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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1996
REGISTRATION NO. 33-________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
PHARMHOUSE CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-2634868
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
860 Broadway
New York, New York 10003
(212) 477-9400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
Kenneth A. Davis, President and Chief Executive Officer
860 Broadway
New York, New York 10003
(212) 477-9400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Copies to:
Melvin Katz, Esq.
Maloney, Gerra, Mehlman & Katz
405 Lexington Avenue, 36th Floor
New York, New York 10174
(212) 973-6900
Approximate date of commencement of proposed sale to
the public: As soon as practicable after effective date of
this Registration Statement.
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, check the following box. /X/
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to Be Registered Be Registered Per Share Offering Price Registration Fee
- --------------------------- ------------- --------- -------------- ----------------
<S> <C> <C> <C> <C>
Warrants to purchase 85,867 Common
Shares, $.01 par value 85,867 --(1) --(1) --(1)
Common Shares, $.01 par value, issuable
upon exercise of warrants 85,867 $4.125(2) $354,201(2) $123(2)
Total -- -- $354,201(1)(2) $123(1)(2)
</TABLE>
(1) Pursuant to Rule 457(g), no separate registration fee is required for the
warrants.
(2) These shares are to be sold by the Selling Shareholder at prices not
presently determinable. The offering price is estimated solely for purposes
of calculating the registration fee in accordance with Rule 457(c) using
the $4.125 closing bid price of the Registrant's common shares on The
NASDAQ Small Cap Market on June 17, 1996.
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The Registrant hereby amends this Registration Statement on such 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.
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PROSPECTUS
PHARMHOUSE CORP.
Warrants to Purchaser 85,867 Common Shares
85,867 Common Shares
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK. SEE "RISK FACTORS".
This Prospectus relates to (i) Warrants (the "Warrants") to purchase
85,867 Common Shares, $.01 par value per share (the "Common Shares"), of
Pharmhouse Corp. (the "Company") and (ii) 85,867 Common Shares issuable upon
exercise of the Warrants (the "Shares"), all of which may be offered from time
to time by the Selling Shareholder named herein. The Warrants were issued to the
Selling Shareholder as partial compensation for investment banking and advisory
services rendered by the Selling Shareholder to the Company in connection with
the Company's acquisition of 24 The Rx Place deep discount drug stores from F.W.
Woolworth Co. in April 1995. Each Warrant entitles the holder thereof to
purchase one Common Share for an exercise price of $.94.
The Common Shares are quoted on the NASDAQ Small Cap Market under the
symbol "PHSE." The closing bid price of the Common shares on the NASDAQ SmallCap
Market on June 17, 1996 was $4.125. Prospective purchasers of the Shares are
urged to obtain a current price quotation. The Warrants are not listed for
trading on any exchange nor traded on any established trading market or system.
Therefore, there is no active trading market for the Warrants and no assurance
can be given that any such market will develop.
It is anticipated that the Selling Shareholder will offer the Shares
(when and if issued) for sale from time to time at the prices prevailing on the
NASDAQ Small Cap Market. The Selling Shareholder also may sell the securities
which are the subject of this Prospectus privately, either directly to
purchasers or through one or more brokers or dealers. See "Plan of
Distribution." The Company shall, at the Selling Stockholder's expense, take
such actions, including filing post-effective amendments to the Registration
Statement of which this Prospectus is a part and/or preparing supplements to
this Prospectus, as shall be required to enable the Selling Shareholder lawfully
to sell the Shares during a period terminating on the 180th day following the
date hereof.
The Company will receive none of the proceeds from the sale of the
Shares and the Warrants offered hereby. All selling and other expenses in
connection with the registration and offer and sale of the Shares and the
Warrants will be borne by the Selling Shareholder.
The Selling Shareholder, and the brokers or dealers through whom sales
of the Shares or Warrants are made, if any, may be deemed to be "underwriters"
within the meaning of section 2(11) of the Securities Act of 1933, as amended
(the "Securities Act"). In addition, any profits realized by the Selling
Shareholder or such brokers or dealers may be deemed to be underwriting
compensation within the meaning of the Securities Act.
