News that Progressive Care Inc (OTCMKTS:RXMD) has executed a $2 million financing agreement seems to have rattled investors. The stock tanking by as much as 10% on the news could be an indication that investors are wary of the company’s financial position. Walgreens Boots Alliance Inc (NASDAQ:WBA) may not have any immediate financial concerns, however, it faces a major hurdle on its push to complete the acquisition of Rite Aid Corporation (NYSE:RAD).
Chicago Ventures $2 Million Financing
Progressive Care says it has entered into Securities Purchase agreement with Chicago Ventures Partners. The Utah-based investor, as a result, is to buy a 10% convertible promissory Note for $2,205,000. According to the purchase terms, the Note is only convertible after one year.
The company is to receive the principal amount for the Note in eight tranches beginning with an initial deposit of $250,000 at the closing of the transaction. Chicago Ventures Partners has also issued the company seven secured Investor Notes each carrying a principal amount of $250,000.
Uses of Proceeds
PharmCo LLC is to act as the guarantor under the Purchase Agreement and as a result, is entitled to 10% of all the proceeds that come from the transaction. The subsidiary will also receive an additional 50% of the proceeds that it intends to use to cater for its ongoing business operations.
In a security filling, Progressive Care says it will use proceeds from the offering to cater for its ongoing growth in development. It is worth noting that the company recently received State license from New Jersey and Pennsylvania where it hopes to expand its business empire. With the new financial banking, the pharmaceutical company should be able to start dispensing traditional and compounded medications in the two states in addition to similar operations in New York, Texas, and Florida.
Investors’ Concerns
The execution of the $2 million financing agreements comes just weeks after Progressive Care announced record revenues of $1.7 million for the month of June. The news coupled with a record first quarter has all but helped bolsters investors’ confidence on the stock.
Pursuit of new financing could be an indication that the company is growing too fast for its balance sheet to cater for all emerging financial obligations. However, the same could also be an indication that the company has run out of cash and is not generating enough cash to finance all ongoing operations. Investors will only know the truth when the company posts its second quarter results.
Walgreens Regulatory Test
While Progressive Care Inc (OTCMKTS:RXMD) continues to pursue new financing, Walgreens is keeping its fingers crossed as regulators heighten scrutiny on the proposed $17 billion takeover of Rite Aid. There have been growing concerns in the recent past that antitrust concerns among regulators could deal the merger a big blow.
In a bid to achieve the much-needed regulatory approval, Walgreens Boots Alliance Inc (NASDAQ:WBA) is planning to divest up to 1000 stores. There is already talk that CVS Health Corp (NYSE:CVS) could buy some of the stores a move that could help accelerate the regulatory process. However, regulators are still concerned that a merger pitying two juggernauts in the business could have serious ramifications on the pricing of drugs in the industry.
Bottom Line
Progressive Care Inc (OTCMKTS:RXMD) stock tanking by more than 10% on the $2 million financing raises serious concerns about the company’s financial position. The company will have to reiterate how financially stable it is, if it is to have a chance of alleviating any investors concerns.
