<PAGE> 1
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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Power-Cell, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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)(1) 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
-----------------------------------------------------------------------
[X] 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> 2
POWER-CELL, INC.
660 PRESTON FOREST CENTER, BOX 200
DALLAS, TEXAS 75230
September 7, 1999
Dear Shareholder:
You are cordially invited to attend the Special Meeting of shareholders
of Power-Cell, Inc. (the "Company") to be held at 10:00 a.m., local time, on
Tuesday, October 12, 1999, at The University Club, 13350 Dallas Parkway, Dallas,
Texas 75240 (the "Special Meeting").
The purpose of the Special Meeting is to consider: (i) a proposal to
approve and adopt the Stock Purchase Agreement dated as of March 9, 1999 (the
"Stock Purchase Agreement"), among the Company, Park Pharmacy Corporation, a
Texas corporation ("Park"), and Park's shareholders (the "Selling
Shareholders"), pursuant to which the Company will acquire all of the issued
and outstanding shares of capital stock of Park in exchange for the issuance by
the Company of shares of a newly authorized and designated series of Preferred
Stock of the Company (the "Reverse Acquisition"), and (ii) a proposal to
approve and adopt amendments to the Company's Articles of Incorporation to (a)
change the name of the Company to "Park Pharmacy Corporation," and (b) create a
new class of Preferred Stock of the Company and to increase the number of
authorized shares of capital stock.
Subject to the terms and conditions of the Stock Purchase Agreement,
upon the Closing of the Reverse Acquisition, Park will become a wholly-owned
subsidiary of the Company, the Selling Shareholders will control approximately
80% of the votes entitled to be cast at any meeting of the Company's
shareholders, and the Selling Shareholders' designees shall constitute five out
of the six members on the Company's Board of Directors. Therefore, the Selling
Shareholders will have effective control of the Company after the Reverse
Acquisition.
Your Board of Directors believes that the Stock Purchase Agreement and
the transactions contemplated thereby, including the Reverse Acquisition, and
the amendments to the Articles of Incorporation are in the best interest of the
Company's shareholders. Your Board has unanimously approved the Stock Purchase
Agreement and such amendments and recommends that you vote FOR approval. You
are encouraged to read the enclosed Proxy Statement which provides detailed
information concerning the Stock Purchase Agreement, the Reverse Acquisition
and the amendments to the Articles of Incorporation.
Your vote is important, regardless of the number of shares you own.
The affirmative vote of the holders of a majority of the outstanding shares of
the Company's Common Stock entitled to vote thereon is required for approval
and adoption of the Stock Purchase Agreement and the transactions contemplated
thereby and the amendments to the Articles of Incorporation. Accordingly,
<PAGE> 3
on behalf of your Board of Directors, I urge you to complete, date and sign the
accompanying proxy and return it promptly in the enclosed postage-paid
envelope. This will not prevent you from attending the Special Meeting or
voting in person, but will assure that your vote is counted if you are unable
to attend the Special Meeting. You may revoke your proxy at any time by filing
a written notice of revocation with or by delivering a duly executed proxy
bearing a later date to, the President of the Company at the Company's offices
prior to the Special Meeting or by attending the Special Meeting and voting in
person.
On behalf of the Board of Directors, I urge you to vote FOR approval
of the Stock Purchase Agreement and the transactions contemplated thereby and
the amendments to the Articles of Incorporation.
Sincerely,
/s/ James C. Rambin
------------------------------
James C. Rambin
President and Chief Executive Officer
<PAGE> 4
POWER-CELL, INC.
660 PRESTON FOREST CENTER, BOX 200
DALLAS, TEXAS 75230
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 12, 1999
To the Shareholders of Power-Cell, Inc.:
A Special Meeting of the shareholders of Power-Cell, Inc., a Colorado
corporation (the "Company"), will be held on Tuesday, October 12, 1999, at
10:00 a.m., local time, at The University Club, 13350 Dallas Parkway, Dallas,
Texas 75240 (the "Special Meeting"), for the following purposes:
1. To consider and vote upon the following proposals described more
fully in the accompanying Proxy Statement:
(a) Proposal One: Approval and adoption of the Stock Purchase
Agreement dated March 9, 1999, by and among the Company, Park
Pharmacy Corporation, a Texas corporation ("Park"), and Park's
shareholders (the "Selling Shareholders"), and the
transactions contemplated thereby, including the acquisition
of all of the issued and outstanding shares of Common Stock,
par value $.0001 per share, of Park (the "Park Common Stock")
in exchange for the issuance by the Company of shares of a
newly authorized and designated series of Preferred Stock, par
value $.0001 per share, of the Company (the "Reverse
Acquisition"), pursuant to which, and upon the Closing of the
Reverse Acquisition: (i) Park will become a wholly-owned
subsidiary of the Company, (ii) the Selling Shareholders will
control approximately 80% of the votes entitled to be cast at
any meeting of the Company's shareholders, and (iii) the
Selling Shareholders' designees shall constitute five out of
the six members on the Company's Board of Directors.
(b) Proposal Two: Approval of amendments to the Company's
Articles of Incorporation to: (i) change the corporate name
of the Company to "Park Pharmacy Corporation," and (ii)
create a new class of Preferred Stock and increase the number
of authorized shares of capital stock.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on September 3,
1999, as the record date for the determination of shareholders entitled to
notice of and to vote at the Special Meeting or any adjournment thereof. Only
holders of record of Common Stock, par value $.0001 per share, of the
-3-
<PAGE> 5
Company (the "Company Common Stock") at the close of business on the record
date are entitled to notice of and to vote at the Special Meeting and any and
all adjournments thereof.
All shareholders are cordially invited to attend the Special Meeting.
Shareholders are urged to sign, date and mail the enclosed proxy card in the
postage-paid envelope provided as promptly as possible. If a shareholder who
has returned a proxy attends the Special Meeting in person, such shareholder
may revoke the proxy and vote in person on all matters submitted at the Special
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE
PROPOSALS LISTED ON THE PROXY CARD.
By Order of the Board of Directors
/s/ James C. Rambin
James C. Rambin
President and Chief Executive Officer
Date: September 7, 1999
-4-
<PAGE> 6
POWER-CELL, INC.
660 PRESTON FOREST CENTER, BOX 200
DALLAS, TEXAS 75230
PROXY STATEMENT
FOR
SPECIAL MEETING OF THE SHAREHOLDERS
TO BE HELD ON OCTOBER 12, 1999
BACKGROUND
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING; SOLICITATION OF PROXIES BY THE
BOARD
This proxy statement is furnished to shareholders of Power-Cell, Inc.,
a Colorado corporation (the "Company"), in connection with the solicitation by
the Board of Directors of the Company of proxies for use at the special meeting
of shareholders to be held at 10:00 a.m. on Tuesday, October 12, 1999, at The
University Club, 13350 Dallas Parkway, Dallas, Texas 75240, and any adjournment
thereof (the "Special Meeting"). The approximate date of mailing of this proxy
statement and the accompanying proxy is September 7, 1999.
On March 9, 1999, the Company entered into a Stock Purchase Agreement
(the "Stock Purchase Agreement") with Park Pharmacy Corporation, a Texas
corporation ("Park"), and Joe B. Park, Thomas R. Baker and David W. Frauhiger,
the shareholders of Park (collectively, the "Selling Shareholders"), which
provides for, among other things, the acquisition (the "Reverse Acquisition") by
the Company of all of the issued and outstanding shares of capital stock of Park
in exchange for the issuance by the Company of shares of a newly authorized and
designated series of Preferred Stock, par value $.0001 per share, of the Company
(the "Series A Preferred Stock"). Upon the closing (the "Closing") of the
Reverse Acquisition: (i) Park will become a wholly-owned subsidiary of the
Company, (ii) the Selling Shareholders will control approximately 80% of the
votes entitled to be cast at any meeting of the Company's shareholders, and
(iii) the Selling Shareholders' designees shall constitute five out of the six
members on the Company's Board of Directors. Therefore, the Selling Shareholders
will have effective control of the Company after the Reverse Acquisition.
In connection with the transactions contemplated by the Stock Purchase
Agreement, the Board of Directors has approved Articles of Amendment to the
Articles of Incorporation of the Company which will change the corporate name
of the Company to "Park Pharmacy Corporation" and will create a new class of
Preferred Stock of the Company and increase the number of authorized shares of
capital stock.
Pursuant to the terms of the Stock Purchase Agreement, the Closing of
the Reverse Acquisition is conditioned upon, among other things, the approval of
the Stock Purchase Agreement and the authorization and designation of the Series
A Preferred Stock by a majority of the outstanding shares of Common Stock, par
value $.0001 per share, of the Company (the "Company Common Stock"). In
addition, pursuant to the Colorado Business Corporation Act and the Bylaws
-5-
<PAGE> 7
of the Company, the amendments to the Articles of Incorporation must be
approved by a majority of the outstanding shares of Company Common Stock.
At the meeting, shareholders will be asked to consider and vote upon
the following proposals (the "Proposals") and upon such other business as may
properly come before the meeting or any adjournment thereof:
(i) approval and adoption of the Stock Purchase Agreement and the
transactions contemplated thereby, including the acquisition
of all of the issued and outstanding capital stock of Park in
exchange for the issuance by the Company of shares of a newly
authorized and designated series of Preferred Stock of the
Company; and
(ii) approval of amendments to the Articles of Incorporation of
the Company to: (a) change the corporate name of the Company
to "Park Pharmacy Corporation," and (b) to create a new class
of Preferred Stock.
The effectiveness of Proposal (i) is conditioned upon, among other
things, the approval of proposal (ii). Accordingly, a failure of the
shareholders to approve Proposal (ii) will result in the ineffectiveness of
Proposal (i).
PROXIES
The Board of Directors recommends that an affirmative vote be cast FOR
each of the Proposals listed in the proxy card. By completing and returning the
accompanying proxy, the shareholder authorizes James C. Rambin, or in the
alternative, Thomas R. Baker if James C. Rambin refuses or is unable to
exercise such proxy, as designated on the face of the proxy, to vote all shares
of Company Common Stock owned by the shareholder. All returned proxies that are
properly signed and dated will be voted as the shareholder directs. If no
direction is given, executed proxies will be voted FOR each of the listed
proposals. Regardless of the size of your holdings, you are encouraged to
complete and return the proxy card so that your shares may be voted at the
Special Meeting. A proxy may be revoked by a shareholder at any time before it
is voted at the Special Meeting by giving written notice of revocation to the
President of the Company at 660 Preston Forest Center, Box 200, Dallas, Texas
75230, by execution of a later dated proxy or by attending and voting in person
at the Special Meeting.
This proxy statement and the accompanying form of proxy are being sent
or given to the shareholders on or about September 7, 1999.
RECORD DATE; SHARES ENTITLED TO VOTE
The only class of voting security of the Company outstanding is the
Company Common Stock. Only holders of Company Common Stock at the close of
business on September 3, 1999, the record date for the Special Meeting, are
entitled to notice of and to vote at the meeting. On the record date for the
meeting there were 6,419,540 shares of Company Common Stock outstanding and
entitled to vote at the Special Meeting. A majority of such shares, present in
person or
-6-
<PAGE> 8
represented by proxy, is necessary to constitute a quorum. Each share of
Company Common Stock is entitled to one vote. The Stock Purchase Agreement and
the transactions contemplated thereby, and the amendments to the Articles of
Incorporation must be approved by the majority of the outstanding shares of
Company Common Stock.
Company Common Stock represented by proxies which are marked "abstain"
will be counted as shares present for purposes of determining the presence of a
quorum at the Special Meeting. Abstentions will have the effect of a vote
against the Proposals. Shares referred to as "broker non- votes" (shares held
by brokers or nominees as to which they have no discretionary authority to vote
on a particular matter and have received no instructions from the beneficial
owners or persons entitled to vote thereon), if any, are counted as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. However, for purposes of determining the outcome of any matter
requiring discretionary authority to vote, broker non-votes will be treated as
not voting with respect to that matter (even though those shares are considered
present for quorum purposes and may be entitled to vote on other matters). For
matters requiring the affirmative vote of a majority of the shares of Company
Common Stock outstanding, broker non-votes will have the effect of votes
against such proposal. Therefore, if shareholders whose shares are held in
street name by brokers fail to provide specific instructions with respect to
their shares of Company Common Stock to their broker or such shareholder
explicitly abstains from voting on such proposals, the effect will be the same
as a vote against the Proposals.
All expenses in connection with the solicitation of this proxy will be
borne by Park. The Company may use certain of its officers (who will receive no
special compensation therefor) to solicit proxies in person or by telephone,
facsimile, telegraph or similar means.
CAUTIONARY STATEMENT CONCERNING
FORWARD LOOKING INFORMATION
Certain information contained in this proxy statement which does not
relate to historical financial information may be deemed to constitute forward
looking statements. The words or phrases "will likely result," "are expected
to," "will continue," "is anticipated," "estimate," "project," "believe" or
similar expressions identify "forward looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (as amended). This proxy
statement contains certain forward-looking statements with respect to the
plans, objectives, future performance and business of the Company and Park, and
the effect of the Reverse Acquisition. Because such statements are subject to
risks and uncertainties, actual results may differ materially from historical
results and those presently anticipated or projected. The Company's
shareholders are cautioned not to place undue reliance on such statements,
which speak only as of the date hereof. Neither the Company nor Park undertakes
any obligation to release publicly any revisions to such forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
-7-
<PAGE> 9
PROPOSAL 1:
APPROVAL OF THE STOCK PURCHASE AGREEMENT
THE REVERSE ACQUISITION
THE FOLLOWING INFORMATION DESCRIBES THE MATERIAL ASPECTS OF THE REVERSE
ACQUISITION. THIS DESCRIPTION DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED
IN ITS ENTIRETY BY THE REFERENCE TO THE ANNEXES HERETO, INCLUDING THE STOCK
PURCHASE AGREEMENT WHICH IS ATTACHED TO THIS PROXY STATEMENT AS ANNEX A AND IS
INCORPORATED HEREIN BY REFERENCE. ALL SHAREHOLDERS ARE URGED TO READ THE
ANNEXES IN THEIR ENTIRETY.
EFFECTS OF THE REVERSE ACQUISITION
Pursuant to the terms of the Stock Purchase Agreement, upon the
closing (the "Closing"), the Company will purchase 7,600,000 shares of common
stock, par value $.0001 per share, of Park (the "Park Common Stock"), which
represents all of the issued and outstanding capital stock of Park, from its
current shareholders, Messrs. Joe B. Park, Thomas R. Baker, and David W.
