ScripsAmerica, Inc. (OTCBB:SCRC) On Its Way To Recovery
We said it before and we’ll say it again. ScripsAmerica, Inc. (OTCBB:SCRC) is different from most small cap pharmaceutical companies. They have a marketable product, they have revenues in their financial statement, their main customer is McKesson Corporation (NYSE:MCK) (one of the largest drug distributors in the US) and they are signing yet more distribution agreements, expanding their business on other continents and speaking about multi-million dollar deals.
They have a solid shareholder base as well and people seem to be really confident in their success. Because of this, as well as some optimistic press releases, SCRC displayed an unprecedented performance during the second half of June when in a matter of two weeks the ticker gained a whopping 180%. July also started on a positive note but then the pumpers came along and it took them no more than thirty minutes to ruin it for everybody. Money Runners’ (MR) first emails hit our inbox back on July 8 and they spoke about the massive potential that SCRC have and about the upcoming growth. The ticker didn’t really need this sort of promotion since, as we mentioned, it was already putting on quite a performance. Regardless of this, MR sent out some more emails on July 10 and July 11 which resulted in more green sessions and a 52-week high of $1.05 registered on July 11. What’s more interesting is that unlike most of the promotions that we deal with on these pages, MR said that they weren’t compensated for their efforts and they disclosed that they are simply going to trade shares as they see fit. On July 12 everything was pretty uneventful until about thirty minutes before the closing bell, when the ticker took a massive plunge and wiped out around 57% of its value. Just five minutes after the end of the session Money Runners said that there was an unexpected seller that caught them off-guard, but looking through the message boards, we can see that investors don’t believe them and think that it was MR who got rid of their shares on the open market and crushed the ticker. We’ll probably never know if it was indeed the pumpers who took down the price, but the fact remains that the crash coincided with the end of their campaign.
As we already said, however, SCRC have strong support from their shareholders and probably this is the reason why the ticker seems to be recovering nicely. During the last couple of days it recorded daily gains of 25% and 19%, respectively. With that in mind, you’ll probably think that it will manage to cover for all the losses and it will soon be back to its former glory. While the odds seem to be in SCRC‘s favor right now, there are still one or two things that might raise some eyebrows.
The first of which is the address of their headquarters. According to the SEC filings, it’s located on 77 McCullough Drive in New Castle, Delaware, whereas when you get to the Contact Us page on their website, you see 843 Persimmon Lane 2nd Floor, Langhorne, Pa and a quick lookup on Google Maps reveals that this is actually a residential house in a borough populated by no more than 1,600 people according to the 2010 census. That’s not the best location for the HQ of a pharmaceutical company that is about to make it big time and generate millions of dollars in revenue, but we can see that the website hasn’t been updated for quite some time and we can concede that it’s an honest mistake on behalf of the people maintaining the webpage.
On to the next, rather more serious problem. As we mentioned numerous times, SCRC have been generating revenues for some time now, but when you take a look at their latest 10-Q for the first three months of 2013, you will see that the proceeds have decreased by about 71% year-over-year, which is quite disturbing. Happily, there is an explanation about the massive decline. SCRC say that because of the shrinking margin, they had to cut down on the volume of sales generated through McKesson Corporation, which is quoted in their financial statement as their biggest customer. That’s something of a red flag, but you all know about black clouds and silver linings. SCRC also say that they’re expecting to compensate and even increase the revenues in the future through new distribution deals and contracts. Will they be able to do it? The next quarterly report will probably give us a definitive answer to this.
We do know for sure, however, that not everything has been going quite according to plan for SCRC. On September 11, 2012 they signed a Letter of Intent to acquire Marlex Pharmaceuticals, Inc. – the company that has been taking care of packaging, distributing and keeping stock of SCRC‘s products. According to the 8-K filed in relation to the Letter of Intent, the merger was to be closed by the end of 2012 with the option of postponing that date to no later than February 28. Now, more than 10 months after the 8-K went out, we still have neither a confirmation of a definitive agreement, nor a notification about the termination of the merger. Even if the acquisition fails, the partnership will probably continue, but we read in the news that Marlex recently won some federal contracts worth tens of millions of dollars and we’re pretty sure that the shareholders will be more than happy to see these figures in SCRC‘s future financial reports.
One thing that they would hate to witness, however, is promotional campaigns similar to the one Money Runners did last week. Let’s hope SCRC will manage to keep clear of those.
