UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 11, 2012
SCRIPSAMERICA, INC.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 000-54550 | 26-2598594 | ||
|
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
77 McCullough Drive, Suite 7, New Castle, Delaware 19720
(Address of Principal Executive Offices)(Zip Code)
Registrant’s telephone number, including area code: (800) 957-7622
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
| Item 1.01 | Entry into a Material Definitive Agreement. |
On September 11, 2012, the registrant, ScripsAmerica, Inc., entered into a letter of intent with Marlex Pharmaceuticals, Inc. and its principals to acquire all of the outstanding shares of Marlex in a reverse triangular merger. The purchase price for Marlex is $5 million, which will be paid by the issuance of restricted shares of the registrant’s common stock. The number of shares of the registrant’s common stock to be issued to the shareholders of Marlex will be based on the purchase price divided by the lesser of (i) $0.338, which is the average closing price of the registrant’s common stock on the OTC Bulletin Board for the five day period ended September 11, 2012 and (ii) the average closing price of the registrant’s common stock on the OTC Bulletin Board for the five day period ending on the date of the closing of the merger (but in no event less than $0.174 per share). The registrant’s board of directors approved the acquisition of Marlex under the letter of intent based upon an appraisal from Corporate Valuation Advisors, Inc., which valued Marlex’s business at $12.5 million.
The closing of the merger is subject to (i) the parties entering into a definitive agreement and plan of merger, (ii) Marlex delivering to the registrant audited financial statements for the year ended December 31, 2011 and unaudited financial statements for the six months ended June 30, 2012 reviewed by an independent auditor and (iii) the registrant securing financing to pay off Marlex’s existing bank debt (which is estimated to be between $4 million - $5 million). The closing must occur on or before December 31, 2012, but the registrant may postpone the closing to no later than February 28, 2013 if the registrant requires additional time to (i) meet SEC filing requirements for the acquisition of Marlex (such as preparing consolidated financial statements and/or pro forma financial statements) or (ii) secure the financing to pay off Marlex’s existing bank debt.
Upon the closing of the merger, Marlex will be a wholly-owned subsidiary of the Company and the current management of Marlex will remain as the management of Marlex. Additionally, at the closing, the executive officers of Marlex will enter into employment agreements consistent with those given to executive officers of the registrant, subject to review and approval by the Compensation Committee of the registrant’s board of directors.
If the conditions to closing are met and Marlex neglects, fails or refuses to close, then (a) all amounts owed by Marlex to the registrant shall become immediately due and payable with interest (at the rate of 3.5% per annum) and (i) Marlex shall pay the registrant a break-up fee of $25,000 plus legal and accounting fees and costs incurred by the registrant with respect to the transaction and all other costs, expenses and losses of the registrant.
The registrant also has a right of first refusal if Marlex receives an offer from a third party to acquire Marlex prior to the closing.
The description of the letter of intent contained in this Item 1.01 is a summary and is qualified in its entirety by reference to the letter of intent which is attached to this Current Report as Exhibit 10.1, and which is incorporated herein by reference.
| Item 8.01 | Other Events. |
On September 12, 2012, the registrant issued a press release regarding the letter of intent it signed with Marlex Pharmaceuticals, Inc. and its principals to acquire all of the outstanding shares of Marlex in a stock-for-stock reverse triangular merger. The press release is attached to this Current Report as Exhibit 99.1
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
| Exhibit No. | Exhibit Description | |
| 10.1 | Letter of Intent, dated September 11, 2012, by and among the registrant, Marlex Pharmaceuticals, Inc., Sarav Patel and Samir Patel. | |
| 99.1 | Press release dated September 12, 2012 |
| 2 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SCRIPSAMERICA, INC. | ||
| Date: September 14, 2012 | By: | /s/ Jeffrey Andrews |
| Jeffrey Andrews | ||
| Chief Financial Officer | ||
3
Exhibit 10.1
September 11, 2012
| Sarav Patel, President | Samir Patel, Vice-President |
| Marlex Pharmaceuticals, Inc. | Marlex Pharmaceuticals, Inc. |
| 50 McCullough Drive | 50 McCullough Drive |
| New Castle, DE 19720 | New Castle, DE 19720 |
Re: Acquisition by ScripsAmerica, Inc. of Marlex Pharmaceuticals, Inc. by tax-exempt reverse triangular merger (under IRC Sec. 358(a)(1)(A)
Dear Messrs. Patel and Patel:
This is to serve as an initially Letter of Intent which shall become a Final Agreement upon the occurrence of certain conditions precedent (Article III). If and when the conditions precedent are met, this shall become a Final Agreement, and a binding agreement upon both parties, until superseded by a more formal Reorganization Agreement for the acquisition by ScripsAmerica, Inc. (“ScripsAmerica”) of Marlex Pharmaceuticals, Inc. (“Marlex”).
