Progressive Care, Inc. (RXMD) CEO Shital Mars on Q2 2018 Results - Earnings Call Transcript

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About: Progressive Care, Inc. (RXMD)
by: SA Transcripts

Progressive Care, Inc. (OTCQB:RXMD) Q2 2018 Earnings Conference Call August 14, 2018 4:30 PM ET

Executives

Stuart Smith - SmallCapVoice.Com

Shital Mars - Chief Executive Officer

Analysts

Stuart Smith

Alright, everybody this is the Progressive Care Conference Call on the Second Quarter 2018 Financial Results. There will also be a business update as well as a question-and-answer section. I want to thank all the shareholders for emailing me your questions. This is Stewart Smith of SmallCapVoice.Com. On the call with me today we're going to have Shital Mars, the CEO of Progressive Care Incorporated, as you know that ticker symbol RXMD.

Before we get started, let me go ahead and read the cautionary statement regarding forward-looking. Statements contained herein, that are not based on current or historical fact are forward- looking in nature and constitute forward-looking statements within the meaning Section 27A of the Securities Litigation Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements reflect the company's expectations about its future operating results, performance and opportunity that involve substantial risk and uncertainties. These statements include but are not limited to statements regarding the intended terms of the offering, closing of the offering and use of any proceeds from the offering, when used here the words anticipate, believe, estimate, upcoming plan, target intend and expect and similar expressions as they relate to Progressive Care Incorporated or its subsidiaries or its management are intended to be or to identify such forward-looking statements.

These forward looking statements are based on the information currently available to the company and are subject to a number of risk uncertainties and other factors that could cause the company's actual results, performance, prospect and opportunities to differ materially from those expressed in or implied by these forward looking statements. You can see those forward looking or the cautionary statement for the forward looking statements at the bottom of every press release as well with this interview once it is archived. Now the press release that was issued last week also gives you that link. You just visit us at SmallCapVoice.Com, go to our clients page, click on Progressive Care and we'll have a button up there of this audio interview. So again, as I mentioned with me on this call today we have the CEO of the company Shital Mars. Shital, how are you today?

Shital Mars

I'm doing great.

Stuart Smith

Well, thank you so much for again calling in on this earnings call and business update as well as the Q&A section. The floor is now yours.

Shital Mars

So I'm going to quickly go through the financial statements. There's a lot to go through because we've experienced quite a bit of changes in the past three months. So I want to be as detailed as possible also getting through everything, so we can get to a lot of the pressing questions that all of you've submitted to Stuart.

So if anybody is looking at the balance sheet amounts, it is pretty straightforward, we have $700,000 in cash on hand as of June 30. That range is pretty much stable, we have anywhere between 300,600 on any given day and that includes paying for inventory and all of the normal bills that go through day today.

Accounts receivable also is pretty steady around 60% of a month's billing. We tend to do more billing towards the end of the month than we do at the beginning of the month in preparation for Med thinking, we try to make sure that all of our patients get the their medications at the same time every month and we know that when we service long-term care institutions, they like to receive at the end of the month all of their medications for the following month. So that's why you feel a little bit wear. Accounts receivable other, that's made up of primarily any money we've infused into Touchpoint at this time.

Once we issue our September financial report and are able to incorporate Touchpoint Financial as a consolidated subsidiary. Some of this will be eliminated and you'll see a revised - not a revised balance sheet, but a balance sheet reflecting the acquisition as it is finalized now. Prepaid expenses some of that is still - contains divesting of the stock and we're portioning that out every three months of invest through the end of the year.

Inventory also is pretty stable about $0.5 million, 444,000 as it was at June 30, about $0.5 million at any given time throughout the year. Acquisition deposit, so we go into other assets we have acquisition deposit, that money is the money that we released on June 29, as you know July 1, fell on a Sunday. So in order to complete the acquisition, we signed all the paperwork, we filed everything with the DEA, so that our responsibility for Touchpoint began on July 1, but we released the funds in the majority of what was due to Touchpoint's owners on June 29. So that's reflected there, that 300,000 is a purchase of Touchpoint. We have other deposits that include rent and security deposits and some other assets that are listed here.

Accounts Payable, an accrued liability this includes accrued payroll, regular accounts payable. Obviously we have enough current assets to meet our day to day liabilities. We've never needed financing in the last few years to make - to pay for our day to day operations, which is wonderful. We don't need any money to keep the lights on or to pay our employees or pay the bills. So when we talk about any kind of capital raises this is all for growth and expansion and development of our products and services and our initiative and now for operational growth or organic growth.

We have note payable, a small amount there, capital lease obligation. One thing that happened during the second quarter was the addition of the TCGRx Automated Pouch Packaging system. For a lot of you that don't know that's the same pouch packaging system that PillPack has, that's the same product, same service, we do all that PillPack does with the machine, we customize it English, Spanish, however the patient needs it, we offer free delivery. So if you think about anything that PillPack is doing, PharmCo does and then some, so it's a wonderful addition to our fleet we still have the ScriptPro.

Touchpoint brings with it, its own pouch packaging machine and software in the pro rata pass, so we are fully stocked up on the variety of packaging solutions that we may need to service our patients and we will be one of the few companies bringing this kind of packaging and service through local delivery to retail patients. A lot of it in this, especially in South Florida a lot of long-term care facilities are just beginning to get use of the pouch packaging system were a lot of the sellers of these devices are used to - pharmacies using it for long-term care facilities, so we'll be one of the first really bringing it to the general public down here in South Florida with the ability to provide same day service and service on a local scale.

