Progressive Care, Inc.
Q2 2021 Earnings Call Transcript

Published: 16 Aug 2021

[Operator:]

Good day and welcome everyone to Progressive Care leadership shareholder conference call and business update. Today, all participants will be in a listen-only mode. Today, certain statements included in this presentation that are not historical or current facts will include but are not limited to those related to our financial and business expectations and outlook the impact of evolving and uncertain health care environment, strategy and growth drivers, utilization and patient volume trends, revenue visibility, anticipated member renewals of GPO participation agreements, cross and up sell opportunities, acquisition activities and pipeline, revenue available under contract, purchases under our share repurchase program and the financial impact of share repurchases, tax reform and cost savings efforts, potential dividend payments and 2020 financial guidance in related assumptions are forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements accordingly readers should not place undue reliance on any forward-looking statements. Readers are urged to consider statements in the conditional or future tenses or that includes terms such as believes or belief, expects, estimates, intends, anticipates or plans to be uncertain and forward-looking. Forward-looking statements that may include comments regarding the company's beliefs and expectations as to future events and trends affecting its business and aren't necessarily subject to uncertainties, many of which are outside the company's control. You should carefully read the company's periodic and current filings with the OTC markets for more information on potential risks and other factors that could affect the company and its financial condition or results of operations. Forward-looking statements speak only as of the date they are made. The company undertakes no obligation to publicly update or revise any forward-looking statements. This presentation includes certain non-GAAP financial measures as defined in Regulation G under the Securities Exchange Act of 1934. Schedules are attached and that reconciles the non-GAAP financial measures to include in this presentation to the most directly compatible financial measures calculated and presented in accordance with Generally Accepted Accounting Principles in the United States. You should carefully read Progressive Care's periodic and current filings on the OTC markets website for definitions and further explanations and disclosure regarding our use of non-GAAP financial measures and such filings should be read in conjunction with this presentation. At this time, I would like to turn the conference over to Jay Weisberg, Chief Executive Officer. Please go ahead, sir

[Jay Weisberg:]

Thank you Chris. Good afternoon and welcome to the conference call for the quarter ending June 30, 2021. I am Alan Jay Weisberg, Chief Executive Officer and Chairman of the Board of Progressive Care, In. Joining me today are our Chief Financial Officer, Cecile, Birute, our Chief Operating Officer and our Director of Administrative Services, Bob. The second quarter of 2021 was very exciting and at the same time a challenging period for us. I would like to introduce our COO, Birute, who will discuss some of the operational challenges the company faced during the last six months.

[Birute Norkute:]

