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Tuesday, November 21, 2017 4:25:40 PM
It’s not the over $15.1 million in net revenues or over 4 million in gross profit a gross profit or the 26.6% gross profit margin, and definitely not the $35,570 net income loss. But these are all critical in determining where the net income will likely be in the coming quarters.
The most recent financial statements showed shareholders both long and new alike that Management was listening and hearing our concerns regarding a certain percentage of profits/incomes being engulfed by a non-fixed expense creating a somewhat even bottom line despite the continued increases in revenue. So now I focus your attention to the Subsequent Event documented in the notes on Page 23 of the Financial Statements.
“On October 1, 2017, the company amended the employment agreement with a certain pharmacist, Head of Compounding Department, who is the first paternal cousin to the preferred stock controlling shareholder and employee of the Company. In consideration for duties performed including but not limited to marketing, patient consultation, formulary development, patient and physician education, training, recruitment, sales management, as well as pharmacist responsibilities, the Company has agreed to provide monthly compensation of $25,000 or $15,000 per month plus 5% commission on monthly gross profits generated by the Compounding Department, whichever is greater.”
Now let’s use the example of the current year in which expected gross profits will be approximately $5,200,000 ($4, 026,081 + 1,187,314 3rd quarter amount, annualized) as it is most likely the certain pharmacist would earn payments based on commission. First the guaranteed amount $180,000 ($15,000 x 12 months). Now for commissions based on 5% of gross profits of compounded pharmacy items only. Let’s assume 50% are compound related which would be $130,000 ($5,200,000/2 x 5%). The total would be $310,000 in payments to certain pharmacist, a difference of $640,000 of direct impact to the bottom line, and roughly $690,000 total in payments, averaging out to an additional $172,500 in net income per quarter.
The key here is that the certified pharmacist is likely at the threshold mark of either making a guaranteed salary or earning some healthy commissions, which provides incentive for her to seek out and generate more revenues for Progressive Care. Either way, the change to the bottom line and selling and general administrative expenses should be seen in the coming quarters, or for sure calendar year 2018.
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