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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 OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is June __, 1996
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No person is authorized to give any information or to make any
representation not contained or incorporated by reference in this Prospectus
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or by the Selling Shareholder.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that the information contained herein is correct as of any time subsequent to
the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington D.C. 20549 and at the following Regional Offices of the Commission:
New York Regional Office, 7 World Trade Center, Suite 1300, New York, New York
10048; Los Angeles Regional Office, 5757 Wilshire Boulevard, Suite 500, Los
Angeles, California 90036; and Chicago Regional Office, Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act (together with all amendments, exhibits and
documents incorporated therein by reference, the "Registration Statement") with
respect to the Shares offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement, of which this
Prospectus is a part, or any amendments thereto, certain portions of which have
been omitted pursuant to the Commission's rules and regulations. The information
so omitted may be obtained from the Commission's principal office in Washington,
D.C. upon payment of the fees prescribed by the Commission. Any statements
contained herein concerning the provisions of any document are not necessarily
complete and in each instance reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
For further information with respect to the Company and the Common Shares,
reference is made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the
Commission (File No. 1-7090) are incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for its fiscal year
ended February 3, 1996.
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(ii) the Company's Quarterly Report on Form 10-Q for its fiscal
quarter ended May 4, 1996.
(iii) the description of the Common Shares contained in the
Company's Restated Certificate of Incorporation filed as
Exhibit 3.1 to the Company's current Report on Form 8-K dated
December 24, 1991, as amended by Certificate of Amendment of
Certificate of Incorporation filed as Exhibit 3.1 to the
Company's current Report on Form 8-K dated April 9, 1993.
All documents filed by the Company with the Commission pursuant to
Section 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 Shares
offered hereby shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of this Prospectus. The Company will provide without charge
to each person to whom this Prospectus is delivered, upon such person's written
or oral request, a copy of any and all of the documents that have been
incorporated by reference in this Prospectus or the Registration Statement
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into such documents). Any such request should be
directed to the Corporate Secretary of Pharmhouse Corp., 860 Broadway, New York,
New York 10003 (telephone number (212) 477-9400).
RISK FACTORS
The securities offered hereby are speculative in nature and involve a
high degree of risk. Prior to making an investment decision with respect to
securities of the Company, prospective investors should carefully consider,
along with the other matters discussed in this Prospectus, the following risk
factors:
Continuing Losses; The Company has sustained net losses in each of the
past four fiscal years and net losses from continuing operations (i.e., before
extraordinary items) since it commenced operation of its first Pharmhouse store
in 1990. The Company's net loss for its fiscal year ended February 3, 1996
("fiscal 1996") was $2,507,000, compared to a net loss of $1,997,000 for its
fiscal year ended January 28, 1995 ("fiscal 1995"). The Company sustained a net
loss of $992,000 during the first quarter of its fiscal year ending February 1,
1997 ("fiscal 1997"), compared to a net loss of $824,000 for the corresponding
quarter of fiscal 1996. The Company realized income from operations of $419,000
in fiscal 1996, compared to a loss from operations of $1,037,000 in fiscal 1995,
and income from operations of $48,000 in the first quarter of fiscal 1997,
compared to a loss from operations of $522,000 in the first quarter of fiscal
1996. Management believes that with the addition of the 24 The Rx Place Stores
acquired by the Company from F.W. Woolworth Co. in April 1995
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(the "Rx Place Acquisition"), the Company will be able to achieve profitable
operations in the future; however, no assurance can be given with respect to
when or whether such profitable operations will be achieved.
Dependence Upon Secured Financing; Increased Interest Expense. In
connection with the Rx Place Acquisition, the Company (i) established a
Revolving Credit Facility pursuant to which a secured lender has agreed to
provide the Company with up to $45,000,000 of secured debt financing (limited to
60% of the defined cost value of the Company's inventory) (the "Revolving Credit
Facility") for general corporate and working capital purposes and (ii) borrowed
an additional $3,000,000, on a subordinated secured basis, from an unaffiliated
trade supplier (the "Subordinated Secured Loan"). For the foreseeable future,
the Company will continue to rely upon the Revolving Credit Facility and such
vendor credit to fund a significant portion of its operations and the Company
and its shareholders will remain subject to the risk that, in the event of a
default by the Company in the satisfaction of its secured debt obligations, the
secured lenders will be able to foreclose upon the assets of the Company to
satisfy such indebtedness through the forced liquidation of all or a substantial
portion of the Company and its operations.
