ScripsAmerica Inc. (SCRCQ)

[tutter18]

This SCRC post from BSAV keeps me adding!!! since March of 2013 I've been here through all the ups and downs! and the only shares I have acquired have been the ones I bought with my own hard earned money, I done my DD and this company will prevail! oh yea after we take out Ironridge!!! Go SCRC!! Tut

ll: Here is an update from my post a couple weeks ago. As I have said many times, I have at least 1M shares locked away. I am very pleased that more of my friends from Antares and other boards have joined me here.

First, if you have not listened to Bob's recent interview yet, please listen to it a couple times. He does a great job laying out the past, present, and future; Bob is a great spokesperson and very shareholder friendly (as evidenced by his focus on pre-paying the remaining convertibles): November 20, 2013 interview with ScripsAmerica CEO, Bob Schneiderman: http://thestockradio.com/scrc-scripsamerica-ceo-robert-schneiderman/


Scrips is in the middle of changing its business model after flirting with so-so success, followed by hard times. It started out slowly in 2010 with $3.2M in revenues, which it grew to $5.9M in 2011 (84% increase). So, initially, things ticked up some and were starting to looking good. Due to lack of exclusivity and shrinking margins with its major revenue source (McKesson), however, Scrips called an audible to a different business model - actually, two new models. As a result, it suffered through a 34% decrease in revenues in 2012, and Bob was forced to borrow from money toxic financiers in exchange for convertible notes that diluted the value of the common stock. This continued well into this year. Indeed, a quick read of the company's third quarter 10Q filed demonstrates how often Scrips went to the well to fund operations and its new business models (link to 10Q here -http://www.sec.gov/Archives/edgar/data/1521476/000101968713004438/scrips_10q-093013.htm). But the tide is turning. Scrips is receiving better debt agreements to fund new business opportunities and clean up its toxic debt; it's new business strategy is slowly ramping up revenues (link to better financing agreement here (GEM deal):http://www.sec.gov/Archives/edgar/data/1521476/000101968713003913/scrc_8k.htm --- another here (Seaside):http://www.sec.gov/Archives/edgar/data/1521476/000101968713004141/scrips_8k-110713.htm --- one more here (Ironridge): http://finance.yahoo.com/news/scripsamerica-closes-equity-transaction-institutional-133000003.html). In my strong opinion, an unbelievable opportunity is starting to emerge.

As I stated above, ScripsAmerica is transforming into two separate businesses. The first of which focuses on the wholesale distribution and sales of prescription and OTC drugs, while the second focuses on the company's sale of RapiMeds, its proprietary fast melt OTC pediatric Tylenol-based tablet, as well as expanding its "Oral Delivery Technology" to other formulations. Mini-McKesson Business -- PIMD & WholesaleRX: As to the drug/controlled substance distribution business, Scrips is positioning itself to be a smaller version of McKesson for small pharmacies. It has made key acquisitions with PIMD in Miami and WholesaleRx in Tennessee, which, conservatively, will generate at least $15M in revenues next year on very high margins. Before Scrips agreed to acquire PIMD (closing will hopefully occur within 12 weeks from the date of the Q3 10Q), that business was generating revenues between $1M to $5M. It distributes and sells controlled and uncontrolled products to pharmacies, hospitals, and just about every other type of medical service provider. Here is its website -http://www.pimdintl.com/. The 8K announcing the PIMD acquisition and agreement is here -http://www.sec.gov/Archives/edgar/data/1521476/000101968713003954/scrips_8k-101813.htm.

In addition to PIMD, SCRC has partnered with WholesaleRx (WRx). WRx services over 700 small chains and independent pharmacies that do not have the volume to satisfy the Rx manufacturers's minimum order quantity requirements for controlled substances. It is a DEA- and state-licensed company with the ability to purchase and store larger quantities of the controlled substances and provide smaller quantities to its independent customers shortly after a doctor or nurse calls in a prescription. WRx enables the small chains and independent pharmacies to service their clients and compete against the larger chains with heavy buying power. Beginning in August, Scrips received 12.5% commission payments for its customers that used WRx's services. Just recently, it announced an agreement to acquire 20% of WRx (link to 8K regarding the acquisition here:http://www.sec.gov/Archives/edgar/data/1521476/000101968713004300/scrips_8k-111313.htm). And so it will soon start receiving 20% of WRx's gross profit after the deal closes.

