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As filed with the Securities and Exchange Commission on December 12, 1997.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-8 AND FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
FLEMINGTON PHARMACEUTICAL CORPORATION
-------------------------------------
(Exact name of issuer as specified in its charter)
New Jersey 22-2407152
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
43 Emery Avenue, Flemington, New Jersey 08822
- --------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
FLEMINGTON PHARMACEUTICAL CORPORATION 1992 Stock Option Plan,
1997 Stock Option Plan and Nonplan Executive Options
-------------------------------------------------------------
(Full title of the plan)
Harry A. Dugger, III, Ph.D., 43 Emery Avenue, Flemington, New Jersey 08822
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(Name and address of agent for service)
(908) 782-3431
--------------
(Telephone number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: Upon
exercise of the options granted under the Stock Option Plans, but in no event
prior to the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box.
|X|
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================
<S> <C> <C> <C> <C>
Proposed Proposed
maximum maximum
Title of securities to be Amount to be offering price aggregate Amount of
registered registered (1) per share offering price Registration Fee (2)
- ------------------------------------------------------------------------------------------------------------
Common Stock $.01 par 1,600,000 $7.50 $12,000,000 $3,540
value
============================================================================================================
</TABLE>
(1) The aggregate amount of securities registered hereunder is 1,600,000
shares of Common Stock. Pursuant to Rule 416 promulgated under the Securities
Act of 1933, as amended, this Registration Statement covers such additional
shares of Common Stock to be offered or issued to prevent dilution as a result
of future stock splits, stock dividends or similar transactions.
(2) The fee with respect to these shares has been calculated pursuant to
paragraphs (h) and (c) of Rule 457 upon the basis of $7.50, the average of the
closing bid and asked price per share of the Registrant's Common Stock on
December 9, 1997, a date within five (5) business days prior to the date of
filing of this Registration Statement, as reported by the OTC Bulletin Board
("OTC Bulletin Board") of the National Association of Securities Dealers, Inc.
EXPLANATORY NOTE
This Registration Statement contains two parts. The first part
contains a prospectus pursuant to Form S-3 (in accordance with Section C of
the General Instructions to Form S-8) which covers reoffers and resales by
affiliates and non-affiliates of Flemington Pharmaceutical Corporation (the
"Registrant") of shares of Common Stock of the Registrant to be issued upon
exercise of options granted pursuant to the Registrant's 1992 Stock Option
Plan, 1997 Stock Option Plan and Nonplan Executive Options. The second part
contains Information Required in the Registration Statement pursuant to Part
II of Form S-8 and certain items from Information Not Required in the
Prospectus pursuant to Part II of Form S-3. Pursuant to the introductory Note
to Part I of Form S-8, the Plan Information specified by Part I is not being
filed with the Securities and Exchange Commission.
<PAGE>
PROSPECTUS
(Form S-3)
FLEMINGTON PHARMACEUTICAL CORPORATION
1,600,000 Shares
Common Stock ($.01 par value)
_____________
Flemington Pharmaceutical Corporation
1992 Stock Option Plan, 1997 Stock Option Plan and Nonplan Executive Options
This Prospectus is being used in connection with the offering from
time to time by certain shareholders (the "Selling Shareholders") of
Flemington Pharmaceutical Corporation (the "Company") or their successors in
interest of shares of the Common Stock ($.01 par value) of the Company
("Common Stock") which have been issued under, or may be acquired upon the
exercise of, stock options pursuant to the Company's 1992 Stock Option Plan,
1997 Stock Option Plan and Nonplan Executive Options (collectively the
"Plans").
The Common Stock may be sold from time to time by the Selling
Shareholders or by their pledgees, donees, transferees or other successors in
interest. Such sales may be made in the over-the-counter market or otherwise
at prices and at terms then prevailing or at prices related to the then
current market price, or in negotiated transactions. The Common Stock may be
sold by one or more of the following: (a) block trades in which the broker or
dealer so engaged will attempt to sell the shares as agent but may position
and resell portions of the block as principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this Prospectus; (c) an exchange
distribution in accordance with the rules of such exchange; and (d) ordinary
brokerage transactions and transactions in which the broker solicits
purchases. In effecting sales, brokers or dealers engaged by the Selling
Shareholders may arrange for other brokers or dealers to participate. Brokers
or dealers will receive commissions or discounts from Selling Shareholders in
amounts to be negotiated immediately prior to the sale. Such brokers or
dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Act") in connection with such sales. In addition, any securities covered
by this Prospectus which qualify for sale pursuant to Rule 144 may be sold
under Rule 144 rather than pursuant to this Prospectus. The Company will not
receive any of the proceeds from the sale of these shares, although it has
paid the expenses of preparing this Prospectus and the related Registration
Statement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
The bid and asked prices of the Company's Common Stock on December 9,
1997 as reported by the NASD's OTC Bulletin Board was $7.00 and $8.00,
respectively.
The date of this Prospectus is December 12, 1997.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS,
OTHER THAN AS CONTAINED HEREIN, IN CONNECTION WITH THE OFFER MADE IN THE
PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
_________
The Company has filed with the Securities and Exchange Commission, a
Registration Statement under the Securities Act of 1933, as amended, with
respect to the securities offered by this Prospectus. This Prospectus does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Additional information concerning the
securities offered hereby is to be found in the Registration Statement
including various exhibits thereto, which may be inspected at the Commission's
office in Washington, D.C.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by the Company can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
Commission's regional offices located at Seven World Trade Center, Suite 1300,
New York, New York 10048; and copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
The Common Stock of the Company is listed for quotation on the NASD's
Over The Counter Bulletin Board ("OTC Bulletin Board") and is traded under the
Symbol "FLEM". Reports, proxy statements and other information filed by the
Company can be inspected at the offices of OTC Bulletin Board, 1735 "K"
Street, N.W., Washington, D.C. 20006-1500.
_________
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DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission (File No. 000-23399)
pursuant to the Exchange Act are incorporated herein by reference:
1. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on
November 19, 1997.
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of this
offering shall be deemed to be incorporated by reference in this Prospectus
and to be a part of this Prospectus from the date of filing thereof.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of that person, a copy
of all documents incorporated by reference into the Registration Statement of
which this Prospectus is a part, other than exhibits to those documents
(unless such exhibits are specifically incorporated by reference into such
documents). Requests for such documents should be directed to Robert F.
Schaul, Esq., General Counsel, Flemington Pharmaceutical Corporation, 43 Emery
Avenue, Flemington, New Jersey, 08822, telephone: (908) 982-3431.
3
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THE COMPANY
Recent Developments
On November 25, 1997, the closing was held for the Company's initial
public offering (the "Public Offering") which was made pursuant to a
Registration Statement filed with the Commission and declared effective on
November 19, 1997 (the "Effective Date"). Pursuant to the Public Offering, the
Company sold an aggregate of 680,000 units (the "Units"). The Public Offering
was underwritten on a firm commitment basis by Monroe Parker Securities, Inc.
of Purchase, New York, which acted as the representative (the
"Representative") of the several underwriters (the "Underwriters"). Each Unit
consisted of one (1) share of Common Stock and one (1) redeemable Class A
Common Stock Purchase Warrant ("Class A Warrant"). Each Class A Warrant
entitles the holder to purchase one (1) share of Common Stock at an exercise
price of $5.80 per share, subject to adjustment. The Class A Warrants expire
on November 18, 2002 and are subject to redemption under certain conditions
commencing May 19, 1999. Pursuant to the Public Offering, the Company received
gross offering proceeds of approximately $4,012,000. Following the Effective
Date, the Company's Units, Common Stock and Class A Warrants commenced trading
on the National Association of Securities Dealers' OTC Bulletin Board under
the symbols FLEMU, FLEM and FLEMW, respectively.
