SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Power-Cell, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[ ] No fee required.
[x] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
Common Stock of Park Pharmacy Corporation a Texas Corporation
2) Aggregate number of securities to which transaction applies: 7,600,000
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined): $0.0001
4) Proposed maximum aggregate value of transaction: $760.00
5) Total fee paid: $16.89
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
TABLE OF CONTENTS
Page
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General 1
Purpose 1
Place and Time of Meeting 1
Mailing of Notice 1
Revocation of Proxy 1
Voting Procedures 1
Who May Vote 1
Change of Address 1
Please Vote 1
Resolutions to Be Considered 2
Acquisition of Park Pharmacy 2
Election of Directors 2
The Series A Preferred Stock 2
Power-Cell, Inc. 4
Present Business 4
Additional Information 4
Park Pharmacy Corporation 4
General 4
Business Plan 4
Competition 5
Year 2000 (Y2K) 5
Officers & Directors 5
Certain Transactions 6
Compensation 6
Capitalization (as of April 30, 1999) 6
Litigation 6
Forward Looking Statements 6
Voting Securities And Principal Holders Thereof 7
Record Date 7
Votes Per Share 7
Quorum 7
Vote Required 7
Market Value of Non-Affiliate Voting Stock 7
Control Persons 7
Selected Financial Data - The Company 8
Selected Financial Data - Park Pharmacy 9
Financial Statements and Supplemental Data 9
Dilution 10
Interests of Certain Persons. 10
Involvement in Certain Legal Proceedings 10
Solicitation of Proxies 11
Other Business; Stockholder Proposals 11
EXHIBITS
EXHIBIT "A" - Stock Purchase Agreement
EXHIBIT "B" - Independent Auditors Report, dated October 8, 1998,
with respect to Power-Cell, Inc., a Colorado corporation
with respect to fiscal year ended June 30, 1998.
EXHIBIT "C" - Independent Auditors Report, dated October 29, 1998,
with respect to Park Pharmacy Corporation, a Texas
corporation, for the fiscal year ended September 30, 1998
<PAGE>
POWER-CELL, INC.
660 Preston Forest Center, Box 200
Dallas, Texas 75230
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PROXY STATEMENT FOR
SPECIAL MEETING OF STOCKHOLDERS
To Be Held on or about June 15, 1999
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General.
Purpose. This Proxy Statement is furnished to the holders (the
"Stockholders") of the $.0001 par value common stock of Power-Cell, Inc., a
Colorado corporation (the "Company") in connection with the solicitation of
proxies by the Company's management for use at a meeting to be held for the
purpose of considering the resolutions set forth in the Notice of Meeting. (See
"Resolutions To Be Considered".)
Place and Time of Meeting. A Special Meeting of Shareholders will be held
at The University Club, 13350 Dallas Parkway, Dallas, Texas 75240, on or about
June 15, 1999, at 9:00 a.m., local time.
Mailing of Notice. A notice of special meeting and the proxy (the "Proxy")
to which this Proxy Statement applies have been mailed with this Proxy
Statement. The date of mailing to Shareholders was on or about May 15, 1999.
Revocation of Proxy. The Proxy may be revoked by the Shareholder at any
time prior to its exercise by executing and returning a proxy bearing a later
day, by giving written notice of revocation to the Secretary of the Company, or
by attending the meeting and voting in person.
Voting Procedures. All properly executed, unrevoked proxies received
before the meeting will be voted in accordance with the directions contained
therein. When no direction has been given by a stockholder returning a proxy,
the proxy will be voted in accordance with the recommendations of the Board of
Directors. The Board of Directors recommends a vote FOR each of the proposals
described in this Proxy Statement. Any unrevoked proxy will be voted in the
discretion of persons named in the proxy with respect to any other business
which may properly come before the meeting. Votes will be tabulated by
inspectors of election appointed by the Company. An abstention from voting on a
proposal will be tabulated as a vote withheld on the proposal, but will be
included in computing the number of shares present for purposes of determining
the presence of a quorum for the meeting.
Who May Vote. Only holders of record of the Company's common stock as of
close of business on April 30, 1999 are entitled to vote on matters coming
before the meeting or any adjournment or postponement thereof. A complete list
of stockholders entitled to vote at the meeting will be maintained at 10711
Preston Road, Dallas, Texas 75230 for 10 days prior to the meeting. Such books
be open to the examination of any stockholder from 10:00 a.m. to 4:00 p.m.,
Dallas time, and during the Special Meeting.
Change of Address. Please advise the Company's transfer agent, Securities
Transfer Corp., 16910 Dallas Parkway, Suite 100, Dallas, Texas 75248 of any
change in your address.
Please Vote. Your vote is important. Whether or not you plan to attend the
meeting in person, please mark, sign, date and return the enclosed proxy in the
envelope provided.
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Resolutions to Be Considered
At the Special Meeting the shareholders of the Company are being asked to
consider and vote on: (i) approval of a Stock Purchase Agreement (the "Purchase
Agreement"), a copy of which is attached hereto as Exhibit "A", between the
Company, Park Pharmacy Corporation, a Texas corporation ("Park Pharmacy") and
the holders (the "Selling Shareholders") of the common stock of Park Pharmacy;
(ii) amending the Company's Articles of Incorporation ("Articles") to change its
name to Park Pharmacy Corporation, (iii) amending the Articles to increase the
aggregate number of authorized stock to include 250,000,000 shares of Preferred
Stock; and (iv) to authorize the Board of Directors of the Company, from time to
time, to divide the Preferred Stock into series, to designate such series, to
fix and determine separately for each series any one or more of the following
relative rights and preferences, and to issue shares of any series then or
previously designated, fixed and determined: (a) the rate of dividend; (b) the
price at and the terms and conditions on which shares may be redeemed; (c) the
amount payable upon shares in the event of involuntary liquidation; (d) the
amount payable upon shares in the event of voluntary liquidation; (e) sinking
fund provisions, if any, for the redemption or purchase of shares; (f) the terms
and conditions on which shares may be converted if the shares of any series are
issued with the privilege of conversion; and (g) voting rights.
Acquisition of Park Pharmacy
Upon approval of the proposals, the Company will amend its Articles as set
forth above; and, pursuant to the Purchase Agreement, will purchase all of the
7,600,000 outstanding shares of common stock of Park Pharmacy from the Selling
Shareholders in consideration for 2,567,816 shares of the Series A Preferred
Stock. The transaction is being treated as a reverse acquisition for accounting
purposes, and is being structured as a tax-free exchange pursuant to the
provisions of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended.
Election of Directors
At the closing, the Company's present Board of Directors will resign
seriatim and will be replaced seriatim by the present board of Directors of Park
Pharmacy. The vacancies created by the respective resignations of the existing
members of the Board of Directors will be filled by appointment of the then
remaining members of the Board of Directors. For information concerning the
members of the Company's present Board of Directors (H. Don Gill, age 61; F.
Brewer Newton, age 60; and James C. Rambin, age 74) see the Company's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1998 (the "1998 Annual
Report"). For information concerning the persons expected to be designated as
members of the Company's Board of Directors by Park Pharmacy (Joe B. Park,
Thomas R. Baker, Gwendolyn Park, Jack R. Munn, and John A. Blomgren), see "Park
Pharmacy Corporation - Officers and Directors", below. The shareholders of the
Company will not be entitled to vote for the new Directors. The Directors so
appointed shall hold office until the next annual meeting of shareholders, until
their successors have been elected and qualified, or until they have sooner
resigned or been removed. It is not contemplated that any of the directors of
Park Pharmacy will be unable or unwilling to serve as a director; however, if
that should occur, the remaining members of the Company's Board of Directors
will vote to fill any such vacancy.
The Series A Preferred Stock
Pursuant to the Purchase Agreement, the Company will designate 5,000,000
shares of its Preferred Stock as its $0.001 par value, Series A Preferred Stock
(the "Series A Preferred Stock"), with the following rights and preferences:
1. Holders of the Series A Preferred Stock may convert one share of
Series A Preferred Stock for ten (10) shares of the Company's $.0001 par
value Common Stock (the "Common Stock"), at any time after June 30, 2001,
upon delivery of the preferred share certificate, duly endorsed, to the
offices of the Company's transfer agent;
2. Holders of the Series A Preferred Stock will not be entitled to
receive any dividends;
3. In case of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, the holders of the Series A
Preferred Stock will be entitled to receive out of the assets of the
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Company which are available for payment to shareholders, before any amount
is paid or distributed among the holders of Common Stock, liquidating
distributions in the amount of $10.00 per share. If, upon any liquidation,
dissolution or winding up of the Company, the amount payable with respect
to the Series A Preferred Stock, and any other stock ranking as to any such
distribution on a parity with the Series A Preferred Stock is not paid in
full, the holders of the Series A Preferred Stock, and of such other stock,
will share ratably in any such distribution of assets in proportion to the
full respective preferential amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to which they
are entitled, the holders of the Series A Preferred Stock will not be
entitled to any further right or claim to any of the remaining assets of
the Company;
4. In the event that the Company shall at any time subdivide or combine
in a greater or lesser number of shares the outstanding shares of Common
Stock, the number of shares of Common Stock issuable upon conversion of the
Series A Preferred Stock shall be proportionately increased in the case of
subdivision or decreased in the case of a combination, effective in either
case at the close of business on the date when such subdivision or
combination shall become effective;
5. In the event that the Company shall be recapitalized, consolidated
with or merged into any other corporation, or shall sell or convey to any
other corporation all or substantially all of its property as an entirety,
provision shall be made as part of the terms of such recapitalization,
consolidation, merger , sale or conveyance so that any holder of Series A
Preferred Stock may thereafter receive in lieu of the Common Stock
otherwise issuable to him upon conversion of his Series A preferred Stock
or the same kind and amount of securities or assets as may be distributable
upon such recapitalization, consolidation, merger, sale or conveyance, with
respect to the Common Stock of the Company;
6. In the event the Company shall at any time pay to the holders of
Common Stock a dividend in Common Stock, the number of shares of Common
Stock issuable upon conversion of the Series A Preferred Stock shall be
proportionately increased, effective at the close of business on the record
date for determination of the holders of Common Stock entitled to such
dividend;
7. In the event that the Company shall at any time pay any dividend or
make any other distribution on its Common Stock in property, other than in
cash or in Common Stock of the Company, then provision shall be made as
part of the terms of such dividend or distribution that the holder of any
Series A Preferred Stock surrendered for conversion after the record date
for determination of holders of Common Stock entitled to such dividend or
distribution shall be entitled to receive the same kind and the same
proportionate share of such property which he would have been entitled to
receive had such Series A Preferred Stock been converted immediately prior
to such record date;
8. Such adjustments shall be made successively if more than one event
listed in the preceding paragraphs 4, 5, 6, and 7 shall occur;
9. The Company is not obligated to redeem the Series A Preferred Stock;
10. At every meeting of the stockholders of the Company, holders of the
Series A Preferred Stock shall be entitled to ten (10) votes for each share
of Series A Preferred Stock standing in their name on the books of the
Company;
11. The Series A Preferred Stock and any other stock having voting
rights, including without limitation the Common Stock, shall vote together
as a single class;
12. The holders of the Series A Preferred Stock have no preemptive
rights, and cumulative voting is denied.
