Replies to post #18473 on ScripsAmerica Inc. (SCRCQ)

[coolerheadsprevail]

The "new compounding pharmacy segment" requires analysis....First, they must carry the receivables (up to $482K vs $0 in the latest filing.) SCRC is responsible for this financing.

Now I know how they needed more money/dilution in their latest stock issue.

Please explain if I am wrong.

Not sure I completely understand your question. I think I do, so I will respond accordingly:

(1)
If by "carrying the receivables" you are essentially saying that SCRC had to "front" the cost of raw materials inventory, sales commissions, and other operating expenses of Main Ave for the first month until the sales from that first month were collected in cash, then yes, you are techincally correct.

(2)
HOWEVER, I do not believe that this was material. Let me explain:

(2a)
We know that COGS and selling expenses (i.e. sales commissions to the salesforce) are the two major expenses, with all other G&A costs of Main Ave paling in comparison. So we will focus on these two.

(2b)
We know that COGS has run at approx 27%. With inaugural FEB-2014 sales of $147k, this translates to potentially $40k in product raw material costs that SCRC may have had to front. IMO, this is a worst case scenario as this is assuming that Main Ave had ZERO raw material inventory on hand, which would be unlikely considering that virtually all purchases/sale transactions involving ongoing businesses include terms that all existing inventories, equipment, supplies, etc of the business are included as part of the business transfer.

(2c)
We know that selling expenses have run at approx 50%. HOWEVER, if these commissions are paid out like the vast majority of commissions, they are NOT actually paid out until SCRC first receives payment on the sales. As such, this expenses would never need to be fronted/financed because it is effectively "self-financed" (i.e. paid out of actual cash receipts).

(2d)
So what we are looking at is a potentially worst-case scenario of $40k in raw materials costs (which I even doubt it hit this high due to the high likelihood that existing raw materials inventory was on-hand) plus nominal amounts for any G&A costs for Main Ave. This is immaterial IMO.

(2e)
In addition to being immaterial, the longest it would be "carried" would be 30 days as Bob stated -- and the SEC filings reflect -- ZERO A/R over 30 days aged (which makes sense considering the fact that insurance is paying for most if not all of these Rx's), and so within 30 days, SCRC/Main Ave had the cash to not only cover the FEB-2014 "fronting/financing" activities, but also have enough left over to almost completely fund MAR-2014's COGS.


If I have misunderstood your question, please advise.