Investors

Michael Sheft Report

The Company
Pharma Holdings, Inc. (“Pharma”) or (“the Company”) is a Florida-based holding company with primary ownership of three companies serving the health-care industry. The focus of these companies is on providing discounted prescription drugs from Canada, a national prescription drug savings plan to consumers and businesses, and a wholesale medical supply company with the ability to sell both prescription and non-prescription medications and disposables on a worldwide basis. With more 45 million uninsured Americans, the Company has developed a niche marketing plan to provide an affordable alternative to the high cost of prescription drugs in America, while also providing a long-term solution to the rising cost of traditional health care plans. While a large number of consumers have some element of health insurance incorporated into their health care initiative, our target markets are often ignored by the major national insurance companies since they have little or no prescription drug benefits, or have no health insurance at all.

The Company has formed exclusive alliances with Extended Care Pharmacy, one of the most prominent players in the prescription drug industry in order to gain a competitive edge on newcomers to the marketplace, as well as giving the Company a significant advantage over many of the current industry players.

The Company has two divisions that strategically complement each other. The first division, Canadian Drug Outlet Store (CDOS) provides customers the ability to purchase prescription drugs from their Canadian pharmacy located in Calgary, Alberta, Canada. Typically, consumers realize savings up to 90% less than the same prescription drugs purchased at US pharmacies. Started in January 2004, CDOS currently operates from offices located in Jupiter, Florida and serves more than 3,000 customers via their retail location and the internet. The second division, Med-RX Health (Med-RX) plans to launch a prescription drug savings plan that will be administered through a discount card that can be redeemed at more than 50,000 pharmacy locations nationally, including nearly every major drugstore chain and supermarket. A key factor of our plan is that it specifically targets uninsured consumers, senior citizens and families for the purpose of providing first class medical and prescription benefits at affordable rates. 

Our prescription drug plan will be administered by Beechstreet Partners, the oldest and most respected plan provider in the USA. Our plan will feature benefits not currently offered through competing plans in the marketplace including prescription drug discounts up to 50% off retail average wholesale, discounts for physicians visits, chiropractic visits, optician visits, and many more discounts that are exclusive to only the Med-RX Health Savings Card.

The Med-RX Health Savings card will be marketed beginning in the first quarter 2005, and the Company plans to sell more than 100,000 cards. With an average retail cost that is far below any competitor, Med-RX plans to sell its card for a flat $79.00 annual premium. The Company projects sales of $7,900,000 for 2005 against a program cost of $2,500,000. As the program roles out into its next phase of marketing and into year two, the Company projects sales for 2006 to gross $15,800,000 with a program cost of $5,000,000. With annual renewals projected at 85%, residual revenue from 2005 and 2006 will contribute an additional $13,430,000 by early 2007, against only $3,000,000 in program costs.

The Company recently signed an agreement with the United States Armed Forces to administer its MED-RX Health Savings Card to more than 2.5 million retired Air Force and Navy personnel. Beginning this year, the US Air Force and US Navy will begin active direct mail campaigns to solicit the Med-RX Health Savings Card to all of their retired personnel. Each month the US Armed Forces mails more than 3.6 million direct mail pieces to promote their existing programs. According to this agreement the MED-RX Health Savings Card will additionally be promoted throughout all of the military PX and commissaries, and on all Air Force and Navy bases in the United States.

The US Armed Forces expects sales of Med-Rx cards to ramp up slowly, but achieve a level of more than 2.5 million cards over the next 24 months. According to Edward Klapp, CEO of Pharma Holdings this deal is worth more than $75 million in sales and represents the company’s single largest contract in it’s first year in business. The US Armed Forces representative, Paul Simmons has already indicated interest by the US Marines and US Army in this identical program. That program could begin marketing by year-end 2005. Pharma Holdings expects to begin fulfilling Med-RX Health Savings Cards for the US Armed Forces by the end of first quarter of 2005.

MED-RX Supply plans to execute a national direct mail campaign to promote several products aimed at doctors, hospitals and smaller wholesalers of medical supplies. The advertising campaign will begin in January and be ongoing throughout the year. A catalog is currently being planned for the Fall 2005.

Company management anticipates that the potential of this agreement with McKesson as a partner will generate significant revenues in the tens of millions of dollars to MED-RX Supply. A typical McKesson distributor can bill in excess of $25 million annually with many approaching $100 million or more.

MED-RX Supply is already in negotiations with the Government of Saudi Arabia to supply medical products for their hospitals and government-funded health programs. According to Mr. Klapp an agreement is forthcoming to supply more than $40 million in supplies over the next two years which will include medical disposables, generic drugs, and medical equipment.

The Business
Pharma Holdings, Inc. is an emerging player in the multi-billion dollar health care solutions arena. Indeed, health benefits are a fact of life for any consumer or business today. Despite the deluge of numerous prescription drug discount cards, there’s room for a card that offers “true” savings and an abundance of savings benefits at an affordable price. Millions of consumers, including more than 45% of all Americans cannot afford health insurance and must suffer when they are forced to purchase prescription drugs without a benefits plan. Even the benefits provided by Medicare cannot compete with the benefits our card will provide to senior citizens. Med-RX Health will focus on the sales and marketing of a prescription drug discount card that cannot be rivaled by our competitors. Our card will be the BEST in the industry, bar none, says Mr. Klapp.

The MED-RX plan will be promoted through television, direct mail, print, radio and billboards to build brand awareness. Consumers will respond directly by calling a toll-free 800 number to enroll or request an application/information package by mail.