Frauhiger (hereinafter collectively referred to as the "Selling Shareholders"),
in exchange for the issuance by the Company to the Selling Shareholders of an
aggregate of 2,567,816 shares of a newly authorized and designated series of
Preferred Stock of the Company (the "Series A Preferred Stock"). Among other
things, each share of Preferred Stock is entitled to ten (10) votes at every
meeting of the shareholders of the Company, may be converted into ten (10)
shares of Company Common Stock by the holder thereof at any time after June 30,
2001, and is entitled to a preference over the Company Common Stock in the
event of a liquidation, dissolution or winding up of the affairs of the
Company. For a more complete description of the Series A Preferred Stock, see
"THE STOCK PURCHASE AGREEMENT -- The Series A Preferred Stock."
As a result of the foregoing transactions, upon the Closing of the
Reverse Acquisition, among other things: (i) Park will become a wholly-owned
subsidiary of the Company, (ii) the Selling Shareholders will control
approximately 80% of the votes entitled to vote at any meeting of the Company's
shareholders, and (iii) the Selling Shareholders' designees shall constitute
five out of six members on the Company's Board of Directors. Therefore, the
Selling Shareholders will have effective control of the Company after the
Reverse Acquisition.
After the Closing, it is anticipated that the Company will issue
additional shares of Series A Preferred Stock to three individuals. In
connection with the transactions contemplated by the Stock Purchase Agreement,
the parties have agreed that as soon as reasonably practicable after the
Closing, Mr. James C. Rambin, the current President and Chief Executive Officer
and a member of the Board of Directors of the Company, will be issued 50,000
shares of Series A Preferred Stock in satisfaction of a contingent bonus granted
to him by the Company's Board of Directors during fiscal 1998. Payment of such
bonus is contingent upon the Closing. See "THE REVERSE ACQUISITION -- Interests
of Certain Persons in the Reverse Acquisition." In addition to the issuance of
shares of Series A Preferred Stock to Mr. Rambin, the Company plans to issue:
(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. The issuance of the aforementioned shares of
Series A Preferred Stock to Mr. Rambin, the former attorney and the consultant
will result in the dilution of the percentage of the total number of votes
entitled to be cast at any meeting of the Company's shareholders then held by
the Selling Shareholders and the current shareholders of the Company from 80% to
78% and from 20% to 19%, respectively. See "THE STOCK PURCHASE AGREEMENT -- The
Series A Preferred Stock."
RISK THAT THE REVERSE ACQUISITION WILL NOT BE CONSUMMATED
Consummation of the Reverse Acquisition is subject to a number of
conditions including, among other things, (i) receipt of shareholder approval,
and (ii) the requirement that no material adverse change shall have occurred in
the business or financial conditions of Park.
It is expected that if the transactions contemplated by the Stock
Purchase Agreement and the amendments to the Articles of Incorporation are not
consummated, management of the Company will continue to seek out candidates for
a business combination with the Company.
-8-
<PAGE> 10
Background of the Reverse Acquisition
In the spring of 1997, the Company ceased its operations when it was
informed that all activities and operations of Reserve Battery Cell, L.P. (the
"Limited Partnership") had ceased due to the lack of funding. At that time, the
Company's operations consisted entirely of its ownership interest in the Limited
Partner. As a result, at such time, for all practical purposes the operations of
the Company ceased. The Company currently has virtually no assets or ongoing
operations and has not engaged in any business activities since 1997. From such
time through the present, other than satisfying its periodic reporting
obligations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Company has been virtually inactive. Therefore, the Company believes
it is still in the development stage.
In the spring of 1998, after reviewing the Company's prospects,
management believed that it would be possible to develop a strategy for the
Company to enter into a business combination with a privately held company as a
reasonable alternative for such company to the more traditional initial public
offering, or "IPO", and would provide the shareholders of the Company a
reasonable opportunity to recover some value on their investment. The Company
also considered raising capital by means of a public or private debt or equity
offering in order to continue operations. However, such alternatives did not
appear feasible on the basis that the Company has virtually no assets or
revenues. As a result, management of the Company began looking for a privately
held company that would be interested in entering into a business combination
with the Company. See "THE REVERSE ACQUISITION -- Recommendation of the
Company's Board of Directors; The Company's Reasons for the Reverse
Acquisition"; "POWER-CELL, INC."
Also in the spring of 1998, the management of Park (which at that time
was an entity in formation) completed its business plan which contemplated
acquiring independent retail pharmacies. Management of Park determined that it
wanted to seek out a public company that it could enter into a reverse
acquisition with in order to give Park opportunities to access capital markets
and to use publicly-traded stock as consideration in acquiring retail pharmacies
in accordance with its business plan. As a result, management of Park began
looking for a publicly traded company that would be interested in entering into
a business combination with Park. See "THE REVERSE ACQUISITION -- Park's Reasons
for the Reverse Acquisition."
The Company's and Park's business relationship began at the end of
April, 1998, when a mutual acquaintance suggested Park as a potential business
partner to the Company that might be interested in the Company's status as a
public company.
On April 28, 1998, James C. Rambin, President and Chief Executive
Officer of the Company, met with Thomas R. Baker, President and Chief Operating
Officer of Park, to discuss a transaction whereby Park would become affiliated
with the Company and Park's shareholders would get publicly-traded stock in
connection with such affiliation. The parties' preliminary discussions on such
date contemplated Park and/or its shareholders acquiring a controlling interest
in the Company; no specific terms of the transaction were discussed at this
time. During the course of the following six (6) months, Mr. Rambin and Mr.
Baker discussed via telephone, and in general terms, the possible framework of a
potential business combination between the Company and Park in the context of
the results of the annual audits of the companies, but no material meetings
occurred between the Company and Park until October, 1998. During this time Mr.
Baker conducted a due diligence review of the Company and Mr. Rambin completed
his review and examination of Park's business plan and prospects.
In October 1998, Mr. Rambin and Mr. Baker discussed a number of
important aspects of a potential business combination, including relative
ownership of the Company after the transaction. On October 8, 1998, Mr. Baker
proposed a stock-for-stock exchange whereby the Company would acquire all of the
issued and outstanding stock of Park and Park's shareholders would receive an
85% interest in Company Common Stock. Mr. Baker also proposed that restrictions
be placed on the ability of certain of the Company's major shareholders to sell
Company Common Stock after the Closing of the Reverse Acquisition. Shortly
thereafter, Mr. Rambin made a counter-proposal acquiescing to a stock-for-stock
exchange, with Park's shareholders receiving an 80% interest instead of an 85%
interest in the Company's securities. Mr. Rambin's counter-proposal included the
issuance of a new class of preferred stock to Park's shareholders instead of
Company Common Stock to avoid an immediate substantial dilution in the trading
price and per share earnings (losses) and other financial information concerning
the Company Common Stock, as well as the exchange of Company Common Stock held
by the Marich Family Trust and the Rambin Family Trust into shares of preferred
stock which, as unregistered stock, would not be freely tradeable and would also
serve to reduce the number of outstanding shares of Company Common Stock thereby
reducing the threat of an "overhang" of Company Common Stock in the market. Mr.
Baker agreed to the terms of Mr. Rambin's counter-proposal prior to the end of
October 1998.
On November 6, 1998, the parties met to discuss the additional
principal terms of the reverse acquisition of the Company by Park. The parties
agreed that the new class of preferred stock would be non-participating as to
dividends and would be convertible into shares of Company Common Stock at a
ratio of ten-to-one approximately two years after the date of their issuance.
The parties also discussed Mr. Rambin's contingent bonus compensation in the
amount of $607,000. The parties agreed that as part of the business combination,
Mr. Rambin would receive shares of Preferred Stock equivalent to 500,000 shares
of Company Common Stock, which at that time was worth $30,000 (based on a
closing price of $.06 of the Company Common Stock) in full satisfaction of his
contingent bonus compensation.
On January 21, 1999, the parties entered into a letter of intent which
had the following terms: (i) the Company would purchase all of the capital stock
of Park in exchange for 80% of the outstanding common shares (or equivalent) in
a tax free exchange; (ii) after the exchange, the current shareholders of the
Company would own 20% of the combined company; and (iii) at the closing of the
transactions, the current members of the Company's board of directors would
resign and elect new members designated by Park. At that time, the parties made
a public announcement of the proposed transaction.
-9-
<PAGE> 11
On March 1, 1999, the Board of Directors of the Company unanimously
approved the execution of a definitive agreement concerning the Reverse
Acquisition and the amendments to the Articles of Incorporation. On March 9,
1999, the parties executed the Stock Purchase Agreement and issued a press
release concerning the same.
Recommendation of the Company's Board of Directors; the Company's Reasons for
the Reverse Acquisition
The Company believes the Stock Purchase Agreement and the transactions
contemplated thereby are fair to and in the best interests of the Company and
its shareholders. Accordingly, the Company's Board unanimously approved the
Stock Purchase Agreement and recommends that the shareholders of the Company
vote FOR approval and adoption of the Stock Purchase Agreement and the
transactions contemplated thereby.
In making its determination to approve the Stock Purchase Agreement and
the Reverse Acquisition, the Company's Board considered a number of factors,
including, together with the matters discussed in "THE REVERSE ACQUISITION --
Background of the Reverse Acquisition," the following factors considered
material by the Company's Board:
(a) The Company's businesses, financial condition, and future
prospects (and lack thereof);
(b) Since the Company has no material assets, no operating staff and
virtually no intrinsic value other than its status as a reporting
issuer under the Exchange Act, entering into the Reverse Acquisition
with Park would provide the shareholders of the Company a reasonable
opportunity to recover some value on their investment in the Company;
(c) Due to the fact that the Company has virtually no assets or ongoing
operations, management did not believe, and currently does not believe,
that there were any other realistic opportunities for the Company to
recover value for its shareholders;
(d) The business experience of Park's current management team, the
contacts that Park's management team has in the retail pharmacy
industry and other related industries, and Park's plan of operation;
See "PARK PHARMACY CORPORATION;"
(e) The anticipated tax treatment of the transaction (and the possible
risks that such treatment would not be obtained); See "THE REVERSE
ACQUISITION - Certain Federal Income Tax Consequences;" and
(f) The terms of the Stock Purchase Agreement and other understandings
surrounding the Stock Purchase Agreement, including the arrangements
concerning Mr. James C. Rambin and the Rambin Family Trust and the
Marich Family Trust, all of which are described herein; See "THE STOCK
PURCHASE AGREEMENT"; "THE REVERSE ACQUISITION -- Interests of Certain
Persons in the Revenue Acquisition."
Management believes that the transactions with Park will make it possible to
recover some value for the shareholders of the Company. Notwithstanding the
foregoing, there can be no assurance that Park's plan of operation will be
successfully implemented after the Reverse Acquisition or that the Company
Common Stock will ever increase in value. Also, there is no assurance that the
Reverse Acquisition will be treated by the Internal Revenue Service as a
tax-free reorganization. See "THE REVERSE ACQUISITION - Certain Federal Income
Tax Consequences."
Park's Reasons for the Reverse Acquisition
The decision of the Park Board of Directors to enter into the Stock
Purchase Agreement and to consummate the transactions contemplated thereby is
based upon its conclusion that the Reverse Acquisition affords Park
opportunities to access capital markets and to use publicly-traded stock as
consideration in acquiring retail pharmacies in accordance with its business
plan, that otherwise would be unavailable as a privately-held company, as well
as providing greater liquidity for Park's shareholders.
-10-
<PAGE> 12
INTERESTS OF CERTAIN PERSONS IN THE REVERSE ACQUISITION
Share Exchanges
Each of the Marich Family Trust (the "Marich Trust") and the Rambin
Family Trust (the "Rambin Trust") currently beneficially own 1,452,313 shares
of Company Common Stock, respectively. Each of the Marich Trust's and the
Rambin Trust's beneficial ownership of Company Common Stock represents
approximately 23% of the total number of issued and outstanding shares of
Company Common Stock as of the record date, respectively. James C. Rambin, the
President, Chief Executive Officer, and member of the Board of Directors, of
the Company, is the trustee of the Rambin Trust.
Pursuant to the terms of the Stock Purchase Agreement, at the Closing,
each of the Marich Trust and the Rambin Trust shall exchange 1,000,000 shares
of Company Common Stock for 100,000 shares of Series A Preferred Stock. For a
description of the Series A Preferred Stock, see "THE STOCK PURCHASE AGREEMENT
- -- The Series A Preferred Stock."
Arrangements with James C. Rambin
Although not set forth in written agreements, the Company, Park and
James C. Rambin have oral agreements in connection with the Reverse Acquisition
concerning the following matters. First, the parties have agreed that Mr.
Rambin shall serve as an advisory director on the Company's Board of Directors
after the Closing. Second, the parties have agreed that Mr. Rambin will serve
as a consultant to the Company on a retainer basis after the Closing. The
specific terms of such consulting arrangement will be determined by the parties
after the Closing and will be subject to approval by the Company's Board of
Directors.
Third, the parties have made certain agreements with respect to a
contingent bonus granted by the Company to Mr. Rambin. During the Company's
1998 fiscal year, Mr. Rambin requested a bonus of approximately $607,000 for
services rendered as President of the Company. The Board of Directors approved
such a request on the condition that such bonus would be payable by the Company
only if Mr. Rambin were able to successfully negotiate the payment of the bonus
or a portion thereof, in the context of a business combination with another
Company, including, without limitation, by way of an acquisition of the Company
or a merger with the Company. In connection with the transactions contemplated
by the Stock Purchase Agreement, the parties have agreed that Mr. Rambin's
contingent bonus will be satisfied in full by the issuance of 50,000 shares of
Series A Preferred Stock after the Closing by the Company.
THE CLOSING
Pursuant to the terms of the Stock Purchase Agreement, the Closing
shall occur within ten (10) days after the approval by the Company's
shareholders of the Stock Purchase Agreement.
-11-
<PAGE> 13
MANAGEMENT OF THE COMPANY AFTER THE REVERSE ACQUISITION
On or prior to the Closing, the Board of Directors will increase the
number of seats on the Board from three (3) to six (6). Pursuant to the terms
of the Stock Purchase Agreement, the current directors of the Company will
resign at the Closing. The vacancies created by such resignations will be
filled by Messrs. Joe B. Park, Thomas R. Baker, Jack R. Munn, R.Ph., John A.