Thank you Jay. The ongoing COVID-19 pandemic had a disruptive impact on our labor force. Our primary business, pharmacy operations including COVID testing, is highly labor intensive. Worsening conditions due to COVID-19 outbreak Miami Dade and Broward county as well as City of Orlando retail led to large scale employee absences due employees contacting the virus. Our work force was also disrupted by employee absences due to care for sick family members or issues with child care or around schooling that prevented them from working full time hours. We also experienced challenges in the labor market as it relates to the hiring new employees due to fewer workers seeking employment since unemployment benefits were extended and increased. This lead to an overall smaller selection of qualified workers. Wee were also experienced fierce competition from our larger competitors as well as hospitals and government agencies for hiring workers for testing and vaccination, as these companies have offered above market compensation and sign-on bonuses. We also fought hard through the challenges and difficulties in implementing our new pharmacy software during the six month period at our PharmCo 901 and PharmCo 1103 locations. The new pharmacy software system turned out to be impossible to connect to our SaaS based environment. We did supply its management and development fees to manufacture to deliver on their contract but after several months of operating in less than optimal conditions due to software, we have decided to return to our original pharmacy software Rx30 that we have worked with almost 10 years. Since the last time we worked with Rx30, the software developer had added significant enhancements to the software that will allow us to greatly expand our site. Plus, the development company has made very important concessions as to customizing their software and offered us some significant financial incentives to use their software. We also have a great in-house development team that will work on developing on our own customizable solution. In summary, the enhancements will allow us to restart our growth in a number of prescriptions sold and begin onboarding new pharmacies. We are confident we will see a turn around in our script numbers this quarter and we project significantly higher script count in the fourth quarter of this year. During the third quarter of 2020, the company launched its COVID-19 testing service that produce rapid detection of the COVID-19 virus and antibody testing to detect the presence of antibodies in the blood with market leading accuracy in 15 to 45 minutes. The system we used for rapid detection of the COVID-19 virus are molecular test using a lab technique called PCR, an antigen-based testing system designed to detect proteins from the virus that causes COVID-19 and COVID-19-Rapid Test Cassette authorized for the detection of antibodies through COVID-19 human blood. The company provides these testing system to patients at its North Miami Beach, Hallandale Beach, Palm Springs and Orlando locations. Our testing sites are equipped with analyzers capable of detecting positive or negative COVID-19 results within minutes. Each site is operated by a clinically trained pharmacist staff and administering tests on and off site. The company has established a reputation of reliable testing partner and currently provides testing services to international travelers and international airlines, chain restaurants, U. S. and international production and entertainment companies and local health care communities. Our testing system allows a patient, employer or coordinator in charge to schedule the test, pay for a test and access test results with minimal efforts. We are looking forward to further building a stronger market share in Florida as well as in other states. We are extremely proud of what we were able to build in such a short period of time. Back to you Jay.

[Jay Weisberg:]

Thank you Birute. Our 340B business has been going strong as well. We continue to add new contracts for PharmCoRx 340B pharmacy services and third-party administrative services performed for 340B covered entities by our subsidiary ClearMetrX. We have completed development of the ClearMetrX 340B platform and we are now in the final testing stages where we will be using the platform at some of our 340B covered entities as part of a pilot program. Our goal is to get the production to a full satisfaction point before the end of this year and begin a nationwide rollout in the first quarter of 2022. As you can see, the positive results from COVID-19 testing and increased business volume relating to 340B contract has validated management's business plan, the objective of which is to complete our evolution and to diversify supplying healthcare service business and to mitigate the risk associated with too much over reliance on our previously core business pharmacy operations. Later in this call, we will provide an update on our progress towards this diversification.. Let's discuss a summary of our quarterly financial report which provides you with our financial position as of June 30, 2021, our results of operations and changes in stockholders equity for the three and six months ended June 30, 2021and our cash flows for the six months ended June 30, 2021. The financial statements in this report were reviewed by our independent public accounting firm. Daszkal Bolton. Please be sure to review our financial report which is available on both the OTC market website as well as our website. Cecile, our CFO, will now walk you through the financial results.

[Cecile Munnik:]