The Company had long-term indebtedness (including the current portion
thereof) as at February 3, 1996 of approximately $38,460,000, compared to
long-term indebtedness (including the current portion thereof) as at January 28,
1995 of approximately $7,481,000. The Company's long-term indebtedness
(including the current portion thereof) as at May 4, 1996 was approximately
$39,693,000. The Company's interest expense for fiscal 1996 was $3,544,000
compared to interest expense of $960,000 for fiscal 1995, and its interest
expense for the first quarter of fiscal 1997 was $1,040,000, compared to
interest expense of $302,000 for the first quarter of fiscal 1996.
Pending Litigation. The Company is currently engaged in litigation with
F.W. Woolworth Co., the former owner and operator of the Company's The Rx Place
Stores, and its parent, Woolworth Corporation (collectively, "Woolworth"),
pursuant to which the Company is seeking damages arising out of Woolworth's
alleged fraud and breaches of covenants and representations and warranties made
to the Company in the Acquisition. The Company's claims in such action are based
upon its belief that material misrepresentations made to it by Woolworth
regarding the inventory, results of operations and gross profit margins of The
Rx Place stores have resulted in injury to the Company. In May 1996, the court
in such action granted Woolworth's motion to compel arbitration of the Company's
claims. The Company intends to appeal that decision based upon its belief that
the arbitration provisions of the purchase agreement on which the court relied
in granting such motion apply only to certain limited post-closing purchase
price adjustments and do not apply to the claims which are the subject of such
action. The outcome of such action could have a material impact upon the
Company's financial condition. The Company's management cannot predict the
outcome of such action at this time.
Uncertain Trade Credit Availability. In addition to the Revolving
Credit Facility, the Company funds its inventory purchases through trade credit
made available by merchandise suppliers. Such trade credit is made available to
the Company based upon several factors, including the Company's prospects for
future profitability and amounts of the Company's other indebtedness
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outstanding. The Company has received increased trade credit from a greater
number of its merchandise suppliers since the closing of the Rx Place
Acquisition; however, there can be no assurance concerning the continuing
availability or amount of trade credit in future fiscal periods. If the Company
does not achieve profitability in the near future, it may experience problems
obtaining adequate amounts of trade credit from merchandise suppliers. The
absence of adequate trade credit would have a material adverse impact on the
Company's operations and results of operations.
Restrictive Financial and Other Covenants. The agreements governing the
Revolving Credit Facility and the Subordinated Loan contain covenants and
conditions which place significant restrictions upon the Company and its
operations. It is anticipated that the terms governing such secured indebtedness
in the future will continue to prohibit or seriously restrict the Company from,
among other matters or transactions, incurring additional indebtedness or paying
cash dividends to its shareholders and will also require the Company to continue
to satisfy minimum tangible net worth requirements. Further net losses would
render it increasingly difficult for the Company to continue to satisfy these
financial covenants. The inability of the Company to continue to satisfy such
covenants in future fiscal periods could result in a default under the
agreements governing such indebtedness and thereby adversely affect its
financial condition and cause serious disruptions in its business operations.
Competition. The sale at retail of health and beauty care products,
cosmetics, prescription drugs and general merchandise is highly competitive. The
Company competes with supermarkets and food stores, traditional drug stores,
discount mass merchants and other retailers, many of whom have a far greater
number of stores and far greater financial, marketing and organizational
resources than those available to the Company now or in the foreseeable future.
The competition created by such competitors, particularly mass merchants, is
likely to continue and could have a material adverse effect upon the Company's
ability to generate increasing sales and preserve gross profit margins from the
operations of its Pharmhouse and The Rx Place stores.
Effect of Economic and other Conditions. Revenue generated by the
Company's Pharmhouse and The Rx Place stores has been, and will continue to be,
affected by general economic and other conditions, such as weather conditions,
prevailing from time to time. The current retail climate is uncertain and future
economic downturns of varying durations could have a negative impact on the
Company's sales and results of operations. In addition, similar to other retail
businesses, sales at such stores have been adversely affected by local economic
conditions and adverse weather conditions in their respective markets.
Inability to Pay Cash Dividends. The Company has not declared cash
dividends on its Common Shares since 1981 and management does not anticipate the
payment of dividends in the foreseeable future. In addition, the Company is
prohibited under the terms of the agreements governing the Revolving Credit
Facility and the Subordinated Loan from paying cash dividends on its equity
securities.