Blomgren, R.Ph. and Ms. Gwendolyn Park, each of whom will serve as directors of
the Company until the next annual meeting of the Company's shareholders or
until their earlier deaths, resignations or removal. As an additional matter,
the parties to the Stock Purchase Agreement and James C. Rambin have agreed
that Mr. Rambin will be appointed as an advisory director to the Board after
the Closing. Biographical information concerning Messrs. Park, Baker, Munn,
Blomgren and Ms. Park is set forth in "PARK PHARMACY CORPORATION --
Management."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Company and Park expect that the Reverse Acquisition will be
treated as a tax free reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended. It is expected that no income,
gain or loss will be recognized by the Company or its shareholders as a result
of the consummation of the Reverse Acquisition.
This discussion does not address potential foreign, state, local and
other tax consequences, nor does it address taxpayers subject to special
treatment under the federal income tax laws, such as life insurance companies,
tax exempt organizations, S Corporations, trusts, and taxpayers subject to the
alternative minimum tax. The Company has not requested the Internal Revenue
Service to rule or issue an opinion on the federal income tax consequences of
the Reverse Acquisition. The Company does not expect to obtain an opinion of
counsel or independent certified public accountants as to the federal income
tax consequences of the Reverse Acquisition.
THERE IS NO ASSURANCE THAT THE REVERSE ACQUISITION WILL BE TREATED AS A
TAX FREE REORGANIZATION BY THE INTERNAL REVENUE SERVICE. ALL SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, FOREIGN, STATE
AND LOCAL TAX CONSEQUENCES OF THE DISPOSITION OF THEIR SHARES IN THE REVERSE
ACQUISITION.
ANTICIPATED ACCOUNTING TREATMENT
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 Park's 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.
GOVERNMENTAL AND REGULATORY APPROVALS
The Company and Park believe that no regulatory approvals are or will
be required in connection with the Stock Purchase Agreement and the
transactions contemplated therein.
-12-
<PAGE> 14
THE STOCK PURCHASE AGREEMENT
THE FOLLOWING IS A BRIEF SUMMARY OF THE TERMS OF THE STOCK PURCHASE
AGREEMENT. THIS DESCRIPTION DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE STOCK PURCHASE AGREEMENT INCLUDED AS ANNEX A
TO THIS PROXY STATEMENT AND INCORPORATED HEREIN BY REFERENCE. ALL SHAREHOLDERS
ARE URGED TO READ THE STOCK PURCHASE AGREEMENT IN ITS ENTIRETY.
THE REVERSE ACQUISITION
The Stock Purchase Agreement provides that, at the Closing, the
Selling Shareholders shall sell and assign to the Company and the Company shall
purchase an aggregate of 7,6000,000 shares of Park Common Stock from the
Selling Shareholders, representing all of the issued and outstanding shares of
capital stock of Park. In consideration of the shares of Park Common Stock to
be purchased from the Selling Shareholders, the Company shall deliver to the
Selling Shareholders, at the Closing, certificates representing an aggregate of
2,567,816 shares of newly authorized and designated Series A Preferred Stock,
free and clear of any liens, encumbrances or charges whatsoever, subject to
certain restrictions on transfer. The issuance of the Series A Preferred Stock
to the Selling Shareholders will be 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 is 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.
As an additional matter, pursuant to the terms of the Stock Purchase
Agreement, at the Closing, the Board of Directors shall hold a special meeting
at which the Board will increase the number of seats on the Board of Directors
from three (3) to six (6) and then each of Messrs. Rambin, Gill and Newton will
resign from their Board positions. At such meeting, each of Messrs. Joe B.
Park, Thomas R. Baker, Jack R. Munn, R.Ph., John A Blomgren, R.Ph., and Ms.
Gwendolyn Park will be appointed to fill the vacancies on the Board caused by
such resignations and the increased number of Board seats. As an additional
matter, the parties have agreed that Mr. Rambin will be appointed to the Board
as an advisory director after the Closing. The Board members so appointed shall
hold office until the next annual meeting of shareholders or until their
earlier deaths, resignations or removal.
-13-
<PAGE> 15
THE SERIES A PREFERRED STOCK
Pursuant to the terms of the Stock Purchase Agreement, the Company
shall designate 5,000,000 shares of the newly authorized Preferred Stock as
Series A Preferred Stock with the following rights and preferences:
(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;
(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
-14-
<PAGE> 16
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;
(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 issuance and sale of the Series A Preferred Stock to the Selling
Shareholders for all of the outstanding shares of Park Common Stock will have
the following effects on the holders of Company Common Stock. As an initial
matter, the voting power currently held by the holders of Company Common Stock
will be substantially diluted. Upon the Closing of the Reverse Acquisition, the
holders of the Series A Preferred Stock will own approximately 80% of the votes
entitled to be cast at any meeting of shareholders and voting power of the
current holders of Company Common Stock will be reduced from 100% to
approximately 20%. After the Closing, it is anticipated that the Company will
issue additional shares of Series A Preferred Stock to three individuals. In
connection with the transactions contemplated by the Stock Purchase Agreement,
the parties have agreed that as soon as reasonably practicable after the
Closing, Mr. James C. Rambin, the current President and Chief Executive Officer
and a member of the Board of Directors of the Company, will be issued 50,000
shares of Series A Preferred Stock in satisfaction of a contingent bonus granted
to him by the Company's Board of Directors during fiscal 1998. Payment of such
bonus is contingent upon the Closing. See "THE REVERSE ACQUISITION -- Interests
of Certain Persons in the Reverse Acquisition." In addition to the issuance of
shares of Series A Preferred Stock to Mr. Rambin, the Company plans to issue:
(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. The issuance of the aforementioned shares of
Series A Preferred Stock to Mr. Rambin, the former attorney and the consultant
will result in the dilution of the percentage of the total number of votes
entitled to be cast at any meeting of the Company's shareholders then held by
the Selling Shareholders and the current shareholders of the Company from 80% to
78% and from 20% to 19%, respectively. See "THE REVERSE ACQUISITION -- Effects
of the Reverse Acquisition."
As an additional matter, in light of the liquidation preference of the
Series A Preferred Stock, after the Reverse Acquisition the holders of Company
Common Stock will not be
-15-
<PAGE> 17
entitled to share in the Company's assets upon a 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.
REPRESENTATIONS AND WARRANTIES
The Stock Purchase Agreement contains various representations and
warranties of the parties. The Company has made representations and warranties
to Park and the Selling Shareholders relating to, among other things, the
following: (i) the due organization, power and good standing of the Company,
(ii) the authorization, execution, delivery and performance by and
enforceability of the Stock Purchase Agreement against the Company, (iii) the
absence of any provision in the Company's articles or bylaws or any agreements,
laws, regulations or orders in conflict with the Company's execution and
performance of the Stock Purchase Agreement, (iv) the absence of required
authorizations, consents or approvals in connection with the Company's
execution, delivery and performance of the Stock Purchase Agreement except as
provided in the Stock Purchase Agreement, (v) compliance with laws, (vi) the
absence of certain litigation, and (vii) tax matters.
The Stock Purchase Agreement contains various representations and
warranties of Park and the Selling Shareholders relating to, among other
things: (i) the due organization, power and good standing of Park, (ii) the
authorization, execution, delivery and performance by and enforceability of the
Stock Purchase Agreement against Park, (iii) financial statements delivered to
the Company, (iv) the absence of any provision in Park's articles or bylaws or
any agreements, laws, regulations or orders in conflict with Park's execution
and performance of the Stock Purchase Agreement, (v) compliance with laws, and
(vi) tax matters.
COVENANTS
The Stock Purchase Agreement provides that on or prior to the Closing,
the Company agrees: (i) to permit Park and its authorized representatives full
access to, and make available for inspection, all of the assets and business of
the Company, (ii) to furnish Park with all documents, records and information
with respect to the affairs of the Company as Park and its representatives may
reasonably request, (iii) except as stated on a schedule to the Stock Purchase
Agreement, not to issue any shares of Company Common Stock nor enter into an
agreement to issue any securities, rights, subscriptions, warrants or options
to purchase shares of Company Common Stock or Preferred Stock, without Park's
prior written consent, (iv) to promptly inform Park of any material adverse
change in the condition of the business of the Company, (v) as soon as
practicable after the execution of the Stock Purchase Agreement, but in any
event prior to the Closing, to use its best efforts to secure all necessary
approvals and consents of third parties to the consummation of the transactions
contemplated by the Stock Purchase Agreement, (vi) prior to or on the date of
the Closing, to take all required actions to change its name to "Park Pharmacy
Corporation," (vii) at the Closing, the current members of the Board of
Directors of the Company shall hold a special meeting at which all of the
resignations of the directors of the Company will be accepted and the new
directors of the Company, designated by Park, will be elected, and (viii) at
the Closing, to deliver to the Selling
-16-
<PAGE> 18
Shareholders all the corporate and business records of the Company, including,
but not limited to the corporate minute book, book of accounts, filings with
the Commission and all banking records.
The Stock Purchase Agreement provides that on or prior to the Closing,
the business of Park shall be operated only in the ordinary course and that
Park shall use its best efforts to preserve its business intact. Park also
agrees: (i) to cause the consummation of the transactions contemplated by the
Stock Purchase Agreement, (ii) not to take any action that might impair the
business or assets of Park without the prior consent of the Company, (iii) not
to take or fail to take any action that would cause or permit the
representations made by Park in the Stock Purchase Agreement to be inaccurate
at the time of the Closing or preclude Park from making such representations
and warranties at the Closing, (iv) to permit the Company and its authorized
representatives full access to, and make available for inspection, all of the
assets and business of Park, (v) to furnish the Company all documents, records
and information with respect to the affairs of Park as the Company and its
representatives may reasonably request, and (vi) to promptly inform the Company
in writing of any material adverse change in the condition of Park's business.
CONDITIONS TO THE REVERSE ACQUISITION
The obligation of the Company to effect the transactions contemplated
by the Stock Purchase Agreement, including the Reverse Acquisition, are subject
to the following conditions: (i) the representations and warranties of Park
contained in the Stock Purchase Agreement shall be true and correct in all
material respects as of the Closing, and the Company shall not have discovered
any material error, misstatement or omission therein, (ii) the Company shall
have received a certificate, dated as of the Closing, and executed by the
President of Park and the Selling Shareholders, certifying in such detail as
the Company 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 the Stock Purchase Agreement as of the Closing, (iii)
Park shall have performed and complied with all covenants or conditions
required by the Stock Purchase Agreement to be performed and complied with by
it prior to or at the Closing, (iv) 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 the Stock Purchase Agreement, (v) Park shall have
obtained, and delivered to the Company evidence thereof, all consents and
approvals required to be obtained in connection with the consummation of the
transactions contemplated by the Stock Purchase Agreement, (vi) no material,
adverse change in the assets, business operations or financial conditions of
Park shall have occurred after the date of the Stock Purchase agreement and
prior to the Closing, (vii) on or before the date of the Closing, the Company
shall have received a representation of investment intent letter from the
Selling Shareholders confirming their understanding that the Series A 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 the Company,
and (viii) the Stock Purchase Agreement shall have been approved by the Board
of Directors of the Company and by the holders of the majority of outstanding
capital stock of the Company.
The respective obligations of Park and the Selling Shareholders to
effect the transactions contemplated by the Stock Purchase Agreement, including
the Reverse Acquisition, are subject to the following conditions: (i) the
representations and warranties of the Company contained in the
-17-
<PAGE> 19
Stock Purchase Agreement 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, (ii) the Selling Shareholders
shall have received a certificate, dated as of the Closing, and executed by the
President of the Company, certifying in such detail as the Selling Shareholder
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 the Stock Purchase Agreement as of the Closing, (iii)
the Company shall have performed and complied in all material respects with all
covenants or conditions required by the Stock Purchase Agreement to be
performed and complied with by it prior to or at the Closing, (iv) 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 Stock Purchase
Agreement, (v) the Company 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 by the Stock Purchase
Agreement, (vi) no material, adverse change in the assets, business operations
or financial condition of the Company shall have occurred after the date of the
Stock Purchase agreement and prior to the Closing, and (vii) the Stock Purchase
Agreement and the authorization of the Series A Preferred Stock contemplated by
the Stock Purchase Agreement shall have been approved by the holders of the
majority of the outstanding capital stock of the Company.
FEES AND EXPENSES
The Stock Purchase Agreement provides that Park shall bear all costs
and expenses (including attorneys' fees), whether or not the transactions
contemplated by the Stock Purchase Agreement are consummated.
AMENDMENT
The Stock Purchase Agreement may be amended, modified or supplemented
only by an instrument in writing executed by the party against whom enforcement
of the amendment, modification or supplement is sought.
WAIVER
The conditions to each of the parties' respective obligations to
consummate the transactions contemplated by the Stock Purchase Agreement may be
waived by such party in writing.
PROPOSAL 2
THE AMENDMENTS TO THE ARTICLES OF INCORPORATION
THE FOLLOWING IS A BRIEF SUMMARY OF THE TERMS OF THE ARTICLES OF AMENDMENT TO
THE ARTICLES OF INCORPORATION EMBODYING THE AMENDMENTS DESCRIBED HEREIN. THIS
DESCRIPTION DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE ARTICLES OF AMENDMENT INCLUDED AS ANNEX B TO THIS PROXY
STATEMENT AND
-18-
<PAGE> 20
INCORPORATED HEREIN BY REFERENCE. ALL SHAREHOLDERS ARE URGED TO READ THE
ARTICLES OF AMENDMENT IN THEIR ENTIRETY.
PREFERRED STOCK
The Articles of Incorporation of the Company as presently in effect
provide that the authorized capital consists of 750,000,000 shares of Common
Stock, par value $.0001 per share (the "Company Common Stock"). In connection
with the transactions contemplated by the Stock Purchase Agreement, the Board
of Directors of the Company has approved, and proposes that the shareholders of
the Company approve, an amendment to the 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 $.0001 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
number of authorized shares of Company Common Stock shall remain 750,000,000
shares pursuant to such amendment.
As of the record date there were 6,419,540 shares of Company Common
Stock issued and outstanding. There are no other shares of capital stock of the
Company outstanding.
The Board of Directors believes that the proposed amendment is
desirable so that, as the need may arise, the Company will have the maximum
financial flexibility to issue shares of Preferred Stock in connection with
growing capital needs and future opportunities for expanding its business, and
for other purposes, without the expense and delay of calling a special
shareholders meeting. Authorizing 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, allows
the Board, in its 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.
The only offering of Preferred Stock contemplated at the present time
is the proposed Series A Preferred Stock, which shall be designated by the
Board of Directors and issued by the
-19-
<PAGE> 21
Company in connection with the transactions contemplated by the Stock Purchase
Agreement. For a description of the Series A Preferred Stock, see "THE STOCK
PURCHASE AGREEMENT --The Series A Preferred Stock."
