As filed with the Securities and Exchange Commission on July 14, 1998
Registration No. 333-47359
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
------------------------------------
PHARMOS CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 36-3207413
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
33 Wood Avenue South, Suite 466
Iselin, New Jersey 08830
(732) 603-3526
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
------------------------------------
GAD RIESENFELD
33 Wood Avenue South, Suite 466
Iselin, New Jersey 08830
(732) 603-3526
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
------------------------------------
Copies to:
ADAM D. EILENBERG, ESQ.
Ehrenreich Eilenberg Krause & Zivian LLP
11 East 44th Street, 17th Floor
New York, New York 10017
------------------------------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of the 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 in connection with dividend or interest
reinvestment plans, check the following box. | X |
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered Registered Per Unit Price Fee
- ----------------------------------- ----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Shares of Common Stock to be 6,000,000(1)(2) $2.53(3) $15,180,000 $4,554
sold by Selling Security holder
Warrants to Purchase 500,000 500,000 -(4) -(4) -(4)
Shares of Common Stock at
$2.67 per share
Shares of Common Stock 500,000(2) $2.67 $1,335,000 $394
issuable upon exercise of
Warrants to purchase 500,000
Shares at $2.67 per share
Warrants to Purchase 150,000 150,000 -(4) -(4) -(4)
Shares of Common Stock at
$2.28 per share
Shares of Common Stock 150,000(2) $2.28 $342,000 $101
issuable upon exercise of
Warrants to purchase 150,000
Shares at $2.28 per share
Warrants to Purchase 171,052 171,052 -(4) -(4) -(4)
Shares of Common Stock at
$2.28 per share
Shares of Common Stock 171,052(2) $1.38 $236,052 $70
issuable upon exercise of
Warrants to purchase 171,052
Shares at $1.38 per share
Total Registration Fee $17,093,052 $5,119
</TABLE>
(1) Assumes conversion price for all the preferred stock at $0.83, which is
estimated for the purpose of determining the maximum number of shares of
Common Stock obtained upon conversion.
(2) Pursuant to Rule 416 under the Securities Act of 1933, an indeterminate
number of additional shares of Common Stock as may become issuable upon
conversion of the Series C Preferred Stock and the exercise of the
Warrants, in accordance with their respective terms, to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
(3) Estimated solely for the purpose of calculating the registration fee.
Proposed maximum offering price per share is estimated based upon the
closing price of the Company's Common Stock listed on the Nasdaq SmallCap
Market on July 7, 1998.
(4) The warrants were issued in connection with the Private Placement
Transaction and the 1997 Private Placement Transaction for no additional
consideration and therefore there is no applicable offering price, no
maximum offering price and no fee.
<PAGE>
The registrant hereby amends the registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PHARMOS CORPORATION
Cross Reference Sheet Showing Location in Prospectus of Information Required
Therein by Item 1 through 13 of Form S-3
<TABLE>
<CAPTION>
Registration Statement Prospectus Caption
Item and Heading of Location
---------------- -----------
<S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus ........................................Outside Front Cover
2. Inside Front and Outside Back
Cover Pages and Prospectus.......................................Inside Front Cover Page
3. Summary Information,
Prospectus Summary
and Ratio of Earnings to Outside Front Cover,
Fixed Charges....................................................Risk Factors
4. Use of Proceeds..................................................Use of Proceeds
5. Determination of Offering Price..................................Cover Page
6. Dilution.........................................................Dilution
7. Selling Security Holder..........................................Selling Security Holder
8. Plan of Distribution.............................................Cover Page, Plan of Distribution
9. Description of the Securities to
be Registered....................................................Description of Securities
10. Interest of Named Experts and Counsel............................Experts
11. Material Changes.................................................Recent Developments
12. Incorporation of Certain
Information by Reference.........................................Incorporation of Certain
Documents by Reference
13. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities..................................................Commission's Policy on
Indemnification for Securities Act
Liabilities
</TABLE>
<PAGE>
PHARMOS CORPORATION
-------------------
PROSPECTUS
This Prospectus relates to and covers the offer and sale by certain persons
listed under "Selling Stockholders (collectively, the "Selling Stockholders") of
an aggregate of up to (a) 6,000,000 shares (the "Shares") of common stock, par
value $.03 per share (the "Common Stock") of Pharmos Corporation (the "Company")
issuable upon the conversion of the Company's 5% Series C Convertible
Participating Preferred Stock (the "Series C Preferred Stock") issued in a
private transaction in February 1998 (the "Private Placement Transaction"), (b)
500,000 shares of Common Stock issuable upon exercise of warrants held by CC
Investments, LDC which are exercisable at $2.67 per share from February 3, 1999
to February 4, 2004, (c) 150,000 shares of Common Stock issuable upon exercise
of warrants to purchase such shares at an exercise price of $2.28 per share by
Gemini Capital issued in connection with such company's role as placement agent
for the Private Placement Transaction (which warrants are exercisable from
February 3, 1999 until January 20, 2003), (d) 171,052 shares of Common Stock
issuable upon exercise of warrants to purchase such shares at an exercise price
of $1.38 per share by Alan Mark issued in connection with his role as placement
agent for a private placement transaction completed in March 1997 (the "1997
Private Placement Transaction") (which warrants are exercisible until March 31,
2008) (all such warrants collectively, the "Warrants" and the shares of Common
Stock issuable upon the exercise of the Warrants collectively, the "Warrant
Shares"), (e) offer and sale of the Warrants and (f) in accordance with Rule 416
under the Securities Act of 1933, as amended (the "Act"), such presently
indeterminate number of additional shares of Common Stock as may be issuable
upon conversion of the Series C Preferred Stock and exercise of the Warrants as
a result of stock splits, stock dividends and other antidilution provisions. See
"Selling Stockholders" and "Plan of Distribution." The Company will not receive
any proceeds from the sale of Common Stock. The Company has agreed to pay the
expenses of registration of the Common Stock, including legal and accounting
fees. The Selling Stockholders currently hold 5,000 shares Series C Preferred
Stock.
Each share of Series C Preferred Stock is convertible into a number of
shares of Common Stock equal to (i) $1,000 (ii) divided by a conversion price
which is currently 90% of the average of the low trade prices of the Common
Stock for the five (5) consecutive trading days ending on the trading day
immediately preceding the conversion date (the "Variable Conversion Price") and
on and after August 2, 1998 the lesser of the Variable Conversion Price and a
number of shares of Common Stock equal to (i) $1,000 (ii) divided by a
conversion price which is one hundred twenty percent (120%) of the average of
the closing bid prices of the Common Stock for the trading days beginning on
July 4, 1998 and ending on August 2, 1998. Under the applicable conversion
formulas of the Series C Preferred Stock, the number of shares of Common Stock
("Common Shares") issuable upon conversion is inversely proportional to the
market price of the Common Shares at the time of conversion (i.e., the number of
shares increases as the market price of the Common Shares decreases); and except
with respect to certain redemption rights of the Company for the Series C
Preferred Stock and the limitation under Nasdaq SmallCap regulations which limit
the aggregate amount of Common Shares which the Company may issue at a discount
from market price upon conversion of the Series C Preferred Stock and Warrants
without stockholder approval, (which stockholder approval is being requested by
the Company), there is no cap on the
<PAGE>
number of shares of Common Stock which may be issued. In addition, the number of
Common Shares issuable upon the conversion of the Series C Preferred Stock and
the exercise of Warrants is subject to adjustment upon the occurrence of certain
dilutive events.
The shares of Common Stock offered hereby may be sold by the Selling
Stockholders or by pledgees, donees, transferees or other successors in interest
that receive such shares as a gift, partnership distribution or other non-sale
related transfer. The shares of Common Stock may be sold from time to time in
transactions in the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Stockholders may effect such
transactions by selling the Common Stock to or through broker-dealers, including
block trades in which brokers or dealers will attempt to sell the Common Stock
as agent but may position and resell the block as principal, or in one or more
underwritten offerings on a firm commitment or best efforts basis. For a more
complete description of the manner in which Common Stock may be offered and sold
pursuant hereto see "Plan of Distribution."