Power-Cell, Inc.
Present Business. As indicated in the Company's 1998 Annual Report, and in
the Notes to Financial Statements included therewith, the Company entered into a
limited partnership agreement in October 1992 that management believed would
potentially result in successful manufacturing and marketing of the Company's
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reserve battery product, and the eventual creation of a royalty stream to the
Company and potential earnings from the Company's interest in the partnership.
However, all marketing and operations activities of the partnership ceased, and,
as reported in the 1998 Annual Report, the Company has been seeking a merger
partner. The Board of Directors of the Company has determined that the proposed
acquisition of Park Pharmacy is the most promising of the several opportunities
reviewed, and has recommended its approval by the Company's shareholders.
Additional Information. A description of the Company and its business,
including its financial condition and information concerning the Company's
product, the partnership, the licensee of the Company's product and certain
litigation is contained in the Company's 1998 Annual Report, the Company's
Quarterly Report on Form 10-QSB for the fiscal quarter ended December 31, 1998,
and the Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended
March 31, 1999. Upon written request delivered to the Company at the address set
forth above, the Company will provide any shareholder with a copy of such
reports.
Park Pharmacy Corporation
General. Other than organizational matters, the preparation of an offering
in September 1998 which was not consummated, negotiations with the owners of
independent retail pharmacies, as discussed below, and matters relating to the
Stock Purchase Agreement to be considered at the Special Meeting, Park Pharmacy
has conducted no business activities. Park Pharmacy Corporation ("Park
Pharmacy") has an expense sharing arrangement with Dougherty's Pharmacy,
Corporation ("Dougherty's") whereby it pays Dougherty's $1,083 per month for
shared office space and equipment for operations. The mailing address of the
principal executive offices of Park Pharmacy is 10711 Preston Road, Suite 250,
Dallas, Texas 75230; and its telephone number is (214) 692 -9921.
Business Plan. Park Pharmacy was incorporated in the State of Texas on June
10, 1998, and is a start-up organization that was formed to acquire independent
retail pharmacies, including pharmacies with associated home healthcare
facilities. The business strategy of Park Pharmacy is to expand through
acquisitions and to increase individual store profitability. In implementing its
business strategy, Park Pharmacy intends to institute cost-control programs,
continue and improve employee training, negotiate increases in vendor rebates,
maintain a high level of customer service and convenience, increase sales in
each department in each store and maintain competitive pricing. To mitigate the
effect of the third-party reimbursement on pharmaceutical sales, Park Pharmacy
also intends to expand its home healthcare services. In addition to prescription
drugs and services, Park Pharmacy intends to offer a broad range of
over-the-counter medications, supplies, health and beauty care, cosmetics,
gifts, greeting cards, convenience foods, cameras, photo supplies and processing
services, and other general merchandise. Some stores may incorporate special
features such as drive-through windows and free home delivery for customer
convenience, faxing, copying, and package delivery services. Park Pharmacy also
plans to sell and lease home medical equipment and offer home healthcare
services, including intravenous services. Park Pharmacy also intends to enter
the developing market for internet pharmacy services.
Park Pharmacy is in discussion with owners of several independent retail
pharmacies concerning Park Pharmacy's business plan. These pharmacies are
established in their retail market areas, and have long histories of operations.
Park Pharmacy has not reached a definitive agreement with any pharmacy owner,
nor have any contracts or letters of intent been executed in connection with any
pharmacy owner. The principal business strategy of Park Pharmacy is to establish
a chain of retail pharmacies through the acquisition of full-line retail
pharmacies. In evaluating a retail pharmacy, for potential acquisition, Park
Pharmacy will: (i) evaluate the target store's profits and losses for preceding
years; (ii) review the pharmacy's tax returns for preceding years; (iii) review
computer-generated prescription reports showing historical information,
including prescriptions sold, average price of each prescription, gross margins
and trends in prescription sales; (iv) analyze the pharmacy's location and
competition in the immediate area; (v) review the store's lease agreement, if
any; and (vi) assess targeted areas for growth patterns and trends. Based on the
analysis of the foregoing items, Park Pharmacy will prepare an offer to purchase
the particular pharmacy. To assess the reasonableness of the purchase price
offered by a seller in connection with a particular acquisition, Park Pharmacy
will consider the availability and terms of owner financing, including the rate
of return and payback period.
There is no assurance that Park Pharmacy will be able to acquire any
independent pharmacies or that Park Pharmacy will achieve its business plan.
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Competition. There are companies that will compete with Park Pharmacy in
the retail pharmacy industry. Park Pharmacy expects to encounter significant
competition from such companies. Many of these companies have substantially
greater financing, marketing and other resources than Park Pharmacy. No
assurance can be given that Park Pharmacy will be able to successfully compete
with such other companies.
Year 2000 (Y2K). It is believed that a significant portion of Park
Pharmacy's computer systems are year 2000 compliant; and Park Pharmacy's
management is in the process of assessing the balance of its systems. Park
Pharmacy intends to communicate with its customers, suppliers, financial
institutions and others with which it does business to ensure that any Y2K
issues will be resolved timely. This issue affects computer systems that have
time-sensitive programs that may not properly recognize the year 2000. If
necessary modifications and conversions by those with which Park Pharmacy does
business are not completed timely, or if all of the Company's systems are not
year 2000 compliant, the year 2000 issue may have a materially adverse effect on
the consolidated financial position, results of operation and liquidity of Park
Pharmacy.
Officers & Directors. The following persons are presently serving, in the
respective capacities set forth below, as officers and directors of Park
Pharmacy:
Joe B. Park, R.Ph., age 62, has served as Director and Chairman of
the Board of Park Pharmacy since that company's inception. From 1962 to
present, Mr. Park has been the owner and operator of Dougherty's, a
multi-location retail pharmacy located in Dallas, Texas. Mr. Park is an
active member of the Dallas County Pharmaceutical Society where he has
served in various capacities including past president. Mr. Park is also
an active member of the Texas Pharmaceutical Association, National
Council of Hospice Professionals and the International Academy of
Compounding Pharmacists. In 1959, Mr. Park graduated with a Bachelor of
Science degree from the University of Texas in Austin and received his
pharmacy license in 1960.
Thomas R. Baker, age 57, has served as Director, President and
Chief Operating Officer of Park Pharmacy since that company's
inception. From 1993 to present, Mr. Baker served as Managing Partner
and Senior Consultant for Management by Action, Inc. a specialized
management consulting firm. From 1991 to 1993, Mr. Baker served as
President and CEO of Medical Warning Systems, Inc. From 1986 to 1991,
Mr. Baker served as Director of Mergers and Acquisitions and President
of West Coast operations for Home Shopping Network, Inc.
Gwendolyn L. Park, age 61, has served as a Director, Secretary and
Treasurer of Park Pharmacy since that company's inception. Mrs. Park
has served as Secretary, Treasurer and Office Manager of Dougherty's
since 1980. Mrs. Park was active in the Auxiliary to the Dallas County
Pharmaceutical Society holding various positions and served as
president. Mrs. Park was also active in the Texas Pharmaceutical
Association. Mrs. Park graduated from the University of Texas in
Austin with a bachelor's degree in mathematics in 1959.
Jack R. Munn, R.Ph., age 49, has served as Director of Park
Pharmacy since April 15, 1999. In 1987, Mr. Munn founded Guardian
Health Systems, 1997 ("Guardian"), a [Texas] [entity type]. Guardian is
a home infusion therapy provider based in Dallas, Texas. Guardian also
has mixing centers in Dallas, Oklahoma City, and 7 other Centers
located in Texas, Oklahoma and Louisiana. Oklahoma and 17 other
communities in Texas, Oklahoma, and Louisiana. From 1980 to 1984, Mr.
Munn founded and served as President for Pharmacy Practice Group, Inc.,
a Texas corporation, a hospital pharmacy management company providing
services to Texas hospitals. From 1984 to 1987, he served as President
of Extended Care Health Systems, Inc., a Texas corporation, a home
infusion therapy and hospital pharmacy management company. In 1973, Mr.
Munn received a Bachelor of Science in Microbiology from the University
of Oklahoma; and in 1976, Mr. Munn received a Bachelor of Science in
Pharmacy from the same institution. He subsequently interned at the
University of Texas Medical Branch Hospital, Galveston, Texas. Mr. Munn
is an active member in Texas Pharmacy Assoc. and Case Management
Society of America.
John A. Blomgren, R.Ph., age 52, has served as Director of Park
Pharmacy since April 15, 1999. Mr. Blomgren has served as a staff
pharmacist for Dougherty's Homecare Pharmacy ("Dougherty's Homecare")
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since January 1997. From October 1996 to the present, he is the manager
of the Hospice Pharmacy Alliance in McKinney Texas. From June 1990 to
October 1996, Mr. Blomgren served as Pharmacy Operations Director for
True Quality Pharmacies, Inc., McKinney, Texas. In 1969, Mr. Blomgren
received a Bachelor of Science in Pharmacy from the University of
Oklahoma. He is an active member in Texas Pharmacy Association and the
National Hospice Council of Hospice Professionals.
Certain Transactions. As of March 31, 1999, Joe B. Park, R.Ph. has extended
loans to the Company in the aggregate amount of $91,621.00 to pay operating
expenses and acquire equipment. The loans do not bear interest but are payable
on demand.
Compensation. Park Pharmacy has to date paid no compensation to its
officers and directors. It is anticipated that following the proposed
acquisition, the Company will pay an annual salary to Mr. Baker in the amount of
$50,000; and that the Company will pay annual directors fees to Mr. Munn and Mr.
Blomgren in the amount of $10,000 each. It is further anticipated that Mr. Baker
will receive additional incentive compensation, as determined from time to time
by the Company's Board of Directors, based on the performance of the Company.
<TABLE>
<CAPTION>
Capitalization (as of April 30, 1999).
Title of Class Shareholder Name No. of Shares Total Outstanding
-------------- ---------------- ------------- -----------------
<S> <C> <C> <C>
Common Stock
$0.0001 par value
9,000,000 authorized Joe B. Parks 6,700,000
Thomas R. Baker 670,000
David R. Frauhiger 230,000 7,600,000
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Series A Preferred Stock
$1.00 par value
1,000,000 authorized None None None
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TOTAL: 7,600,000
=========
</TABLE>
Litigation. No legal proceedings are pending to which Park Pharmacy or any
of its property is subject and management of Park Pharmacy has represented that,
to its knowledge, no such legal proceedings are threatened.
