Revenues

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Revenues

Note 2: Revenues 

Revenue Recognition 

Revenue is recognized pursuant to ASC Topic 606, “Revenue from Contracts with Customers” (ASC 606). Accordingly, revenue is recognized at an amount that reflects the consideration to which we expect to be entitled in exchange for transferring goods or services to a customer. This principle is applied using the following 5-step process:

1.	Identify the contract with the customer
2.	Identify the performance obligations in the contract
3.	Determine the transaction price
4.	Allocate the transaction price to the performance obligations in the contract
5.	Recognize revenue when (or as) each performance obligation is satisfied

The Company’s revenues are entirely attributed to its USC subsidiary. The only performance obligation identified with the Company’s sales arrangement is the delivery of the products, so revenue is recognized upon delivery of the promised goods to the customers. Revenue is measured at the point control transfers and represents the amount of consideration the Company expects to receive in exchange for transferring the goods. USC is a registered drug compounding outsourcing facility under Section 503B of the U.S. Food, Drug & Cosmetic Act, as amended, or FDCA, and provides prescription compounded medications to humans and animals, including compounded sterile preparations or CSPs, and non-sterile compounds to patients, physician clinics, hospitals, surgery centers and other clients throughout most of the United States. 

Disaggregation of Revenue 

As operations under a sterile environment are covered by Section 503B of the FDCA, and the U.S. Drug Quality and Security Act, USC's operations are governed by specific regulatory and quality requirements. Any deviation from these exacting standards could result in a stoppage of operations, recall of products, and a significant reduction in revenues. The Company employs rigorous quality controls and outside testing facilities to minimize the likelihood of this occurrence. 

The following table presents the Company's revenues disaggregated by sterile and non-sterile regulatory environments for the three months and six months ended June 30, 2018 and 2017.

	Three Months Ended June 30				Six Months Ended June 30
	2018		2017		2018		2017
Sterile	$	2,111,509	$	2,405,709	$	3,882,245	$	4,218,912
Non-Sterile	$	1,809,057	$	1,399,646	$	3,217,555	$	2,624,294
Total	$	3,920,566	$	3,805,355	$	7,099,800	$	6,843,206

The revenues of the Company's pharmacy formulations rely, in large part, on sales generated from clinics/hospitals. Adverse economic conditions pose a risk that the Company's customers may reduce or cancel spending, which would impact the Company's revenue. 

The following table presents the Company's revenue disaggregated by end market for the three months and six months ended June 30, 2018 and 2017.

	Three Months Ended June 30				Six Months Ended June 30
	2018		2017		2018		2017
Clinics/Hospitals	$	3,365,302	$	3,390,355	$	6,117,912	$	6,044,634
Direct to Patients	$	555,264	$	415,000	$	981,888	$	798,572
Total	$	3,920,566	$	3,805,355	$	7,099,800	$	6,843,206

Contract Liabilities 

Contract liabilities are deferred revenue that the Company records when cash payments are received or due in advance of the Company's performance obligations. The Company’s performance obligation is met when control of the promised goods is transferred to the Company's customers. For the three months ended June 30, 2018 and 2017, $12,043 and $82,082 of the revenues recognized were reported as contract liabilities as of March 31, 2018 and 2017, respectively, and for the six months ended June 30, 2018 and 2017, $14,758 and $54,478 of the revenues recognized were reported as contract liabilities as of December 31, 2017 and 2016, respectively. 

Practical Expedients 

The Company pays commissions on certain sales once the customer payment has been received, which are accrued at the time of the sale.  The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses.