PROSPECTUS SUPPLEMENT File No. 333-80813
Filed Pursuant to Rule 424(b)(2)
Under the Securities Act of 1933
PHARMOS CORPORATION
1,500,000 Shares of Common Stock
This prospectus may be used only in connection with the resale, from time
to time, of up to 1,500,000 shares of Common Stock, par value $.03 per share, of
Pharmos Corporation, a Nevada corporation, by Centennial Parkway LLC for its own
benefit in transactions in the over-the-counter market, at prevailing market
prices, at negotiated prices or otherwise. This prospectus has been prepared for
the purposes of registering the shares under the Securities Act of 1933, to
allow for future sales by Centennial to the public without restriction. To the
knowledge of Pharmos, Centennial has made no arrangement with any brokerage firm
for the sale of the shares.
The 1,500,000 shares offered by Centennial consist of shares of common
stock which may purchased by Centennial pursuant to an equity line of credit
agreement between Pharmos and Centennial and shares of common stock issuable
upon exercise of warrants which may be issued to Centennial upon the purchase of
shares of common stock pursuant to the equity line of credit agreement. Pharmos
will not receive any proceeds from the sale of shares by Centennial.
Pharmos' 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 common stock on July 13, 1999 was $1.72.
See "Risk Factors" beginning on page 6 to read about certain factors
investors should consider before buying shares.
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus supplement is July 16, 1999.
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TABLE OF CONTENTS
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Special Note Regarding Forward-Looking Information......................... 4
The Company................................................................ 5
Risk Factors............................................................... 6
The Equity Line of Credit Agreement........................................ 9
Use of Proceeds............................................................10
Registered Stockholders....................................................11
Plan of Distribution.......................................................12
Description of Securities..................................................14
Indemnification of Officers and Directors..................................15
Legal Matters..............................................................16
Experts....................................................................16
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
offering other than those contained or incorporated by reference in this
prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by Pharmos or Centennial. This
prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, nor shall there be any sale of these securities by any person in any
jurisdiction in which such an offer, solicitation or sale would be unlawful.
Neither the delivery of this prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of Pharmos since the date of this prospectus or that the information
contained in this prospectus is correct as of any time subsequent to the date of
this prospectus.
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AVAILABLE INFORMATION
Pharmos is subject to the informational requirements of the Exchange Act
and, accordingly, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the Commission's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
located at Seven World Trade Center, Suite 1300, New York, New York 10048, and
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. The public may obtain information on the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0330. The Commission
maintains a Web site at http://www.sec.gov that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Commission.
Pharmos has filed with the Commission a registration statement on Form S-3
under the Securities Act with respect to the shares offered in this offering.
This prospectus does not contain all of the information set forth in the
registration statement, as permitted by the rules and regulations of the
Commission. For further information with respect to Pharmos and the shares
offered, reference is made to the registration statement. Statements contained
in this prospectus or in any document incorporated by reference regarding the
contents of any agreement or other document are not necessarily complete and are
qualified in their entirety by reference to any such agreement or document. The
registration statement may be inspected without charge at the office of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies may be
obtained from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Pharmos with the Commission are
incorporated by reference:
o The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, filed pursuant to Section 13 of the Exchange Act
(the "Form 10-K").
o The Company's Quarterly Report on Form 10-Q, as amended, for the
quarter ended March 31, 1999, filed pursuant to Section 13 of the
Exchange Act.
o 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.
o The Company's Preliminary Proxy Statement for the Annual Meeting of
Stockholders to be held on September 16, 1998, filed with the
Commission on August 7, 1998.
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All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
prospectus and prior to the termination of the offering of the securities
registered shall be deemed to be incorporated by reference into this prospectus
from the date of filing such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference shall be deemed to be
modified or superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated by reference modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus.
Pharmos 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 by reference. Requests should be addressed to: Mr.
Robert Cook, Chief Financial Officer, Pharmos Corporation, 99 Wood Avenue South,
Suite 301, Iselin, New Jersey 08830.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this prospectus and any prospectus supplement, and in
the documents incorporated by reference, constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 2B of the
Exchange Act. For this purpose, any statements contained in this prospectus and
any prospectus supplement, or incorporated by reference, that are not statements
of historical fact may be deemed to be forward-looking statements. For example,
the words "believes," "plans," "expects" and similar expressions are intended to
identify forward-looking statements. There are a number of important factors
that could cause the results of Pharmos to differ materially from those
indicated by forward-looking statements. These factors include those set forth
under the heading "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Certain Factors That May Affect Future
Results" in the Form 10-K and those set forth in "Risk Factors."
