Acquisition of Hocks

12 Months Ended

Dec. 31, 2012

15. Acquisition of Hocks

On February 14, 2011, Hocks Acquisition Corporation (“Hocks Acquisition”) the Company’s wholly-owned subsidiary (formed February 2011), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Hocks Pharmacy, an Ohio corporation and its stockholders. Under the Asset Purchase Agreement, Hocks Acquisition purchased all of the inventory and fixed assets (the “Purchased Assets”) owned by Hocks Pharmacy and used in the operation of its internet pharmacy business (the “Internet Business”). The Internet Business consists primarily of the internet sale of over-the-counter health and medical products and supplies. Hocks Acquisition paid $200,000 in cash to Hocks Pharmacy for the Purchased Assets.

Also on February 14, 2011, the Company entered into a Merger Agreement (the “Merger Agreement”) with Hocks Pharmacy and its stockholders and Hocks.com Inc. (“Hocks.com”), a newly formed Ohio corporation and a wholly-owned subsidiary of Hocks Pharmacy. Under the Merger Agreement, Hocks Acquisition merged into Hocks.com and Hocks.com became the Company’s wholly-owned subsidiary. At the time of the Merger, Hocks.com owned all of the intangible assets of the Internet Business, including trademarks, domain names, and customer accounts. The merger consideration consisted of 166,667 shares of the Company’s common stock issued to Hocks Pharmacy, valued at $693,335, based on the $4.16 share price on the date of the closing of the transaction.

The following table summarizes the allocation of the purchase price for Hocks:

Inventory	$	200,000
Customer relationships		693,335
Net fair value of assets acquired	$	893,335

The following represents a summary of the purchase price consideration:

Common stock	$	693,335
Cash		200,000
Total purchase price consideration	$	893,335

The Company allocated the excess value entirely to customer relationships with an estimated useful life of seven years. The basis of the allocation was both for quantifiable and qualitative reasons. The quantifiable reasons were based on the estimated number of permanent customers that would be retained by the Company divided into the net fair value of the customer relationship approximated the Company’s average customer acquisition costs for the year ended December 31, 2011. The qualitative reason for allocating the excess value entirely to customer relationship was that the purpose of the acquisition was to acquire new revenue producing customers. The primary factor in estimating the useful life of seven years was based on public information of major pharmacies discounted to reflect the size of the Hocks.com acquisition (see Note 5).

During the year ended December 31, 2011, the Company recognized $2,674,031, of revenue generated by Hocks.com. The Company has determined that disclosing the earnings of Hocks.com for the period from February 14, 2011 (date of acquisition) through December 31, 2011 is impracticable as distinguishing objectively the operating expenses incurred to support the Hocks.com sales is not readily determinable as it has been consolidated with the operating results of the Company.

The following table presents the unaudited pro-forma combined results of operations of the Company and Hocks.com for the year ended December 31, 2011 as if Hocks.com had been acquired at January 1, 2011:

	2011 (unaudited)

Revenue	$	10,697,247
Net loss	$	(5,719,396	)
Net loss attributable to common stockholders per share – basic and diluted	$	(6,056,313	)
Pro-forma basic and diluted net loss per common share	$	(0.55	)
Net loss attributable to common stockholders per share – basic and diluted	$	(0.58	)
Weighted average common shares outstanding – basic and diluted		10,418,215