ScripsAmerica Inc. (SCRCQ)

[coolerheadsprevail]

TYSONS CORNER, Va., March 5, 2015 (GLOBE NEWSWIRE) -- ScripsAmerica Inc. (OTCBB:SCRC), today announced that the Company's Florida-based pharmaceutical distributor, PIMD International LLC, ("PIMD"), reported $554,411 in revenue during the month of February 2015.

In and of itself, this $554k for FEB is a very nice number, no doubt about it.

However, shareholders need to understand that this PR is non-transparent about one very important thing: How much of this $554k (if any) relates to sales to Main Ave?

Why is this an important question?

Well, if you recall, because both PIMD and Main Ave are subsidiaries of SCRC, related party transactions between the two (such as PIMD selling raw materials to Main Ave) gets eliminated when it is time for SCRC to consolidate its subs and prepare "entity-wide" financial statements. In essence, PIMD revenues from sales to Main Ave DO NOT COUNT.

That being said, it is possible that this $554k represents the net-net after already backing out related party transactions.

WE SIMPLY DO NOT KNOW.

We will need to wait until the 1st Qtr 10Q comes out to find out what PIMD's "true" revenue numbers are. We won't see these PIMD numbers in the 10K, but it is possible that BS Schneiderman may include some useful tidbits of info in some of the MD&A disclosures and Subsequent Events disclosures about PIMD that may shed some light on this.

To put a boundary on what impact any related party sales to Main Ave may have, here is a ballpark estimate:

Start with Main Ave's FEB-2015 approved orders number: $3.75M.

Now, we know from the 10Q's that for 2014 (at least for the 9-month period ending 9/30/14), Main Ave's COGS ran at an average of roughly 10%.

So... ...an estimate of Main Ave's COGS for FEB-2015 would be 10% of $3.75M -- or $375k.

What this means is that the worst case scenario is that Main Ave sourced ALL of its raw materials from PIMD in FEB-2015, and if so, then this means that roughly $375k of PIMD's $544k was due to related party transactions w/Main Ave for which US GAAP requires to be eliminated as if it never happened. In this worst case scenario, this would leave PIMD with "true revenues" of only $169k.

REMEMBER, no one is saying that this is the case. This exercise is simply to educate shareholders of what this PR means vs what this PR DOESN'T mean. And, due to the lack of transparency, all we can say is that depending upon whether or not PIMD sales to Main Ave are included in this $544k number, PIMD's "true revenues" are likely somewhere between $169k-$544k.

This PR is awfully reminiscent of the PR's that BS Schneiderman used to issue when WRx came online. Knowledgeable shareholders knew that SCRC only received a 14% commission based off of WRx's gross profit, but yet BS Schneiderman would keep PR'ing WRx's total top-line revenues, which was incredibly misleading -- especially when you consider the fact that WRx was a completely unrelated company, so there was ZERO reason why SCRC should be PR'ing the revenues of an unrelated 3rd party company. So what most retail sheeple didn't realize was that even though BS Schneiderman kept PR'ing monthly revenues of hundreds of thousands of dollars, SCRC only actually got anywhere from $15k-$30k of it.


Moving on... ...I am very pleased to see that PIMD added 5 states just in the past 22 days, bringing the total to 16. Now, assuming that the same sales force that is hunting for new business for Main Ave is also servicing PIMD (I have no idea if this is the case or not, or whether PIMD has its own dedicated sales force), we just need them to get cracking on getting sourcing deals signed with as many local pharmacies as possible in the 16 states PIMD now is licensed in.

If PIMD can sign an exclusive sourcing agreement with just one single compounding pharmacy in each state (which, in theory, doesn't sound like it should be too terribly difficult to do), then here is a theoretical picture of what this could mean to SCRC:

Let's assume that these local compounding pharmacies are all very modest and only generate approx $2M in revenues per month (so annual run rate of only $24M).

At a COGS rate of 10%, this means that each pharmacy "client" translates to $200k/mo ($2.4M/yr) in revenues for PIMD.

Multiply this out by 16 (one per state), and this translates to $3.2M/mo ($38.4M/yr) in revenues for PIMD.

This would be a game-changer.

Heck, even only signing up just one compounding pharmacy client in just HALF of the states PIMD is licensed in would still bring in $1.6M/mo ($19.2M/yr) in revenues for PIMD.

And this $19.2M would still represent a VERY material 35% of incremental value on top of the $55M that Main Ave is conservatively bringing in per annum.


Of course, not every dollar of revenue is the same. Another unknown at this time is the net income rate for PIMD. If it is at least the same as Main Ave, then this becomes a very simple apples-to-apples comparison. But if PIMD's operating expenses are higher, then PIMD's revenues will contribute LESS to SCRC's bottom line than an equal amount of revenues from Main Ave would. And the corollary would hold true as well.

It will be very interesting to follow PIMD over the next 3-6 months to see how many more states it can obtain licenses for and whether its sales force can sign up meaningful pharmacy clients in these states. After all, having a license is useless if you can't find customers there.


And speaking of state licenses, seeing PIMD get all these new state licenses just raises more questions re: why Main Ave has been stuck on its original 7 state licenses for over a year now...