In August, Scrips started with 35 to 50 of the WRx operators in and at the time anticipated servicing the entire 700-plus operator network within a six-month ramp-up period, ending in January. Scrips estimates about $1M in sales during this initial period. Importantly, a condition to closing requires WRx to obtain a Class 2 DEA license, which, when granted, will open up significantly more opportunities. In a nutshell, I believe (as do many others), that Bob will leverage his numerous contacts in the pharmacy industry, PIMD, and WRx to grow this portion of the business quickly and generate revenues above $25M by 2015.

Also included in this business model is also DOD agreement that generates about $7M in revenues and 14% margins (Scrips is unable to recognize these revenues above the line, but they do recognize the profit obviously). One more thing with the mini-McKesson business, the margins here are unbelievable, up to 80% from the controlled substances and more than twice that from compounding pharmacies. Though the distribution and sales of drugs may appear a bit mundane, the high margins are anything but mundane. And the pharmacies pay in advance before receiving their products, thus virtually eliminating accounts receivable issues. In my opinion, this business model combines little risk with a reward potential of growing the company's stock price above $1 by the end of 2014. This would help the company uplist to a major exchange.

Oral Delivery Technology -- RapiMeds: The second business model requires more risk, as well as larger development, marketing, and other costs than the "Mini McKesson"model. But this second model has the potential to generate significantly more revenues than the potential of its first model. Specifically, Scrips will launch its first proprietary product that will combine its Oral Delivery Technology (ODT) with a pediatric dose of Tylenol, which will be sold under the "RapiMeds" brand name. This tylenol-based easy-melt tablet for children between ages 2-11 is expected to be on the shelves in the U.S., and possibly China, in first half of 2012 . The link to RapiMeds information is here:http://www.rapimeds.com. See also the following link to the Top 15 Hot Proucts at the ECRM Cough, Cold and Allergy Conference in 2012 (RapiMeds is 9/14):http://www.drugstorenews.com/hot-products-ecrm-cough-cold-2012?utm_source=MagnetMail&utm_medium=email&utm_term=[e-mail]&utm_content=DSN-EDIT-Product%20News%20Alert-02-23-12&utm_campaign=SNEAK%20PEEK%3A%20ECRM%20Cough-Cold%20Hot%20Products And here is another good summary:http://www.elsevierbi.com/publications/health-news-daily/2012/8/24/scripsamericas-emrapimedem-painkillers-will-go-up-against-emtylenolem-meltaways

During the ECRM Conference, about 55 of the OTC distributers who first learned about RapiMeds there said they would put in immediate orders of RapiMeds after it became available. A major reason is that J&J was forced to pull its tylenol products, including their popular children's melt-away pain tablets. I understand J&J anticipates adding these products to the shelves in late 2014. So, currently, there are no branded products similar to RapiMeds on the shelves anywhere in the U.S. And this is the principal reason Scrips chose this product as its first of many anticipated products from its ODT platform. I would be happy to send you links to a few articles explaining what happened to J&J's tylenol product and why it is still off the market. But the bottom line is that if Scrips can launch RapiMeds early next year, it will have a big leg up in the race to the retail shelves in the U.S. and capture market share before J&J re-appears with its products. As demonstrated in the RapiMeds website I posted above, the product improvements in size, dissolution speed, flavors (adding cherry flavor, which is undergoing stability testing), accurate dosing, and more. I can go on and on about the potential in the U.S. Scrips signed an exclusive distribution deal in the U.S. for RapiMeds with DPG (www.dpgdistribution.com), which is experienced at getting products on the shelves of large retailers and pharmacies, including Walmart, Target, Cosco, Walgreens, CVS, and more.