Material Dependence Upon Chief Executive Officer. The Company is
materially dependent upon the efforts of Kenneth A. Davis, its President and
Chief Executive Officer. The loss of Mr.
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Davis' services could have a material adverse effect upon the Company's business
and future prospects. Mr. Davis' employment is governed by an Employment
Agreement, the term of which expires in January 1999.
Effective Control by Principal Shareholders. As of June 14, 1996,
members of the family of Manfred Brecker, Chairman of the Board, and Kenneth A.
Davis, President and Chief Executive Officer of the Company (and son-in-law of
Mr. Brecker), owned, as a group, approximately 37% of the outstanding Common
Shares (not including the Shares which are the subject of this Prospectus or
other Common Shares issuable upon the exercise of outstanding options and
warrants), constituting the single largest block of the outstanding Common
Shares of the Company. (In addition, if Mr. Davis and his wife, Marcie B. Davis,
Executive Vice President and Secretary of the Company, were to exercise all of
their currently exercisable options, and assuming no other warrants (including
the Warrants) or options were exercised, the Brecker-Davis family would own
approximately 43.8% of the outstanding Common Shares of the Company.) In light
of the fact that the Brecker-Davis family will continue to own, as a group, the
most significant percentage of the outstanding voting shares of the Company,
they will be able to exert substantial influence upon its overall management,
including election of directors, and otherwise control its operations.
Limited Market for Company Securities. There is no public trading
market for the Warrants. In addition, while there is an active trading market
for the Common Shares issuable upon exercise of the Warrants, only a limited
number of such Common Shares trade on a daily basis which may result in added
volatility in the price of such shares. The Warrants will not be listed for
trading on any securities exchange or any interdealer quotation system. The
Shares, if issued, will be listed for trading on the NASDAQ SmallCap Market.
There can be no assurance that a substantial public market for the Common Shares
will be sustained; and no market is expected to develop for the Warrants. The
Company believes that, in addition to fluctuations in the price of the Company's
securities resulting from factors related to the operating performance of the
Company, certain factors which are unrelated to the Company's performance, such
as general and regional economic conditions and other market conditions in the
deep discount retail market generally and the perception thereof in the
securities markets, could cause volatility in the price of the Company's
securities. Broad market fluctuations may adversely affect the market price and
liquidity of the Company's securities in the future.
Dilutive and Market Effect of Outstanding Derivative Securities. As of
the date of this Memorandum, the Company has reserved, in addition to the 85,867
Common Shares issuable upon exercise of the Warrant, an aggregate of 1,155,352
Common Shares for issuance upon the exercise of (i) stock options granted to
executives and employees and (ii) outstanding warrants held by its prior secured
lender (collectively, the "Outstanding Derivative Securities"). A substantial
majority of the Common Shares issuable pursuant to such options and warrants are
issuable at exercise prices which are significantly less than the currently
prevailing market price of the Common Shares.
During the respective terms of the Outstanding Derivative Securities,
the holders thereof are given an opportunity to profit from a rise in the market
price of the Company's Common Shares with a resulting potential dilution in the
interests of then existing shareholders. The holders of the
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Outstanding Derivative Securities might be expected to exercise their respective
rights to acquire Common Shares at times when the Company would, in all
likelihood, be able to obtain required capital through a new offering of
securities on terms more favorable to the Company than those provided by such
Outstanding Derivative Securities. Furthermore, in the event that such holders
exercise their respective rights to acquire Common Shares at such times, the net
tangible book value per share of the Company's Common Shares may be subject to
further dilution.
Shares Eligible for Future Sale. Certain of the Common Shares currently
owned by management and certain other shareholders are deemed to be "restricted
securities", as such term is defined in Rule 144 under the Securities Act of
1933. Rule 144 provides generally that a person holding securities that were
acquired by such person or a predecessor purchaser(s) from the issuer or an
affiliate thereof more than two years from the date of sale may sell in "brokers
transactions" (as defined by the Rule) an amount equal to the greater of 1% of
the issuer's outstanding securities of such class or the average weekly reported
volume of trading in such securities during the four calendar weeks preceding
the sale within a three month period if the conditions specified by the Rule are
satisfied. If such person is not an "affiliate" of the issuer, as such term is
defined by Rule 144, he may, after a holding period of three years, sell all of
such restricted securities without a limitation.
