U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 30, 1999.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to __________________
Commission File Number 000-15379
---------
Park Pharmacy Corporation
(Exact Name of Small Business as Specified in its Charter)
Colorado 841029701
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
10711 Preston Road, Suite 250, Dallas, Texas 75230
Address of Principal Executive Offices
(214) 692-9921
Issuer's Telephone Number, Including Area Code
Power-Cell, Inc. 660 Preston Forest Center #200, Dallas, Texas 75230
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ____
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes ____ No X
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 4,419,551
---------
Transitional Small Business Disclosure Format (check one): Yes ____ No X
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Balance sheet - September 30, 1999 (unaudited) 3
Unaudited condensed statements of operations - three month 4
periods ended September 30, 1999 and 1998 and the period from
January 21, 1987 (date of incorporation) to September 30, 1999
Unaudited condensed statements of cash flows - three months 5
ended September 30, 1999 and 1998 and the period from January
21, 1987 (date of incorporation) to September 30, 1999
Notes to condensed financial statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 7
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 10
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature Page 14
2
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
PARK PHARMACY CORPORATION
(formerly Power-Cell, Inc.)
(a development stage enterprise)
BALANCE SHEET
(Unaudited)
September 30, 1999
ASSETS
<S> <C>
ASSETS $ --
-----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 30,748
Payable to officer 30,000
-----------
60,748
STOCKHOLDERS' DEFICIT:
Common stock, par value $.0001 per share, 750,000,000 shares authorized;
6,419,540 shares issued and outstanding 642
Additional paid-in capital 1,571,825
Deficit accumulated in the development stage (1,633,215)
-----------
Total Stockholders' Deficit (60,748)
Total Liabilities and Stockholders' Deficit $ --
-----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
PARK PHARMACY CORPORATION
(formerly Power-Cell, Inc.)
(a development stage enterprise)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months For the Period From
Ended January 21, 1987 (Date of
September 30, Incorporation) to
1999 1998 September 30, 1999
----------- ----------- -------------------------
<S> <C> <C> <C>
REVENUE -
Interest and other income $ -- $ -- $ 176,724
EXPENSES:
Product development -- -- 225,478
General and administrative 229 3,139 1,539,968
Interest -- -- 32,706
Impairment of investment -- -- 11,787
----------- ----------- -----------
Total expenses 229 3,139 1,809,939
----------- ----------- -----------
NET LOSS $ (229) $ (3,139) $(1,633,215)
=========== =========== ===========
NET LOSS PER SHARE (Basic and diluted) $ * $ *
=========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,419,540 6,419,540
=========== ===========
*Less than $(.01)
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
PARK PHARMACY CORPORATION
(formerly Power-Cell, Inc.)
(a development stage enterprise)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Period from
Three Months Ended January 21, 1987
September 30, (Date of Incorporation)
-------------------------- to
1999 1998 September 30, 1999
----------- ----------- ------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (229) $ (3,139) $(1,633,215)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization and depreciation -- -- 24,644
Issuance of stock options for services -- -- 24,094
Loss on theft of equipment -- -- 741
Impairment of investment in Partnership -- -- 11,787
Expenses paid by stockholder 229 1,250 18,853
Changes in operating asset and liabilities:
Other assets -- -- (16,400)
Payable to officer -- -- 30,000
Accounts payable and accrued expenses -- 1,250 30,748
----------- ----------- -----------
NET CASH USED IN OPERATING
ACTIVITIES -- (639) (1,508,748)
----------- ----------- -----------
INVESTING ACTIVITIES:
Purchase of office equipment -- -- (8,985)
Investment in limited partnership -- -- (31,787)
----------- ----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES -- -- (40,772)
----------- ----------- -----------
FINANCING ACTIVITIES:
Advance received -- -- 20,000
Issuance of common stock and exercise of
warrants -- -- 1,533,020
Stock issuance costs -- -- (3,500)
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES -- -- 1,549,520
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS -- (639) --
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD
-- 1,117 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ -- $ 478 $ --
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
PARK PHARMACY CORPORATION
(formerly Power-Cell, Inc.)
