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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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(X)
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Definitive Proxy Statement
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(
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Definitive Additional Materials
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(
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Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
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(X)
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No
fee required
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| 1) |
Title
of each class of securities to which transaction applies:
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| 2) |
Aggregate
number of securities to which transaction
applies:
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| 3) |
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
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| 4) |
Proposed
maximum aggregate value of transaction:
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| 5) |
Total
fee paid:
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(
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Fee
paid previously with preliminary materials.
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(
)
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous
filing by
registration statement number, or the Form or Schedule and the date
of its
filing.
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| 1. |
To
consider and act upon a proposal to amend the Articles of Incorporation
of
the Company to change the Company’s name to Assured
Pharmacy, Inc.;
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| 2. |
To
confirm the appointment of Squar, Milner, Reehl & Williamson, LLP as
auditors for the Company; and
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| 3. |
To
elect four directors for a term expiring at the next annual meeting
of
shareholders, or until their successors are duly elected or qualified;
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| 4. |
To
consider and act upon such other business as may properly come before
the
Meeting or any adjournment thereof.
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Name
of Nominee
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Age
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Richard
Falcone
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52
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James
Manfredonia
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44
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Robert
DelVecchio
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40
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Haresh
Sheth
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55
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Name
|
Age
|
Position
|
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Robert
DelVecchio
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40
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Chief Executive Officer & Chief Financial Officer
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John
Eric Mutter
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45
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Chief Operating Officer
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| · |
The
appropriate size of the Company’s board of directors;
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| · |
The
needs of the Company with respect to the particular talents and experience
of its directors;
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| · |
The
knowledge, skills and experience of nominees, including experience
in
finance, administration or public service, in light of prevailing
business
conditions and the knowledge, skills and experience already possessed
by
other members of the board;
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| · |
Experience
in political affairs;
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| · |
Experience
with accounting rules and practices; and
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| · |
The
desire to balance the benefit of continuity with the periodic injection
of
the fresh perspective provided by new board members.
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| 1. |
Reviewed
and discussed the audited financial statements with management of
the
Company;
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| 2. |
Discussed
with Squar,
Milner, Reehl & Williamson, LLP,
the independent auditors of the Company, the matters required to
be
discussed by Statement on Accounting Standards No. 61 (communications
with
Audit Committees); and
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| 3. |
Reviewed
and discussed the written disclosures and the letter from the Company's
independent auditors on the matters relating to the auditor's independence
from the Company.
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| · |
The
Company’s former CEO, David Parker, founded
RxSystems, Inc. (“RxSystems”) in March 2002. In March 2002, RxSystems
acquired from the Safescript Pharmacies, Inc. (formerly known as
RTIN
Holdings, Inc.) the exclusive licensing rights to establish and operate
pharmacies under the name “Safescript Pharmacies” throughout California,
Oregon, Washington and Alaska. On March 27, 2003, RxSystems assigned
to
the Company all of its rights under this exclusive license.
The
Company agreed to reimburse Mr. Parker $370,000 for personal funds
advanced to secure the License. These funds plus five percent (5%)
interest per annum were due and payable in full to Mr. Parker on
December
31, 2007. In a termination and settlement agreement entered into
with Mr.
Parker on February 1, 2005, Mr. Parker accepted $10,000 cash and
494,000
shares of common stock and released and forever discharged the Company
from all liability associated with this
debt.
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| · |
On
November 27, 2003, the Company entered into an agreement with its
former
CEO, David Parker, to cancel debt owed to him and reported on the
Company’s financial statements as “Advances due to a shareholder.”
Initially, Mr. Parker agreed to release and forever discharge the
Company
from all liability associated with this debt and the Company agreed
to
transfer, assign, and convey all of its rights under the exclusive
license
granted by Safescript Pharmacies, Inc. solely for the consolidated
statistical metropolitan area of Fresno, California. As a part of
this
agreement, the Company agreed to continue to make all payments under
the
license agreement, including those owed on the Fresno market, until
the
current existing obligation to Safescript Pharmacies, Inc. for this
license regarding the consolidated statistical metropolitan area
of
Fresno, California is fully paid. This agreement was amended on February
16, 2004. As a result of this amendment to the agreement, Mr. Parker
received 220,429 shares of common stock and released and forever
discharged the Company from all liability associated with this debt.
Mr.
Parker also relinquished to the Company all of his rights under the
exclusive license granted by Safescript Pharmacies, Inc. solely for
the
consolidated statistical metropolitan area of Fresno, California.
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| · |
On
January 26, 2004, the Company entered into an agreement with Brockington
Securities, Inc. (“Brockington”) to act as its financial advisor,
investment banker, and placement agent. The Company’s current CEO, Mr.