In connection with this offering, the Selling Stockholder and certain
holders of the Warrants who may be deemed to be "affiliates" of the Company, as
that term is defined under the Act, may be deemed to be an "underwriter," as
that term is defined under the Act, of the Shares or Warrant Shares offered
hereby. It is anticipated that the Selling Stockholder and such affiliates
intend to sell the Shares or Warrant Shares offered hereby from time to time for
their own respective accounts in the open market at the prices prevailing
therein or in individually negotiated transactions at such prices as may be
agreed upon. Each Selling Stockholder and such affiliate will bear all expenses
with respect to the offering of the Shares or Warrant Shares offered hereby by
him except the costs of legal counsel and costs associated with registering such
shares under the Act and preparing and printing this Prospectus.
The net proceeds from Shares to be sold by the Selling Stockholder (and by
holders of Warrant Shares who exercise their Warrants) will inure entirely to
their benefit and not to that of the Company; however, the Company will receive
proceeds from the exercise of the Warrants.
The Company's Common Stock is traded on the over-the-counter market and is
quoted on the Nasdaq SmallCap Market under the symbol "PARS". The closing price
of the Company's Common Stock on July 7, 1998 was $2.53.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION AS
DESCRIBED HEREIN (SEE "RISK FACTORS" AND "DILUTION").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY
<PAGE>
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is _________________________
The Company will furnish to each person to whom this Prospectus is
delivered, upon written request, a copy of any or all of the documents referred
to by reference, other than exhibits to such documents unless such exhibits are
specifically incorporated herein by reference. Requests should be addressed to:
Mr. Gad Riesenfeld, President and Chief Operating Officer, Pharmos Corporation,
33 Wood Avenue South, Suite 466, Iselin, New Jersey 08830.
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. ANY INFORMATION OR REPRESENTATION NOT HEREIN CONTAINED, IF GIVEN OR
MADE, MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN RESPECT OF THE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. DELIVERY OF THIS PROSPECTUS SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE OF THIS PROSPECTUS.
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, 450
Fifth Street, Washington, D.C. 20549, a Registration Statement on Form S-3 under
the Securities Act of 1933 with respect to the securities offered hereby. This
Prospectus filed as part of such Registration Statement does not contain all the
information set forth in, or annexed as exhibits to, the Registration Statement.
For further information pertaining to the securities offered hereby and the
Company, reference is made to the Registration Statement and the exhibits
thereto. The Registration Statement and exhibits thereto may be inspected at the
Headquarters Office of the Securities and Exchange Commission located at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at certain of the
Commission's regional offices at the following addresses: 7 World Trade Center,
Suite 1300, New York, New York 10048; Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661. Copies of this material also may be
obtained from the Public Reference Section of the SEC, at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. at prescribed rates. Electronic registration
statements made through the Electronic Data Gathering, Analysis and Retrieval
System are publicly available through the Commission's World Wide Web site at
http:\www.sec.gov. The statements contained in this Prospectus concerning the
contents of any contract or document referred to are not necessarily complete,
and in each instance, reference is made to such contract or document filed as an
exhibit to the Registration Statement, each statement being qualified in all
respects by provisions of such exhibit to which reference is hereby made for a
full statement of the provisions thereof.
<PAGE>
THE COMPANY
The Company is engaged in the development of novel pharmaceuticals based on
innovative drug design technologies targeting diseases of the eye, principally
ocular inflammation, and the brain, principally stroke and head trauma.
Its leading products are (i) Lotemax(TM), a proprietary ophthalmic
anti-inflammatory drug that has demonstrated significant efficacy in a series of
completed Phase III clinical trials and a uniquely superior safety profile
compared to currently available ophthalmic steroids; and (ii) Alrex(TM), a
product with the same active ingredient as Lotemax , for the treatment of
seasonal allergic conjunctivitis. On March 10, 1998, the Company, together with
Bausch & Lomb Pharmaceuticals, Inc., announced the approval from the Food and
Drug Administration ("FDA") to manufacture and market Lotemax and Alrex.
The Company's principal executive offices are located at 33 Wood Avenue
South, Suite 466, Iselin, New Jersey 08830.
RISK FACTORS
The Common Stock being offered hereby involves a high degree of risk.
Prospective investors should carefully consider the following risk factors in
addition to other information contained in this Prospectus, in evaluating an
investment in the shares of Common Stock offered hereby.
Early Stage of Development; Technological Uncertainty
The Company is at an early stage of development. Apart from Lotemax and
Alrex, most of the Company's other potential products are early in the research
and development phase, and product revenues may not be realized from the sale of
any such products for at least the next several years, if at all. Many of the
Company's proposed products will require significant additional research and
development efforts prior to any commercial use, including extensive preclinical
and clinical testing as well as lengthy regulatory approval. There can be no
assurance that the Company's research and development efforts will be
successful, that the Company's potential products will prove to be safe and
effective in clinical trials or that any commercially successful products will
ultimately be developed by the Company.
History of Operating Losses; Accumulated Deficit
The Company has experienced significant operating losses since its
inception. As of March 31, 1998, the Company had an accumulated deficit of
approximately $73,702,422. The Company expects to incur operating losses over at
least the next several years as the Company's research and development efforts
and preclinical and clinical testing activities continue. The Company's ability
to achieve profitability depends in part upon its ability, alone or with others,
to successfully commercialize and receive approval on its first proposed
product, to complete development of its
1
<PAGE>
other proposed products, to obtain required regulatory approvals and to
manufacture and market such products.
Future Capital Needs; Uncertainty of Additional Financing
The Company's operations to date have consumed substantial amounts of cash.
The development of the Company's technology and potential products will require
a commitment of substantial funds to conduct the costly and time-consuming
research necessary to develop and optimize such technology, and ultimately, to
establish manufacturing and marketing capabilities. The Company's future capital
requirements will depend on many factors, including continued scientific
progress in the research and development of the Company's technology and drug
programs, the ability of the Company to establish and maintain collaborative
arrangements with others for drug development, progress with preclinical and
clinical trials, the time and costs involved in obtaining regulatory approvals,
the costs involved in preparing, filing, prosecuting, maintaining and enforcing
patent claims, competing technological and market developments, changes in its
existing research relationships and effective product commercialization
activities and arrangements.
The Company believes that its current cash resources and interest income
thereon, including approximately $4.75 million in net cash and cash equivalents
received by the Company from the Private Placement Transaction, combined with
anticipated cash inflows, including revenues expected to be derived from sales
of Lotemax and Alrex, should be sufficient to fund its operating expenses and
capital requirements as currently planned through the first quarter of 1999. The
Company will seek additional funding through collaborative arrangements or
through future public or private equity or debt financing. There can be no
assurance that additional financing will be available on acceptable terms, or at
all. In addition, pursuant to the Private Placement Transaction, the Company
will not, except under certain limited exceptions, issue or agree to issue any
equity securities at a price less than fair market value or any variably priced
securities convertible into or exercisable or exchangeable for equity or equity
like securities of the Company for a period of one hundred eighty (180) days
following the Closing Date. If additional funds are raised by issuing equity
securities, further dilution to stockholders may result. If adequate funds are
not available, the Company may be required to delay, reduce the scope of or
eliminate one or more of its research or development programs or to obtain funds
through arrangements with collaborative partners or others that may require the
Company to relinquish rights to certain of its technologies, product candidates
or products that the Company would otherwise seek to develop or commercialize
itself.
Dependence on Potential Collaborative Partners
The Company's strategy for the development, clinical testing,
manufacturing, marketing and commercialization of certain of its products
includes entering into various collaborations with corporate partners,
licensors, licensees and others. To date, the Company has entered into
agreements with Bausch & Lomb to manufacture and market the Company's lead
products, Lotemax and Alrex, in the United States and throughout Europe, Canada
and selected other
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<PAGE>
countries. The agreements also cover the co-development of LE-T, a combination
of loteprednol etabonate and the anti-infective tobramycin, that is currently
being developed by the Company. There can be no assurance that the Company will
be able to negotiate any future collaborative agreement with Bausch & Lomb or
other companies on acceptable terms, or that any present or future collaborative
agreements will be successful. To the extent that the Company chooses not to or
is not able to establish such arrangements, the Company would experience
increased capital requirements to undertake such activities at its own expense.
In addition, the Company may encounter significant delays in introducing its
proposed products currently under development into certain markets or find that
the development, manufacture, or sale of its proposed products in such markets
is adversely affected by the absence of such collaborative agreements.