(a development stage enterprise)
A. Basis of Presentation
The accompanying financial statements are those of Power-Cell, Inc. ("the
Company"), which changed its name to Park Pharmacy Corporation as described
in Note B.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed and omitted pursuant to such rules and
regulations, although management believes the disclosures are adequate to
make the information presented not misleading. These interim financial
statements should be read in conjunction with the Company's (1) annual
report and most recent financial statements included in its report on Form
10-KSB for the year ended June 30, 1999 and (2) the September 1999 Proxy
Statement for the Special Meeting of the Shareholders, both of which were
filed with the Securities and Exchange Commission.
The interim financial information included herein is unaudited; however,
such information reflects all the adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management, necessary
for a fair statement of results of operations and cash flows for the interim
period. The results of operations for the three months ended September 30,
1999 are not considered indicative of the results to be expected for the
full year, due to the transactions described in Note B.
B. Subsequent Events
-----------------
On October 19, 1999, a reverse acquisition of the Company by the
shareholders of Park Pharmacy Corporation, a privately held Texas
corporation ("Park"), was completed. The reverse acquisition was consummated
pursuant to the terms of a stock purchase agreement dated as of March 9,
1999 (the "Stock Purchase Agreement"), which was approved by the
shareholders of the registrant at a special meeting of shareholders on
October 12, 1999. Pursuant to the stock purchase agreement, (i) the Company
acquired all of the stock of Park with Park becoming a wholly-owned
subsidiary of the Company, and (ii) the Company issued to the Park
shareholders shares of newly designated Series A Preferred Stock of the
Company in exchange for their shares of Park. Following this transaction,
the Park shareholders control 80% of the voting stock of the Company. As
part of the transaction, the Company amended its Articles of Incorporation
to create a new class of "blank check" Preferred Stock and changed the
corporate name to "Park Pharmacy Corporation". The Articles of Amendment
were approved by the shareholders of the Company at the October 19, 1999
meeting.
As a result of the closing of the reverse acquisition, the business of the
registrant shall be the acquisition, development and operation of both
Internet-based and non Internet-based retail pharmacies. For accounting
purposes, the reverse acquisition will be accounted for as an issuance of
stock by Park for the net monetary assets of the Company accompanied by a
recapitalization of Park. The accounting is identical to that of a reverse
acquisition, with Park being treated as the acquiror, except that no
goodwill is recorded. There will be no change in the recorded amount of the
Park assets and liabilities. The assets and liabilities of the Company that
are acquired as a result of the reverse acquisition will be recorded at
their fair market value. Following the reverse acquisition, the historical
financial statements of Park will become the historical financial statements
of the Company.
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<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Safe Harbor Statement Under the Private Securities Litigation Reform
Act of 1995: Statements in this report that are not historical facts, including
statements about plans and expectations regarding businesses and opportunities,
demand and acceptance of new and existing businesses, capital resources and
future financial condition and results are forward-looking. Forward-looking
statements involve risks and uncertainties, which may cause the Company's actual
results in future periods to differ materially and adversely from those
expressed. Forward-looking statements involve risks and uncertainties, which may
cause the Company's actual results in future periods to differ materially and
adversely from those expressed. These uncertainties and risks include
competition, changing consumer preferences, lack of success of new businesses,
the inability to acquire retail pharmacies, and other factors discussed from
time to time in the Company's filings with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1999.
Except as otherwise indicated, references to the "Company" refer to
Park Pharmacy Corporation, a Colorado corporation ("Park (CO)"), and its wholly
owned subsidiary, Park Pharmacy Corporation, a Texas corporation ("Park (TX)").