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THE COMPANY
Pharmos is a pharmaceutical company engaged in the discovery, development
and commercialization of pharmaceuticals and delivery formulations based on
rational drug design. Pharmos is developing pharmaceuticals in three fields:
site specific drugs for ophthalmic indications, neuroprotective agents with a
novel mechanism of action for the treatment of certain central nervous system
disorders and newly designed molecules to treat certain types of cancer. Pharmos
is also developing an emulsion-based delivery formulation for topical and
systemic applications.
In March 1998, Pharmos and its partner, Bausch & Lomb Pharmaceuticals,
Inc., announced the receipt of approval from the Food and Drug Administration to
manufacture and market two ophthalmic products, Lotemax(R) and Alrex(TM) .
Lotemax is a topical, site-specific steroid that is used to treat all steroid
responsive inflammation of the eye as well as postoperative eye inflammation
such as that experienced following cataract surgery. Lotemax was approved by the
FDA for the broadest range of indications of any ophthalmic steroid on the
market. Alrex is a specially developed formula of loteprednol etabonate that is
used in the treatment of eye allergies.
The regulatory approvals for Lotemax and Alrex are the first two of three
to be sought for the Pharmos' and Bausch & Lomb's line of ophthalmic products
containing loteprednol etabonate. The third product, which combines the active
ingredient loteprednol etabonate with the anti-infective agent tobramycin, is in
clinical development.
Bausch & Lomb Pharmaceuticals, a subsidiary of the global eye care company
Bausch & Lomb Incorporated, co-developed Lotemax and Alrex with Pharmos after
Pharmos granted Bausch & Lomb Pharmaceuticals the rights to market the new
ophthalmic pharmaceutical line in 1995. In 1996, Bausch & Lomb Pharmaceuticals'
rights were extended to select international markets including Europe and
Canada.
Dexanabinol (HU-211), Pharmos lead central nervous system product aimed
initially at treating severe head trauma and stroke, is currently being studied
in a Phase II clinical trial for severe head trauma. Pharmos' tamoxifen analog
anti-cancer program is advancing in preclinical development.
Pharmos was incorporated in the State of Nevada in 1982. Pharmos'
executive offices are located at 99 Wood Avenue South, Suite 301, Iselin, New
Jersey 08830, and its telephone number is (732) 452-9556. The Company also
leases facilities used in the operation of its research, development, pilot
manufacturing and administrative activities in Rehovot, Israel.
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RISK FACTORS
Early Stage of Development
Pharmos is at an early stage of development. Apart from Lotemax and Alrex,
most of Pharmos' 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 Pharmos'
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 Pharmos' research and development efforts will be successful,
that Pharmos' potential products will prove to be safe and effective in
clinical trials or that any commercially successful products will ultimately be
developed by Pharmos.
History of Operating Losses
Pharmos had no sources of recurring revenues until the commencement of
product sales in April 1998, and has incurred operating losses since its
inception. At March 31, 1999, Pharmos had an accumulated deficit of $79,188,926.
Pharmos has financed its operations with public and private offerings of
securities, advances and other funding pursuant to a marketing agreement with
BLP, research contracts, license fees, royalties and sales, and interest income.
Pharmos' ability to achieve profitability depends in part upon its ability,
alone or with others, to successfully commercialize its first approved product,
to complete development of its other proposed products, to obtain required
regulatory approvals and to manufacture and market such products.
Uncertain Availability of Future Financing
Pharmos' operations to date have consumed substantial amounts of cash. The
development of Pharmos' 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. Pharmos' future capital
requirements will depend on many factors, including:
o continued scientific progress in the research and development of Pharmos'
technology and drug programs;
o the ability of Pharmos to establish and maintain collaborative arrangements
with others for drug development;
o progress with preclinical and clinical trials;
o the time and costs involved in obtaining regulatory approvals;
o the costs involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims;
o competing technological and market developments;
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o changes in its existing research relationships; and
o effective product commercialization activities and arrangements.