Authorized but unissued shares of the Company's Common Stock and the
new Preferred Stock, if authorized, may be issued at such time, for such
purposes, and for such consideration as the Board of Directors may determine to
be appropriate without further authority from the Company's shareholders,
except as otherwise required by applicable law or stock exchange policies.
While the Board of Directors has no present intention of doing so, the
Company's authorized but unissued Preferred Stock could be issued in one or
more transactions which could delay or prevent a change in control of the
Company by making it more difficult or costly to do so. Depending upon the
particular features of a series of Preferred Stock, its issuance could also
make the removal of the Company's management more difficult, or result in
restrictions upon the payment of dividends and other distributions to the
holders of Common Stock. Issuing additional shares of stock would also have the
effect of diluting the stock ownership of persons seeking to obtain control of
the Company. Some companies have issued rights to purchase their Common Stock
and/or Preferred Stock, with such rights having terms designed to encourage, in
certain potential acquisitions, the potential acquirer to begin negotiations
with the Company's Board of Directors. The authorized but unissued shares of
Preferred Stock would be available for use in connection with the issuance of
such rights. The proposed amendment to the Articles of Incorporation is not
being recommended in response to any specific effort of which the Company is
aware to obtain control of the Company other than as contemplated by the Stock
Purchase Agreement, nor is the Board of Directors currently proposing to
shareholders any anti-takeover measures.
CHANGE OF CORPORATE NAME
In connection with the transactions contemplated by the Stock Purchase
Agreement, the Board of Directors has approved and proposes that the
shareholders of the Company approve an amendment to the Articles of
Incorporation of the Company to change the corporate name of the Company to
"Park Pharmacy Corporation." The Company believes that the corporate name of
the Company should be changed to reflect the Company's intention to operate the
business of Park after the Reverse Acquisition.
The affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock is required to adopt the proposed amendments to
the Articles of Incorporation. If the amendments are approved by the
shareholders, such amendments will take effect upon filing with the Secretary
of State of the State of Colorado.
THE BOARD OF DIRECTORS BELIEVES THE PROPOSED AMENDMENTS TO BE IN THE BEST
INTERESTS OF THE COMPANY AND THE COMPANY'S SHAREHOLDERS AND RECOMMENDS A VOTE
"FOR" APPROVAL OF PROPOSAL TWO.
-20-
<PAGE> 22
POWER-CELL, INC.
The Company was incorporated on April 26,1986 under the laws of the
State of Colorado. The Company conducted its initial public offering in
December 1986. From its inception until May 1987, the Company evaluated various
business opportunities. In May 1987, the Company and Balzac Investments, Inc.
("Balzac") entered into a Merger Agreement. At the time, Balzac owned the
rights to a battery charger product which consisted of a reserve battery
encased in hard form plastic that was designed to be carried in a car and used
to charge a "dead" automotive battery (the "Product"). The merger was completed
in February 1988 and, as a result of the merger, the Company obtained the
rights to manufacture, market and distribute the Product and all related
technology in the United States and its territories. The former shareholders of
Balzac retained the international rights to the Product. On December 27, 1988,
the United States Patent and Trademark Office issued a United States' Letter
Patent to the Company relating to certain features of the Product. The Product
has also been approved for patent protection in at least five (5) foreign
countries.
On October 9, 1992, the Company formed a limited partnership with
Reserve Battery, Inc., the general partner, and certain additional parties, by
entering into an Agreement of Limited Partnership. The limited partnership
formed by such parties, the name of which is Reserve Battery Cell, L.P. (the
"Limited Partnership"), was formed for the purpose of developing,
manufacturing, marketing and selling the Product. The Company's limited
partnership interest in the Limited Partnership is currently 7.28%. In
connection with forming the Limited Partnership, the Company entered into a
License with the Limited Partnership pursuant to which it licensed its
intellectual property rights in the Product to the Limited Partnership in
return for royalties on sales of the Product.
In the spring of 1997, the Company was informed that all activities
and operations of the Limited Partnership had ceased due to the lack of
funding. As a result, at such time, for all practical purposes the operations
of the Company ceased. The Company currently has virtually no assets or ongoing
operations and has not engaged in any business activities since 1997. From such
time through the present, other than satisfying its periodic reporting
obligations under the Exchange Act, the Company has been virtually inactive.
Therefore, the Company believes it is still in the development stage.
After reviewing the Company's prospects, management believed that it
would be possible to develop a strategy for the Company to enter into a
business combination with a privately held company as a reasonable alternative
for such company to the more traditional initial public offering, or "IPO", and
would provide the shareholders of the Company a reasonable opportunity to
recover some value on their investment. The Company also considered raising
capital by means of a public or private debt or equity offering in order to
continue operations. However, such alternatives did not appear feasible on the
basis that the Company has virtually no assets or revenues.
Prior to the announcement of the proposed transactions contemplated by
the Stock Purchase Agreement, The National Quotation bureau reported that the
closing bid and ask prices for the Company Common Stock were $.125. Since the
press releases announcing the execution of the Stock Purchase Agreement, trading
activity in the Company Common Stock has increased. On September 3, 1999, the
record date, there were six (6) market makers with the high ask and low bid
price of the Company Common stock being $1.594.
-21-
<PAGE> 23
MANAGEMENT'S PLAN OF OPERATION
The Company has not engaged in any material operations since the
spring of 1997 and has had virtually no revenues from operations during the
last two fiscal years. The Company believes that it is an attractive business
partner for an entity seeking a strategic combination with a publicly-held
company. Company management and the Board of Directors believe that such a
combination will serve the interests of the Company's shareholders better than
a liquidation of the Company. If the Stock Purchase Agreement and the Articles
of Amendment are approved, it is the Board of Directors' intention to complete
the Reverse Acquisition and assist Park in its operations and implementing its
plan of operation. See "PARK PHARMACY CORPORATION -- Management's Discussion
and Analysis."
In the event the transactions contemplated by the Stock Purchase
Agreement are not consummated, the Company's plan of operation is to pursue an
alternative business combination with another entity that may benefit the
Company and its shareholders. Foreseeable cash requirements relating to
maintenance of the Company in good standing and expenses associated with
receiving and investigating a potential business combination will be met by
personal funds advanced from Mr. Rambin. Because the Company has no revenues or
cash resources, management anticipates that to achieve any such combination,
the Company plans to issue shares of Company Common Stock as the sole
consideration for such combination. However, the consummation of any such
combination may require the Company to obtain debt or equity financing. The
Company has no current plan to obtain additional financing and no assurance can
be given that such financing will be available to enter into a particular
business combination.
DESCRIPTION OF PROPERTY
The Company has a nominal amount of office space, which is located at
the residence of James C. Rambin. Mr. Rambin provides such space on an informal
basis and free of charge. There are no other offices or properties of the
Company.
LEGAL PROCEEDINGS
Neither the Company nor its property is presently subject to any
material litigation nor, to the Company's knowledge, is any material litigation
threatened against the Company or its properties.
MARKET FOR COMMON EQUITY
The Company Common Stock is currently traded on the over-the-counter
bulletin board market. The high ask and low bid price of the Company Common
Stock on January 20, 1999, the day before the public announcement of the
execution of the Letter of Intent, were $.375 and $.125, respectively. The high
ask and low bid price of the Company Common Stock as of March 8, 1999, the day
before public announcement of the execution of the Stock Purchase Agreement,
were $1.00 and $.875, respectively. Such figures represent "inter-dealer"
prices without adjustment for retail markups, markdowns or commissions, and may
not represent actual transactions.
-22-
<PAGE> 24
The Company has never paid cash dividends on its Common Stock and does
not intend to do so in the foreseeable future. It is anticipated that earnings,
if any, will be retained to finance the Company's growth. Future payments of
cash dividends, if any, will be determined by the Board of Directors of the
Company based upon circumstances then existing, including contractual
restrictions, financial condition, capital requirements and business outlook of
the Company.
YEAR 2000
The Company currently has virtually no active business operations. The
issues associated with computing difficulties that may affect existing computer
systems as a result of programming code malfunctions in distinguishing 21st
century dates from 20th century dates are known as the "Year 2000" issue. The
Year 2000 issue is a pervasive problem affecting many information technology
systems and embedded technologies in all industries. The Company has determined
that the consequences of its Year 2000 issues will not have a material effect
on the Company's business, results of operations, or financial condition.
The Company does not currently have any significant information
technology ("IT") systems, including computer hardware systems or software.
The Company's assessment of the Year 2000 issue does not necessitate a
review of non- information technology ("non-IT" systems) (systems that contain
embedded technology in process control equipment containing microprocessors or
other similar circuitry), because the Company has no internal equipment and
facilities.
The Company's current plans, as previously discussed, involve
implementing Park's plan of operations, which consist of the pursuit of new
investment opportunities. Due diligence with any potential acquisition
candidate will include a review of any Year 2000 exposure. Since the Company
has not yet consummated a business acquisition, the Company is unable to
estimate Year 2000 compliance costs that may arise from such business
acquisition opportunities.
-23-
<PAGE> 25
SELECTED FINANCIAL DATA
The following table sets forth selected financial information for Power-Cell,
Inc. and should be read in conjunction with the financial statements of
Power-Cell, Inc. and the accompanying notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Proxy or incorporated by reference. For further information
concerning the pro forma financial information as of June 30, 1999, see the
Pro Forma Combined Financial Statements and the notes thereto included
elsewhere in this Proxy.
<TABLE>
<CAPTION>
CUMULATIVE PROFORMA
YEAR ENDED YEAR ENDED INCEPTION YEAR ENDED
JUNE 30, JUNE 30, TO JUNE 30, JUNE 30,
1998 1999 1999 1999
---------- ---------- ----------- -----------
STATEMENT OF OPERATIONS DATA: (Unaudited)
<S> <C> <C> <C> <C>
Net Revenue $ -- -- $ 176,724 $ 177,822
Gross Profit -- -- 176,724 153,699
Product Development -- -- 225,478 --
General and Administrative Expense 16,651 36,602 1,539,739 377,303
Interest Expense -- -- 32,706 --
Impairment of Investment 11,787 -- 11,787 --
Total Expenses 28,438 36,602 1,809,710 377,303
Net Loss (28,438) (36,602) (1,632,986) (223,604)
Net Loss Per Share * * n/a (0.03)
Average Common Shares Outstanding 6,419,540 6,419,540 n/a 6,419,540
</TABLE>
<TABLE>
<CAPTION>
PROFORMA
JUNE 30, JUNE 30, JUNE 30,
1998 1999 1999
---------- ---------- -----------
BALANCE SHEET DATA: (Unaudited)
<S> <C> <C>
Current Assets 1,117 -- 596,173
Total Assets 1,117 -- 616,168
Current Liabilities 27,948 60,748 806,576
Total Liabilities 27,948 60,748 806,576
Total Shareholders' Deficit (26,831) (60,748) (190,408)
Total Liabilities and Shareholders' Deficit 1,117 -- 616,168
</TABLE>
* Less than $.01 per share
-24-
<PAGE> 26
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, 1999, and the related statements of
operations, shareholders' equity (deficit) and cash flows for each of the two
years in the period ended June 30, 1999 and the period from July 1, 1989 through
June 30, 1999, which is not separately presented. The period from incorporation
(January 21, 1987) 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, 1999, and the results of its operations and its
cash flows for each of the two years in the period ended June 30, 1999, and the
period from July 1, 1989 through June 30, 1999, 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, 1999. 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
August 13, 1999
25
<PAGE> 27
POWER-CELL, INC.
(A Development Stage Enterprise)
BALANCE SHEET
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS $ --
- ------ ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES :
Accounts payable and accrued expenses $ 30,748
Payable to officer (Note H) 30,000
-----------
Total current liabilities 60,748
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 1,571,596
Deficit accumulated in the development stage (1,632,986)
-----------
Total shareholders' deficit (60,748)
-----------
Total liabilities and shareholders' deficit $ --
===========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
26
<PAGE> 28
POWER-CELL, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the period
from January 21,
Years Ended June 30, 1987 (Date of
------------------------------- Incorporation) to
1999 1998 June 30, 1999
----------- ----------- --------------
<S> <C> <C> <C>
REVENUE -
Interest and other income $ -- $ -- $ 176,724
EXPENSES:
Product development -- -- 225,478
General and administrative 36,602 16,651 1,539,739
Interest -- -- 32,706
Impairment of investment -- 11,787 11,787
----------- ----------- -----------
36,602 28,438 1,809,710
----------- ----------- -----------
NET LOSS $ (36,602) $ (28,438) $(1,632,986)
=========== =========== ===========
NET LOSS PER SHARE (Basic and Diluted) $ * $ *
=========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,419,540 6,419,540
=========== ===========
</TABLE>
* Less than $ (.01)
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
27
<PAGE> 29
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, 1999
<TABLE>
<CAPTION>
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-
28
<PAGE> 30
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, 1999
<TABLE>
<CAPTION>
Common Stock
Common Stock Subscribed
------------------------ ----------------------------
Shares Amount Shares Amount
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Subscription of common stock on June 30, 1994 -- -- 100,000 25,000
Net loss -- -- -- --
----------- ----------- ----------- -----------
BALANCE, June 30, 1994 6,006,875 601 100,000 25,000
Issuance of stock subscribed on July 14, 1994 100,000 10 (100,000) (25,000)
Issuance of stock on July 14, 1994 for commission
on June 30, 1994 stock offering 10,000 1 -- --
Issuance of stock on July 14, 1994 100,000 10 -- --
Cost of stock issuance-legal fees and commissions -- -- -- --
Net loss -- -- -- --
----------- ----------- ----------- -----------
BALANCE, June 30, 1995 6,216,875 622 -- --
Issuance of stock options for legal fees -- -- -- --
Net loss -- -- -- --
----------- ----------- ----------- -----------
BALANCE, June 30, 1996 6,216,875 622 -- --
Issuance of stock options for legal fees -- -- -- --
Net loss -- -- -- --
----------- ----------- ----------- -----------
BALANCE, June 30, 1997 6,216,875 622 -- --
----------- ----------- ----------- -----------
Issuance of stock to president of Company for expenses paid 202,665 20 -- --
Net loss -- -- -- --
----------- ----------- ----------- -----------
BALANCE, June 30, 1998 6,419,540 642 -- --
Expenses paid by president of Company -- -- -- --
Net loss -- -- -- --
----------- ----------- ----------- -----------
BALANCE, June 30, 1999 6,419,540 $ 642 -- $ --
=========== =========== =========== ===========
<CAPTION>
Deficit
Accumulated
Additional in the
Paid-in Development
Capital Stage
----------- ------------
<S> <C> <C>
Subscription of common stock on June 30, 1994 (2,500) --
Net loss -- (31,876)
----------- -----------
BALANCE, June 30, 1994 1,479,919 (1,494,412)
Issuance of stock subscribed on July 14, 1994 24,990 --
Issuance of stock on July 14, 1994 for commission
on June 30, 1994 stock offering 2,499 --
Issuance of stock on July 14, 1994 24,990 --
Cost of stock issuance-legal fees and commissions (3,500) --
Net loss -- (23,194)
----------- -----------
BALANCE, June 30, 1995 1,528,898 (1,517,606)
Issuance of stock options for legal fees 12,985 --
Net loss -- (29,001)
----------- -----------
BALANCE, June 30, 1996 1,541,883 (1,546,607)
Issuance of stock options for legal fees 11,109 --
Net loss -- (21,339)
----------- -----------
BALANCE, June 30, 1997 1,552,992 (1,567,946)
----------- -----------
Issuance of stock to president of Company for expenses paid 15,919 --
Net loss -- (28,438)
----------- -----------
BALANCE, June 30, 1998 1,568,911 (1,596,384)
Expenses paid by president of Company 2,685 --
Net loss -- (36,602)
----------- -----------
BALANCE, June 30, 1999 $ 1,571,596 (1,632,986)
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
29
<PAGE> 31
POWER-CELL, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Period
Years Ended June 30, from January 21, 1987
------------------------ (date of incorporation) to
1999 1998 June 30, 1999
---------- ---------- --------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (36,602) $ (28,438) $(1,632,986)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization and depreciation -- -- 24,644
Loss on theft of equipment -- -- 741
Issuance of stock options for services -- -- 24,094
Impairment of investment -- 11,787 11,787
Expenses paid by president 2,685 15,939 18,624
Changes in operating assets and liabilities: --
Other assets -- -- (16,400)
Payable to officer 30,000 -- 30,000
Accounts payable and accrued expenses 2,800 887 30,748
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (1,117) 175 (1,508,748)
----------- ----------- -----------
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 (1,117) 175 --
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,117 942 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ -- $ 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.
