UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission file number 000-15379
PARK PHARMACY CORPORATION
(formerly known as Power-Cell, Inc.)
(Name of small business issuer in its charter)
Colorado 84-1029701
(State or other jurisdiction (I.R.S. Employer incorporation
organization or Identification No.)
10711 Preston Road
Suite 250
Dallas, TX 75230
(Address of principal executive offices)
(Zip Code)
Issuer's telephone number (214) 692-9921
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.0001 par value
(Title of Class)
Check whether the issuer: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [ ] No
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year were
$11,477,179.
The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant as of
September 26, 2000 was approximately $3,548,248 based on the
average of the registrant's bid and ask price on the OTC
Bulletin Board. Shares held by non-affiliates were determined
using beneficial ownership rules adopted pursuant to Schedule 13
of the Exchange Act, and exclude stock owned by directors,
officers and ten percent stockholders, some of which may not
be held to be affiliates upon judicial determination.
The number of shares outstanding of each of the issuer's
classes of common equity as of September 26, 2000 was 4,529,551.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Annual Report on
Form 10-K, to the extent not set forth herein, is incorporated by
reference from specified portions of Park Pharmacy Corporation's
definitive proxy statement for the 2000 Annual Meeting of
Stockholders to be filed with the Securities and Exchange
Commission on or before October 30, 2000.
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FORWARD-LOOKING STATEMENTS
With the exception of historical information, the matters
discussed in this Annual Report on Form 10-KSB include "forward-
looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Forward-looking statements are statements
other than historical information or statements of current
condition. Some forward-looking statements may be identified by
the use of the terms "expects," "will," "anticipates,"
"estimates," "believes," "plans" and words of similar meaning.
These forward-looking statements relate to our business plans,
programs, trends, results of future operations, funding of future
growth, acquisition plans and other matters. In light of the
risks and uncertainties inherent in all projected matters, the
inclusion of forward-looking statements in this Form 10-KSB
should not be regarded as a representation by us or any other
person that our objectives or plans would be achieved or that
operating expectations will be realized. Revenues and results of
operations are difficult to forecast and could differ materially
from those projected in forward-looking statements, such as
statements regarding our belief with respect to the sufficiency
of capital resources, our ability to complete and assimilate
acquisitions, and our ability to compete in our pharmacy and
physician services businesses. Actual results could differ from
those projected in any forward-looking statements for, among
others, the following reasons: (a) increased competition from
existing or new competitors, (b) changes in government regulation
of the pharmacy industry, (c) changes in the reimbursement costs
or policies of private insurance companies or federally-funded
insurance programs, (d) our failure to manage its growth and
integrate businesses acquired or to be acquired, and (e) our
failure to attract or retain key employees. We do not undertake
to update any forward-looking statements contained herein. For a
more complete discussion of these factors and others, please see
"Certain Business Factors" in Item 1 of this report. Readers are
cautioned not to place undue reliance on any forward-looking
statements made herein, or incorporated by reference into this
Annual Report on Form 10-KSB or in any document or statement
referring to this Annual Report on Form 10-KSB.
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PART I
Item 1. BUSINESS
COMPANY OVERVIEW
Introduction
General. Our company, Park Pharmacy Corporation, is a
holding company based in Dallas, Texas, that is engaged, through
its subsidiaries, in retail pharmacy, institutional pharmacy,
infusion pharmacy, wholesale pharmacy distribution and Internet
pharmacy and physician services. Through Dougherty's Pharmacy
("Dougherty's") in North Dallas and Raven's Pharmacy ("Raven's")
in Oak Cliff, a Dallas suburb, we offer traditional independent
pharmacy services, including prescriptions, over-the-counter
drugs, durable medical equipment, cosmetics, gifts and sundries.
Our subsidiary, Total Pharmacy Supply, Inc. ("TPS"), is a
national wholesale supplier of non-drug products for independent
drug stores and grocery chains. Through Dougherty's Homecare
Infusion ("DHI") and Park Infusion Services LP ("Park Infusion"),
we supply enteral nutrition, total parenteral nutrition,
antibiotic therapy, chemotherapy and other infusion products and
services to home healthcare and hospice patients throughout North
Texas. Dougherty's Homecare Pharmacy ("Homecare") is an
institutional pharmacy fulfilling prescriptions for nursing homes
and assisted living facilities in North Texas. Our subsidiary,
Rx-Pro.Com, Inc. is a provider of pharmacy and related
application services via the Internet to physicians and
pharmacies.
We believe that a significant market exists for high-end,
technical pharmacy services such as compounded prescriptions,
intravenous infusion, injectables and pain management products
that are not typically offered by chain drug stores, grocery
pharmacies or mass merchandise pharmacies. Specifically, we
believe that opportunities exist to acquire independent
pharmacies that provide these high-end services, but whose owners
face limited viable exit strategies. As a result, we intend to
acquire highly profitable, independent pharmacies that either 1)
specialize in technical pharmacy operations such as infusion or
compounding, among others, 2) dominate their markets in niche
services such as hospice care, oncology or AIDS, among others, or
3) are geographically attractive and offer the opportunity to
implement additional lines of business such as infusion,
compounding, durable medical equipment, institutional pharmacy
and the like. We also intend to expand the operations and market
presence of our Internet subsidiary, Rx-Pro.Com, Inc. through the
hiring of personnel across several disciplines and the
implementation of a regional marketing strategy to grow the
business.
Our business address is 10711 Preston Road, Suite 250,
Dallas, Texas 75230 and our telephone number is (214) 692-9921.
Our Web site is www.parkrxcorp.com.
Background. On March 9, 1999, the shareholders of Park
Pharmacy Corporation, a privately-held Texas corporation ("Park-
Texas"), entered into a stock purchase agreement with Power-Cell,
Inc., a publicly-held Colorado corporation that was incorporated
in 1986 but had been inactive since 1997, for the acquisition by
Power-Cell of all the issued and outstanding shares of capital
stock of Park-Texas in exchange for shares of a newly authorized
and designated series of preferred stock of Power-Cell. Upon the
closing of the acquisition, which was approved by Power-Cell's
shareholders on October 12, 1999: 1) Park-Texas became a wholly-
owned subsidiary of Power-Cell, 2) Park-
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Texas' shareholders gained voting control over 80% of the issued
and outstanding capital stock of Power-Cell, and 3) Park-Texas'
designees comprised five of the six members of the board of
directors. Immediately following the reverse acquisition, Power-
Cell was renamed to Park Pharmacy Corporation.
Park-Texas undertook the reverse acquisition in order to
improve access to the capital markets and to use publicly traded
stock as currency in acquiring independent pharmacies.
Additionally, the public vehicle affords our current and future
shareholders greater liquidity than would otherwise be available
as a private company.
Prior to October 19, 1999, we were a non-operating public
company. From October 19, 1999 to December 31, 1999, we were
essentially a developmental-stage company with a plan of
operation to acquire independent pharmacies in Texas and the
southern United States.
Since December of 1999, we have completed four acquisitions
in the pharmacy business. On a consolidated, unaudited basis, we
anticipate that the companies we now own will generate for fiscal
2001 annual revenue of approximately $32 million and earnings before
interest, taxes, depreciation and amortization ("EBITDA") of
roughly $2.0 million.
Regulatory Environment
Retail Pharmacy. Our pharmacies and pharmacists must be
licensed by the appropriate state boards of pharmacy. Our
pharmacies are also registered with the federal Drug Enforcement
Agency. Additionally, our pharmacies must be approved by the
Health Care Financing Administration as providers under Medicare
and by state governmental agencies responsible for Medicaid.
Because of these licensing and registration requirements, we must
comply with various statutes, rules and regulations, which, if
violated, could result in a suspension or revocation of those
licenses or registrations.
Participants in the healthcare industry are subject to
frequently changing, and often confusing, regulation at federal,
state and local levels. Providers, payors, and plans are also
subject to a variety of laws and regulations that could affect
their business relationships with us. Federal and state laws
regulating health insurance, health maintenance organizations and
similar organizations, as well as employee benefit plans, are not
uniform and cover a broad array of subjects, including
confidentiality, financial relationships with vendors, mandated
benefits, grievance and appeal procedures and others. Some
federal and state so-called "fraud and abuse" laws may also limit
or prohibit some financial relationships with out healthcare
participants, including physician practices, hospitals and
laboratories.
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
healthcare system, either nationally or at the state level. We
cannot predict whether any federal or state healthcare reform
legislation will eventually be passed, or the impact of any
reform legislation on our financial position or results of
operations. If implemented, healthcare reform could adversely
affect the pricing of prescription drugs or the amount of
reimbursement from governmental agencies and managed care payors,
and consequently have adverse effects on us. However, to the
extent healthcare reform expands the number of persons receiving
healthcare benefits covering the purchase of prescription drugs,
it may also result in increased
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purchases of such drugs and could thereby have a favorable impact
on both our company and the retail drug industry in general.
Nevertheless, there can be no assurance that any future federal
or state healthcare reform legislation will not adversely affect
our company or the retail drugstore industry generally.
The Internet. The Internet and its associated technologies
are also subject to changing government regulation. Many
existing laws and regulations, when enacted, did not anticipate
the methods of healthcare business-to-business commerce we are
developing through our Rx-Pro subsidiary. Nonetheless, we
believe that these laws and regulations may affect the following
aspects of its services: patient medical record confidentiality
and disclosure; electronic transmission of patient-identifiable
information among healthcare participants; use of software to
diagnose, cure, treat, mitigate or prevent disease; relationships
and referral patterns among healthcare participants; and Internet-
related issues, including security, privacy, encryption, pricing,
content, intellectual property rights, contracting and selling
over the Internet, distribution, scope of professional licensure
and characteristics and quality of services. In particular,
forthcoming federal regulations concerning "administrative
simplification" of healthcare data will require us to adopt
uniform formats and security measures concerning the information
it communicates on behalf of our physicians and pharmacies.
These and other regulations may entail significant costs,
although we anticipate our continuing development of our
technology platform to be compatible with the developing
standards.
Over the past year, the U.S. House of Representatives
Committee on Commerce and the General Accounting Office have been
investigating online pharmacies and online prescribing. We
believe that any regulations resulting from the investigations
will likely result in increased reporting and monitoring
requirements, which could increase our expenses. Other
legislation and regulations currently being considered at the
federal and state level could affect our 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 our expenses.
We are 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, we may be restricted
or prevented from delivering patient records electronically.
This could have an adverse impact on our 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
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those governing privacy, libel and taxation apply to Internet
businesses such as ours. 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 or maintain medical or pharmaceutical records. The
adoption or modification of laws or regulations relating to the
Internet business could adversely affect our ability to attract
and serve Internet customers.
Current Operations
Retail Pharmacy. In December of 1999, we acquired
Dougherty's Pharmacy, Inc., which has been in operation for over
70 years and currently operates Dougherty's in North Dallas and
Raven's Pharmacy in Oak Cliff, a suburb of Dallas. After our
acquisition of this company, the Dougherty's and Raven's
pharmacies were separated into distinct legal entities. The Park
family has operated Dougherty's since 1947 and Raven's since
1959.
Dougherty's and Raven's are full-service pharmacies,
offering a broad range of over-the-counter medications, supplies
and equipment, health and beauty aids, cosmetics, gifts, greeting
cards and other general merchandise. We are unique relative to
chain drug stores, grocery pharmacies and mass merchandise
pharmacies in providing technical products, particularly
compounded drugs and infusion products. The specialized nature
of these products yields above average pricing, and competition
for these products is relatively limited.
Infusion Pharmacy. Through Dougherty's Homecare Infusion, a
division of Dougherty's, and Park Infusion, we have quickly
developed a significant infusion presence in the North Texas
region, the South Texas region and the Tampa/St. Petersburg area
of Florida. DHI has been operating in Dallas since March 1997,
and Park Infusion Services was formed in July 2000 to facilitate
our August 2000 acquisition of three infusion pharmacies with
locations in San Antonio, Texas; Dallas, Texas and St.