Unearned revenue, for anybody that doesn't understand what that is that is a little bit of lag time between when a prescription is billed and when it is in the hands of the patient. So when we bill a patients prescription, let's say it's happens at 6.30 on a Thursday and the patient doesn't receive it till the following day, we have this little bit where we've billed it, but the patients hasn't received it, so we don't recognize that as revenue until it's received by the patient. So you'll see unearned revenue there and that just reflects the amount of dollars waiting to for patient - what's the amount of dollars the patients waiting to receive in their medications.

Drew viability is kind of self-explanatory, we had the Chicago Venture Partners draw down of about $584,000 worth net to asset, I think the total amount was $630,000. We had a derivative liability stemming from - a fairly large one stemming from the volatility that occurred in the first part of the year that has leveled off and we were really happy about the stability and now we've been able to reverse a lot of that liability, especially since - as of today all of it is paid down. So on our next set of balance sheets we shouldn't see this derivative liability at all. Deferred rent is a long-term liability as rent increases throughout the year, throughout the years of its useful life. And then capital use obligation, this is a long-term portion of the two capital leases that we have which is again the TCGRx Pouch Packaging System and the ScriptPro automated vial packaging system.

Going into our P&L, I want to talk a little bit - go into a little bit detail of our sales. We did 10.3, just under 10.3 million for the full six months, that's the highest six months we've ever had. If we go into the three months it's about flat to the same three months last year and the big question is why is that. As we've been reporting growth year-over-year consistently why is this quarter somewhat of an anomaly and for us, we kind of think of it as a beautiful thing. On our end we always anticipate that insurance companies are going to continually constrict reimbursement, they're going to bring it down and bring it down, that gross margin - we're one of the few industries in this country where we don't set our pricing, we don't set our margins, we're subject to the whims as you would say of insurance and what they want to decide to pay for something.

So when we see that there was some contraction especially with regard to compounding and that occurred in the second quarter of this year, we knew that our growth and our ability to have diversified sales, to have a lot of product lines is what's going to sustain us through this period and then we can keep on growing. So for us to have a drop off in the reimbursement rates on compounds, to have that kind of benefit contraction that we saw, where a lot of patients are being denied access to compounds and I'll get into more of that later. When we saw that kind of contraction and still be able to deliver same sales of last year when last year we had significantly more compound revenue, was a beautiful thing for us. We were very excited and happy about it and we believe that this was a great stress test for us that our diversity really can, our diversity of products and services and our model really can withstand any kind of economic pressure than insurance companies may press upon us with regard to reimbursement, compression and things like.

Our cost of sales is pretty much flat. The difference that you'll see there is - why it's a little bit higher than it was last year is the inclusion of DIR fees into that and every year that DIR fee gets more aggressive. The performance bonuses and metrics become harder to meet, they become a lot less generous, so we kind of put that as a cost of sale, our DIR fees because there's no getting around, it's payment at the point of sale. If we do get - if we do meet the measures and do get the bonuses you'll see that reflected in our next quarterly report, so we have about 22% or 23% gross profit margin that is pretty standard for a company like us that have a diversity of products that we do. We don't expect to have 50% margins. So when we're doing 22, 23 that's really great and we know that we're keeping our cost down. We know that we're using the cheapest products that we can while still delivering the quality of medications to our patients.

Our bad debt is historically low. Stock based compensation is again the vesting of a stock that was issued in January and selling, general and administrative expenses has gone down. We've reduced any compensation packages as it's tied to compounds as it made sense and obviously we try to keep a lean tight ship even though we have now over 70 employees, kind of a weird thing for me to know that I have seventy employees when it used to be in the teens. I've been with this company long enough to see when it had only five. So I'm really proud of the growth we have, but we have the right staff and a lean staff to get done what we need to get done. So you'll see the change in fair value of derivatives that's the reverse of the Chicago Venture Partners derivative liability where we've paid down a lot of that note and as of today it's completely paid down and reflective of that change in volatility over the six month period.

To get into total income, net income is about 203,000 on the quarter. We're down $437,000 loss on the six months. A lot of that has to do with the stock based compensation and the GAAP recognition of the stock based compensation and the increase in the DIR fees. So we believe that our operations are still doing well and that our cash flow is still doing well. We're going to get into just a look at the equity statement. A lot of you guys have questions about the share structure, so we have as of June 30, it was 421 million. As of June 30, per the transfer agent was 427 million and change. You'll notice there is a difference between what we record on our books and what the transfer agent has. That is due to, when we first became a publicly traded company in about 2010, PharmCo was issued one 1.7ish million shares and then in 2012 we had a return of shares from our prior officer and so that is another 3.5 million shares those are beneficially owned by Progressive Care.

So because PharmCo is a wholly owned subsidiary of Progressive Care and because that 3.5 million shares is under for - it's mistakenly under Progressive Training, but it's still - because that used to be the name of Progressive Care before we changed it in 2010. It is still Progressive Care's ownership and so we kind of eliminate that balance of as out of our issued and outstanding and we're working with the transfer agent now to figure out how to retire and eliminate these shares, so that where we can have a proper reconciliation going forward. We hope to resolve that before the end of the year.

So going into our cash flows from operation, we had again and a net loss over the six months, but we believe that some of this is eliminated by the share based compensation, by inventory and so we know that at the end of the day, we are building cash from the operation and that is sustaining our organic growth. If we look at just prescription filled from the prior year we're up about 21% to 23% in prescriptions filled. So that is a good indication of the stability of our growth. We also like to point to another metric which we review internally, which is the ratio of refill to new and that allows for a sustained revenue and longevity. If you don't have new prescriptions and if you don't have new patients you're going to slowly see recession in the number of sales, in the number of reimbursements that you have on a given month. So we like to make sure that we have at least as many refill to new prescriptions and a lot of times we have 60% new and 40% refills and that's a great way to see the stability and longevity of our of our revenues.