Forward Looking Statements.
Forward-looking statements included in this Proxy Statement concerning the
possible or future results of operations of the Company or Park Pharmacy are
subject to risks and uncertainties. Expressions using words such as "believes",
"expects", "anticipates", or similar expressions are forward-looking statements.
Shareholders should note that many factors could affect the future financial
results of the Company and Park Pharmacy, and could cause those results to
differ materially from those expressed in the forward-looking statements
contained in this Proxy Statement.
Voting Securities And Principal Holders Thereof.
Record Date. The close of business on April 30, 1999, has been set as the
record date for determination of the shareholders entitled to notice of, and to
vote at, the meeting. On the record date there were outstanding and entitled to
vote 6,419,540 shares of common stock.
Votes Per Share. Holders of the common stock are entitle to one vote per
share on all matters which come before the meeting.
Quorum. The presence, in person or by proxy, of a majority of the
outstanding shares of common stock entitled to vote at the meeting will
constitute a quorum.
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Vote Required. Under Colorado law, the affirmative vote of the holders of
a majority of the outstanding Common Stock will be required to approve the
amendments to the Articles. The Company's management believes that the requisite
number of shares will vote to approve the proposals. (See "Voting Securities And
Principal Holders Thereof - Control Persons").
Market Value of Non-Affiliate Voting Stock. The aggregate market value of
the voting stock held by non-affiliates of the Registrant is approximately
$342,000. This calculation is based upon the average of the bid and asked prices
of the Registrant's Common Stock on June 30, 1998.
Control Persons. The following table sets forth, as of April 30, 1999, as
a group, the number of shares of Company's Common Stock and percentage of the
outstanding shares of Company's Common Stock owned beneficially (1) by each
officer, director and director nominee of Company; (2) by all officers and
directors of Company as a group; and (3) by all other persons who are known to
the Company to own more than 5% of the Company's Common Stock. Except as noted,
each shareholder has sole voting and investment power of the shares listed.
<TABLE>
Number of Shares Percentage of
Name and Addresses Beneficially Owned Outstanding Shares
<S> <C> <C>
H. Don Gill (1)
4224 Ocean Drive
Corpus Christi, TX 78411 55,555 0.9%
S.A. Hellerstein
Trustee for the Farkas Trusts (2)
1139 Delaware Street
Denver, Co 80204 1,089,235 17%
Windy City, Inc. (3)
8300 Boone Boulevard
Suite 780
Vienna, VA 22182 363,078 6%
Janet M. Dickson (5)
Trustee of the Marich Family Trust
9th Street, No. 101
Greeley, CO 80631
1,452,323 23%
James C. Rambin (1, 4, 6, 7)
4032 Bandera Drive
Plano, Texas 75074 0 0.00%
J.L. Rambin (6)
Trustee of the Rambin Family Trust
4032 Bandera Drive
Plano, Texas 75074 1,452,313 23%
</TABLE>
1. Currently director of the Company.
2. The Farkas Trusts are a group of trusts of which the beneficiaries
include family members of Howard L. Farkas, a former director of the
Company. Mr. Farkas disclaims beneficial ownership of the shares owned
by the Farkas Trusts.
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3. Windy City, Inc. is a corporation composed of certain interests of
family member of Burton W. Kanter, a former director of the Company.
Mr. Kanter disclaims beneficial ownership of shares owned by Windy
City, Inc.
4. Currently an officer and Director of the Company.
5. Marich Investments, Ltd. a Trust organized under the laws of the State
of Colorado.
6. Rambin Family Trust, a Trust organized under the laws of the State of
Texas.
Selected Financial Data - The Company
The financial data included in the table shown below has been selected by
Company and has been derived from the financial statements for the periods
indicated. Consolidated balance sheets as of June 30, 1998 and 1997 and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years ended June 30, 1998, have been examined by
Hein + Associates LLP., Certified Public Accountants.
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Years Ended June 30 1998 1997 1996
STATEMENT OF OPERATIONS DATA:
Total Revenue $ -0- $ 189 $ 791
Net Loss (28,438) (21,528) (29,001)
[BALANCE SHEET DATA ON NEXT PAGE]
BALANCE SHEET DATA:
Working Capital Deficit $(26,831) $(26,119) $(15,889)
Total assets 1,117 32,729 42,159
Long term liability -0- 20,000 20,000
Shareholders' Deficit (26,831) (14,332) (4,102)
Selected Financial Data - Park Pharmacy
The financial data included in the table shown below has been selected by
Registrant and has been derived from the financial statements for the periods
indicated. Consolidated balance sheets as of September 30, 1998 and the related
consolidated statements of operations, shareholders' equity and cash flows for
the year ended September 30, 1998, have been examined by Alvin L. Dahl &
Associates, P.C., Certified Public Accountants.
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Years Ended September 30 1998 1997 1996
STATEMENT OF OPERATIONS DATA:
Total Revenue $ -0- -0- -0-
Net Loss (37,452) -0- -0-
BALANCE SHEET DATA:
Working Capital $ 1,000 $ -0- $ -0-
Total assets 18,750 -0- -0-
Long term debt 55,022 -0- -0-
Shareholders' Deficit (36,452) -0- -0-
Financial Statements and Supplemental Data
The financial statements of the Company and the financial statements of
Park Pharmacy are set forth immediately following the signature page of this
Proxy Statement.
Dilution.
If the proposed transactions are approved, then the present owners of the
Company's Common Stock would be entitled to approximately 20% of the voting
rights in the Company and the owners of the Series A Preferred Stock would be
entitled to approximately 80% of such voting rights.
Interests of Certain Persons.
At closing, the Rudy Marich Trust will exchange 1,000,000 shares of Common
Stock for 100,000 shares of the Series A Preferred Stock; and the JCR Family
Trust will exchange 1,000,000 shares of Common Stock for 100,000 shares of the
Series A Preferred Stock. A prior attorney for the Company who took an option
for 200,000 shares of the Company's Common Stock, in lieu of legal fees, has
exercised his option, subject to such shares being converted to 20,000 shares of
the Series A Preferred Stock upon the closing of the proposed transactions.
Additionally, James C. Rambin, a present director of the Company, in
consideration for the issuance of 50,000 shares of the Series A Preferred Stock
at closing, has agreed will forego deferred compensation in the aggregate amount
of $637,000.
Involvement in Certain Legal Proceedings
To the knowledge of management, during the past five years, no present or
former director, executive officer, person nominated to become a director or an
executive officer of Registrant, promoter, or control person:
(1) filed a petition under the federal bankruptcy laws or any state
insolvency law, or had a receiver, fiscal agent or similar officer
appointed by a court for the business or property of such person, or any
partnership in which he was a general partner at or within two years before
the time of such filing, or any corporation or business association of
which he was an executive officer at or within two years before the time of
such filing, or any corporation or business association of which he was an
executive officer at or within two years before the time of such filing;
(2) was convicted in a criminal proceeding or named the subject of a
pending criminal proceeding (excluding traffic violation and other minor
offenses);
(3) was the subject of any order, judgment or decree, not subsequently
reversed, suspended, or vacated, or any court of competent jurisdiction,
permanently or temporarily enjoining him from or otherwise limiting, the
following activities: acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor broker,
10
<PAGE>
leveraged transaction merchant associated person of any of the foregoing,
or as an investment advisor, underwriter, broker, or dealer in securities,
or as an affiliate person, director, or employee of any investment company,
or engaging in or continuing any conduct or practice in connection with
such activity; (ii) engaging in any type of business practice; or (ii)
engaging in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of federal or
state securities laws or federal commodities laws;
(4) was the subject of any order, judgment, or decree, not subsequently
reversed, suspended, or vacated, of any federal or state authority barring,
suspending, or otherwise limited for more than 60 days the right of such
person or engage in any activity described above under this heading, or to
be associated with persons engage in any such activity;
(5) was found by a court of competent jurisdiction in a civil action or
by the Securities and Exchange Commission to have violated any federal or
state securities law, and the judgment in such civil action or finding by
the Securities and Exchange Commission has not been subsequently reversed,
suspended, or vacated; or
(6) was found by a court of competent jurisdiction in a civil action or
by the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended, or vacated.
Solicitation of Proxies
The Company will pay the expense of this proxy solicitation. In addition to
solicitation by mail, some of the officers and regular employees of the Company
may solicit proxies personally or by telephone, if deemed necessary. The Company
will request brokers and other fiduciaries to forward proxy soliciting material
to beneficial owners of shares which are held of record by the brokers and
fiduciaries, and the Company may reimburse them for reasonable out-of-pocket
expenses incurred by them in connection therewith. The Company does not intend
to retain the services of any third party in connection with the solicitation of
proxies for the meeting.
Other Business; Stockholder Proposals
Since this is a Special Meeting of stockholders, no proposals other than
those set forth above will be considered at the meeting.
By Order of the Board of Directors
/s/ James C. Rambin
---------------------
Name: James C. Rambin
Title: President
Dallas, Texas
June ___, 1999
<PAGE>
EXHIBIT "A"
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is effective as of the 9th day of March, 1999, by and among
POWER-CELL, INC., a Colorado corporation ("Purchaser"), Park Pharmacy
Corporation, a Texas corporation ("Park") and Joe B. Park, Thomas R. Baker and
David W. Frauhiger (the "Selling Shareholders").
W I T N E S S E T H :
WHEREAS, Purchaser is a publicly held corporation that desires to combine
with a business which has growth potential;
WHEREAS, Park has a business plan to acquire independent retail pharmacies
and associated home care facilities, if any, and appears to have growth
potential; and
WHEREAS, Purchaser desires to acquire one hundred percent (100%) of the
issued and outstanding shares of common stock, $0.0001 par value, of Park
Pharmacy Corporation. (the "Park Common Stock") owned by the Selling
Shareholders in exchange for shares of Series A Preferred stock, $0.001 par
value, of Purchaser (the "Power Preferred Stock") in a tax-free transaction
pursuant to the provisions of Section 368(a)(1)(B) of the Internal Revenue Code
of 1986;
NOW, THEREFORE, for and in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions set forth herein, the parties hereto agree as follows:
<PAGE>
ARTICLE I
PURCHASE AND SALE
1.01 Sale and Purchase of Stock. Subject to and upon the terms and
conditions contained herein, at the Closing (as hereinafter defined), the
Selling Shareholders shall sell, assign, transfer, convey and deliver to
Purchaser and Purchaser shall purchase, accept and acquire from the Selling
Shareholder the Park Common Stock owned by them. Purchaser shall purchase,
accept and acquire from the Selling Shareholder in the aggregate 7,600,000
shares of Park Pharmacy Corporation common stock.