Thank you Jay. Good afternoon everyone. As Jay mentioned, it was a challenging quarter for us. Despite a disruptive condition, we were able to manage our cash position and liquidity through careful planning as well as some support from federal programs such as the PPP loan program. We expect the same for the third quarter of 2021. Also removing significant, non-cash items such as gains associated with fair value adjustments to our derivative instruments, the company still managed positive EBITDA of nearly $78,000 for the second quarter of 2021 and over $219,000 for the six months ended June 30, 2021. This was compared to negative EBITDA of $311,000 and $955,000 respectively for the same period in 2020. Our cash position was over $2.4 million on June 30, 2021, which increased over $325,000 over our cash position on December 31, 2020. We expect our cash position will remain around $2 million through remainder of the year. Our second quarter 2021 revenue, net of PBM fees, was $9.6 million, nearly identical to our first quarter 2021 revenue and increased over $371,000 when compared to the same period in 2020. Much of that increase was attributable to the COVID-19 testing that we performed from our pharmacies during the quarter which was not present during the second quarter in 2020. For the six months ended June 30, 2021, we recognized overall revenue from operations of approximately $19.2 million, which is a $900,000 year-over-year increase when compared to the same period in 2020. The increase is mainly due to an increasing in 340B fees earned of approximately $800,000, COVID-19 testing revenue of approximately $1.6 million and a decrease in DIR and other PBM fees of approximately $500,000. This was offset by a decrease in pharmacy and other revenues of $2 million Jay mentioned that we have been planning to diversify our business lines and our efforts to mitigate the risks associated with overall reliance on our primary business line, pharmacy operations. We believe our efforts to execute on business plan are beginning to bear fruit. Our pharmacy services revenue was less than 90% of our total revenues during the six months ended June 30, 2021. This is attributable to the increase in 340B contract revenue and COVID-19 testing. During the second quarter of 2021, we have again expanded the number of contracts for our 340B pharmacy, dispensing and third-party administration or TPA services. The TPA services are provided through our ClearMetrX subsidiary. Revenue earned on these contracts increased over 64% for the second quarter of 2021 from approximately $400,000 to $700,000 when compared to the same period in 2020. Total revenue for the first six months under the 340B contracts were $1.4 million and $600,000 for 2021 and 2020 respectively. That is 127% year-over-year increase. Second, we earned over $1 million in revenue from COVID-19 testing for over 6,000 patients at our pharmacies during the second quarter of 2021. Testing was not a component of our revenue in the second quarter of 2020 as we had not yet obtained permission to perform testing at our pharmacies. We project that our testing services will remain at or above our present levels as travel restrictions are lifted and many popular travel destinations now require proof of testing or vaccinations from travelers. We continue to book stronger relationships with our current clients and constantly expanding our marketing efforts towards building new relationships. We are regularly having new organizations reaching out to us for our rapid testing solution. Our Orlando location is beginning to bring stronger results in testing as our marketing efforts begin to come to fruition. We project that our 2021 annual revenue will exceed $3 three dollars from this source assuming there will be no material disruptions in testing supply. Third, during April 2021 we have received a large of inventory of Moderna vaccines which represents 2,000 doses and began distribution to customers. The company is providing vaccinations at the pharmacy locations as well as administered vaccines at locations, such as long term care facilities, clinics, community centers and vaccination events carried out a partnership with various community organizations. We are also playing an imperative role in helping to educate our patients and the residents of our surrounding communities on the safety, importance and value of vaccinations that protect against COVID-19. We also recognized non-operating and non-recurring gains on debt extinguishment that resulted from payment forgiveness of one of our PPP loans from the federal government and a debt principal adjustment by our convertible notes. Finally, I would like to discuss the status of our registration statement filing with the Securities and Exchange Commission. As we discussed in our first quarter in full in May, we have made a confidential filing our Form S-1 with the SEC. The registration statement was reviewed by the SEC staff and comments were provided to us for our consideration. These comments were addressed and incorporated into the next draft of the Form S-1, which will be filed in the near future. This completes my remarks on the financial results for the second quarter of 2021 and our business outlook. Back to you, Jay.

[Jay Weisberg:]