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
30
<PAGE> 32
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.
Comprehensive Income (Loss)
Comprehensive income is defined as all changes in stockholders' equity,
exclusive of transactions with owners, such as capital investments.
Comprehensive income or loss includes net income or loss, changes in
certain assets and liabilities that are reported directly in equity such as
translation adjustments on investments in foreign subsidiaries, and certain
changes in minimum pension liabilities. The Company's comprehensive loss
was equal to its net loss for the years ended June 30, 1999 and 1998.
Long-Lived Assets
In the event that facts and circumstances indicate that the cost of assets
or other assets may be impaired, an
31
<PAGE> 33
POWER-CELL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
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. As described in Note
I, in March 1999 the Company entered into an agreement to merge with
another company which management believes will allow the Company to
continue as a going concern.
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.
32
<PAGE> 34
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 200,000 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 10,000
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, if any. 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:
<TABLE>
<CAPTION>
June 30,
1999
---------
<S> <C>
Deferred tax asset - net operating loss carryforward $ 430,000
Deferred tax asset valuation allowance (430,000)
---------
Net deferred tax asset $ -
=========
</TABLE>
33
<PAGE> 35
POWER-CELL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
For federal income tax purposes at June 30, 1999, the Company had a net
operating loss carryover of approximately $1,270,000. If not utilized, the
net operating loss will begin expiring in 2002 through 2019.
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, 1999 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 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
34
<PAGE> 36
POWER-CELL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
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 - CONTINGENT LIABILITY
In fiscal 1998, the Company's board of directors approved a request for
compensation of approximately $607,000 for the president of the Company.
However, the board of directors agreed this amount would be due only if the
president could negotiate the payment (or some portion thereof) with an
acquiring or merging company, if any. At June 30, 1998, this amount was
considered a contingent liability and was not recorded in the Company's
financial statements, because payment would be subject to approval by the
management of an acquiring or merging company. As described in Note I, in
fiscal 1999, the Company signed an agreement to merge with another company
and the president negotiated a payment in stock to satisfy the contingent
liability. The stock to be issued the president is 50,000 shares of
preferred stock, which is to be newly authorized if approved by the
Company's shareholders. The stock is to be convertible to 500,000 shares of
the Company's common stock. Based on the trading price of the common stock,
the liability was recorded at $30,000 at June 30, 1999.
NOTE I - PROPOSED MERGER
In March 1999, the Company entered into an agreement to acquire all the
outstanding stock of Park Pharmacy Corporation ("Park") in exchange for the
issuance to Park's shareholders of newly authorized preferred stock,
convertible into the Company's common stock. Following the transaction,
Park's shareholders will own about 87% of the Company's voting stock.
Completion of the transaction is subject to approval by the Company's
shareholders.
35
<PAGE> 37
PARK PHARMACY CORPORATION
Park Pharmacy Corporation was incorporated on June 10, 1998, under the
laws of the State of Texas. The business activities of Park to date have been
the following: (i) organizational matters, (ii) preparation of a private equity
offering in September 1998 which was abandoned before its consummation, (iii)
preliminary negotiations with the owners of independent retail pharmacies, as
discussed below, (iv) matters relating to the Stock Purchase Agreement, and (v)
negotiations concerning the acquisition of Rx-Pro.Com, Inc., a Texas
corporation ("Rx-Pro"), discussed below. The mailing address of the principal
executive offices of Park is 10711 Preston Road, Suite 250, Dallas, Texas 75230
and its telephone number is (214) 692-9921.
On April 18, 1999, Park entered into an oral agreement with Joe B.
Park, Jack R. Munn, R.Ph., and John A. Blomgren, the shareholders of Rx-Pro
(the "Rx-Pro Shareholders"), pursuant to which Park will purchase from the
Rx-Pro Shareholders all of the issued and outstanding shares of capital stock
of Rx-Pro in exchange for shares of Series A Preferred Stock of the Company.
The transaction is expressly conditioned upon the closing of the Reverse
Acquisition and the approval of the Company's Board of Directors. As part of
the transaction, Rx-Pro will be merged with and into Park with Park as the
surviving corporation in the merger. The transaction is structured as a
tax-free share exchange and pursuant to the agreement among the parties, the
Rx-Pro Shareholders will receive in the aggregate 30,000 shares of Series A
Preferred Stock of the Company. It is anticipated that the Park-Rx-Pro
transaction will be closed as soon as reasonably practicable following the
Reverse Acquisition.
Rx-Pro currently operates two online pharmacy Web sites,
((www.hospicerx.com)) ("HospiceRx.Com") and ((www.rx-pro.com)) ("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. In connection
with the transaction, Rx-Pro issued 30,000 shares of its common stock, par
value $.0001 per share, to Hospice Alliance, which then distributed such
common stock to its shareholders.
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 the 250 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.
-36-
<PAGE> 38
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. See "-- Financial Data."
MANAGEMENT'S DISCUSSION AND ANALYSIS
PLAN OF OPERATION
Park's plan of operation for the next twelve months is to close the
transaction with Rx-Pro and the Rx-Pro Shareholders and to acquire independent
non-Internet retail pharmacies, including pharmacies with associated home
healthcare facilities. Park's general business strategy is to establish a chain
of retail pharmacies through the acquisition of full-line retail pharmacies. In
implementing its business strategy, Park intends to institute the following
programs with acquired pharmacies: cost-control programs, improved employee
training, negotiating increases in vendor rebates, maintaining a high level of
customer service and convenience, increasing sales in each department in each
store and maintaining competitive pricing. In addition to prescription drugs
and services, Park intends for its pharmacies to offer a broad range of
over-the-counter medications, home healthcare services, health and beauty care,
cosmetics, gifts, greeting cards, convenience foods, cameras, photo supplies
and processing services, and other general merchandise. Some pharmacies may
incorporate special features such as drive-through windows and free home
delivery for customer convenience, faxing, copying, and package delivery
services.
Park is currently engaged in discussions on a preliminary basis with
owners of several independent retail pharmacies in accordance with Park'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, Park 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, Park will consider the availability and terms of owner financing,
including the rate of return and payback period.
There is no assurance that Park will be able to acquire any
independent pharmacies, whether in the next twelve months or thereafter, or
that Park Pharmacy will be able to implement and/or realize its plan of
operation.
-37-
<PAGE> 39
Park intends to merge with Rx-Pro after the Reverse Acquisition and,
once merged, expand Rx-Pro's Internet pharmacy operations, including
commencement of full of operations for the HospiceRx.Com and Rx-Pro.Com Web
sites. Rx-Pro is currently developing additional software systems to provide
complementary services to its current Internet pharmacy operations.
ANALYSIS OF FINANCIAL OPERATIONS
Park Pharmacy Corporation
From inception to June 30, 1999, Park has generated no revenue and
incurred general and administrative expenses of $109,871 that primarily consist
of employee salaries, professional services and office rent related to
developing its business plan and infrastructure. Park has an oral agreement to
acquire 100% of the common stock of Rx-Pro concurrent with the closing of the
reverse acquisition in exchange for 30,000 shares of Power Cell $0.001 par
value convertible preferred stock. See the comparative analysis of the
operations of Rx-Pro below.
Rx-Pro.Com, Inc. (Six months ended June 30, 1999 and June 30, 1998)
Sales decreased by $25,355 or 23% from $108,765 for the six months
ended June 30, 1998 to $83,410 for the six months ended June 30, 1999. The
primary reason for this decrease was due to the loss of several customers in
1999, primarily home health care agencies, that were forced to cease operations
due to the changes in the Medicare reimbursement methods. Gross profit remained
constant at 89% of sales in both of the six-month periods.
General and administrative expenses increased by $73,210 or 92% from
79,606 for the six months ended June 30, 1998 to $152,816 for the six months
period ended June 30, 1999. The primary reason for this increase was due the
additional salaries and benefits related to the development of internet
protocols so that Rx-Pro could increase market size and presence.
As a result of the decrease in revenue and the increase in general and
administrative expenses, net income of $15,924 for the six month period ended
June 30, 1998 compares to a net loss of $80,424 for the six month period ended
June 30, 1999.
For the six month period ended June 30, 1999, operations used cash
flow of $53,880 which was funded by $39,038 in advances from an affiliate and
use of $14,842 of the beginning cash balance. For the six months ended June 30,
1998, operations used cash flow of $22,577 that was funded from $14,562 of
capital contributions and $16,168 of advances from an affiliate. During both
periods, Rx-Pro financed its day to day operations by timing the payment of
trade payables to coincide with the receipt of its trade receivables.
Rx-Pro.Com, Inc. (Year ended December 31, 1998 and December 31, 1997)
Sales increased by $49,815 or 32% from $153,362 for the year ended
December 31, 1997 to $203,177 for the year ended December 31, 1998. The primary
reason for this increase was due to expansion and growth in Rx-Pro's customer
base during 1998. Gross profit remained fairly constant at 86%-87% of sales in
both years.
General and administrative expenses increased by $30,302 or 23% from
129,146 for the year ended December 31, 1997 to $159,448 for the year ended
December 31, 1998. The primary reason for this increase was due to the increase
in support staff and related overhead during 1998 required to service the
expanding customer base.
As a result of the increase in revenue offset by the increase in
general and administrative expenses, net income of $1,535 for the year ended
December 31, 1997 compares to net income of $15,073 for the year ended December
31, 1998.
For the year ended December 31, 1998, operations provided cash flow
of 40,602 of which $3,986 was used to purchase computer equipment and 1,426 was
used to repay affiliate advances. For the year ended December 31, 1997,
operations used cash flow of $19,001 and $3,822 was used to purchase computer
equipment. The 1997 cash requirement was funded by $12,827 of capital
contributions and $11,802 in advances from an affiliate. During both years,
Rx-Pro financed its day to day operations by timing the payment of trade
payables to coincide with the receipt of its trade receivables.
Park plans to use cash flow from current operations and a line of
credit in the amount of $125,000 from North Dallas Bank & Trust Co. (the "Line
of Credit"), $45,000 of which is currently outstanding, to satisfy operating
costs of its Internet operations.
ACQUISITIONS
Park plans to cause the Company 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 plan of operation. Other than with
respect to Rx-Pro, Park may also issue notes or use cash to make such
acquisitions; Park intends to fund its acquisitions through: (i) cash flow from
current operations, (ii) the Line of Credit; and (iii) a non-interest bearing
loan from Dougherty's Pharmacies, Inc., a Texas corporation wholly owned by Joe
B. Park, an owner, officer and director of Park, of up to $150,000 to cover
part or all of Park's expenses for rent, officers' salaries and office
equipment, respectively, $125,961 of which is currently outstanding. In
addition to the foregoing, Park plans to raise additional funds within the next
12 months for acquisitions through a loan from North Dallas Bank & Trust Co. 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
Company Common Stock. Furthermore, shareholders of the Company may not have an
opportunity to vote on acquisitions made by Park and/or the Company in
connection with the implementation of Park's plan of operation.
Park 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 there will be any increase in the number of
employees or that Park will be able to make any acquisitions in accordance with
Park's plan of operation.
-38-
<PAGE> 40
COMPETITION
The retail pharmacy business is highly competitive. The online
pharmacy market is new, rapidly evolving, and also intensely competitive.
Park's competitors can be divided into several groups: (i) independent
pharmacies, (ii) chain pharmacies, such as Walgreen's and Eckerd, (iii) mass
market retailers, such as Wal Mart, Kmart and Target, (iv) supermarkets, such
as Albertson's and Kroger, (v) warehouse clubs, (vi) online retailers of
pharmaceutical and other health related products, such as Drugstore.Com and
Rx.Com, (vii) mail order pharmacies, (viii) prescription benefits managers, and
(ix) hospice pharmacy service providers, such as Hospice Pharmacia. Many of
Park's competitors have, or have announced their intention to have, the
capability to accept orders for products online.
Park believes that it will compete primarily on the basis of: (i)
customer service and satisfaction, (ii) product selection and variety, (iii)
store location and convenience, (iv) Web site performance and accessibility,
(v) reliability and speed of order shipment, and (vi) price. Park believes that
its strengths in terms of competing with other retail pharmacy companies will
be the business connections and experience of its management team and its plans
to offer a wider variety of prescription medicine and health related products
than most other retail pharmacies. Park believes that many of its competitors
have longer operating histories, larger customer or user bases, greater name
recognition, and significantly greater financial, marketing and other resources
than Park. Some of Park's competitors may be able to secure products from
vendors on more favorable terms, fulfill customer orders more efficiently and
adopt more aggressive pricing than Park can. Furthermore, many of Park's
competitors can devote substantially more resources to their Web sites and
systems development than Park can.
