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jun. 30, 2012  
Document Fiscal Year Focus 2012  
Document Fiscal Period Focus Q2  
Entity Registrant Name TARGETED MEDICAL PHARMA, INC.  
Entity Central Index Key 0001420030  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   22,049,976

CONSOLIDATED BALANCE SHEETS

v2.4.0.6
CONSOLIDATED BALANCE SHEETS (USD $)
Jun. 30, 2012
Dec. 31, 2011
Current Assets:    
Cash and Cash Equivalents $ 44,603 $ 147,364
Inventory 1,140,635 495,821
Accounts Receivable 568,302 899,493
Loans Receivable - Employees 92,688 23,360
Prepaid Expenses - Short Term 676,587 241,208
Prepaid Taxes 894,301 792,301
Deferred Tax Asset - Short Term 301,626 300,170
Total Current Assets 3,718,742 2,899,717
Property and Equipment - Net of Accumulated Depreciation 422,274 411,823
Intangible Assets - Net of Accumulated Amortization 2,365,237 2,387,801
Prepaid Expenses - Long Term 81,245 111,259
Deferred Tax Asset - Long Term 4,606,052 3,141,176
Other Assets 26,000 26,000
Total Assets 11,219,550 8,977,776
Liabilities:    
Accounts Payable and Accrued Expenses 5,897,038 5,035,136
Notes Payable-Related Parties net of $0 and $591,702 discount on warrants issued as of June 30, 2012 and December 31, 2011 5,227,000 1,775,561
Other Amounts due to Related Parties 585,448 602,948
Deferred Tax Liability - Current 69,648 69,648
Total Current Liabilities 11,779,134 7,483,293
Deferred Income Taxes 943,234 887,050
Total Liabilities 12,722,368 8,370,343
Shareholders' Equity:    
Preferred stock, $0.001 par value; 20,000,000 shares authorized, no shares issued and outstanding      
Common stock, $0.001 par value; 100,000,000 shares authorized, 21,949,576 and 21,949,576 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively 21,950 21,950
Additional Paid-In Capital 6,374,584 4,684,095
Accumulated Deficit (7,899,352) (4,098,612)
Total Shareholders' Equity (1,502,818) 607,433
Total Liabilities and Shareholders' Equity (Deficit) $ 11,219,550 $ 8,977,776

CONSOLIDATED BALANCE SHEETS (Parenthetical)

v2.4.0.6
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Jun. 30, 2012
Dec. 31, 2011
Notes Payable-Related Parties, discount on warrants issued $ 0 $ 591,702
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 20,000,000 20,000,000
Preferred stock, shares issued      
Preferred stock, shares outstanding      
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 21,949,576 21,949,576
Common stock, shares outstanding 21,949,576 21,949,576

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

v2.4.0.6
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Revenues:        
Product Sales $ 1,331,005 $ 2,149,948 $ 2,603,815 $ 4,031,325
Service Revenue 117,221 224,984 219,596 378,932
Total Revenue 1,448,226 2,374,932 2,823,411 4,410,257
Cost of Product Sold 179,678 258,273 369,671 541,933
Cost of Services Sold 441,582 297,123 886,324 670,462
Total Cost of Sales 621,260 555,396 1,255,995 1,212,395
Total Gross Profit 826,966 1,819,536 1,567,416 3,197,862
Operating Expenses:        
Research and Development 30,009 32,372 57,273 69,120
Selling, General and Administrative 2,494,018 2,696,893 4,778,372 5,560,861
Total Operating Expenses 2,524,027 2,729,265 4,835,645 5,629,981
Net Income (Loss) before Other Income and Expense (1,697,061) (909,729) (3,268,229) (2,432,119)
Other Income and Expense:        
Interest Income (Expense) (1,866,818)   (1,942,657)  
Investment Income (Loss)   13   7,638
Total Other Income and (Expense) (1,866,818) 13 (1,942,657) 7,638
Net Income (Loss) before Taxes (3,563,879) (909,716) (5,210,886) (2,424,481)
Deferred Income Tax Expense (Benefit) (739,056) (338,185) (1,410,146) (924,160)
Net Income (Loss) before Comprehensive Income (2,824,823) (571,531) (3,800,740) (1,500,321)
Reclassification for losses included in Net Income       (3,209)
Comprehensive Income (Loss) $ (2,824,823) $ (571,531) $ (3,800,740) $ (1,503,530)
Basic and Diluted Loss Per Share $ (0.13) $ (0.03) $ (0.17) $ (0.07)
Basic and Diluted Weighted Average Number of Common Shares Outstanding 21,949,576 21,949,576 21,949,576 21,328,175

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

v2.4.0.6
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $)
Total
Common Stock
Additional Paid-In Capital
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Beginning Balance at Dec. 31, 2010 [1] $ 3,291,270 $ 18,309 $ 3,191,314 $ 78,438 $ 3,209
Beginning Balance (in shares) at Dec. 31, 2010 [1]   18,308,576      
Stock Issued for Services (in shares)   16,000      
Stock Issued for Services 40,800 16 40,784    
Shares issued to existing shell shareholders in the reorganization (in shares)   3,625,000      
Shares issued to existing shell shareholders in the reorganization (500,000) 3,625 (503,625)    
Reclassification of Gains to Net Income (3,209)       (3,209)
Warrants Issued in connection with loans from related party 591,702   591,702    
Stock Option Expense 1,363,920   1,363,920    
Net Loss (4,177,050)     (4,177,050)  
Ending Balance at Dec. 31, 2011 607,433 21,950 4,684,095 (4,098,612)  
Ending Balance (in shares) at Dec. 31, 2011   21,949,576      
Warrants Issued in connection with loans from related party 1,301,457   1,301,457    
Stock Option Expense 389,032   389,032    
Net Loss (3,800,740)     (3,800,740)  
Ending Balance at Jun. 30, 2012 $ (1,502,818) $ 21,950 $ 6,374,584 $ (7,899,352)  
Ending Balance (in shares) at Jun. 30, 2012   21,949,576      
[1] The stockholders' equity has been recapitalized to give effect to the shares exchanged by existing shareholders pursuant to the merger agreement dated January 31, 2011, more fully discussed in Note 6 to these financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