1.02 Closing. The closing of the transaction contemplated hereby (the
"Closing") shall occur within ten (10) days after the approval of this Agreement
by the shareholders of Purchaser. The Closing shall occur in the offices of
Purchaser or at such other place as shall be mutually agreed to in writing by
the parties hereto.
1.03 Purchase Price. In consideration of the shares of Park Common
Stock to be purchased from the Selling Shareholders, Purchaser at the Closing
shall deliver to Selling Shareholders one or more certificates representing an
aggregate of 2,567,816 shares of Power Series A Preferred Stock, free and clear
of any liens, encumbrances or charges whatsoever, subject to the restrictive
legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD OR TRANSFERRED UNLESS THE SAME ARE REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR THE COMPANY RECEIVES AN OPINION FROM COUNSEL
SATISFACTORY TO IT THAT SUCH REGISTRATION IS NOT REQUIRED FOR SALE OR TRANSFER
OR THAT THE SHARES HAVE BEEN LEGALLY SOLD IN BROKER TRANSACTIONS PURSUANT TO
RULE 144 OF THE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION
PROMULGATED UNDER THE SECURITIES ACT OF 1933.
A description of terms of the Series A Preferred Stock is attached as Exhibit
1.03.
1.04 Instruments of Transfer; Further Assurances. In order to
consummate the transaction contemplated hereby, the following documents and
instruments shall be delivered:
(a) Documents from Selling Shareholder. Selling Shareholders shall
deliver to Purchaser at the Closing one or more stock certificates representing
in the aggregate the number of shares of Park Common Stock owned by them plus a
duly executed stock power or other instrument of transfer for each such stock
certificate.
(b) Documents from Purchaser. Purchaser shall deliver to Selling
Shareholders at the closing one or more stock certificates representing in the
aggregate the number of shares of Power Preferred Stock to which such Selling
Shareholders are entitled, to be in such denominations as shall be requested by
Selling Shareholders not less than three (3) business days prior to the Closing
Date.
<PAGE>
(c) Further Documents. At the Closing, and at all times thereafter as
may be necessary (i) Selling Shareholders shall execute and deliver to Purchaser
such other instruments of transfer as shall be reasonably necessary or
appropriate to vest in Purchaser good and indefeasible title to the shares the
Park Common Stock owned by them and to comply with the purposes and intent of
this Agreement, and (ii) Purchaser shall execute and deliver to Selling
Shareholder such other instruments as shall be reasonably necessary or
appropriate to comply with the purposes and intent of this Agreement.
ARTICLE II
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser represents and warrants that the following are true and
correct as of this date and will be true and correct through the Closing Date as
if made on that date:
2.01 Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, with all requisite power and authority to carry on the
business in which it is engaged, to own the properties it owns and to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby.
2.02 Authorization and Validity. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been or will be prior to Closing duly authorized by
Purchaser. This Agreement constitutes or will constitute the legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms.
2.03 No Violation. Neither the execution and performance of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the Articles of Incorporation or
Bylaws of Purchaser or any agreement, indenture or other instrument under which
Purchaser is bound or to which the assets of Purchaser are subject, or result in
the creation or imposition of any lien, charge or encumbrance upon any of such
assets, or (b) violate or conflict with any judgment, decree, order, statute,
rule or regulation of any court or any public, governmental or regulatory agency
or body having jurisdiction over Purchaser or the properties or assets of
Purchaser. Purchaser has complied in all material respects with all applicable
laws, regulations and licensing requirements, and has filed with the proper
authorities all necessary statements and reports. Purchaser possesses all
necessary licenses, franchises, permits and governmental authorizations to
conduct its business as now conducted.
2.04 Disclosure. No representation or warranty by Purchaser in this
Agreement nor any statement or certificate furnished or to be furnished by it
pursuant hereto or in connection with the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
<PAGE>
will omit to state a material fact necessary to make the statements contained
therein not misleading or necessary in order to provide Park and the Selling
Shareholders with complete and accurate information.
2.05 Consents. There is no authorization, consent, approval, permit or
license of, or filing with, any governmental or public body or authority, any
lender or lessor or any other person or entity is required to authorize, or is
required in connection with, the execution, delivery and performance of this
Agreement or the agreements contemplated hereby on the part of Purchaser.
2.06 Compliance with Laws. There are no existing violations of any
applicable federal, state or local law or regulation that could materially
adversely affect the property or business of Purchaser and there are no known,
noticed or threatened violations of any zoning, building, fire, safety or wage
and hour laws or regulations.
2.07 Litigation. Purchaser has not had any legal action or
administrative proceeding or investigation instituted or, to the best of the
knowledge of Purchaser, threatened against or affecting any of the assets or
business of Purchaser. Purchaser is not (a) subject to any continuing court or
administrative order, writ, injunction or decree applicable specifically to
Purchaser or to its business, assets, operations or employees, or (b) in default
with respect to any such order, writ, injunction or decree. Purchaser knows of
no basis for any such action, proceeding or investigation.
2.08 Tax Returns. Purchaser has prepared and filed, or has caused to be
prepared and filed, with the appropriate United States, state and local
government agencies, and all political subdivisions thereof, all tax returns
required to be filed by, on behalf of or on account of the operations of
Purchaser and has paid or caused to be paid all assessments shown to be due and
claimed to be due on such tax returns.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARK
AND THE SELLING SHAREHOLDERS
Park and the Selling Shareholders, jointly and severally, represent and
warrant that the following are true and correct as of this date and will be true
and correct through the Closing Date as if made on that date:
3.01 Organization and Good Standing. Park is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation with all requisite power and authority to carry on the business in
which it is engaged and to own the properties it owns. Park is duly qualified
and licensed to do business and is in good standing in all jurisdictions where
the nature of its business makes such qualification necessary.
3.02 Authorization and Validity. The execution, delivery and
performance of this Agreement by Park and the consummation of the transactions
contemplated hereby have been or will be prior to Closing duly authorized by
Park. This Agreement constitutes or will constitute legal, valid and binding
<PAGE>
obligations of Park, enforceable against Park in accordance with its terms. This
Agreement constitutes the valid and binding agreement of the Selling
Shareholders, enforceable in accordance with its terms.
3.03 Financial Statements. Park has furnished to Purchaser Park's
audited balance sheet and related statements of income and changes in financial
position at September 30, 1998. (the "Park Financial Statements")
The Park Financial Statements fairly present the financial condition and results
of operations of Park as of the dates and for the periods indicated and have
been prepared in conformity with generally accepted accounting principles.
3.04 No Violation. Neither the execution and performance of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the Articles of Incorporation or
Bylaws of Park or any agreement, indenture or other instrument under which Park
is bound or to which any of the assets of Park are subject, or result in the
creation or imposition of any lien, charge or encumbrance upon any of such
assets, or (b) violate or conflict with any judgment, decree, order, statute,
rule or regulation of any court or any public, governmental or regulatory agency
or body having jurisdiction over Park or the properties or assets of Park. Park
has complied in all material respects with all applicable laws, regulations and
licensing requirements, and has filed with the proper authorities all necessary
statements and reports. Park possesses all necessary licenses, franchises,
permits and governmental authorizations to conduct its business as now
conducted.
3.05 Compliance with Laws. There are no existing violations of any
applicable federal, state or local law or regulation that could materially
adversely affect the property or business of Park and there are no known,
noticed or threatened violations of any pharmacy, zoning, building, fire,
safety, discrimination or wage and hour laws or regulations.
3.06 Disclosure. No representation or warranty by Park or the Selling
Shareholders in this Agreement nor any statement or certificate furnished or to
be furnished by it or them pursuant hereto or in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained therein not misleading or necessary in order to
provide Purchaser with complete and accurate information.
3.07 Tax Returns. Park has prepared and filed, or has caused to be
prepared and filed, with the appropriate United States, state and local
government agencies, and all political subdivisions thereof, all tax returns
required to be filed by, on behalf of or on account of, the operations of Park
and has paid or caused to be paid all assessments shown to be due and claimed to
be due on such tax returns.
<PAGE>
ARTICLE IV
PARK'S COVENANTS
Park agrees that on or prior to the Closing:
4.01 Business Operations. Park shall operate its business only in the
ordinary course and Park shall use its best efforts to preserve the business of
Park intact, to retain its present customers and suppliers so that they will be
available to Purchaser after the Closing and to cause the consummation of the
transactions contemplated by this Agreement in accordance with its terms and
conditions. Park shall not take any action that might impair the business or
assets of Park without the prior consent of Purchaser or take or fail to take
any action that would cause or permit the representations made in Article III
hereof to be inaccurate at the time of Closing or preclude Park from making such
representations and warranties at the Closing.
4.02 Access. Park shall permit Purchaser and its authorized
representatives full access to, and make available for inspection, all of the
assets and business of Park, including Park's employees, customers and
suppliers, and Park shall furnish Purchaser all documents, records and
information with respect to the affairs of Park as Purchaser and its
representatives may reasonably request.
4.03 Material Change. Prior to the Closing, Park shall promptly inform
Purchaser in writing of any material adverse change in the condition of the
business of Park. Notwithstanding the disclosure to Purchaser of any such
material adverse change, Park shall not be relieved of any liability for, nor
shall the providing of such information by Park to Purchaser be deemed a waiver
by Purchaser of, the breach of any representations or warranty of Park contained
in this Agreement.
ARTICLE V
PURCHASER'S COVENANTS
Purchaser agrees that on or prior to the Closing:
5.01 Access. Purchaser shall permit Park and its authorized
representatives full access to, and make available for inspection, all of the
assets and business of Purchaser, and Purchaser shall furnish Park all
documents, records and information with respect to the affairs of Purchaser as
Park and its representatives may reasonably request.
5.02 Sales of Stock. Except as stated on Schedule 5.03, Purchaser will
not without Park's prior written consent, after the date hereof, issue any
shares of its common stock nor will it issue or enter into an agreement to issue
any securities, rights, subscriptions, warranty or options to purchase shares of
its common stock or preferred stock or which are convertible into shares of its
common stock or preferred stock in whole or in part.
5.03 Material Change. Prior to the Closing, Purchaser shall promptly
inform Park in writing of any material adverse change in the condition of the
business of Purchaser. Notwithstanding the disclosure to Park of any such
material adverse change, Purchaser shall not be relieved of any liability for,
<PAGE>
nor shall the providing of such information by Purchaser to Park be deemed a
waiver by Park of, the breach of any representation or warranty of Purchaser
contained in this Agreement.
5.04 Approvals of Third Parties. As soon as practicable after the
execution of this Agreement, but in any event prior to the Closing Date,
Purchaser will use its best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
by this Agreement.
5.05 Name Change. Prior to or on the date of the Closing, Purchaser
shall take all required actions to change its name to PARK PHARMACY CORPORATION.
5.06 Board Representation. At the closing, the current members of the
Board of Directors of Purchaser shall hold a special meeting at which all of the
resignations of the directors of Power will be accepted and the new directors of
Power, designated by Park, will be elected.