In addition, in connection with the Public Offering, two principal
shareholders who held the Company's 7% convertible notes agreed to convert the
principal of such indebtedness into shares of Common Stock of the Company.
Pursuant to these agreements (collectively the "Conversion Agreements"), an
aggregate of 600,000 shares of Common Stock were issued in respect of $300,000
aggregate principal amount of notes.
In connection with the Public Offering, the Underwriters received an
option (the Underwriters' Option") to purchase an aggregate of 67,500 Units at
an exercise price of $9.74 for the four year period commencing one year after
the Effective Date.
Company Background
Flemington Pharmaceutical Corporation, a New Jersey corporation (the
"Company"), is engaged in the development of novel application drug delivery
systems for presently marketed prescription and over-the-counter ("OTC")
drugs. The Company's patent-pending delivery systems are lingual sprays and
soft gelatin bite capsules, enabling drug absorption through the oral mucosa,
and more rapid absorption into the bloodstream than presently available oral
delivery systems. The Company's proprietary oral dosage delivery systems
enhance and greatly accelerate the onset of the therapeutic benefits which the
drugs are intended to produce. The Company refers to its delivery systems as
Immediate-Immediate Release I(2)R(TM) because its delivery systems are designed
to provide therapeutic benefits within minutes of administration. The
Company's development efforts for its novel drug delivery systems are
concentrated on drugs which are already available and proven in the
marketplace. In addition to increasing bioavailability by avoiding metabolism
by the liver before entry into the bloodstream, the Company believes that its
proprietary delivery systems offer the following significant advantages:
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<PAGE>
(i) improved drug safety profile by reducing the required dosage, including
possible reduction of side-effects; (ii) improved dosage reliability; (iii)
allowing medication to be taken without water; and (iv) improved patient
convenience and compliance.
The Company has initially identified approximately fifty (50)
presently marketed drugs that meet the Company's criteria for its drug
delivery systems. The Company will concentrate its product development
activities on those pharmaceuticals with significant prescription or OTC
sales. The Company believes that applying a novel application delivery system
to existing drugs involves less cost, time and risk than developing and
commercializing a new chemical entity. The Company believes that there is
significant opportunity to combine its delivery systems with existing
pharmaceuticals to expand the market for an existing drug, differentiate a
product from a generic or brand name competition, and possibly create new
markets. In light of the material expense and delays associated with
independently developing and obtaining approval of pharmaceutical products,
the Company will only continue to develop such products through collaborative
arrangements with major pharmaceutical companies, which will fund that
development. To date, the Company has signed two such development agreements
with major pharmaceutical companies.
The Company was incorporated in New Jersey in 1982 under the name
Pharmaconsult, Inc. and in 1992 the Company's name was changed to Flemington
Pharmaceutical Corporation. Since its inception, the Company has been a
consultant to the pharmaceutical industry, focusing on product development
activities of various European pharmaceutical companies, and since 1992 has
used its consulting revenues to fund its own product development activities.
The Company's recent focus on developing its own products evolved naturally
out of its consulting experience for other pharmaceutical companies.
Substantially all of the Company's revenues have been derived from its
consulting activities. The Company's business address is 43 Emery Avenue,
Flemington, New Jersey 08822, and its telephone number is (908) 782-3431.
FORWARD LOOKING STATEMENTS
When used in this Prospectus, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend" and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 regarding events, conditions and financial
trends that may affect the Company's future plans of operations, business
strategy, operating results and financial position. Prospective investors are
cautioned that any forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties and that actual results
may differ materially from those included within the forward-looking
statements as a result of various factors. Such factors are described in the
Company's Exchange Act reports under the headings "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "The Company,"
"Business" and in the Risk Factors set forth below.
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RISK FACTORS
All prospective investors should carefully consider, among other
things, the following factors before purchasing any securities offered hereby:
Shares Under Stock Option Plans; Underwriters' Options and Additional
Options and Warrants. The Company has reserved 1,700,000 shares of its Common
Stock for issuance upon exercise of stock options or similar awards which may
be granted pursuant to the Company's 1992 Stock Option Plan (options to
purchase 500,000 shares), 1997 Stock Option Plan (options to purchase 500,000
shares), Nonplan Executive Options (options to purchase 600,000 shares), and
100,000 shares reserved for issuance upon the exercise of the outstanding
warrants. At the date hereof, options to purchase an aggregate of 682,000
shares have been issued under the Plans. In connection with the Public
Offering, the Company issued to the Underwriters an option to purchase 67,500
Units exercisable at $9.74 (165% of the Public Offering price of the Units)
for a term of four years commencing one year from the Effective Date (the
"Underwriters' Options"). In addition, the Company has agreed with the
Underwriters, under certain circumstances, to register the Shares and the
Warrants subject to the Underwriters' Options for distribution to the public.
Exercise of these registration rights could involve a substantial expense to
the Company and could prove a hindrance to future financings. Exercise of the
Underwriters' Option, the outstanding warrants and stock options, and those
which have been or may be granted under the Plans (collectively, the
"Convertible Securities"), will reduce the percentage of Common Stock held by
the public stockholders. Further, the terms on which the Company could obtain
additional capital during the life of the Convertible Securities may be
adversely affected, and it should be expected that the holders of the
Convertible Securities would exercise them at a time when the Company would be
able to obtain equity capital on terms more favorable than those provided for
by such Convertible Securities.
OTC Bulletin Board; Volatility of Price; Limited Public Market.
Although currently the Units, Common Stock and Warrants are listed on the OTC
Bulletin Board, there can be no assurance that a regular trading market for
the securities will be sustained, or that the market price of such securities
will not decline below the offering price. The OTC Bulletin Board is an
unorganized, inter-dealer, over-the-counter market which provides
significantly less liquidity than the Nasdaq Stock Market, and quotes for
stocks included on the OTC Bulletin Board are not as widely available in the
financial sections of newspapers as are those for the Nasdaq Stock Market. In
the event the securities are not included on the OTC Bulletin Board, quotes
for the securities may be included in the "pink sheets" for the
over-the-counter market. Furthermore, it is unlikely that a lending
institution will accept the Company's securities as pledged collateral for
loans even if a regular trading market develops. The trading price of the
Common Stock could be subject to wide fluctuations in response to quarterly
variations in the Company's operating results, announcements by the Company or
others, developments affecting the Company, and other events or factors. In
addition, the stock market has experienced extreme price and volume
fluctuations in recent years. These fluctuations have had a substantial effect
on the market price for many companies, often unrelated to the operating
performance of such companies and may adversely affect the market price of the
Common Stock.
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Proceeds of the Offering. The Company will not receive any of the
proceeds of this offering. All of the proceeds of this offering will be received
by the Selling Security Holders. However, the Company will receive the
consideration necessary for the exercise of outstanding options issued under the
Plan, if and when such options are exercised. See "Use of Proceeds."
Possible Future Sales of Shares by the Selling Security Holders. Subject
to the restrictions described under "Risk Factors -- Possible Resales Under Rule
144" and applicable law, the Selling Security Holders could cause the sale of
any or all the shares of Common Stock they own upon the effectiveness of the
Registration Statement of which this Prospectus forms a part. The Selling
Security Holders may determine to sell shares of Common Stock from time to time
for any reason. Although the Company can make no prediction as to the effect, if
any, that sales of shares of Common Stock owned by Selling Security Holders
would have on the market price prevailing from time to time, sales of
substantial amounts of Common Stock, or the availability of such shares for sale
in the public market, could adversely affect prevailing market prices of Common
Stock.