Petersburg, Florida. DHI exclusively provides pharmacy services,
while Park Infusion operates alternative-site suites adjacent to
its pharmacies in order to manage more complex infusion
procedures. The division's business is spread among numerous
medical conditions, from chronic blood disorders, chronic pain,
massive infections and cancer, among others. DHI's business is
largely private insurance or private pay, and Park Infusion,
alternatively, conducts a significant amount of managed care
business and has well-established relationships with the managed
care community.
Institutional Pharmacy. Dougherty's Homecare Pharmacy,
another division of Dougherty's, provides pharmacy services to
nursing homes and assisted living facilities. Homecare purchases
and dispenses in custom dose packs prescription and non-
prescription medication in accordance with physician orders and
delivers such prescriptions to the nursing facility for
administration to individual residents by the facility's nursing
staff. Homecare typically services nursing homes within a 75-
mile radius of its pharmacy location. Homecare maintains a 24-
hour, on-call pharmacist service, 365 days per year, for
emergency dispensing and delivery or for consultation with the
facility's staff or the resident's attending physician.
Wholesale Pharmacy Supply. In March of 2000, we acquired
Total Pharmacy Supply, Inc. ("TPS") based in Arlington, Texas.
TPS is a wholesale distributor of a variety of non-drug products
utilized by pharmacies. These
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products include prescription packaging and containers,
dispensing supplies and equipment, labels and forms, medication
carts and canes, among many other products. TPS was pharmacies
formed in 1989 and maintains a customer base of approximately
3,000 pharmacies, grocery stores, healthcare distributors,
healthcare institutions and other pharmacy providers.
Internet Pharmacy and Patient Charting. In December of
1999, we also acquired Rx-Pro.Com, Inc., a provider of Internet-
based communications technology and information solutions for
healthcare providers, including physicians and pharmacies. Rx-
Pro offers professional-to-professional ("P-to-P") and
professional-to-business ("P-to-B") services that connect
physicians to pharmacies and other healthcare participants.
Through Rx-Pro's application service platform, prescriptions are
automatically processed through end-to-end integration between
the physician, the insurance company, the pharmacy and the
patient. As a subset of our pharmacy system, Rx-Pro has
developed expertise in disease state management, through which we
contract with disease state management organizations and offer a
customized, tailored approach to pharmacy services through one
central point of contact. Rx-Pro is also developing
functionality for physicians to manage day-to-day clinical and
administrative activities in a paperless, online environment,
regardless of location.
PRODUCTS AND SERVICES
Retail Pharmacy
Prescriptions. Prescription medications are our primary
focus. Dougherty's and Raven's inventory both concurrently
prescribed drugs as well as a substantial variety of
pharmaceuticals that are not typically carried by chain drug
stores, grocery pharmacies and mass merchandise pharmacies. Our
ability to provide a full array of prescription medications has
positioned us as a reliable provider of a wide range of
prescription drugs that physicians and customers have come to
trust.
In addition to prescription drugs, we carry a full line of
over-the-counter medications, along with nutriceutical (vitamin)
supplements. As with our prescription drugs, our customers rely
on Dougherty's and Raven's for our deep product offerings.
Compounding. We provide custom formulating of prescription
medications. This procedure creates higher prescription margins
and fills a special need in the marketplace. Some of these
products include antibiotic creams, suppositories, topical
ointments and various other compounds used in pain management,
wound care and other conditions.
Durable Medical Equipment ("DME"). We offer for sale and
lease, certain products that consist of patient room equipment
(such as hospital beds, patient lifts and commodes), ambulatory
aids (such as walkers and canes), bathroom safety items, wound
care, and ostomy products. Our broad range of products provides
patients who require either infusion or home healthcare services
access to needed DME through a single source.
Non-pharmaceutical Merchandise. We also offer a wide
variety of other nationally advertised and private label non-
prescription merchandise including health and beauty care,
cosmetics, gifts, greeting cards, and other general merchandise.
In addition, we offer a broad assortment of popular national
brand over-the-counter drugs and other products related to dental
care, foot
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care, vitamins and nutritional supplements, feminine hygiene,
family planning and baby care. We provide a helpful environment
that enables consumers to obtain product information from
professional pharmacists and knowledgeable staff, and to benefit
from other special features such as free home delivery, charge
accounts and fax and copy machines for customer convenience.
Infusion Pharmacy
Infusion therapy involves the intravenous, intramuscular or
subcutaneous administration of nutrients, antibiotics or other
medications to patients in their homes usually as a continuation
of treatment initiated in the hospital. Through DHI and Park
Infusion, we offer both traditional forms of medication delivery
such as the "hanging bag", along with newer methods such as
portable pumps that administer medication in periodic, measured
doses, and injectibles that utilize "bulbs" to allow patients to
administer drugs themselves through previously installed
intravenous nodes.
Historically, infusion therapy was confined to the hospital
environment. However, with the development of portable
technology and the expanded training and certification standards
for registered infusion nurses, infusion procedures can be safely
and effectively performed in the home setting, physician office
and ambulatory infusion suite. As an example, chemotherapy was
once administered primarily in the hospital setting but can now
be administered by the patient at home via a bulb. As a result
of such changes, infusion patients now enjoy greater freedom to
maintain daily activities.
At the same time that technology and nurse credentialling
have improved, payors have encouraged the trend toward
alternative-site and home infusion in order to reduce costs. The
growing healthcare management practices of discouraging hospital
treatment and discharging patients from hospitals earlier prior
to complete recovery have shifted more treatment responsibility
to the infusion pharmacist. Because patients are often more
acute, infusion formulating and dosing is more complex, and
infusion pharmacists must be skilled in addressing such
complexities. Infusion therapy now plays a greater role in
patient recovery outside the hospital.
Our infusion products and services, provided through DHI and
Park Infusion, are generally categorized as follows:
Antibiotic Therapy. The infusion of antibiotic medications
to treat various infections and diseases, such as bacterial
arthritis, endocarditis, cellulitis, cystic fibrosis, fungal
infections, Lyme disease, osteomyolitis, urinary tract
infections and wound infections.
Total Parenteral Nutrition ("TPN"). The infusion of
balanced dietary nutrients, vitamins and electrolytes to
patients unable to absorb nutrients through the digestive
tract due to various gastrointestinal conditions.
Conditions often treated with TPN include cancer, Chron's
disease, HIV, cystic fibrosis and various nutritional
disorders.
Pain Management. The continuous or intermittent infusion of
parenteral analgesics to patients experiencing severe,
chronic pain, with conditions related to cancer, intractable
pain, arthritis, chronic back or bone pain and AIDS.
Chemotherapy. The infusion of oncolytic agents used in the
treatment of various forms of cancer. Adjunct therapies
often accompany
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chemotherapy, such as treatment for nausea, compromised
blood factors, malnutrition and pain.
Enteral Nutrition. The administration of dietary nutrients
through a feeding tube directly into the digestive tract to
patients unable to eat or drink normally. Conditions
treated with enteral nutrition include esophageal
reconstruction or cancer and traumatic injury to the
gastrointestinal system.
Hydration Therapy. The infusion of fluids to patients who
have disease states that deplete the normal balance of
fluids and/or electrolytes. Hydration therapy is usually a
short-term treatment ranging from one to three days.
While DHI and Park Infusion provide all of these products, a
significant proportion of the business is concentrated in
antibiotic therapy, TPN, pain management and chemotherapy.
Institutional Pharmacy
Through Dougherty's Homecare, a division of Dougherty's, we
provide prescriptions and other home healthcare products and
services to patients residing in facilities such as extended care
facilities, nursing homes, home hospices and assisted living
centers. Our patients typically cover a variety of health
conditions, and some of the products and services offered by
Homecare offered include treatment in disease state management
and pharmacy consulting. Prescription medications that are sold
to these facilities are purchased by us at contracted prices that
are usually lower than normal retail pharmacy.
Upon receipt of a prescription, the relevant resident
information is entered into Homecare's computerized dispensing
and billing systems. At that time, the dispensing system checks
the prescription for any potentially adverse drug interactions or
resident sensitivity. When required and/or specifically
requested by the physician or patient, branded drugs are
dispensed. Generic drugs are substituted in accordance with
applicable state and federal laws and as requested by the
physician or resident. We also provide therapeutic interchange,
with physician approval, in accordance with the company's
pharmaceutical care guidelines.
Through Homecare, we provide a "unit dose" distribution
system. Most of our prescriptions are filled utilizing
specialized unit-of-use packaging and delivery systems.
Maintenance medications are typically provided in 30-day supplies
utilizing either a box unit dose system or unit dose punch card
system. The unit dose system, preferred over the bulk delivery
systems employed by retail pharmacies, improves control over
drugs in the nursing facility and improves resident compliance
with drug therapy by increasing the accuracy and timeliness of
drug administration.
Homecare's drug distribution system is integral to our
computerized medical records and documentation system. Homecare
provides to the facility computerized medication administration
records and physician's order sheets and treatment records for
each resident. Data extracted from these computerized records
are also formulated into monthly management reports on resident
care and quality assurance. The computerized documentation
system, in combination with the unit dose drug delivery system,
results in greater
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efficiency in nursing time, improved control, reduced drug waste
in the facility and lower error rates in both dispensing and
administration. These benefits improve drug efficacy and result
in fewer drug-related hospitalizations.
Consultant Pharmacist Services
Federal and state regulations mandate that nursing
facilities, in addition to providing a source of pharmaceuticals,
retain consultant pharmacist services to monitor and report on
prescription drug therapy in order to maintain and improve the
quality of resident care. The Omnibus Budget Reconciliation Act
("OBRA") implemented in 1990 seeks to further upgrade and
standardize care by setting forth more stringent standards
relating to planning, monitoring and reporting on the progress of
prescription drug therapy as well as facility-wide drug usage.
Homecare provides consultant pharmacist services that help
clients comply with such federal and state regulations applicable
to nursing homes. The services offered by Homecare's consultant
pharmacists include: (i) conducting comprehensive, monthly drug
regimen reviews for each resident in the facility to assess the
appropriateness and efficacy of drug therapies, which includes
reviewing the resident's medical records, monitoring drug
reactions to other drugs or food, monitoring lab results and
recommending alternate therapies or discontinuing unnecessary
drugs; (ii) participating on the Pharmacy and Therapeutics,
Quality Assurance and other committees of client nursing
facilities as well as staff meetings; (iii) monitoring and
monthly reporting on facility-wide drug usage; (iv) developing
and maintaining pharmaceutical policy and procedures manuals; and
(v) assisting the nursing facility in complying with state and
federal regulations as they pertain to patient care.
Wholesale Pharmacy Supply
Our subsidiary, Total Pharmacy Supply, Inc., is a national
distributor of non-drug supplies that are essential to the
operation of a pharmacy, such as prescription bottles, caps,
labels, paper bags, medication cards, forms and prescription
pads, dosing aids and pill containers, lab coats, shock-absorbing
floor mats, walking canes and merchandising displays. TPS
inventories a substantial array of products and is a one-stop
source of non-drug supplies to the pharmacy industry.
TPS has approximately 3,000 customers, which include
independent drug stores, grocery pharmacies and other healthcare
institutions. For a number of customers, TPS provides custom,
private label products tailored to the customer's specific needs.
TPS provides a high level of service in delivering its products
in a timely manner.
Internet Pharmacy and Patient Charting
Our subsidiary, Rx-Pro, has developed an Internet-based
software system that is designed to assist physicians, pharmacies
and other healthcare participants with providing effective and
efficient healthcare on a daily basis. Rx-Pro designed the
system to address known, recurring problems in the healthcare
delivery process.
Rx-Pro's system essentially moves much of the physician's
office onto the Internet through a secure, private network,
allowing physicians and office staff to verify patient insurance
coverage, issue prescriptions, manage and track referral
authorizations, maintain patient records, send and receive lab
reports and images, and communicate via secure e-mail with other
healthcare
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professionals, patients and suppliers. The Rx-Pro system creates
a virtual medical office that is accessible by all healthcare
professionals.