v2.4.0.6
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Cash Flows from Operating Activities:    
Net Income $ (3,800,740) $ (1,500,321)
Adjustments:    
Depreciation and Amortization 223,291 215,766
Stock Option Compensation 389,032 530,973
Stock Issued for Services   40,800
Deferred Income Taxes (1,410,146) (924,160)
Amortization of Note Discount 1,942,657  
Changes:    
Inventory (644,814) 3,861
Accounts Receivable 331,191 (248,229)
Loans Receivable - Employees (69,328) (153,442)
Prepaid Expenses (405,365) 3,888
Prepaid Taxes (102,000) 191,723
Deferred Tax Asset (130,947)  
Other Assets      
Accounts Payable and Accrued Expenses 861,902 863,530
Taxes Payable      
Deferred Tax Liability 56,184 56,603
Net Cash Flows from Operating Activities (2,759,083) (919,008)
Cash Flows from Investing Activities:    
Net Sales or (Purchases) of Investments   241,207
Acquisition of Intangible Assets (102,255) (369,172)
Purchases of Property and Equipment (108,923) (66,651)
Net Cash Flows from Investing Activities (211,178) (194,616)
Cash Flows from Financing Activities:    
Notes Payable-Related Parties 2,885,000 450,000
Due to Related Parties (17,500)  
Net Cash Flows from Financing Activities 2,867,500 450,000
Net Change in Cash and Cash Equivalents (102,761) (663,624)
Cash and Cash Equivalents - Beginning of Year 147,364 795,914
Cash and Cash Equivalents - End of Period 44,603 132,290
Supplemental Disclosure of Cash Flow Information    
Interest Paid      
Interest Expense   10,400
Income Taxes Paid $ 102,000 $ 152,675

CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical)

v2.4.0.6
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) (USD $)
6 Months Ended
Jun. 30, 2012
Supplemental Disclosure of Non-Cash Investing and Financing Activities  
Note payable issued to Companies Founders in partial payment of stock purchase $ 440,000
Accrued Expenses related to stock purchase 60,000
Shares issued to existing shell shareholders in the reorganization $ 500,000

Business Activity

v2.4.0.6
Business Activity
6 Months Ended
Jun. 30, 2012
Business Activity

Note 1: Business Activity

 

TARGETED MEDICAL PHARMA, INC. (“Company”), also doing business as Physician Therapeutics (“PTL”), is a specialty pharmaceutical company that develops and commercializes nutrient- and pharmaceutical-based therapeutic systems. The Company also does business as Laboratory Industry Services (“LIS”), which is a facility for the performance of diagnostic testing. On July 30, 2007, the Company formed the wholly-owned subsidiary, Complete Claims Processing, Inc. (“CCPI”), which provides billing and collection services on behalf of physicians for claims to insurance companies, governmental agencies and other medical payers.

 

Segment Information:

 

The Company had revenue outside of the United States of $0 and $93,684 for the six months ended June 30, 2012 and 2011, respectively. The Company’s operations are organized into two reportable segments: Targeted Medical Pharma (“TMP”) and CCPI.

 

  · TMP: This segment includes PTL and LIS as described above. This segment develops and distributes nutrient based therapeutic products and distributes pharmaceutical products from other manufacturers through employed sales representatives and distributors. TMP also performs the administrative, regulatory compliance, sales and marketing functions of the corporation, owns the corporation’s intellectual property and is responsible for research and development relating to medical food products and the development of software used for the dispensation and billing of medical foods, generic and branded products. The TMP segment also manages contracts and chargebacks.

 

  · CCPI: This segment provides point-of-care dispensing solutions and billing and collections services. It is responsible for the research and development of billing software and methodologies and the customization of hardware that supports dispensing, billing and collection operations.

 

Segment Information for the three months ended June 30,

 

2012 (unaudited)   Total     TMP     CCPI  
Gross Sales   $ 1,448,226     $ 1,331,005     $ 117,221  
Gross Profit (Loss)   $ 826,966     $ 1,151,327     $ (324,361 )
Comprehensive Income (Loss)   $ (2,824,823 )   $ (2,500,462 )   $ (324,361 )
Total Assets   $ 11,219,550     $ 11,459,574     $ (240,024 )
less Eliminations   $ -     $ (210,231 )   $ 210,231  
Net Total Assets   $ 11,219,550     $ 11,249,343     $ (29,793 )

 

2011 (Unaudited and restated)   Total     TMP     CCPI  
Gross Sales   $ 2,374,932     $ 2,149,948     $ 224,984  
Gross Profit   $ 1,819,536     $ 1,891,675     $ (72,139 )
Comprehensive Income   $ (571,531 )   $ (172,548 )   $ (398,983 )
Total Assets   $ 6,367,070     $ 9,040,723     $ (2,673,653 )
less Eliminations   $ -     $ (2,734,661 )   $ 2,734,661  
Net Total Assets   $ 6,367,070     $ 6,306,062     $ 61,008  