Shares Eligible for Future Sale. There are 3,877,390 shares of Common
Stock currently outstanding. To the extent they are not held by "affiliates,"
the 680,000 shares and 680,000 warrants sold in the Public Offering and the
shares of Common Stock offered hereby are eligible for sale in the public
market. All of the remaining issued and outstanding shares of Common Stock are
currently "restricted securities" for purposes of the Act. Although the Company
can make no prediction as to the effect, if any, that sales of the shares of
Common Stock referred to above would have on the market price prevailing from
time to time, sales of substantial amounts of Common Stock, or the availability
of such shares for sale in the public market could adversely affect prevailing
prices of the Common Stock.
Accumulated Deficit and Operating Losses and Anticipated Continuing
Losses. The Company had an accumulated deficit at July 31, 1997 of $1,160,000
and a working capital deficit of $39,000. The Company incurred operating losses
in three of the last five fiscal years ended July 31 including a net loss of
$411,000 for the year ended July 31, 1997. Because the Company has changed its
business focus from pharmaceutical consulting to product development, the
Company anticipates that it will incur substantial operating expenses in
connection with continued development, testing and approval of its proposed
products, and expects these expenses will result in continuing and, perhaps,
significant operating losses until such time, if ever, that the Company is able
to achieve adequate product sales levels.
Dependence on Principal Clients. To date, substantially all of the
Company's revenues have been derived from consulting services rendered to a
limited number of clients, the loss of certain of which would have an adverse
effect on the Company. For the year ended July 31, 1997, consulting activities
relating to the Company's two largest clients, with which the Company has
written agreements, accounted for approximately 24% and 23%, respectively, of
the Company's revenues. The project for the Company's largest client in the year
ended July 31, 1996 was completed in that year and the Company does not expect
to perform any additional services for that client in the immediate future.
There can be no assurance that the Company's clients will continue to seek
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consulting services from the Company or that the Company will continue to
provide consulting services to the industry.
Evolving Nature of Business; Entry into Product-Based Business. Although
the Company has received revenue from its own product development activities,
these revenues are insignificant as compared to the Company's revenues from
product development consultation work done for its clients. The nature of the
Company's revenue received from its own product development consists of payments
by major pharmaceutical companies for research and bioavailability studies,
pilot clinical trials, and similar milestone-related payments. The Company
expects to continue its consulting activities, although to a lesser extent. The
future growth and profitability of the Company will, however, be dependent
principally upon the Company's ability to successfully complete the development
of, obtain regulatory approvals for, and license out or market, its own proposed
products. Accordingly, the Company's prospects must be considered in light of
the risks, expenses and difficulties frequently encountered in connection with
the establishment of a new business in a highly competitive industry,
characterized by frequent new product introductions. The Company anticipates
that it will incur substantial operating expenses in connection with the
development, testing and approval of its proposed products and expects these
expenses to result in continuing and, perhaps, significant operating losses
until such time, if ever, that the Company is able to achieve adequate levels of
sales or license revenues. There can be no assurance that the Company will be
able significantly to increase revenues or achieve profitable operations.
Significant Capital Requirements; Dependence on Public Offering Proceeds
for Product Development and Commercialization. Prior to the Public Offering, the
Company had an immediate need for the proceeds of the Public Offering to fund
planned expenditures in connection with the research, development, testing and
approval of its proposed products. In the event the Company's cash flow from
operations is insufficient to meet current expenditures, proceeds of the Public
Offering will also be used for general working capital purposes, including the
payment of general overhead expenses. These expenditures are expected to be
significant. The Company anticipates, based on its current proposed plans and
assumptions relating to its operations (including the timetable of, and costs
associated with, new product development), that the proceeds from the Public
Offering together with projected cash flow from operations will be sufficient to
satisfy its contemplated cash requirements for approximately 24 months following
the Effective Date. If the Company's plans change, its assumptions change or
prove to be inaccurate, or if the proceeds of the Public Offering and/or
projected cash flow prove to be insufficient to fund operations, due to
unanticipated expenses, technical problems or difficulties or otherwise, the
Company could be required to seek additional financing sooner than currently
anticipated. The Company has no current arrangements with respect to, or sources
of, additional financing, and there can be no assurance that additional
financing will be available to the Company on acceptable terms, if at all.
Pursuant to a certain underwriting agreement between the Company and the
Representative (the "Underwriting Agreement"), the Company may not offer, sell,
issue or transfer its capital stock within thirty-six (36) months of the closing
of this offering without the prior written consent of the Representative. In
view of the Company's very limited resources, its anticipated expenses and the
competitive environment in which the Company operates, any inability to obtain
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additional financing could severely limit the Company's ability to complete
development and commercialization of its proposed products.
No Commercially Available Products. The Company's principal efforts are
the development of, and obtaining regulatory approvals for, its proposed
products. The Company anticipates that marketing activities for its products,
whether by the Company or one or more licensees will not begin until 1998 at the
earliest. Accordingly, it is not anticipated that the Company will generate any
revenues from royalties or sales of products until regulatory approvals are
obtained and marketing activities begin. There can be no assurance that any of
the Company's proposed products will prove to be commercially viable, or if
viable, that they will reach the marketplace on the timetables desired by the
Company. The failure or the delay of these products to achieve commercial
viability would have a material adverse effect on the Company.
Product Development and Acceptance Risks. The development of the
Company's proposed products has not been completed and the Company will be
required to devote considerable effort and expenditures to complete such
development. Satisfactory completion of development, testing, government
approval and sufficient production levels of such products must be obtained
before the proposed products will become available for commercial sale. The
Company does not anticipate generating material revenue from product sales until
perhaps 1998 or thereafter. Other potential products remain in the conceptual or
very early development stage and remain subject to all the risks inherent in the
development of pharmaceutical products, including unanticipated development
problems, and possible lack of funds to undertake or continue development. These
factors could result in abandonment or substantial change in the development of
a specific formulated product. There can be no assurance that any of the
Company's proposed products will be successfully developed, be developed on a
timely basis or be commercially accepted once developed. The inability to
successfully complete development, or a determination by the Company, for
financial or other reasons, not to undertake to complete development of any
product, particularly in instances in which the Company has made significant
capital expenditures, could have a material adverse effect on the Company.
Lack of Direct Consumer Marketing Experience; Dependence on Joint
Marketing Arrangements. The Company has no experience in marketing or
distribution at the consumer level of its proposed products. Moreover, the
Company does not have the financial or other resources to undertake extensive
marketing and advertising activities. Accordingly, the Company intends generally
to rely on marketing arrangements, including possible joint ventures or license
or distribution arrangements with third parties. The Company has not entered
into any significant agreements or arrangements with respect to the marketing of
its proposed products, and there can be no assurance that it will do so in the
future or that any such products can be successfully marketed. The Company's
strategy to rely on third party marketing arrangements could adversely affect
its profit margins.
Dependence on Contract Manufacturing. The Company has agreements with
respect to the manufacture of its initially proposed products with its European
contract manufacturers. Under these agreements the Company is responsible to
obtain required regulatory approvals, begin commercialization within three
months after FDA marketing approval, pay royalties under certain circumstances,
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and satisfy certain minimum purchase requirements. Additionally, these
agreements provide for negotiation and annual re-negotiation of terms relating
to per item cost. There can be no assurance that such terms can be negotiated on
terms satisfactory to the Company or that failure to negotiate such terms will
not result in the termination of any such agreement. The failure of the Company
to satisfy its obligations under any of these agreements could result in
modification or termination of such agreement. There can be no assurance that
the Company will have the ability to satisfy all of its obligations under these
agreements, and failure to do so could require the Company to obtain alternative
manufacturing arrangements, which could have an material adverse effect on the
Company. The Company's dependence upon third parties for the manufacture of its
products could have an adverse effect on the Company's profit margins and its
ability to deliver its products on a timely and competitive basis.