So we have a net increase in cash from December of $286,000. We have - some of that is the draw down from Chicago Venture Partners and keep in mind, we did use about $400,000 of this in furtherance of that acquisition, 300,000 is the purchase price and then we are working on developing Touchpoint, growing Touchpoint, working on its staffing and its model and its buildup. So we believe that we do have enough cash in the bank to sustain us in the short-term. We are meeting our current liabilities and so when we look at cash obligations or cash needs going forward, keep in mind that any kind of cash needs that we may say we need will all be for expansion purposes.

So going into the notes, one of the things that I want to point out is 340B. I know a lot of us have some questions on it. I don't want to get into a non-GAAP analysis of the financial statements. I wanted to be clear to everybody that the financial statements as presented on a GAAP and that's the way you should be reviewing or analyzing our financial statements. But I want to explain a little bit, the 340B, we don't eliminate that. We don't include it as a sale and then eliminate it and then it becomes net revenue, so they're not included in as what some would call gross revenue. These are sales that are done on behalf of a charitable organization or nonprofit healthcare institution. So as we finish up the call and we get into the questions, I know many people have questions about 340B. I'll be able to explain that further.

I think for now I want to get into the overview and the MD&A because we have a lot of accomplishments in the past quarter, one of - the biggest being the acquisition and that means to us and how we've been able to really execute on our growth agenda by securing this acquisition. The point of securing Touchpoint was three prone, one at $300,000 it was an incredible price for us to have thought about building a new facility in Palm Beach on our own with no licenses and no nothing would have cost us well over $0.5 million and if we wanted to have the kind of equipment and staffing, we're looking at $750,000 with the inventory in the build out and everything else. So with $300,000 we were really excited.

We know that that provides us the ability to decrease the cost of our service ratio because for those of you that aren't familiar with our geographic area we're south Florida that includes Miami, and which is in Miami Dade County, Broward County which includes Fort Lauderdale, Hollywood, Dania Beach, Hallandale Beach, Delray Beach. And then Palm Beach which is - West Palm Beach, Boca Raton area and going into Morgan and St. Lucie County. So that's a long drive from Miami, so now having a location in Palm Springs that cuts our drive time in half and when we're reaching those St. Lucie residents. We think that it's really important that we understand that the development of Touchpoint is ongoing and that we're going - it is a regulated process and changing over from it being owned by certain individuals to being owned by PharmCo and there's a lot of paperwork and approvals that are necessary that go with that. So we got into an update on that at the end of it.

Just to talk a little bit about PharmCo, we service nearly 13,000 patients of diverse demographics all across South Florida and that diversity is important. By talking - by working with patients of diverse backgrounds, the elderly, the poor, the professional, the LGBTQ, each group, each societal group, each culture has their own perspective on how healthcare should work. And by interacting with them in the way that we do, we are building a relationship, we're building that loyalty, they see us as people - as a healthcare institution that cares and understands and we're able to reach them on an emotional and mental level to get them to understand what medication is for, how it should be used and how they should be feeling when they take it and that is why our adherence is so good. We maintain a five star rating if you look at our - hopefully we'll be able to report our performance rating as they become finalized, but we consistently deliver ninety 99%, 95% adherence where is the average patient, the 50% of patients are not adherent.

So for our patients from 95% to 99% of our patients to be adherent it's not just making sure the drugs are on their doorstep or in their cupboards, it's making sure they understand what those drugs are for and how to take them and whether those medications are the best for them and what they're - what medical situation they're dealing with. So we did about 133,000 prescriptions over the same period last year in the same six months, so that's a 23% increase again. So we believe that this was a phenomenal quarter for us and we really see how resilient and how powerful our message is, how powerful our brand is that despite what happens in insurance, despite whatever happens with the FDA, the DEA, whatever may come. Our ability to plan for and execute our growth and plan for and execute the future of the way we believe healthcare should be delivered is important to us and we think that we're making really great strides on that.

So some 2018 key highlights, five star where rating, 5.1 million revenue in the second quarter, 10.3 million revenue for the six months, 133,000 prescriptions, filled in the six month 23% increase over 2017, Touchpoint acquisition, completion, the ability to deliver, the ability to increase our service portfolio is tremendous. We raised over $1.4 million for 340 of the charitable organizations, by dispensing these medications it's a win-win for us, it's a win for the charitable organization, we're supporting some amazing foundations that are doing everything they can to reach out to the infectious disease community, to stem the tide of increasing infection rates especially in south Florida which is a hard zone for HIV Aids, especially with the epidemic opioids increasing the chances of the spread of infectious disease as more and more people turn to illicit heroin or fentanyl or injectables and spreading these viruses.

We are really happy to be supporting them in the way that we are and just for peace of mind on the same thing with our revenues the dispensing fee that we receive from billing these prescriptions on behalf of these organizations is more than the profitability had we build and dispensed the medication without the charitable organizations, so it's a win for us, it's a win for them. The installation of the TCGRx Pouch Packaging System, engagement of CMW media has done wonders for our visibility. We are working with them to build out our contributed writing to be able to have our name presented in magazines and newspapers and online articles to work with the news media to really get our message out there about how we can transform pharmacy delivery and prescriptions and how we view that role in the overall ecosystem of healthcare is been - we we've been really pleased with how that's developed over the last three months.

We have our online prescription management solutions, so we're developing –for an independent pharmacy to have the kind of applications that we're developing and the online presence that we're developing is really unique to us and our brand and so we're hoping to continue to develop that. We want launched our campaign to combat opioid abuse and a lot of that stems from educating the public on medication, on how to use it, on what opioids were intended for, on alternative medications that still can provide pain relief without abusing the recommended dosage. So we really want to build out those resources, we really want to reach patients and you'll hear more about this campaign as we reach out to our legislators and our local activists and the community, especially those suffering with pain, reaching out to those patients and how we can improve their lives and how we can develop solutions specifically tailored to them and how they feel pain, we think will really make a difference. We got a license in another state, I believe it was in Minnesota and we are still actively pursuing more licenses.