Technological Change and Competition
The pharmaceutical industry is subject to rapid, unpredictable and
significant technological change. Competition from universities, research
institutions and other pharmaceutical, chemical and biotechnology companies is
intense. Many competitors or potential competitors have greater financial
resources, research and development capabilities, and manufacturing and
marketing experience than the Company. To this end, the Company has entered into
agreements with Bausch & Lomb for the manufacture and marketing of Lotemax and
Alrex. There can be no assurance that developments by the Company's competitors
or potential competitors will not render the Company's technology or proposed
applications of its technology obsolete.
Technologies Subject to Licenses
As a licensee of certain research technologies, the Company has various
license agreements with certain U.S. federal agencies and the State of Israel,
certain universities and Dr. Nicholas Bodor, a former vice president and
director of the Company, wherein the Company has acquired exclusive and
coexclusive rights to develop and commercialize certain research technologies.
The agreements generally require the Company to pay royalties on sale of
products developed from the licensed technologies and fees on revenues from
sublicensees, where applicable, and the Company is responsible for the costs of
filing and prosecuting patent applications. In addition, some of the Company's
license agreements require that the Company commit certain sums annually for
research and development of the licensed products. Should the Company default on
its obligations under any of the license agreements, such agreement would
terminate, and the Company would suffer materially adverse effects from its
inability to use the licensed technology for research and product development.
The exclusivity of license agreements generally expires fifteen years after
the later of commercialization or the effectiveness of the patents. Each
agreement is terminable by either party, upon notice, if the other party
defaults in its obligations.
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<PAGE>
Uncertainty of Protection of Patents and Proprietary Rights
The Company's success will depend in large part on its ability to obtain
patents, maintain trade secrets and operate without infringing on the
proprietary rights of others, both in the U.S. and in other countries. The
patent positions of pharmaceutical companies can be highly uncertain and involve
complex legal and factual questions, and therefore the breadth and
enforceability of claims allowed in pharmaceutical patents cannot be predicted.
There can be no assurance that any issued or pending patents will not be
challenged, invalidated or circumvented, or that the rights granted thereunder
will provide proprietary protection or competitive advantages to the Company.
The commercial success of the Company also will depend, in part, on Pharmos
not infringing patents issued to others and not breaching the technology
licenses upon which any Company products are based. It is uncertain whether any
third-party patents will require the Company to alter its products or processes,
obtain licenses or cease certain activities. In addition, if patents are issued
to others which contain competitive or conflicting claims, and such claims are
ultimately determined to be valid, the Company may be required to obtain
licenses to these patents or to develop or obtain alternative technology. If any
licenses are required, there can be no assurance that the Company will be able
to obtain any such licenses on commercially favorable terms, if at all. The
Company's breach of an existing license or failure to obtain a license to any
technology that it may require to commercialize its products may have a material
adverse impact on the Company. Litigation, which could result in substantial
costs to the Company, may also be necessary to enforce any patents licensed or
issued to the Company or to determine the scope and validity of third-party
proprietary rights. If competitors of the Company prepare and file patent
applications in the U.S. that claim technology also claimed by the Company, the
Company may have to participate in interference proceedings declared by the U.S.
Patent and Trademark Office to determine priority of invention, which could
result in substantial costs to the Company, even if the eventual outcome is
favorable to the Company. An adverse outcome could subject the Company to
significant liabilities to third parties, require disputed rights to be licensed
from third parties or require the Company to cease using such technology.
The Company also relies on secrecy to protect its technology, especially
where patent protection is not believed to be appropriate or obtainable. Thus,
Pharmos protects its proprietary technology and processes, in part, by
confidentiality agreements with its employees, consultants and certain
contractors. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
discovered by competitors.
Extensive Government Regulation
The Company's products require the approval of the FDA before they can be
marketed in the U.S. In addition, approvals are also required from health
authorities in most foreign countries before the Company's products can be
marketed in such countries. Before an NDA, a type of submission used to obtain
FDA approval to market a new drug, can be filed with the FDA, a
4
<PAGE>
product must undergo, among other things, extensive animal testing and human
clinical trials, which can take up to seven years to complete. Except for
Lotemax and Alrex, the Company has not yet filed NDAs on its products. The time
required for regulatory approval of the Company's products after acceptance for
filing an NDA can vary and is usually one to three years or more, and the FDA
may require additional animal studies and/or clinical trials before granting
approval. There can be no assurance that the FDA and foreign regulatory agencies
will be satisfied with the information, including that emanating from clinical
trials, submitted to them in applications (like NDAs) seeking approval and will
approve the marketing of any of the Company's potential products, or that
problems will not arise that could delay or prevent the commercialization of the
Company's future products.
There can be no assurance that any potential products developed by the
Company alone or in conjunction with others will be proven to be safe and
effective in clinical trials and will meet all of the applicable regulatory
requirements needed to receive marketing approval. Data obtained from
preclinical testing and clinical trials can be susceptible to varying
interpretations which could delay, limit or prevent regulatory approvals. In
addition, delays or disapprovals may be encountered based upon additional
government regulation resulting from future legislation or administrative action
or changes in FDA policy made during the period of product development and FDA
regulatory review. Similar delays may also be encountered in foreign countries.
There can be no assurance that even after such time and expenditures, regulatory
approval will be obtained for any potential products developed by the Company.
If regulatory approval of a product is granted, such approval will be limited to
those therapeutic uses for which the product has been demonstrated through
clinical studies and other means to be safe and effective. Furthermore, approval
may entail ongoing requirements for post-marketing studies. Even if regulatory
approval is obtained, a marketed product, its manufacturer and its manufacturing
facilities are subject to continual review and periodic inspections. The
regulatory standards for manufacturing are currently being applied stringently
by the FDA. Discovery of previously unknown problems with a product,
manufacturer or facility may result in FDA restrictions being placed on such
product or manufacturer or facility, including an order to withdraw a specific
product from the market, and may also result in court enforced sanctions against
the product, manufacturer or facility.
The Company may establish collaborative relationships to conduct clinical
testing and seek regulatory approvals to market its products in major markets
outside the U.S. There can be no assurance that the Company will be successful
in establishing such relationships or that such approvals will be received in a
timely manner, if at all. To market its products abroad, the Company is also
subject to numerous and varying foreign regulatory requirements, implemented by
foreign health authorities, governing the design and conduct of human clinical
trials, pricing and marketing. The approval procedure varies among countries and
can involve additional testing, and the time required to obtain approval may
differ from that required to obtain FDA approval. At present, foreign marketing
authorizations are applied for at a national level, although within the European
Union ("EU") certain registration procedures are available to companies wishing
to market a product in more than one EU member country. If a regulatory
authority is satisfied that adequate evidence of safety, quality and efficacy
has been presented, marketing authorization is
5
<PAGE>
almost always granted. The foreign regulatory approval process includes all of
the risks associated with obtaining FDA approval set forth above. Approval by
the FDA does not ensure approval by other countries.
Lack of Sales and Marketing Capability
The Company has no experience in sales, marketing or distribution. To
market any of its products directly, the Company must develop a marketing force
and sales force with technical expertise and with supporting distribution
capability. Alternatively, the Company may obtain the assistance of a
pharmaceutical company with an established distribution system and sales force.
The Company has entered into agreements with Bausch & Lomb to market Lotemax and
Alrex. There can be no assurance, however, that the Company will be able to
establish sales and distribution capabilities or be successful in gaining market
acceptance for its products.
Lack of Manufacturing Capability
The Company currently does not have manufacturing facilities to produce its
products for clinical trials. The Company's agreements with Bausch & Lomb
provide for the manufacturing of Lotemax and Alrex. The proposed products under
development by the Company have never been manufactured on a commercial scale
and there can be no assurances that such products can be manufactured at a cost
or in quantities necessary to make them commercially viable. Any delay in
availability of products may result in delay in the submission of products for
regulatory approval or the market introduction and subsequent sales of such
products, which would have a material adverse effect on the Company.