Compliance with Good Manufacturing Practices. The Company currently
intends to rely on third-party arrangements for the manufacture of its proposed
products. The manufacture of the Company's pharmaceutical products will be
subject to current Good Manufacturing Practices ("cGMP") prescribed by the FDA,
pre-approval inspections by the FDA or foreign authorities, or both, before
commercial manufacture of any such products and periodic cGMP compliance
inspections thereafter by the FDA. There can be no assurance that the Company's
European manufacturers will be able to comply with cGMP or satisfy pre- or
post-approval inspections in connection with the manufacture of the Company's
proposed products. The Company's gelatin capsule manufacturer
SCA-Lohnherstellungs AG ("Swisscaps") successfully completed an FDA pre-approval
inspection in connection with the approval of the Company's Abbreviated New Drug
Application ("ANDA") for Nifedipine. The Company's other manufacturer, Rapid
Spray GmbH & Co, KG. ("Rapid Spray") has not yet been inspected by the FDA.
Failure or delay by any such manufacturer to comply with cGMP or satisfy pre- or
post-approval inspections would have a material adverse effect on the Company.
See "BUSINESS - Manufacturing."
Foreign Manufacturing and Related Risks. The Company anticipates that
its initially proposed products will be manufactured by its European
manufacturers at facilities in Germany and Switzerland. The Company intends to
import completed manufactured products into the United States. In addition, the
raw materials necessary for the manufacture of the Company's products will, in
all likelihood, be purchased by the Company from suppliers in the United States
or Europe and delivered to its manufacturers' facilities by such suppliers.
Accordingly, the Company and its manufacturers may be subject to various import
duties applicable to both finished products and raw materials and may be
affected by various other import and export restrictions as well as other
developments impacting upon international trade. These international trade
factors will, under certain circumstances, have an impact both on the
manufacturing cost (which will, in turn, have an impact on the cost to the
Company of the manufactured product) and the wholesale and retail prices of the
products to be manufactured abroad. To the extent that transactions relating to
the foreign manufacture of the Company's proposed products and purchase of raw
materials involve currencies other than United States dollars, the operating
results of the Company will be affected by fluctuations in foreign currency
exchange rates.
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Supplier Dependence. The Company believes that the active ingredients
used in the manufacture of its proposed pharmaceutical products are presently
available from numerous suppliers located in the United States, Europe and
Japan. The Company believes that certain raw materials, including inactive
ingredients, are available from a limited number of suppliers and that certain
packaging materials intended for use in connection with its spray products
currently are available only from sole source suppliers. Although the Company
does not believe it will encounter difficulties in obtaining the inactive
ingredients or packaging materials necessary for the manufacture of its
products, there can be no assurance that the Company will be able to enter into
satisfactory agreements or arrangements for the purchase of commercial
quantities of such materials. The Company has written supply agreements with
Dynamit Nobel for certain raw materials and with Rapid Spray for the
nitroglycerin lingual spray product. With respect to other suppliers, the
Company operates primarily on a purchase order basis beyond which there is no
contract memorializing the Company's purchasing arrangements. The failure to
enter into agreements or otherwise arrange for adequate or timely supplies of
principal raw materials and the possible inability to secure alternative sources
of raw material supplies could have a material adverse effect on the Company's
ability to arrange for the manufacture of formulated products. In addition,
development and regulatory approval of the Company's products are dependent upon
the Company's ability to procure active ingredients and certain packaging
materials from FDA-approved sources. Since the FDA approval process requires
manufacturers to specify their proposed suppliers of active ingredients and
certain packaging materials in their applications, FDA approval of a
supplemental application to use a new supplier would be required if active
ingredients or such packaging materials were no longer available from the
originally specified supplier, which could result in manufacturing delays.
Competition. The markets which the Company intends to enter are
characterized by intense competition. The Company or its licensees may be
competing against established pharmaceutical companies which currently market
products which are equivalent or functionally similar to those the Company
intends to market. Prices of drug products are significantly affected by
competitive factors and tend to decline as competition increases. In addition,
numerous companies are developing or may, in the future, engage in the
development of products competitive with the Company's proposed products. The
Company expects that technological developments will occur at a rapid rate and
that competition is likely to intensify as enhanced dosage from technologies
gain greater acceptance. Additionally, the markets for formulated products which
the Company has targeted for development are intensely competitive, involving
numerous competitors and products. Most of the Company's prospective competitors
possess substantially greater financial, technical and other resources than the
Company. Moreover, many of these companies possess greater marketing
capabilities than the Company, including the resources necessary to enable them
to implement extensive advertising campaigns. There can be no assurance that the
Company will have the ability to compete successfully.
Absence of Product Liability Insurance Coverage. The Company may be
exposed to potential product liability claims by consumers. The Company does not
presently maintain product liability insurance coverage. Although the Company
will seek to obtain product liability insurance before the commercialization of
any products, there can be no assurance that the Company will be able to obtain
such insurance or, if obtained, that any such insurance will be sufficient to
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<PAGE>
cover all possible liabilities to which the Company may be exposed. In the event
of a successful suit against the Company, insufficiency of insurance coverage
could have a material adverse effect on the Company. In addition, certain food
and drug retailers require minimum product liability insurance coverage as a
condition precedent to purchasing or accepting products for retail distribution.
Failure to satisfy such insurance requirements could impede the ability of the
Company or its distributors to achieve broad retail distribution of its proposed
products, which could have a material adverse effect on the Company. None of the
Company's European manufacturers have made any representations as to the safety
or efficacy of the products covered by their agreements or as to any products
which may be marketed or used under rights granted under any such agreements,
other than compliance with cGMP and product specifications.
Extensive Government Regulation. The development, manufacture and
commercialization of pharmaceutical products is generally subject to extensive
regulation by various federal and state governmental entities and comparable
authorities in other countries. The FDA, which is the principal United States
regulatory authority, has the power to seize adulterated or misbranded products
and unapproved new drugs, to request their recall from the market, to enjoin
further manufacture or sale, to publicize certain facts concerning a product and
to initiate criminal proceedings. As a result of federal statutes and FDA
regulations, pursuant to which new pharmaceuticals are required to undergo
extensive and rigorous testing, obtaining pre-market regulatory approval
requires extensive time and expenditures. Under the Federal Food, Drug and
Cosmetic Act (the "FDC Act"), a new drug may not be commercialized or otherwise
distributed in the United States without the prior approval of the FDA. The FDA
approval processes relating to new drugs differ, depending on the nature of the
particular drug for which approval is sought. With respect to any drug product
with active ingredients not previously approved by the FDA, a prospective drug
manufacturer is required to submit a new drug application ("NDA"), including
complete reports of pre-clinical, clinical and laboratory studies to prove such
product's safety and efficacy. The NDA process generally requires, before the
submission of the NDA, submission of an IND pursuant to which permission is
sought to begin preliminary clinical testing of the new drug. An NDA, based on
published safety and efficacy studies conducted by others, may also be required
to be submitted for a drug product with a previously approved active ingredient
if the method of delivery, strength or dosage form is changed. Alternatively, a
drug having the same active ingredient as a drug previously approved by the FDA
may be eligible to be submitted under an ANDA, which is significantly less
stringent than the NDA approval process. While the ANDA process requires a
manufacturer to establish bioequivalence to the previously approved drug, it
permits the manufacturer to rely on the safety and efficacy studies contained in
the DNA for the previously approved drug. The Company believes that some of its
drug products developed in capsule form will be substantially similar to
products which have previously obtained FDA approval and, accordingly, that
approvals for such products can be obtained by submitting an ANDA. The Company,
however, may be required, before submitting an ANDA, to submit a suitability
petition, the purpose of which is to permit the FDA to evaluate whether a change
in strength, dosage form or method of delivery is significant enough to require
clinical trials and, therefore, an NDA filing. There can be no assurance that
the FDA will not require the Company to conduct clinical trials for such
products and otherwise comply with the NDA approval process. The Company
believes that products developed in spray dosage form will require submission of
an NDA. The Company estimates that the development of new formulations of
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<PAGE>
pharmaceutical products, including formulation, testing and obtaining FDA
approval, generally takes four to six years for the ANDA process and six to
eight years for the NDA process. There can be no assurance that the Company's
determinations will prove to be accurate or that pre-marketing approval relating
to its proposed products will be obtained on a timely basis, or at all. The
failure by the Company to obtain necessary regulatory approvals, whether on a
timely basis, or at all, would have a material adverse effect on the Company.