Robert DelVecchio, is the President and CEO of Brockington. Pursuant
to
this agreement, Brockington received 500,000 shares of the Company’s
common stock. On June 18, 2004, the board of directors approved an
extension for an additional term of eighteen months to the agreement
entered into with Brockington. Pursuant to the terms of this extension,
Brockington received an additional 150,000 shares of common stock
and
warrants to purchase 350,000 shares of common stock exercisable for
a
period of five years from the date of issuance at the price of $0.60
per
share. In connection with the aforementioned extension, Brockington
was
granted certain “piggy-back” registration rights relating to the equity
instruments issued in June 2004.
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·
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On
June 17, 2004, the Company completed an exempt offering to accredited
investors pursuant to Rule 506 of Regulation D under the Securities
Act
and Brockington acted as placement agent for this offering. Upon
closing
of this offering, Brockington received a commission of $295,670 and
expenses in the amount of $8,000.
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| · |
In
December, 2004, the Company received a loan from Robert James, Inc.
(the
“Lender”), a company under the control of Mr. DelVecchio, evidenced by a
promissory note (“Note”) for the purpose of purchasing inventory for the
Company’s pharmacies. This Note was for a maximum of $150,000 and matured
on the earlier of March 6, 2005 or the date that the Company was
able to
consummate an accounts receivable factoring arrangement for its working
capital. The outstanding principal amount of this Note accrued interest
at
a rate of three percent (3%) per month. In consideration of this
Note, the
Company agreed to pay the Lender an administrative fee of $1,500
and a
financing fee of $2,100. In addition to these fees, the Company agreed
to
pay the Lender by the fifth day of every month from January 2005
until the
principal amount is repaid an administrative fee of $1,875 and a
financing
fee of $2,675. On February 13, 2005, the loan was paid in full.
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| · |
On
February 1, 2005, the Company entered into a Termination and Settlement
Agreements with Mr. David Parker and Mr. A.J. LaSota. Mr. Parker
and Mr.
LaSota resigned from their positions as officers and directors. In
accordance with the terms of these agreements, Mr. Parker and Mr.
LaSota
returned to the corporate treasury 5,400,000 and 429,353 shares of
common
stock respectively. Also on February 1, 2005, the Company entered
into a
Settlement Agreement with Ron Folse, the former Executive Vice President.
In accordance with the terms of this agreement, Mr. Folse returned
to the
corporate treasury 429,353 shares of common stock.
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| · |
On
February 23, 2005, the Company entered into an accounts receivable
servicing agreement and line of credit agreement with Mosaic Financial
Services, LLC. The monthly interest rate under this agreement is
equal to
one and one quarter percent (1.25%) of the maximum amount of the
credit
line. This agreement allows the Company to successfully secure financing
for inventory purchases over an extended period of time. Under the
terms
of the line of credit agreement, the maximum amount that can be drawn
to
purchase inventory increased on July 1, 2005 from $500,000 to $700,000.
This agreement is for a term of one (1) year and shall automatically
renew
for another one (1) year period unless either party provides notice
to the
other of termination within 180 days prior to the end of the effective
term. Mosaic Financial Services, LLC is a wholly-owned subsidiary
of
Mosaic Capital Advisors LLC. Mr. Haresh Sheth who is a member of
the
Company’s board of directors also acts as group financial officer to
Mosaic Capital Advisors LLC. Mr. Sheth was appointed to the Company’s
board of directors in September
2005.
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Name
|
Principal
Position
|
Number
of
late
reports
|
Transactions
not
timely
reported
|
Known
failures to
file
a required form
|
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Richard
Falcone
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Director
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3
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3
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0
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James
Manfredonia
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Director
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3
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3
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0
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Annette
M. McEvoy
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Former
Director
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2
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2
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0
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Geoffrey
S. Carroll
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Former
Director
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2
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2
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0
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David
Parker
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Former
CEO, CFO,
and Director
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1
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1
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0
|
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A.J.
LaSota
|
Former
President and Director
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0
|
0
|
0
|
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Ronald
Folse
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Former
Executive Vice President
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0
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0
|
0
|
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Michael
Doan
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Former
Secretary and Treasurer
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0
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0
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0
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Annual
Compensation
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Long
Term Compensation
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||||||||
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Name
|
Title
|
Year
|
Salary
($)
|
Bonus
($)
|
Other
Annual Compensation
($)
|
Restricted
Stock
Awarded
($)
|
Options/
SARs
(#)
|
LTIP
Payouts
($)
|
All
Other
Compensation
($)
|
|
Robert
DelVecchio
|
CEO
|
2004
2003
2002
|
n/a
n/a
n/a
|
n/a
n/a
n/a
|
n/a
n/a
n/a
|
n/a
n/a
n/a
|
n/a
n/a
n/a
|
n/a
n/a
n/a
|
n/a
n/a
n/a
|
|
David
Parker (1)
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Former
CEO,
CFO, and Director
|
2004
2003
2002
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129,082
33,923
n/a
|
0
0
n/a
|
0
144,000
n/a
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0
0
n/a
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0
0
n/a
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0
0
n/a
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0
0
n/a
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A.J.