I
HOLDING COMPANY STRUCTURE
It is the intent of ScripsAmerica to develop its corporate structure as a holding company, with operating subsidiaries. As the holding company, ScripsAmerica will be the “parent” of the group and will provide “staff” functions to the operating subsidiaries, which will perform “line” functions. The “staff” functions to be provided by ScripsAmerica will include maintaining the publicly trading status of the group, securing financing for needs of the group members, providing legal and accounting services to the group members, providing investor relations/public relations to the group, providing marketing and advertising to the group, managing the group to best reduce operating costs and maximizing profitability, and securing growth of the group through acquisitions.
II
ACQUISITION OF MARLEX; REVERSE TRIANGULAR MERGER
In order to best maintain the approvals, licenses, business relationships, etc. of Marlex, it is desirable to have the acquisition structured so that the existing Marlex entity is acquired and maintained. This would normally be structured as a tax free “stock-for-stock” exchange; ScripsAmerica would issue shares of its stock to the shareholders of Marlex in exchange for 100% of their shares of Marlex, resulting in the Marlex shareholders becoming shareholders of ScripsAmerica and ScripsAmerica becoming the sole shareholder, and owner, of Marlex. Here, however, Marlex has debt which has been personally guaranteed, which will be paid off by ScripsAmerica, initially by loans as provided in Article VI. In addition, the officers of Marlex will receive employment agreements and various fringe benefits, which the I.R.S. might regard as taxable boot. A stock-for-stock exchange, known as a 368(a)(1)(B) Reorganization, is tax free, BUT there can be no boot at all. That is, any boot at all destroys the tax free status of the exchange. Because of the risk that the I.R.S. might try to find boot and destroy the tax free status of transaction, an alternative acquisition must be structured.
Obviously, we cannot use a stock-for-assets acquisition and maintain the current Marlex entity; that would require forming a new operating subsidiary for ScripsAmerica which would replace Marlex.
In order to avoid this problem, while maintaining the current Marlex entity, ScripsAmerica will structure the acquisition of Marlex as a reverse triangular merger. As a “merger” it falls under Section 368(a)(1)(A) of the Internal Revenue Code. As a “triangle” the acquisition will involve three (3) companies. As a “reverse” merger, Marlex will survive the merger rather than being merged. The procedure will be as follows:
1. ScripsAmerica will form a new subsidiary, “Pharmaceuticals Acquisition, Inc.
2. ScripsAmerica will capitalize Pharmaceuticals Acquisition, Inc. with sufficient shares of its common stock to accomplish the merger/acquisition.
3. Pharmaceuticals Acquisition, Inc. will merge with and into Marlex; Marlex will be the surviving corporation and Pharmaceuticals Acquisition, Inc. will be the merging corporation.
4. In the merger, the Marlex shareholders will receive shares of ScripsAmerica and their shares of Marlex will be canceled. The loans by ScripsAmerica to Marlex (Article VI) will be converted to a capital contribution to Marlex.
III
CONSIDERATION FOR ACQUISITION/SHARES TO BE ISSUED BY SCRIPS/AMERICA
The parties have negotiated on the basis of general, unaudited, financial information supplied by Marlex. Subject to approximate (+/- 20%) confirmation of such financial information by the audited financial statements to be supplied by Marlex (see below) ScripsAmerica shall issue, to the shareholders of Marlex in the merger, that number of shares of ScripsAmerica’s Common Stock calculated by dividing the agreed purchase value, Five Million Dollars ($5,000,000), by the lesser of:
(i) the Market Value of the shares on the date of the signing of this Letter of Intent, or
(ii) the Market Value of the shares on the date the Merger is closed; but
| 2 |
(iii) in no event, less than $.174 (Seventeen and Four-tenths Cents) per share.
“Market Value” shall mean the average Closing Sale Price for the five (5) consecutive trading days up to and including the day of the calculation.
When issued, the shares shall be legally authorized, validly issued and fully-paid and non-assessable. When issued, the shares of ScripsAmerica’s Common Stock shall not be registered for trading/transfer, but shall be restricted as to further transfer pursuant to applicable rules and regulations of the Securities and Exchange Commission (“SEC”) (e.g., Rule 144).
During the period prior to Closing, ScripsAmerica may, in its sole discretion, loan funds to Marlex.The parties have agreed that until Closing, if and when it may occur, such loans shall be loans, in fact, and not equity nor contributions to capital. Furthermore, the improvement (increase) in equity of Marlex, resulting from the loans and corresponding repayment of existing debt, shall be deemed offset by the loans by ScripsAmerica and no adjustment to the purchase price shall be made on account of such.