Patents and Protection of Proprietary Information. The Company holds a
United States patent covering its formulation for Nifedipine gelatin capsules,
which the Company believes is not material to its operations. The Company has
applied for United States and foreign patent protection for its proposed lingual
sprays and soft gelatin drug delivery processes. To the extent possible, the
Company intends to seek formulation patent protection or other proprietary
rights for those products utilizing the Company's oral dosage formulations.
There can be no assurance, however, that patents relating to such formulated
products or processes will in fact be granted or, if granted, will provide any
proprietary rights adequately protecting the Company. Other companies may
independently develop equivalent or superior technologies or processes and may
obtain patent or similar rights with respect thereto. Although the Company
believes that its technology has been independently developed and does not
infringe on the patents of others, there can be no assurance that the technology
does not and will not infringe on the patents of others.
If a process covered by a United States patent is utilized in the
manufacture of a product in a foreign country, the further manufacture, use or
sale of such products in the United States may constitute an infringement of the
United States patent. In the event of infringement, the Company or its European
manufacturers could, under certain circumstances, be required to modify the
infringing process or obtain a license. There can be no assurance that the
Company or the European manufacturers will be able to do so in a timely manner
or upon acceptable terms and conditions or at all. The failure to do any of the
foregoing could have a material adverse effect on the Company. In addition,
there can be no assurance that the Company will have the financial or other
resources necessary to enforce or defend a patent infringement or proprietary
rights violation action. If any of the products developed by the Company
infringes upon the patent or proprietary rights of others, the Company could,
under certain circumstances, be enjoined or become liable for damages, which
would have a material adverse effect on the Company.
Dependence on Existing Management and Key Personnel. The success of the
Company is substantially dependent on the efforts and abilities of its founder
Harry A. Dugger, III, Ph.D., and John J. Moroney, its Chairman. Decisions
concerning the Company's business and its management are and will continue to be
made or significantly influenced by these individuals. The Company has entered
into employment agreements with both Harry A. Dugger, III, Ph.D., and John J.
Moroney. The loss or interruption of their continued services would have a
materially adverse effect on the Company's business operations and prospects.
Additionally, the Company's operations may be materially adversely affected if
it is unable to obtain and retain qualified research, technical and marketing
personnel. Only Dr. Dugger is required to devote his full time to the Company.
The Company has coverage under a Key Man life insurance policy on Dr. Dugger.
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<PAGE>
Control by Current Stockholders, Officers and Directors. Management and
affiliates of the Company currently beneficially own (including shares they have
the right to acquire) approximately 54.8% of the outstanding Common Stock. These
persons are and will continue to be able to exercise control over the election
of the Company's directors and the appointment of officers, increase the
authorized capital, dissolve, merge or engage the Company in other fundamental
corporate transactions. Certain change in control provisions found in the
employment agreements of Dr. Dugger and Mr. Moroney may have the effect of
discouraging, delaying or preventing a change in control of the Company.
Ongoing Influence of the Representative. Pursuant to the provisions of
the Underwriting Agreement and a certain financial consulting agreement between
the Company and the Representative (the "Financial Consulting Agreement"), the
Representative is entitled to the following: (1) a finder's fee, payable in the
event the Representative introduces the Company to another party and as a result
of such introduction, a transaction such as a merger, acquisition, joint venture
or similar transaction is consummated at anytime during the five year period
following the Effective Date; (2) to select a person to serve as a member of the
Company's Board of Directors; (3) to serve as the Company's non-exclusive
financial consultant for a period of two years following the Effective Date; and
(4) to purchase a total of 67,500 Units at $9.74 per Unit for a four-year period
beginning the Effective Date. These arrangements may result in the
Representative asserting undue influence on the Company.
Dividend Policy. The Company has never declared or paid a dividend on
its Common Stock, and management expects that a substantial portion of the
Company's future earnings will be retained for expansion or development of the
Company's business. The decision to pay dividends, if any, in the future is
within the discretion of the Board of Directors and will depend upon the
Company's earnings, capital requirements, financial condition and other relevant
factors such as contractual obligations. Management, therefore, does not
contemplate that the Company will pay dividends on the Common Stock in the
foreseeable future.
Possible Restrictions on Market-Making Activities in Company's
Securities. The Representative has advised the Company that they intend to make
a market in the Company's securities. Regulation M, which was recently adopted
to replace Rule 10b-6 and certain other rules promulgated under the Exchange Act
may prohibit the Underwriters from engaging in any market-making activities with
regard to the Company's securities for the period from five business days (or
such other applicable period as Regulation M may provide) prior to any
solicitation by the Underwriters of the exercise of Warrants until the later of
the termination of such solicitation activity or the termination (by waiver or
otherwise) of any right that the Underwriters may have to receive a fee for the
exercise of Warrants following such solicitation. As a result, the Underwriters
may be unable to provide a market for the Company's securities during certain
periods while the Warrants are exercisable. In addition, under applicable rules
and regulations under the Exchange Act, any person engaged in the distribution
of securities of any selling stockholder may not simultaneously engage in
market-making activities with respect to any securities of the Company for the
applicable "cooling off" period prior to the commencement of such distribution.
Accordingly, in the event the Underwriters are engaged in a distribution of the
securities of any selling stockholder, they will not be able to make a market in
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<PAGE>
the Company's securities during the applicable restrictive period. Any temporary
cessation of such market-making activities could have an adverse effect on the
market price of the Company's securities.
Potential Adverse Effect from Class A Warrants. In connection with the
Public Offering, 680,000 Class A Warrants were issued. The exercise of such
Warrants, or a substantial portion thereof, and the sale of the resulting shares
of Common Stock could adversely affect the market price of the Company's Common
Stock.
Possible Resales Under Rule 144. The 3,197,390 shares of Common Stock
held by the Company's stockholders immediately prior to the Public Offering and,
except for those shares registered under this Registration Statement on Form
S-8/S-3, the shares of Common Stock issuable upon exercise of outstanding stock
options have not been registered under the Securities Act of 1933, as amended
(the "Act"), but may, under certain circumstances, be available for public sale
by means of ordinary brokerage transactions in the open market pursuant to Rule
144, promulgated under the Act, subject to certain limitations. In general,
under Rule 144, a person (or persons whose shares are aggregated) who has
satisfied a one-year holding period may, under certain circumstances, sell
within any three-month period a number of securities which does not exceed the
greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume of the class during the four calendar weeks prior to such
sale. Rule 144 also permits, under certain circumstances, the sale of
securities, without any limitation, by a person who is not an affiliate of the
Company and who has satisfied a two-year holding period. Although certain of the
Company's principal stockholders, as well as all of its officers and directors
have agreed not to publicly offer, sell or otherwise dispose of directly or
indirectly, any of the Company's securities owned by them for a period of
thirty-six (36) months following the consummation of this offering without the
prior written consent of the Representative, any substantial sale of Common
Stock pursuant to Rule 144 may have an adverse effect on the market price of the
Shares or the competent securities.