Need to Attract and Retain Key Employees and Consultants
The Company is highly dependent on the principal members of its scientific
and management staff. In addition, the Company relies on consultants and
advisors to assist the Company in formulating its research and development
strategy. Retaining and attracting qualified personnel, consultants and advisors
will be critical to the Company's success. In order to pursue its product
development and marketing plans, the Company will be required to hire additional
qualified scientific personnel to perform research and development, as well as
personnel with expertise in clinical testing, government regulation,
manufacturing and marketing. The Company faces competition for qualified
individuals from numerous pharmaceutical and biotechnology companies,
universities and other research institutions. There can be no assurance that the
Company will be able to attract and retain such individuals on acceptable terms
or at all.
The Company's clinical development is conducted under agreements with
universities and medical institutions. The Company depends on the availability
of a principal investigator for each such program, and the Company cannot assure
that these individuals or their research staffs will be available to conduct
clinical development. The Company's academic collaborators are not employees of
the Company. As a result, the Company has limited control over their activities
and can expect that only limited amounts of their time will be dedicated to
Company activities. The
6
<PAGE>
Company's academic collaborators may have relationships with other commercial
entities, some of which compete with the Company.
Uncertainty of Health Care Reform Measures and Third-Party Reimbursement
The levels of revenues and profitability of biotechnology and
pharmaceutical companies may be affected by the continuing efforts of
governmental and third-party payors to contain or reduce the costs of health
care through various means. For example, in certain foreign markets, pricing or
profitability of prescription pharmaceuticals is subject to government control.
In the U.S., there have been, and the Company expects that there will continue
to be, a number of federal and state proposals to control health care costs.
While the Company cannot predict whether any such legislative or regulatory
proposals will be adopted or the effect such proposals may have on its business,
the uncertainty surrounding such proposals could have a material adverse effect
on the Company. Furthermore, the Company's ability to commercialize its
potential product portfolio may be adversely affected to the extent that such
proposals have a material adverse effect on the business, financial condition
and profitability of other companies that are prospective collaborators for
certain of the Company's proposed products.
Dependence on Reimbursement
Pharmos' ability to commercialize its products successfully may depend in
part on the extent to which reimbursement for the cost of such products and
related treatments will be available from government health administration
authorities, private health insurers and other organizations. Third-party payors
are increasingly challenging the price of medical products and services.
Significant uncertainty exists as to the reimbursement status of newly approved
health care products, and there can be no assurance that adequate third-party
coverage will be available to enable Pharmos to maintain price levels sufficient
to realize an appropriate return on its investment in product development.
Risk of Product Liability; Availability of Insurance
The design, development and manufacture of the Company's products involve
an inherent risk of product liability claims and associated adverse publicity.
Although the Company currently maintains general liability insurance, there can
be no assurance that the coverage limits of the Company's insurance policies
will be adequate. Similarly, the Company currently maintains clinical trial
liability insurance, but there can be no assurance that the coverage limit of
the Company's insurance policies will be adequate. The Company currently has no
product liability insurance, and there can be no assurance that the Company will
be able to obtain or maintain product liability insurance on acceptable terms or
with adequate coverage against potential liabilities. Such insurance is
expensive, difficult to obtain and may not be available in the future on
acceptable terms or at all. A successful claim brought against the Company in
excess of the Company's insurance coverage could have a material adverse effect
upon the Company and its financial condition.
7
<PAGE>
Use of Hazardous Materials; Potential Liability to Comply with Environmental
Laws
The Company's research and development involves the controlled use of
hazardous materials. Although the Company believes that its safety procedures
for handling and disposing of such materials comply in all material respects
with the standard prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result, and any such liability could exceed the resources
of the Company. The Company may incur substantial costs to comply with
environmental regulations if the Company develops manufacturing capacity.
Market for the Company's Securities; Shares Eligible for Future Sale; Possible
Volatility of Share Prices
The market price of the Company's Common Stock, like that of other emerging
pharmaceutical companies, has fluctuated significantly in recent years and is
likely to fluctuate in the future. Announcements by the Company or others
regarding scientific discoveries, technological innovations, litigation,
products, patents or proprietary rights, the progress of clinical trials,
government regulation, public concern as to the safety of drugs and the
reliability of the Company's testing processes and general market conditions may
have a significant impact on the market price of the Common Stock. The addition
of the shares being offered hereby and the shares issuable upon exercise of the
Company's currently outstanding warrants and options to the number of
publicly-traded shares of the Company's Common Stock may affect the volatility
of share prices of the Company's Common Stock.
Dilution as a result of Conversion of Preferred Stock and exercise of Warrants
The Selling Stockholders hold 5,000 shares of Series C Preferred Stock of
the Company, which are convertible into Common Shares. See "Selling
Stockholders." Each share of Series C Preferred Stock is convertible into a
number of shares of Common Stock equal to (i) $1,000 (ii) divided by a
conversion price which is currently 90% of the average of the low trade prices
of the Common Stock for the five (5) consecutive trading days ending on the
trading day immediately preceding the conversion date (the "Variable Conversion
Price") and on and after August 2, 1998 the lesser of the Variable Conversion
Price and a number of shares of Common Stock equal to (i) $1,000 (ii) divided by
a conversion price which is one hundred twenty percent (120%) of the average of
the closing bid prices of the Common Stock for the trading days beginning on
July 4, 1998 and ending on August 2, 1998 (in each case subject to equitable
adjustment for any stock splits, stock dividends and reclassifications or
similar events during the period. Under the applicable conversion formulas of
the Series C Preferred Stock, the number of Common Shares issuable upon
conversion is inversely proportional to the market price of the Common Shares at
the time of conversion (i.e., the number of shares increases as the market price
of the Common Shares decreases); and except with respect to certain redemption
rights of the Company for the Series C Preferred Stock and the limitation under
Nasdaq SmallCap regulations which limit the aggregate amount of Common Shares
which the Company may issue at a discount from market price upon conversion of
the Series C Preferred Stock and Warrants without stockholder approval, (such
stockholder approval is being requested by the
8
<PAGE>
Company), there is no cap on the number of shares of Common Stock which may be
issued. In addition, the number of Common Shares issuable upon the conversion of
the Series C Preferred Stock and the exercise of Warrants is subject to
adjustment upon the occurrence of certain dilutive events. For a further
description of the rights of holders of Series C Preferred Stock, see the
Designations, Preferences and Rights of Series C Convertible Participating
Preferred Stock of Pharmos Corporation filed as an exhibit to the Company's
Current Report on Form 8-K, dated February 4, 1998. The Selling Stockholders
also hold outstanding Warrants to acquire 821,052 Common Shares. All of such
Common Shares are covered by the registration statement containing this
Prospectus or will be covered by subsequent registration statements filed by the
Company, if necessary. The exercise of such Warrants and conversion of such
Series C Preferred Stock and the sale of such Common Shares could have a
significant negative effect on the market price of the Common Stock and could
materially impair the Company's ability to raise capital through the future sale
of equity securities.
Outstanding Stock Options and Warrants
As of June 30, 1998, the Company had outstanding incentive stock options to
purchase an aggregate of 484,669 shares of Common Stock at an average exercise
price of $2.17 per share and non-qualified stock options to purchase an
aggregate of 439,265 at an average exercise price of $2.63 per share issued to
employees, directors and consultants pursuant to stock option plans and
individual agreements with management and directors of the Company and warrants
(excluding the Warrants) to purchase 3,709,713 shares of the Company's Common
Stock at an average price of $1.91 per share.
The Company may issue additional capital stock, warrants and/or options to
raise capital in the future. The Company regularly examines opportunities to
expand its technology base and product line through means such as licenses,
joint ventures and acquisition of assets or ongoing businesses and may issue
securities in connection with such transactions. However, no commitments to
enter into or pursue any such transaction have been made and there can be no
assurance that any such discussions will result in any such transaction being
concluded. In order to attract and retain key personnel, the Company may also
issue additional securities, including stock options, in connection with its
employee benefit plans. During the terms of such options and warrants, the
holders thereof are given the opportunity to profit from a rise in the market
price of the Company's Common Stock. The exercise of such options and warrants
may have an adverse effect on the market value of the Company's Common Stock.
Also, the existence of such options and warrants may adversely affect the terms
on which the Company can obtain additional equity financing.