Thank you Cecile. We believe our financial results for 2021 thus far are excellent, Given the conditions in the past six months. But we also believe we can accomplish much more as we continue along our plan to transform into a data-centric healthcare technology platform with market leading and innovative solutions to deliver personalized patient-centered care. We continue to receive many questions from our shareholders about the convertible note payable with Chicago Ventures, which we currently service through the conversion of debt principal and interest and the shares of our common stock. The shares received and these conversions are then put on open market by the note holder. Those sales have had a dilutive effect on our stock price. Our efforts to modify the note turns to remove the conversion feature and replace with more conventional features have been unsuccessful. Our debt agreement has share volume limitations that were meant to lessen the potential dilutive effects of the sale of converted shares on the market. We have determined that Chicago Ventures sold shares on the market in excess of the volume limitations in our agreement. We have requested and received partial reductions in the debt principal that we owe them. We have also requested that they resist from sales exceeding the volume limitations in the future. Thus far, since our discussions with them, sale of shares from Chicago Ventures have been moderated. In the interim, we continue to seek other forms of capital, either debt or equity in form, which will be used to pay down the remaining principal balance the notes. During Q3, we are nearing the completion of our IT HIPAA compliance software development and virtual and healthcare care services and plans to deliver these services directly to consumers and through channel partners. Our independent contractor MyApp corp. has completed the software platform for ClearMetrX and we are in testing phase. We will then concentrate our efforts to develop new sales channels or expand existing ones and move forward with the execution on our plan of offering our TPA services nationwide. We also signed a service agreement with Eagle Force LLC in February 2021 to integrate its telehealth health platform called myVax into our beta platform to offer a digital passport for COVID-19 testing and vaccination results. The platform was launched on July 20 and is capable of managing an individual's COVID-19 vaccine and testing records. Once a PharmCoRx myVax profile has been created, patients have a secure way to store health records, including testing records, vaccination records, medication, vitals and vaccine passport data. It is also capable of tracking vital health data from smart watches and other devices. The myVax passport serves as an easy and secure way to store and manage verifiable COVID-19 related records for traveling or work purposes. It is also available to consumers in a mobile application which is available on both iOS and Android devices. Next, I would like to review for you our strategic goals for 2021, which remain largely unchanged from our first quarter goals that we discussed back in May. Strive to achieve over $45 million in sales in 2021, expansion of COVID-19 testing and vaccination programs, completion of telehealth integration with Eagle Ford Digital, nationwide launch of ClearMetrX 340B TPA services, secure additional 34tB contracts with covered entities, seek an upcoming long term care facility relationships, achieve full enterprise profitability and earnings growth, become SEC registered and fully reporting, complete an up uplift to a national exchange. We believe that despite the challenges, Q1 and Q2 2021 have been a promising start to accomplishing each of these goals. As we progress throughout the year, it will be important to keep our management team's vision for Progressive Care in mind. The healthier we make our patients, the more successful our business would be. And we will not lose sight of that patient with the added goal of enhancing been and creating more value for our shareholders. That concludes our remarks for the earnings call. We would like to turn now to the questions that we receives in advance of the earnings call. I would like to introduce Bob Bedwell, our Director of Administrative Services, to discuss and answer those questions.

[Bob Bedwell:]