So with that I will turn it over to questions and get to answer as many as I can.

Question-and-Answer Session

Q - Stuart Smith

Well, very good and there's a lot of them and I made this statement last time and we did get to many of the questions in the following audio interview. So guys there was I think over 50 questions in sent in. We did group them into a few different topics that we're going to touch on so lots of questions about Chicago Ventures, lots of questions about updates on acquisitions, we grouped together, but we do have a handful of questions that we're not to be going to be able to get to today because of time constraints. But we will get to those questions in coming audio interviews with Shital. So as I said Shital, let's just start with those major areas, those major topics that had the most hits, update on the acquisition, how is it going what can be expected from it. Go ahead.

Shital Mars

So I touched a little bit on it when I was going over the acquisition during the review of the financial statements. So Touchpoint here is where we are. We are in the process of completing all of the change of ownership documents, so that means we've already secured that change of ownership with the DEA, with Medicare and Medicaid and now - and the Board of Pharmacy with the state of Florida and all of that. Now we're going through the insurance process and updating them with all of the different - with all of the new owner ownership information. Once that's complete and we're in the - we're just now beginning to work on changing the name and getting that going. So Touchpoint right now does about $80,000 to about $120,000 in net revenues every month, we expect to grow that number at least 20% to 30% by the end of the year. I believe that I said that on another call and I'm still convinced that that's a reasonable expectation. One of the things that it is - that slows the process down is this change of ownership process because we cannot go out and market the new location as a PharmCo location until we change the name and so we wanted to have those DEA approval of Medicare and Medicaid, Board of Pharmacy approval in hand before we change the name.

Now that those have come through or in the process of changing the name, so that way we can now go to any of the doctors in the area and refer to PharmCo's performance and PharmCo's model and PharmCo's branding because that's who they know ,that's who they hear and so when we go to doctors' offices and say yes, we're PharmCo, but everything you're going to get and everything your patients going to get is going say Touchpoint, that's a little bit confusing. So we want to make sure we unify the messaging, we unify the model, unify the metrics and then bring that - really bring that full force to the doctors' offices into the patients and also we have West Palm Beach, Martin County, St Lucie County, patients already that we're servicing from Miami Dade, the only reason we haven't transferred those patients to Touchpoint is again the name changes because that can be pretty confusing when you get PharmCo packaging and then get Touchpoint packaging.

So we believe once we're able to change the name, which should be soon, I'm hoping within the next 30 days, but the name change is affective and all of our branding, all of our marketing materials, all of our packaging is now updated with the new name. That we can then go to the doctor's window, or go to the patient's window and go to the patient, but don't know if and continue to build upon that PharmCo brand. But right now Touchpoint is doing well, we have added new doctors to their portfolio that are continuing - that have started recommending Touchpoint soon to be PharmCo2 to their patients. We are working with the long-term care facilities that they already service to begin expanding our breath of service and really monetize that relationship by explaining to them the adherence, explaining to them that we work with their primary care physicians, a lot of what wasn't done by the previous management, we're now able to do because we have that dedicated workforce and that knowledge and the last thing that we're doing and this is really important is that we are building out the facility.

So right now when we bought Touchpoint it had rudimentary inventory, it had - what it had was the automated pouch packaging system, which was really enticing to us, but it was really kind of bare as far as the workspace. I mean, many of the technicians didn't have counters, they had little cubicles and so it wasn't a functional workspace especially for the model that we bring which isn't just long-term care they're used to more of a long-term care model or an end patient model. So we are building out that space so that we can then be able to bring the volume, we want to make sure that that level of service whether it's PharmCo in Miami or PharmCo in Palm Beach County is the same and that the patients that go to either or both or however they choose to use us can expect a certain quality of service. And so once we build that out and have that efficient work flow, we think we really can ramp up. So that's where we're devoting some of our capital to now is doing that build out.

Stuart Smith

Excellent, well I mentioned Chicago Venture Partners; we have questions covering every angle. So why don't you give us an exhaustive update on the Chicago Venture Partners?

Shital Mars

So as you know, I know it's fairly controversial amongst our shareholder base our relationship with Chicago Venture Partners. I want to explain one thing, when we first worked with them they were one of the few groups willing to finance a company that had nearly no financial data, we were on the SEC, dropped off of SEC, went dark, did a 3A10 and then we're coming back to them for money without being fully reporting with the SEC and for that that means a 12 month hold. And at that time we were going out to the investment community, we're like, we are profitable, we have great sales, we have longevity, we've been around eight nine, 10 years. This is a legitimate business and they go - a lot of them kept saying call us when you're SEC reporting. So when they reached out to us and worked with us, it was kind of not just - not the only option but it was our best option because we were trading at $0.01 a share and they were willing to work with us on leak out, they were willing to work with us on charges and they really have been considerate of the needs we have. Was it a rich deal? Absolutely. Was it the deal that was right for us? I certainly think so.

So with the new tranche that we brought down, we needed to grow, we needed to have a facility to be able to execute on the Touchpoint acquisition and when we went to alternative sources again we still got met with call us when you're SEC reporting . When we went to a bank's the trouble with us we kind of were in that no man's land of being in between, where we're not fully reporting, but we're not reporting, we're not private and so the banks were kind of reticent and we were shocked by that given that the we have a long history of revenue and a good credit rating and all of that and the ability to sustain and - to sustain some debt. They were saying that they wanted to wait until 2019 to consider doing a debt facility. So when we reached to Chicago Venture Partners they're like absolutely, we'll work with you, we'll do the leak out, well we paid down so you don't have that much interest on the note just the funding fee and so we were really happy that at least we could get that and Touchpoint going to be a major stepping stone for us going on into the future.