LaSota (2)
|
Former
President
and Director
|
2004
2003
2002
|
108,940
29,400
n/a
|
0
0
n/a
|
0
129,600
n/a
|
0
0
n/a
|
0
0
n/a
|
0
0
n/a
|
0
0
n/a
|
|
Ron
Folse (3)
|
Former
Executive
Vice-President
|
2004
2003
2002
|
91,138
24,877
n/a
|
0
0
n/a
|
0
105,600
n/a
|
0
0
n/a
|
0
0
n/a
|
0
0
n/a
|
0
0
n/a
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| (1) |
On
February 1, 2005, the Company received the resignation of David Parker.
Under the terms of a settlement and termination agreement, Mr. Parker
returned to the corporate treasury 5,400,000 shares of common
stock.
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| (2) |
On
February 1, 2005, the Company received the resignation of A.J. LaSota.
Under the terms of a settlement and termination agreement, Mr. LaSota
returned to the corporate treasury 684,861 shares of common
stock.
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| (3) |
On
November 19, 2004, the Company accepted the resignation of Ron Folse.
Under the terms of a settlement agreement, Mr. Folse returned to
the
corporate treasury 429,353 shares of common
stock.
|
| · |
David
Parker was issued 300,000 shares of restricted common stock valued
at
$144,000.
|
| · |
A.J.
LaSota was issued 270,000 shares of restricted common stock valued
at
$129,600.
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| · |
Ron
Folse was issued 220,000 shares of restricted common stock valued
at
$105,600.
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|
Outside
Director
|
Year
|
Shares of Common
Stock Received
|
|
Richard
Falcone
|
2005
2004
|
300,000
50,000
|
|
James
Manfredonia
|
2005
2004
|
300,000
50,000
|
|
Annette
McEvoy (1)
|
2005
2004
|
25,000
50,000
|
|
Geoffrey
S. Carroll (2)
|
2005
2004
|
25,000
50,000
|
| (1) |
On
February 16, 2005, Annette McEvoy resigned as a member of our board
of
directors.
|
| (2) |
On
February 11, 2005, Geoffrey Carroll resigned as a member of our board
of
directors.
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Title
of class
|
Name
and address
of
beneficial owner (1)
|
Amount
of
beneficial
ownership
|
Percent
of
class*
|
|
Executive
Officers & Directors:
|
|||
|
Common
|
Robert
DelVecchio
18021
Sky Park Circle, Suite G2
Irvine,
California 92614
|
970,860
shares(2)
|
3.6%(3)
|
|
Common
|
James
Manfredonia
18021
Sky Park Circle, Suite G2
Irvine,
California 92614
|
100,000
shares
|
0.3%
|
|
Common
|
Richard
Falcone
18021
Sky Park Circle, Suite G2
Irvine,
California 92614
|
100,000
shares
|
0.3%
|
|
Common
|
Haresh
Sheth(4)
18021
Sky Park Circle, Suite G2
Irvine,
California 92614
|
0
shares
|
0%
|
|
Common
|
John
Eric Mutter
18021
Sky Park Circle, Suite G2
Irvine,
California 92614
|
75,000
shares
|
0.2%
|
|
Total
of All Directors and Executive Officers:
|
1,245,860
shares
|
4.3%
|
|
| (1) |
As
used in this table, "beneficial ownership" means the sole or shared
power
to vote, or to direct the voting of, a security, or the sole or shared
investment power with respect to a security (i.e., the power to dispose
of, or to direct the disposition of, a security). In addition, for
purposes of this table, a person is deemed, as of any date, to have
"beneficial ownership" of any security that such person has the right
to
acquire within 60 days after such
date.
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| (2) |
Mr.
DelVecchio is the indirect beneficial owner of 970,860 shares held
by
Brockington Securities, Inc.
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| (3) |
Included
in the calculation of beneficial ownership for Mr. DelVecchio are
350,000
warrants which are exercisable within 60 days. Brockington Securities,
Inc. holds warrants to purchase 350,000 shares of common stock at
the
exercise price of $0.60 per share. These warrants are immediately
exercisable and expire on June 17, 2009. Mr. DelVecchio is the indirect
beneficial owner of the warrants held by Brockington Securities,
Inc.
|
| (4) |
Mr.
Sheth maintains a 24% voting interest and 25% economic interest in
Mosaic
Capital Advisors, LLC (“MCA”). MCA is the investment advisor to Mosaic
Partners Fund and by Mosaic Partners Fund LP. As of the record date,
Mosaic Partners Fund held 250,000 shares of the Company’s common stock and
Mosaic Partners Fund LP held 187,500 shares of the Company’s common
stock.
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| 2. |
The
articles have been amended as follows (provide article numbers, if
available):
|
| 3. |
The
vote by which the stockholders holding shares in the corporation
entitling
them to exercise at least a majority of the voting power, or such
greater
proportion of the voting power as may be required in the case of
a vote by
classes or series, or as may be required by the provisions of the
articles
of incorporation have voted in favor of the amendment
is:_______________________*
|