SEASONALITY
Sales of prescription drugs and other health related products peak
during seasonal outbreaks of cough and cold/flu virus, typically during the
winter and fall months. Accordingly, sales and earnings are usually highest for
retail pharmacies in the fourth and first quarters.
REGULATION
In recent years, an increasing number of legislative proposals have
been introduced or proposed in Congress and in some state legislatures that
would effect major changes in the health care system, either nationally or at
the state level. Park cannot predict whether any federal or state health care
reform legislation will eventually be passed, and if so, the impact thereof on
Park's financial position or results of operations. Health care reform, if
implemented, could adversely affect the pricing of prescription drugs or the
amount of reimbursement from governmental agencies and managed care payors, and
consequently could be adverse to Park. However, to the extent health care
reform expands the number of persons receiving health care benefits covering
the purchase of prescription drugs, it may also result in increased purchases
of such drugs and could thereby have a favorable impact on both Park and the
retail drug industry in general. Nevertheless, there can be no assurance that
any future federal or state health care reform legislation will not adversely
affect Park or the retail drugstore industry generally.
The U.S. House of Representatives Committee on Commerce and the
General Accounting Office are currently investigating online pharmacies and
online prescribing. Park believes that any
-39-
<PAGE> 41
regulations resulting from the investigations will likely result in increased
reporting and monitoring requirements, which could increase Park's expenses.
Other legislation and regulations currently being considered at the federal and
state level could affect Park's business, including legislation or regulations
relating to confidentiality of patient records, electronic access and storage
as well as the inclusion of prescription drugs as a Medicare benefit. In
addition, various state legislatures are considering new legislation related to
the regulation of nonresident pharmacies. Compliance with the new laws or
regulations could increase Park's expenses.
Park is subject to extensive regulation relating to the confidentiality
and release of patient records. Additional legislation governing the
distribution of medical records exists or has been proposed at both the state
and federal level. It may be expensive to implement security or other measures
designed to comply with any new legislation. Moreover, Park may be restricted or
prevented from delivering patient records electronically. This could have an
adverse impact on Park's ability to gain and retain Internet customers.
Laws and regulations directly applicable to communications or commerce
over the Internet are becoming more prevalent. The most recent session of the
U.S. Congress resulted in Internet laws regarding children's privacy,
copyrights, taxation and the transmission of sexually explicit material. The
European Union recently enacted its own privacy regulations. In particular,
many government agencies and consumers are focused on the privacy and security
of medical and pharmaceutical records. The law of the Internet, however,
remains largely unsettled, even in areas where there has been some legislative
action. It may take years to determine whether and how existing laws such as
those governing privacy, libel and taxation apply to Internet stores such as
Park's. The rapid growth and development of the market for online commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad, that may impose additional burdens on companies conducting
business online and in particular companies that fill prescriptions maintain
medical or pharmaceutical records. The adoption or modification of laws or
regulations relating to the Internet business could adversely affect Park's
ability to attract and serve Internet customers.
YEAR 2000
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.
Park's information technology ("IT") systems consist of computer
hardware systems and software supplied by third parties. Park utilizes current
generation off-the-shelf software for its management and accounting systems. As
a result, Park expects its exposure to be minimal since such hardware and
software have been determined by Park to be Year 2000 compliant.
Rx-Pro uses software, computer technology and other services
internally developed and provided by third-party vendors that may fail due to
the year 2000 phenomenon. Rx-Pro has internally developed substantially all of
the systems for the operations of its Web sites, with the assistance of outside
consultants. These systems include the software used to provide customer
interaction, transaction-processing, and monitoring and back-up capabilities.
Rx-Pro has reviewed the year 2000
-40-
<PAGE> 42
compliance of its internally developed proprietary software. Rx-Pro believes
that its internally developed proprietary software is year 2000 compliant.
Rx-Pro has assessed the year 2000 readiness of its third-party
supplied software, computer systems and other services, which include software
for use in accounting and management systems and database services. The failure
of such software or systems to be year 2000 compliant could have a material
negative impact on Rx-Pro's corporate accounting functions and the operation of
its Web sites. As part of the assessment of the year 2000 compliance of these
systems, Rx-Pro has sought assurances from its vendors that their software,
computer systems and other services are year 2000 compliant. The failure of
third-party supplied software, computer systems and other services to be year
2000 compliant could have a material adverse effect on Rx-Pro. At this time,
expenses associated with a potential corrective action plan that may be
incurred in the future cannot be determined.
The year 2000 readiness of the general infrastructure necessary to
support Rx-Pro's operations is difficult to assess. For example, Rx-Pro depends
on the integrity and stability of the Internet to provide its Web site
services. Rx-Pro is dependent on a third party that hosts its servers and on
telecommunications vendors to maintain its network. The infrastructure
necessary to support Rx-Pro's operations consists of a network of computers and
telecommunications systems located throughout the world and operated by
numerous unrelated entities and individuals, none of which has the ability to
control or manage the potential year 2000 issues that may impact the entire
infrastructure. Rx-Pro's ability to assess the reliability of this
infrastructure is limited and relies solely on generally available news
reports, surveys and comparable industry data. Based on these sources, Rx-Pro
believes most entities and individuals that rely significantly on the Internet
are reviewing and attempting to remediate issues relating to year 2000
compliance, but it is not possible to predict whether these efforts will be
successful in reducing or eliminating the potential negative impact of year
2000 issues. A significant disruption in the ability of customers to reliably
access the Internet or portions of it could have an adverse effect on demand
for Rx-Pro's services.
Rx-Pro also depends on the year 2000 compliance of the software and
computer systems used by its customers (hospice companies in the case of
HospiceRx.Com and physicians, other health care providers and other consumers
in the case of Rx-Pro.Com), and those of its member pharmacies. Rx-Pro has not
undertaken an assessment of whether the software and computer systems of its
customers and member pharmacies is year 2000 compliant. The failure of customer
or member pharmacy software or computer systems to be year 2000 compliant could
have a material adverse effect on Rx-Pro. At this time, Rx-Pro has developed a
contingency plan to address situations that may result if its customers or its
member pharmacies are unable to achieve year 2000 compliance. Such contingency
plan consists of utilizing facsimile and telephone transmission to place and
fill orders for prescription drugs and other health related products. The cost
of implementing such a plan, if necessary, would not be significant. To date,
Rx-Pro has incurred less than $1,000 in incremental costs, to address the year
2000 issues.
Any failure of Rx-Pro's material systems, the systems of its customers
or those of its member pharmacies, or the Internet to be year 2000 compliant
could have serious negative consequences for Park. Such consequences could
include difficulties in operating the Web sites effectively, taking customer
orders, or conducting other fundamental parts of its business.
-41-
<PAGE> 43
Park'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) as well as those of Rx-Pro. This assessment includes a
review of facilities (including building maintenance, security, electrical,
lighting, fire protection, telephone, heating and cooling systems). Based on
this review, Park believes that both its and Rx-Pro's non-IT systems and
equipment are year 2000 compliant.
Park'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 Park has not yet consummated a business acquisition, Park is
unable to estimate year 2000 compliance costs that may arise from such business
acquisition opportunities.
DESCRIPTION OF PROPERTY
Park currently leases office space from Dougherty's pursuant to an oral
month to month lease, at rental of $1,083 per month. Other than the leased
property, Park has no other offices or properties.
LEGAL PROCEEDINGS
Neither Park nor its property is presently subject to any material
litigation, nor to Park's knowledge, is any material litigation threatened
against Park or its property.
MARKET FOR COMMON EQUITY
Park is a privately-held development-stage company. Therefore, there
is no market for its securities.
EMPLOYEES
Park currently has a total of three (3) employees, none of which are
full time. Park 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 there will be any increase in the number of
employees or that Park will be able to make any acquisitions in accordance with
Park's plan of operation.
MANAGEMENT
The current directors and officers of Park are: Messrs. Joe B. Park,
Thomas R. Baker, Jack R. Munn, R.Ph., and John A. Blomgren, R.Ph., and Ms.
Gwendolyn Park. Biographical information concerning such persons is set forth
below.
Joe B. Park, R.Ph Age 62, has served as Director and Chairman of the
Board of Park since its inception. From 1962 to
present, Mr. Park has been the owner and operator of
Dougherty's Pharmacy, Inc., a Texas corporation
wholly-owned by Mr. Park ("Dougherty's") that owns
and operates two retail pharmacies in the Dallas,
-42-
<PAGE> 44
Texas area and has approximately $15 million in
annual sales. 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 at Austin and received
his pharmacy license in 1960.
Thomas R. Baker Age 57, has served as Director, President and Chief
Operating Officer of Park since its 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 62, has served as a Director, Secretary and
Treasurer of Park since its 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 since April
15, 1999. In 1987, Mr. Munn founded Guardian Health
Systems, Inc, a Texas corporation ("Guardian").
Guardian is a home infusion therapy provider based
in Dallas, Texas. Guardian owns two mixing centers
in Dallas and Oklahoma City, and contracts with
seven other centers located 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, Age 52, has served as Director of Park since April
R.Ph 15, 1999. Mr. Blomgren has served as a staff
pharmacist for Dougherty's Homecare Pharmacy
("Dougherty's Homecare") since January 1997. From
October 1996 to the present, he has served as 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,
-43-
<PAGE> 45
Texas. In 1969, Mr. Blomgren received a Bachelor of
Science in Pharmacy from the University of Oklahoma.
He is an active member in the Texas Pharmacy
Association and the National Hospice Council of
Hospice Professionals.
FINANCIAL DATA
Power-Cell, Inc., Park Pharmacy Corporation and Rx-Pro.Com, Inc.
Unaudited Pro Forma Combined Financial Statements
The accompanying unaudited pro forma financial statements have been prepared to
reflect the reverse acquisition of Power Cell, Inc. by Park Pharmacy Corporation
by the issuance of 2,567,816 shares of convertible $0.001 par value preferred
stock to the Park shareholders for 100% of the outstanding common stock of Park.
The pro forma financial statements also reflect the acquisition of Rx-Pro.Com,
Inc. by Park for 30,000 shares of convertible $0.001 par value preferred stock
of Power Cell concurrent with the closing of the reverse acquisition. The pro
forma financial statements have been prepared as if the reverse acquisition and
the acquisition of Rx-Pro.Com had occurred as of June 30, 1999, with respect to
the pro forma balance sheet, and as of July 1, 1998 and July 1, 1997, with
respect to the pro forma statements of operations.
-44-
<PAGE> 46
POWER CELL AND PARK PHARMACY
PRO FORMA BALANCE SHEET
JUNE 30, 1999
<TABLE>
<CAPTION>
Pro forma
Power Cell Park RxPro.Com adjustments Pro forma
------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets $ -- $ 1,000 $ 595,173 $ 596,173
Fixed assets, net -- 14,878 3,905 18,783
Other assets -- 1,212 -- 1,212
----------- ----------- ----------- ----------- -----------
Total assets $ -- $ 17,090 $ 599,078 $ -- $ 616,168
=========== =========== =========== =========== ===========
Current liabilities $ 60,748 $ 125,961 $ 649,867 (30,000) 2 $ 806,576
Stockholders' equity (deficit)
Preferred stock -- -- -- 2,568 1 2,648
50 2
30 3
Common stock 642 760 1,000 (760) 1 642
(1,000) 3
Additional paid-in capital 1,571,596 240 28,635 (1,571,596) 1 (30,190)
29,950 2
(28,635) 3
Accumulated deficit (1,632,986) (109,871) (80,424) 1,569,788 1 (233,888)
29,605 3
----------- ----------- ----------- ----------- -----------
Total stockholders' deficit (60,748) (108,871) (50,789) 30,000 (190,408)
----------- ----------- ----------- ----------- -----------
Total liabilities and stockholders'
deficit $ -- $ 17,090 $ 599,078 $ -- $ 616,168
=========== =========== =========== =========== ===========
</TABLE>
1. Adjustment to record issuance of 2,567,816 shares of Powercell $.001 par
value convertible preferred stock issued to the Park shareholders in the
reverse acquisition of Powercell's net assets and recapitalize Park with
the capital structure of Powercell. Powercell's net assets are recorded
at book value which approximates fair market value.
2. Adjustment to reflect issuance of 50,000 shares of Powercell $.001 par
value convertible preferred stock to satisfy the liability to
Powercell's president.
3. Adjustment to reflect issuance of 30,000 shares of Powercell $.001 par
value convertible preferred stock issued in the purchase of Rx-Pro.Com
by Park and eliminate the Rx-Pro.Com equity accounts in the combination.
Rx-Pro's net assets are recorded at book value which approximates fair
market value.
