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BUSINESS CONCENTRATIONS
12 Months Ended
Dec. 31, 2016
Risks and Uncertainties [Abstract]  
BUSINESS CONCENTRATIONS

NOTE 12 - BUSINESS CONCENTRATIONS

 

We purchase our products from several suppliers with approximately 98%, 60% and 82% of our purchases supplied by one vendor for the years ended December 31, 2016, 2015 and 2014, respectively.

 

We sell our prescription prenatal vitamin products to wholesale distributors, specialty pharmacies, specialty distributors, and chain drug stores that generally sell products to retail pharmacies, hospitals, and other institutional customers. During the years ended December 31, 2016, 2015 and 2014; three, two and four customers each, respectively, generated more than 10% of our revenues. Revenue generated from three major customers combined accounted for approximately 41% of our revenue during the year ended December 31, 2016. Revenue generated from two major customers combined accounted for approximately 67% of our revenue during the year ended December 31, 2015. Revenue generated from four major customers combined accounted for approximately 75% of our recognized revenue during the year ended December 31, 2014.

 

During the year ended December 31, 2016, Woodstock Pharmaceutical and Compounding generated approximately $2,247,000 of our revenue; Medical Center Pharmacy generated approximately $3,700,000 of our revenue and Pharmacy Innovations PA generated approximately $2,040,000 of our revenue. During the year ended December 31, 2015, Woodstock Pharmaceutical and Compounding generated approximately $8,848,000 of our revenue and Due West Pharmacy generated approximately $4,843,000 of our revenue. During the year ended December 31, 2014, AmerisourceBergen generated approximately $1,610,000, McKesson generated approximately $1,587,000, Cardinal generated approximately $1,804,000 and Woodstock Pharmaceutical and Compounding generated approximately $4,054,000 in sales, respectively.

 

As a result of developments in the pharmaceutical industry that negatively affected independent pharmacies, including such pharmacies’ reliance on third party payors, in 2016, we identified that payment periods for our retail pharmacy distributors were becoming longer than in prior years. As a result, during the third quarter of 2016, we centralized the distribution channel for both our retail pharmacy distributors and wholesale distributors, in order to facilitate sales to a broader population of retail pharmacies and minimize business risk exposure to any one retail pharmacy. During the third quarter of 2016, we entered into new distribution agreements with our retail pharmacy distributors to effectuate this centralization which were effective September 1, 2016.

 

Prior to January 1, 2015, we deferred the recognition of revenue on prescription products until the right of return no longer existed as prior to that date, we could not reasonably estimate the amount of future returns. Revenue generated by major customers accounted for approximately 97% of deferred revenue for the year ended December 31, 2014. As of January 1, 2015, we started estimating returns based on historical return rates and recorded actual product returns against this reserve as received. As a result, no deferred revenue was recorded for the years ended December 31, 2016 and 2015.