Rx-Pro's prescription fulfillment system utilizes the
Internet to streamline the prescription process, improve
physician efficiency and increase customer satisfaction. The Rx-
Pro system provides a streamlined delivery process for
prescription drugs to provide "clean scripts" to the healthcare
industry. At the heart of this system is a protected-access
software system through which medication can be ordered by the
physician and approved on a real-time basis, while building and
maintaining patient care information and charts. Prescriptions
are pre-scanned for clinical conflicts and insurance coverage
before being electronically transmitted directly from the
physician's office to the patient's pharmacy of choice via the Rx-
Pro Internet server. The physician is prompted to address any
conflicts prior to transmitting the prescription. Once the
pharmacy receives the "clean", legible prescription, it can be
quickly dispensed and delivered to the patient with no changes or
callbacks to either the physician or insurance company. Through
this system, we are able to dispense prescriptions nationally.
For a higher degree of care, Rx-Pro has established an affiliate
network of 250 preferred pharmacies that deliver to the home on a
same-day basis prescription medication over broad geographical
areas in Texas and the Southwest with one central control point.
Rx-Pro also contracts with disease state management
organizations for pharmacy services. The primary benefit is
providing the organization with a high level of service,
designing and implementing customized pharmacy services that
address the specific needs of the different disease states such
as hospice care, heart disease, diabetes, asthma and cystic
fibrosis. The service offerings include comprehensive care
plans, ongoing monitoring and evaluation, and caregiver support
resources and information.
CUSTOMERS
We serve a variety of customers through our operations,
ranging from individuals to physician practices to hospices to
other independent pharmacies and healthcare institutions. With
all of our subsidiaries, we attempt to manage customer
concentration to protect ourselves from the potential loss of any
one customer.
The customer base of Dougherty's and Raven's is diversified
among a significant number of individuals who are covered by a
wide variety of payors, including insurance companies, health
maintenance organizations, Medicare, Medicaid and others. The
loss of any one customer, or the refusal of any payor to conduct
business with our stores, would not have a material adverse
impact to the operations or financial results of our stores.
The customer base of DHI and Park Infusion is also generally
comprised of individuals who are covered by a variety of payors.
Although infusion pharmacies generally deal with a smaller number
of individuals than either Dougherty's or Raven's, we maintain
sufficient diversification as to avoid a customer concentration.
The loss of any one customer, or the refusal of any payor to
conduct business with either DHI or Park Infusion, would not have
a material adverse impact to the operations or financial results
of our infusion pharmacies.
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Homecare conducts business with a limited number of nursing
homes, and although we believe that the division's current
customer relationships are good, the loss of any one customer
would have a significant impact on the results of Homecare but
not with respect to our consolidated results of operations and
financial position.
TPS maintains an active customer base of over 3,000
accounts. Within those accounts are certain national grocery
store chains with a significant number of individual stores doing
business with TPS. Corporate headquarters for these customers
does not dictate which non-drug supplier is to be used; rather,
each store is permitted to order product from its approved vendor
of choice. While the potential loss of one grocery store
location would not be material to TPS' operations, we do face the
risk that a chain may elect to direct its business elsewhere,
which would materially impact TPS' operations and financial
results, as well as the operations and financial results of our
company as a whole. We have enjoyed well established, long-term
relationships with our grocery customers and do not believe any
of those relationships to be currently at risk.
SALES AND MARKETING
The ultimate customer of our pharmacy and infusion products
and services is generally an individual requiring prescription
and related services and products. To attract these customers,
we must market our products and services both to the individual
and to a broader group that influences the pharmacy decision,
such as physicians, outpatient clinics, discharge planners,
hospices and other disease state management organizations.
In general, success in the pharmacy industry is primarily
based on price, service quality, convenience, product quality and
product availability. Dougherty's and Raven's have historically
gained a loyal following through quality of service, with well-
trained and attentive staffs; convenience, through drive-through
windows and home delivery; and product availability, carrying a
wide range of merchandise. With respect to more complex pharmacy
products like compounding and infusion, sales are primarily based
on relationships, reputation, technical competence, product
availability and product quality. Our infusion pharmacies have
gained excellent reputations over time with high quality service,
broad product offerings and technical capability. These
characteristics have resulted in long histories of stable
operations with growing revenues and profits for our operating
companies.
As part of our strategic plan, we will provide outside sales
personnel and sales training on an ongoing basis in such areas as
generics, private label merchandise, over-the-counter medications
and homeopathic medicine. We will also provide literature in the
stores, invoice stuffers, coupons in account statements and
direct mail letters from its pharmacists for customer awareness.
Finally, we have developed, and will continue to develop,
customer awareness programs for the management of disease states
such as diabetes, asthma, hypertension, ostomy and kidney health.
OPERATIONS AND MERCHANDISING
For Dougherty's and Raven's, our store hours are tailored to
match the preferences and purchasing habits of the local
community. Dougherty's is located in the heart of a substantial
residential community and maintains
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store hours from 8:00 AM until 9:00 PM Monday through Saturday
and 10:00 AM to 7:00 PM on Sunday. Raven's is located in a
central business district and maintains store hours from 9:00 AM
until 7:00 PM Monday through Friday and 9:00AM to 5:00 PM on
Saturday.
Each of Dougherty's and Raven's employ full staffs of
pharmacists and pharmacy technicians in order to provide a high
level of customer consultation and service. Each store
department also maintains staff that specialize in their
respective product offerings, in order to provide a helpful
environment for the customer.
We work diligently to merchandise our products in a manner
that is convenient for the customer and facilitates the free flow
of traffic. At Dougherty's, for example, product aisles are
aligned in a front-to-back fashion to provide ease of access to
the prescription counter.
To ensure adequate product availability, we have
consolidated our vendor relationships to ensure continuous flow
of product along with optimal pricing. We utilize one primary
vendor for a majority of our drug and related purchases, and that
vendor delivers products to the retail stores twice per day.
INTELLECTUAL PROPERTY
In general, we do not believe that our intellectual property
is material to the success of Dougherty's, Raven's, TPS, DHI,
Park Infusion or Homecare. For Rx-Pro, however, intellectual
property is material, and we rely upon a combination of trade
secret, copyright and trademark laws, license agreements,
confidentiality procedures, employee nondisclosure agreements and
technical measures to maintain the secrecy of Rx-Pro's
intellectual property. Rx-Pro's technology is not patented.
The possibility exists that Rx-Pro could be subject to
intellectual property infringement claims as the company expands
its product and service offerings and as the number of
competitors increases. Defending against these claims, even if
not meritorious, could be expensive and divert management's
attention from operating the company. If Rx-Pro becomes liable
to third parties for infringing upon their intellectual property
rights, it could be required to pay a substantial damage award
and be forced to develop noninfringing technology, obtain a
license or cease using the applications that contain the
infringing technology or content. Rx-Pro may be unable to
develop noninfringing technology or content or obtain a license
on commercially reasonable terms, or at all.
Rx-Pro also relies on certain technologies that are licensed
from third parties to perform key functions. These third party
licenses are an essential element of Rx-Pro's business as an
application services provider. These third party licenses may
not be available to us on commercially reasonable terms in the
future. The loss of or inability to maintain any of these
licenses could delay the introduction of software enhancements
and other features until equivalent technology can be licensed or
developed. Any such delay could materially adversely affect Rx-
Pro's ability to attract and retain customers.
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TECHNOLOGY
Historically, the pharmacy industry has conducted its
operations manually and without the aid of technology. Within
recent history, however, technology has become available to
improve productivity, although to date large-scale pharmacies
have been the primary adopters. To date, we have not adopted
technology to any significant extent.
Over the course of the next two to three years, and subject
to the execution of our acquisition strategy, we plan to improve
productivity, accuracy and profitability and increase customer
service and satisfaction by utilizing technology that will, in
turn, allow our pharmacists to spend more time with customers.
Examples of such technology may include automated drug dispensing
systems and wireless communication systems.
Our Rx-Pro.Com subsidiary operates as an application service
provider that employs technology from Sybase, Inc. to provide a
scalable Internet platform. The platform includes secure Web
servers, database servers and transaction servers which provide
access to our proprietary databases and care plans.
Our Rx-Pro system also employs various wireless LAN and wireless
WAN networks to provide true mobility to healthcare professionals
and access to critical healthcare data.
Rx-Pro is currently utilizing wireless devices from Palm, Inc.,
as well as personal digital assistants and other handheld
computers from various other manufacturers.
ACQUISITIONS
To take advantage of existing market opportunities and
execute our strategy, from time to time we will enter discussions
with independent pharmacies and related companies regarding
potential acquisitions. As a fundamental principle, we are
committed to acquiring well-performing pharmacies that are
geographically desirable, offer technical pharmacy and related
services or are otherwise market leaders. Strong management is a
key consideration for us in reviewing acquisition candidates,
because the independent pharmacy business is a local business
frequently dependent on personal relationships. In addition, we
target owner/pharmacists who are interested in remaining involved
with us for the foreseeable future.
In evaluating a pharmacy for potential acquisition, we
consider 1) historical financial statements and tax returns, 2)
operational data, 3) management and employee information, 4)
material contracts, including customer and vendor contracts, 5)
financing arrangements, 6) corporate organizational information,
7) regulatory information and 8) litigation history. To assess
the reasonableness of the purchase price offered by a seller in
connection with a particular acquisition, we also consider the
availability and terms of owner financing, including the rate of
return and payback period.
In structuring our acquisitions, we emphasize continuity of
management in order to preserve the underlying business
franchise. This strategy typically involves the continued
involvement of the seller, who is usually a pharmacist, along
with the other pharmacists employed by the operation. We
typically enter into employment agreements with acquired
pharmacists, including owner pharmacists, for periods ranging
from five to seven years. Compensation for non-owner pharmacists
may consist of a combination of cash
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and stock options to promote employment longevity and continuing
focus on business process improvement and increasing
profitability.
Once we acquire a business, we seek to implement our
business model by focusing on complex products, improving
fundamental business processes and increasing individual store
profitability. Where opportunities exist to implement new
services, such as infusion therapy or durable medical equipment,
we may introduce such services, leveraging the expertise of
particular stores across other owned operations. While we have
had recent success imposing our business model on pharmacy
operations, we believe our strategy will also allow us to improve
and grow our other business operations. We intend to institute
cost-control programs, continue and improve employee training,
negotiate increases in vendor rebates, maintain a high level of
customer service and convenience, increase sales in each
department and maintain competitive pricing. In addition to
prescription drugs and services, we expect our 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 of our
pharmacies may incorporate special features such as drive-through
windows and free home delivery for customer convenience, faxing,
copying, and package delivery services.
Since the completion of the reverse acquisition in October
1999, we have completed four acquisitions, including Rx-Pro.Com,
Inc. in December 1999; Dougherty's Pharmacy, Inc. in December
1999; Total Pharmacy Supply, Inc. in March 2000; and three
infusion pharmacies in San Antonio, Texas; Dallas, Texas and St.
Petersburg, Florida in August 2000.
Rx-Pro.Com, Inc.
On December 21, 1999, we acquired all of the issued and
outstanding stock of Rx-Pro.Com, Inc., a Texas corporation. The
acquisition was structured as a merger pursuant to which Rx-Pro
was merged with and into one of our wholly-owned subsidiaries,
Park Pharmacy Corporation, a Texas corporation. Park-Texas was
the surviving company in the merger and continued to be one of
our wholly owned subsidiaries. Park-Texas changed its name to Rx-
Pro.Com, Inc. in the merger. Rx-Pro's shareholders, which
included Mr. Joe B. Park, received an aggregate of 97,500 shares
of Series A Preferred Stock in the merger. Mr. Park serves on
our Board of Directors and as our Chairman. Mr. Park also is our
controlling shareholder.
Dougherty's Pharmacy, Inc.
On December 30, 1999, we acquired all of the issued and
outstanding stock of Dougherty's Pharmacy, Inc., a privately held
Texas corporation owned by the Park family. The acquisition was
closed pursuant to the terms of a Share Exchange Agreement
between our company and The Park Family Limited Partnership, a
Texas limited partnership and the sole shareholder of
Dougherty's. In the acquisition, the partnership received an
aggregate of 45,000 shares of our Series A Preferred Stock in
exchange for all of the issued and outstanding shares of
Dougherty's. As a result of the transaction, Dougherty's is now
one of four wholly owned subsidiaries.