 

Segment Information for the six months ended June 30,

 

2012 (unaudited)   Total     TMP     CCPI  
Gross Sales   $ 2,823,411     $ 2,603,815     $ 219,596  
Gross Profit (Loss)   $ 1,567,416     $ 2,234,144     $ (666,728 )
Comprehensive Income (Loss)   $ (3,800,740 )   $ (3,134,012 )   $ (666,728 )
Total Assets   $ 11,219,550     $ 11,459,574     $ (240,024 )
less Eliminations   $ -     $ (210,231 )   $ 210,231  
Net Total Assets   $ 11,219,550     $ 11,249,343     $ (29,793 )

 

2011 (Unaudited and restated)   Total     TMP     CCPI  
Gross Sales   $ 4,410,257     $ 4,031,325     $ 378,932  
Gross Profit   $ 3,197,862     $ 3,489,392     $ (291,530 )
Comprehensive Income   $ (1,503,530 )   $ (1,620,516 )   $ 116,986  
Total Assets   $ 6,367,070     $ 9,040,723     $ (2,673,653 )
less Eliminations   $ -     $ (2,734,661 )   $ 2,734,661  
Net Total Assets   $ 6,367,070     $ 6,306,062     $ 61,008  

Summary of Significant Accounting Policies

v2.4.0.6
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2012
Summary of Significant Accounting Policies

Note 2: Summary of Significant Accounting Policies

 

Going concern: – The 2011 audited consolidated financial statements were prepared on the basis that the Company would continue as a going concern. The Company has losses for the year ended December 31, 2011 totaling $4,177,050 as well as accumulated deficit amounting to $4,491,740. Further the Company appeared to have inadequate cash and cash equivalents of $147,364 as of December 31, 2011 to cover projected operating costs for the next 12 months. The loss for the six months ended June 30, 2012 was $3,800,740, which increased the accumulated deficit to $(7,899,352). As a result, the Company is dependent upon further financing, development of revenue streams with shorter collection times and accelerating collections on our physician managed and hybrid revenue business models.

 

These factors raise substantial doubt about the ability of the Company to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. In this regard, management is planning to raise any necessary additional funds through loans and/or additional sales of its common stock development of revenue streams with shorter collection times and accelerating collections on our physician managed and hybrid revenue streams. There is no assurance that the Company will be successful in raising additional capital.

 

Principles of consolidation: The consolidated financial statements include accounts of TMP and its wholly owned subsidiary, CCPI, collectively referred to as “the Company”. All significant intercompany accounts and transactions have been eliminated in consolidation. In addition, TMP and CCPI share the common operating facility, certain employees and various costs. Such expenses are principally paid by TMP. Due to the nature of the parent and subsidiary relationship, the individual financial position and operating results of TMP and CCPI may be different from those that would have been obtained if they were autonomous.

 

Accounting estimates: The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash Equivalents: The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less when purchased to be cash equivalents. The recorded carrying amounts of the Company’s cash and cash equivalents approximate their fair market value.

 

Considerations of credit risk: Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable.

 

TMP markets medical foods and generic and branded pharmaceuticals through employed sales representatives, independent distributors and pharmacies. Product sales are invoiced upon shipment at Average Wholesale Price (“AWP”), which is a commonly used term in the industry, with varying rapid pay discounts, under four models: Physician Direct Sales, Distributor Direct Sales, Physician Managed and Hybrid.

 

Revenue Recognition:

 

Under the following revenue models product sales are invoiced upon shipment:

 

  · Physician Direct Sales Model (1% of revenue for the six months ended June 30, 2012): Under this model, a physician purchases products from TMP but does not retain CCPI’s services. TMP invoices the physician upon shipment under terms which allow a significant rapid pay discount off AWP for payment within discount terms in accordance with the product purchase agreement. The physicians dispense the product and perform their own claims processing and collections. TMP recognizes revenue under this model on the date of shipment at the gross invoice amount less the anticipated rapid pay discount offered in the product purchase agreement. In the event payment is not received within the term of the agreement, the amount payable for the purchased TMP products reverts to the AWP. In addition, if payment is not received within the agreed-upon term, a late payment fee of up to 20% may be applied to the outstanding balance. The physician is responsible for payment directly to TMP.

 

  · Distributor Direct Sales Model (36% of revenue for the six months ended June 30, 2012): Under this model, a distributor purchases products from TMP and sells those products to a physician and the physician does not retain CCPI’s services. TMP invoices distributors upon shipment under terms which include a significant discount off AWP. TMP recognizes revenue under this model on the date of shipment at the net invoice amount. In the event payment is not received within the term of the agreement, the amount payable for the purchased TMP products reverts to the AWP. In addition, if payment is not received within the agreed-upon term, a late payment fee of up to 20% may be applied to the outstanding balance.

 

Due to substantial uncertainties as to the timing and collectability of revenues derived from our Physician Managed and Hybrid models described below, which can take in excess of four years to collect, we have determined that these revenues did not meet the criteria for recognition in accordance with ASC 605, Revenue Recognition. These revenues are therefore required to be recorded when collectability is reasonably assured, which the Company has determined is when the payment is received.