The terms "fiscal year" and "fiscal" refer to the Company's fiscal year which is
the year ending June 30 of the following calendar year mentioned (e.g., a
reference to fiscal 1999 is a reference to the fiscal year ending June 30,
2000).
The Reverse Acquisition
On October 19, 1999, the reverse acquisition (the "Reverse
Acquisition") of the registrant by the shareholders of Park Pharmacy
Corporation, a privately held Texas corporation ("Park TX"), was completed. The
Reverse Acquisition was consummated pursuant to the terms of that certain Stock
Purchase Agreement dated as of March 9, 1999 (the "Stock Purchase Agreement"),
by and among the registrant, Park TX, and Joe B. Park, Thomas R. Baker and David
W. Frauhiger (the "Selling Shareholders").
Pursuant to the Stock Purchase Agreement, which was approved by the
shareholders of the registrant at a special meeting of shareholders held on
October 12, 1999, (i) the registrant acquired all of the stock of Park (TX) with
Park (TX) becoming a wholly-owned subsidiary of the registrant, and (ii) the
registrant issued to the Selling Shareholders shares of newly designated Series
A Preferred Stock of the registrant in exchange for their shares of Park (TX),
with the Selling Shareholders now controlling approximately 80% of the voting
stock of the registrant. As part of the transaction, the registrant filed
Articles of Amendment to its Articles of Incorporation which created a new class
of "blank check" Preferred Stock and changed the registrant's corporate name to
"Park Pharmacy Corporation." The Articles of Amendment were approved by the
shareholders of the registrant at the October 12, 1999 meeting.
Effective October 19, 1999, Messrs. Brewer Newton and H. Don Gill
resigned from all officer and director positions they held with the registrant
and Mr. James C. Rambin resigned from all officer positions he held with the
registrant. On that date, the following persons were elected to the registrant's
Board of Directors and to serve as officers:
Name: Position:
Joe B. Park Chairman of the Board, Director
Thomas R. Baker Chief Executive Officer & President, Director
Gwendolyn Park Vice President, Secretary & Treasurer, Director
Jack R. Munn Director
John A. Blomgren Director
7
<PAGE>
In addition to the above, Mr. Rambin shall continue to serve on the Board of
Directors of the registrant in an advisory capacity. Furthermore, although not
set forth in a written agreement, the parties have agreed that Mr. Rambin will
serve as a consultant to the Company on a retainer basis. The specific terms of
such consulting arrangement will be determined by the parties and will be
subject to approval by the Board of Directors of the registrant.
Plan of Operation
Prior to the closing of the Reverse Acquisition, the Company had
virtually no assets or ongoing operations since 1997. As a result of the closing
of the Reverse Acquisition, the business of the registrant shall be the
acquisition, development and operation of both Internet-based and non
Internet-based retail pharmacies.
The Company has entered into an agreement in principle with Rx-Pro.Com,
Inc., a privately held Texas corporation ("Rx-Pro"), and Rx-Pro's shareholders
under which Rx-Pro will be acquired and merged into Park (TX). Rx-Pro's
shareholders will receive an aggregate of 97,500 shares of Series A Preferred
Stock of Park (CO) for their shares of Rx-Pro in the merger. The merger, which
will be a tax-free exchange for Rx-Pro's shareholders, is expected to be
completed early next week. The surviving company in the merger will change its
name to "Rx-Pro.Com, Inc." in the transaction.