Mr. Joe B. Park and Mr. Jay H. Park own approximately 55%
and 45%, respectively, of the equity interests of The Park Family
Limited Partnership. Mr. Joe B. Park serves as one of our
directors and as our Chairman of the
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Board. Mr. Joe B. Park is also our controlling shareholder.
Messrs. Joe B. Park and Jay H. Park are brothers.
Total Pharmacy Supply, Inc.
Effective April 1, 2000, pursuant to a merger with a
subsidiary formed by us to effect the transaction, we acquired
all of the shares of Total Pharmacy Supply, Inc. In the
acquisition, TPS was merged with one of our newly formed
subsidiaries and became a wholly-owned subsidiary of our company.
All of the issued and outstanding shares of common stock of Total
owned by Mr. Carl S. Moses and Ms. Cynthia A. Moses were
exchanged for an aggregate of 41,515 shares of our Series A
Preferred Stock. Of the total shares received, we held back
4,151 shares for satisfaction of any indemnification claims by us
against Total and the Moses pursuant to the terms of the merger
agreement. Mr. Moses and Ms. Moses are husband and wife.
Amedisys Alternate-Site Infusion Therapy Services, Inc. and PRN,
Inc.
On August 10, 2000, we acquired certain infusion pharmacy
businesses from subsidiaries of Amedisys, Inc., a publicly held
Delaware corporation. The acquisition was effected by one of our
subsidiaries, Park Infusion Services, LP, which purchased
operating businesses from Amedisys Alternate-Site Infusion
Therapy Services Inc., and PRN, Inc., subsidiaries of Amedisys,
Inc., effective August 1, 2000.
In the transaction, Park Infusion acquired the ongoing
operations of three infusion pharmacies located in San Antonio,
Texas; Dallas, Texas; and St. Petersburg, Florida for cash
consideration of $1,750,000. The sellers retained all cash and
accounts receivable, and Park Infusion acquired all inventory,
furniture, fixtures, equipment and other tangible and intangible
assets. All employees previously employed by the sellers were
hired by Park Infusion, and the newly acquired pharmacies now
operate under the name Park Infusion Services.
In July of 2000, we entered into a non-binding letter of
intent to acquire a pharmacy company in North Texas for
approximately $1.2 million, $800,000 of which will be payable
in Series A Preferred Stock and $400,000 of which will be
payable in cash.
COMPETITION
The retail pharmacy business is highly competitive. The
online pharmacy market is new, rapidly evolving, and also
intensely competitive. Our competitors can be divided into
several groups: (i) independent pharmacies, (ii) chain
pharmacies, such as Walgreen's and Eckerd, (iii) mass merchandise
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 PlanetRx.Com, (vii) mail order
pharmacies, (viii) prescription benefit managers, and (ix)
hospice pharmacy service providers, such as Hospice Pharmacia.
Many of our competitors have, or have announced their intention
to have, the capability to accept orders for products online.
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We believe that we 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. We believe that our strengths in terms
of competing with other retail pharmacy companies will result
from the business connections and experience of our management
team, along with our ability to offer a wider variety of
prescription medicine and health related products than most other
retail pharmacies.
We believe that many of our competitors have longer
operating histories, larger customer or user bases, greater name
recognition, and significantly greater financial, marketing and
other resources. Some of our competitors may be able to secure
products from vendors on more favorable terms, fulfill customer
orders more efficiently and adopt more aggressive pricing than we
can. Furthermore, many of our competitors can devote
substantially more resources to their Web sites and systems
development.
EMPLOYEES
As of September 26, 2000, we employed a total of 150
employees, of whom 67 were employed by Dougherty's (including DHI
and Homecare), 19 by Raven's, 15 by TPS, 35 by Park Infusion, 6
by Rx-Pro and 8 by our corporate office. None of our employees
is represented by a labor union, and we have never experienced a
work stoppage. We believe our relationship with our employees to
be good.
CERTAIN BUSINESS FACTORS
We depend on acquisitions for growth
We anticipate that a significant portion of our revenue and
profit growth will depend on our ability to complete and
assimilate acquired businesses. Our ability to acquire
independent pharmacies will depend on a number of factors, such
as the availability of attractive target companies, the
availability of financing, and market factors that may limit our
ability to use our stock for acquisitions. In addition, we
compete for acquisition candidates with buyers who have greater
resources and may be able to offer more consideration to
acquisition candidates. If we are unable to acquire suitable
businesses, our ability to expand our operations and execute our
business strategy will be adversely affected.
We must integrate our acquired businesses
We have recently grown through acquisitions and plan to
continue acquiring businesses in the future. Our success is
dependent, in part, upon our ability to assimilate acquired
businesses, transition customer and vendor contracts, standardize
financial and accounting systems, and integrate and retain
management and employees of acquired businesses.
We are dependent on our ability to attract and retain key
management and technical personnel
Our success depends to a significant extent on our ability
to attract and retain key personnel. In particular, we are
dependent on our senior management team and personnel with
experience in the pharmacy industry and in consolidating
businesses. To date, industry growth has created a tight labor
market for pharmacists and pharmacy technicians. We expect
competition for pharmacists and technicians to continue to
intensify. Although we believe that we will compete for
personnel by offering competitive cash and equity compensation
and flexible work schedules, we cannot be certain that we will be
able to attract or retain key employees. If we are unable to
continue to hire pharmacists and pharmacy technicians as we grow
our business, our business operations will be materially and
adversely affected.
We are subject to changes in government regulations
Pharmacists and pharmacies are subject to a variety of state
and federal regulations, such as regulations relating to the
approval process for prescription drugs and reimbursement
policies of government and private plans. Because prescription
drug sales represent a significant portion of our revenues and
profits, changes in the governmental regulations affecting
approval processes or reimbursement policies for prescription
drugs could adversely affect our business.
We are subject to changes in reimbursement cost policies
We sell a growing percentage of our prescription drugs to
customers who are controlled by third-party payment programs,
such as Medicare, Medicaid, private insurance, managed-care plans
and HMOs. Although contracts with third-party payors may
increase the volume of prescription drug sales and gross
revenues, third-party payors typically negotiate lower
prescription prices than other payors. Accordingly, gross profit
margins on sales of prescription drugs have been decreasing and
are expected to continue to decline in future periods. The
amounts we receive from government programs and private third-
party payors are dependent upon the specific benefits included
under the program or the patient's insurance program. Any
substantial delays in reimbursement or significant reductions in
the coverage or payment rates of third-party payors would have a
material adverse effect on our liquidity revenues and
profitability.
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We face increasing competition in our industry
The retail and infusion pharmacy businesses are highly
competitive. We compete with national, regional and local retail
pharmacy chains, other independent retail pharmacies, discount
retail pharmacies, supermarkets, mass merchandise and other
retail stores, and mail order and Internet operations. Our
infusion operations also compete with other large providers of
infusion services, such as national infusion therapy companies,
infusion divisions of national health care companies, and
regional and local providers, many of which may be more
established in a particular market. Some of our competitors have
financial resources that are substantially greater than ours, and
we cannot be certain that we will able to continue to
successfully compete in the future. For an additional
description of our competition, please see the discussion in
Item 1 - Business - Competition.
We have a controlling shareholder
Joe B. Park, our chairman, owns 66% percent of our voting
power through a family limited partnership. As a result, he has
the ability to elect all of our directors and to control the
vote on matters such as mergers, consolidations, sales of
substantially all of our assets, or transactions that could
result in our company ceasing to be publicly-held.
Our common stock trades infrequently and our stock price may be
volatile.
We cannot ensure that an active trading market for our
common stock exists or will exist in the future. Even if the
trading market for our common stock exists, the price at which
the shares of common stock trade is likely to be subject to
significant volatility. The market for our common stock may be
influenced by many factors, including the depth and liquidity of
the market for our common stock, investor perceptions of us, and
general economic and similar conditions.
Our common stock is subject to the "penny stock" rules
Our common stock currently trades on the OTC Bulletin Board.
Therefore, we cannot provide any assurances that a liquid trading
market will exist at the time any investor desires to dispose of
any shares of our common stock. In addition, our common stock is
subject to the so-called "penny stock" rules that impose
additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and
accredited investors (generally defined as an investor with a net
worth in excess of $1 million or annual income exceeding $200,000
or $300,000 together with a spouse). For transactions covered by
the penny stock rules, a broker-dealer must make a suitability
determination for the purchaser and must have received the
purchaser's written consent to the transaction prior to sale.
Consequently, both the ability of a broker-seller to sell our
common stock and the ability of holders of our common stock to
sell their securities in the secondary market may be adversely
affected. The Securities and Exchange Commission has adopted
regulations that define a "penny stock" to be an equity security
that has a market price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require the delivery, prior to the
transaction, of a disclosure schedule relating to the penny stock
market. The broker-dealer must disclose the commissions payable
to both the broker-dealer and the registered representative,
current quotations for the securities and, if the broker-dealer
is to sell the securities as a market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control
over the market. Finally, monthly statements must be sent
disclosing recent price information for the penny stock held in
the account and information on the limited market in penny
stocks. As a result of the additional suitability requirements
and disclosure requirements imposed by the "penny stock" rules,
an investor may find it more difficult to dispose of our common
stock.
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We do not anticipate paying any dividends
We do not plan to pay any dividends in the near future, and
plan to invest available cash in acquiring new businesses and
growing existing businesses. In addition, our senior credit
facility prohibits the payment of any dividends.
Item 2. PROPERTY
We operate multiple locations under lease agreements with
multiple landlords that are subject to different terms and
conditions and expire at various times. In general, we prefer to
lease retail and office space, as opposed to owning property, to
preserve available capital for investment in our pharmacy
operations. However, we may from time to time evaluate the
opportunity to either build or acquire an existing facility in
situations that we believe would be beneficial. Although we
believe that our inability to renew any one of our leases,
particularly those of Dougherty's and Raven's, would result in a
loss of goodwill associated with the location and could
materially impact our operating results for a limited period of
time, we expect to be able to negotiate leases on acceptable
terms in the future.
We maintain both our corporate offices and our Rx-Pro.Com,
Inc. offices in the same North Dallas office building on Preston
Road, near our Dougherty's pharmacy. We lease 1,762 square feet
of space under a lease that expires in May 2001. Rx-Pro.Com,
Inc. leases 1,372 square feet of space under a lease that expires
February 2003.
Dougherty's operates the retail pharmacy, DHI and Homecare
in a single-story retail shopping center located on Preston Road
in North Dallas. Dougherty's has operated at that location since
March of 1967. The pharmacy currently leases 11,685 square feet
under an agreement that expires in January 2004. Given the
longevity of Dougherty's operations at the Preston location, the
pharmacy has gained a certain degree of customer familiarity and
loyalty over time, as customers have come to associate
Dougherty's with its current location. While there can be no
assurance that lease rates in the future will
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remain economically attractive at its current location, we
believe that we will continue to be able to negotiate lease terms
reasonably acceptable to us, due in part to a continuing
competitive local real estate market and Dougherty's operating
history, reputation and creditworthiness.
Raven's leases a stand-alone, two-story facility in the
central business district of Oak Cliff, south of downtown Dallas.
The pharmacy operates 2,587 square feet of space under a lease
that expires in January 2002. As with Dougherty's, Raven's has a
well-established operating history and reputation at that
location, and although there can be no assurance that we will be
able to negotiate acceptable lease terms in the future, we
believe that Raven's will be able to operate in its current
location for the foreseeable future.
Total Pharmacy Supply operates 12,000 square feet of office
and warehouse space in a single-story commercial office park in
Arlington, Texas near U.S. Interstate 30. From this location,
under a lease that expires in March of 2002, TPS maintains its
executive offices and inventory of saleable goods. We believe
that, in the event TPS is unable to negotiate acceptable lease
terms, we would be able to secure replacement office and
warehouse space at acceptable terms without substantial
disruption in operating results.
