HealthSport, Inc., a fully integrated formulator, developer and manufacturer of bi-layer, oral thin film products that deliver drug and dietary supplement ingredients through buccal (between the cheek and gum) absorption, is pleased to announce the signing of a merger agreement with Supplemental Manufacturing and Ingredients, LLC (“SMI Manufacturing”), to create a fully integrated technology-based manufacturing, marketing and sales organization. The merger of HealthSport and SMI Manufacturing will result in one of the industry’s only companies dedicated to developing and producing oral thin film for the delivery of dietary supplements and pharmaceutical actives, with a commitment to providing partners and customers with viable alternatives to traditional drug delivery technologies.
Kevin Taheri, the CEO of HealthSport, stated that, “The combination of HealthSport and SMI creates a significant opportunity for the two companies by joining forces to leverage each company’s core competencies. HealthSport provides an extensive background in R&D, and SMI is a proven leader in the manufacturing of health related products. We feel the new company will be in a position to commercialize the platform technology by offering the multi-billion dollar pharmaceutical industry a new drug delivery method that can be used with a wide variety of medicines.” SMI Manufacturing is a fully integrated cGMP certified manufacturing company formed in 1996 to formulate, manufacture and market organic and other health related nutritional supplements with an emphasis on Certified Organic products. SMI Manufacturing has had a strong relationship with HealthSport through an existing agreement whereby SMI Manufacturing has a license to manufacture HealthSport’s products.
SMI Manufacturing has also committed to building a state-of-the-art film strip manufacturing facility adjacent to its current facility in Tempe, Arizona and has invested approximately $5 million into HealthSport.
Under the terms of the Merger agreement, unanimously approved by the Boards of Directors of both companies, SMI shareowners will own approximately 84% and HealthSport shareowners 16% of the merged company. The transaction, which is expected to be tax-free to shareowners of both companies for U.S. federal income tax purposes, will be accounted for as a reverse triangular merger. Subject to certain obligations on behalf of both of the companies, including the investment by a third party investment group of at least $10 million that has been arranged for by SMI, and regulatory and other customary closing conditions, the transaction is expected to close by no later than July 15, 2010.
The CEO of SMI Manufacturing, Ferrel Raskin, stated that, “Clearly, the potential of this combination is compelling, but we understand the magnitude of the challenge and the need for discipline and speed.
We’re helped by the fact that both companies have been pursuing similar organizational structures and marketing and sales strategies, and there is immense talent residing in both organizations. We have already begun the comprehensive integration process and have identified key metrics to drive our success. We are committed to achieving our goals and advancing our competitive position in the marketplace.” The merger agreement contemplates that Kevin Taheri will remain as the Chief Executive Officer of HealthSport and Rob Davidson will stay on as the President of HealthSport. The companies have created an integration team to be led by Rick Gean, currently Chief Financial Officer of SMI Manufacturing, and Tom Beckett, Chief Operating Officer of HealthSport.
The new HealthSport will be structured around three operating units that build on the companies’ similar go-to-market and product development structures that provide clear customer and competitive focus. Several important highlights are as follows:
— The current SMI Manufacturing plant, located in Tempe, Arizona, will continue to be dedicated to the development, manufacture and sale of non-film dietary supplement products. The plant is a high volume capacity facility.
— The current oral thin film facility in Oxnard, California will serve as both the center for research and development as well as a fully operational manufacturing facility with a projected annual capacity in excess of 55 million cassettes (with up to 20 individual film strips per cassette)..
— SMI Manufacturing’s oral thin film facility in Tempe, Arizona is currently under construction to be a state-of-the-art manufacturing facility containing four production lines. The first line is planned to be identical to the production line in the Oxnard facility and will be dedicated to nutraceutical and dietary supplement production. The additional three lines will be devoted to producing OTC and prescription drug products. The Tempe facility is anticipated to be fully operational in the first quarter of 2011 and will have a projected capacity of 2 billion film strips annually.
Mr. Taheri added, “In addition to the clear strategic benefits of combining two highly complementary organizations and product families, we can create substantial shareowner value through significant cost structure improvements and access to new growth opportunities within the pharmaceutical industry.”