So going into how that conversion happened, we took down - the net to us was 584,000, the total facility is about $630,000 and that includes a $50,000 fee for the tranche, that's just their facility fee. So we had to pay back to them a total of $630,000. When we pay off we were converting the trenches keep in mind that when you read the document and the agreement, market price is not market prices it has a specific definition. Market price is defined as a 30% discount to the average of the three lowest closing bids in the prior 20 business days. So when you look at conversions that took place under $0.05 the agreement states that it's the lesser of either market price as defined in the agreement or $0.05. Now for a long time we were trading at $0.08, $0.09 $0.10 and we were able to convert $0.05, we did have a fewer charges that did convert at under $0.05, but the one thing I want to make clear to everybody now is that we are not issuing any further shares to Chicago Venture Partners at this time.

The funding facility is completely paid off as of today, the shares have been issued and we don't expect them to hold onto those shares or maintain a position in our company or have voting - want to have voting rights going forward. So we are excited about this milestone we are excited that from September we won't have this derivative liability on our books for these tranches, we've been able to pay all these off and we look forward to the next the next phase of our relationship. If we work with Chicago Venture Partners, they've been willing to look at a new funding facility instead of keeping us on the one that we're on because again we had a $2 million - access to $2 million. So we don't have to continue to use that particular facility, we can then negotiate with them and work out a new deal that is more reflective of the company we are today as opposed to the company we were trading at $0.01 a share and we want to extend our thanks and our gratefulness to our shareholders who have stood by us and worked with us and been patient with us and understood that the broader vision of the company and being able to facilitate the pay down of this debt.

Stuart Smith

Well, speaking of those shareholders they want to know and get an update on up listing as well as SEC compliant dove tale those two which is next response to the up listing and SEC compliance?

Shital Mars

So we are really excited. We began the process of putting together our registration statement. The Sec is going to require us to submit a registration statement in order to reregister with the SEC and become compliant. And then there will be some sample memory forms that we will have to do to get current. Other than that, other than approval of a registration statement there won't be anything else, so we do believe that if it's not this year it is absolutely going to be by March 2019 when the 10-K is due. At that point we will have three years of audited PCAOB, audited financial statements and in our experience and the work we've done with our attorneys and the reaching out that we've done with the SEC and people that know the SEC very well, we are certain that if they come back with comments about third year as opposed to two years in the registration statement, we'll be able to deliver that no later than March 2019. So we are well on our way. We work with our attorneys, we've submitted them - submitted to them any due diligence documents that they require to begin producing that registration statement. They are working fully on that.

When we talk about uplifting to NASDAQ, I want to make sure that I'm not putting the cart before the horse, I want to get through SEC compliance and SECC registration and then look at uplifting because uplifting as I've spoken about in previous calls can take a couple of different forms. If we go by ourselves we're going to work with our shareholders and how best to execute our share structure whether its needing to do a merger, whether it's needing to do a big acquisition, whether it's authorizing more shares or doing the reverse, split, all of that is going to be run through our shareholders and that does not include preferred shareholders, only common shareholders can vote on this matter. So when we go to uplifting and we were talking about just PharmCo, just Progressive Care and its current subsidiaries doing that uplift process, we're going to work directly with our shareholders and their votes to come up with the best solution to make that happen. And we want to make sure that people understand that becoming a NASDAQ company puts us in a different Tier as far as being able to raise capital, being able to execute on acquisitions, being able to execute on mergers, it is a whole different ball game as it comes to legitimacy and everything else to visibility. So it's a beneficial to our shareholders and that's why we want to do a national exchange like NASDAQ and we think that we can work with our shareholders to provide the best path towards that.

Now if we did it through a merger or a big acquisition then we're talking about a completely different structure of a company that is going to be uplifted to NASDAQ, we are always pursuing a variety of avenues to get those acquisitions and see whether there's either a partnership or a merger that makes sense that brings us to a different kind of market cap, that provides us with a different kind of revenue base and shareholder base and all of that. So if we go that route, it's a different way of going to up lifting and going to NASDAQ. Today I cannot provide guidance or timing on that. I don't want to put out there something that I would be regretful of sharing where I couldn't deliver. For me execution is everything and so I don't want to put notions out there that I can deliver something that may not be feasible. So we are working towards that, we are looking at those acquisitions, we are looking at those merger opportunities and all of these ways to deliver real value for our shareholders. But I want to make sure that - I clearly state that I want to give you guys and give all of our investors and shareholders something that is realistic and something that we can definitely execute on. But in no matter how far we go in that process, our shareholders will be involved 100% of the way.

Stuart Smith

Well this one is similar, but you've talked about it in that response and you talked about it earlier on the update on the acquisition, but this is about different acquisitions. What are the plans for any future acquisitions?

