ScripsAmerica Inc. (SCRCQ)

[coolerheadsprevail]

One of the interesting things about this stock is the fact that we are dealing with prescriptions. Even if the economy starts to pull back, people will still be filling their prescriptions. I think 2015 will be shown to have been a good year and 2016 will be even better.

This makes little sense, exhibits severely flawed logic, and is most definitely not reflected in any real-world facts.

(1)
Rx's are no different than any other consumer good. If we were talking about a bottle of cough syrup that went up in price from $4.00 a bottle to $4.50 a bottle, that is one thing. But we are talking about a compounded Rx that costs thousands of dollars that is by and large no longer reimbursable by insurance companies. Consumers will do what they always do: Find cheaper substitutes and learn to deal with it for no other reason than the fact that they now have no choice.

(2)
2015 will be a good year? SCRC has already PR'd most of its monthly numbers, and they fell off a cliff once news of CVS/Caremark hit. Do you really think the market trusts SCRC mgmt after seeing the way SCRC mgmt selectively PR's only certain months and only highlights "increasing sales" after they fall to near-historic lows of $1.1M per month, when the reality is that there was nowhere to go but up?

(3)
Do you really think that if SCRC truly had a blockbuster year (post-CVS/Caremark, which is the only way to view SCRC, in spite of what pumpers will attempt to do by factoring in the pre-CVS numbers and spinning it as if they were to be expected every year going forward), that Mgmt would not have PR'd these amazing numbers throughout the year? You think they are holding back the awesome news? A company with a history of simply making $#!+ up and knowingly pumping out false PR's would pass up a chance to PR "real" positive news if such news existed? Sure, OK... ...and I haven't even mentioned yet about how any material business activity would have been a MANDATORY disclosure in the Subsequent Events section of the 10K even if SCRC mgmt was stupid enough to not trumpet any legitimate awesome news on their own.

(4)
It is not that difficult to project out what SCRC's 2015 earnings should be based on publicly available information (so, already, we know that normal retail joes are not on the same level playing field as SCRC's officially endorsed criminal homophobic Section 17(b) violator JOSEPH ZAMPETTI, LOL). But here is what the publicly available info tells us:

COGS = 10% of Revenues
Selling Expenses = 90% of Revenues

Last I checked, 10% + 90% = 100%, so in many ways, the story ends right there.

BUT... ...SCRC did eliminate what appears to be 10% of Selling Expenses by telling their prior 3rd party biller to take a hike and begin performing the function in-house. So net savings of 5%, we'll say, since SCRC did have to hire 10 billers and so a good chunk of the "savings" will still need to be spent on billing services, just not as much.

Other SG&A Expenses = 14% of Revenues

So even if the 10 billers were working for free and SCRC was able to actually save the full 10% from getting rid of the 3rd party biller, these 14% of other SG&A expenses still mean that SCRC is incurring a net loss just from Operations of 4% (10% + 90% - 10% + 14% = 104% worth of total expenses as a percentage of Revenues).

And that is just the loss from Operations. True earnings takes into account the additional 3% of Other Expenses such as interest, financing costs, Depr/Amort, etc, etc, etc.

If these expense ratios do not improve, then this is a fatal formula as SCRC will always be spending more that $1 to generate $1 worth of revenues.

What the publicly available info also tells us is that SCRC is currently running a post-CVS/Caremark revenue run-rate of only approx $1.5M/mo.

Now, to look at the glass as being half-full, we can say that the Other SG&A Expenses and Other Expenses are not variable 14% and 3% fixtures, but rather that flat dollar values we see in 2014 of $4M and $1M, respectively, are what become consistent year-over-year. So... ...in that case, a $1.5M/mo run rate translates to $18M/year, and with 10% COGS, 80% Selling Exp, $4M in othe SG&A costs, and $1M in Other expenses, this amounts to a net loss of $3.2M, or -18%.

You can extrapolate this formula out if you'd like and at the current expense ratios (which, remember, already factor in the full 10% savings from bringing billings in-house AND assuming the fantasyland scenario that none of the 10 billers wish to be paid for their work), SCRC would require $50M in Revenues in order to break-even ($50M minus 10% COGS minus 80% Selling Exp minus $4M Other SG&A costs minus $1M Other expenses = $0).

Will the 2015 filings reflect this? No idea. But based on the publicly available info thus far, the above very much represents a legit projection.

(5)
What is actually the one interesting thing about this stock is the fascinating variety of penny pumpers that exist on throughout the public space.