Park Infusion Services operates three locations in San
Antonio, Dallas and St. Petersburg, Florida. The San Antonio
location operates in 4,226 square feet of office space located
within the primary medical district of San Antonio under a lease
that expires in October of 2000. The Dallas location operates in
3,400 square feet of office space near downtown Dallas under a
lease that expires January 2004. The St. Petersburg location
operates 4,267 square feet in a commercial office building under
a lease that expires May 2003. We do not believe that the
failure to successfully renegotiate any of its leases would
materially impact our operations or operating results.
Item 3. LEGAL PROCEEDINGS
We are not a party to, nor are any of our properties the
subject of, any pending legal proceeding other than routine
matters incidental to our business.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal 2000, the Company
did not submit any matters to a vote of the Company's security
holders.
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market for Common Stock. We have only one class of
outstanding shares, common stock, $.0001 par value, which is
traded on the OTC Bulletin Board. Each share ranks equally as to
dividends, voting rights, participation in assets on winding-up
and in all other respects. No shares have been or will be issued
subject to call or assessment. There are no preemptive rights,
provisions for redemption or purpose for either cancellation or
surrender or provisions for sinking or purchase funds. We also
have authorized 250,000,000 shares of preferred stock, $.001 par
value, 5,000,000 of which have been
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designated as Series A Preferred Stock, of which 3,024,581 shares
have been issued and are currently outstanding. Each share of
Series A Preferred Stock is entitled to ten votes per share and
to vote with the common shareholders, may be converted into ten
shares of common stock at any time after June 30, 2001, and is
entitled to receive a liquidation preference of $10 per share.
The Company's Common Stock is currently traded on the OTC Bulletin
Board under the symbol "PPRX.OB".
Market Prices of our Common Stock. The following table sets
forth for the fiscal periods indicated the high and low closing
sales price per share of our Common Stock as reported on the OTC
Bulletin Board. The market quotations presented reflect inter-
dealer prices, without retail mark-up, mark-down or commissions
and may not necessarily reflect actual transactions.
COMMON STOCK
CLOSING PRICES
HIGH LOW
FISCAL 1999
First Quarter............................ $0.375 $0.156
Second Quarter........................... $0.375 $0.063
Third Quarter............................ $3.000 $0.125
Fourth Quarter........................... $3.563 $1.125
FISCAL 2000
First Quarter............................ $3.188 $1.000
Second Quarter........................... $3.000 $1.625
Third Quarter............................ $4.063 $2.063
Fourth Quarter........................... $2.938 $1.625
FISCAL 2001
First Quarter (through September 26, 2000) $2.000 $1.063
The closing price for the Company Common Stock on September
26, 2000 as reported on the OTC Bulletin Board was $1.063.
STOCKHOLDERS. As of September 26, 2000, there were
832 holders of record of the common stock according to the
records maintained by our transfer agent. As of September 26,
2000, we had approximately 1,500 stockholders, including
beneficial owners holding shares in street or nominee names.
DIVIDENDS. Park did not pay any dividends on the common
stock during our two most recent fiscal years, and we do not
intend to pay any dividends in the foreseeable future.
Furthermore, we cannot declare or pay any dividends without the
prior written consent of The Bank of Texas, N.A., our senior
lender, until we fulfill all of our obligations and payments
under our agreement with the Bank.
RECENT SALES OF UNREGISTERED SECURITIES. Through June 30,
2000, we issued 41,515 shares of our Series A Preferred Stock to
two shareholders of Total Pharmacy Supply, Inc. ("TPS") in
connection with our acquisition of TPS on April 1, 2000. These
shares were issued to these former owners in a private
transaction in reliance upon Section 4(2) of the Securities Act
of 1933.
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Item 6. MANAGEMENT'S PLAN OF OPERATION
Strategic Objectives
Over the course of the next twelve months, we intend to
pursue the following strategic objectives in order to grow our
business, improve productivity and efficiency, enter new
geographic and product markets, enhance profitability and build
shareholder value.
Focus on High-End, Technical Pharmacy Services. We believe
that a substantial market exists for high-end pharmacy services
that are not typically provided by national chain drug stores,
grocery pharmacies or mass merchandise pharmacies. Among these
high-end services are drug compounding, infusion therapy, durable
medical equipment and institutional pharmacy. We intend to
promote these services in the coming year.
The market for these high-end products and services has
emerged over recent history due to several factors. First, the
healthcare industry has experienced a trend toward reduced
hospitalization. With the widespread implementation of managed
care in the United States and its attendant focus on cost
containment, payors have increasingly sought treatment
alternatives to hospitalization. Second, improved technology and
other advancements have fostered an environment in which
alternative healthcare solutions such as outpatient care, day
surgery, home healthcare and hospice care have grown
significantly over the past decade. Third, improvements in drug
development and efficacy have facilitated the treatment of
certain conditions, such as those relating to the heart or
thyroid, through a drug regimen in lieu of hospitalization.
As a result of these broad trends, drug utilization has increased
dramatically over the last several years, and pharmacy services
that were historically provided largely in the hospital setting,
including compounded drugs, infusion therapy and durable medical
equipment, are now increasingly delivered through independent
pharmacies and related businesses.
Dramatic changes in the industry landscape for drug stores
over the last several years have contributed to our market
opportunity. Large, national drug store chains such as Eckerd's
and Walgreen's have significantly expanded their number of
locations and adjusted their operating focus by increasing the
variety of products offered but decreasing the depth of those
products. These locations typically seek to maximize product
throughput, and the net result is a retail presence that operates
more like a convenience store or mass merchandise retailer,
offering certain grocery and home goods items, along with a
limited inventory of prescription drugs and over-the-counter
items. These companies are not able to meet the need for more
technical, complex pharmacy products, like antibiotic creams or
infusion products that we provide.
Acquire Pharmacies and Related Businesses. To take
advantage of the existing market opportunity, we anticipate that
we will enter discussions from time to time with independent
pharmacies and related companies regarding potential
acquisitions. We intend to acquire independent pharmacies that
provide complex, high-end pharmacy and related services, are
geographically desirable or are otherwise market leaders. Our
approach is to identify high-quality, well-performing pharmacies
with long histories of operations and solid, stable management
teams in place.
Our objective is to build a cohesive network of operations
providing a wide range of technical pharmacy services. We plan
to focus our efforts
-21-
<PAGE>
toward major metropolitan and surrounding areas with large
populations of customers who require these types of products and
services. We believe that our strategy will provide the greatest
opportunity to achieve sales and profit growth over time.
Cost Control. Over the next year, we will emphasize cost
control, including both purchasing costs and operating costs.
While we believe that cost management is a daily requirement, our
acquisition strategy increases the need for such attention to
cost.
We anticipate negotiating our purchasing terms with
suppliers from time to time for improved pricing and increased
service levels, particularly as we complete acquisitions over the
next year. We believe that as we grow, our purchasing power and
ability to lower our purchasing costs will increase.
We are also pursuing programs to reduce operating expenses,
particularly store staffing and overhead expenses. To reduce our
reliance on overtime, improve our workforce utilization and
reduce overall payroll costs, we plan to improve staffing
management programs, increase employee training and implement
general business process improvements. We will review overhead
costs on an ongoing basis, and with each acquisition, in order to
minimize administrative redundancy.
Technology Implementation and Productivity Improvements. To
date, technology has not been deployed to any significant extent
at Park's operating companies. We are currently in the process
of developing a comprehensive technology plan that will be
implemented over the next two to three years. We are reviewing
proposed projects and intend to establish the priority and timing
of projects; however, at present, a definitive implementation
schedule has not been determined.
Although we are currently evaluating various technical
solutions, our objectives include:
* improving business processes,
* increasing product throughput,
* reducing operating expense,
* maximizing inventory utilization,
* minimizing accounts receivable investment,
* improving corporate communication and
* increasing employee satisfaction and productivity.
We anticipate that while some of these technology projects
will be implemented over the next 12 months, other of these
projects will not be implemented until a later date.
Through these efforts, we intend to provide a higher level
of customer service while improving overall profitability and
shareholder value in the process.
-22-
<PAGE>
Expand Rx-Pro.Com Operations in Texas and the Southwest.
Our Rx-Pro subsidiary has developed Internet technology to
facilitate the electronic process of issuing prescriptions and
maintaining patient records. Currently, Rx-Pro is in the later
stages of beta testing its systems, and for the upcoming year, we
plan to begin offering Rx-Pro's services commercially beginning
in Texas and then to the Southwest.
To accomplish our commercial rollout of the application
service platform, Rx-Pro will require additional funding to hire
personnel across several disciplines and implement a regional
marketing strategy to grow the business. We are currently
evaluating capital strategies with respect to Rx-Pro, which may
involve selling a portion of the subsidiary to outside investors
or issuing additional shares of our stock through either a
private equity placement or secondary equity offering. We
believe that an investment of $5 million will be required in the
next twelve months for Rx-Pro to implement its business plan.
Hire Pharmacists and Pharmacy Technicians. As we grow and
overall prescription volume increases, we will require
additional, competent staff to support our pharmacy operations.
To date, industry growth has created a tight labor market for
pharmacists and pharmacy technicians. We expect that competition
for pharmacists and technicians will continue to intensify in the
upcoming year, and we plan to compete for these people primarily
by offering flexible work schedules, market-oriented salary
compensation and stock options.
Capital Adequacy and Sources of Liquidity
To accomplish our strategic objectives over the next year,
we will in all likelihood require additional capital. The amount
of capital required will depend, among other things, on the
success of our acquisition program and the structure of our
acquisitions. Specifically, to the extent that acquisition
consideration consists of our stock or subordinated seller notes,
our cash capital requirements will generally be reduced.
With the noted exception of the capital required for the
commercial rollout of Rx-Pro, we believe that our existing
sources of capital, primarily operating cash flow and our bank
facility, will be adequate to undertake our plan of operation for
the next twelve months. With respect to the proposed North Texas
acquisition, we anticipate drawing under our Acquisition Facility
(described below) to fund the $400,000 cash portion of that
transaction.
In August 2000, we entered into a Loan Agreement with Bank
of Texas, N.A. (the "Credit Facility"). The Credit Facility,
which replaced our former existing $3,336,000 revolving credit
and term loan facility, consists of a $1,500,000 revolving credit
facility (the "Revolving Facility") for working capital purposes,
a $1,300,000 term loan facility (the "Term Facility") to
refinance existing indebtedness and a $5,000,000 acquisition line
of credit (the "Acquisition Facility") for future acquisitions.
The Term Facility, was fully drawn on August 10, 2000 to repay
amounts outstanding under our former credit facility and matures
on August 10, 2004. The Term Facility and will be amortized in
equal monthly payments over four (4) years, commencing September
10, 2000. The Revolving Facility matures on August 10, 2001, with
interest payable monthly and principal due at maturity. The
Acquisition Facility, which matures on August 10, 2001, permits
Park to borrow money in conjunction with acquisitions, subject to
certain conditions. Under the Acquisition Facility, borrowings
for a given acquisition under the line may revolve for a period
of 180 days, at which point such borrowings are repayable on a
four (4) year,
-23-
<PAGE>
fully amortizing term loan. We also may borrow additional
amounts under the Credit Facility subject to certain operating
cash flow and asset conditions.
The Credit Facility limits our ability to incur debt, to
sell or dispose of assets, to create or incur liens, to make
additional acquisitions, to pay dividends, to purchase or redeem
our stock and to merge or consolidate with any other person. In
addition, the Credit Facility requires us to meet certain
financial ratios and tests, and provides the lender with the
right, following an event of default, to require the payment of
all amounts outstanding under the facility and terminate all
commitments thereunder. The Credit Facility is secured by our
consolidated assets and a pledge of our stock in our operating
subsidiaries.
Item 7. FINANCIAL STATEMENTS
The financial statements required by this Item are set forth
beginning on page F-1 hereof.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
-24-
<PAGE>
PART III
Certain information required by Part III is incorporated by
reference in this report from the definitive Proxy Statement for
the Company's 2000 Annual Meeting of Stockholders to be filed
with the Commission within one hundred twenty (120) days
following the end of the fiscal year covered by this report (the
"Proxy Statement").