5.07 Delivery of Corporate Records. At the closing, Purchaser shall
deliver to Selling Shareholders all the corporate and business records of
Purchaser, including, but not limited to the Minute Book, book of accounts,
filings with the SEC and all banking records.
ARTICLE VI
PURCHASER'S CONDITIONS PRECEDENT
Except as may be waived in writing by Purchaser, the obligations of Purchaser
hereunder are subject to the fulfillment at or prior to the Closing of each of
the following conditions:
6.01 Representations and Warranties. The representations and warranties
of Park contained herein shall be true and correct in all material respects as
of the Closing, and Purchaser shall not have discovered any material error,
misstatement or omission therein. At the Closing, Power shall have received a
certificate, dated the date of the Closing, and executed by the President of
Park and Selling Stockholders, certifying in such detail as Power may reasonably
request as to the accuracy of such representations and warranties and the
fulfillment of the obligations and compliance with the covenants referred to in
Section 6.02 below as of the Closing.
6.02 Covenants. Park shall have performed and complied with all
covenants or conditions required by this Agreement to be performed and complied
with by it prior to or at the Closing.
6.03 Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement.
6.04 Consents and Approvals. Park shall have obtained, and delivered
to Purchaser evidence thereof, all consents and approvals required to be
obtained in connection with the consummation of the transactions contemplated
hereby.
<PAGE>
6.05 No Material Adverse Change. No material, adverse change in the
assets, business operations or financial conditions of Park shall have occurred
after the date hereof and prior to the Closing.
6.06 Representation Letters. On or before the date of the Closing,
Power shall have received a representation of investment intent letter from
Selling Shareholder confirming his understanding that the Power Preferred Stock
to be received by them is restricted and may not be freely resold unless the
shares are registered or an exemption from registration is available, as well as
such other representations as are reasonably required by Power.
6.07 Approval of Purchaser's Shareholders. This Agreement shall have
been approved by the Board of Directors of Power and by the holders of the
majority of the outstanding capital stock of Power.
ARTICLE VII
CONDITIONS PRECEDENT OF SELLING SHAREHOLDERS
Except as may be waived in writing by the Selling Shareholder, the
obligations of the Selling Shareholder hereunder are subject to fulfillment at
or prior to the Closing of each of the following conditions:
7.01 Representations and Warranties. The representations and warranties
of Purchaser contained herein shall be true and correct in all material respects
as of the Closing, and the Selling Shareholders shall not have discovered any
material error, misstatement or omission therein. At the Closing, Selling
Shareholder shall have received a certificate, dated the date of the Closing,
and executed by the President of Power, certifying in such detail as Selling
Shareholder may reasonably request as to the accuracy of such representations
and warranties and the fulfillment of the obligations and compliance with
covenants referred to in Section 7.02 as of the Closing.
7.02 Covenants. Purchaser shall have performed and complied in all
material respects with all covenants or conditions required by this Agreement to
be performed and complied with by it prior to or at the Closing.
7.03 Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement.
7.04 Consents and Approvals. Purchaser shall have obtained, and
delivered to Park evidence thereof, all consents and approvals required to be
obtained in connection with the consummation of the transactions contemplated
hereby.
7.05 No Material Adverse Change. No material, adverse change in the
assets, business operations or financial condition of Purchaser shall have
occurred after the date hereof and prior to the Closing.
<PAGE>
7.06 Approval of Purchaser's Shareholders. This Agreement and the
authorization of the Preferred Shares contemplated by ss.1.03 and ss.7.07 shall
have been approved by the holders of the majority of the outstanding capital
stock of Power. The terms, conditions, preferences and rights of the Series A
Preferred Shares shall be established by the Board of Directors of Power prior
to the Closing pursuant to the terms stated in Schedule 1.03, attached hereto.
7.07 Conversion of Current Shareholders. At the Closing the following
current shareholders of Power shall exchange the outstanding Power Common Shares
for new issue Series A Preferred Shares of stock of Power set forth opposite
their names:
Shareholder Current Common Shares Series A Preferred Shares
Rudy Marich Trust 1,000,000 100,000
JCR Family Trust 1,000,000 100,000
ARTICLE VIII
MISCELLANEOUS
8.01 Amendment. This Agreement may be amended, modified or supplemented
only by an instrument in writing executed by the party against which enforcement
of the amendment, modification or supplement is sought.
8.02 Parties in Interest. This Agreement shall be binding on and inure
to the benefit of and be enforceable by Selling Shareholders, Park, and the
Purchaser, their respective heirs, executors, administrators, legal
representatives, successors and assigns, except as otherwise expressly provided
herein.
8.03 Assignment. Neither this Agreement nor any right created hereby
shall be assignable by either party hereto except by Purchaser to a wholly-owned
subsidiary of Purchaser.
8.04 Notice. Any notice or communication must be in writing and given
by depositing the same in the United States mail, addressed to the party to be
notified, postage prepaid and registered or certified with return receipt
requested or by delivering the same in person. Such notice shall be deemed
received on the date on which it is hand-delivered or on the third business day
following the date on which it is so mailed. For purposes of notice, the
addresses of the parties shall be:
If to Park:
-----------
Thomas R. Baker
10711 Preston Road, Suite 250
Dallas, TX 75230
If to the Selling Shareholders:
At the address set forth above.
If to Purchaser:
---------------
James Rambin, President
Power-Cell, Inc.
4032 Bandera Drive
Plano, TX 75074
Any party may change its address for notice by written notice given to the other
parties.
<PAGE>
8.05 Entire Agreement. This Agreement and the exhibits hereto supersede
all prior agreements and understandings relating to the subject matter hereof,
except that the obligations of any party under any agreement executed pursuant
to this Agreement shall not be affected by this Section.
8.06 Costs, Expenses and Legal Fees. Whether or not the transactions
contemplated hereby are consummated, Park shall bear all costs and expenses
(including attorneys' fees).
8.07 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
8.08 Governing Law. This Agreement and the rights and obligations of
the parties hereto shall be governed, construed and enforced in accordance with
the laws of the State of Texas. The parties agree that any litigation relating
directly or indirectly to this Agreement must be brought before and determined
by a court of competent jurisdiction with the State of Texas.
8.09 Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
8.10 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first written above.
SELLING SHAREHOLDERS: PURCHASER:
Power-Cell, Inc.
/s/ Joe B. Park
- - -----------------------
Joe B. Park /s/ James Rambin
--------------------------
James Rambin, President
/s/ Thomas R. Baker
- - ----------------------- Park:
Thomas R. Baker
Park Pharmacy Corporation
/s/ David W. Frauhiger /s/ Thomas R. Baker
- - ----------------------- --------------------------
David W. Frauhiger Thomas R. Baker, President
<PAGE>
DESCRIPTION OF SERIES A PREFERRED SHARES
The Board of Directors has designated 5,000,000 Preferred Shares as
Series A Preferred, par value $0.001 per share, with the following rights and
preferences:
1. Holders of the Series A Preferred Stock may convert one share of
Preferred for ten (10) shares of Common Stock at any time after June 30, 2001,
upon delivery of the preferred shares certificate duly endorsed to the offices
of the Company.
2. Holders of the Series A Preferred Stock will not be entitled to
receive any dividends.
3. In case of any voluntary of involuntary liquidation, dissolution or
winding up of the affairs of the Company, the holders of Series A Preferred
Stock will be entitled to receive in full out of the assets of the Company which
are available for payment to shareholders, before any amount is paid or
distributed among the holders of Common Stock, liquidating distributions in the
amount of $10.00 per share. If, upon any liquidation, dissolution or winding up
of the Company, the amount payable with respect to the Series A Preferred Stock,
and any other stock ranking as to any such distribution on a parity with the
Preferred Stock is not paid in full, the holders of the Series A Preferred
Stock, and of such other stock, will shares ratably in any such distribution of
assets in proportion to the full respective preferential amounts to which they
are entitled. After payment of the full amount of the liquidating distribution
to which they are entitled, the holders of shares of Series A Preferred Stock
will not be entitled to any further right or claim to any of the remaining
assets of the Company.
4. In the event that the Corporation shall at any time subdivide or
combine in a greater or lesser number of shares the outstanding shares of Common
Stock, the number of shares of Common Stock issuable upon conversion of the
Series A Preferred Stock shall be proportionately increased in the case of
subdivision or decreased in the case of a combination, effective in either case
at the close of business on the date when such subdivision or combination shall
become effective.
5. In the event that the Corporation shall be recapitalized,
consolidated with or merged into any other corporation, or shall sell or convey
to any other corporation all or substantially all of its property as an
entirety, provision shall be made as part of the terms of such recapitalization,
consolidation, merger, sale or conveyance so that any holder of Series A
Preferred Stock may thereafter receive in lieu of the Common Stock otherwise
issuable to him upon conversion of his Series A Preferred Stock or the same kind
and amount of securities or assets as may be distributable upon such
recapitalization, consolidation, merger, sale or conveyance, with respect to the
Common Stock of the Company.
<PAGE>
6. In the event that the Corporation shall at any time pay to the
holders of Common Stock a dividend in Common Stock, the number of shares of
Common Stock issuable upon conversion of the Series A Preferred Stock shall be
proportionately increased, effective at the close of business on the record date
for determination of the holders of Common Stock entitled to such dividend.
7. In the event that the Company shall at any time pay any dividend or
made any other distribution on its Common Stock in property, other than in cash
or in Common Stock of the Corporation, then provision shall be made as part of
the terms of such dividend or distribution so that the holder of any Series A
Preferred Stock surrendered for conversion after the record date for
determination of holders of Common Stock entitled to such dividend or
distribution shall be entitled to receive the same kind and the same
proportionate share of such property which he would have been entitled to
receive had such Series A Preferred Stock been converted immediately prior to
such record date.
8. Such adjustments shall be made successively if more than one event
listed in subdivisions 4, 5, 6 and 7 shall occur
9. The Company is not obligated to redeem the Series A Preferred
shares.
10. At every meeting of the stockholders of the Company, holders of
Series A Preferred shares shall be entitled to ten (10) votes for each share of
Series A Preferred Stock standing in their name on the books of the Company. The
Series A Preferred Stock and any other stock having voting rights shall vote
together as one class.
11. The holders of the Series A Preferred Stock have no preemptive
rights.
<PAGE>
EXHIBIT "B"INDEPENDENT AUDITOR'S REPORT
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Power-Cell, Inc.
Dallas, Texas
We have audited the accompanying balance sheet of Power-Cell, Inc. (a
development stage enterprise) as of June 30, 1998, and the related statements of
operations, shareholders' equity (deficit) and cash flows for each of the two
years in the period ended June 30, 1998 and the period from July 1, 1989 through
June 30, 1998, which is not separately presented. The period from inception
through June 30, 1989, which is not separately presented, was audited and
reported on by other auditors. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Power-Cell, Inc. (a development
stage enterprise) as of June 30, 1998, and the results of its operations and its
cash flows for each of the two years in the period ended June 30, 1998, and the
period from July 1, 1989 through June 30, 1998, which is not separately
presented, in conformity with generally accepted accounting principles.