Underwriters' Influence on the Market. A significant amount of the
Common Stock offered in the Public Offering was sold to customers of the
Underwriters. Such customers subsequently may engage in transactions for the
sale of purchase of such shares and may otherwise effect transaction in such
securities. If they participate in the market, the Underwriters may exert
substantial influence on the market, if one develops, for the Units, Common
Stock and Warrants. Such market making activity may be discontinued at any time.
The price and liquidity of the Units, Common Stock and Warrants may be
significantly affected by the degree, if any, of the several Underwriters'
participation in such market.
Possible Adverse Effect of "Penny Stock" Rules in Liquidity for the
Company's Securities. Commission regulations define a "penny stock" to be any
equity security that is not traded on a national securities exchange or Nasdaq
and that has a market price (as therein defined) of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require delivery prior to any transaction in a penny
stock, of a disclosure schedule prepared by the Commission relating to the penny
stock market. Disclosure is also required to be made about commissions payable
to both the broker-dealer and the registered representative and current
quotations for the securities. Finally, monthly statements are required to be
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<PAGE>
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
If the Company's securities are trading on the OTC Bulletin Board at
less than $5.00 per security at any time, the Company's securities may become
subject to Rule 15g-9 under the Exchange Act that imposes additional sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors (generally, such
investors have assets in excess of $1,000,000 or an individual annual income
exceeding $200,000, or, together with the investor's spouse, a joint income of
$300,000). For transactions covered by these rules, the broker-dealer must make
a special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require, among other things, the delivery, prior to the
transaction, of a risk disclosure document mandated by the Commission relating
to the penny stock market and the risks associated therewith. The broker-dealer
must also disclose the commission payable to both the broker-dealer and the
registered representative, current quotations for the securities and, if the
broker-dealer is the sole 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.
Consequently, such rule may adversely affect the ability of broker-dealers to
sell the Company's securities and may adversely affect the ability of
stockholders to sell in the secondary market any of the securities acquired
hereby.
There can be no assurance that the Company's securities will continue to
qualify for exemption from these restrictions. In any event, even if the
Company's securities remain exempt from such restrictions, it would remain
subject to Section 15(b)(6) of the Exchange Act, which gives the Commission the
authority to prohibit any person that is engaged in unlawful conduct while
participating in a distribution of a penny stock from associating with a
broker-dealer or participating in a distribution of a penny stock, if the
Commission finds that such a restriction would be in the public interest. If the
Company's securities were subject to rules on penny stocks, the market liquidity
for the Company's securities could be severely adversely affected. In such
event, the regulations on penny stocks could limit the ability of broker-dealers
to sell the Company's securities and thus the ability of purchasers of the
Company's securities to sell their securities in the secondary market.
Potential Conflicts of Interest. The Company has entered into various
transactions with certain of its directors and principal shareholders and their
affiliates which could result in potential conflicts of interest. The Company
believes that all of such transactions and arrangements were fair and reasonable
to the Company and were on terms no less favorable than could have been obtained
from unaffiliated third parties. There can be no assurance, however, that future
transactions or arrangements between the Company and its affiliates, if any,
will continue to be advantageous to the Company, that conflicts of interest will
not arise with respect thereto, or that if conflicts do arise, they will be
resolved in a manner favorable to the Company. Any such future transactions will
be on terms no less favorable to the Company than could be obtained from
unaffiliated parties and will be approved by a majority of the independent and
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<PAGE>
disinterested members of the Board of Directors, outside the presence of any
interested directors and, to the extent deemed appropriate by the Board of
Directors, the Company will obtain shareholder approval or fairness opinions in
connection with any such transaction.
Limitation on Directors' Liabilities under New Jersey Law. Pursuant to
the Company's Certificate of Incorporation and under New Jersey law, directors
of the Company are not liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty, except for liability in connection with a
breach of duty of loyalty, for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, for dividend
payments or stock repurchases illegal under New Jersey law or any transaction in
which a director has derived an improper personal benefit.
Indemnification of Directors under New Jersey Law. Pursuant to both the
Company's Certificate of Incorporation and New Jersey law, the Company's
officers and directors are indemnified by the Company for monetary damages for
breach of fiduciary duty, except for liability which arises in connection with
(i) a breach of duty or loyalty, (ii) acts or omissions not made in good faith
or which involve intentional misconduct or a knowing violation of law, (iii) for
dividend payments or stock repurchases illegal under New Jersey law, or (iv) any
transaction in which the officer or director derived an improper personal
benefit. The Company's Certificate of Incorporation does not have any effect on
the availability of equitable remedies (such as an injunction or rescissions)
for breach of fiduciary duty. However, as a practical matter, equitable remedies
may not be available in particular circumstances. The Company has arranged for
director and officer liability coverage to commence upon the closing of this
offering.
Authorization and Discretionary Issuance of Preferred Stock. The
Company's Certificate of Incorporation authorizes the issuance of "blank check"
preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividends, liquidation, conversion, voting or other rights which
could adversely affect the relative voting power or other rights of the holders
of the Company's Common Stock. In the event of issuance, the preferred stock
could be used, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of the Company, which could have the
effect of discouraging bids for the Company and thereby prevent stockholders
from receiving the maximum value for their shares. Although the Company has no
present intention to issue any shares of its preferred stock, there can be no
assurance that the Company will not do so in the future.
Pursuant to the terms of the Underwriting Agreement, the Company may
not, except with respect to certain qualifying acquisitions, issue capital stock
for a period of 36 months from the effective date of Registration Statement
without prior written consent of the Underwriter.
USE OF PROCEEDS
The shares which may be sold under this Prospectus will be sold for the
respective accounts of each of the Selling Stockholders. Accordingly, the
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<PAGE>
Company will not realize any proceeds from the sale of the shares, except that
the Company will derive net proceeds of approximately $2,973,600 if all of the
options currently outstanding are exercised. Such funds will be available to
the Company for working capital and general corporate purposes. No assurance
can be given, however, as to when or if any or all of the options will be
exercised. All expenses of the registration of the Shares will be paid for by
the Company. See "Selling Shareholders" and "Plan of Distribution."
SELLING SHAREHOLDERS
The following table sets forth the name and relationship to the Company
of each Selling Shareholder and the number of shares of Common Stock which each
Selling Shareholder (1) owned of record as of December 1, 1997; (2) may acquire
pursuant to the exercise of a previously granted option or options which
hereafter may be granted under the Plan, all of which Shares may be sold
pursuant to this Prospectus; and (3) the amount of Common Stock to be owned by
each Selling Shareholder assuming the grant of the maximum number of shares
issuable under the Plan, the exercise of all options granted under the Plan, and
the sale of all shares acquired upon exercise of such options.
<TABLE>
<CAPTION>
=========================================================================================================================
Amount of
Expected to Acquire Common Stock to Percentage of
Pursuant to the be Owned After Common Stock
Name and Relationship to the Owned as of Plans and Offered Exercise and Owned After
Company December 1, 1997 Pursuant Hereto Sales Exercise and Sales
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Harry A. Dugger, III, Ph.D., 1,059,003 (1) 500,000(2) 1,059,003 24.2%
President, Chief Executive Officer
and Chief Financial Officer
John J. Moroney, Chairman of the 223,080 (3) 500,000(2) 223,080 5.1%
Board of Directors
=========================================================================================================================
</TABLE>
(1) Includes 60,000 shares beneficially owned by his daughter Christina Dugger
Sommers and 60,000 shares owned by his son Andrew Dugger.