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
The information required by this Item is incorporated by
reference from the Proxy Statement.
Item 10. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by
reference from the Proxy Statement.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated by
reference from the Proxy Statement.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by
reference from the Proxy Statement.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following exhibits are filed as a part of, or incorporated
by reference into, this Annual Report on Form 10-KSB:
2.1 Stock Purchase Agreement dated as of March 9, 1999 (filed as
Annex "A" to the Registrant's Definitive Proxy Statement
filed on September 7, 1999, and incorporated herein by
reference)
2.2 Agreement and Plan of Merger dated as of December 9, 1999
(filed as Exhibit 10.1 to the Registrant's Form 8-K on
January 5, 2000, and incorporated herein by reference)
2.3 Share Exchange Agreement dated as of December 30, 1999
(filed as Exhibit 10.1 to the Registrant's Form 8-K on
January 14, 2000, and incorporated herein by reference)
2.4 Agreement and Plan of Merger dated as of March 31, 2000
(filed as Exhibit 2.1 to the Registrant's Form 8-K on April
14, 2000, and incorporated herein by reference)
2.5 Bill of Sale and Asset Purchase Agreement dated as of August
10, 2000 but effective August 1, 2000 by and among Park Infusion
Services, LP and Amedisys, Inc. and certain of its subsidiaries.
(filed as Exhibit 2.1 to the Registrant's Current Report on
Form 8-K dated August 10, 2000 and filed August 25, 2000, and
incoporated herein by reference)
3.1* Articles of Incorporation
3.2 Articles of Amendment to the Articles of Incorporation
(filed as Exhibit 3.1.2 to the Registrant's Amendment No. 1
to Form 10-KSB for fiscal year ended June 30, 1998, and
incorporated by reference herein)
3.3 Articles of Amendment and Statement of Designation of Series
A Preferred Stock (filed as Annex "B" to the Registrant's
Definitive Proxy Statement filed on September 7, 1999, and
incorporated herein by reference)
3.4* Amended and Restated Bylaws of Park Pharmacy Corporation
10.1 Loan Agreement dated as of August 10, 2000, by and among Park
Pharmacy Corporation, Dougherty's Pharmacy, Inc., Raven's
Pharmacy, Inc., Total Pharmacy Supply, Inc., Rx-Pro.Com, Inc.
and Park Infusion Services, LP, as borrowers, and Bank of Texas,
N.A., as lender, and related Promissory Notes and Pledge and
Security Agreements. (filed as Exhibit 99.1 to the Registrant's
Current Report on Form 8-K dated August 10, 2000 and filed
August 25, 2000, and incorporated herein by reference)
10.2* Form of Executive Employment Agreement
21.1* Subsidiaries of the Registrant
27.1* Financial Data Schedule
(b) Reports on Form 8-K: A current Report on Form 8-K was
filed on April 14, 2000 in connection with the Company's
acquisition of Total Pharmacy Supply, Inc.
* Filed herewith
-25-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the Registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on September 26,
2000.
PARK PHARMACY CORPORATION,
a Colorado corporation
By: /s/ Thomas R. Baker
--------------------------------
Name: Thomas R. Baker
Title: President and
Chief Executive Officer
In accordance with the Exchange Act, this report has been
signed on the 26th day of September, 2000, by the following
persons on behalf of the Registrant and in the capacities
indicated.
Signature Title Date
--------- ----- ----
/s/ Thomas R. Baker President, Chief September 26,
-------------------- Executive Officer and 2000
Thomas R. Baker Director
(Principal Executive Officer,
Principal Financial Officer
and Principal Accounting
Officer)
/s/ James W. Moncrief
--------------------- Executive Vice President September 26,
James W. Moncrief and Director 2000
/s/ Joe B. Park
-------------------- Chairman of the Board of September 26,
Joe B. Park Directors 2000
/s/ Gwendolyn L. Park
--------------------- Secretary, Treasurer and September 26,
Gwendolyn L. Park Director 2000
-------------------- Chief Infusion Director and September 26,
Richard M. Allen Director 2000
-26-
<PAGE>
Index to Financial Statements
Independent Auditors Report (Hein + Associates, LLP) F-1
Independent Auditors Report (Alvin L. Dahl & Associates, PC) F-2
Consolidated Balance Sheet at June 30, 2000 F-3
Consolidated Statements of Operations for the fiscal
years ended June 30, 2000 and June 30, 1999 F-4
Consolidated Statements of Shareholders' Equity for the
fiscal years ended June 30, 2000 and June 30, 1999 F-5
Consolidated Statements of Cash Flows for the fiscal
years ended June 30, 2000 and June 30, 1999 F-6
Notes to Consolidated Financial Statements F-7
-27-
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Park Pharmacy Corporation
Dallas, Texas
We have audited the accompanying consolidated balance sheet of Park
Pharmacy Corporation as of June 30, 2000 and the related
consolidated statements of income, stockholders' equity and cash
flows for the year 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 Park
Pharmacy Corporation as of June 30, 2000, and the results of its
operations and its cash flows for the year then ended in conformity
with generally accepted accounting principles
/s/ Hein + Associates LLP
Hein + Associates LLP
Dallas, Texas
September 19, 2000
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Park Pharmacy Corporation
Dallas, Texas
We have audited the accompanying statements of operations,
stockholders' equity, and cash flows of Park Pharmacy Corporation, a
development stage company, for the year ended 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 results of operations and cash
flows for the year ended June 30, 1999 of Park Pharmacy Corporation
in conformity with generally accepted accounting principles.
/s/ Alvin L. Dahl & Associates, PC
Alvin L. Dahl & Associates, PC
July 21, 1999
Dallas, Texas
F-2
<PAGE>
CONSOLIDATED BALANCE SHEET
June 30, 2000
ASSETS
------
CURRENT ASSETS:
Cash $ 935,946
Trade accounts receivable, net of $68,700 allowance for
doubtful accounts 2,982,657
Inventories 1,911,705
Prepaid expenses and other 51,561
-----------
Total current assets 5,881,869
PROPERTY AND EQUIPMENT, net 877,670
SOFTWARE COSTS 2,269,265
GOODWILL, net of $28,100 accumulated amortization 1,239,803
OTHER ASSETS 228,263
-----------
Total assets $10,496,870
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 1,912,651
Accrued liabilities 284,007
Income taxes payable 98,400
Current portion of long-term debt 66,602
-----------
Total current liabilities 2,361,660
LONG-TERM DEBT, net of current portion 2,096,239
COMMITMENTS (Notes 7 and 10)
STOCKHOLDERS' EQUITY:
Preferred stock; $.001 par value; 250,000,000 shares
authorized; 3,024,581 shares issued and outstanding 3,025
Common stock; $.0001 par value; 750,000,000 shares
authorized;4,508,551 shares issued and outstanding 451
Additional paid-in capital 6,063,792
Retained earnings 133,003
Unearned compensation-restricted stock awards (161,300)
-----------
Total stockholders' equity 6,038,971
-----------
Total liabilities and stockholders' equity $10,496,870
===========
F-3
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended June 30,
-------------------------
2000 1999
--------- ------------
REVENUES:
Product sales, net 11,354,039 $ -
Online sales, net 123,140 -
----------- ----------
Total revenues 11,477,179 -
OPERATING EXPENSES:
Cost of goods sold 7,473,575 -
Salaries, wages and related taxes 2,093,793 47,368
Selling, general and administrative
expenses 1,401,585 55,991
Depreciation and amortization 85,938 2,368
Acquisition and merger costs 54,163 -
----------- ----------
Total operating expenses 11,109,054 105,727
----------- ----------
Income (loss) from operations 368,125 (105,727)
OTHER EXPENSE:
Interest expense, net (78,554) -
Financing expenses (15,067) -
----------- ----------
Total other expense (93,621) -
----------- ----------
Income (loss) before income taxes 274,504 (105,727)
INCOME TAX EXPENSE 31,630 -
----------- ----------
NET INCOME (LOSS) 242,874 (105,727)
=========== ===========
NET LOSS PER COMMON SHARE - basic and
diluted $ .01 $ (.01)
=========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
basic and diluted (Note 2(n)) 31,543,000 7,600,000
=========== ==========
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended June 30, 2000 and 1999
<TABLE>
Unearned Total
Preferred Common Stock Additional Retained Compensation- stockholders'
------------------ -------------------- Paid-in- Earnings Restricted Equity
Shares Amount Shares Amount Capital (Deficit) Stock Awards (Deficit)
--------- ------- ---------- ------- ----------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, July 1,
1998 - $ - - $ - $ - $ (4,144) $ - $ (4,144)
Issuance of common
stock for cash - - 7,600,000 760 240 - - 1000
Net loss - - - - - (105,727) - (105,727)
-------- ------- ---------- ------ ------- -------- -------------- ---------
BALANCES, June 30,
1999 - - 7,600,000 760 240 (109,871) - (108,871)
Issuance of Series A
preferred stock in
connection with
reverse acquisition 2,840,566 2,840 (3,180,449) (318) (2,522) - - -
Issuance of Series A
preferred stock in
connection with
businesses acquired 184,015 185 - - 5,872,353 - - 5,872,538
Unearned
compensation in
connection with
restricted stock
awards, net of
forfeitures - - 89,000 9 193,721 - (193,730) -
Amortization of
unearned
compensation - - - - - - 32,430 32,430
Net income - - - - - 242,874 - 242,874
--------- ------- ---------- ------ ---------- -------- -------------- -----------
BALANCES, June 30,
2000 3,024,581 $ 3,025 4,508,551 $ 451 $6,063,792 $133,003 $ (161,300) $ 6,038,971
========= ======= ========== ====== ========== ======== ============== ===========
</TABLE>
See accompanying notes to these financial statements.
F-5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30,
------------------------
2000 1999
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 242,874 $ (105,727)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 85,938 2,368
Amortization of debt issuance costs 15,067 -
Amortization of unearned compensation 32,430 -
Deferred income taxes (4,770) -
Changes in operating assets and liabilities,
net of effects of businesses acquired:
Increase in trade accounts receivable (500,256) -
Increase in inventories (26,735) -
Increase in prepaid expenses and other (25,994) -
Increase in other assets (36,685) -
Decrease in trade accounts payable (111,763) -
Increase in accrued liabilities 39,770 -
Decrease in taxes payable (203,100) -
---------- ---------
Net cash used in operating
activities (493,224) (103,359)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (96,021) (1,407)
Increase in software costs (109,357) -
Payments in connection with businesses
acquired (182,837) -
Cash in acquired businesses 540,874 -
---------- ---------
Net cash provided by (used in) investing
activities 152,659 (1,407)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuances of notes payable and
long-term debt 2,808,227 -
Repayments of notes payable (1,337,423) -
Deferred financing costs (195,293) -
Proceeds from issuance of common stock - 1,000
Advances from subsequently-acquired business - 104,766
---------- ---------
Net cash provided by financing
activities 1,275,511 105,766
NET INCREASE IN CASH 934,946 1,000
CASH, beginning of year 1,000 -
---------- ---------
CASH, end of year $ 935,946 $ 1,000
========== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 78,554 $ -
========== =========
Income taxes paid $ 160,000 $ -
========== =========
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Businesses acquired through issuances of
Series A preferred stock $5,872,538 -
Loan origination and other costs incurred
in connection with issuances of notes
payable and long-term debt $ 49,265 $ -
See accompanying notes to these financial statements.
F-6
<PAGE>
1.Nature of Operations
--------------------
Park Pharmacy Corporation ("the Company"), a Colorado
corporation, is primarily engaged in the sale of prescription and
over-the-counter medications, healthcare products and related
services. The Company sells its products and services to a
variety of customers including individuals, hospices, assisted-
living facilities and other institutional healthcare providers.
The Company is also involved in the wholesale distribution of
pharmacy-related products and supplies, which are sold primarily
to independent pharmacies and national retail chains.