 

  · Physician Managed Model (45% of revenue for the six months ended June 30, 2012): Under this model, a physician purchases products from TMP and retains CCPI’s services. TMP invoices physician upon shipment to physician under terms which allow a significant rapid pay discount for payment received within terms in accordance with the product purchase agreement which includes a security interest for TMP in the products and receivables generated by the dispensing of the products. The physician also executes a billing and claims processing services agreement with CCPI for billing and collection services relating to our products (discussed below). CCPI submits a claim for reimbursement on behalf of the physician client. The CCPI fee and product invoice amount are deducted from the reimbursement received by CCPI on behalf of the physician client before the reimbursement is forwarded to the physician client. In the event the physician fails to pay the product invoice within the agreed term, we can deduct the payment due from any of the reimbursements received by us on behalf of the physician client as a result of the security interest we obtained in the products we sold to the physician client and the receivables generated by selling the products in accordance with our agreement. In the event payment is not received within the term of the agreement, the amount payable for the purchased TMP products reverts to the AWP. In addition, if payment is not received within the agreed-upon term, a late payment fee of up to 20% is applied to the outstanding balance. However, since we are in the early stage of our business, as a courtesy to our physician clients, our general practice has been to extend the rapid pay discount beyond the initial term of the invoice until the invoice is paid and not to apply a late payment fee to the outstanding balance. TMP recognizes revenue under this model on the date payment is received at the gross invoice amount less the applicable rapid pay discount offered in the product purchase agreement

 

  · Hybrid Model (11% of revenue for the six months ended June 30, 2012): Under this model, a distributor purchase products from TMP and sell those products to a physician and the physician retains CCPI’s services. TMP invoices distributors upon shipment under terms which allow a significant rapid pay discount for payment received within terms in accordance with the product purchase agreements. The physician client of the distributor executes a billing and claims processing services agreement with CCPI for billing and collection services (discussed below). The distributor product invoice and the CCPI fee are deducted from the reimbursement received by CCPI on behalf of the physician client before the reimbursement is forwarded to the distributor for further delivery to their physician clients. In the event payment is not received within the term of the agreement, the amount payable for the purchased TMP products reverts to the AWP. In addition, if payment is not received within the agreed-upon term, a late payment fee of up to 20% is applied to the outstanding balance. However, since we are in the early stage of our business, as a courtesy to our physician clients, our general practice has been to extend the rapid pay discount beyond the initial term of the invoice until the invoice is paid and not to apply a late payment fee to the outstanding balance. TMP recognizes revenue under this model on the date payment is received at the net invoice amount.

 

In the six months ended June 30, 2012 and 2011 the Company issued invoices to Physician Managed and Hybrid model customers aggregating $6,631,514 and $8,430,195, respectively, which were not recognized as revenues or accounts receivable in the accompanying consolidated financial statements at the time of such billings. Direct costs associated with these revenues are expensed as incurred. Direct costs associated with these billings aggregating $369,671 and $541,933, respectively, were expensed in the accompanying consolidated financial statements at the time of such billings. However, in accordance with the revenue recognition policy described above, the Company recognized revenues from customers under these business models when cash was collected aggregating $807,170 and $1,234,060 in the six months ended June 30, 2012 and 2011, respectively. As of June 30, 2012, the Company had contractual receivables from its Physician Managed and Hybrid model customers totaling $33,773,599 which are not reflected in the accompanying consolidated balance sheet as of such dates and will be recorded as revenue only when payment is received.

 

CCPI receives no revenue in the physician direct or distributor direct models because it does not provide collection and billing services to these customers. In the Physician Managed and Hybrid models, CCPI has a billing and claims processing service agreement with the physician. That agreement includes a service fee defined as a percentage of collections on all claims. Because fees are only earned by CCPI upon collection of the claim and the fee is not determinable until the amount of the collection of the claim is known, CCPI recognizes revenue at the time that collections are received.

 

No returns of products are allowed except products damaged in shipment, which has been insignificant.

 

The rapid pay discounts to the AWP offered to the physician or distributor, under the models described above, vary based upon the expected payment term from the physician or distributor. The discounts are derived from the Company’s historical experience of the collection rates from internal sources and updated for facts and circumstances and known trends and conditions in the industry, as appropriate. As described in the models above, we recognize provisions for rapid pay discounts in the same period in which the related revenue is recorded. We believe that our current provisions appropriately reflect our exposure for rapid pay discounts. These rapid pay discounts, have typically ranged from 40% to 88% of Average Wholesale Price and we have monitored our experience ratio periodically over the prior twelve months and have made adjustments as appropriate.

 

Allowance for doubtful accounts: Under the direct sales to physician and direct sales to distributor models, product is sold under terms that allow substantial discounts (40-88%) for payment within terms. With such substantial discounts, it is rare that an invoice is not paid within terms. We have not experienced any write offs associated with these revenue models.

 

Under the Company’s physician managed model and hybrid model, CCPI performs billing and collection services on behalf of the physician client and deducts the CCPI fee and product invoice amount from the reimbursement received by CCPI on behalf of the physician client before the reimbursement is forwarded to the physician client . Extended collection periods are typical in the workers compensation industry with payment terms extending from 45 days to in excess of four years. The physician remains personally liable for purchases of product from TMP and, during this long collection cycle, TMP retains a security interest in all products sold to the physician along with the claims receivable that result from sales of the products. CCPI maintains an accounting of all managed accounts receivable on behalf of the physician and regularly reports to the physician. As described above, due to uncertainties as to the timing and collectability of revenues derived from these models, revenue is recorded when payment is received therefore no allowance for doubtful accounts is necessary.

 

In addition to the bad debt recognition policy above, it is also TMP’s policy to write down uncollectible loans and trade receivables when the payer is no longer in existence, is in bankruptcy or is otherwise insolvent. In such instances our policy is to reduce accounts receivable by the uncollectible amount and to proportionally reduce the allowance for doubtful accounts.