(2) Includes options to purchase 200,000 shares of Common Stock issued under
the 1992 Stock Option Plan and Nonplan Executive options to purchase 300,000
shares of Common Stock.
(3) Includes 50,000 shares owned by each of his three sons, Matthew, Timothy
and Sean.
PLAN OF DISTRIBUTION
The securities covered by this Prospectus (the "Securities") may be sold
from time to time by the Selling Security Holders, or by pledgees, transferees
or other successors in interest, on the NASD's OTC Bulletin Board (or such other
exchange on which the Securities are listed at the time of sale), in the
over-the-counter market or otherwise, at prices and at terms then prevailing or
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<PAGE>
at prices related to the then current market price, or in privately negotiated
transactions. The Securities may be sold by various methods, including, but not
limited to one or more of the following; (a) directly in a privately negotiated
transaction; (b) a block trade in which the broker or dealer so engaged will
attempt to sell the Securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (c) purchased by a broker
or dealer as principal and resale by such broker or dealer for its own account
pursuant to this Prospectus; (d) an exchange transaction in accordance with the
rules of such exchange; and (e) ordinary brokers transactions and transactions
in which the broker solicits purchasers. In effecting sales, brokers or dealers
engaged by the Selling Security Holders may arrange for other brokers or dealers
to participate. Alternatively, the Selling Security Holders may from time to
time offer the Securities through underwriters, dealers or agents who may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Security Holders and/or the purchasers of
Securities for whom they may act as agents. In addition any of the Securities
which qualify for sale pursuant to Rule 144 under the Act, or otherwise pursuant
to an applicable exemption under the Act, may be sold other than pursuant to
this Prospectus.
The Selling Security Holders and any such underwriters, dealers or agents
that participate in the distribution of Securities may be deemed to be
underwriters, and any profit on the sale of the Securities by them and any
discounts, commissions or concessions received by them may be deemed to be
underwriting discounts and commissions under the Act. The Securities may be
sold from time to time in one or more transactions at a fixed offering price,
which may be changed, or at varying prices determined at the time of sale or
at negotiated prices. Such prices will be determined by the Selling Security
Holders or by an agreement between the Selling Security Holders and
underwriters or dealers. Brokers or dealers acting in connection with the sale
of the Securities contemplated by this Prospectus may receive fees or
commissions in connection therewith.
At the time a particular offer of Securities is made, to the extent
required, a supplement to this Prospectus will be distributed which will
identify and set forth the aggregate amount of Securities being offered and
the terms of the offering, including the name or names of any underwriters,
dealers or agents, the purchase price paid by any underwriter for Securities
purchased from the Selling Security Holders, any discounts, commissions and
other items constituting compensation from the Selling Security Holders and/or
the Company and any discounts, commissions or concessions allowed or
re-allowed or paid to dealers, including the proposed selling price to the
public. Such supplement to this Prospectus and, if necessary, a post-effective
amendment to the Registration Statement of which this Prospectus is a part,
will be filed with the Commission to reflect the disclosure of additional
information with respect to the distribution of the Securities. The Company
will pay all of the expenses incident to the registration and certain other
expenses related to this offering with respect to Securities, other than
underwriting commissions and discounts, normal commission expenses and
brokerage fees, applicable transfer taxes and attorney's fees of Selling
Security Holders' counsel.
Upon the Company's being notified by any Selling Stockholder that any
material arrangement has been entered into with a broker-dealer for the sale
of Securities through a cross or block trade, a supplemental prospectus will
be filed under Rule 424(c) under the Securities Act, setting forth the name of
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<PAGE>
the participating broker-dealer(s), the number of shares involved, the price
at which such shares were sold by the Selling Stockholder, the commissions
paid or discounts or concessions allowed by the Selling Shareholder to such
broker-dealer(s), and where applicable, that such broker-dealer(s) did not
conduct any investigation to verify the information set out in this
Prospectus.
Any Securities covered by this Prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under that Rule rather
than pursuant to this Prospectus.
The Selling Security Holders have entered into indemnification
agreements with the Company pursuant to which the Company will be indemnified
against failure by the Selling Security Holders to deliver a Prospectus if
required, as well as against certain civil liabilities, including liabilities
under the Act or the Exchange Act, incurred in connection with any untrue (or
alleged untrue) statement of a material fact or omission of a material fact in
this Registration Statement to the extent such liability relates to information
supplied by the Selling Security Holder for inclusion in the Registration
Statement or Prospectus.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Securities may not enter bids to
purchase, purchase or engage in similar trading or market making activities with
respect to the Securities for a period commencing nine business days prior to
the commencement of such distribution and ending with the completion of such
distribution. In addition, and without limiting the foregoing, the Selling
Security Holders and any person participating in the distribution of the
Securities will be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including without limitation Regulation M,
which provisions may limit the timing of purchases and sales of the Securities
by the Selling Security Holders. All of the foregoing may affect the
marketability of the Securities.
In order to comply with certain states' securities laws, if applicable,
the Securities will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states the Securities may not be sold
unless the Securities have been registered or qualified for sale in such state,
or unless an exemption from registration or qualification is available and is
obtained.
There can be no assurance that the Selling Security Holders will sell
any or all of the Securities offered by them hereby.
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PART II
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3 (FORM S-8): DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission (File No. 000-23399)
pursuant to the Exchange Act are incorporated herein by reference:
1. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on
November 19, 1997.
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of this
offering shall be deemed to be incorporated by reference in this Prospectus and
to be a part of this Prospectus from the date of filing thereof.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute part of this Prospectus.
ITEM 4 (FORM S-8): DESCRIPTION OF SECURITIES
The description of the Company's Common Stock contained in the Company's
Form 8-A Registration Statement under the Exchange Act and declared effective by
the Commission on November 9, 1997 is hereby incorporated by reference.
ITEM 5 (FORM S-8): INTERESTS OF NAMED EXPERTS AND COUNSEL
The balance sheet of the Company as of July 31, 1997 and the statements
of operations, changes in capital deficiency and cash flows for each of the
years in the two-year period ended July 31, 1997, incorporated by reference in
this Registration Statement have been audited by Wiss & Company, LLP. These
financial statements have been incorporated herein by reference in reliance upon
the report of Wiss & Company, LLP, and upon their authority as experts in
accounting and auditing.
The legality of the Common Stock to be offered hereby has been passed
upon for the Company by Reed Smith Shaw & McClay LLP, One Riverfront Plaza,
Newark, New Jersey 07102.
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ITEM 6 (FORM S-8) AND ITEM 15 (FORM S-3): INDEMNIFICATION OF DIRECTORS AND
OFFICERS
Section 14A:3-5(2) of the Business Corporation Act of the State of New
Jersey (the "Business Corporation Act") provides, in general, that a corporation
shall have the power to indemnify a corporate agent against his expenses and
liabilities in connection with any proceeding involving the corporate agent by
reason of his being or having been such a corporate agent, other than a
proceeding by or in the right of the corporation, if (a) such corporate agent
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation; and (b) with respect to any
criminal proceeding, such corporate agent had no reasonable cause to believe his
conduct was unlawful. The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not in itself create a presumption that such corporate agent did meet the
applicable standards of conduct set forth in paragraphs (a) and (b) above.