Anti-Takeover Provisions
The Company is subject to Sections 78.411-.444 of the Nevada General
Corporation Law ("Nevada Law"), an anti-takeover law, which may discourage
certain types of transactions involving an actual or potential change in control
of the Company, including transactions in which the stockholders might otherwise
receive a premium for their shares over the current prices, and may limit the
ability of the stockholders to approve a transaction that they may deem to be in
their
9
<PAGE>
best interests. In addition, the Board of Directors has the authority without
action by the stockholders to fix the rights and preferences of and issue shares
of Preferred Stock, which may have the effect of delaying or preventing a change
in control of the Company.
Potential Future Acquisitions
Due to the current uncertainties of the capital markets for emerging
pharmaceutical companies, the Company has had preliminary discussions with
several emerging pharmaceutical and biotechnology companies about potential
business and/or product consolidations, joint ventures, acquisitions, mergers or
other business combinations (collectively "acquisitions"). In the event the
Company undertakes any such acquisitions it may use some of its cash, including
part of the cash received in connection with the Private Placement Transaction,
or may issue its stock in connection therewith. Although management would
attempt to structure such acquisitions in a manner that will minimize dilution
of the equity owned by current stockholders, no assurance can be given that
acquisitions will not result in such dilution or that control of the Company
will not be changed as a result of such acquisitions. Such acquisitions may be
negotiated or may be sought on an unsolicited basis and may involve speculative
and risky undertakings by the Company with increased risks to its stockholders.
Under Nevada law, acquisitions do not require shareholders' approval except when
accomplished by merger or consolidation. The Company does not, in general,
intend to submit acquisitions to shareholder vote except where required by
Nevada law. The Company has not entered into any preliminary undertaking with
any third parties involving any acquisitions or other business combination
transactions.
Special Considerations of Doing Business in Israel
A significant part of the operations of the Company is conducted in Israel
through its wholly-owned subsidiary, Pharmos Limited ("Pharmos Ltd."), and is
directly affected by economic, political and military conditions there. In
addition, Pharmos Ltd. has received certain funding from the Office of the Chief
Scientist of the Israel Ministry of Industry and Trade (the "Chief Scientist")
relating to its proprietary SubMicron Emulsion Technology and to Dexanabinol, a
new chemical entity. Such funding prohibits the transfer or license of know-how
and the manufacture of resulting products outside of Israel without the
permission of the Chief Scientist. Although it is the Company's belief that the
Chief Scientist does not unreasonably withhold this permission if the request is
based upon commercially justified circumstances and any royalty obligations to
the Chief Scientist are sufficiently assured, there can be no assurance that
such consent, if requested, would be granted upon terms satisfactory to the
Company or granted at all.
Absence of Dividends
No dividends have been paid on the Common Stock to date, and the Company
does not expect to pay cash dividends in the foreseeable future.
10
<PAGE>
DILUTION
As of March 31, 1998, the net tangible book value of the Company was
$2,508,738 or $0.07 per share. Net tangible book value per share is determined
by dividing the net tangible book value (tangible assets less liabilities) of
the Company by the number of shares of Common Stock outstanding at that date.
If all of the 500,000 Warrants exercisable at an exercise price of $2.67
per share are exercised, (each of the Warrants purchasing one share of Common
Stock), there would be 36,765,119 shares of Common Stock outstanding with a net
tangible book value of $0.11 and the purchasers of shares through the exercise
of such Warrants at such prices would suffer immediate dilution of $2.56 per
share.
If all of the 150,000 Warrants exercisable at an exercise price of $2.28
per share are exercised, (each of the Warrants purchasing one share of Common
Stock), there would be 36,415,119 shares of Common Stock outstanding with a net
tangible book value of $0.08 and the purchasers of shares through the exercise
of such Warrants at such prices would suffer immediate dilution of $2.20 per
share.
If all of the 171,052 Warrants exercisable at an exercise price of $1.38
per share are exercised, (each of the Warrants purchasing one share of Common
Stock), there would be 36,436,171 shares of Common Stock outstanding with a net
tangible book value of $0.08 and the purchasers of shares through the exercise
of such Warrants at such prices would suffer immediate dilution of $1.30 per
share.
If all of the Warrants are exercised, (each of the Warrants purchasing one
share of Common Stock), there would be 37,086,171 shares of Common Stock
outstanding with a net tangible book value of $0.12. The purchasers of shares
through the exercise of such Warrants at a price of $2.67 per share would suffer
immediate dilution of $2.55 per share; the purchasers of shares through the
exercise of such Warrants at a price of $2.28 per share would suffer immediate
dilution of $2.16 per share; and the purchasers of shares through the exercise
of such Warrants at a price of $1.38 per share would suffer immediate dilution
of $1.26 per share.
USE OF PROCEEDS
The Company will receive no proceeds from the 6,000,000 shares of Common
Stock to be offered and resold by the Selling Stockholder.
If all 821,052 Warrants whose underlying Common Stock is being offered
hereby are exercised, the gross proceeds to be received by the Company will be
$1,913,052 (assuming that the cashless exercise option is not used for the
500,000 Warrants exercisable at an exercise price of $2.67 and the 150,000
Warrants exercisable at an exercise price of $2.28). Any proceeds received by
the Company from the exercise of the Warrants will be used for working capital.
11
<PAGE>
The Company believes that its current cash resources and interest income
thereon, including the funds obtained from the Private Placement Transaction,
should be sufficient to fund its operating expenses and capital requirements as
currently planned through the first quarter of 1999. The amounts and timing of
expenditures for each purpose will depend on the progress of the Company's
research and development programs, technological advances, determinations as to
commercial potential, the terms of any collaborative arrangements entered into
by the Company for development and licensing, regulatory approvals, and other
factors, many of which are beyond the Company's control. Pending such uses, the
cash received in connection with the Private Placement Transaction will be
invested in short-term, interest-bearing investment grade securities and
commercial paper.
DESCRIPTION OF SECURITIES
Common Stock
The Common Stock being offered hereby (i) by the Selling Stockholder, (ii)
by the Company upon the exercise of the Warrants, and (iii) by any "affiliate"
of the Company upon the resale of such Common Stock obtained from exercising the
Warrants is fully described in the Company's Registration Statement on Form 8-A
dated January 30, 1984, filed pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). See "Incorporation of Certain
Documents by Reference".
The Company's Restated Articles of Incorporation currently authorize the
issuance of up to 60,000,000 shares of Common Stock. As of June 30, 1998, there
were 37,055,886 shares outstanding.
Preferred Stock
The Company's Restated Articles of Incorporation currently authorize the
issuance of up to 1,250,000 shares of Preferred Stock. Of the authorized
Preferred Stock, no shares, designated as Series A or Series B Preferred Stock,
are currently outstanding. In addition, 5,000 shares, designated as Series C
Preferred Stock, are currently issued and outstanding and held by the Selling
Stockholder. There are an additional 3,000 shares, designated as Series C
Preferred Stock which may be issued at the discretion of the Company to the
current Selling Stockholder. The Company, however, does not intend to issue such
shares. The Series C Preferred Stock was issued in connection with the February
1998 Private Placement Transaction (the "Private Placement Transaction").
Holders of Series C Preferred Stock have the right to convert their shares as
follows: at 90% of the average of the lowest sale price of the Common Stock for
the five consecutive trading days ending on the trading day immediately
preceding the Conversion for the first 6 months after closing; thereafter, the
conversion price will equal the lower of (i) 90% of the then prevailing market
prices, as determined above, or (ii) 120% of the average closing bid prices for
days 151-180 following the closing. For a complete description of the rights of
holders of
12
<PAGE>
Series C Preferred Stock, see the Company's Current Report on Form 8-K,
including the exhibits thereto, dated February 4, 1998.
Warrants
The 500,000 Warrants exercisable at an exercise price of $2.67 are
exercisable commencing February 4, 1999 and expire on February 4, 2003; the
150,000 Warrants exercisable at an exercise price of $2.28 are exercisable
commencing February 4, 1999 and expire on February 4, 2003; and the 171,052
Warrants exercisable at an exercise price of $1.38 are exercisable commencing on
March 31, 1998 and expire on March 31, 2008. All of the Warrants contain
anti-dilution provisions providing for an adjustment to their respective
exercise prices in the event that the Company effects a stock split or stock
dividend. In addition, the number and kind of shares of Common Stock underlying
the Warrants are subject to adjustments in the event of any capital
reorganization, or reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation or entity (other
than a subsidiary of the Company in which the Company is the surviving or
continuing corporation and no change occurs in the Company's Common Stock).