It also signed a similar deal with Forbes in Hong Kong for the exclusive rights to sell and distribute RapiMeds in China. I understand Scrips's sales team recently returned from a trip to China, and I am expecting some good news from that trip soon. Indeed, according to a recent PR, Forbes had identified over 300 pharmacies and hospitals for the potential sales of RapiMeds in China. For more details on the China opportunity, please visithttp://scripsamerica.com/wp-content/uploads/2013/07/ScripsAmerica-China-Package.pdf. Frankly, the potential numbers associated with a successful marketing launch in China are difficult to fathom, they could be astronomical. There are no children's tylenol fast melt tablets in China, and I see no reason why Scrips and Forbes cannot be first to market there. Since my last post, here is what Bob and his team had to say about China: ScripsAmerica November 25 PR updating shareholders on recent China visit: http://finance.yahoo.com/news/scripsamerica-moves-finalize-negotiations-major-133000734.html

So, assuming no delays with the 60- to 90-day product registration approval process, which I'm certain Forbes is helping with, I fully expect purchase orders from China no later than February. So it appears China will win the race to the shelves.

I am a little concerned about product protection over there. We did not patent this product and the Chinese are notorious for reverse engineering everything and selling it cheaper than the OEMs. So, to me, that's a risk. Another risk is product registration approval and other importation obstacles. I understand the project registration period typically takes between 60-90 days to complete, and we are about 30 days into the process. Excluding these risks and if I was more comfortable with the product protection issues, my revenue and pps projections below would be much higher, possibly double or even triple. Admittedly, without reliable market data for pediatric analgesics in China, it is nearly impossible to accurately project this number. Scrips will use two U.S. manufacturing facilities for RapidMeds -- one facility for distribution in the U.S., and the other for China. Importantly, the profit margins will be about 60%. If Scrips succeeds with its launch, it will seek to enter other global markets and expand its ODT to other formulations, including migraines, sleep deprivation, allergies, and vitamin deficiencies.

I understand this is a long post that is distracting you from your busy life, but I felt duty bound to at least present my take on this opportunity based on my DD to date. As of Friday, 11/22/13, SCRC's market cap was about $15M, the total outstanding share count was about 87M, and 8 people owned almost 53M shares -- so the float is unbelievably low for an OTC stock (I own a little over 1M). I also am aware of millions of shares that are tied up in friendly hands looking to 2014 and beyond. Of course with the transition to the two new business models, Scrips is not yet profitable and needs money to continue operations, complete it's "Mini McKesson" acquisitions, and launch RapiMeds in the U.S. and China. In its Q3 10Q, Scrips stated that with the necessary funding, it will launch RapiMeds in the U.S. in the first half of 2014. The way the China opportunity appears to be moving, I would not be surprised to see its launch first.

At this time, based on the finance agreements that were announced after the third quarter closed, I believe Scrips needs less than $3M to fully execute on its plan. (Its current monthly cash burn rate is less than $100K.) Bob is seeking out friendly financiers who share his vision and will enter into debt-equity deals. Obviously, this will result in more dilution. Notwithstanding the imminent dilution from additional financing, Bob has committed to pre-paying all existing convertible debt before each note becomes due in an effort to eliminate the toxic impact those conversions would have on the common stock. My worst-case scenario estimate is 125M total outstanding shares, which considers an additional $3M in equity debt financing, uncertainties regarding remaining convertibles and other debt, and the other areas where the company issues shares. Assuming $20M in revenues next year, my simple financial model yields a pps of about $1 with a PE multiplier of 20. And with a successful RapidMeds launch and the Mini-McKesson model in full stride by the end of 2014, it is not unreasonable to expect over $50M in revenues in 2015 and a sustainable pps of about $2.70. I own a ton of this stock and it would be great if more investors joined me here. I have talked to Bob many times, and each time I can hear the confidence and excitement in his tone as he talks about ScripsAmerica's opportunities and potential. If you want to talk to Bob Scheiderman, please feel free to call him anytime; you will be impressed. His phone number is 215-741-7006, or you can send him an email at [e-mail]. If you do call him, please tell him "BSAV says hello."

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