Thank you Jay. We have received a number of questions concerning the status of our Form S-1 statement and our plans to uplist to a national stock exchange. Some of those questions included, when are we going to finally make the SEC filing? Why has it been delayed? And when will it be resolved? Are we still on a quiet period and why? So here's the current state of our business plan are it relates to SEC registrations and the uplist. So we have previously provided you, our shareholders, with our business plan, which was to register with the SEC and uplist to a national stock exchange. That plan must be carried out in that order. To initiate that business plan, we first filed our initial draft to the Form S-1 with the SEC. The Form S-1 registration process contemplates that companies planning to raise capital in the public market. That form includes a prospectus which requires that the company provides certain disclosures about its business operations, its financial conditions as well as information about its management. We elected the confidential status for that registration and for that registration process, which means that we have to remain bound about any statements regarding the registration statement or the uplist process. That period of time is known as the quiet period that extends from the time that a company files the registration statement with the SEC until such time as the SEC staff declares the registration statement effective. During that period, the federal securities laws limit what information a company and related parties can release to the public. Failure to comply with those restrictions generally is referred to as gun jumping and we can get into some serious trouble if we don't comply with those provisions. So once we filed our Form S-1, it was then reviewed by the SEC staff who have then registered SEC comments. We then submit our responses to those comments. Once those comments are cleared and finally the S-1 is declared effective by the SEC and company become subject to SEC reporting requirements. This entire process must be completed before we can uplist to a national stock exchange. It can be and has been a difficult and complex process and you have to be sure that you have right investment thesis and underwriters on board to carry out the entire process. So here we are with the status of this process. We received and cleared two rounds of EC comments. The second round consisted of merely one question. So we have generally taken that to be a pretty good sign. The next step is the initiation of a capital raise. Unfortunately, our plans in this regard has not yet reached fruition. We have hired a new investment banker which, we believe, will get the job done for us a lot faster. Since we filed the SEC registration statement on a confidential basis, we are now in quiet period until such time that the registration is made effective by the SEC. We have also received numerous questions regarding the status of our note to John Fife and Iliad Research. Jay has previously provided some information regarding that. Some of the questions we received in regards to the note, how much do we still owe them? Have we attempted to renegotiate the terms of possibly to convert to note into more conventional financing? Can we pay down some or all of the notes principal in cash? Is much of the dilutive trading attributable to them? What are we doing about that? To answer the first question, how much do we still owe them? The balance on our note today is approximately $2.2 million, which includes accrued but unpaid interest. We have had several discussions with the lender about restructuring or renegotiating the terms of the note, but ultimately the proposed terms from them have not been favorable to us as a company. Please remember that that note is a contract and we have abide by the terms of that contract, which includes allowing them to redeem portions of a note and then request either payment in cash or in shares of our company's common stock in accordance with the conversion provisions of that agreement. We currently need our cash balances to manage our working capital and liquidity needs and therefore, we have not explored repayment of the note with our available cash balances. We have also explored several refinancing opportunities with other financing sources. But those alternatives have either been too expensive for us or they very unfavorable terms. It is very difficult to find financing for healthcare companies our size because there is generally insufficient collateral to offer them a security or a loan. So until we find other affordable finance sources that has non-dilutive features, we will continue to redeem the note in the same manner as we have in the past. As to some of your suspicions regarding the significant trading activity that’s transpired in recent months, we have suspected that some of that significant trading activity that has such a negative dilutive effect on our trading price, was attributable to Iliad. And as Jay mentioned, it admitted that as much to us and have provided a significant discount on our note as a result of the excessive trades that they carried out the last two quarters. We have included in our discussions with them a demand to adhere to the volume limitations provisions in our agreement with them and we have noted that the trading activity has since stabilized. We also received several questions inquiring about whether we have a business plan? Three-year plan? Five-year plan? What some of the goals and steps that we plan to take to reach our goals? I will tell you that one thing that’s been consistent with my involvement in this company over four years ago is that our business is constantly evolving. We are always looking at what kind of company do we want to be. Quire simply, our five-year plan is that we would like to be $1 billion diversified healthcare care company. We recognize that we would have to take care of this diversification goal before we can meet our more challenging revenue goal. We have discussed previously in this call our attempts to diversify by our business. We plan to meet our revenue goals through a combination of organic growth and through acquisitions. We prepared three-year business projections as set ourselves budgets and performance goals to measure our progress towards our business plan. All of these plans and budgets and goals needs one thing to be successful, access to capital. We don't want capital from sources that will be negatively non-dilutive. In other words, we accept dilution if the capital source furthers us towards the goals in our business plan. So we ask for your patience as we work through the registration, the uplist process as that will give us access to the right kind of capital. A kind of will allow us to execute acquisitions, execute on our digital platforms and finance and marketing plans to bring our digital platforms nationwide. Finally, we received questions in terms of information that’s being provided by us to you, our shareholders. Why did we stop providing monthly shareholder updates? While we haven't stopped providing information to our shareholders entirely, but we changed the reporting intervals to quarterly to coincide with our financial reporting intervals. Much of the financial data that we provided in the past is revenue related. Revenue related to prescription claims can sometimes be included and the payment status claims may some times overlap months resolution. It is found that our public reporting to shareholders is less subject to change if we provide shareholders updates after our public accounting firm ha we reviewed our financial metrics. Back to you Jay.

[Jay Weisberg:]

Thank you Bob. That's all the questions we have for today. We believe that we have provided you with important information about our Q2 financial results and our business outlook. We thank you for taking the time to join us on this call and for submitting your questions to us. We hope that you have a great remainder of the summer season and look forward to talking with you again in November during our next earnings conference call.

[End of Q&A:]

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.