Normally, I would have bought back into this company after taking profits in the mid .09's, but this time I am more cautious. Here are my current and past concerns about the company.
1. In June of 2019, Progressive Care closed on the Physician's RX deal for a total purchase price of around 3,000,000 dollars. It was reported, this company (Physician's RX) was showing a net profit of about 500,000 dollars a year at the time of purchase. In November of 2019, Progressive Care announced they had renegotiated the deal and it would now be a purchase price of 1,900,000 dollars. This would call for 700,000 dollars worth of stock to be returned, plus 400,000 dollars in cash.
My problem with this is simple: if the deal was closed, why would Physician's RX agree to take 1/3 less for the deal? The only answer I could come up with would be they found accounting issues or misstatements when they began doing their reconciliation audit.
2. Progressive care had an operational loss of 471,371 dollars and a gross margin of 19.7% in the first quarter of 2019. In the first quarter of 2020, they had an operational loss of 794,677 and and their gross margin dropped to 17.9%. This increase in loss and sagging profit margin comes with the addition of a company, that was supposed to be net profitable.
3. Recently, the company applied for and was awarded a PPP loan of 1,000,000 dollars. While on the face it seems like a great deal for the company, it also indicates they are experiencing financial hardship at this time. Their 1st quarter results substantiate that concern.
4.The first quarter results were not negatively affected by Covid-19. Florida did not shutdown until April. In fact, March numbers were actually bolstered by people buying prescriptions ahead of the shutdown. The 2nd quarter will be adversely affected by the virus and is evidenced by April revenue numbers. The CEO also said in the conference call, that May numbers were being impacted by the virus.
5. Much of the 1st quarter loss is blamed on PBM's and DIR fees. I agree with this explanation but it does not remove the problem, as they are not going away and they are part of the business. Perhaps legislation will be forthcoming and will de-feather these vultures. Right now however, it is what it is.
These five concerns taken cumulatively, suggest the company will continue to operate at a loss for the foreseeable future.
My holdout on buying back in, is based on fundamentals and certain personal conclusions and inferences that keep me in cash at this time. I want to see an S-1 before I begin committing dollars to this company again. By that, I mean I want to see the actual document and their plans for the future in writing and not more announced deadlines they seem to be continually missing. If they do intend to do share reconstruction to uplist; doing so without sustained profits would be seen as a negative by the market.
I have never pumped or bashed this stock, I am simply pointing out my rationale, for why I am still a bystander.
Wolf