Shital Mars

So we want to - now that we have kind of the South Florida, Greater South Florida area kind of covered which is Miami Dade, Broward, Palm Beach, Martin, St Lucie County going up that East Coast, we want to get now into the I-4 and to go over that Florida geography, we're looking at St Petersburg, Tampa, Ocala, Orlando, Kissimmee, Daytona area, Titusville area, Palm Coast all of those cities a lot of those especially Tampa, St Petersburg, Orlando, Daytona these are densely populated areas, a lot of areas where there are there are large retirement communities, where adherence is especially necessary. And the kind of services that we offer are specifically beneficial to those demographics, so we know that the next place we're going to try to go is in that in that I-4 corridor. Then if we're going up the East Coast we're going to look into Greater Jacksonville area into Georgia and those are the common sense areas that we think that we can execute on an acquisition. We're looking for targets similar to that of Touchpoint, similar in scope and in value as what Touchpoint was able to provide for us, which is that ability to have complimentary services and be able to add to our suite and portfolio of services and as well as be auditable and adaptable to the PharmCo model. The PharmCo model is what we're planning to expand and we believe that's going to drive our growth and so we want to make sure that any acquisition target we bring on board and evaluate have those synergies. So that's where we're headed next. It takes - just as you saw with Touchpoint, it can take months to execute on an acquisition, so I don't want to put out there that we're going to fully execute on an acquisition within the year, but I do believe that as we work on our expansion plans more acquisitions are part of the agenda and part of the short-term agenda, we're not talking about five years, ten years down the road, we're talking about the next six to 18 months of bringing more pharmacies onboard and bringing - consolidating more healthcare companies into the Progressive Care brand and model.

Stuart Smith

All right we talked a lot about 340B earlier, but can you explain how 340B works?

Shital Mars

So I know that it can be kind of confusing especially because we separate and we talk about millions of dollars and it's kind of confusing. So the way I describe it is like raising money and I don't like to describe it as sales, but it's not raising money, we're calling and getting donations. 340B works in - and I'm going to try to explain this as simply as possible, almost like the way consignment works. So the inventory is owned by the charitable organization and that inventory is given to us to dispense to their patients. So when we go through and we receive a prescription by the 340B entity for their patient, we will use their inventory to fill that prescription and dispense it to the patient. Now, for this service of facilitating that delivery of the prescription to the patient we receive a fee and that fee is what is our sales. So when we talk about millions of dollars that's the billing, so we bill the prescription to insurance that insurance company will reimburse us whatever their contracted reimbursement rate is and I'll give you an example.

So we have a medication like Atripla or Genvoya, these are common HIV medications that the insurance company traditionally pays a pharmacy, let's say $300,000 for, that $300,000 belongs to the 340B entity and that $300,000 less our dispensing fee, whatever fee we've negotiated and disclosed by the way to the federal government as this is a federal program that fee –so that reimbursement less that fee is what we remit to the 340B entity, so that they can use that money to buy medications at a discounted rate for those high risk patients, those vulnerable patients that they service. Now the net value to them is that reimbursement minus their inventory costs is what they can use now to facilitate their mission, which is either bringing HIV AIDS awareness, bringing free healthcare services, bringing educational seminars, delivering other medications to the patient, all of those things that facilitate their mission, improve healthcare in these high risk communities is what they'll use that money for. But just so we all understand this money is on behalf of the 340B entity, so while $2.7 million did flow through the pharmacy in the first three - first six months of the year those moneys left are dispensing fee which is a hundred and something thousand. I'm not looking at the financial statement right now because my screen froze, that that dispensing fee is what we keep the rest of it goes to the charitable organization to facilitate their mission.

I know that there was one question about how we service these organizations especially with some of them that are based in Orlando or Tampa or further out. A lot of them while they may be based in those areas, do you have providers in the South Florida area, so these patients are South Florida residents, we're going to be servicing those patients. The important part of doing the acquisition and growing and getting into Orlando and getting into that I4- corridor is so we can then expand our radius of 340B services as well. And as I said before, when I went over the financial statements it is a win-win for us. The reimbursements that we would get in many of these HIV medications if we bought them under our own contract would be reimbursed at even or at below cost. So by working with charitable organizations they're able to buy those medications at a discounted rate because they are servicing these high risk vulnerable populations and able to improve the healthcare in these communities, we are now able to - at least to realize some profitability on that service. It's not exorbitant, but it is better and beneficial to us and we have been growing it especially with the ones that we service now. We have two more contracts that are set to be effective October 1.

The contracts we're serving now, they're seeing a difference in adherence, they're seeing a difference in their patients and with infectious disease you cannot miss a dose, you cannot be non-adherent because then you're putting yourself and your community at risk of having an increase viral load in your body. So by maintaining that adherence is really phenomenal for them and that's why they consistently try to recommend their patients to use PharmCo not only for their benefit because sometimes certain drugs don't come under the 340B program, but because it's better for their patients, diabetes medications, certain antibiotics and things like that they don't fall under the 340B program. It doesn't help them revenue wise, but they tell their patients go to PharmCo get everything you need from one place because we're going to make sure that you get your medications on time and you don't miss doses. And so they're consolidating as much as they can to have their patients and their patients are pleased. The patients are happy to have a pharmacy that understands, a pharmacy that provides discreet packaging, a pharmacy that delivery, so that they don't have to go to a pharmacist and worry about whether their status can be compromised or exposed or worry about the stigma associated with their diagnosis, they just get a delivery and they're able to maintain that privacy as they see fit.

Stuart Smith

Well let's change gears a little bit, let's talk about the CBD products. Here's the question, what are the plans for incorporation of CBD products into the business model?

Shital Mars

So right now we've been working with some CBD manufacturers, we do hold of line of CBD products on our shelves and we are working with our community organizations, we're working with 340B organizations, our healthcare practitioners to raise awareness about what CBD is because there's a lot of misconceptions. You'll see a lot more writing from me about CBD and what it is and what the difference is as it compares to marijuana. For many of us that don't know CBD is derived from hemp and the difference between CBD and marijuana is marijuana can be 30% THC, which is that psychoactive compound that produces that high like effect whereas hemp or cannabis - CBD derive from hemp or cannabis is only 0.3% THC. So there is no possible way for CBD to produce a high like effect. However CBD does have a therapeutic property that does reduce inflammation, it does calm nerve endings and so it is - we have seen that it's beneficial for our patients and we are marketing as such. That the rub is for us is that CBD has kind of a murky legal status and that is because not all CBD is derived from hemp, some of it is derived straight from marijuana and so some states, some localities, municipalities they all treat CBD differently. Some say it's illegal, some say legal, you can look it up a dozen times and find different answers. Is CBD legal right now and some say, yes and some say, no. Now, there is a bill in Congress, the Senate just approved a bill to legalize CBD where you can grow it and you can - any CBD were doesn't have the psychoactive compound and produce a high like effect is approved.