We have also audited the combination of the accompanying statements of
operations and cash flows for the period from January 21, 1987 (date of
incorporation) to June 30, 1989 into the period from January 21, 1987 to June
30, 1998. In our opinion, such statements have been properly combined.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A, the Company's
significant operating losses and limited financial resources raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note A. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
HEIN + ASSOCIATES LLP
Dallas, Texas
October 8, 1998
1
<PAGE>
POWER-CELL, INC.
(A Development Stage Enterprise)
BALANCE SHEET
June 30, 1998
ASSET
-----
CURRENT ASSET - Cash $ 1,117
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES - Accounts payable and
accrued expenses $ 27,948
COMMITMENTS AND CONTINGENCIES
(Notes D, F, G and H)
SHAREHOLDERS' DEFICIT:
Common stock, $.0001 par value, 750,000,000 shares
authorized; 6,419,540 shares issued and outstanding 642
Additional paid-in capital 1,568,911
Deficit accumulated in the development stage (1,596,384)
-----------
Total shareholders' deficit (26,831)
-----------
Total liabilities and shareholders' deficit $ 1,117
===========
See accompanying notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
POWER-CELL, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
For the period
from January 21,
Years Ended June 30, 1987 (Date of
-------------------------- Incorporation)
1998 1997 to June 30, 1998
--------- ----------- ----------------
<S> <C>
REVENUE -
Interest and other income $ -- $ 189 $ 176,724
EXPENSES:
Product development -- -- 225,478
General and administrative 16,651 21,528 1,503,137
Interest -- -- 32,706
Impairment of investment 11,787 -- 11,787
----------- ----------- ------------
28,438 21,528 1,773,108
----------- ----------- ------------
NET LOSS $ (28,438) $ (21,339) $ (1,596,384)
=========== =========== ============
NET LOSS PER SHARE (Basic and Diluted) $ * $ *
=========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,419,540 6,216,875
=========== ===========
</TABLE>
* Less than $ (.01)
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
POWER-CELL, INC.
(A Development Stage Enterprise)
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
For the Period From January 21, 1987 (Date of Incorporation)
through June 30, 1998
Deficit
Common Stock Accumulated
Common Stock Subscribed Additional in the
-------------------------- ------------------------- Paid-in Development
Shares Amount Shares Amount Capital Stage
---------- ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of stock on January 21, 1987 4,356,942 $ 436 - - $ 564 $ -
Net loss - - - - - (255,419)
---------- ---------- ---------- ---------- ------------ ----------
BALANCE, June 30, 1987 4,356,942 436 - - 564 (255,419)
Issuance of stock for legal services
on February 17, 1988 163,385 16 - - 1,234 -
Stock recorded upon reverse
acquisition of Magellan 925,850 93 - - 285,427 -
Exercise of warrants 560,698 56 - - 1,195,194 -
Net loss - - - - - (271,610)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE, June 30, 1988 6,006,875 601 - - 1,482,419 (527,029)
Net loss - - - - - (273,357)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE, June 30, 1989 6,006,875 601 - - 1,482,419 (800,386)
Net loss - - - - - (310,335)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE, June 30, 1990 6,006,875 601 - - 1,482,419 (1,110,721)
Net loss - - - - - (199,455)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE, June 30, 1991 6,006,875 601 - - 1,482,419 (1,310,176)
Net loss - - - - - (87,993)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE, June 30, 1992 6,006,875 601 - - 1,482,419 (1,398,169)
Net loss - - - - - (64,367)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE, June 30, 1993 6,006,875 601 - - 1,482,419 (1,462,536)
</TABLE>
-Continued-
4
<PAGE>
<TABLE>
<CAPTION>
POWER-CELL, INC.
(A Development Stage Enterprise)
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT), Continued
For the Period From January 21, 1987 (Date of Incorporation)
through June 30, 1998
Deficit
Common Stock Accumulated
Common Stock Subscribed Additional in the
------------------------ ------------------------- Paid-in Development
Shares Amount Shares Amount Capital Stage
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Subscription of common stock
on June 30, 1994 -- -- 100,000 25,000 (2,500) --
Net loss -- -- -- -- -- (31,876)
----------- ----------- ----------- ----------- ----------- ----------
BALANCE, June 30, 1994 6,006,875 601 100,000 25,000 1,479,919 (1,494,412)
Issuance of stock subscribed on
July 14, 1994 100,000 10 (100,000) (25,000) 24,990 --
Issuance of stock on July 14, 1994
for commission on June 30,
1994 stock offering 10,000 1 -- -- 2,499 --
Issuance of stock on July 14, 1994 100,000 10 -- -- 24,990 --
Cost of stock issuance-legal fees
and commissions -- -- -- -- (3,500) --
Net loss -- -- -- -- -- (23,194)
----------- ----------- ----------- ----------- ----------- ----------
BALANCE, June 30, 1995 6,216,875 622 -- -- 1,528,898 (1,517,606)
Issuance of stock options for
legal fees -- -- -- -- 12,985 --
Net loss -- -- -- -- -- (29,001)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, June 30, 1996 6,216,875 622 -- -- 1,541,883 (1,546,607)
Issuance of stock options for legal
fees -- -- -- -- 11,109 --
Net loss -- -- -- -- -- (21,339)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, June 30, 1997 6,216,875 622 -- -- 1,552,992 (1,567,946)
----------- ----------- ----------- ----------- ----------- -----------
Issuance of stock to president of
Company for expenses paid 202,665 20 -- -- 15,919 --
Net loss -- -- -- -- -- (28,438)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, June 30, 1998 6,419,540 $ 642 $ -- $ -- $1,568,911 $(1,596,384)
=========== =========== ============ ============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
POWER-CELL, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
For the Period
from January 21,
1987 (date of
Years Ended June 30, incorporation) to
1998 1997 June 30, 1998
----------- ----------- -----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (28,438) $ (21,339) $(1,596,384)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization and depreciation -- -- 24,644
Loss on theft of equipment -- -- 741
Issuance of stock options for services -- 11,109 24,094
Impairment of investment in Partnership 11,787 -- 11,787
Expenses paid by shareholder 15,939 -- 15,939
Changes in operating assets and liabilities:
Other assets -- -- (16,400)
Accounts payable and accrued expenses 887 800 26,561
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 175 (9,430) (1,507,631)
----------- ----------- -----------
INVESTING ACTIVITIES:
Investment in limited partnership -- -- (31,787)
Purchase of office equipment -- -- (8,985)
----------- ----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES -- -- (40,772)
----------- ----------- -----------
FINANCING ACTIVITIES:
Advance received -- -- 20,000
Proceeds from issuance of common stock and
exercise of warrants -- -- 1,533,020
Cost of stock issuance -- -- (3,500)
----------- ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES -- -- 1,549,520
----------- ----------- -----------
INCREASE (DECREASE) IN CASH 175 (9,430) 1,117
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 942 10,372 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,117 $ 942 $ (1,117)
=========== =========== ===========
SUPPLEMENTAL INFORMATION - cash paid
during the period for interest $ -- $ -- $ 32,706
=========== =========== ===========
</TABLE>
NONCASH TRANSACTIONS - Common stock was issued for services and for the
acquisition of Magellan (Note B) in fiscal year 1988.
6
<PAGE>
POWER-CELL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
-------------
Magellan Corporation (Magellan) was incorporated in Colorado on April 28,
1986 for the purpose of raising capital to seek and participate in business
opportunities. Effective February 19, 1988, Magellan completed a merger with
Balzac Investments, Inc. (Balzac) (see Note B), which was incorporated
January 21, 1987, and the resulting entity adopted the name Power Cell, Inc.
(the Company). The Company has had no revenues from operations and is
considered to be in the development stage. The Company has certain rights to
a battery charger product (see Notes D and G).
Loss per Common Share
---------------------
Basic loss per common share is based upon the weighted average number of
common shares outstanding. Diluted loss per share also considers common
stock equivalents in the determination of weighted average shares, unless
the common stock equivalents would be antidilutive. Warrants prior to
exercise are not considered in the computation as their effect would be
antidilutive.
Office Equipment
----------------
Office equipment is recorded at cost. Depreciation is calculated using the
straight-line method over the estimated useful life of the assets. As of
June 30, 1994, the equipment had been fully depreciated.
Organization Costs
------------------
Costs incurred in connection with the organization of Balzac ($16,400) were
capitalized and amortized over five years using the straight-line method.
Cash Equivalents
----------------
For purposes of reporting cash flows, the Company considers demand deposits,
money market accounts and certificates of deposits with an original maturity
of three months or less to be cash equivalents.
Investment in Partnership
-------------------------
The Company has an approximate 7.35% limited partner interest in a
partnership and the investment is carried at cost, net of an allowance for
impairment.
Income Taxes
------------
The Company accounts for deferred income taxes on a liability method,
whereby deferred income taxes are provided for temporary differences between
financial statements and income tax reporting amounts.
7
<PAGE>
POWER-CELL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
Long-Lived Assets
-----------------
In the event that facts and circumstances indicate that the cost of assets
or other assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted
cash flows associated with the asset would be compared to the asset's
carrying amount to determine if a write-down to market value or discounted
cash flow value is required.
Continuation as a Going Concern
-------------------------------
The accompanying financial statements and related footnotes have been
prepared assuming the Company will continue as a going concern. The Company
is in the development stage and has incurred significant losses since
inception and has limited financial resources. These factors raise
substantial doubt about the Company's ability to continue as a going
concern. The Company will need to raise capital and/or eventually achieve
profitable operations in order for it to continue as a going concern. The
Company entered into a limited partnership agreement in October 1992 that
management believed would potentially result in successful manufacturing and
marketing of the Company's product and the eventual creation of a royalty
stream to the Company and potential earnings from the Company's interest in
the partnership (see note G). However, all marketing and operations
activities of the partnership have ceased. The Company is currently seeking
a merger partner.
NOTE B - MERGER
Effective February 19, 1988, Magellan exchanged shares of its common stock
for all of the issued and outstanding common shares of Balzac. The shares
issued represented approximately 83% of the outstanding shares of Magellan
after the merger, and officers and directors of Balzac became the officers
and directors of Magellan. Accordingly, for financial reporting purposes,
Balzac is deemed to have acquired Magellan. The transaction was accounted
for using the purchase method of accounting and was recorded based upon the
value of Magellan's identifiable net assets, net of offering costs. The
accompanying financial statements, during the period prior to the merger,
reflect the historical accounts of Balzac. Magellan's operations are
included in the accompanying financial statements commencing February 19,
1988. Balzac's equity section has been restated from the date of
incorporation to reflect the number of shares which would have been
outstanding under Magellan's $.0001 par value capital structure.
