FY. This post got deleted from iFlub so I re-posted it there. Here you go:
DrugDoctor, after reading your post, I reviewed PXYN’s financials, and compared them to SCRC's financials:
PXYN v SCRC
FY14 Q3 reports
First Nine Months ending 9/30/14:
PXYN
Revenues: $55,358,161
Operating expenses: $31,511,330
Operating income: $1,705,196
Other expenses: $33,757,168
Net income (loss): ($12,343,623)
Net income (loss) per share: ($0.06)
Three months ending 9/30/14;
PXYN
Revenues: $22,895,889 -
Operating expenses: $9,851,817
Operating income: $11,917,703
Other expenses: $11,468,002
Net income: $449,701
Income per share: $0.00
Net income profit margin: 1.96%
Total OS: 346,753,110
Total diluted OS: 1.4 billion
First Nine Months ending 9/30/14:
SCRC
Revenues: $17,341,993
Operating expense: $14,799,510
Operating income: $725,833
Other expenses: $1,120,755
Net income (loss): ($394,922)
Net income (loss) per share: ($0.00)
Three months ending 9/30/14;
SCRC
Revenues: $12,817,413
Operating expenses: $9,943,414
Operating income: $1,661,031
Other expenses: $143,574
Net income: $1,517,457
Income per share: $0.01
Net income profit margin: 11.84%
Total OS: 135,881,121
Total diluted OS: 161,280,997
Per the PXYN report, “Management believes that it will need additional accounts receivable factoring, or debt/equity financing to be able to implement our business plan. Given the indicators described above, there is substantial doubt about our ability to continue as a going concern.” The company also reported, “During the three and nine months ended September 30, 2014 and 2013, revenues generated from sales of compounding pharmaceutical products primarily to worker’s compensation patients located throughout Southern California represented 100% of total revenues.”
Per the SCRC report, “At September 30, 2014 our accumulated deficit is approximately $13.9 million, but after taking into consideration our 2014 interim results to date and current projections for the remainder of 2014, management believes that the Company’s cash flow from operations will be sufficient to support the working capital requirements, debt service, applicable debt maturity requirements, and operating expenses through September 30, 2015.”
PXYN - 100% of income from workers compensation reimbursement of PXYN's compounded pain creams, all of which was generated from only two consultants. While it is true this company is licensed in 22 states, it appears their 2 consultants are connected in only Southern California. Considering the highly competitive landscape of the compounding market, it will be difficult for PXYN to duplicate the efforts of their Southern Cal consultants.
SCRC - Clearly the vast majority of SCRC's income to date has been from sales of its compounded topical creams from Main Ave Pharma. The most significant disadvantage is SCRC's 60% selling expenses versus PXYN's two consultant's 13 to 17.5%. The biggest problem with PXYN’s financials is the very high interest / debt expenses. Both companies expressed their intentions to reduce these unreasonably high expenses.
Main Ave is licensed in only 7 states, versus PXYN's 22 states. But prior press releases imply that SCRC is closing the gap on PXYN's addressable market advantage. Per a September 16, 2014 release, for instance, SCRC entered into a prescription sourcing agreement with Jungle Jim's, thereby expanding SCRC's addressable compounding pharmacy market by an additional 12 states. http://finance.yahoo.com/news/scripsamerica-e...00793.html
About a week before the Jungle Jim's announcement, SCRC also reported a similar agreement with United Apothecary, Inc., another compounding pharmacy in TN.
http://finance.yahoo.com/news/scripsamerica-e...00745.html. With this announcement, SCRC stated it expected "to enter sourcing agreements with several more pharmacies throughout the US allowing Scrips to effectively provide prescriptions across a growing geographic area, further increasing our revenues and shareholder value." It now appears SCRC has access to 20 states. But again, broadening the addressable market is no guarantee for success in that new territory. A quick Google search will reveal compounding pharmacies virtually everywhere. The key to success is signing quality consultants with strong doctor relationships and supporting those consultants with needed sales support, as well as excellent products, customer service, expert insurance adjudicators, good compliance programs, and the ability to ramp up capacity without taking on a lot of extra overhead. Without all of these items intact, companies like PXYN and SCRC can be licensed in all 50 states and still fail to increase their market share. Back to the comparison…
SCRC also stated in its United Apothecary release that it intended to generate a second revenue stream from this agreement. That is, SCRC expected to provide United with the raw materials for its compounding products from PIMD. More recently, SCRC's CEO stated during the Q3 conference call that he expected PIMD to obtain a license to sell raw materials in New Jersey, which is where Main Ave is based. In addition to the better overall financials, this second source of revenue is an area where SCRC starts to creep away from PXYN as a more diversified investment. But full disclosure reveals that for the 9 months ending on September 30, 2014, PIMD actually posted a net loss of $114,600. Perhaps this Miami-based independent wholesale drug distributor will soon swing to a net profit over the next couple quarters after obtaining a New Jersey license and, thus, give SCRC shareholders more to celebrate. Of course, it could also just provide the materials to Main Ave at break even or a small loss in order to lower Main Ave’s COGS. Either way would be a win for SCRC shareholders. I believe Bob said he would camp out at the state licensing office until he secured the license. Does anyone have an update on this?