-45-
<PAGE> 47
POWER CELL AND PARK PHARMACY
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Pro forma
Power Cell Park RxPro.Com adjustments Pro forma
------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales $ -- $ -- $ 177,822 $ -- $ 177,822
Cost of Sales -- -- 24,123 -- 24,123
--------- --------- --------- --------- ---------
Gross Profit -- -- 153,699 -- 153,699
General and administrative
expenses 36,602 105,727 234,974 -- 377,303
--------- --------- --------- --------- ---------
Net loss $ (36,602) $(105,727) $ (81,275) $ -- $(223,604)
========= ========= ========= ========= =========
Loss per share $ (0.01) $ (0.02) $ (0.01) * $ (0.03)
========= ========= ========= ========= =========
</TABLE>
* less than $(.01) per share
-46-
<PAGE> 48
POWER CELL AND PARK PHARMACY
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Pro forma
Power Cell Park RxPro.Com adjustments Pro forma
------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales $ -- $ -- $ 185,021 $ -- $ 185,021
Cost of Sales -- -- 24,456 -- 24,456
--------- -------- --------- --------- ---------
Gross Profit -- -- 160,565 -- 160,565
General and administrative
expenses 28,438 4,144 150,987 -- 183,569
--------- -------- --------- --------- ---------
Net income (loss) $ (28,438) $ (4,144) $ 9,578 $ -- $ (23,004)
========= ======== ========= ========= =========
Income (loss) per share * * * * *
========= ======== ========= ========= =========
</TABLE>
* less than $(.01) per share
-47-
<PAGE> 49
Independent Auditor's Report
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 June 30, 1999, and the related statements of
operations, retained earnings, and cash flows for the period June 10, 1998
(Inception) through June 30, 1999. 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
June 30, 1999 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
July 21, 1999
Dallas, Texas
-48-
<PAGE> 50
PARK PHARMACY CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
BALANCE SHEET
JUNE 30, 1999 & 1998
<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash $ 1,000 $ 0
------------ ------------
Total Current Assets 1,000 0
Fixed Assets:
Furniture & Fixtures (Note 2) 17,542 16,135
Accumulated Depreciation and Amortization (2,664) (296)
------------ ------------
Total Fixed Assets 14,878 15,839
Other Assets:
Security Deposit (Note 3) 1,212 1,212
------------ ------------
Total Other Assets 1,212 1,212
------------ ------------
TOTAL ASSETS $ 17,090 $ 17,051
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Advances from Affiliate (Note 4) $ 125,961 $ 21,195
Commitments and Contingent Liabilities -0- 0
------------ ------------
Total Current Liabilities 125,961 21,195
Stockholders' Equity:
Common Stock - 9,000,000 shares authorized,
7,600,000 shares issued and outstanding
$0.0001 per share par value 760 0
Preferred Stock - 1,000,000 shares authorized,
0 shares issued and outstanding
$1.00 per share par value 0 0
Paid In Capital 240 0
Deficit Accumulated in Development Stage (109,871) (4,144)
------------ ------------
Total Stockholders' Equity (108,871) (4,144)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,090 $ 17,051
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-49-
<PAGE> 51
PARK PHARMACY CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
INCOME STATEMENT
FOR THE FISCAL YEAR ENDING JUNE 30, 1999
AND JUNE 10-30, 1998
<TABLE>
<CAPTION>
INCEPTION TO
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1999
------------- ------------- -------------
<S> <C> <C> <C>
Sales $ -0- $ -0- $ -0-
General & Administrative Expenses:
Software Training $ 6,534 0 $ 6,534
Supplies 895 15 910
Salaries 47,368 0 47,368
Depreciation 2,368 296 2,664
Rent 12,800 2,110 14,910
Travel 553 1,703 2,256
Printing 1,978 0 1,978
Public Relations 3,192 0 3,192
Professional Services 30,039 0 30,039
--------- --------- ---------
Total General & Admin. Expenses 105,727 4,144 109,871
Net Operating Income (Loss) (105,727) (4,144) (109,871)
Provision for Federal Income Tax -0- -0- -0-
Net Income (Loss) (105,727) (4,144) (109,871)
========= ========= =========
Basic Earnings Per Share (Note 5) $ (0.0139) $ (0.006) $ (0.0145)
Diluted Earnings Per Share NA NA
</TABLE>
SEE NOTES TO THE FINANCIAL STATEMENTS
-50-
<PAGE> 52
PARK PHARMACY CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
AND JUNE 10-30, 1998
<TABLE>
<CAPTION>
INCEPTION
6/30/99 6/30/98 TO 6/30/99
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (105,727) (4,144) (109,871)
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 2,368 296 2,664
------------ ------------ ------------
Net Cash Provided
(Used) by Operating Activities (103,359) (3,848) (107,207)
CASH FLOWS FROM INVESTING ACTIVITIES:
Lease Deposit 0 (1,212) (1,212)
Purchase of Equipment (1,407) (16,135) (17,542)
------------ ------------ ------------
Net Cash Provided
(Used) by Investing Activities (1,407) (17,347) (18,754)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of Common Stock 1,000 0 1,000
Advances from Affiliated Party (Note 4) 104,766 21,195 125,961
------------ ------------ ------------
Net Cash Provided
(Used) by Financing Activities 105,766 21,195 126,961
------------ ------------ ------------
Net Increase in Cash and Cash Equivalents 1,000 0 1,000
------------ ------------ ------------
Cash and Cash Equivalents at Beginning of Period 0 0 0
------------ ------------ ------------
Cash and Cash Equivalents at end of Period 1,000 0 1,000
============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-51-
<PAGE> 53
PARK PHARMACY CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF COMPREHENSIVE INCOME
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
AND JUNE 10-30, 1998
<TABLE>
<CAPTION>
<S> <C>
Net Income, June 30, 1999 $ (105,727)
Other Comprehensive Income, Net of Tax -0-
Comprehensive Income (Note 8) $ (105,727)
============
Net Income, June 30, 1998 $ (4,144)
Other Comprehensive Income, Net of Tax -0-
Comprehensive Income $ (4,144)
============
</TABLE>
SEE NOTES TO THE FINANCIAL STATEMENTS
-52-
<PAGE> 54
PARK PHARMACY CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JUNE 10, 1998 (INCEPTION) THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
Common Paid-In Pfd Retained
Stock Capital Stock Earnings Total
--------- --------- ----- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 10, 1998 $ -0- $ -0- $ -0- $ -0- $ -0-
Net Income, June 30, 1998 (4,144) (4,144)
--------- --------- ----- ---------- ----------
BALANCE, JULY 1, 1998 (4,144) (4,144)
Sale of Common Stock
September 30, 1998 760 240 1,000
Net Income, June 30, 1999 (105,727) (105,727)
--------- --------- ----- ---------- ----------
BALANCE, JUNE 30, 1999 $ 760 $ 240 $ -0- $ (109,871) $ (108,871)
========= ========= ===== ========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-53-
<PAGE> 55
PARK PHARMACY CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
AND JUNE 10-30, 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 acquirees will
each have an inventory of product on hand.
-54-
<PAGE> 56
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.
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 previously elected a fiscal year end of September 30, 1998. Under the
terms of the acquisition agreement with Power-Cell, Inc., management has applied
to change the Company's fiscal year to June 30, 1999 to coincide with the new
parent corporation's fiscal year.
-55-
<PAGE> 57
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.
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 June 30, 1999 and June 30, 1998, the Company had used or
obligated itself for $125,961 and $21,195 respectively. 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
1999. 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 June 30, 1999, the
Company was privately held and had no common stock equivalents outstanding. The
weighted average number of common shares outstanding as of June 30, 1999 was
7,600,000 and Basic Earnings per share was $(0.0139).
NOTE 6: INCOME TAXES
At March 31, 1999, the Company has available net operating loss carryforwards of
approximately $109,871 for federal income tax purposes that begin to expire in
2013. The
-56-
<PAGE> 58
federal carryforwards resulted from the operating loss generated in fiscal 1998.
For financial purposes, a valuation allowance of $109,871 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 June 30, 1999 were as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforward 109,871
Valuation allowance for deferred tax assets 109,871
Deferred tax assets 0
</TABLE>
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 March 31, 1999
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.
-57-
<PAGE> 59
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.
NOTE 10: SUBSEQUENT EVENT
On April 18, 1999, the Company agreed to acquire RX-PRO.COM, Inc., a Texas
Corporation. RX-PRO.COM, Inc. is the survivor of a plan of reorganization of
HOSPICE PHARMACY ALLIANCE, a Texas Limited Liability Company. The Company will
issue 30,000 shares of $1.00 par value Preferred Stock of the Company as
consideration for the purchase. The acquisition will be accounted for as an
equity purchase. Under the terms of the acquisition agreement, the Company will
acquire RX-PRO.Com, Inc. after, or concurrent with, the reverse merger with
Power-Cell, Inc.. This agreement is contingent upon the closing of the merger
agreement with Power-Cell, Inc. and will be an acquisition of the merger
survivor.
-58-
<PAGE> 60
Independent Auditor's Report
To the Members
Hospice Pharmacy Alliance LLC
10711 Preston Road, Suite 250
Dallas, TX 75230
We have audited the accompanying balance sheet of Hospice Pharmacy Alliance LLC,
as of December 31,1998 and 1997, and the related statements of operations,
retained earnings, and cash flows for the years then ended. 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 Hospice Pharmacy Alliance LLC
as of December 31, 1998 and 1997 and the results of its operations and its cash
flows for the periods then ended in conformity with generally accepted
accounting principles.
ALVIN L. DAHL & Associates, PC
July 21, 1999
Dallas, Texas
-59-
<PAGE> 61
HOSPICE PHARMACY ALLIANCE LLC
BALANCE SHEET
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
DEC. 31, 1998 DEC. 31, 1997
------------- -------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash $ 37,532 $ 2,342
Accounts Receivable 479,788 642,344
------------ ------------
Total Current Assets 517,320 644,686
Fixed Assets:
Computers & Equip (Note 2) 9,102 5,116
Accumulated Depreciation (3,865) (1,201)
------------ ------------
Total Fixed Assets 5,237 3,915
TOTAL ASSETS $ 522,557 $ 648,601
============ ============
LIABILITIES AND MEMBERS' EQUITY:
Current Liabilities:
Accounts Payable $ 482,546 $ 622,237
Due to Member (Note 3) 10,376 11,802
Commitments and Contingent Liabilities -0- -0-
------------ ------------
Total Current Liabilities 492,922 634,039
Members' Capital:
Total Members' Capital 29,635 14,562
------------ ------------
TOTAL LIABILITIES AND MEMBERS' EQUITY $ 522,862 $ 648,601
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-60-
<PAGE> 62
HOSPICE PHARMACY ALLIANCE LLC
INCOME STATEMENT
FOR THE YEARS ENDING DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
DEC. 31, 1998 DEC. 31, 1997
------------- -------------
<S> <C> <C>
Sales $ 203,177 $ 153,362
Less:
Processing Fees 26,241 21,480
------------ ------------
Gross Profit 176,936 131,882
General & Administrative Expenses 159,448 129,146
Depreciation 2,415 1,201
------------ ------------
Total Expenses 161,863 130,347
------------ ------------
Net Operating Income 15,073 1,535
Net Income Before Federal Income Tax 15,073 1,535
Provision for Federal Income Tax -0- -0-
------------ ------------
Net Income 15,073 1,535
============ ============
</TABLE>
SEE NOTES TO THE FINANCIAL STATEMENTS
-61-
<PAGE> 63
HOSPICE PHARMACY ALLIANCE LLC
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
12/31/98 12/31/97
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (Loss) $ 15,073 1,535
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 2,415 1,201
(Increase) Decrease in Receivables 163,061 (643,974)
Increase (Decrease) in Payables (139,947) 622,237
--------- ---------
Net Cash Provided (Used) by Operating Activities 40,602 (19,001)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Computers & Equipment (3,986) (3,822)
--------- ---------
Net Cash Provided (Used) by Investing Activities (3,986) (3,822)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions -0- 12,827
Advances from Affiliated Party (Note 3) (1,426) 11,802
--------- ---------
Net Cash Provided (Used) by Financing Activities (1,426) 24,629
--------- ---------
Net Increase in Cash and Cash Equivalents 35,190 1,806
Cash and Cash Equivalents at Beginning of Period 2,342 536
--------- ---------
Cash and Cash Equivalents at end of Period 37,532 2,342
========= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-62-
<PAGE> 64
HOSPICE PHARMACY ALLIANCE LLC
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C>
Net Income, 1998 $ 15,073
Other Comprehensive Income, Net of Tax -0-
------------
Comprehensive Income (Note 5) $ (15,073)
============
Net Income, 1997 $ 1,535
Other Comprehensive Income, Net of Tax -0-
------------
Comprehensive Income, Net of Tax $ 1,535
============
</TABLE>
SEE NOTES TO THE FINANCIAL STATEMENTS
-63-
<PAGE> 65
HOSPICE PHARMACY ALLIANCE LLC
STATEMENT OF MEMBERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Member Retained
Investment Earnings Total
-------------- -------------- --------------
<S> <C> <C> <C>
BALANCE, JAN 1, 1997 $ 1,500 $ 1,500
Member Investment 11,527 11,527
Net Income, Dec 31, 1997 1,535 1,535
-------------- -------------- --------------
BALANCE, JAN 1, 1998 13,027 1,535 14,562
Net Income, Dec 31, 1998 15,073 15,073
BALANCE, DEC 31, 1998 $ 13,027 $ 16,608 $ 29,635
============== ============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-64-
<PAGE> 66
HOSPICE PHARMACY ALLIANCE LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Organization and Business Activities
Hospice Pharmacy Alliance LLC was formed in the state of Texas as a Limited
Liability Company. The Company
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
"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.
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.
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.
-65-
<PAGE> 67
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 December 31, 1998. There has been no effect as of
December 31, 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 calendar year end of December 31 for financial and
income tax reporting.
NOTE 2: FURNITURE & FIXTURES:
The Company has purchased computers and related equipment, which are being
utilized in its daily activities.
NOTE 3: ADVANCES FROM AFFILIATE AND RELATED PARTY TRANSACTIONS
An affiliated Company, owned by a member advanced operating funds to the
Company. At December 31, 1998 and 1997, the Company had a balance payable of
$10,376 and $11,802 respectively. These funds were advanced on a
non-interest-bearing basis.
NOTE 4: 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.
-66-
<PAGE> 68
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 December 31, 1998
and 1997, respectively, represent fair value.
NOTE 5: 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 6: 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.
NOTE 7: SUBSEQUENT EVENT
On April 8, 1999, the Company agreed to a Plan of Reorganization, whereby all
assets of the Company were sold to RX-PRO.COM, Inc., a Texas Corporation.
RX-PRO.COM assumed all liabilities of the Company. RX-PRO.COM issued 30,000
shares of its common stock with a par value of $0.001 and the members of Hospice
Pharmacy Alliance, a Texas Limited Liability Company received a distribution of
common stock. Subsequently, an oral agreement was reached whereby Park Pharmacy
Corporation will acquire all outstanding stock of RX-PRO.COM for 30,000 shares
of $1.00 par value Preferred Stock. This agreement is contingent upon the
reverse merger agreement between Park Pharmacy Corporation and Power-Cell, Inc.
being consumated.
NOTE 8: RECEIVABLES AND PAYABLES:
The Company serves as a "middle-man" brokering product between sellers and
purchasers. When an order is received from a purchaser, the Company places an
order with a supplier for the product and has it shipped direct to the
purchaser. The supplier invoices the Company for the product and the Company in
turn invoices the purchaser for the sales price. The Company receives the
"spread" between the sales price and its purchase price. Since the Company is
responsible for the collection of the sales price and is liable for the payment
of the invoice to the supplier, Accounts Receivable and Accounts Payable are
recorded at full value. The Company records the difference between the purchase
price and the sale price as their Gross Income.