The merger agreement also entitles Balzac's shareholders of record prior to
the merger to a 10% royalty on gross sales of the battery charger product.
NOTE C - SHAREHOLDERS' EQUITY
On December 6, 1986, Magellan received the net proceeds from the sale of
400,000 units (each unit consisting of one share of Magellan's common stock
and one Class A warrant) at $.01 per unit. Each Class A warrant entitled the
holder to purchase at a price of $.02, one share of common stock and one
Class B warrant. Each Class B warrant entitled the holder to purchase, at a
price of $.03, one share of common stock and one Class C warrant. Each Class
C warrant entitled the holder to purchase, at a price of $.04, one share of
common stock and one Class D warrant. Each Class D warrant entitled the
holder to purchase one share of common stock for $.05 per share.
8
<PAGE>
POWER-CELL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
On April 13, 1988, the Company called all Class A, B, C and D warrants for
redemption. Certain warrants were exercised and the Company received
approximately $1,284,000 net of escrow fees and the cost of redeeming the
remaining warrants. Other costs of approximately $88,000 related to the
registration of the warrants have been offset against the proceeds and
charged to additional paid in capital. All outstanding Class A, B, C and D
warrants were redeemed on May 16, 1988.
During fiscal 1995, the Company issued 20,000,000 shares of common stock for
$50,000, $25,000 of which had been subscribed as of June 30, 1994.
Commissions and other expenses related to the stock issuances of 1,000,000
shares of stock and $3,500 of cash were paid.
The Company's board of directors approved a 100 for 1 reverse stock split on
October 25, 1994, which was effective for shareholders of record on November
21, 1994. All shareholders' equity information in the accompanying financial
statements has been restated to reflect the reverse split as if it had
occurred at inception.
During fiscal 1997, the Company granted options to purchase up to 200,000
shares of its common stock for $100 in lieu of legal services valued at
approximately $24,000. The options expire August 31, 2000. The portion of
the services attributable to fiscal years 1997 and 1996 amounted to $11,109
and $12,985, respectively, and were charged to operations in the
accompanying statements of operations.
During fiscal 1998, the Company's board of directors approved the issuance
of 202,665 shares to the president of the Company in repayment of $15,939 of
costs the president paid on the Company's behalf. The majority of the costs
were in connection with a special shareholders' meeting.
NOTE D - ACQUISITION OF BATTERY CHARGER PRODUCT
On January 22, 1987, Balzac entered into an agreement to purchase the
product, Power Cell, and all related technology from the developers. Power
Cell is the trade name of a reserve battery device intended to be stored
until needed and immediately brought to full working capacity by activation.
Balzac paid $150,000 cash (including a total of $52,995 to a director and a
former officer of the Company) for the product and the technology. In
addition, Balzac agreed to make royalty payments to the former owners equal
to $.10 per unit for the first 11.2 million units sold and $.05 per unit for
the next 18 million units sold up to $2,000,000. The two individuals
referred to above are entitled to 45.2% of this royalty. The Company assumed
this royalty obligation pursuant to the merger.
The purchase price was funded by a note payable to a director of the
Company. The principal and accrued interest (total of $176,984) was paid in
July 1988.
NOTE E - INCOME TAXES
The components of the Company's deferred tax accounts are as follows:
9
<PAGE>
POWER-CELL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
June 30,
1998
Deferred tax asset - net operating loss carryforward $ 430,000
Deferred tax asset valuation allowance (430,000)
------------
Net deferred tax asset $ --
============
For federal income tax purposes at June 30, 1998, the Company had a net
operating loss carryover of approximately $1,260,000. If not utilized, the
net operating loss will begin expiring in 2002 through 2012.
NOTE F - RELATED PARTY TRANSACTIONS
During 1988, the Company used Corporate Stock Transfer, Inc. (CST) as its
transfer agent. An officer, director and shareholder of CST was also a
director of the Company in 1988. Total payments to CST by the Company (and
Magellan prior to the merger) through June 30, 1988 were approximately
$13,000. The Company discontinued using CST in 1989. Effective February 19,
1988, the Company entered into a consulting agreement with International
Marketing Visions, Inc. (IMV), which required monthly payments of $1,000 for
a term of thirty months. This agreement expired during fiscal year ended
June 30, 1991 and was not renewed. A family member of a former director of
the Company is a principal shareholder of IMV.
The Company does not have international rights to its battery charger
product. However, the Company is obligated to pay for expenses incurred in
filing foreign patent applications for the product on behalf of certain
directors of the Company and other individuals who hold the international
rights. These amounts are to be repaid out of the 10% royalty discussed in
Note B. The total paid by the Company pursuant to this obligation for the
period from January 21, 1987 (date of incorporation) to June 30, 1998 was
$72,057. These amounts were paid primarily prior to fiscal year 1993, and
the general partner has since assumed the obligation.
NOTE G - LIMITED PARTNERSHIP
In October 1992, the Company entered into a limited partnership agreement
with several other limited partners (including directors and/or significant
shareholders of the Company) and a sole general partner to provide for the
initial testing, and potentially, the management, funding, manufacturing and
marketing of the Power Cell reserve battery unit. In exchange for
contribution of rights to the Power Cell unit the Company initially obtained
an approximate 11% interest in the limited partnership (the Partnership) as
a limited partner, which is subject to certain preference distributions to
the general partner. The Company's initial Partnership interest decreased to
approximately 7.35% at June 30, 1996 due to the admittance of outside
investors into the Partnership. The Company is not involved in the
management of the Partnership.
A separate license royalty agreement between the Company and the
Partnership provides that the Company will be entitled to royalty payments
on all Power Cell units produced and sold in the United States and its
territories equal to 5% to 20% of the annual gross sales of the Partnership
up to a certain sales level as specified in the agreement. A portion of
this royalty was assigned to another party as
10
<PAGE>
POWER-CELL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
described below. Royalties on international sales of Power-Cell units will
be paid to individual international rights holders, some of which are
affiliates of the Company (directors and/or significant shareholders), and
all of which are limited partners in the Partnership.
In connection with the royalty and limited partnership agreements, the
engineering firm that developed the battery product received an approximate
41% of the Company's royalty rights and an approximate 8% interest in the
Partnership. During fiscal year 1998, the Partnership received a settlement
in a lawsuit against the engineering firm which released the 41% royalty
rights and the 8% Partnership interest.
During fiscal 1993, the Company incurred legal fees of $31,787 related to
the acquisition of its interest in the Partnership. The general partner
advanced the Company $20,000 to assist with the legal costs. The terms of
the agreement between the general partner and the Company require the
advance to be repaid, with interest at 10%, from the first royalty payments
which the Company may receive from the Partnership. The Partnership's
activities have ceased and as of June 30, 1998 the management believes the
Company's investment in the Partnership is fully impaired. Consequently, the
investment and related liability have been charged to expense.
NOTE H - CONTINGENCIES
In fiscal 1998, the Company's board of directors approved a request for
compensation of approximately $607,000 for the president of the Company. In
addition, the president of the Company intends to submit to the Company's
board of directors a request for additional compensation totaling $30,000
for the fiscal year ended June 30, 1998. However, the board of directors
agreed these amounts would be due only if the president could negotiate the
payment (or some portion thereof) with an acquiring or merging company, if
any.
These amounts are considered contingent liabilities and have not been
recorded in the accompanying financial statements, because their payment
would be subject to approval by the management of an acquiring or merging
company.
11
<PAGE>
EXHIBIT "C"
INDEPENDENT AUDITOR'S REPORT
(Park Pharmacy Corporation)
Board of Directors and Stockholders
Park Pharmacy Corporation
10711 Preston Road, Suite 250
Dallas, TX 75230
We have audited the accompanying balance sheet of Park Pharmacy Corporation, a
Development Stage Company, as of September 30, 1998, and the related statements
of operations, retained earnings, and cash flows for the period June 10, 1998
(Inception) through September 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Park Pharmacy Corporation as of
September 30, 1998 and the results of its operations and its cash flows for the
period then ended in conformity with generally accepted accounting principles.
ALVIN L. DAHL & Associates, PC
October 29, 1998
Dallas, Texas
1
<PAGE>
Park Pharmacy Corporation
(A Development Stage Corporation)
Balance Sheet
September 30, 1998
Assets:
Current Assets:
Cash $ 1,000
--------
Total Current Assets 1,000
Fixed Assets:
Furniture & Fixtures (Note 2) 17,542
Accumulated Depreciation and Amortization (1,184)
--------
Total Fixed Assets
16,358
Other Assets:
Security Deposit (Note 3) 1,212
--------
Total Other Assets 1,212
--------
Total Assets $ 18,570
========
Liabilities and Stockholders' Equity:
Current Liabilities:
Accrued Expenses 3,756
Advances from Affiliate (Note 4) $ 51,266
Commitments and Contingent Liabilities -0-
--------
Total Current Liabilities 55,022
Stockholders' Equity:
Common Stock - 9,000,000 shares authorized,
7,600,000 shares issued and outstanding
$0.0001 per share par value 760
Preferred Stock - 1,000,000 shares authorized,
-0- shares issued and outstanding
$1.00 per share par value 0
Paid In Capital 240
Deficit Accumulated in the Development Stage (37,452)
--------
Total Stockholders' Equity (36,452)
Total Liabilities and Stockholders' Equity $ 18,570
========
See Notes to Financial Statements
2
<PAGE>
Park Pharmacy Corporation
(A Development Stage Corporation)
Income Statement
For the period June 10, 1998 (inception) through September 30, 1998
Sales $ -0-
General & Administrative Expenses:
Software Training $ 4,035
Supplies 131
Salaries 21,772
Depreciation 1,184
Rent 5,325
Travel 1,705
Audit Fee Accrual 3,300
---------
Total General & Administrative Expenses 37,452
Net Operating Income (Loss) (37,452)
Provision for Federal Income Tax -0-
Net Income (Loss) (37,452)
======
Basic Earnings Per Share (Note 5) $ 0.0147
Diluted Earnings Per Share NA
See Notes to the Financial Statements
3
<PAGE>
Park Pharmacy Corporation
(A Development Stage Corporation)
Statement of Cash Flows
For the period June 10, 1998 (Inception) through September 30, 1998
Cash Flows from Operating Activities:
Net Income (Loss) $ (37,452)
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 1,184
Year End Accruals 3,756
Change in operating assets and liabilities:
Other Assets: Security Deposit (1,212)
-----
Net Cash Provided (Used) by Operating Activities (33,724)
Cash Flows from Investing Activities:
Capital Expenditures on Property, Plant & Equipment (17,542)
Net Cash Provided (Used) by Investing Activities (17,542)
Cash Flows from Financing Activities:
Advances from Affiliated Party (Note 4 ) 51,266
Proceeds from Sale of Stock 1,000
-------
Net Cash Provided (Used) by Financing Activities 52,266
Net Increase in Cash and Cash Equivalents 1,000
Cash and Cash Equivalents at Beginning of Period -0-
Cash and Cash Equivalents at end of Fiscal Year 1,000
=======
See Notes to Financial Statements
4
<PAGE>
Park Pharmacy Corporation
(A Development Stage Corporation)
Statement of Comprehensive Income
For the period June 10, 1998 (Inception) through September 30, 1998
Net Income $(37,452)
Other Comprehensive Income, Net of Tax -0-
Comprehensive Income (Note 8) $(37,452)
======
See Notes to the Financial Statements
5
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<TABLE>
<CAPTION>
Park Pharmacy Corporation
(A Development Stage Corporation)
Statement of Stockholders' Equity
For the period June 10, 1998 (Inception) through September 30, 1998
Common Paid-In Retained
Stock Capital Earnings Total
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, June 10, 1998 $ -0- $ -0- $ -0- $ -0-
Sale of Common Stock,
September 30, 1998 760 240 -0- 1,000
Net Income (37,452) (37,452)
-------------------------------------------------------------
Balance, Sept. 30, 1998 $ 760 $ 240 $ (37,452) $(36,452)
=============================================================
</TABLE>
6
<PAGE>
Park Pharmacy Corporation
(A Development Stage Corporation)
Notes to Financial Statements
For the Period June 10, 1998 (Inception) through September 30, 1998
Note 1: Summary of Significant Accounting Policies:
a. Organization and Business Activities
Park Pharmacy Corporation was incorporated in the state of Texas on June 10,
1998 and is in its development stage of organization. The Company plans to
acquire several independent retail pharmacies with associated home healthcare
facilities, if any. The operating pharmacies will be acquired in exchange for
stock of the Company.