 

Inventory valuation: Inventory is valued at the lower of cost (first in, first out) or market and consists primarily of finished goods.

 

Property and equipment: Property and equipment are stated at cost. Depreciation is calculated using the straight line method over the estimated useful lives of the related assets. Computer equipment is amortized over three to five years. Furniture and fixtures are depreciated over five to seven years. Leasehold improvements are amortized over the shorter of fifteen years or term of the applicable property lease. Maintenance and repairs are expensed as incurred; major renewals and betterments that extend the useful lives of property and equipment are capitalized. When property and equipment is sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recognized. Amenities are capitalized as leasehold improvements.

 

Impairment of long-lived assets: The long-lived assets held and used by the Company are reviewed for impairment no less frequently than annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability is performed. No asset impairment was recorded for the six months ended June 30, 2012 or 2011.

 

Intangible assets: Intangible assets with finite lives, including patents and internally developed software (primarily the Company’s PDRx Software), are stated at cost and are amortized over their useful lives. Patents are amortized on a straight line basis over their statutory lives, usually fifteen to twenty years. Internally developed software is amortized over three to five years. Intangible assets with indefinite lives are tested annually for impairment, during the fiscal fourth quarter and between annual periods, and more often when events indicate that an impairment may exist. If impairment indicators exist the intangible assets are written down to fair value as required. No asset impairment was recorded for the six months ended June 30, 2012 or 2011. 

  

Fair value of financial instruments: The Company’s financial instruments are accounts receivable, accounts payable and notes payable. The recorded values of accounts receivable, accounts payable, and notes payable approximate their values based on their short term nature.

 

Income taxes: The Company determines its income taxes under the asset and liability method. Under the asset and liability approach, deferred income tax assets and liabilities are calculated and recorded based upon the future tax consequences of temporary differences by applying enacted statutory tax rates applicable to future periods for differences between the financial statements carrying amounts and the tax basis of existing assets and liabilities. Generally, deferred income taxes are classified as current or non-current in accordance with the classification of the related asset or liability. Those not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. Valuation allowances are provided for significant deferred income tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized.

 

The Company recognizes tax liabilities by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized, and also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. To the extent that the final tax outcome of these matters is different than the amount recorded, such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense.

 

Stock-Based Compensation: The Company accounts for stock option awards in accordance with ASC 718. Under ASC 718, compensation expense related to stock-based payments is recorded over the requisite service period based on the grant date fair value of the awards. Compensation previously recorded for unvested stock options that are forfeited is reversed upon forfeiture. The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock-based awards. The Black-Scholes model requires the use of assumptions which determine the fair value of stock-based awards, including the option’s expected term and the price volatility of the underlying stock.

 

The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC 505-50. Accordingly, the measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

 

Income Per Share: The Company utilizes ASC 260, “Earnings per Share”. Basic income (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding. Diluted income (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Common equivalent shares are excluded from the computation if their effect is anti-dilutive.

 

The following potential common shares have been excluded from the computation of diluted net income (loss) per share for the periods presented where the effect would have been anti-dilutive:

 

    June 30, 2012     June 30, 2011  
Options shares excluded     1,893,444       291,347  

 

Research and development: Research and development costs are expensed as incurred. In instances where we enter into agreements with third parties for research and development activities we may prepay fees for services at the initiation of the contract. We record the prepayment as a prepaid asset and amortize the asset into research and development expense over the period of time the contracted research and development services are performed. Most contract research agreements include a ten year records retention and maintenance requirement. Typically, we expense 50% of the contract amount within the first two years of the contract and 50% over the remainder of the record retention requirements under the contract based on our experience on how long the clinical trial service is provided.

 

Reclassification:

Certain accounts in the prior-year consolidated financial statements have been reclassified for comparative purposes to conform to the presentation in the current-year financial statements.

Stock Based Compensation

v2.4.0.6
Stock Based Compensation
6 Months Ended
Jun. 30, 2012
Stock Based Compensation

Note 3: Stock Based Compensation

 

For the six months ended June 30, 2012 and 2011, the Company recorded compensation costs for options amounting to $389,032 and $530,973 respectively. A deduction is not allowed for income tax purposes until nonqualified options are exercised. The amount of this deduction will be the difference between the fair value of the Company’s common stock and the exercise price at the date of exercise. Accordingly, there is a deferred tax asset recorded for the tax effect of the financial statement expense recorded. The tax effect of the income tax deduction in excess of the financial statement expense, if any, will be recorded as an increase to additional paid-in capital. No tax deduction is allowed for incentive stock options (ISO). Accordingly no deferred tax asset is recorded for GAAP expense related to these options.

 

Management has valued the options at their date of grant utilizing the Black Scholes option pricing model. As of the issuance of these consolidated financial statements, there was not a public market for the Company shares. Accordingly, the fair value of the underlying shares was determined based on the historical volatility data of similar companies, considering the industry, products and market capitalization of such other entities. The risk-free interest rate used in the calculations is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options depending on the date of the grant and expected life of the options. The expected life of the options used was based on the contractual life of the option granted. Stock-based compensation is a non-cash expense because we settle these obligations by issuing shares of our common stock from our authorized shares instead of settling such obligations with cash payments.

 

The fair value of options granted in the six months ended June 30, 2012 was determined using the following assumptions:

 

  · Volatility factors of 83-84% were based on similar companies;
  · Expected terms of 5.25-6 years based on one-half of the average of the vesting term and the ten year expiration of the option grant;
  · A dividend rate of zero; and
  · The risk free rate was the treasury rate with a maturity of the expected term (1.95% to 2.46%).