Now, we're waiting for the House and we're waiting for the President to sign such a bill, we believe that that's the best case scenario. Hemp CBD is still a C1 under federal law which is a controlled substance that has no medical use. We don't agree with that classification, we are working to communicate with our legislators and anybody we can reach out to, to raise awareness on this, where that classification has to change. Everybody kind of is understanding now is that an increasingly accepted notion that as marijuana and CBD has medical benefits and so we want to make sure that we continue to lobby for that. The new law that the Senate just passed doesn't change the classification. So what we're waiting for is for there to be some clarity on the law. However, we do know in the state of Florida that we can have certain CBD products that we've attested to, that we've found that have no THC that there is a proper chain of the plants going into that CBD products, so we're able to maintain a small line.

Our plans are to either acquire or manufacture or partner with the manufacturer to develop our own line especially as it relates to nervous system disorders and neural disorders and pain management, especially for pain management which we're seeing very promising studies showing that its effectiveness in pain management. So we want to make sure that we really promote the healthcare aspect of CBD and integrate that under the PharmCo banner as opposed to having a completely separate company. While we're under DEA jurisdiction, we have to be very careful of how we approach these substances while we agree and we recommend and will attest to the medicinal benefits of either marijuana or CBD. If we go outside of the law, it puts everyone at risk and I'm not willing to put people at risk. So we just make those recommendations to the patients and if we can dispense CBD to our patients we will do so.

Stuart Smith

Excellent. Well, then can you go over the current initiatives that are underway now?

Shital Mars

So we have a lot of exciting things we have - a lot of you read our press release about DischargeRx. Now, that is a program we designed specifically for hospitals because again we noticed gaps in healthcare we noticed that a lot of patients are going to the hospital and not filling their prescriptions, which is putting them at risk of being readmitted to the hospital within 30 to 90 days. Now for hospitals, they get penalize for that, after 30 to 90 days if a patient is readmitted for the same diagnosis the hospital have to pay a fine. So they're responsible for the care or the transitional care and management of medication for the patient even after they're discharged. And how do they do that with limited resources, limited time, the doctors doing rounds, very few people will have the ability to communicate with the patient and describe go over their medications. Patients are saying it costs too much, patients don't understand what each medication is for or how to take them or how to stay adherent and that's where we came in and that's where we're doing that pilot program with Westchester General Hospital and we're working with these new patients. The one thing that's unique about Florida is there's nothing - and there may not be an unique about Florida, but one thing that we know being a pharmacy in Florida is that you cannot force a patient to use a particular pharmacy. The hospital cannot say we're - PharmCo is dispensing all of our discharge meds. They can only make a recommendation and it is up to the patient to decide whether to come to a PharmCo or not.

Now, we are putting our representatives, our marketing material going there, educating the nursing staff, the doctor staff to really explain the PharmCo model and why it's beneficial to the patient, but ultimately we cannot force them to change. The great thing is that they have been really receptive and they believe that they can work with the patients and get them to at least start using PharmCo for their transitional care as an additional service provided by the hospital. So after transitional care it's like putting PharmCo on a trial period, after the transitional care 30 to 90 days' supply of medication, if they find that PharmCo is delivering the kind of service that they want and this we're talking about from the from the patient perspective, they can continue to use PharmCo for a supplementary refills and we can continue to work with their primary care physician as they use - as they go through ongoing condition management and supervision. So we are excited, we do have other hospitals that are interested and as soon as we roll this out with Westchester they - we have a doctor's group that works a lot of other facilities, they reached out to us, long-term care facilities are also looking at us and we're working on trying to do in service with these other institutions to go over our program and how we help.

And then the other thing is tele-pharmacy and we've gone over this a little bit, I know it's kind of confusing. Tele-pharmacy is live streaming digital pharmacy window. What does that mean? If I was in the hospital and I'm going to give you an imaginary scenario, but we want to make this a reality. Imagine I'm being discharged and I have a med list, one of the things that's important for all doctors to do is a medication reconciliation that means working with the patient saying what are you currently on, what medications conflict with the medication go with the diagnosis I have now given you, streamline this medication regiment, so that is beneficial to you and then send this to the pharmacy to get it filled. So that's a lot of consultation, that's a lot of time the doctor or the nursing staff or the administrative staff have to spend with the patient to go over medication. Now for us what we would like to do is for - at discharge, the nursing staff would simply put a kiosk, a digital - it looks like a big iPad screen on a platform they bring it into the patient's room and in it they can communicate face to face with the pharmacy staff that will do - while they're running around and doing all their discharge billing and their paperwork, we can go over the medication reconciliation, we can go over the medication list, we can go over how to take it, we can go over adherence, we can go over delivery and insurance and co-pay all right there. Before the patient gets a list or goes to the pharmacy and gets surprised by co-pays or anything else, we can make recommendations on cheaper alternatives to the doctor right there as we communicate with the patient and the nursing staff face to face.