2.Summary of Significant Accounting Policies
------------------------------------------
(a) - Organization and Basis of Presentation
On October 19, 1999, Power-Cell, Inc. ("Power-Cell"), a Colorado
corporation, acquired all of the issued and outstanding common
stock of Park Pharmacy Corporation ("Park-TX"), a Texas
corporation, in a transaction that was accounted for as an
acquisition of Power-Cell's net assets and a reorganization under
Power-Cell's capital structure ("reverse acquisition"). In
connection with the reverse acquisition, the stockholders of Park-
TX were issued 2,567,816 shares of newly designated Series A
Preferred Stock. In addition, two Power-Cell stockholders were
issued 200,000 shares of Series A Preferred Stock in exchange for
their common stock, and 72,750 shares of the Series A Preferred
Stock were issued in satisfaction of outstanding Power-Cell
liabilities. The Series A Preferred Stock (see Note 8) includes
voting rights on all matters with the common stock. Following
the reverse acquisition, the former stockholders of Park-TX held
approximately 78% of the Company's voting power. Following the
reverse acquisition, Power-Cell changed its name to Park Pharmacy
Corporation.
In December 1999, the Company acquired Rx-Pro.Com, Inc. ("Rx-
Pro") which operates two Internet pharmacy Web-sites and derives
revenues from the filling and management of prescriptions; and
Dougherty's Pharmacy, Inc. ("Dougherty's") which owns and
operates two retail pharmacies located in Dallas, Texas. In
March 2000, The Company acquired Total Pharmacy Supply, Inc.
("Total Pharmacy"), a wholesale distributor of pharmacy-related
products and supplies. See Note 3.
During the year ended June 30, 1999, the Company had not
commenced its intended plan of operations and was considered a
development stage enterprise. As a result of the acquisitions
described above, the Company has had significant revenues from
principal operations and is no longer considered to be in the
development stage.
(b) - Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries.
Significant intercompany balances and transactions have been
eliminated in consolidation.
(c) - Financial Instruments
The Company's financial instruments, consisting of cash, accounts
receivable, accounts payable and accrued liabilities are carried
at cost, which approximates fair value, due to the short-term
maturities of these instruments. The carrying amounts of the
Company's borrowing arrangements approximates fair value based on
interest rates for similar types of credit arrangements currently
available to the Company.
F-7
<PAGE>
(d) - Inventory
Inventory consists principally of finished goods held for resale,
valued at the lower of cost, using the first-in, first-out
method, or market.
(e) - Property and Equipment
Property and equipment is stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives, generally five to seven
years, of the underlying assets. Leasehold improvements are
depreciated over the expected terms of the underlying leases.
Depreciation expense for the years ended June 30, 2000 and 1999
was approximately $57,900 and $2,400, respectively. The costs of
repairs and maintenance are expensed as incurred.
(f) - Capitalized Software Costs
The Company accounts for costs incurred in connection with its
development of computer software to be used in an application service
platform in accordance with the provisions of Statement of Position
No. 98-1, Accounting for the Costs of Computer Software Developed or
Obtained For Internal Use ("SOP98-1"). The Company capitalizes
eligible software costs once the capitalization criteria of SOP
98-1 are met. After all substantial testing is completed and
software is available for its intended use, software costs are
amortized as described below. Costs of maintenance and customer
support are to be charged to expense when related revenue is
recognized or when those costs are incurred, which ever occurs first.
During the year ended June 30, 2000, the Company capitalized
approximately $2,269,200 related to the development of the Company's
Internet-based pharmaceutical care information system, including
$2,159,900 upon the acquisition of Rx-Pro (Note 3).
Software costs are amortized based upon the greater of the ratio
of current revenues to anticipated future revenues or straight-
line basis over the estimated economic life of five years. As of
June 30, 2000, the Company's pharmaceutical care information
system had not been made available for general release to
customers, as a result, amortization expense has not been
recognized in connection with capitalized software costs.
(g) - Goodwill
Goodwill representing excess of cost over the net assets of
acquired businesses is amortized on a straight-line basis over
estimated lives of five to 20 years. Amortization expense in
connection with goodwill was approximately $28,100 and $0 for the
years ended June 30, 2000 and 1999, respectively.
(h) - Impairment of Long-Lived Assets
The Company evaluates long-lived assets, including goodwill, for
impairment whenever events and changes in circumstances indicate
that the carrying amount of such an asset may not be recoverable.
The Company assesses the recoverability of long-lived assets by
determining whether an asset's carrying value will be recovered
through undiscounted expected future cash flows. If the total of
the future cash flows is less than the carrying amount of the
asset, the Company recognizes an impairment loss based on the
excess of the carrying amount over the estimated fair value of
the asset. As of June 30, 2000, the Company believes no
impairment of the carrying values of its long-lived assets is
required.
(i) - Deferred Financing Costs
Costs incurred in connection with the issuance of new debt
instruments are deferred and included in other assets. Such
costs are amortized by the effective yield method over the term
of the related debt obligation.
F-8
<PAGE>
(j) - Product Sales
The Company recognizes revenue from the sale of pharmaceutical
products and retail merchandise as transactions occur and product
is delivered to the customer. Revenue from wholesale product
sales is recognized at the time of shipment. Revenue is reported
at the estimated net realizable amounts expected to be received
from individuals, third-party payers, and others
Product sales for the fiscal year ended June 30, 2000 included
approximately $8,853,000 related to pharmaceutical products.
(k) - Online Sales
Online sales revenue consists primarily of processing fees
representing amounts billed to customers net of product costs
incurred. The Company recognizes net revenue from such sales as
transactions occur. In November 1999, the Emerging Issues Task
Force ("EITF") of the Financial Accounting Standards Board issued
EITF 99-19, Reporting Revenue Gross versus Net and in December
1999, the U.S. Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements, both of which provide specific guidance for
determining the appropriateness of gross versus net revenue
reporting practices of companies selling products and services
over the Internet. A member pharmacy, and not the Company, is
responsible for the fulfillment of customer purchases, which
indicates the Company does not have risks and rewards as
principal in online sales transactions. Therefore, the Company
records amounts billed to customers net of amounts payable to the
member pharmacy, as prescribed by the pronouncements.
The Company, however, records the gross amounts of receivables
and payables because the Company assumes credit risk for the
amount billed to the customer and is responsible for paying the
member pharmacy.
(l) - Advertising Costs
Advertising costs are expensed as incurred. Total advertising
expenses were approximately $65,700 and $0 in 2000 and 1999,
respectively.
(m) - Income Taxes
The Company accounts for income taxes using the liability method
whereby deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax basis
of assets and liabilities using enacted tax rates and laws which
will be in effect for the year in which the differences are
expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to amounts expected to be
realized.
(n) -Per Share Data
Basic earnings (loss) per common share is computed using the
weighted average number of common shares outstanding during the
period. Diluted earnings (loss) per common share is computed
using the weighted average number of common and common stock
equivalent shares outstanding during the period. Common stock
equivalent shares are excluded from the computation if their
effect is antidilutive.
Included in the weighted average shares computation are
28,430,711 equivalent shares representing 2,843,071 shares of
Series A Preferred Stock that include conversion restrictions.
These shares may not be converted into the Company's common stock
prior to June 30, 2001, and 2,263,700 of such shares
(representing 22,637,000 equivalent shares) can only be converted
ratably over a twenty-year period beginning in 2002.
F-9
<PAGE>
(o) - Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that effect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates and those differences
could be material. Significant estimates made by the Company
include the carrying amounts and economic lives of software costs
and goodwill and the net realizable value of third-party
receivables.
(p) - Reclassifications
Certain reclassifications have been made to conform the prior
year financial statements to the June 30, 2000 presentation.
3.Acquisitions
------------
Rx-Pro.Com, Inc.
On December 21, 1999, the Company acquired all the outstanding
common stock of Rx-Pro in exchange for 97,500 shares of the
Company's Series A Preferred Stock with an estimated fair value,
based on the quoted value of underlying Company common stock, of
approximately $2,154,750, and incurred acquisition costs of
approximately $5,400. The acquisition was recorded using the
purchase method of accounting and the Company's consolidated
financial statements include Rx-Pro's operating results beginning
January 1, 2000. The purchase price was allocated to the net
assets acquired based on their estimated fair values. The fair
value assigned to software costs applicable to an Internet-based
pharmaceutical information system of approximately $2,159,900 was
based on a valuation prepared by an independent third party. The
excess of cost over the fair value of net assets acquired of
approximately $139,700 was recorded as goodwill and is being
amortized over a period of five years. One of the former owners
of Rx-Pro is also a director and significant stockholder of the
Company.
Dougherty's Pharmacy, Inc.
On December 30, 1999, the Company acquired all the outstanding
common stock of Dougherty's in exchange for 45,000 shares of the
Company's Series A Preferred Stock. Dougherty's net assets
acquired were recorded at their historical cost bases due to
common control between Dougherty's and the Company. The
Company's consolidated financial statements include Dougherty's
operating results beginning January 1, 2000.
Total Pharmacy Supply, Inc.
On March 31, 2000 the Company acquired all the outstanding common
stock of Total Pharmacy in exchange for 41,515 shares of the
Company's Series A Preferred Stock (subject to a hold-back of
4,151 of such stock for satisfaction of potential indemnification
claims against the former owners of Total Pharmacy) with a fair
value, based on the quoted value of underlying Company common
stock, of approximately $935,000. In connection with the
acquisition, the Company incurred approximately $177,400 in
related acquisition costs. The acquisition was recorded using the
purchase method of accounting and the Company's consolidated
financial statements include Total Pharmacy's operating results
beginning April 1, 2000. The purchase price was allocated to the
net assets acquired based on their estimated fair values. The
excess of cost over the fair value of net assets acquired of
approximately $1,128,100 was recorded as goodwill and is being
amortized over a period of twenty years.
The following unaudited pro forma summary presents consolidated
results of operations for the Company as if the acquisitions of
Rx-Pro, Dougherty's and Total Pharmacy had occurred at the
beginning of each of the fiscal years ended June 30, 2000 and
1999.
F-10
<PAGE>
2000 1999
------------ -----------
Revenues, net $23,359,000 $19,793,000
Net income (loss) $ 507,000 $ 531,000
----------- -----------
Net income (loss) per common
share, basic and diluted $ .02 $ .07
----------- -----------
The pro forma results included adjustments for the amortization
of goodwill and acquired intangible assets, financing expenses,
and related tax effects. The unaudited pro forma results are not
necessarily indicative of the actual results that would have been
attained had the acquisitions occurred on those dates, nor is it
necessarily indicative of future consolidated results of the
Company.
4.Property and Equipment
----------------------
Property and equipment at June 30, 2000 consisted of the
following:
Furniture, fixtures and equipment $378,998
Computer equipment 343,315
Leasehold improvements 762,254
Vehicles 163,592
----------
1,648,159
Less accumulated depreciation and
amortization (770,489)
----------
$ 877,670
==========
5.Long-Term Debt
--------------
Long-term-debt at June 30, 2000 consisted of the following:
Borrowings with Bank of Texas, N.A. (a):
Revolving Line of Credit Agreement dated
March 6, 2000 in the maximum principal
amount of $3,000,000 - interest payable
monthly; due February 28, 2002 $1,847,113
Term Note dated March 6, 2000 in the
original principal amount of $336,000 -
monthly principal and accrued interest
payments of $7,735; matures February
28, 2005 313,497
Other 2,231
----------
2,162,841
Less current portion (66,602)
----------
$2,096,239
==========
(a) Interest at prime plus one percent (10.5% at June 30,
2000) and collateralized by all the assets of the Company.