Rx-Pro currently operates two online pharmacy Web sites,
<<("HospiceRx.Com") and <<("Rx-Pro.Com"). Rx-Pro was formed on March 19, 1999,
and is the successor company of Hospice Pharmacy Alliance LLC, a Texas limited
liability company ("Hospice Alliance"). Rx-Pro acquired all of the assets and
assumed all of the liabilities of Hospice Alliance in a transaction that closed
on April 8, 1999. The HospiceRx.Com Web site is an online service that contracts
with member pharmacies to process orders for prescription drugs,
non-prescription drugs and other health related products, from hospice
companies. The hospice companies place orders over the HospiceRx.Com Web site,
or by facsimile or telephone, on behalf of their hospice patients, which orders
are then forwarded to the member pharmacy located nearest to the hospice
patient. Orders are filled and delivered to the hospice patient by the member
pharmacy. Rx-Pro receives a processing fee from the member pharmacies for
hospice company orders originating through Rx-Pro. Although the HospiceRx.Com
Web site has been completed, it is not yet fully operational. Rx-Pro is
currently in the process of seeking additional member pharmacies to add to the
member pharmacies currently affiliated with HopsiceRx.Com. To date, although the
Web site is not yet fully operational, approximately 25 hospice companies
regularly place orders with HospiceRx.Com by telephone or facsimile.
Rx-Pro has also developed the Rx-Pro.Com Web site, an online pharmacy
store which will offer online shopping and information for consumers (including
physicians, other health care providers and patients) in the following product
categories: (i) prescription drugs, (ii) non-prescription drugs, (iii) durable
medical equipment, (iv) personal care products, (v) disease state management
books, and (vi) other health and beauty products customarily sold by retail
pharmacies. Although the Rx-Pro.Com Web site has been completed, it is not yet
fully operational. Rx-Pro is currently in the process of seeking out
relationships with independent and small chain retail pharmacies to become
member pharmacies. Rx-Pro plans to affiliate with pharmacies in all fifty states
to provide convenient service to its customers. Rx-Pro will contract with such
pharmacies to fill orders placed by consumers over its Rx-Pro.Com Web site or by
facsimile or telephone.
The Company's plan of operation for the next twelve months is to close
the transaction with Rx-Pro and to acquire independent non-Internet retail
pharmacies, including pharmacies with associated home healthcare facilities. The
Company is currently engaged in discussions on a preliminary basis with owners
of several independent retail pharmacies in accordance with the Company's
business plan. These pharmacies are established in their retail market areas,
and have long histories of operations. Other than with respect to Rx-Pro, Park
has not reached a definitive agreement with any pharmacy owner, nor have any
contracts or letters of intent been executed in connection therewith. In
evaluating a retail pharmacy for potential acquisition, the Company 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. To assess the reasonableness of
the purchase price offered by a seller in connection with a particular
acquisition, the Company will consider the availability and terms of owner
financing, including the rate of return and payback period.
8
<PAGE>
The Company plans to issue equity securities, including Company Common
Stock, Series A Preferred Stock, or other series of Preferred Stock designated
by the Company's Board of Directors, to close the transaction with Rx-Pro and
the Rx-Pro Shareholders and to acquire other non-Internet retail pharmacies as
contemplated by its business plan. Other than with respect to Rx-Pro, the
Company may also issue notes or use cash to make such acquisitions; the Company
intends to fund its acquisitions through: (i) cash flow from current operations;
(ii) a line of credit in the amount of $125,000 from North Dallas Bank & Trust
Co.; and (iii) a non-interest bearing loan from Dougherty's Pharmacies, Inc., a
Texas corporation wholly owned by Joe B. Park, an officer, director and
shareholder of the Company, of up to $150,000 to cover part or all of the
Company's expenses for rent, officers' salaries and office equipment,
respectively, $125,961 of which is currently outstanding. In addition to the
foregoing, the Company plans to raise additional funds within the next 12 months
for acquisitions through a loan from a Texas bank in the aggregate amount of
$5,000,000, the terms of which have been discussed on a preliminary, informal
basis only. In the event the Company issues equity securities in connection with
an acquisition, the current shareholders of the Company will be subject to
further dilution in their voting rights, percentage ownership in the Company,
and/or other rights with respect to their shares of capital stock of the
Company. Furthermore, shareholders of the Company may not have an opportunity to
vote on acquisitions made by the Company in connection with the implementation
of its plan of operation.
The Company anticipates a significant change in the number of its
employees in the next twelve months in connection with its planned acquisitions.