Pharmos believes that the equity line of credit, existing cash and cash
equivalents combined with anticipated cash inflows from investment income, R&D
grants and proceeds from sales of the drug substance for Lotemax and Alrex to
BLP will be sufficient to support operations through 2000. Pharmos is continuing
to actively pursue various funding options, including additional equity
offerings, strategic corporate alliances, business combinations and the
establishment of product related research and development limited partnerships,
to obtain the additional financing that would be required to continue the
development of its products and bring them to commercial markets. Pharmos'
success depends upon many factors that are beyond the Pharmos' immediate
control, including market acceptance of Lotemax and Alrex, competition, and the
ability to obtain additional financing. There can be no assurance that Pharmos
will be successful in obtaining additional financing or commercializing its
product candidates or that Lotemax or Alrex will achieve market acceptance.
Dependence on Potential Collaborative Partners
Pharmos' strategy for the development, clinical testing, manufacturing,
marketing and commercialization of certain of its products includes entering
into collaborations with corporate partners, licensors, licensees and others. To
date, Pharmos has entered into agreements with Bausch & Lomb Pharmaceuticals to
manufacture and market Pharmos' lead products, Lotemax and Alrex, in the United
States and throughout Europe, Canada and selected other 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 Pharmos and Bausch & Lomb Pharmaceuticals. There can be no assurance that
Pharmos will be able to negotiate any future collaborative agreement with Bausch
& Lomb Pharmaceuticals or other companies on acceptable terms, or that any
present or future collaborative agreements will be successful. To the extent
that Pharmos chooses not to or is not able to establish such arrangements,
Pharmos would experience increased capital requirements to undertake such
activities at its own expense. In addition, Pharmos 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.
Technologies Subject to Licenses
Pharmos has license agreements with YISSUM Research Development Company of
the Hebrew University of Jerusalem and Dr. Nicholas Bodor, a former vice
president and director of Pharmos, under which Pharmos has acquired exclusive
and co-exclusive rights to develop and commercialize certain research
technologies. The agreements generally require Pharmos to pay royalties on sale
of products developed from the licensed technologies, fees on revenues from
sublicensees, where applicable, and the costs of filing and prosecuting patent
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applications. In addition, some of Pharmos' license agreements require that
Pharmos commit certain sums annually for research and development of the
licensed products. Should Pharmos default on its obligations to any of its
licensors, its licenses could terminate, which would have a material adverse
effect on Pharmos' operations and prospects.
Lack of Manufacturing Capability
Pharmos currently does not have manufacturing facilities to produce its
products. Pharmos' agreements with Bausch & Lomb Pharmaceuticals provide for
the manufacturing of Lotemax, Alrex and, upon receipt of approvals, loteprednol
etabonate - tobramycin. Pharmos provides loteprednol etabonate to Bausch & Lomb
Pharmaceuticals for use in the manufacturing process through a third-party
contract manufacturer. Any delay in availability of products may result in delay
in sales of such products, which would have a material adverse effect on
Pharmos.
Use of Hazardous Materials; Potential Liability to Comply with Environmental
Laws
Pharmos' research and development involves the controlled use of hazardous
materials. Although Pharmos 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, Pharmos could be held liable for any damages that
result, and any such liability could exceed the resources of Pharmos. Pharmos
may incur substantial costs to comply with environmental regulations if Pharmos
develops manufacturing capacity.
Anti-Takeover Provisions
Pharmos is subject to Sections 78.411-.444 of the Nevada General
Corporation Law, an anti-takeover law, which may discourage certain types of
transactions involving an actual or potential change in control of Pharmos,
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 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 Pharmos.
Special Considerations of Doing Business in Israel
A significant part of the operations of Pharmos is conducted in Israel
through its wholly-owned subsidiary, Pharmos Limited, 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 primarily relating to
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its proprietary submicron emulsion technology and to dexanabinol. 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 Pharmos' 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 Pharmos or granted at all.
Absence of Dividends
No dividends have been paid on the common stock to date, and Pharmos does
not expect to pay cash dividends in the foreseeable future.
