ScripsAmerica Inc. (SCRCQ)

[coolerheadsprevail]

Not talking about it offsetting the revenues. It would add to the net income. If revenues declined by $1m, that's about $120k net income. By getting materials from PIMD, it possibly could save $200-300k. Therefore $300k savings minus $120k loss net income, would be an increase of $180k. This is just a hypothetical but the math is sound.

(1)
In principle, your theory is sound, and is similar to the example I had provided in my prior posts yesterday where I explained how it will depend on what exactly PIMD's own COGS are and what their typical selling price would be to unrelated 3rd parties, as well as what Main Ave's current COGS are, in order to know whether or not any incremental benefit can be obtained by SCRC on an entity-wide basis by having PIMD source raw materials for Main Ave.

(2)
Although the math itself that you are using is solid, your examples do not reflect real-world scenarios -- and it is by using real-world scenarios that we as shareholders can get a real grasp of what outcomes are PROBABLE vs simply POSSIBLE (but improbable).

For example, in your scenario above, you are assuming that Main Ave has a COGS rate of higher than 20-30%. How do I know this? Because in order to "save $200k-$300k", Main Ave first has to spend AT LEAST $200k-$300k on its current COGS. And if you are assuming only $1M in revenues, then spending at least $200k-$300k on COGS means that the COGS rate is at least 20-30%... ...and that is not reality.

Per the most recent 10Q, the COGS rate is less than 9% (8.3% just for Q3'14 and 8.7% for YTD). So this means that based off of a $1M revenues number, the COGS is only between $83k-$87k.

EVEN IF PIMD GAVE MAIN AVE THE RAW MATERIALS FOR FREE, the most that SCRC as an entity can save is the DIFFERENCE between WHAT IT COST PIMD and this $83k-$87k number.

So let's assume that PIMD paid $60k for the materials. Then this means that the net savings to SCRC is only $23k-$27k... ...hardly worth giving up $120k in additional net positive earnings for, no?

BUT, even if COGS did shoot up to 30% as in your example, this $300k does NOT by itself reflect savings to SCRC. We need to first back out PIMD's own cost of obtaining the materials. Let's say PIMD paid $200k for it. So the net savings to SCRC is now $100k (the $300k that Main Ave would have normally spent, less the $200k that PIMD was able to get it for). Even at this inflated COGS rate, this $100k is still not worth losing the $120k in net earnings from this $1M in revenues in your example.

The key, as I mentioned in several prior posts, is PIMD's capacity, and ensuring that any sales to Main Ave is NOT at the expense of other sales to other bona fide unrelated 3rd party customers.


I hope this helps clarify...