F-11
<PAGE>
Credit Facility
On August 10, 2000, The Company entered into a Loan Agreement
("the Credit Facility") with Bank of Texas, N.A. The Credit
Facility, which replaces the borrowing arrangements described
above, consists of a $1,500,000 revolving credit facility (the
"Revolving Facility"), a $1,300,000 term loan facility (the "Term
Facility") and a $5,000,000 acquisition line of credit (the
"Acquisition Facility"). The Revolving Facility matures on August
10, 2001, with interest payable monthly and unpaid principal due
upon maturity. The Term Facility, all of which was borrowed on
August 10, 2000, matures on August 10, 2004 and requires monthly
principal and accrued interest payments. The Acquisition
Facility permits the Company, subject to certain conditions, to
borrow money in connection with future acquisitions. Under the
Acquisition Facility, borrowings for a given acquisition may
revolve for a period of 180 days, at which time such borrowings
are repayable under a four-year term loan arrangement. The
Credit Facility bears interest at prime plus 0.5% and is
collateralized by substantially all of the Company's assets.
The Company's borrowing arrangements with Bank of Texas, N.A.
contain various financial covenants which require the Company to
maintain a specified ratio of current assets and liabilities,
maintain a certain level of net worth and limit capital
expenditures. The borrowing arrangements also contain covenants
that, among other things, limits the Company's ability to incur
additional liens and indebtedness, make certain kinds of
investments, make certain asset dispositions and acquisitions,
make distributions or pay dividends to its stockholders, purchase
or redeem its capital stock and merge or consolidate with any
other entity.
Maturities of Long-Term Debt
Aggregate maturities of the Company's long-term debt obligations
at June 30, 2000 were as set forth below. These amounts give
effect to the refinancing described above:
Year ended June 30,
-------------------
2001 $ 66,602
2002 1,917,073
2003 77,670
2004 86,229
2005 15,267
----------
$2,162,841
==========
6.Income Taxes
------------
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.
The significant components of the Company's deferred tax assets
and liabilities at June 30, 2000 were as follows:
Deferred tax assets:
Accounts receivable valuation allowance $ 25,420
Inventory costs capitalized for tax purposes 11,510
Research and devlopment tax credits 13,420
Net operating loss carryforwards 126,500
----------
Total deferred tax assets 176,850
F-12
<PAGE>
Deferred tax liabilities:
Property and equipment differences in
depreciation methods 111,210
Software costs, differences in
capitalization methods 57,820
Other 3,110
----------
Total deferred tax liabilities 172,140
----------
Net deferred tax asset $ 4,710
==========
Income tax expense consisted of the following:
Year Ended June 30,
-------------------
2000 1999
-------- -------
Current tax expense:
Federal $ - $ -
State 36,400 -
-------- --------
36,400 -
Deferred tax expense:
Federal (5,780) -
State 1,010 -
-------- --------
$ 31,630 $ -
======== ========
The differences between income tax expense at the federal
statutory rate and the Company's effective tax rate were as
follows:
Year Ended June 30,
------------------
2000 1999
-------- -------
Federal statutory rate 33% 33%
State taxes 13% -
Non-deductible expenses 8% -
Research and development
activities credit (5%) -
Net operating loss carryforwards (46%) (33%)
Other 9% -
-------- -------
Effective tax rate 12% -
-------- -------
At June 30, 2000, the Company had available net operating loss
("NOL") carryforwards of approximately $1,380,000 which may be
used to reduce future taxable income and begin to expire in 2000
through 2020. NOLs related to businesses acquired of
approximately $1,300,000 are subject to certain annual
limitations.
7.Commitments
-----------
Leases
The Company's retail pharmacy, wholesale distribution and
corporate office facilities are leased under non-cancelable
operating lease agreements. Certain leases contain renewal
options and provide that the Company pay taxes, insurance,
maintenance and other operating expenses. Total rent expense for
operating leases was approximately $225,000 and $12,800 for the
years ended June 30, 2000 and 1999, respectively.
F-13
<PAGE>
Future minimum lease payments under non-cancelable operating
leases are as follows:
Year ended June 30,
-------------------
2001 $ 445,200
2002 395,700
2003 348,500
2004 165,600
----------
$1,355,000
==========
Employment Agreements
In April of 2000, employment agreements were executed with three
officers of the Company. These agreements provide for annual
base salaries with terms of two to five years expiring at various
dates through March 2005. The agreement entered into with one
officer may also require the issuance of an option to acquire
1,000,000 shares of the Company's common stock. As of June 30,
2000, a stock option plan to permit issuance of the option had
not been adopted by the Company.
The Company has also entered into employment agreements in
connection with its acquisition of Total Pharmacy. The Total
Pharmacy agreements provide for annual salaries and expire in
March 2005.
Future minimum payments under these agreements are as follows:
Year ended June 30,
2001 $ 455,000
2002 423,750
2003 298,750
2004 205,000
2005 153,750
----------
$1,536,250
==========
Software Licensing Agreement
The Company has entered into a licensing agreement with a party
involved in the initial development of the Company's Internet-
based pharmaceutical care information system. Under the
agreement, the Company has been granted the rights to various
copyrighted databases and related software libraries. The
agreement also includes rights to sublicense the software to the
Company's customers. The agreement requires the Company pay an
annual licensing fee of $5,000 and per user royalty fees as
specified under the agreement. The Company may terminate its
obligation as provided for in the agreement.
8. Stockholders' Equity
--------------------
Preferred Stock
The Company has authorized 250,000,000 shares of preferred stock,
which may be issued in series with rights and preferences as
designated by the Company's board of directors.
F-14
<PAGE>
Series A Preferred Stock
In connection with the acquisitions described in Notes 2 and 3,
the Company issued 3,024,581 shares of Series A Preferred Stock.
Each share of Series A Preferred Stock is convertible into ten
shares of the Company's common stock. The conversion into common
stock is restricted as described in Note 2 (n).
Restricted Stock Awards
In March 2000, the Company awarded 92,000 shares of restricted
stock to certain employees. These shares are nontransferable and
subject to forfeiture in the event employment is terminated
within an eighteen-month vesting period. The estimated fair
value of shares awarded was $200,000, which has been recorded as
a separate component of stockholders' equity. Compensation
expense is being amortized over the vesting period. During 2000,
the Company recognized related compensation expense of $32,430
and a total of 3,000 shares were forfeited.
9. Concentrations and Credit Risk
------------------------------
Accounts receivable consists primarily of amounts receivable from
third-party payment providers (insurance companies and government
agencies) under various medical reimbursement programs. Certain
third-party receivables are recorded at estimated net realizable
amounts. Amounts that may be received under medical
reimbursement programs are affected by changes in payment
criteria and are subject to legislative actions. Concentrations
of credit risk associated with these accounts receivable are
considered minimal due to the Company's diverse customer base.
The Company does not generally require collateral in connection
with credit sales to its customers. Management periodically
evaluates the creditworthiness of the Company's customers and
believes the allowance for doubtful accounts is adequate.
10. Employee Benefit Plans
----------------------
Through its subsidiaries, the Company maintains two defined
contribution plans. The plans collectively benefit most full-
time employees of the Company and provide for employer matching
contributions ranging from 3% to 6% of annual compensation.
Combined employer's matching contributions for the plans were
approximately $10,400 and $0 in 2000 and 1999, respectively.
11. Business Segment Information
----------------------------
The Company has adopted Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise
and Related Information, which establishes standards for
reporting information about operating segments in financial
statements.
The Company's operations are principally managed on a products
and services basis and are comprised of the following reportable
segments: Pharmacy Operations, Non-Drug Products and Online
Pharmacy Services. Through its pharmacy operations, the Company
offers prescription and over-the-counter medications, durable
medical products and other general merchandise. Non-drug
products represent the wholesale distribution of pharmacy
supplies and related accessory items sold to independent
pharmacies, national retail chains and hospitals. The Company
also provides online pharmacy services through an Internet web-
site primarily used by hospice facilities located in the
Dallas/Fort Worth, Texas metropolitan area.
F-15
<PAGE>
Management evaluates the performance of its operating segments
based on segment earnings, which is defined as income before
income taxes, interest, depreciation and amortization.
Company management is actively pursuing strategic purchases of
existing pharmacy-related enterprises and as such has combined
certain corporate assets with the Pharmacy Operations segment.
Information for the year ended June 30, 1999 has not been
provided since the Company's principal operations had not yet
begun during that period.
Summarized segment information for fiscal June 30, 2000 is as
follows:
Segment Revenues:
Pharmacy operations $10,497,700
Non-drug products 856,300
Online pharmacy services 123,100
-----------
Total segment revenues $11,477,100
===========
Segment Earnings:
Pharmacy operations $ 920,000
Non-drug products 82,600
Online pharmacy services (128,200)
-----------
Total segment earnings 874,400
-----------
Corporate (366,200)
Interest and financing
expense, net (93,600)
Depreciation and
amortization (85,900)
Acquisition costs (54,200)
-----------
Income before income taxes $ 274,500
===========
Segment Assets:
Pharmacy operations $5,523,600
Non-drug products 741,100
Online pharmacy services 2,786,400
----------
Total segment assets 9,051,100
----------
Corporate 206,000
Goodwill resulting from
business acquisitions, net
1,239,800
-----------
Total assets $10,496,900
===========
12. Subsequent Events (unaudited)
----------------------------
On August 10, 2000, the Company acquired certain infusion
pharmacy assets from subsidiaries of Amedisys, Inc., a provider
of home healthcare services. The Company acquired the ongoing
operations of three infusion pharmacies for cash consideration of
$1,750,000. In the transaction, the Company acquired
F-16
<PAGE>
all tangible and intangible assets, except for cash and accounts
receivable, which were retained by the seller.
In July 2000, the Company entered into a non-binding letter of
intent to purchase a pharmcay company that operates two retail
pharmacies located in North Texas. The proposed consideration
for the acquisition consists of $800,000 payable in the Company's
Series A Preferred Stock and $400,000 of cash.
**************************
F-17
<PAGE>
INDEX TO EXHIBITS
2.1 Stock Purchase Agreement dated as of March 9, 1999 (filed as
Annex "A" to the Registrant's Definitive Proxy Statement
filed on September 7, 1999, and incorporated herein by
reference)
2.2 Agreement and Plan of Merger dated as of December 9, 1999
(filed as Exhibit 10.1 to the Registrant's Form 8-K on
January 5, 2000, and incorporated herein by reference)
2.3 Share Exchange Agreement dated as of December 30, 1999
(filed as Exhibit 10.1 to the Registrant's Form 8-K on
January 14, 2000, and incorporated herein by reference)
2.4 Agreement and Plan of Merger dated as of March 31, 2000
(filed as Exhibit 2.1 to the Registrant's Form 8-K on April
14, 2000, and incorporated herein by reference)
2.5 Bill of Sale and Asset Purchase Agreement dated as of August
10, 2000 but effective August 1, 2000 by and among Park Infusion
Services, LP and Amedisys, Inc. and certain of its subsidiaries.
(filed as Exhibit 2.1 to the Registrant's Current Report on
Form 8-K dated August 10, 2000 and filed August 25, 2000, and
incoporated herein by reference)
3.1* Articles of Incorporation
3.2 Articles of Amendment to the Articles of Incorporation
(filed as Exhibit 3.1.2 to the Registrant's Amendment No. 1
to Form 10-KSB for fiscal year ended June 30, 1998, and
incorporated by reference herein)
3.3 Articles of Amendment and Statement of Designation of Series
A Preferred Stock (filed as Annex "B" to the Registrant's
Definitive Proxy Statement filed on September 7, 1999, and
incorporated herein by reference)
3.4* Amended and Restated Bylaws of Park Pharmacy Corporation
10.1 Loan Agreement dated as of August 10, 2000, by and among Park
Pharmacy Corporation, Dougherty's Pharmacy, Inc., Raven's
Pharmacy, Inc., Total Pharmacy Supply, Inc., Rx-Pro.Com, Inc.
and Park Infusion Services, LP, as borrowers, and Bank of Texas,
N.A., as lender, and related Promissory Notes and Pledge and
Security Agreements. (filed as Exhibit 99.1 to the Registrant's
Current Report on Form 8-K dated August 10, 2000 and filed
August 25, 2000, and incorporated herein by reference)
10.2* Form of Executive Employment Agreement
21.1* Subsidiaries of the Registrant
27.1* Financial Data Schedule
* Filed herewith
