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Re: None

Sunday, 01/31/2016 10:08:34 PM

Sunday, January 31, 2016 10:08:34 PM

Post# of 24848
So it looks like the desperate near-octogenarian CORE member who got screwed by the criminal homophobe JOSEPH ZAMPETTI -- you know, the moron who previously attempted to pump about how PIMD selling to Main Ave meant that SCRC would get to "ring the bell twice" and double-dip by being able to count the same revenues twice -- is now pumping about how SCRC paying its president Adam Brosius' other company $18M in commissions is supposed to translate to another world of endless riches. Egads...

(1)
Have folks so quickly remembered that when Adam first came on board, the commission rate was only approx 40% and then right when he got here, the commission rates shot up to the absurd levels we are seeing to this day.

(2)
The just-released 10K shows us in black and white that Selling Expenses consumed 90%, and after COGS, consumed just about 100% of the gross profit, leaving nothing to pay for any other operating expense of either Main Ave or SCRC's corporate costs.

(3)
That $18M was only the commissions paid to Adam Brosius' company, as this was a mandatory related-party disclosure. And note that he has always been nothing more than an unnecessary middleman. These commissions are paid to marketers. This does not even begin to address the commissions that have to be paid when actual sales occur. This is why Selling Expenses are 90%.

(4)
If anyone wants to know what Main Ave revenues are for 2015, it is not that difficult to ballpark. We know that there were $17.2M of approved orders PR'd from JAN-SEP, excluding JUL for which there was no PR. I think it would be safe to assume $1.0M for JUL (as if it was above avg, we all know SCRC would have PR'd it on the first day of AUG). And if SEP was $1.6M, I think we can conservatively estimate OCT-DEC to be $1.5M each. So that gets us to a total of $22.7M.

Now, if we want to be generous and say that none of the customers who were part of the 6-weeks' worth of backlog valued at $7M at the end of 12/31/14 cancelled their orders, then based on SCRC's revenue recognition policy of recognizing revenues when customers receive their orders, then we can add $7M to this. Now we are at $29.7M.

At this point, we should deduct for the 12/31/15 backlog, but I will be generous and say that if orders were only $1.5M, then this should be a volume that 1 pharmacist can fill without falling behind and creating any backlog.

(5)
For this $29.7M in estimated 2015 revenues, remember that $12.2M of it came before CVS/Caremark left. Since then SCRC has only averaged $1.2M/mo. When I estimated $18M/yr going forward, I was generously using a monthly avg of $1.5M based on their most recent PR of SEP-2015 orders, which was $1.6M.

(6)
Depending on when commissions to both Adam's other company as well as commissions to the actual sales force is required to be paid, it may be possible that SCRC's 2015 earnings may benefit from the backlog. For example, if some of the Selling Expenses related to the $7M of backlog was incurred in 2014, then a good chunk of this $7M may be reported as 2015 revenues without the full burden of the Selling Expenses. It's an accounting gimmick, but legit, so I will take it gladly and not look this gift horse in the mouth.

(7)
As far as the "efficiencies" are concerned, think about how simple SCRC's operations are. Where do you think cost savings could even occur? COGS? Nope. Commissions? Not with Adam Brosius as the wolf guarding the henhouse. Rent/utilities/insurance? Good luck with that one. Pharmacists and other employees taking 50% pay cuts? Guess again. The only place is with billings, and SCRC has already told us this happened. SCRC replaced the 3rd party biller with its own internal billing dept. Based on what is disclosed in the 10K, it appears that billing costs ran at approx 10% of sales/orders, so there could be a couple million saved here -- but the amount will be decreased by the internal costs of the financial systems as well as the 10 employees hired to be billers. So maybe half of that amount? A cool million saved is still not too shabby.

(8)
Problem with the above, though, is that it is still not enough to turn SCRC into the black based on the 2014 financial results. SCRC lost much more than $1M. Much more than $2M. SCRC lost $4.8M, $3.8M just from operations.

It will be very interesting to see the Q3'15 10Q as well as the 2015 10K to see how SCRC executes on their statement that they anticipate having enough cash flow to cover what THEY deem to be the necessary working capital requirements -- remember what I told you all previously about the share-based compensation and how SCRC has a habit of paying for operating expenses by issuing discounted stock in lieu of cash. This is nothing more than indirect dilution.