ScripsAmerica Inc. (SCRCQ)

[Huggy Bear]

Can y'all clarify where this info on a Share Lending provision is located? All I have seen regarding this deal with GEM is the info that was in the original PR and the subsequent 8-K filing. Both say basically the same.

Under the terms of the financing agreement, ScripsAmerica may sell shares of its restricted common stock to GEM Global, subject to the satisfaction of certain conditions. The Company will use the capital acquired primarily to fund the manufacturing and marketing of its RapiMed® children's pain reliever domestically and internationally, as well as for working capital.

Now here is the entire 8-K regarding the GEM financing. I will highlight what I think is relevant.


Item 1.01 Entry into a Material Definitive Agreement.

On October 11, 2013, the Registrant entered into a financing agreement with GEM Global Yield Fund Limited ("GEM Global") to provide funding to the Company of up to $2 million. Under the terms of the financing agreement, the registrant may sell restricted shares of its common stock to GEM Global, subject to the satisfaction of certain conditions, at a purchase price to be negotiated between the Registrant and GEM Global. The Registrant will use the capital raised from the financing agreement primarily to fund the manufacturing and marketing of its RapiMed® children's pain reliever domestically and internationally, as well as for working capital.

Item 3.02 Unregistered Sales of Equity Securities.

In connection with entering into the financing agreement, the Registrant issued to 590 Partners Capital, LLC (“590 Partners”) and GEM Global six (6) common stock purchase warrants to purchase collectively up to ten million (10,000,000) shares of the Registrant’s common stock. Each of GEM Global and 590 Partners received (i) a warrant exercisable to purchase 2,000,000 shares of common stock at an exercise price of $0.41, (ii) a warrant exercisable to purchase 1,500,000 shares of common stock at an exercise price of $0.55 and (iii) a warrant exercisable to purchase 1,500,000 shares of common stock at an exercise price of $0.75. All of the warrants expire on October 10, 2018 and are only exercisable on a cash basis (they do not contain any cashless exercise provisions). Additionally, the Registrant granted registration rights to 590 Partners and GEM Global to register the resale of the shares underlying the warrants.

The warrants were issued to GEM Global and 590 Partners in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). The warrants qualified for exemption under Section 4(2) of the Securities Act because the issuances by the Registrant did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. GEM Global and 590 Partners are accredited investors and acknowledged the restricted nature of the warrants (and the underlying shares) they acquired. Based on an analysis of the above factors, the registrant has met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.


http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=9558803

Nowhere in the SEC document is there any mention of "share lending". It is creative language, IMO, to describe a fairly standard convertible or discounted debt financing arrangement. In most to all discounted financing arrangements there is a Rule 144 restriction which is all they seem to be referring anyway. The shares are restricted from coming onto the market for six months in a one year maturity financing arrangement in most cases.

This is the strangest part of the 8-K to me: at a purchase price to be negotiated between the Registrant and GEM Global.

My take on it is that the PR and the 8-K describe a discounted shares financing arrangement and of course the shares are restricted for a lock up period. That is standard. What is not standard is why release a 8-K saying you have a financing deal but the terms are not decided yet? That is not a deal in my book, that is negotiation.

What was the point of the PR and the 8-K with no terms of financing details released? As an SEC filer SCRC is going to have to release another 8-K with the details when they are agreed upon to be compliant anyway. Strange to me.

Now regarding this Share Lending aspect I am all ears if someone can show me where this line of thought originated. And thanks to you two guys for the intelligent discourse. Final note,

In connection with entering into the financing agreement...

I find this a bit strange as well, as in what financing agreement? The ones in SEC filings that do not disclose fully the details to shareholders?