WholesaleRx, another independent wholesale drug distributor, is a third revenue stream for SCRC. While the Q3 report indicated a dispute with a 40% owner who may have dipped his hand too far into the cookie jar, SCRC still reported commission income totaling $202,128 from this company for the 9 months ending September 30, 2014.
A fourth revenue stream that SCRC has is the U.S. government contract packager leftover deal from the company's prior McKesson days of shrinking margins. For the 9 months ending September 30, 2015, SCRC reported net income of $371,810. Though this number was reported above the line, there were virtually no below-the-line expenses associated with these revenues, which is likely one of the reasons for SCRC’s 12% net profit margin versus PXYN’s 2%.
A fifth and final potential revenue source that is often discussed as SCRC's most colossal failure is RapidMeds. There is not much to say about this opportunity that hasn't already been said. If the company is able to make this work, however, it could possibly replace compounding as SCRC's crown jewel. To further the agony of broken promises, the CEO did go on record recently and stated he expected the final Hong Kong approval in Q4, which is ticking down to zero very fast (only 3 more days). So I'm sure this long-awaited approval gets pushed into 2015. The good news is the company played it safe with its 2015 revenue guidance and completely ignored the possibility of any revenues from RapiMeds next year. So if it does materialize, it will be icing on the cake.
PXYN and SCRC are similar insofar as they both sell compounding topical creams. But that's where their similarities end. While SCRC has unreasonably large selling expenses, PXYN has unreasonably large interest expenses. Overall, SCRC's net profit margins are 12% versus PXYN's 2%, which explains why I believe SCRC is much better situated to report a net profit for FY14. Indeed, I expect SCRC to report a net profit for FY14 between $1.1 million and $1.3 million. Considering that PXYN is carrying a net loss of $12,343,623 through its first 9 months, in my opinion, they will report a net loss between $11.8 million to $11.3 million for FY14. Scrips also reported $600,000 more cash than PXYN on September 30th.
Also weighing heavily in favor of SCRC its share structure. It has 136 million shares outstanding versus PXYN's 347 million shares (more than double SCRC’s shares). And looking at the remaining convertible debt, warrants, and preferred shares, PXYN is still exhibiting a risk of heavy dilution. It has significantly more convertible debt and derivative liability such that its diluted total share count is a gut-wrenching 1.4 billion, which equals the company's total number of authorized shares. SCRC’s fully-diluted share total is about 161 million, and it’s recent low-interest letter of credit for $4 million will likely reduce this total after SCRC uses about $500,000 of this amount to pay off most of its high-interest convertible debt. So in addition to its better share structure and lower risk of heavy dilution, SCRC also has a cleaner, more shareholder-friendly debt structure.
Assuming no change to SCRC's 60% selling expenses and the same 12% net profit margin, $60,000,000 annual revenues for SCRC would net $7,200,000. Assuming the same status quo for PXYN in terms of its 2% net margin, it would need $360,000,000 in revenues to report the same net profit of $7,200,000. If both reported $7,200,000 in net profit, assuming no more dilution for each, SCRC's eps would be $0.05 and PXYN's eps would be $0.02. For PXYN to report an eps of $0.05 it needs about $900,000,000 in total revenues versus SCRC's $60,000,000.
To that end, here is my opinion on how these two companies stack up in a side-by-side comparison:
1. Revenues: PXYN
2. Operating Income: PXYN
3. Net Income: SCRC
4. Net Profit Margin: SCRC
5. Higher EPS: SCRC
6. Strongest Likelihood of Reporting a Profit for FY14: SCRC
7. Total Share Structure: SCRC
8. Less Risk of Heavy Dilution: SCRC
9. Best Debt Structure: SCRC
10. Diversified Business Segments: SCRC
11. Leadership – Not discussed, but will give this to PXYN for sympathy
Results: SCRC 8, PXYN 3
SCRC has fewer than the half the number of PXYN’s outstanding shares, more cash, better net profit margins, a cleaner balance sheet, a much better chance of turning a profit for FY14, and four non-compounding business segments that PXYN doesn't have. In my opinion, ScripsAmerica appears to be an overall better investment than PXYN. Not to rain on your parade, but maybe you should rethink your #1 investment choice for 2015. Outside of some million dollar penny stock promotion for PXYN to help absorb millions of shares as the result of the mountain of debt converting into shares into the float, SCRC will end 2015 way ahead of PXYN.