IV
INTERIM CONDUCT OF BUSINESS BY MARLEX
Pending the execution of the formal Plan of Reorganization, and thereafter until Closing, Marlex shall conduct its business in the ordinary course, so as to retain suppliers and customers, retain management and employees, continue selling and marketing, collect receivables and maintain payment of debts in the ordinary course and as scheduled, timely pay all taxes including payroll taxes, and maintain all approvals, licenses, authorities to do business, etc.
V
PRE-CLOSING, INTERIM LOANS BY SCRIPSAMERICA
During the period prior to Closing, ScripsAmerica may, in its sole discretion, loan funds to Marlex. The parties have agreed that until Closing, if and when it may occur, such loans shall be loans, in fact, and not equity nor contributions to capital. At Closing, however, all loans shall be converted to capital contributions by ScripsAmerica to Marlex.
VI
FORMAL PLAN OF REORGANIZATION
The reverse triangular merger outlined in this Letter of Intent shall be formalized and detailed in a Reorganization Agreement which shall supersede this Letter of Intent. The parties agree to complete the negotiations in good faith, with all deliberate speed, and to execute the Reorganization Agreement. The Reorganization Agreement shall contain the usual warranties and representations as determined by our respective attorneys and as mutually acceptable. The Marlex shareholders shall warrant their legal title and beneficial ownership of all shares delivered, free of all adverse claims thereto and free and clear of all liens, encumbrances, hypothecations and security interests. All shares of ScripsAmerica’s Common Stock being acquired by the Marlex shareholders shall be legally authorized and fully-paid and non-assessable.
| 3 |
VII
EMPLOYMENT AGREEMENTS
The current management of Marlex will remain the management of Marlex following the acquisition. At the present time, such management is employed on oral employment agreements. At Closing, the primary officers of Marlex shall be given Employment Agreements consistent with those given to the executives of ScripsAmerica, with the compensation and benefits to be subject to the Compensation Committee of the Board of Directors of ScripsAmerica, but which compensation and benefits shall also be consistent with that paid to executives of ScripsAmerica.
SECTION VIII
CLOSING
The parties intend that the Closing of the reverse triangular merger transaction occur on or before December 31, 2012 or as soon thereafter as possible, recognizing that the two (2) primary conditions for such Closing are (i) the securing of audited financial statements and reviewed stub period financial statements, by Marlex, and (ii) the securing of the funds necessary for Closing, by ScripsAmerica. The parties recognize that the Closing cannot occur until Marlex’s financial statements are available for the preparation and filing of appropriate SEC filings and the Closing shall be delayed as may be necessary to obtain such financial statements.
Subject to the postponement rights of ScripsAmerica, Closing shall be held at a mutually selected date, time and place on or before December 31, 2012. If the parties are unable to agree on a date, time and place, closing shall be held on December 31, 2012 at the offices of ScripsAmerica at 77 McCullough Drive, Suite 7, New Castle, DE 19720. Notwithstanding the foregoing, ScripsAmerica shall have the right to postpone Closing up to February 28, 2013, in the event that it requires time to meet (i) filing requirements for the SEC with respect to the acquisition of Marlex and the consolidation of financial statements, and preparation of pro formas, or (ii) completion and closing of the financing required for the Closing of the merger.
At Closing, the parties shall agree upon the allocation of the purchase price to the assets of Marlex, including the value of “goodwill”, if any, using the $5,000,000 valuation.
IX
FAILURE OF MARLEX TO CLOSE
In the event that a formal Plan of Reorganization is executed, and the period for closing has elapsed, and Marlex neglects, fails, or refuses to close the acquisition by ScripsAmerica, Inc., then:
1. All loans, advances or financial accommodation made to, or on behalf of, or for the benefit of, Marlex, shall be due and payable. All cash loans and advances shall be repaid, in full, with interest at the rate of 3.5% simple interest per annum. Terms for repayment will be negotiated by the parties. All financial accommodations shall be terminated.
| 4 |
2. Marlex shall pay a break-up fee, not as a penalty but to compensate ScripsAmerica for (i) the time expended by its management and executives, (ii) legal and accounting fees and costs incurred with respect to the proposed acquisition, and (iii) all other costs, expenses and losses, including “loss of benefit”, of Twenty Five Thousand Dollars ($25,000) with payment terms to be negotiated by the parties.
X
FAILURE OF SCRIPSAMERICA TO CLOSE
In the event that a formal Plan of Reorganization is executed, and the period for closing (including any extension to February 28, 2013) has elapsed, and ScripsAmerica neglects, fails, or refuses to close the acquisition by ScripsAmerica, Inc., then all loans, advances or financial accommodation made by ScripsAmerica to, or on behalf of, or for the benefit of, Marlex, shall be immediately converted to a capital contribution to Marlex.
XI
RIGHT OF FIRST REFUSAL
From the date of signing this document until closing of the final agreement ScripsAmerica shall have the “Right of First Refusal” should Marlex receive another offer from a third party for the purchase of Marlex.