 

The following table summarizes the status of the Company’s aggregate stock options granted:

 

    Number of
Shares
Remaining
Options
    Weighted
Average
Exercise
Price
 
             
Outstanding at January 1, 2011     566,424     $ 2.11  
Options granted during 2011     1,382,538     $ 2.96  
Options exercised during 2011     0          
Options forfeited during 2011     365,871     $ 2.62  
Outstanding at December 31, 2011     1,583,091     $ 2.73  
Exercisable at December 31, 2011     1,147,909     $ 2.49  
Options granted during 2012     310,353     $ 1.08  
Options exercised during 2012     0          
Options forfeited during 2012     0          
Outstanding at June 30, 2012     1,893,444     $ 2.46  
Exercisable at June 30, 2012     1,538,052     $ 2.48  

  

The following table summarizes the status of the Company’s aggregate non-vested shares:

 

    Number of
Non-vested
Shares
    Weighted
Average
fair Value
at Grant
Date
 
             
Non-vested at December 31, 2010     206,310     $ 1.07  
Granted in 12 months ended December 31, 2011     1,382,538     $ 2.10  
Forfeited in 12 months ended December 31, 2011     365,871     $ 1.76  
Vested in 12 months ended December 31, 2011     941,599     $ 1.61  
Non-vested at December 31, 2011     435,182     $ 1.66  
Exercisable at December 31, 2011     1,147,909     $ 1.30  
Outstanding at December 31, 2011     1,583,091     $ 1.40  
Granted in six months ended June 30, 2012     310,353     $ 0.44  
Forfeited in six months ended June 30, 2012     -     $ -  
Vested in six months ended June 30, 2012     390,144     $ 1.09  
Non-vested at June 30, 2012     355,391     $ 1.23  
Exercisable at June 30, 2012     1,538,052     $ 1.24  
Outstanding at June 30, 2012     1,893,444     $ 1.24  

 

Per employment agreements with each of Dr. Shell and Mr. Giffoni (the “TMP Insiders”), each dated September 1, 2010 and amended on January 31, 2011, the TMP Insiders are entitled to 500,000 shares of common stock and annual base salary and benefits for the longer of the remaining term of the employment agreement or 30 months in the event the TMP Insider is terminated without cause by us or with cause by the TMP Insider. We would have “cause” to terminate the employment relationship upon (i) a TMP Insider’s conviction of or a plea of nolo contendere for the commission of a felony or (ii) the TMP Insider’s willful failure to substantially perform the TMP Insider’s duties under the employment agreement. A TMP Insider will have “cause” to terminate the employment relationship with us in the event any of the following circumstances are not remedied within 30 days of our receipt of a notice of termination from the TMP Insider: (i) a material change in the TMP Insider’s duties or a material limitation of the TMP Insider’s powers; (ii) a failure to elect the TMP Insider to the management position specified in such TMP Insider’s employment agreement or a reduction of the TMP Insider’s annual base salary; (iii) our failure to continue in effect any benefit plan in effect upon the execution of the initial employment agreement, (iv) a material breach by us of the employment agreement and (v) a change in control (which is defined in the TMP Insiders’ employment agreements). Amendment No. 1 to each of the TMP Insiders’ employment agreements deleted the change in control provisions.

  

Pursuant to the employment agreements, the TMP Insiders are also entitled to receive incentive stock options ranging from 7,394 options to 110,917 options, each at an exercise price of $3.49 per share (which numbers have been adjusted for the Reorganization), in the event we achieve certain EBITDA targets ranging from $50,000,000 to $250,000,000. The Company will grant additional incentive stock options upon achievement of each milestone set forth below. Milestone levels shall be based upon EBIDTA reported in the financial statements during any calendar year. EBIDTA is defined as earnings before taxes, interest, depreciation, and amortization.

 

EBIDTA     Options
$ 50,000,000     an option to purchase 5,000 shares Common Stock.
$ 60,000,000     an option to purchase 7,500 shares Common Stock.
$ 80,000,000     an option to purchase 7,500 shares Common Stock.
$ 100,000,000     an option to purchase 10,000 shares Common Stock.
$ 125,000,000     an option to purchase 10,000 shares Common Stock.
$ 150,000,000     an option to purchase 10,000 shares Common Stock.
$ 175,000,000     an option to purchase 15,000 shares Common Stock.
$ 200,000,000     an option to purchase 50,000 shares Common Stock.
$ 250,000,000     an option to purchase 75,000 shares Common Stock.

 

The fair value of warrants issued in connection with certain loans made by related parties during the three months ended June 30, 2012 was determined using the Black Scholes Option Pricing Model with the following assumptions:

 

  · Stock price of $0.612.55
  · Exercise price of $1.00
  · Volatility factor of 96.66% based on similar companies;
  · Expected term of 5 years based on the term of the warrant;
  · A dividend rate of zero; and
  · The risk free rate of 0.90%

  

The following table summarizes the status of the Company’s outstanding warrants

 