Section 14A:3-5(3) of the Business Corporation Act provides, in general,
that a corporation shall have power to indemnify a corporate agent against his
expenses in connection with any proceeding by or in the right of the corporation
to procure a judgment in its favor which involves the corporate agent by reason
for his being or having been such corporate agent, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation. However, in such proceeding no indemnification shall be
provided in respect of any claim, issue or matter as to which such corporate
agent shall have been adjudged to be liable to the corporation, unless and only
to the extent that the Superior Court or the court in which such proceeding was
brought shall determine upon application that despite the adjudication of
liability, but in view of all circumstances of the case, such corporate agent is
fairly and reasonably entitled to indemnity for such expenses as the Superior
Court or such other court shall deem proper.
Section 14A:3-5(4) of the Business Corporation Act provides, in general,
that a corporation shall indemnify a corporate agent against expenses to the
extent that such corporate agent has been successful on the merits or otherwise
in any proceeding referred to in subsections 14A:3-5(2) and 14A:3-5(3) or in
defense of any claim, issue or matter therein.
Section 14A:3-5(9) of the Business Corporation Act provides, in general,
that a corporation shall have power to purchase and maintain insurance on behalf
of any corporate agent against any expenses incurred in any proceeding and any
liabilities asserted against him by reason of his being or having been a
corporate agent, whether or not the corporation would have the power to
indemnify him against such expenses and liabilities under the provision of this
section.
The Business Corporation Act also provides that a corporation's
certificate of incorporation may provide that a director or officer shall not be
personally liable, or shall be liable only to the extent therein provided, to
the corporation or its shareholders for damages for breach of any duty owed to
the corporation or its shareholder, except that such provision shall not relieve
a director from liability for any breach of duty based upon an act or omission
(a) in breach of such person's duty of loyalty to the corporation or its
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shareholders, (b) not in good faith or involving a knowing violation of law or
(c) resulting in receipt by such person of an improper personal benefit.
The Company's by-laws and Certificate of Incorporation provide that the
Company will indemnify its officers, directors, employees and agents to the
fullest extent permitted by the Business Corporation Act.
The Company's Certificate of Incorporation eliminates the personal
liability of the directors to the fullest extent permitted by the Business
Corporation Law.
In addition to such other rights of indemnification as they may have as
directors or as members of the committee (the "Committee") administering the
Company's 1992 Stock Option Plan and 1997 Stock Option Plan (the "Plans"), under
the terms of the Plans the members of the Committee shall be indemnified by the
Company against the reasonable expenses, including attorney's fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plans or any option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Board member is liable for negligence or misconduct in the
performance of his duties.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
ITEM 7 (FORM S-8): EXEMPTION FROM REGISTRATION CLAIMED
All currently outstanding options to purchase shares of Common Stock
granted under the Plans were issued in transactions not involving a public
offering and such offers and sales were therefore exempt pursuant to the
provisions of Section 4(2) under the Act.
ITEM 20 (FORM S-8) AND ITEM 16 (FORM S-3): EXHIBITS
Number Description
------ -----------
1 Registrant's Certificate of
Incorporation(1)
2 Registrant's By-Laws(1)
4.1 Registrant's 1992 Stock Option Plan(1)
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4.2 Registrant's 1997 Stock Option Plan*(1)
5.1 Opinion of Reed Smith Shaw & McClay LLP
23.1 Consent of Wiss & Company LLP (included
on page II-5)
23.2 Consent of Reed Smith Shaw & McClay LLP
(included in Exhibit 5.1)
(1) Incorporated by reference to the Registrant's Form SB-2 Registration
Statement No. 33-33201 filed on August 8, 1997.
ITEM 21 (FORM S-8) AND ITEM 17 (FORM S-3): UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration
Statement of Flemington Pharmaceutical Corporation (the "Company") on Form S-8
and Form S-3 of our report dated September 10, 1997 on the financial statements
of the Company for the year ended July 31, 1997. We also consent to the
reference to our firm under the caption "Interests of Named Experts and Counsel"
included in the Registration Statement.
Wiss & Company, LLP
Woodbridge, New Jersey
December 11, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8/S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Flemington, New Jersey, on December 12, 1997.
FLEMINGTON PHARMACEUTICAL CORPORATION
By: /s/ Harry A. Dugger
------------------------------
Harry A. Dugger, III, President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Harry A. Dugger, III and John J. Moroney
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement on
Form S-8/S-3, and to file the same, with all exhibit thereto, and any other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-8/S-3 has been signed by the following persons
in the capacities and on the dates indicated.
Name Title Signature
---- ----- ---------
Harry A. Dugger, III, Ph.D. President, Chief Executive /s/ Harry A. Dugger
December 12, 1997 Officer and Chief Financial ---------------------
Officer (Principal
Financial/Accounting and
Executive Officer)
John J. Moroney Chairman of the Board /s/ John J. Moroney
December 12, 1997 ----------------------
Robert F. Schaul Secretary and Director /s/ Robert F. Schaul
December 12, 1997 ----------------------
Jean Marc Maurette Director /s/ Jean Marc Maurette
December 12, 1997 ----------------------
Jack R. Kornreich Director
December 12, 1997 ----------------------
John R. Toedtman Director /s/ John R. Toedtman
December 12, 1997 ----------------------
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REED SMITH SHAW & MCCLAY LLP
Formed in the Commonwealth of Pennsylvania
GERARD S. DIFIORE, One Riverfront Plaza
Resident Counsel Newark, New Jersey 07102-5400
Phone: 973-622-1600
Writer's Direct Fax: 973-621-3199
Numbers:
Phone 973-621-3179
Fax 973-621-3199
[email protected]
December 11, 1997
Board of Directors
Flemington Pharmaceutical, Inc.
43 Emery Avenue
Flemington, New Jersey 08822
Re: Registration Statement on Form S-3/S-8 with Respect to
Flemington Pharmaceutical Corporation 1992 Stock Option Plan,
1997 Stock Option Plan and Executive Nonplan Options
Gentlemen:
This opinion is delivered to you in connection with the Registration
Statement on Form S-8/S-3 (the "Registration Statement"), which will be filed
with the U.S. Securities and Exchange Commission on or about December 11, 1997
by Flemington Pharmaceutical Corporation (the "Company") under the Securities
Act of 1933, as amended (the "Act") for registration under the Act of 1,600,000
shares (the "S-8 Shares") of Common Stock, $.01 par value, of the Company to be
sold and issued by the Company pursuant to its 1992 Stock Option Plan, 1997
Stock Option Plan and shares underlying certain Executive Nonplan Options
(collectively the "Plans").
We are familiar with the Certificate of Incorporation, the corporate
minute book and the bylaws of the Company, the Plans and the Registration
Statement. We have examined the proceedings taken and proposed to be taken in
connection with the issuance, sale and payment of consideration for the S-8
Shares. We have also examined such other documents, records and certificates and
made such further investigation as we have deemed necessary for the purposes of
this opinion.
<PAGE>
REED SMITH SHAW & MCCLAY LLP
Board of Directors
Flemington Pharmaceutical Corporation, Inc.
December 11, 1997
Page 2
Based upon and subject to the foregoing, we are of the opinion that
upon completion of the proceedings being taken or contemplated by us, as your
counsel, to be taken prior to the issuance of the S-8 Shares pursuant to the S-8
Prospectus contained in the Registration Statement, and upon completion of the
proceedings being taken to permit such transactions to be carried out in
accordance with the securities laws of the various states where required, the
S-8 Shares will be legally issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the reference to our firm in the Prospectus
under the caption "Legal Opinion and Experts."
Very truly yours,
REED SMITH SHAW & McClay LLP