Yours truly,
SCRIPSAMERICA, INC.
| By: | /s/ Robert Schneiderman | |
| Robert Schneiderman, President/CEO | ||
AGREED AND ACCEPTED:
Date: September 11, 2012
MARLEX PHARMACEUTICALS, INC.
| By: | /s/ Sarav Patel | |
| Sarav Patel, President | ||
| /s/ Sarav Patel | ||
| Samir Patel, Individually | ||
| /s/ Samir Patel | ||
| Samir Patel, Individually | ||
5
Exhibit 99.1
ScripsAmerica Signs Letter of Intent to Acquire Marlex Pharmaceuticals Inc. a Global Pharmaceutical
Packager
Acquisition Could Increase ScripsAmerica’s Revenues by as much as $6 Million Annually
New Castle, DE
– September 12, 2012 - ScripsAmerica Inc. (OTCBB: SCRC), a leading supplier of
prescription, OTC and nutraceutical drugs, today announced that the Company has signed a Letter of Intent (LOI) to acquire Marlex
Pharmaceuticals, Inc., a global pharmaceutical packaging company.
Management of ScripsAmerica believes the acquisition will have a significant positive impact on both companies and could add 10-15% to ScripsAmerica’s gross profit margin. More specifically, the Company forecasts that this move would significantly increase its revenues, order processing capability, and profitability in addition to providing more opportunities to secure government contracts due to Marlex’s current relationships.
Marlex Pharmaceuticals’ New Castle, DE facility is in compliance with the FDA, DEA, and the state board of pharmacy and contains 12,000 square feet of temperature-controlled space dedicated to pharmaceutical packaging, contract packaging and private labeling. ScripsAmerica, which has already received an independent 3rd party valuation of Marlex Pharmaceuticals, and in anticipation of the receipt of the audited financial statements, expects to raise the necessary funds to complete the acquisition through a private placement of its equity and/or debt securities.
“The acquisition of Marlex Pharmaceuticals will position ScripsAmerica to increase its annual revenues by up to $6 million dollars and operating income by up to 10 to 15 percent. This scope of growth would significantly increase shareholder value and mark the Company’s first major step toward becoming a complete provider of OTC and nutraceutical drugs, which includes the distribution and packaging of current product lines as well as the acquisition of new brands,” commented ScripsAmerica’s CEO, Bob Schneiderman.
“ScripsAmerica will not only dramatically increase its processing capacity by this move, but will also add the guidance and expertise of Marlex’s seasoned professionals in pharmaceutical packaging to our management team . We are very confident that the Company will raise the capital necessary to finalize this acquisition and expect it to contribute to our bottom line by the first quarter of 2013. Following the acquisition of Marlex, we will continue to seek strategic acquisition partners in the prescription, generic drug and OTC markets, which can exponentially fuel our growth,” added Mr. Schneiderman.
About Marlex Pharmaceuticals, Inc.
Marlex Pharmaceuticals, Inc. is a leading global packager and distributor of generic Rx, branded Rx, OTC, nutraceuticals and oral delivery OTC pharmaceuticals. The Company has relationships with major pharmaceutical distributors such as Cardinal Health, McKesson HBOC, AmeriSource Bergen, medium market pharmaceutical distributors and export market distributors. Through its distributors, Marlex has created a cost-effective, mass-market distribution system, providing pharmaceuticals to mass merchants, super markets, chain drug stores, independent drug stores, hospitals, long term care facilities, HMO’s, mail order, home health care, clinics, PBM’s, the Department of Defense, the Department of Veterans Affairs and other State and Federal Governments.
About ScripsAmerica, Inc.
ScripsAmerica, Inc. delivers pharmaceutical products to a wide range of end users across the health care industry, including physicians' offices, retail pharmacies, long-term care sites, hospitals, and Government and home care agencies through the largest pharmaceutical distributor in North America, McKesson Corporation. Current therapeutic categories serviced by the Company include pain, arthritis, prenatal, urinary, and hormonal replacement drugs. Other customers of ScripsAmerica include Cardinal Health, Curtis Pharmaceuticals, MedVet and the United States Veterans Administration.
For more information please visit: www.ScripsAmerica.com.
Safe Harbor Statement
This release includes forward-looking statements, which are based on certain assumptions and reflects management's current expectations. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Some of these factors include: general global economic conditions; general industry and market conditions, sector changes and growth rates; uncertainty as to whether our strategies and business plans will yield the expected benefits; increasing competition; availability and cost of capital; the ability to identify and develop and achieve commercial success; the level of expenditures necessary to maintain and improve the quality of services; changes in the economy; changes in laws and regulations, including codes and standards, intellectual property rights, and tax matters; or other matters not anticipated; our ability to secure and maintain strategic relationships and distribution agreements. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Contact:
888-959-7095
2