DrugDoctor, after reading your post, I reviewed PXYN’s financials, and compared them to SCRC's financials:
PXYN v SCRC
FY14 Q3 reports
First Nine Months ending 9/30/14:
PXYN
Revenues: $55,358,161
Operating expenses: $31,511,330
Operating income: $1,705,196
Other expenses: $33,757,168
Net income (loss): ($12,343,623)
Net income (loss) per share: ($0.06)
Three months ending 9/30/14;
PXYN
Revenues: $22,895,889 -
Operating expenses: $9,851,817
Operating income: $11,917,703
Other expenses: $11,468,002
Net income: $449,701
Income per share: $0.00
Net income profit margin: 1.96%
Total OS: 346,753,110
Total diluted OS: 1.4 billion
First Nine Months ending 9/30/14:
SCRC
Revenues: $17,341,993
Operating expense: $14,799,510
Operating income: $725,833
Other expenses: $1,120,755
Net income (loss): ($394,922)
Net income (loss) per share: ($0.00)
Three months ending 9/30/14;
SCRC
Revenues: $12,817,413
Operating expenses: $9,943,414
Operating income: $1,661,031
Other expenses: $143,574
Net income: $1,517,457
Income per share: $0.01
Net income profit margin: 11.84%
Total OS: 135,881,121
Total diluted OS: 161,280,997
Per the PXYN report, “Management believes that it will need additional accounts receivable factoring, or debt/equity financing to be able to implement our business plan. Given the indicators described above, there is substantial doubt about our ability to continue as a going concern.” The company also reported, “During the three and nine months ended September 30, 2014 and 2013, revenues generated from sales of compounding pharmaceutical products primarily to worker’s compensation patients located throughout Southern California represented 100% of total revenues.”
Per the SCRC report, “At September 30, 2014 our accumulated deficit is approximately $13.9 million, but after taking into consideration our 2014 interim results to date and current projections for the remainder of 2014, management believes that the Company’s cash flow from operations will be sufficient to support the working capital requirements, debt service, applicable debt maturity requirements, and operating expenses through September 30, 2015.”
PXYN - 100% of income from workers compensation reimbursement of PXYN's compounded pain creams, all of which was generated from only two consultants. While it is true this company is licensed in 22 states, it appears their 2 consultants are connected in only Southern California. Considering the highly competitive landscape of the compounding market, it will be difficult for PXYN to duplicate the efforts of their Southern Cal consultants.
SCRC - Clearly the vast majority of SCRC's income to date has been from sales of its compounded topical creams from Main Ave Pharma. The most significant disadvantage is SCRC's 60% selling expenses versus PXYN's two consultant's 13 to 17.5%. The biggest problem with PXYN’s financials is the very high interest / debt expenses. Both companies expressed their intentions to reduce these unreasonably high expenses.
Main Ave is licensed in only 7 states, versus PXYN's 22 states. But prior press releases imply that SCRC is closing the gap on PXYN's addressable market advantage. Per a September 16, 2014 release, for instance, SCRC entered into a prescription sourcing agreement with Jungle Jim's, thereby expanding SCRC's addressable compounding pharmacy market by an additional 12 states. http://finance.yahoo.com/news/scripsamerica-e...00793.html
About a week before the Jungle Jim's announcement, SCRC also reported a similar agreement with United Apothecary, Inc., another compounding pharmacy in TN.
http://finance.yahoo.com/news/scripsamerica-e...00745.html. With this announcement, SCRC stated it expected "to enter sourcing agreements with several more pharmacies throughout the US allowing Scrips to effectively provide prescriptions across a growing geographic area, further increasing our revenues and shareholder value." It now appears SCRC has access to 20 states. But again, broadening the addressable market is no guarantee for success in that new territory. A quick Google search will reveal compounding pharmacies virtually everywhere. The key to success is signing quality consultants with strong doctor relationships and supporting those consultants with needed sales support, as well as excellent products, customer service, expert insurance adjudicators, good compliance programs, and the ability to ramp up capacity without taking on a lot of extra overhead. Without all of these items intact, companies like PXYN and SCRC can be licensed in all 50 states and still fail to increase their market share. Back to the comparison…
SCRC also stated in its United Apothecary release that it intended to generate a second revenue stream from this agreement. That is, SCRC expected to provide United with the raw materials for its compounding products from PIMD. More recently, SCRC's CEO stated during the Q3 conference call that he expected PIMD to obtain a license to sell raw materials in New Jersey, which is where Main Ave is based. In addition to the better overall financials, this second source of revenue is an area where SCRC starts to creep away from PXYN as a more diversified investment. But full disclosure reveals that for the 9 months ending on September 30, 2014, PIMD actually posted a net loss of $114,600. Perhaps this Miami-based independent wholesale drug distributor will soon swing to a net profit over the next couple quarters after obtaining a New Jersey license and, thus, give SCRC shareholders more to celebrate. Of course, it could also just provide the materials to Main Ave at break even or a small loss in order to lower Main Ave’s COGS. Either way would be a win for SCRC shareholders. I believe Bob said he would camp out at the state licensing office until he secured the license. Does anyone have an update on this?