THE EQUITY LINE OF CREDIT AGREEMENT
Pharmos entered into a Private Equity Line of Credit Agreement, as of
December 10, 1998, and as amended on December 18, 1998, with Centennial under
which Pharmos may, from time to time during a specified term, cause Centennial
to purchase up to an aggregate of $10,000,000 of common stock. The price per
share of common stock to be paid by Centennial is to be determined at the time
of each purchase according to a specified formula which is based upon the
average closing bid price of the common stock on the principal trading exchange
or market for the common stock, currently the Nasdaq SmallCap Market, over a
prescribed five-day period. With each purchase of common stock under the equity
line of credit agreement, Centennial will also receive warrants exercisable for
a number of shares of common stock determined according to a formula based on
the dollar amount invested by Centennial. The exercise price per share of the
warrants equals 125% of the closing bid price of the common stock on the Nasdaq
SmallCap Market on a specified date. The warrants are immediately exercisable
and expire three years after the date of issuance.
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Pursuant to the requirements of a Registration Rights Agreement dated as of
December 10, 1998, between Pharmos and Centennial, Pharmos has filed a
registration statement, of which this prospectus forms a part, in order to
permit Centennial to resell the shares of common stock it acquires to the
public. Pharmos' ability to sell shares, and Centennial's obligations to
purchase the shares, is conditioned upon the satisfaction of certain conditions
and subject to certain limitations. These conditions and limitations include:
o the registration statement of which this prospectus forms a part shall
have been declared effective by the Commission and remain effective;
o the representations and warranties of Pharmos set forth in the equity
line of credit agreement must be true and correct in all material
respects;
o Pharmos shall have performed and complied with all obligations
under the equity line of credit agreement, the registration rights
agreement and the warrants;
o no statute, rule, regulation, executive order, decree, ruling or
injunction shall be in effect which prohibits or directly and
adversely affects any of the transactions contemplated by the equity
line of credit agreement;
o there shall have been no material adverse change in Pharmos'
business prospects or financial condition; and
o Pharmos' common stock shall not have been delisted from the Nasdaq
SmallCap Market nor suspended from trading.
Centennial has agreed that it will not maintain a short position with
respect to the common stock which is greater than the number of shares most
recently sold, or to be sold following a written notice to sell, to Centennial
under the equity line of credit agreement.
USE OF PROCEEDS
The proceeds from the sale of the shares will be received directly by
Centennial. Pharmos will not receive any proceeds from the sale of the shares
offered in this offering. Pharmos will receive the proceeds from the exercise of
the warrants received by Centennial. However, Pharmos will receive the purchase
price paid pursuant to the equity line of credit agreement if and to the extent
common stock is sold to Centennial. The proceeds from the sale of shares to
Centennial will be used primarily for research and product development
activities, conducting preclinical studies and clinical trials, and purchasing
equipment.
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REGISTERED STOCKHOLDERS
The following table sets forth certain information as of July 12, 1999 with
respect to the registered stockholder, Centennial, for whom Pharmos is
registering securities for resale to the public.
Beneficial ownership has been determined in accordance with the rules of
the Securities and Exchange Commission and includes voting or investment power
with respect to shares. Centennial has sole voting and investment power with
respect to the number of shares indicated as beneficially owned by it.
Neither Centennial nor any of its affiliates has had any material
relationship with Pharmos or any of its affiliates within the past three years
other than as a result of the ownership of securities or as a result of the
negotiation and the execution of the equity line of credit agreement.
The shares offered by Centennial are to be acquired pursuant to the equity
line of credit agreement. Under the equity line of credit agreement, Pharmos
agreed to register the shares for resale by Centennial to the public without
restriction. The Company will prepare and file such amendments and supplements
to the registration statement as may be necessary in accordance with the rules
and regulations of the Securities Act to keep it effective until the earlier to
occur of (i) the date when all shares may be resold in a public transaction
without volume limitations or other material restrictions without registration
under the Securities Act, including without limitation, pursuant to Rule 144
under the Securities Act or (ii) the date when all shares acquired by the
Centennial under the equity line of credit agreement have been resold.
The Company has agreed to pay the expenses (other than broker discounts and
commissions, if any) in connection with this prospectus.