    Note     Interest     Number of  
Date   Amount     Rate     Warrants  
                   
08/19/11   $ 150,000       3.95 %     43,568  
09/01/11   $ 80,000       3.95 %     23,237  
09/23/11   $ 52,000       3.95 %     15,104  
09/28/11   $ 200,000       3.95 %     58,091  
10/17/2011   $ 170,000       3.95 %     50,296  
10/20/2011   $ 125,000       3.95 %     36,982  
11/8/2011   $ 120,000       3.95 %     35,503  
11/22/2011   $ 140,000       3.95 %     41,420  
12/7/2011   $ 115,000       3.95 %     34,024  
1/4/2012   $ 30,000       3.95 %     8,876  
1/18/2012   $ 25,000       3.95 %     7,396  
1/19/2012   $ 100,000       3.95 %     29,586  
1/31/2012   $ 200,000       3.95 %     59,172  
2/1/2012   $ 250,000       3.95 %     73,964  
2/15/2012   $ 200,000       3.95 %     59,172  
2/29/2012   $ 240,000       3.95 %     71,006  
3/15/2012   $ 75,000       3.95 %     22,189  
3/28/2012   $ 150,000       3.95 %     44,379  
4/11/2012   $ 250,000       3.95 %     250,000  
4/19/2012   $ 100,000       3.95 %     100,000  
4/26/2012   $ 200,000       3.95 %     200,000  
5/2/2012   $ 150,000       3.95 %     150,000  
5/10/2012   $ 110,000       3.95 %     110,000  
5/24/2012   $ 220,000       3.95 %     220,000  
5/25/2012   $ 190,000       3.95 %     190,000  
6/13/2012   $ 175,000       3.95 %     175,000  
6/27/2012   $ 220,000       3.95 %     220,000  
                         
    $ 4,037,000               2,328,964  

Notes Payable - Related Parties

v2.4.0.6
Notes Payable - Related Parties
6 Months Ended
Jun. 30, 2012
Notes Payable - Related Parties

Note 4:  Notes Payable – Related Parties

 

On December 12, 2010, the Company issued a promissory note to the Targeted Medical Pharma, Inc. Profit Sharing Plan (the “Plan”) in the amount of $300,000 (the “Plan Note”).  The note bears interest at a rate of 8.0 percent per annum and was payable on June 12, 2011.

 

On January 31, 2011, the Company issued promissory notes to each of William Shell, our Chief Executive Officer, Chief Scientific Officer, interim Chief Financial Officer and a director, Elizabeth Charuvastra, our Chairman, Vice President of Regulatory Affairs and a director, and Kim Giffoni, our Executive Vice President of Foreign Sales and Investor Relations and a director, in an aggregate amount of $440,000.  The notes bear interest at a rate of 6% per annum and are payable on the earlier of December 1, 2012 or the consummation of the Company’s initial public offering.

 

On May 4, 2011, the Company issued a promissory note to the Elizabeth Charuvastra and William Shell Family Trust dated July 27, 2006 and Amended September 29, 2006 (the “EC and WS Family Trust”) in the amount of $200,000.  The note bears interest at a rate of 3.25% per annum and is payable May 14, 2016.

 

On May 4, 2011, the Company issued a promissory note to the Giffoni Family Trust Dated September 26, 2008 (the “Giffoni Family Trust”) in the amount of $100,000.  The note bears interest at a rate of 3.25% per annum and is payable on demand.

  

On June 12, 2011, the Company, the Plan, William E. Shell, Elizabeth Charuvastra, Kim Giffoni, the EC and WS Family Trust and the Giffoni Family Trust entered into an agreement  (the “Note Agreement”) pursuant to which the Plan assigned the Plan Note to Dr. Shell, Ms. Charuvastra and Mr. Giffoni in an amount of $100,000 each.  Moreover, pursuant to the Note Agreement, each of Dr. Shell and Ms. Charuvastra assigned their respective interests in the Plan Note to the EC and WS Family Trust.  In accordance with the Note Agreement, in connection with the assignments, the Plan Note was amended to extend the maturity date to December 15, 2015 and to reduce the interest rate from 8.0% per annum to 3.25% per annum.  The Company issued new notes to each of the WC and WS Family Trust (in the amount of $200,000) and to Mr. Giffoni (in the amount of $100,000) to memorialize the amendments pursuant to the Note Agreement.

 

On June 18, 2011, the Company issued a promissory note to the EC and WS Family Trust in the amount of $150,000.  The note bears interest at a rate of 3.25% per annum and is payable on demand.

 

August 19, 2011, the Company issued a promissory note to the EC and WS Family Trust in the amount of $150,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust was issued a warrant for 43,568 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share. This warrant was issued November 7, 2011 and expires August 19,2016.

 

On September 1, 2011, the Company issued a promissory note to the EC and WS Family Trust in the amount of $80,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 23,237 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share. This warrant was issued November 7, 2011 and expires September 1, 2016.

 

On September 23, 2011, the Company issued a promissory note to the EC and WS Family Trust in the amount of $52,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 15,104 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share. This warrant was issued November 7, 2011 and expires September 23, 2016.

 

On September 28, 2011, the Company issued a promissory note to the EC and WS Family Trust in the amount of $200,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 58,091 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share. This warrant was issued November 7, 2011 and expires September 28,2016.

 

On October 17, 2011, the Company issued a promissory note to the EC and WS Family Trust in the amount of $170,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 50,296 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share. This warrant was issued October 17, 2011 and expires October 17, 2016.

 

On October 20, 2011, the Company issued a promissory note to the EC and WS Family Trust in the amount of $125,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 36,982 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share. This warrant was issued October 20, 2011 and expires October 20, 2016.

 

On November 8, 2011, the Company issued a promissory note to the EC and WS Family Trust in the amount of $120,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 35,503 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share. This warrant was issued November 8, 2011 and expires November 8, 2016.

 

On November 22, 2011, the Company issued a promissory note to the EC and WS Family Trust in the amount of $140,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 41,420 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share. This warrant was issued November 22, 2011 and expires November 22, 2016.