Other Securities--Preferred Stock
The Company's Restated Articles of Incorporation currently authorize the
issuance of up to 1,250,000 shares of Preferred Stock, of which no shares of
Series A or Series B Preferred Stock are currently outstanding, and 5,000 shares
of Series C Preferred Stock issued in connection with the Private Placement
Transaction are currently issued and outstanding as of March 2, 1998, and
empower the Board of Directors, without the necessity of further action or
authorization by the stockholders, to authorize the issuance of Preferred Stock
from time to time in one or more series and to fix the relative rights,
preferences and limitations of each such series. The issuance of Preferred Stock
could adversely affect the voting power of holders of Common Stock and the
likelihood that such holders will receive dividend payments and payments upon
liquidation and could have the effect of delaying, deferring or preventing a
change in control of the Company. The Company has no present plan to issue any
additional shares of Preferred Stock.
Other Securities--Options and Warrants
As of June 30, 1998, the Company had outstanding incentive stock options to
purchase an aggregate of 484,669 shares of Common Stock at an average exercise
price of $2.17 per share and non-qualified stock options to purchase an
aggregate of 439,265 at an average exercise price of $2.63 per share issued to
employees, directors and consultants pursuant to stock option plans and
individual agreements with management and directors of the Company and warrants
(excluding the Warrants) to purchase 3,709,713 shares of the Company's Common
Stock at an average price of $1.91 per share, consisting of: 112,979 warrants
which can be exercised until February 1999 each to purchase a single share of
Common Stock for $2.44; 454,121 warrants which can be exercised until August
1999 each to purchase a single share of Common Stock for $2.67; 65,044
13
<PAGE>
warrants which can be exercised until September 1999 each to purchase a single
share of Common Stock for $2.26; 150,000 warrants which can be exercised until
October 1999 each to purchase a single share of Common Stock for $0.84; 500,000
warrants which can be exercised until April 2005 each to purchase a single share
of Common Stock for $2.75; 10,000 Warrants which can be exercised until April
2005 each to purchase a single share of Common Stock for $0.78; 7,119 warrants
which can be exercised until April 2000 each to purchase a single share of
Common Stock for $.75; 17,119 Warrants which can be exercised until April 2000
each to purchase a single share of Common Stock for $1.00; 17,119 warrants which
can be exercised until April 2000 each to purchase a single share of Common
Stock for $1.50; 821,489 warrants which can be exercised until September 2000
each to purchase a single share of Common Stock for $1.80; 10,000 warrants which
can be exercised until October 2001 each to purchase a single share of Common
Stock for $1.88; 15,000 warrants which can be exercised until March 2002 each to
purchase a single share of Common Stock for $2.31; 65,000 warrants which can be
exercised until September 2007 each to purchase a single share of Common Stock
for $1.34; 50,000 warrants which can be exercised until September 2007 each to
purchase a single share of Common Stock for $1.75; 10,000 warrants which can be
exercised until November 2002 each to purchase a single share of Common Stock
for $1.39; 110,000 warrants which can be exercised until February 2003 each to
purchase a single share of Common Stock for $1.59; 849,250 warrants which can be
exercised until February 2007 each to purchase a single share of Common Stock
for $1.59; 159,000 warrants which can be exercised until March 2001 each to
purchase a single share of Common Stock for $1.75; 10,000 warrants which can be
exercised until March 2007 each to purchase a single share of Common Stock for
$1.66; 239,473 warrants which can be exercised until March 2008 each to purchase
a single share of Common Stock for $1.38; 15,000 warrants which can be exercised
until April 2003 each to purchase a single share of Common Stock for $1.22.; and
22,000 warrants which can be exercised until October 2005 each to purchase a
single share of Common Stock for $2.22.
Nevada Anti-Takeover Laws
The Company is subject to the provisions of Sections 78.411 through 78.444
of the Nevada Law, an anti-takeover statute (the "Business Combination
Statute"). In general, the Business Combination Statute prohibits a
publicly-held Nevada corporation from engaging in a "combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless such
combination is approved in a prescribed manner or satisfies certain fair value
requirements. For the purposes of the Business Combination Statute,
"combination" includes a merger, an asset sale, the issuance or transfer by the
corporation of its shares in one transaction or a series of transactions, having
an aggregate fair market value equal to five percent or more of the aggregate
market value of the corporation's outstanding shares, to the interested
stockholder or to an associate of the interested stockholder, and certain other
types of transactions resulting in a financial benefit the interested
stockholder. An "interested stockholder" is a person who is the beneficial
owner, directly or indirectly, of ten percent or more of the corporation's
voting stock or an affiliate or associate of the corporation that at any time
within the three years immediately preceding the date in question
14
<PAGE>
was the beneficial owner, directly or indirectly, of ten percent or more of the
corporation's voting stock.
By an amendment to its By-laws, the Company has exempted itself from the
provisions of Sections 78.378 through 78.3793 of the Nevada Law, a "control
share" statute which otherwise prohibits an acquiring person, under certain
circumstances, from voting certain shares of a target corporation's stock after
such acquiring person's percentage of ownership of such corporation's stock
crosses certain thresholds, unless the target corporation's disinterested
stockholders approve the granting of voting rights to such shares.
Transfer Agent and Registrar
The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer and Trust Company, New York, New York.
PLAN OF DISTRIBUTION
The shares of Common Stock will be offered and sold by the Selling
Stockholders for their own accounts. The Company will not receive any proceeds
from the sale of the Common Stock pursuant to this Prospectus. The Company has
agreed to pay the expenses of registration of the Common Shares, including legal
and accounting fees.
The Company will receive no proceeds from this offering (other than from
the exercise of the Warrants). The Shares offered hereby may be sold by the
Selling Stockholders or by pledgees, donees, transferees or other successors in
interest that receive such shares as a gift, partnership distribution or other
non-sale related transfer. The Shares may be sold from time to time in
transactions in the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers, including block
trades in which brokers or dealers will attempt to sell the Shares as agent but
may position and resell the block as principal to facilitate the transaction, or
in one or more underwritten offerings on a firm commitment or best effort basis.
Sales of Selling Stockholders' Shares may also be made pursuant to Rule 144
under the Securities Act, where applicable.
To the extent required under the Securities Act, the aggregate amount of
Selling Stockholders' Shares being offered and the terms of the offering, the
names of any such agents, brokers, dealers, transferees or underwriters and any
applicable commission with respect to a particular offer will be set forth in an
accompanying Prospectus supplement. Any underwriters, dealers, brokers or agents
participating in the distribution of the Shares may receive compensation in the
form of underwriting discounts, concessions, commissions or fees from the
Selling Stockholders and/or purchasers of Selling Stockholders' Shares, for whom
they may act (which compensation as to a particular broker-dealer might be in
excess of customary commissions).
15
<PAGE>
From time to time, the Selling Stockholders may pledge, hypothecate or
grant a security interest in some or all of the Shares, and the pledgees,
secured parties or persons to whom such securities have been hypothecated shall,
upon foreclosure in the event of default, be deemed to be Selling Stockholders
hereunder. In addition, the Selling Stockholders may, from time to time, sell
short the Shares of the Company, and in such instances, this Prospectus may be
delivered in connection with such short sales and the Shares offered hereby may
be used to cover such short sales.
From time to time, the Selling Stockholders may transfer, pledge, donate or
assign Shares to lenders or others and each of such persons will be deemed to be
a "Selling Stockholder" for purposes of the Prospectus. The number of the
Selling Stockholders' Shares beneficially owned by a Selling Stockholder who
transfers, pledges, donates or assigns Shares will decrease as and when they
take such actions, The plan of distribution for Selling Stockholders' Shares
sold hereunder will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be a Selling Stockholder hereunder.
A Selling Stockholder may enter into hedging transactions with
broker-dealers, and the broker-dealers may engage in short sales of the Shares
in the course of hedging the positions they assume with such Selling
Stockholder, including, without limitation , in connection with distribution of
the Shares by such broker-dealers. The Selling Stockholders may also enter into
option or other transactions with broker-dealers that involve the delivery of
the Shares to the broker-dealers, who may then resell or otherwise transfer such
Shares. The Selling Stockholders may also loan or pledge the Shares to a
broker-dealer and the broker-dealer may sell the Shares as loaned or upon a
default may sell or otherwise transfer the pledge Shares.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available.