However, there can be no assurance that (i) there will be any increase in the
number of employees, (ii) the Company will be able to acquire any independent
non-Internet pharmacies, whether in the next twelve months or thereafter, or
(iii) that the Company will be able to fully implement and/or realize its plan
of operation.
Year 2000 Compliance
Many existing computer programs use only two digits to identify a year.
These programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer applications
could fail or create erroneous results by, at or beyond the year 2000.
The Company's information technology ("IT") systems consist of computer
hardware systems and software supplied by third parties. The Company utilizes
current generation off-the-shelf software for its management and accounting
systems. As a result, the Company expects its exposure to be minimal since such
hardware and software have been determined by the Company to be year 2000
compliant.
The Company's assessment of its year 2000 issues includes a review of
its non-information technology ("non-IT" systems) (systems that contain embedded
technology in process control equipment containing microprocessors or other
similar circuitry). This assessment includes a review of facilities (including
building maintenance, security, electrical, lighting, fire protection,
telephone, heating and cooling systems). Based on this review, the Company
believes that its non-IT systems and equipment are year 2000 compliant.
The Company's current plans, as previously discussed, involve the
acquisition of retail pharmacies. Due diligence with any potential acquisition
candidate will include a review of any year 2000 exposure. Other than with
respect to Rx-Pro, since the Company has not yet consummated a business
acquisition, Park is unable to estimate year 2000 compliance costs that may
arise from such business acquisition opportunities.
9
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
Authorization, Designation and Issuance of Preferred Stock
On October 12, 1999, at the Company's special meeting of shareholders,
the shareholders approved an amendment to the Company's Articles of
Incorporation to increase the number of authorized shares of capital stock of
the Company from 750,000,000 to 1,000,000,000 and create a new class of
250,000,000 shares of Preferred Stock having a par value of $.001 per share (the
"Preferred Stock"), with respect to which the Board shall have authority to
issue such Preferred Stock in series and to fix, from time to time, the number,
designation, powers, preferences, and rights of the shares of Preferred Stock in
each series. The amendment was filed with the Colorado Secretary of State on
October 19, 1999. The number of authorized shares of Company Common Stock
remains 750,000,000 shares pursuant to the amendment.
In connection with the Reverse Acquisition of the Company by the
Selling Shareholders, the Company issued shares of newly designated Series A
Preferred Stock, par value $.001 per share (the "Series A Preferred Stock"). The
rights and preferences of the Series A Preferred Stock are as follows:
(i) 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, at any time after
June 30, 2001, upon delivery of the preferred shares
certificate, duly endorsed, to the offices of the Company's
transfer agent;
(ii) Holders of the Series A Preferred Stock will not be entitled to
receive any dividends;
(iii) 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 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 the parity with the Series A Preferred Stock
is not paid in full, the holders of the Series A Preferred Stock,
and of any other stock ranking as to any such distribution and
party with the 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
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;
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(iv) 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;
(v) 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;
(vi) 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;
(vii) 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;
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(viii) Such adjustments shall be made successively if more than one
event listed in the preceding paragraphs (iv), (v), (vi), and
(vii) shall occur;
(ix) The Company is not obligated to redeem the Series A Preferred
Stock;
(x) 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;
(xi) The Series A Preferred Stock and any other stock having voting
rights, including without limitation the Common Stock, shall vote
together as one class; and
(xii) The holders of the Series A Preferred Stock have no preemptive
rights.