And face to face is important especially if you're prescribing something that is a topical or a suspension or whether it's multi meds you want to be able to explain that visually. So we think that tele-pharmacy is going to really integrate well with the DischargeRx program, we also think it's going to work really well for doctors' offices and large scale clinics that after you go and see your doctor and get a diagnosis and a list of medications you can go right to the pharmacy window without leaving, without having to step foot in the pharmacy, go over everything having to do with your medications and know that it's going to be delivered to your door that day and you don't have to worry about. Now, you understand everything that you need to understand to stay compliant, to stay adherent and to get well. And so that's what we really in vision for tele-pharmacy and we're developing PharmCo, we're developing that Apple rolling it out in the kiosk platform or working with our– some technological hardware providers who are really excited about this opportunity because nobody has approached them about this kind of program where we're going to have that visual audio interface. And this simple compliant secure interface, so we're really excited about the rollout, we really think it's going to be beneficial and we're really looking forward to doing our technological advancements.

Stuart Smith

Well, very good. Let's talk about - can you talk about Benchmark and how they factor into the top a nice growth agenda?

Shital Mars

So we were approached by Benchmark about doing a capital raise and we worked with them and we agreed to $10 million capital raise and now we're working around the structure of that. How would it take place, what kind of materials and due diligence, we're in that process. The purpose of working with Benchmark and the amount of money that we think is necessary is all for growth and expansion. We want to be a NASA company that makes sense. We want to be a company that's really changing the face of pharmacy, changing the face of healthcare and while we are growing and we are having organic growth and we are increasing our prescription count to really make a difference on this growth, to really accelerate this growth we need we're real capital and so we believe that Benchmark is going to be able to provide this and provide it with investors that are friendly, that understand our market, understand our shareholder base, that are looking to - that aren't toxic in any way. We want to make sure that we're working with a company that really gets the benefit of PharmCo, of Progressive Care and the healthcare vision that we present. We chose Benchmarks for a couple of different reasons, one is their integrity and visibility, so we know that they have a large following, we know that they have institutional analyst coverage, so we know that once we do our capital raise that they will be able to provide that coverage and be able to provide that visibility for the stock afterwards and to that point a lot of us are familiar with their work on the CNBC, they are - they do have an analyst that does speak on that network from time to time and they do –they are referred to significantly in the Wall Street Capital Market industry. So we wanted to really use a reputable company and hopefully they're going to be able to deliver the kind of capital raise where our shareholders are really going to see the benefits of the accelerated growth that we can do with that expansion capital.

Stuart Smith

Well, Shital we've been at it for over an hour. So I want to thank you for your endurance ask if you have any closing comments or thoughts for your shareholders before we end the call.

Shital Mars

So I always end this with some reflection or talking about what's going on. I'm going to try to keep this really brief because I know I've been talking for an hour, but I want everybody to get excited. This is a new, this is fresh, nobody talks about pharmacy the way we do, nobody approaches tech companies with the ideas that we have. And we are on the precipice of really developing technologically but also in a way that's personal. A lot of times we all get frustrated with calling in - in calling in a company, getting an automated report by going through the prompt, working with computers all the time, but healthcare is personal, healthcare is emotional, healthcare is impacted by upbringing in our worldview and for healthcare to be effective you have to have providers that understand that. And we want to use tech that brings us to the forefront of personalization of bringing that to the to the home because that's really where healthcare is being delivered. So we're doing DischargeRx, we're doing tele-pharmacy, we're doing the opioid campaign, you're going to see more writing from me, you're going to see more speaking from me, you're going to see more challenge from me of the industry and say, here I say that this is our perspective, this is how we believe healthcare should be and we're going to make it so.

Now, I'm a load person, I have very little volume control, but I'm still only one voice. I need a lot a lot of people to form a chorus with us to say yes, this is the right approach, yes, this is what we believe in and yes, this is where we will leave pharmacy should go. One thing I'll shout from the rooftops if I have to it is that pharmacists many of them are doctors and pharmacology you don't see them put doctor in front of their name, but they are. They're Dr. Pamela Roberts, they're Dr. Deseret Baker and those are our pharmacists in charge of Touchpoint and PharmCo and they are specialists in pharmacology. They know these drugs backwards, forwards, inside out, the interactions, they know over the counter products, so we want to patients start looking at their pharmacist as a valuable healthcare resource and to look to the - even if it's their local pharmacist, if it's us and we hope to be that resource to just call us and ask us about over the counter medication, ask us about pain treatment, ask about hormones because our pharmacists can tell you. Our pharmacists are knowledgeable; our pharmacists are healthcare professionals with decades of pharmacy experience, of healthcare experience under their belt.

And so I want every one of our investors, every one of our shareholders, everyone listening, who's just looking at healthcare to get excited because we're going to start making a change, we're going to start making a difference in this industry and you're just now seeing the beginning of it. I mean, one quick plug at the end of this and I never do a plug, but we are up for a South by Southwest speaking opportunity where I can bring this message to a broader scale, so if everybody can go to the Facebook page and find that link or go to our Twitter and find that link and register and account and vote for me to go and make this presentation at that conference. I would really appreciate, I think it will be a great thing for the company and for the visibility of our message and the legitimacy of what we're trying to do to prevent at that conference. So just a quick plug and I know that I don't usually do that, but I think it's important in this case especially for the company. So I want to extend a big thank you to everybody for listening to me for so long here at 75 minutes going on. Thank you for listening to everything I've had to say and I hope you found it valuable.

Stuart Smith

Absolutely and once again I'm going to give a plug and I hope you win the South by Southwest Austin Texas is where SmallCapVoice.Com is located. But I want to give a plug as well, I want you guys to come and listen to these audio interviews, we're going to get so many of these questions that we weren't able to get into day because we knew today was going to be a long one anyway. So we just weren't able to get as many questions in, but do stay tuned, check out the audio interviews as we issue them via press releases. For Shital Mars, CEO of Progressive Care, ticker symbol RXMD this is Stuart Smith saying thanks so much listening.