 

On December 7, 2011, the Company issued a promissory note to the EC and WS Family Trust in the amount of $115,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 34,024 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share. This warrant was issued December 7, 2011 and expires December 7, 2016.

 

On January 4, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $30,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 8,876 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share. This warrant was issued January 4, 2012 and expires January 4, 2017.

  

On January 18, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $25,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 7,396 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share, This warrant was issued January 18, 2012 and expires January 18,2017.

 

On January 19, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $100,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 29,586 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share, This warrant was issued January 19, 2012 and expires January 19, 2017.

 

On January 31, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $200,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 59,172 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share, This warrant was issued January 31, 2012 and expires January 31, 2017.

 

On February 1, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $250,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 73,964 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share, This warrant was issued February 1, 2012 and expires February 1, 2017.

 

On February 15, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $200,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 59,172 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share, This warrant was issued February 15, 2012 and expires February 15, 2017.

 

On February 29, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $240,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 71,006 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share, This warrant was issued February 29, 2012 and expires March 1, 2017.

 

On March 15, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $75,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 22,189 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share, This warrant was issued March 15, 2012 and expires March 15, 2017.

 

On March 28, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $150,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 44,739 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $3.38 per share, This warrant was issued March 28,2012 and expires March 28, 2017.

 

On April 11, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $250,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 250,000 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $1.00 per share, This warrant was issued June 22, 2012 and expires April 11, 2017.

 

On April 19, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $100,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 100,000 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $1.00 per share, This warrant was issued June 22, 2012 and expires April 19, 2017.

 

On April 26, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $200,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 200,000 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $1.00 per share, This warrant was issued June 22, 2012 and expires April 26, 2017.

  

On May 2, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $150,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 150,000 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $1.00 per share, This warrant was issued June 22, 2012 and expires May 2, 2017.

 

On May 10, 2012 the Company issued a promissory note to the EC and WS Family Trust in the amount of $110,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 110,000 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $1.00 per share, This warrant was issued June 22, 2012 and expires May 10, 2017.

 

On May 24, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $220,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 220,000 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $1.00 per share, This warrant was issued June 22, 2012 and expires May 24, 2017.

 

On May 25, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $190,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 190,000 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $1.00 per share, This warrant was issued June 22, 2012 and expires May 25, 2017.

 

On June 13, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $175,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 175,000 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $1.00 per share, This warrant was issued June 22, 2012 and expires June 13, 2017.

 

On June 22, 2012 the terms of all notes listed above to the EC and WS Family Trust were modified to make the principal payable on demand and accrued interest payable on a quarterly basis. The Company recorded any remaining note discount as of June 22, 2012.

 

On June 27, 2012, the Company issued a promissory note to the EC and WS Family Trust in the amount of $220,000.  The note bears interest at a rate of 3.95% per annum and is payable on demand. As an inducement to make this loan the EC and WS Family Trust  was issued a warrant for 220,000 shares of Targeted Medical Pharma, Inc. common stock at an exercise price of $1.00 per share, This warrant was issued June 27, 2012 and expires June 27, 2017.

 

As approved on July 27, 2012, warrants issued by the Company after June 30, 2012 will contain a provision such that if and whenever the Company shall either (i) reduce, or be deemed to have reduced, the exercise price or conversion price of any of its outstanding warrants to purchase shares of Common Stock of the Company, or any other security exercisable for, or convertible into, shares of Common Stock of the Company, to a price lower than the Exercise Price of the Warrant in effect immediately prior to the time of such reduction, or (ii) issues or sells, or is deemed to have issued or sold, any additional warrants to purchase shares of Common Stock of the Company, or any other security exercisable for, or convertible into, shares of Common Stock of the Company, with a price lower than the Exercise Price of the Warrant in effect immediately prior to the time of such issuance or sale, then, and in each such case, the then-existing Exercise Price of the Warrant shall be reduced to a price equal to the exercise price or conversion price of such amended or newly-issued or sold security.

Recently Issued Accounting Pronouncements

v2.4.0.6
Recently Issued Accounting Pronouncements
6 Months Ended
Jun. 30, 2012
Recently Issued Accounting Pronouncements

Note 5: Recently Issued Accounting Pronouncements  

 

Presentation of Comprehensive Income: In June 2011, the FASB issued ASU No.  2011-05 , “Presentation of Comprehensive Income” ( ASU 2011-05). The provisions of ASU 2011-05 amend FASB ASC Topic 220 “Comprehensive Income” to eliminate the current option to present the components of other comprehensive income in the statement of changes in equity, and require the presentation of net income and other comprehensive income (and their respective components) either in a single continuous statement or in two separate but consecutive statements. The amendments do not alter any current recognition or measurement requirements with respect to items of other comprehensive income. The provisions of ASU 2011-05 are effective for the Company’s first reporting period beginning on January 1, 2012, with early adoption permitted. The adoption of ASU 2011-05 did not have a material impact on the Company’s condensed consolidated financial statements.

  

Fair Value Measurement and Disclosure : In May 2011, the FASB issued ASC Update 2011-04, “Fair Value Measurement: (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” ASC Update 2011-04 amends current U.S. GAAP to create more commonality with IFRS by changing some of the wording used to describe requirements for measuring fair value and for disclosing information about fair value measurements. This update is effective for the first interim or annual reporting period beginning after December 15, 2011. The Company began application of ASC 2011-04 on January 1, 2012, which is not expected to have any effect on results of operations, financial position, and cash flows.