The Selling Shareholders received in the aggregate 2,567,816 shares of
Series A Preferred Stock in the Reverse Acquisition. In addition, (i) each of
the Marich Family Trust and the Rambin Family Trust exchanged 1,000,000 shares
of Common Stock owned by such trusts for 100,000 shares of Series A Preferred
Stock, respectively, and (ii) Mr. James C. Rambin, a former officer and current
director of the Company, received 50,000 shares of Series A Preferred Stock in
satisfaction of a contingent bonus granted by the Company during the 1998 fiscal
year. Furthermore, the Company issued: (i) 20,000 shares of Series A Preferred
Stock to a former attorney of the Company for past services rendered (unrelated
to the Reverse Acquisition) in full satisfaction of an option granted to the
attorney for 200,000 shares of Company Common Stock, and (ii) 2,750 shares of
Series A Preferred Stock to a consultant of the Company who provided consulting
services in connection with the Company's evaluation of various business
strategies after the Company's operations ceased in fiscal 1997. As of the date
hereof, there currently are 2,840,566 shares of Series A Preferred Stock of the
Company issued and outstanding and 4,419,551 shares of Common Stock of the
Company issued and outstanding.
The issuance and sale of the Series A Preferred Stock in connection
with the Reverse Acquisition have had the following effects on the holders of
Company Common Stock. As an initial matter, the voting power held by the holders
of Company Common Stock immediately prior to the Reverse Acquisition has been
substantially diluted. As a result of the Reverse Acquisition, the holders of
the Series A Preferred Stock currently own approximately 85% of the votes
entitled to be cast at any meeting of shareholders and the voting power of the
holders of Company Common Stock has been reduced from 100% to approximately 15%.
As an additional matter, in light of the liquidation preference of the
Series A Preferred Stock, the holders of Company Common Stock will not be
entitled to share in the Company's assets upon liquidation, dissolution or
winding up of the assets of the Company until the Series A Preferred Stock
preference has been fully satisfied as to all outstanding shares of Series A
Preferred Stock. It should also be noted that, although the Series A Preferred
Stock is not entitled to any dividends, such shares may be converted into shares
of Company Common Stock at any time after June 30, 2001, and will then be
entitled to share in any dividends declared and paid by the Company.
The issuance of the Series A Preferred Stock to the Selling
Shareholders in the Reverse Acquisition was made by the Company in reliance on
the exemption from registration set forth in Section 4(2) of the Securities Act
of 1933, as amended. The Company believes the Section 4(2) exemption from
registration was available based upon the established criteria for effecting a
private offering by virtue of the following facts, among others: (i) the Selling
Shareholders had access to the type of information that would be included in a
registration statement, (ii) the Selling Shareholders have adequate financial
means to bear the risk of an investment in the Company and can be described as
sophisticated, (iii) the Selling Shareholders were the only offerees in the
transaction, (iv) the Stock Purchase Agreement contains restrictions on resale
of the Series A Preferred Stock issued by the Company to the Selling
Shareholders, and (v) no underwriters were involved nor were any underwriters'
commissions paid in connection with the transactions. The consideration received
by the Company for the shares of Series A Preferred Stock issued to the Selling
Shareholders in the Reverse Acquisition was all of the issued and outstanding
shares of Park (TX).
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Because the Articles of Incorporation currently authorize the Board
of Directors to issue preferred stock in series and to fix the designation,
powers, preferences and rights of shares in each series, sometimes referred to
as "blank check" authority, the Board has discretion to tailor the terms of any
series of Preferred Stock to fit the particular needs of the Company at the time
of the stock's issuance. In other words, each series may differ substantially
from the others with respect to rights regarding dividends, voting,
convertibility, preferences upon liquidation, and redemption. It is not possible
to state the precise effects of the authorization of "blank check" authority
over Preferred Stock upon the rights of holders of Common Stock until the Board
of Directors determines the respective preferences, limitations and relative
rights of the holders of one or more series of new Preferred Stock that are
actually issued in the future. However, such effects might include (i) a
reduction of the amount otherwise available for payment of any dividends on
Common Stock, to the extent dividends are payable on any issued shares of a new
series of Preferred Stock, and restrictions on dividends on Common Stock if
dividends on then outstanding shares of any new series of Preferred Stock are in
arrears; (ii) further dilution of the voting power of the Common Stock to the
extent that any issued series of any new series of Preferred Stock has voting
rights as may be determined by the Board; and (iii) the holders of Common Stock
not being entitled to share in the Company's assets upon liquidation until
satisfaction of any liquidation preference granted to then outstanding shares of
any new series of Preferred Stock.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held a special meeting of shareholders on October 12, 1999.