-67-
<PAGE> 69
RX-PRO.COM, INC. AND
HOSPICE PHARMACY ALLIANCE LLC
BALANCE SHEET
JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash $ 1,113 $ 15,955
Accounts Receivable 594,060 797,737
--------- ---------
Total Current Assets 595,173 813,692
Fixed Assets:
Computers & Equip 9,102 9,102
Accumulated Depreciation (5,197) (2,533)
--------- ---------
Total Fixed Assets 3,905 6,569
TOTAL ASSETS $ 599,078 $ 820,261
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts Payable $ 579,439 $ 757,904
Due to Member 70,428 31,871
Commitments and Contingent Liabilities -0- -0-
--------- ---------
Total Current Liabilities 649,867 789,775
Stockholders' Equity:
Common Stock, 30,000 shares
issued and outstanding, $0.001
par value 1,000 -0-
Paid In Capital 28,635 -0-
Total Members' Capital -0- 14,562
Current Earnings (Loss) (80,424) 15,924
--------- ---------
Total Stockholders' Equity(Members') (50,789) 30,486
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 599,078 $ 820,261
========= =========
</TABLE>
-68-
<PAGE> 70
RX-PRO.COM, INC. AND
HOSPICE PHARMACY ALLIANCE LLC
INCOME STATEMENT
FOR THE SIX MONTHS ENDING JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Sales $ 83,410 $ 108,765
Less:
Processing Fees 9,686 11,804
--------- ---------
Gross Profit 73,724 96,861
General & Administrative Expenses 152,816 79,606
Depreciation 1,332 1,332
--------- ---------
Total Expenses 154,148 80,936
--------- ---------
Net Operating Income (Loss) (80,424) 15,924
Net Income Before Federal Income Tax (80,424) 15,924
Provision for Federal Income Tax -0- -0-
Net Income (80,424) 15,924
========= =========
</TABLE>
-69-
<PAGE> 71
RX-PRO.COM, INC. AND
HOSPICE PHARMACY ALLIANCE LLC
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
6/30/99 6/30/98
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (80,424) 15,924
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 1,332 1,332
(Increase)Decrease in Receivables 203,677 (797,737)
Increase(Decrease) in Payables (178,465) 757,904
--------- ---------
Net Cash Provided (Used) by Operating Activities (53,880) (22,577)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net Cash Provided (Used) by Investing Activities -0- -0-
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions -0- 14,562
Advances from Affiliated Party 39,038 16,168
--------- ---------
Net Cash Provided (Used) by Financing Activities 39,038 34,631
--------- ---------
Net Increase in Cash and Cash Equivalents 35,190 15,955
Cash and Cash Equivalents at Beginning of Period 15,955 -0-
--------- ---------
Cash and Cash Equivalents at end of Period 1,113 15,955
========= =========
</TABLE>
-70-
<PAGE> 72
COMPARATIVE UNAUDITED PER SHARE DATA
The following table presents selected comparative unaudited per share
data with respect to the Company Common Stock on an historical and a pro forma
combined basis, and with respect to Park Common Stock on an historical [and a
pro forma equivalent basis], giving effect to the Reverse Acquisition as a
business combination utilizing the reverse acquisition method for accounting
and financial reporting purposes. Such pro forma data assumes that the Reverse
Acquisition had been effective on June 30, 1998, for the book value per share
data, the dividends declared and net earnings per share data. The historical
per share data set forth in the following table are derived from and should be
read in conjunction with the historical consolidated financial statements of
the Company and Park, including the notes thereto as set forth elsewhere in
this Proxy Statement. The per share data set forth below are presented for
informational purposes only and are not necessarily indicative of the results
of the future operations of the Company or the actual results that would have
been achieved had the Reverse Acquisition been consummated on the date
indicated above.
<TABLE>
<CAPTION>
Rx-Pro.Com
Company Park Common Common
Common Stock Stock Stock Pro Forma
Historical Historical Historical Equivalent (1)
<S> <C> <C> <C> <C>
Book value per share:
June 30, 1998 $ * $ * * --
June 30, 1999 $ * $ (.01) $ (1.69) $ (.03)
Cash dividends per share:
Year ended June 30, 1998 $ 0 $ 0 $ 0 $ 0
Year ended June 30, 1999 $ 0 $ 0 $ 0 $ 0
Net earnings per share from
continuing operations:
Year ended June 30, 1998 $ * $ * * *
Year ended June 30, 1999 $ * $ (.01) $ (2.71) $ (.03)
</TABLE>
* Less than $(.01).
-71-
<PAGE> 73
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of the record date the beneficial
ownership of Company Common Stock of (i) each director and executive officer of
the Company, and (ii) the only other persons who were known to the Company to
be the beneficial owners of more than five percent (5%) of the total number of
issued and outstanding shares of Company Common Stock.
<TABLE>
<CAPTION>
Number of Shares Percentage of
Beneficially Outstanding
Name and Addresses Owned Shares
------------------ ---------------- -------------
<S> <C> <C>
H. Don Gill (1) 56,555 0.9%
4224 Ocean Drive
Corpus Christi, TX 78411
S. A. Hellerstein 1,089,235 17.09%
Trustee for the Farkas Trusts (2)
1139 Delaware Street
Denver, CO 80204
Windy City, Inc. (3) 363,078 5.6%
8300 Boone Boulevard
Suite 780
Vienna, VA 22182
Janet M. Dickson (5) 1,452,313 22.6%
Trustee of the Marich Family Trust
9th Street, No. 101
Greeley, CO 80631
James C. Rambin (4) 1,452,313 22.6%
4032 Bandera Drive
Plano, TX 75074
Brewer Newton (6) 7,000 0.1%
4311 Resort Drive
Granbury, TX 76048
</TABLE>
1. Mr. Gill currently is a member of the Board of Directors 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.
3. Windy City, Inc. is a corporation composed of certain interests
of family members of Burton W. Kanter, a former director of the
Company. Mr. Kanter disclaims beneficial ownership of shares
owned by Windy City, Inc.
4. Mr. Rambin currently serves as the President and Chief Executive
Officer of the Company and is a member of the Board of
Directors. Includes 1,452,313 shares of
-72-
<PAGE> 74
Company Common Stock held by the Rambin Family Trust over which
Mr. Rambin has voting power as trustee of the Trust. The
beneficiaries of the Rambin Family Trust are Ronald E. Rambin, J.
Steven Rambin and Michael C. Rambin, all of whom are sons of Mr.
James C. Rambin.
5. The Marich Family Trust is a trust the beneficiaries of which are
family members of Rudy Marich, a former officer and director of
the Company.
6. Mr. Newton serves as the Secretary of the Company and is a
member of the Board of Directors.
Each of Messrs. Rambin, Gill and Newton and Ms. Janet Dickson, who in
the aggregate own of record or beneficially 2,961,191 shares of Company Common
Stock, representing approximately forty-six percent (46%) of the total number
of issued and outstanding shares of Company Common Stock, have informed the
Company that they intend to vote all shares over which they have voting power
in favor of both proposals.
APPRAISAL RIGHTS
Under the Colorado Business Corporation Act, the shareholders do not
have dissenters' rights of appraisal in connection with the consummation of the
Reverse Acquisition or the amendments to the Articles of Incorporation.
AUDITORS
Hein & Associates LLP has audited the Company's financial statements
since 1989. Representatives of Hein & Associates are expected to be present at
the Special Meeting to respond to appropriate questions from the shareholders
and will be given the opportunity to make a statement if they desire to do so.
SHAREHOLDER PROPOSALS
The Company has not held an annual meeting of shareholders since
October 1988. In the event the Reverse Acquisition is consummated, the Company
plans to hold an annual meeting of shareholders as soon as it is reasonably
practicable to do so. Shareholders will be notified of the date of any such
annual meeting. Shareholder proposals for inclusion in the Company's proxy
materials for such annual meeting must be received by the Company at its
office, addressed to the President of the Company, within a reasonable time
before the Company begins to print and mail its proxy materials which shall
occur on or about 30 days prior to such meeting in accordance with Rule 14a-8
under the Exchange Act.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Exchange Act and, in accordance therewith, files reports, proxy statements
and other information with the Commission. Such reports, proxy statements and
other information can be inspected and copies made at the public reference
facilities of the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and the Commission's regional offices at Seven World Trade Center,
Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also
be obtained from the Public Reference Section of Commission at its Washington,
-73-
<PAGE> 75
D.C. address at prescribed rates. Such materials also may be accessed
electronically by means of the SEC's Web site at http://www.sec.gov.
/s/ JAMES C. RAMBIN
James C. Rambin,
President and Chief Executive Officer
Dallas, Texas
Dated: September 7, 1999
-74-
<PAGE> 76
ANNEX "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:
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
-75-
<PAGE> 77
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.
(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
-76-
<PAGE> 78
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
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
administration 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.
-77-
<PAGE> 79
2.08 Tax Returns. Purchase 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
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.
-78-
<PAGE> 80
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.
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.
-79-
<PAGE> 81
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,
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
-80-
<PAGE> 82
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.
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.
-81-
<PAGE> 83
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.
7.06 Approval of Purchaser's Shareholders. This Agreement and the
authorization of the Preferred Shares contemplated by Section 1.03 and Section
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:
<TABLE>
<CAPTION>
Shareholder Current Common Shares Series A Preferred Shares
<S> <C> <C>
Rudy Marich Trust 1,000,000 100,000
JCR Family Trust 1,000,000 100,000
</TABLE>
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
-82-
<PAGE> 84
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, Texas 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, Texas 75074
Any party may change its address for notice by written notice given to the other
parties.
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.
-83-
<PAGE> 85
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
- ----------------------------- /s/ James Rambin
Joe B. Park -----------------------------------------
James Rambin, President
/s/ Thomas R. Baker Park:
- -----------------------------
Thomas R. Baker Park Pharmacy Corporation
/s/ David W. Frauhiger
- -----------------------------
David W. Frauhiger /s/ Thomas R. Baker
-----------------------------------------
Thomas R. Baker, President
-84-
<PAGE> 86
EXHIBIT 1.03 TO STOCK PURCHASE AGREEMENT
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.
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.
-85-
<PAGE> 87
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.
-86-
<PAGE> 88
ANNEX "B"
ARTICLES OF AMENDMENT
AND STATEMENT OF DESIGNATION
OF A SERIES OF SERIES A PREFERRED STOCK
TO THE
ARTICLES OF INCORPORATION
OF
POWER-CELL, INC.
a Colorado Corporation
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation, as amended:
FIRST. Name. The name of the corporation is POWER-CELL, INC.
SECOND. Statement of Amendment. The following amendment to the Articles
of Incorporation, as amended, was adopted by resolution of the shareholders at a
meeting duly held on ________________, 1999, in the manner prescribed by the
Colorado Corporate Code.
Articles I and II of the Articles of Incorporation of the Corporation
is hereby repealed and amended by substitution of the following:
ARTICLE I - NAME
1.1 The name of the Corporation is PARK PHARMACY CORPORATION.
ARTICLE II - AUTHORIZED SHARES
2.1 The aggregate number of shares which the Corporation shall have
authority to issue is One Billion (1,000,000,000) shares, divided into:
(a) one class of Seven Hundred Fifty Million
(750,000,000) common shares with a par value of $.0001 per
share; and
(b) one class of Two Hundred Fifty Million
(250,000,000) Preferred Shares with a par value of $.001 per
share, which may be divided into and issued in Series.
The Board of Directors is authorized, from time to time, to divide the
Preferred Shares into Series, to designate each 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:
-87-
<PAGE> 89
(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
(h) voting rights.
2.1.1. The Board has designated Five Million (5,000,000) Preferred
Shares as "Series A Preferred Stock".
THIRD. The number of shares voted for the Amendment to Articles I and
II were sufficient for approval.
FOURTH. The resolutions establishing and designating Series A Preferred
Shares and fixing and determining the relative rights and preferences thereof,
insofar as the same are not fixed and determined by the Certificate of
Incorporation, as amended, of POWER-CELL, INC., was duly adopted by all of the
members of the Board of Directors on the ____ day of _____________, 1999. A true
and correct copy of such resolution is attached to this Amendment and Statement
as Exhibit "A", and by reference made a part hereof for all purposes.
FIFTH. The manner in which any exchange, reclassification or
cancellation of issued shares provided for in the amendments shall be effected
as follows: None .
SIXTH. The manner in which such amendments effect a change in the
amount of stated capital and the amount of stated capital changed by such
amendments is as follows: None.
-88-
<PAGE> 90
EXECUTED this ____ day of ___________, 1999.
POWER-CELL, INC.
a Colorado corporation
By:
--------------------------------------
James C. Rambin, President
ATTESTED TO: By:
--------------------------------------
James C. Rambin, Secretary
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared James C. Rambin, President and Secretary, of POWER-CELL,
INC., a Colorado corporation, known to me to be the person and officer whose
name is subscribed to the foregoing instrument, and acknowledged to me that he
executed the same as a duly authorized officer of such corporation, for the
purposes and consideration therein expressed, in the capacity therein stated and
as the act and deed of such corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this _____ day of _________,
1999.
-----------------------------------------
Notary Public, State of Texas
-89-
<PAGE> 91
POWER-CELL, INC.
660 Preston Forest Center, Box 200
Dallas, Texas 75230
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James C. Rambin, or in the
alternative, Thomas R. Baker if James C. Rambin refuses or is unable to
exercise this Proxy, with the full power of substitution, and hereby authorizes
them to represent and to vote, as directed on the reverse side hereof, all of
the shares of common stock of Power-Cell, Inc. (the "Company") held of record
by the undersigned on _______ __, 1999, at the special meeting of shareholders
to be held on ________ __, 1999, or any adjournment thereof.
IT IS UNDERSTOOD THAT WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED
IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. WHEN NO CHOICE IS
SPECIFIED BY THE SHAREHOLDER, THE PROXY WILL BE VOTED IN FAVOR OF EACH OF THE
TWO PROPOSALS ON THE REVERSE SIDE.
The undersigned hereby revokes all previous proxies relating to the
shares covered hereby and confirms all that said proxy or his substitutes may
do by virtue hereof.
(To Be Signed on Reverse Side)
Please date, sign and mail your
proxy card back as soon as possible!
Special Meeting of Shareholders
POWER-CELL, INC.
________________ __, 1999
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
[X] Please mark your votes as in this example.
1. PROPOSALS
[ ] PROPOSAL ONE: Approval and ratification of Stock Purchase Agreement
dated March 9, 1999 among the Company, Park Pharmacy Corporation and
Park Pharmacy Corporation's shareholders, and the transactions
contemplated thereunder (the "Transactions").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
-90-
<PAGE> 92
[ ] PROPOSAL TWO: Approval of an amendment to the Company's Articles of
Incorporation that would (i) change the name of the Company to "Park
Pharmacy Corporation" and (ii) increase the aggregate 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 $.0001
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.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In his discretion, the Proxy is authorized to vote upon any matters
which may properly come before the Special Meeting or any adjournment or
postponement thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
PLEASE CHECK THIS BOX IF [ ]
YOU INTEND TO BE PRESENT
AT THE MEETING
Signature:
-------------------------------------
Printed Name: Dated: , 1999
---------------------------------- -----------------
Signature if held jointly:
---------------------
Printed Name: Dated: , 1999
---------------------------------- -----------------
(Note that you should sign exactly as your name appears above.)
-91-