<TABLE>
<CAPTION>
Shares Percentage Shares Shares
Beneficially Owned Ownership Offered Beneficially
Prior to Prior to Pursuant to Owned After
Name Offering Offering this Prospectus Offering
- ---- -------- -------- --------------- --------
<S> <C> <C> <C> <C>
Centennial Parkway LLC 2,162,280(1) 4.99% 1,500,000(2) 662,280
</TABLE>
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(1) Includes warrants to purchase 237,410 shares of common stock. As of the
date of this prospectus, Centennial owns no shares of common stock. Also
includes, solely for purposes of this prospectus, up to an additional
1,924,870 shares of common stock that may be acquired by Centennial
pursuant to the equity line of credit agreement within 60 days of the date
of this prospectus. This number of shares assumes the
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initial minimum sale price under the equity line of credit agreement of
$.75 per share and also takes into account a provision of the equity line
of credit agreement which provides that Pharmos cannot sell shares to
Centennial if Centennial's beneficial ownership of common stock would
exceed 4.99% of Pharmos' outstanding shares of common stock. Therefore,
for purposes of calculating the number of shares of common stock
beneficially owned by Centennial, the number of shares is assumed to be
4.99% of the outstanding shares of common stock, or 2,162,280 shares.
(2) Consists of shares which may be issued pursuant to the equity line of
credit agreement.
PLAN OF DISTRIBUTION
Pharmos has been advised by Centennial that all or a portion of the Shares
offered by this Prospectus may be offered for sale, from time to time, by
Centennial in one or more private or negotiated transactions, in open market
transactions on the Nasdaq SmallCap Market, in settlement of short sale
transactions, in settlement of options transactions, or otherwise, or by a
combination of these methods, at fixed prices that may be changed, at market
prices prevailing at the time of the sale, at prices related to such market
prices, at negotiated prices, or otherwise. Centennial may effect these
transactions by selling the shares directly to one or more purchasers or to or
through broker-dealers or agents including: (a) in a block trade in which the
broker or dealer so engaged will attempt to sell the shares of common stock as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction; (b) in purchases by a broker or dealer and resale by
such broker or dealer as a principal for its account pursuant to this
prospectus; (c) in ordinary brokerage transactions and (d) in transactions in
which the broker solicits purchasers. The compensation to a particular
broker-dealer or agent may be in excess of customary commissions.
To the knowledge of Pharmos, Centennial has made no arrangement with any
brokerage firm for the sale of the shares. Pharmos has been advised by
Centennial that they presently intend to dispose of the shares through
broker-dealers in ordinary brokerage transactions at market prices prevailing at
the time of the sale. However, depending on market conditions and other factors,
Centennial may also dispose of the shares through one or more of the other
methods described above. Concurrently with sales under this prospectus,
Centennial may effect other sales of shares under Rule 144 or other exempt
resale transactions. There can be no assurance that Centennial will sell any or
all of the shares offered under this prospectus.
Centennial may be an "underwriter" within the meaning of the Securities
Act, in connection with the sale of the shares offered in this offering. Any
broker-dealers or agents who act in connection with the sale of the shares may
also be deemed to be underwriters. Profits on any resale of the shares by
Centennial and any discounts, commissions or concessions received by any such
broker-dealers or agents may be deemed to be underwriting discounts and
commissions under the Securities Act.
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Any broker-dealer participating in such transactions as agent may receive
commissions from Centennial (and, if they act as agent for the purchaser of such
shares, from such purchaser). Broker-dealers may agree with Centennial to sell a
specified number of shares at a stipulated price per share and, to the extent
such a broker-dealer is unable to do so acting as agent for Centennial, to
purchase as principal any unsold shares at the price required to fulfill the
broker-dealer commitment to Centennial. Broker-dealers who acquire shares as
principal may thereafter resell such shares from time to time in transactions
(which may involve crosses and block transactions and which may involve sales to
and through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
shares commissions computed as described above. To the extent required under the
Securities Act, a supplemental prospectus will be filed, disclosing (a) the name
of any such broker-dealers; (b) the number of shares involved; (c) the price at
which such shares are to be sold; (d) the commissions paid or discounts or
concessions allowed to such broker-dealers, where applicable; (e) that such
broker-dealers did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus, as supplemented; and (f)
other facts material to the transaction.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the shares may not simultaneously engage in market
making activities with respect to the shares for a period beginning when such
person becomes a distribution participant and ending upon such person's
completion of participation in the distribution, including stabilization
activities in the common stock to effect covering transactions, to impose
penalty bids or to effect passive marketing making bids. In addition to and
without limiting the foregoing, in connection with transactions in the shares,
Pharmos and Centennial may be subject to applicable provisions of the Exchange
Act and the rules and regulations under the Exchange Act which may affect the
marketability of the shares.