Each pharmacy will be a wholly owned subsidiary of the Company.
The purpose of this venture is to build a network of highly technical pharmacies
that are known as the leaders in the industry. The Company believes that
customer service and convenience are critical in positioning itself as an
alternative to mass merchandisers, supermarkets and other retail channels.
Targeted locations will include high population areas which are not only capable
of providing the normal day-to-day prescription and over -the-counter medication
market but a requirement for the higher technical product such as compounded
prescriptions, intravenous infusion, injectibles, and pain management products.
b. Cash and Cash Equivalents:
For purposes of reporting cash flows, the Company considers all cash on hand and
in banks, certificates of deposit and other highly liquid debt instruments with
a maturity of three months or less at the date of purchase to be cash and cash
equivalents.
c. Revenue recognition and credit policies:
In the normal course of business, the Company primarily would sell its goods on
either a "cash in advance" or would invoice third party providers. In the event
of complete non-performance by the Company's customers, the maximum exposure to
the Company is the outstanding trade accounts receivable balance at the date of
non-performance.
d. Inventory:
The Company currently holds no inventory; however, the target acquiree will each
have an inventory of product on hand.
e. Property and equipment:
Property and equipment is recorded at its historical cost. Depreciation is
provided for in amounts sufficient to relate the asset cost to operations over
the estimated useful life (three to five years) using the straight-line method
for financial reporting purposes.
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Gains and losses from disposition of property and equipment are recognized as
incurred and are included in operations.
f. Income Taxes:
The Company uses the asset and liability method as identified in SFAS 109,
Accounting for Income Taxes.
g. Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
h. Asset Impairment:
The Company adopted the provisions of SFAS 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, in its financial
statements for the year ended September 30, 1998. There has been no effect as of
September 30, 1998 of adopting SFAS 121.
i. Stock-Based Compensation:
The Company will follow the intrinsic value based method of accounting as
prescribed by SFAS No. 123, Accounting for Stock-Based Compensation, for its
stock-based compensation. The Company has not adopted a stock option plan.
j. Fiscal Year:
Management has elected a fiscal year end of September 30, 1998.
Note 2: Furniture & Fixtures:
The Company has purchased computers and related equipment, which are being
utilized in its daily activities.
Note 3: Security Deposit:
The security deposit is equal to one-half of one month's rent on the office
space that the Company shares with a related party. The Company has not signed a
lease with the related party and has no liability other than the agreement
described in Note 5.
8
<PAGE>
Note 4: Advances from Affiliate and Related Party Transactions
An affiliated Company, owned by the majority stockholder, has agreed to advance
operating funds of up to $150,000.00 to cover the Company's developmental stage
expenses. These expenses include 50% of the Company's office rent, 40% of the
operating officer's salaries, 100% of office equipment purchases and various
other expenses. At September 30, 1998, the Company had used or obligated itself
for $55,021 including $51,266 advanced and $3,755 accrued. These funds are being
advanced on a non-interest-bearing basis.
The majority stockholder of the Company also controls Dougherty's Pharmacy
Company. The Boards of Directors of the Company and Dougherty's interlock and
the operating officers of the Company also perform duties for Dougherty's.
Note 5: Earnings (Loss) Per Common Share
Earnings per common share are computed by dividing net income by the weighted
average number of common shares and common stock equivalents outstanding during
1998. SFAS No. 128, Earnings per Share applies to entities with publicly held
common stock and establishes standards for computing and presenting earnings per
share (EPS). Basic EPS excludes dilution and is computed by dividing income
available to common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. At September 30, 1998, the
Company was privately held and had no common stock equivalents outstanding. The
weighted average number of common shares outstanding as of September 30, 1998
was 2,533,333 and Basic Earnings per share was $(0.0147).
Note 6: Income Taxes
At September 30, 1998, the Company has available net operating loss
carryforwards of approximately $37,452 for federal income tax purposes that
begin to expire in 2013. The federal carryforwards resulted from the operating
loss generated in fiscal 1998. For financial purposes, a valuation allowance of
$37,452 has been recognized to offset any deferred tax assets. There are no
deferred tax liabilities. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets as of September 30,
1998 are as follows:
Deferred tax assets:
Net operating loss carryforward 37,452
Valuation allowance for deferred tax assets 37,452
Deferred tax assets 0
9
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Note 7: Fair Values of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
financial instruments:
Cash and Cash Equivalents. The carrying amount reported in the balance sheet for
cash and cash equivalents approximates its fair value.
Accounts Receivable and Accounts Payable. The carrying amount of accounts
receivable and accounts payable in the balance sheet approximates fair value.
Short-Term and Long-Term Debt. The carrying amount of the advances from
affiliates recorded in the balance sheet approximates fair value because of its
short term and its non-interest-bearing basis.
The carrying amounts of the Company's financial instruments at September 30,
1998 represent fair value.
Note 8: Comprehensive Income
SFAS No. 130, Reporting Comprehensive Income establishes standards for reporting
and display of comprehensive income and its components (revenues, expenses,
gains and losses) in a full set of general-purpose financial statements. It
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid in capital in the equity section of a statement of
financial position. The Company's comprehensive income does not differ from its
reported net income.
Note 9: Year 2000 Issues
The Y2K issue is the result of computer programs being written using two digits
rather than four to define the applicable year. Any programs that have time
sensitive software or hardware may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a major system failure or
malfunction. The Company's current accounting software, office software, and
hardware applications are Y2K compliant. Other applications such as telephone
systems, etc. are being reviewed by their vendors for compliance. No cost has
been estimated at this time. The Pharmacies that the Company plans to acquire
may not be Y2K compliant. The Company will investigate this issue as part of its
due diligence on each acquisition.
10
<PAGE>
SECURITIES TRANSFER CORP.
16910 Dallas Parkway # 100
Dallas, Texas 75248
This Proxy is Solicited on Behalf of Power-Cell, Inc. (the
"Corporation"), a Colorado Corporation for the Shares of the
Common Stock of the Corporation, in connection with a
special meeting of shareholders to be held at the University
Club, 13350 Dallas Parkway, Dallas, Texas 75240, on or about
June 15, 1999, or any adjournment thereof (the "Special
Meeting").
PROXY
The undersigned holder of shares of Common Stock of the Corporation revokes all
previously executed proxies and appoints James C. Rambin, or in the
alternative, Thomas R. Baker, if James C. Rambin refuses or is unable to
exercise this Proxy, as his or her proxy with power of substitution, to vote and
otherwise represent all of the shares of the undersigned at the Special Meeting.
The persons named above are appointed to represent the undersigned and to vote
all of the shares of common stock of the Corporation held on record by the
undersigned on April 30, 1999, with the same effect as if the undersigned were
present and voting the shares, on the following matters and in the following
manner.
1. Approval of a Stock Purchase Agreement (the "Purchase Agreement") between
the Corporation, Park Pharmacy, Inc., a Texas corporation ("Park Pharmacy")
and the holders (the "Selling Shareholders") of the common stock of Park
Pharmacy (Please Check Only One):
For [ ] Against [ ] Abstain [ ]
2. Amending the Corporation's Articles of Incorporation ("Articles")to change
its name to Park Pharmacy, Inc. (Please Check Only One):
For [ ] Against [ ] Abstain [ ]
3. Amending the Articles to increase the aggregate number of authorized stock
to include 250,000,000 shares of Preferred Stock (Please Check Only One):
For [ ] Against [ ] Abstain [ ]
4. Authorize the Board of Directors of the Corporation, from time to time, to
divide the Preferred Shares into series, to designate such series, to fix
and determine separately for each series any one or more of the following
relative rights and preferences, and to issue shares of any series then or
previously designated, fixed and determined: (a) the rate of dividend; (b)
the price at and the terms and conditions on which shares may be redeemed;
(c) the amount payable upon shares in the event of involuntary liquidation;
(d) the amount payable upon shares in the event of voluntary liquidation;
(e) sinking fund provisions, if any, for the redemption or purchase of
shares; (f) the terms and conditions on which shares may be converted if
the shares of any series are issued with the privilege of conversion; and
(g) voting rights. (Please Check Only One):
For [ ] Against [ ] Abstain [ ]
The shares represented by this proxy will be voted as you have indicated above.
If no indication is made, the share represented by this proxy will be voted in
favor of each of the above nominees and proposals. I authorize my proxy to
substitute any other person to act under this proxy, to revoke any substitution,
and to file this proxy and any substitution or revocation with the cooperation.
This proxy and the authority represented by this proxy may be revoked at any
time by the undersigned. Unless revoked, this proxy shall terminate on July 1,
1999, the day after the shareholders' meeting, or if the meeting is continued or
adjourned, the day after the continuation or adjournment.
The undersigned acknowledges receipt of the Notice Special Meeting of
Shareholders and Proxy Statement, each dated May 15, 1999.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title of such, if a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
Dated: May 15, 1999
-----------------------------------
[signature]
-----------------------------------
[signature]
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