WholesaleRx, another independent wholesale drug distributor, is a third revenue stream for SCRC. While the Q3 report indicated a dispute with a 40% owner who may have dipped his hand too far into the cookie jar, SCRC still reported commission income totaling $202,128 from this company for the 9 months ending September 30, 2014.
A fourth revenue stream that SCRC has is the U.S. government contract packager leftover deal from the company's prior McKesson days of shrinking margins. For the 9 months ending September 30, 2015, SCRC reported net income of $371,810. Though this number was reported above the line, there were virtually no below-the-line expenses associated with these revenues, which is likely one of the reasons for SCRC’s 12% net profit margin versus PXYN’s 2%.
A fifth and final potential revenue source that is often discussed as SCRC's most colossal failure is RapidMeds. There is not much to say about this opportunity that hasn't already been said. If the company is able to make this work, however, it could possibly replace compounding as SCRC's crown jewel. To further the agony of broken promises, the CEO did go on record recently and stated he expected the final Hong Kong approval in Q4, which is ticking down to zero very fast (only 3 more days). So I'm sure this long-awaited approval gets pushed into 2015. The good news is the company played it safe with its 2015 revenue guidance and completely ignored the possibility of any revenues from RapiMeds next year. So if it does materialize, it will be icing on the cake.
PXYN and SCRC are similar insofar as they both sell compounding topical creams. But that's where their similarities end. While SCRC has unreasonably large selling expenses, PXYN has unreasonably large interest expenses. Overall, SCRC's net profit margins are 12% versus PXYN's 2%, which explains why I believe SCRC is much better situated to report a net profit for FY14. Indeed, I expect SCRC to report a net profit for FY14 between $1.1 million and $1.3 million. Considering that PXYN is carrying a net loss of $12,343,623 through its first 9 months, in my opinion, they will report a net loss between $11.8 million to $11.3 million for FY14. Scrips also reported $600,000 more cash than PXYN on September 30th.
Also weighing heavily in favor of SCRC its share structure. It has 136 million shares outstanding versus PXYN's 347 million shares (more than double SCRC’s shares). And looking at the remaining convertible debt, warrants, and preferred shares, PXYN is still exhibiting a risk of heavy dilution. It has significantly more convertible debt and derivative liability such that its diluted total share count is a gut-wrenching 1.4 billion, which equals the company's total number of authorized shares. SCRC’s fully-diluted share total is about 161 million, and it’s recent low-interest letter of credit for $4 million will likely reduce this total after SCRC uses about $500,000 of this amount to pay off most of its high-interest convertible debt. So in addition to its better share structure and lower risk of heavy dilution, SCRC also has a cleaner, more shareholder-friendly debt structure.
Assuming no change to SCRC's 60% selling expenses and the same 12% net profit margin, $60,000,000 annual revenues for SCRC would net $7,200,000. Assuming the same status quo for PXYN in terms of its 2% net margin, it would need $360,000,000 in revenues to report the same net profit of $7,200,000. If both reported $7,200,000 in net profit, assuming no more dilution for each, SCRC's eps would be $0.05 and PXYN's eps would be $0.02. For PXYN to report an eps of $0.05 it needs about $900,000,000 in total revenues versus SCRC's $60,000,000.
To that end, here is my opinion on how these two companies stack up in a side-by-side comparison:
1. Revenues: PXYN
2. Operating Income: PXYN
3. Net Income: SCRC
4. Net Profit Margin: SCRC
5. Higher EPS: SCRC
6. Strongest Likelihood of Reporting a Profit for FY14: SCRC
7. Total Share Structure: SCRC
8. Less Risk of Heavy Dilution: SCRC
9. Best Debt Structure: SCRC
10. Diversified Business Segments: SCRC
11. Leadership – Not discussed, but will give this to PXYN for sympathy
Results: SCRC 8, PXYN 3
SCRC has fewer than the half the number of PXYN’s outstanding shares, more cash, better net profit margins, a cleaner balance sheet, a much better chance of turning a profit for FY14, and four non-compounding business segments that PXYN doesn't have. In my opinion, ScripsAmerica appears to be an overall better investment than PXYN. Not to rain on your parade, but maybe you should rethink your #1 investment choice for 2015. Outside of some million dollar penny stock promotion for PXYN to help absorb millions of shares as the result of the mountain of debt converting into shares into the float, SCRC will end 2015 way ahead of PXYN.
