The good news is that per the 10Q, Scrips has NOT written any new unfriendly, toxic notes this year, only $115K in friendly notes that may never convert. Indeed, there is a big difference between the fixed, friendly convertible notes and the variable, unfriendly toxic notes that aggressively attack the bid immediately after they convert. Per the 10Q, there were only 3 remaining toxic notes on March 31, 2014 (versus 14 toxic notes on 12/31/14.)
The 10M shares opinion is a little off the mark. There was a convertible note balance of $869,038 on 3/31/14 - $761,174 of which were fixed rate friendly notes set to mature on January 31, 2015 or November 30, 2015 (unless the parties agree to extend the maturity date), and $107,864 were toxic, unfriendly notes that could convert at a big discount to the share price. Assuming SCRC does not pay some or all of the principal on these convertible notes with the millions in revenues they will collect from their specialty pharmacy over the next year, the worst-case scenario is an additional 6M shares between now and November 30, 2015 or later if the parties agree to extend the maturity date of the friendly notes (i.e., $761,174/$0.17 and $107,864/assumed discount of $0.075).
Clearly, nobody likes dilution. Indeed, I doubt Bob Schneiderman who is the co-founder and holds over 17M shares, dislikes dilution. But I'd take the extra dilution over lackluster revenues or bankruptcy 100 times out of 100. Scrips found a gold mine when it acquired Main Ave Pharmacy. In my strong opinion, the risk of bankruptcy is extremely low and with the specialty pharmacy revenues at about $1 million in only the second full month of operations, I believe the days of lackluster revenues are gone. I further believe the freight train of dilution required to position the company where it is today has already significantly slowed and that my 200M total OS opinion by the end of the year is about 25M or more shares too high.
Good luck to all the patient and loyal longs!
Bsav88atty (these are just my opinions, for which I am not being paid)