The Selling Stockholders and any broker-dealer or agent that participates
with the Selling Stockholders in the distribution of the Shares may be deemed to
be "underwriter" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commissions under the Securities Act.
The Company has agreed to pay certain costs and expenses incurred in
connection with the registration of the shares of Common Stock offered hereby,
except that the Selling Stockholders shall be responsible for all selling
commissions, transfer taxes and related charges in connection with the offer and
sale of such shares.
The Company has agreed to keep the Registration Statement of which this
Prospectus forms a part continuously effective until the earlier of the date
that all of such Shares have been sold or three years from the date of this
Prospectus.
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SELLING SECURITY HOLDERS
The table below sets forth the name of each of the Selling Stockholders,
the total amount of (i) shares of Common Stock beneficially owned by such
security holders as of June 30, 1998, (ii) Warrant Shares issuable upon the
exercise of the Warrants beneficially owned by such security holders; (iii) the
aggregate amount of Common Stock and/or Warrant Shares which may be offered for
sale for the account of such security holders in his/her discretion from time to
time pursuant to this Prospectus; and (iv) the amount and percentage of Common
Stock which would be beneficially owned by such security holders after sale of
all securities offered by the Selling Stockholders pursuant to this Prospectus,
if they are offered and sold, and assuming that any other shares held by such
security holders are not sold. The information included below is based upon
information provided by the Selling Stockholders. The Selling Stockholders as
referred to herein have not held any position or office, or had any material
relationship, with the Company or any of its predecessors or affiliates within
the last three years, except as noted below, and the Selling Stockholders will
not own 1% or more of the outstanding stock of the Company after completion of
the offering, except as noted below.
<TABLE>
<CAPTION>
Shares and Percentage of Shares
Shares of Shares of Percentage Owned After Completion of
Names Common Stock Common Stock of Shares Offering
(and position or office held in Beneficially and/or Warrant Owned Prior -----------------------------------
the Company) Owned(1) Shares Offered to Offering Shares Percentage
=============================== ================= ================= =============== ================ =================
<S> <C> <C> <C> <C> <C>
Alan Mark(2) 171,052(3) 171,052 ** 0 0
- ------------------------------- ----------------- ----------------- --------------- ---------------- -----------------
Gemini Capital 0(4) 150,000 ** 0 0
- ------------------------------- ----------------- ----------------- --------------- ---------------- -----------------
CC Investments, LDC (5) 1,817,222(6) 6,500,000(7) 4.9% 0 0
- ------------------------------- ----------------- ----------------- --------------- ---------------- -----------------
</TABLE>
- --------------------
** Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities and includes any securities
which the person has the right to acquire within 60 days of July 14, 1998
through the conversion or exercise of any security or other right.
(2) Alan Mark served as Acting Chief Financial Officer of the Company from July
1, 1996 to July 31, 1997.
(3) Consists of currently exercisable Warrants to purchase 171,052 shares of
Common Stock at an exercise price of $1.38 per share.
(4) Gemini Capital holds Warrants to purchase 150,000 shares of Common Stock at
an exercise price of $2.28 per share which are not exercisable within 60
days of July 14, 1998.
(5) Castle Creek Partners, LLC is the investment advisor to CC Investments, LDC
and consequently may be deemed to have voting control and investment
discretion over the securities held by CC Investments LDC. Castle Creek
Partners disclaims beneficial ownership of all securities owned by CC
Investments LDC. David
17
<PAGE>
Asher and John Ziegelman may be deemed to be the beneficial owners of the
securities held by CC Investments LDC. Mr. Asher and Mr. Ziegelman disclaim
such beneficial ownership. The address CC Investments, LDC, is c/o Citco
Fund Services, Ltd., Corporate Center, West Bay Road, P.O. Box 31106, SMD
Grand Cayman. The address of Castle Creek Partners, LLC, Mr. Asher and Mr.
Ziegelman is 333 West Wacker Drive, Chicago, IL 60606.
(6) Does include warrants to purchase 500,0000 shares of Common Stock at a
price of $2.67 per share because such warrants are not exercisable within
60 days of July 14, 1998. Pursuant to the terms of the Series C Preferred
Stock, no holder thereof can convert or exercise any portion of such Series
C Preferred Stock if such conversion would increase such holder's
beneficial ownership of Common Stock to in excess of 4.9%. Therefore, for
purposes of calculating the number of shares of Common Stock beneficially
owned by the Selling Stockholder holding the Series C Preferred Stock, such
number of shares is assumed to be 4.9% of the outstanding shares of Common
Stock, or 1,817,222 shares. Absent such limitation, the number of shares of
Common Stock issuable upon the conversion of the Series C Preferred Stock,
based on a conversion price of $2.28, which is derived from 90% of the
lowest trading price of the Common Stock as of July 7, 1998, would have
been 2,192,982 shares or 5.9% of the outstanding shares of Common Stock.
Moreover, pursuant to the regulations of the National Association of
Securities Dealers, in the absence of shareholder approval, the aggregate
number of shares of Common Stock issuable at a discount from market price
upon conversion of the Series C Preferred Stock may not exceed 19.99% of
the outstanding shares of Common Stock. Unless shareholder approval is
obtained to issue Common Stock in excess of the maximum amount set forth
above, the holder of the Series C Preferred Stock will not be entitled to
acquire more than its proportionate share of such maximum amount. Any
Series C Preferred Stock which may not be converted because of such
limitation must be redeemed by the Company.
(7) The number of shares of Common Stock registered pursuant to the
Registration Statement on behalf of the Selling Stockholder holding Series
C Preferred Stock and the number of shares of Common Stock offered hereby
by such holder have been determined by agreement between the Company and
such Selling Stockholder. Because the number of shares of Common Stock that
will ultimately be issued upon conversion of the Series C Preferred Stock
is dependent, subject to certain limitations, upon the average of certain
closing bid prices of the Common Stock prior to conversion, as described
above, and certain antidilution adjustments, such number of shares of
Common Stock (and therefore the number of shares of Common Stock offered
hereby) cannot be determined at this time. The 6,000,000 shares of Common
Stock being registered for the conversion of the Series C Preferred Stock
represents approximately 13% of the Company's currently outstanding shares
of Common Stock.
18
<PAGE>
RECENT DEVELOPMENTS
On January 1, 1998, Robert Cook was appointed to the position of Vice
President- Finance and Chief Financial Officer. Prior to joining Pharmos, Mr.
Cook was Vice President in the Healthcare Group of General Electric Capital
Corporation's Commercial Finance unit, working with pharmaceutical companies as
well as middle-market and emerging companies. Prior to working at General
Electric, Mr. Cook was at Chase Manhattan Bank for 18 years.
On March 10, 1998, the Company, together with Bausch & Lomb
Pharmaceuticals, Inc. ("BLP") announced the recent approval from the Food and
Drug Administration ("FDA") to manufacture and market its two opthalmic
products, Lotemax (loteprednol etabonate opthalmic suspension 0.5%) and Alrex
(loteprednol etabonate opthalmic suspension 0.2%).
Lotemax is a topical, site-specific steroid that will be used to treat
post-operative eye inflammation such as that experienced following cataract
surgery. The new prescription eye drop will also be used for various other
inflammatory eye conditions. The novel chemical structure of Lotemax allows it
to be predictably transformed by enzymes in the eye to an inactive metabolite,
and increases its safety profile. The safety profile of Lotemax was demonstrated
in clinical trials by a low incidence of increased intraocular pressure, a
significant side effect of ophthalmic steroid use. In addition, Lotemax will
have the broadest range of indications of any ophthalmic steroid on the market.
Alrex is a specially developed formula of loteprednol etabonate that will
be used in the treatment of ophthalmic allergies. Alrex is indicated for the
treatment of seasonal allergic conjunctivitis, an inflammation of the eye
usually caused by pollens. Seasonal allergic conjunctivitis produces itching,
tearing, redness and swelling in the conjunctiva, the membrane that covers the
inside of the eyelid and the white part of the eye.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K, as amended by Amendment No.