At that meeting, the shareholders were presented with proposals with respect to:
(i) the approval and ratification of the Stock Purchase Agreement and the
transactions contemplated thereunder, and (ii) the approval of the amendment to
the Company's Articles of Incorporation to (a) change the name of the Company to
"Park Pharmacy Corporation", and (b) to increase the number of authorized shares
of capital stock from 750,000,000 to 1,000,000,000 and create a new class of
Preferred Stock having a par value of $.001 per share, with the number of
authorized shares of Common Stock to remain 750,000,000 shares and the number of
authorized shares of Preferred Stock to be 250,000,000. The results of the vote
of the shareholders at the special meeting are set forth below with respect to
each of the proposals presented.
(i) With respect to the proposal to approve and ratify the Stock Purchase
Agreement and the transactions contemplated thereunder, shares of the Company's
Common Stock were voted as follows: the number of votes cast for such proposal
was 4,288,873; the number of votes cast against such proposal was 1,920; the
number of votes abstaining was 5,632; and the number of broker non-votes was
2,123,126.
(ii) With respect to the proposal to amend the Company's Articles of
Incorporation to (a) change the name of the Company to "Park Pharmacy
Corporation", and (b) to increase the number of authorized shares of capital
stock from 750,000,000 to 1,000,000,000 and create a new class of Preferred
Stock having a par value of $.001 per share, with the number authorized shares
of Common Stock to remain 750,000,000 shares and the number of authorized shares
of Preferred Stock to be 250,000,000, shares of the Company's Common Stock were
voted as follows: the number of votes cast for such proposal was 4,286,834; the
number of votes cast against such proposal was 3,427; the number of votes
abstaining was 6,164; and the number of broker non-votes was 2,123,126.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The information required by this Item 6(a) is set forth in the
Index to Exhibits accompanying this quarterly report and is
incorporated herein by reference.
(b) Reports Submitted on Form 8-K:
A report on Form 8-K was filed on October 27, 1999, reporting
on the closing of the Reverse Acquisition of the Company by
the Selling Shareholders.
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PARK PHARMACY CORPORATION
Date: November 12, 1999 /s/ Thomas R. Baker
----------------------------------
By: Thomas R. Baker, President and
Chief Executive Officer
Date: November 12, 1999 /s/ Gwendolyn L. Park
----------------------------------
Gwendolyn L. Park, Secretary and
Treasurer
14
<PAGE>
INDEX TO EXHIBITS
2,10(1) Stock Purchase Agreement dated March 9, 1999, among the Company,
Park Pharmacy Corporation, Joe B. Park, Thomas R. Baker and
David W. Frauhiger
3.1.1 (1) Articles of Incorporation and Amendment to Articles of Incorporation
3.1.2 (3) Articles of Amendment to Articles of Incorporation
3.2 (4) Bylaws
27(5) Financial Data Schedule
(1) Incorporated herein by reference to Annex A in the Company's Definitive
Proxy Statement filed on September 7, 1999, with the Securities and
Exchange Commission.
(2) Incorporated herein by reference to Exhibit 3(a) in the Company's
Registration Statement on Form S-18 filed on August 8, 1986 with the
Securities and Exchange Commission.
(3) Incorporated herein by reference to Exhibit 3.1.2 in Amendment No. 2 to
the Company's Annual Report on Form 10-KSB filed on August 4, 1999,
with the Securities and Exchange Commission.
(4) Incorporated herein by reference to Exhibit 3(b) in the Company's
Registration Statement on Form S-18 filed on August 8, 1986 with the
Securities and Exchange Commission.
(5) Filed herewith.
15
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