American Energy Partners signs LOI for reverse merger with SCWorx

American Energy Partners announced it has signed a Letter of Intent to be acquired by SCWorx Corp, a Nasdaq listed company under the ticker symbol “WORX.” The LOI sets forth the proposed terms and conditions pursuant to which SCWorx and American Environmental intend to effect a business combination, as a result of which American Environmental and SCWorx’s healthcare data management business will each be conducted through wholly-owned subsidiaries of SCWorx. SCWorx anticipates that the Proposed Transaction will be structured as a share-for-share exchange, with SCWorx shareholders retaining 17% and American Environmental retaining 83% of the issued and outstanding shares of common stock of SCWorx, after giving effect to a $6 million capital raise by American Environmental, which is a condition to completion of the Proposed Transaction. The LOI has binding and non-binding components. The binding components require among other things that American Environmental provide SCWorx $150,000 of working capital, as well as cover its costs to complete the Proposed Transaction. In addition, both parties are restricted from engaging in discussions with other parties about an acquisition or other transaction similar to the terms of the Proposed Transaction. Upon execution of a definitive agreement, SCWorx will file a Current Report on Form 8-K with more details regarding the Proposed Transaction, including the proposed capitalization of SCWorx upon the closing of the Proposed Transaction. SCWorx previously engaged Stanton Park Capital, a boutique investment bank, to advise it in connection with the process of reviewing strategic opportunities available to SCWorx, including the Proposed Transaction. The Proposed Transaction has been approved by the Boards of Directors of both SCWorx and American Environmental and is expected to close in the first quarter of 2024. The Proposed Transaction will be structured either as a stock for stock exchange, in which American Environmental becomes a wholly owned subsidiary of SCWorx post-closing, or as a “reverse triangular merger,” in which a subsidiary of SCWorx will merge with and into American Environmental, with American Environmental being the surviving entity. Because SCWorx will issue more than 20% of the issued and outstanding shares of its common stock to the shareholders of American Environmental in the Proposed Transaction, SCWorx must obtain approval from its stockholders in order to issue the shares in the Proposed Transaction pursuant to Rule 5635(d) of The Nasdaq Stock Market LLC. In addition, the closing of the Proposed Transaction is subject to satisfaction of the following conditions: satisfactory completion of due diligence review by both parties, the negotiation, execution, and delivery of the definitive agreement and any related agreements thereto, American Environmental raising $6 million of equity, concurrently with the closing, satisfactory completion of an audit of American Environmental’s financial statements, approval of the final terms of the Proposed Transaction by the Board of Directors of SCWorx and American Environmental, and approval by American Environmental shareholders, as well as other customary closing conditions. There can be no assurance that the Proposed Transaction will be completed as currently contemplated, or at all.