1, dated May 14, 1998, Amendment No.2, dated July 13, 1998 and Amendment No. 3,
dated July 14, 1998, for the fiscal year ended December 31, 1997, filed pursuant
to Section 13 of the Exchange Act.
(b) The Company's Quarterly Report on Form 10-Q, for the quarter ended
March 31, 1998, filed pursuant to Section 13 of the Exchange Act.
(c) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A dated January 30, 1984, filed pursuant to
Section 12 of the Exchange Act.
(d) The Company's Current Report on Form 8-K, including the exhibits
thereto, dated February 4, 1998.
19
<PAGE>
(e) The Company's Current Report on Form 8-K, dated March 10, 1998.
In addition, all reports and other documents to be filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities offered hereby
then remaining unsold, as well as all such reports filed after the date hereof
and prior to the termination of this offering, shall be deemed to be
incorporated by reference herein and shall be deemed to be a part hereof from
the date of the filing of each such report or document.
COMMISSION'S POLICY ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Article 12 of the Company's Restated Articles of Incorporation directs the
Company to provide in its bylaws for provisions relating to the indemnification
of directors and officers to the full extent permitted by law, including the
federal securities law. Section 78.751 of the Nevada Revised Statutes, as
amended, authorizes the Company to indemnify any director or officer under
certain prescribed circumstances and subject to certain limitations against
certain costs and expenses, including attorneys' fees actually and reasonably
incurred in connection with any action, suit or proceeding, whether civil,
criminal, administrative or investigative, to which such person is a party by
reason of being a director or officer of the Company if it is determined that
such person acted in accordance with the applicable standard of conduct set
forth in such statutory provisions. The Company may also purchase and maintain
insurance for the benefit of any director or officer which may cover claims for
which the Company could not indemnify such person.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Company, or to
underwriters (or controlling persons thereof) of which an officer, partner, or
controlling person thereof is one of the foregoing pursuant to the foregoing
provisions or otherwise, the Company 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 Company of expenses incurred or paid by any such persons, in the successful
defense of any action, suit or proceeding) is asserted by any such persons in
connection with the securities being registered, the Company 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 of 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.
20
<PAGE>
LEGAL OPINIONS
Legal matters in connection with the securities being offered hereby will
be passed upon for the Company by Ehrenreich Eilenberg Krause & Zivian LLP, 11
East 44th Street, 17th Floor, New York, NY 10017.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31, 1997, have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
21
<PAGE>
PHARMOS CORPORATION
, 1998
INDEX
Page No.
--------
THE COMPANY................................................................. 1
RISK FACTORS................................................................ 1
DILUTION ................................................................... 11
USE OF PROCEEDS............................................................. 11
DESCRIPTION OF SECURITIES................................................... 12
PLAN OF DISTRIBUTION........................................................ 15
SELLING SECURITY HOLDERS.................................................... 17
RECENT DEVELOPMENTS......................................................... 19
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. 19
COMMISSION'S POLICY ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES.............................................. 20
LEGAL OPINIONS.............................................................. 21
EXPERTS ................................................................... 21
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following statement sets forth the estimated expenses in connection
with the offering described in the Registration Statement, assuming all of the
Warrants are exercised at their respective exercise price (all of which will be
borne by the Registrant).
Securities and Exchange Commission Fee $ 6,728
Printing and Engraving Expenses 100
Accountants' Fees and Expenses 3,000
Legal Fees and Expenses 60,000
Blue Sky Filing Fees 1,500
Miscellaneous 672
-------
TOTAL $72,000
=======
Item 15. Indemnification of Directors and Officers.
Article 12 of the Registrant's Certificate of Incorporation directs the
Registrant to provide in its bylaws for provisions relating to the
indemnification of directors and officers to the full extent permitted by law.
Section 78.751 of the Nevada Revised Statutes, as amended, authorizes the
Registrant to indemnify any director or officer under certain prescribed
circumstances and subject to certain limitations against certain costs and
expenses, including attorneys' fees actually and reasonably incurred in
connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which such person is a party by reason of
being a director or officer of the Registrant if it is determined that such
person acted in accordance with the applicable standard of conduct set forth in
such statutory provisions.
The Registrant may also purchase and maintain insurance for the benefit of
any director or officer which may cover claims for which the Registrant could
not indemnify such person.
Item 16. Exhibits
4(a) Specimen of Common Stock Certificate (incorporated by reference to
Form S-3 Registration Statement of the Company dated November 25,
1994 [No. 33-86720])
4(b) Restated Articles of Incorporation (incorporated by reference to
Appendix E to the Joint Proxy Statement/ Prospectus included in
the
II-1
<PAGE>
Form S-4 Registration Statement of the Registrant dated September
28, 1992 [No. 33-52398])
4(c) Certificate of Amendment of Restated Articles of Incorporation
(incorporated by reference to the Company's Annual Report on Form
10- K for the year ended December 31, 1994 [No. 0-11550])
*4(d) Certificate of Amendment of Restated Articles of Incorporation
dated January 16, 1998
4(e) Certificate of Designation, Rights, Preferences and Privileges of
Series A Preferred Stock of the Company (incorporated by reference
to Form S-3 Registration Statement of the Company dated December
20, 1996 [No. 333-15165])
4(f) Certificate of Designation, Rights, Preferences and Privileges of
Series B Preferred Stock of the Company (incorporated by reference
to Form S-3 Registration Statement of the Company dated April 30,
1997 [No. 333- 26155
4(g) Certificate of Designation, Rights, Preferences and Privileges of
Series C Convertible Preferred Stock of the Company (incorporated
by reference to the Company's Current Report on Form 8-K filed on
February 4, 1998)
4(h) Amended and Restated By-Laws (incorporated by reference to Form
S-1 Registration Statement of the Company dated June 30, 1994 [No.
33- 80916])
4(i) Form of Stock Securities Purchase Agreement dated as of February
4, 1998 between the Company and the Investor (incorporated by
reference to the Company's Current Report on Form 8-K filed on
February 4, 1998)
4(j) Form of Stock Purchase Warrant dated as of February 4, 1998
between the Company and the Investor and the Company and the
Placement Agent (incorporated by reference to the Company's
Current Report on Form 8- K filed on February 4, 1998)
*4(k) Form of Stock Purchase Warrant dated as of March 31, 1997 between
the Company and the Investor
*5 Opinion re: legality
II-2
<PAGE>
23(a) Consent of Ehrenreich Eilenberg Krause & Zivian LLP (included in
the Opinion filed as Exhibit 5)
**23(b) Consent of PricewaterhouseCoopers LLP
- ---------------
* Filed with the original S-3 Registration Statement filed on March 5, 1998.
** Filed herewith.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes;
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that Paragraphs (i) and (ii) above do not apply if the
Registration Statement is on Form S-3 and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for the purpose of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual
II-3
<PAGE>
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>
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-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Iselin and State of New Jersey on the 13th day of
July, 1998.
PHARMOS CORPORATION
By: /s/ Dr. Haim Aviv
----------------------------------
Dr. Haim Aviv, Chairman, Chief
Scientist, Chief Executive Officer
and Director (Principal Executive
Officer)
Pursuant to the requirements of the Securities Act of 1933, this registration
statement or amendment has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert Cook Chief Financial Officer (Principal July 13, 1998
- ---------------------------- Financial and Accounting Officer)
Robert Cook
/s/ Dr. Gad Riesenfeld President, Chief Operating Officer July 13, 1998
- ---------------------------- and Acting Secretary
Dr. Gad Riesenfeld
/s/ Marvin P. Loeb Director July 13, 1998
- ----------------------------
Marvin P. Loeb
/s/ E. Andrews Grinstead III Director July 13, 1998
- ----------------------------
E. Andrews Grinstead III
/s/ Stephen C. Knight Director July 13, 1998
- ----------------------------
Stephen C. Knight
/s/ David Schlachet Director July 13, 1998
- ----------------------------
David Schlachet
/s/ Fredric D. Price Director July 13, 1998
- ----------------------------
Fredric D. Price
/s/ Mony Ben Dor Director July 13, 1998
- ----------------------------
Mony Ben Dor
</TABLE>
II-5
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Pharmos Corporation
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
March 16, 1998 appearing in Pharmos Corporation's Annual Report on Form 10-K for
the year ended December 31, 1997. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
/s/PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
New York, New York
July 9, 1998