Management
Pharma Holdings, Inc. can proudly boast its senior management, advisors and affiliates to perhaps be its greatest single asset. Indeed, the Company has meticulously assembled a team of hands-on industry and business professionals to ensure the Company's future success. Led by Edward Klapp, Chief Executive Officer, the Company has implemented an aggressive, yet cost-sensitive approach to attaining its goals. Mr. Klapp brings more than 25 years experience to his leadership position. Familiar with establishing companies in existing marketplaces, his business acumen has been an asset to the Company from its inception. Since the development and ultimate success of the Company is solely reliant on the use of intensive marketing and advertising to promote sales. Mr. Klapp’s expertise and hands-on involvement in this business will directly affect the companies’ bottom-line profitability.

The founding management of MED-RX Health Plans has an accumulated 75 years of industry related experience. All are well versed in industry fundamentals, educated in the evolution of the health care services industry, and share a vision for the successful positioning the Company within the industry. The leadership of the company is a distinct competitive advantage. With an executive staff that has extensive experience in television media, the management has held positions of significant responsibility within the industry and has thorough knowledge of the development of direct-to-consumer advertising campaigns and promotions. The company is positioned to meet the challenges in the marketplace today, and to anticipate emerging trends
The founders will manage the company’s growth jointly as managing partners. Mr. Edward Klapp IV will serve as the CEO / Managing Partner. All sales and marketing personnel will report to them through a sales manager (heavy in industry experience) who has yet to be identified. Future branch offices will each have a general manager. The key to achieving the near-term objectives relies on utilizing the skills of the existing management team. The intention of the Company is to operate the company with a few top executives and to determine future recruitment requirements in their secondary growth plan. The executive management team of the Company has the knowledge and expertise that will serve to launch the Company quickly and generate profitable sales in a relatively short period of time.

The CEO and Managing Partner, Edward Klapp IV, has served as the President of Millennium Partners Incorporated (MPI), a multi-faceted direct marketing and media agency since 1992. Over the past twelve years Mr. Klapp has developed a client list that reads like the “Who’s Who” of national advertisers. Since founded, MPI has developed a reputation as the industry leader for discount media and for cutting edge marketing campaigns for direct-to-consumer advertisers. The main source of revenue for MPI has been from the sales of national television media to direct response marketers of products and services.

Mr. Klapp has represented clients such as: Time Life, Nordic Track, US Army, Barnes & Noble Books, Rogaine, Craftmatic Beds, Republican National Committee, Physicians Mutual Insurance, Columbia House, AT&T, Tae-Bo and many other household names. Mr. Klapp attributes his overall success to his ability to identify opportunistic media trends and negotiate great rates for his clients. Mr. Klapp has over twenty five years experience in the media industry and comes from an advertising agency background.

The success of the Company relies on the efficient management and function of its office environment. As the CFO, Edward Klapp Jr. brings more than fifty years experience in business management to the table. Mr. Klapp has the credentials to manage and structure a working office that produces results. As the former president of Harmonay Corporation, Mr. Klapp was responsible for the day-to-day management responsibilities of running a general contracting company with more than $40 million in assets and revenues. Mr. Klapp functions as the general manager and chief financial officer for Millennium Partners Incorporated (MPI) in Jupiter, Florida. Mr. Klapp has a working knowledge of direct-to-consumer marketing and has assisted his son, Edward Klapp IV since 1992 when they opened MPI.

Since the business will require top-notch customer service, the management team has selected Mrs. Marguerite Klapp as the general manager of the office. Mrs. Klapp has more than 10 years customer service experience working for Sears & Roebuck. As a customer service representative, her primary responsibilities include day-to-day contact with new and returning customers. She is skilled at consulting with new customers, providing prices quotes and placing customer orders. She has been attributed with setting up the office policies and procedures and communicates daily with vendors and alliance partners. She currently maintains all customer files and handles the day-to-day operations of the Company. At present she handles all order processing, customer services, pharmacy liaison and customer inquiries. As the Company expands she will be responsible for training new employees and affiliates.

Outlook
Pharma Holdings, Inc. is poised to embark on a period of explosive growth as it furthers its expansion of its significant profit streams.

Indeed, the Company operates in a highly profitable segment. The typical profit margin being realized by the sale of the prescription drug cards is more than 100% per card on an annual basis. The Company expects an 85% renewal rate based on the researched history of similar discount drug cards.

The company also has significant potential to be an acquisition candidate in an industry that traditionally undergoes consolidation.

Pharma Holdings contends that they have identified a niche market within the industry that is typically ignored by the more traditional medical insurance companies. The market niche for a quality provider of services like those offered by the Company is ripe for picking. The Company, by virtue of its alliances with McKesson and Extended Care Pharmacy, already has the resources in place for critical mass. Ultimately, product, service and price will prevail. The Company is poised to lead the industry in all of these areas with a line of products and depth of services that cannot be rivaled by our competitors.

All sales forecasts of the Company recognize the time line of market penetration, and have realistic, if not conservative market share goals.

Michael Scheft
February, 2005

For further Company information, please contact Edward Klapp at 561.746.6868 or visit the Company's web site at www.pharmaholdingsinc.com.

Mr. Scheft is an independent research analyst and editor of Scheft Ticks, an equities newsletter providing unique insight to the markets since 1987. Mr. Scheft has appeared regularly on CNBC and Financial News Network and is a weekly guest on GEM radio, along with several other financial programs throughout the country. The information contained herein is based on sources and data, which we believe reliable but is not guaranteed by us. The above information contains certain forward-looking statements. For this purpose, any statements contained in the above information that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may", "will", "expect", "believe", "anticipate", "estimate", or "continue" or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors. Furthermore, this information is furnished for informational purposes and is not intended to be construed as an offer to buy or sell securities. Compensation has been paid by the Company to cover printing, postage, transmissions and other related costs.