Centennial has agreed that it will not maintain a short position with
respect to the common stock which is greater than the number of shares most
recently sold, or to be sold following a written notice to sell, to Centennial
under the equity line of credit agreement. Centennial will pay all commissions,
transfer taxes and other expenses associated with sales of the shares by it. The
shares are being registered pursuant to contractual obligations of Pharmos, and
Pharmos has agreed to pay the expenses of the preparation of this prospectus.
Pharmos has also agreed to indemnify Centennial against certain liabilities,
including, without limitation, liabilities arising under the Securities Act.
Pharmos will not receive any of the proceeds from the sale of the shares by
Centennial. However, Pharmos will receive the purchase price paid by Centennial
if and to the extent common stock is sold by Pharmos to Centennial under the
equity line of credit agreement.
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In order to comply with the securities laws of certain states, if
applicable, the shares may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless the shares have been registered or qualified for
sale in these states or an exemption from registration or qualification is
available and complied with.
The common stock of Pharmos is currently traded on the Nasdaq SmallCap
Market under the symbol "PARS". Concurrently with sales under this prospectus,
Centennial may effect other sales of shares under Rule 144 or other exempt
resale transactions. There can be no assurance that Centennial will sell any or
all of the shares offered in this offering.
DESCRIPTION OF SECURITIES
Common Stock
The common stock is fully described in Pharmos' Registration Statement on
Form 8-A dated January 30, 1984, filed pursuant to Section 12 of the Exchange
Act.
Pharmos' Restated Articles of Incorporation currently authorize the
issuance of up to 60,000,000 shares of Common Stock. As of July 12, 1999, there
were 43,332,274 shares outstanding.
Warrants
With each purchase of common stock under the equity line of credit
agreement, Centennial will also receive warrants exercisable for a number of
shares of common stock determined according to a formula based on the dollar
amount invested by Centennial. The exercise price per share of the warrants
equals 125% of the closing bid price of the common stock on the Nasdaq SmallCap
Market on a specified date. The warrants are immediately exercisable and expire
three years after the date of issuance.
Centennial currently holds warrants to purchase 237,410 shares of common
stock. The shares issuable upon exercise of these warrants have been separately
registered for resale under the Securities Act and are the subject of a separate
prospectus.
All of the warrants contain anti-dilution provisions providing for an
adjustment to their respective exercise prices in the event that Pharmos 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 Pharmos,
or consolidation or merger of Pharmos with another corporation or entity (other
than a subsidiary of Pharmos in which Pharmos is the surviving or continuing
corporation and no change occurs in Pharmos' common stock).
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Nevada Anti-Takeover Laws
Pharmos is subject to the provisions of Sections 78.411 through 78.444 of
the Nevada Law, an anti-takeover statute. In general, the 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 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 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, Pharmos 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 Pharmos' Common Stock is American
Stock Transfer and Trust Company, New York, New York.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article 12 of Pharmos' Restated Articles of Incorporation directs Pharmos
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 Pharmos 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 Pharmos if it is determined that such person
acted in accordance with the applicable standard of conduct set forth in such
statutory provisions.
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<PAGE>
Pharmos may also purchase and maintain insurance for the benefit of any director
or officer which may cover claims for which Pharmos could not indemnify such
person.
Pharmos has been advised that it is the position of the Securities and
Exchange Commission that insofar as provisions of the certificate of
incorporation may be invoked to disclaim liability for damages arising under the
Securities Act, these provisions are against public policy as expressed in the
Securities Act and are, therefore, unenforceable.
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, 1998, 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.
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<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or represent anything not contained in this prospectus. Purchasers
must not rely on any unauthorized information. This Prospectus does not offer to
sell or buy any shares in any jurisdiction where it is unlawful. The information
in this Prospectus is current only as of the date of this Prospectus.
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TABLE OF CONTENTS
Available Information....................................................... 3
Incorporation of Certain Documents by Reference............................. 3
Special Note Regarding Forward-Looking Information.......................... 4
The Company................................................................. 5
Risk Factors................................................................ 6
The Equity Line of Credit Agreement......................................... 9
Use of Proceeds............................................................. 10
Registered Stockholders..................................................... 11
Plan of Distribution........................................................ 12
Description of Securities................................................... 14
Indemnification of Officers and Directors................................... 15
Legal Matters............................................................... 16
Experts..................................................................... 16
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PHARMOS CORPORATION
1,500,000 Shares of Common Stock
July 16, 1999