DESCRIPTION OF SECURITIES
The following descriptions of certain terms of the Company's
securities, including the securities being offered by this Prospectus, are
intended as summaries only and are qualified in their entirety by reference to
the complete text of the instruments governing such securities.
THE WARRANTS
In January 1996, as partial compensation for investment banking and
advisory services rendered by the Selling Shareholder to the Company in
connection with the Rx Place Acquisition, the Company issued to the Selling
Stockholder Warrants to purchase 85,867 Common Shares, for an exercise price of
$.94 per share, subject to standard anti-dilution provisions as set forth in the
Warrant Agreement governing the Warrants. The Warrants may be exercised at any
time and from time to time until they expire in January 2001.
THE COMMON SHARES
The Company's certificate of incorporation, as amended, (the
"Certificate of Incorporation") authorizes the issuance of up to 25,000,000
Common Shares, par value $.01. As of June 17, 1996, 2,231,140 Common Shares were
issued and outstanding.
The holders of the Common Shares have equal ratable rights to dividends
from funds legally available therefor, when, as and if declared by the Board of
Directors and are entitled to share ratably in all of the assets of the Company
available for distribution to holders of Common Shares upon the
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liquidation, dissolution or winding up of the affairs of the Company. Holders of
Common Shares do not have preemptive, subscription or conversion rights. There
are no redemption or sinking fund provisions in the Certificate of
Incorporation. Holders of Common Shares are entitled to one vote per share on
all matters which shareholders are entitled to vote upon at all meetings of
shareholders. All outstanding Common Shares are, and those offered hereby will
when issued be, validly issued, fully paid and non-assessable. The holders of
Common Shares do not have cumulative voting rights, which means that the holders
of more than 50% of such outstanding shares of Common Stock can elect all of the
directors of the Company.
TRANSFER AGENT
Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey
07016 is the transfer agent and registrar for the Company's Common Shares.
THE COMPANY
Pharmhouse Corp. (the "Company") operates a chain of 38 deep discount
drug stores, 14 of which are operated under the name Pharmhouse (the "Pharmhouse
Stores") and 24 of which are operated under the name The Rx Place (the "Rx Place
Stores"). The Company's stores are located primarily in the mid-Atlantic and New
England states and emphasize a pricing policy of everyday deep discount prices
on all merchandise. The Pharmhouse Stores are approximately 35,000 square feet
in size and the Rx Place Stores are approximately 25,000 square feet. The
Company maintains one distribution center to support its store operations.
The Company's deep discount drug stores offer a broad variety of
merchandise and services at everyday deep discount prices. The stores offer
health and beauty care products, prescription drugs, cosmetics, stationery,
video rentals, housewares, pet supplies, greeting cards, food, snacks, beverages
and certain other merchandise. The Company's stores also offer certain
merchandise on a seasonal basis, such as garden, patio and Christmas items. Such
merchandise is sold at everyday deep discount prices. As of June 14, 1996, the
Company employed approximately 2,200 persons in its operations, including a
substantial number of part-time employees.
Eleven Pharmhouse stores are located in smaller communities and three
such stores are located in more densely populated areas, reflecting management's
decision to expand into such markets. The Rx Place Stores are also located in
more densely populated areas than the older Pharmhouse Stores. All 38 stores
have pharmacies staffed by licensed pharmacists and are open seven days per
week. Merchandise is sold primarily on a cash-and-carry basis although certain
credit cards and checks are accepted.
The Company's offices are located at 860 Broadway, New York, New York
10003 and its telephone number is (212) 477-9400.
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SELLING SHAREHOLDER
The Warrants which are the subject of this Prospectus are owned by
Brenner Securities Corporation (the "Selling Shareholder"). The Shares are
issuable to the holder or holders of the Warrants upon the exercise thereof. The
Warrants were issued to the Selling Shareholder as partial compensation for
investment banking and advisory services rendered by the Selling Shareholder to
the Company in connection with the Company's acquisition of 24 The Rx Place deep
discount drug stores from F.W. Woolworth Co. in April 1995. Each Warrant
entitles the holder thereof to purchase one Common Share for an exercise price
of $.94.
PLAN OF DISTRIBUTION
It is anticipated that the Selling Shareholder will offer the Shares
(when and if issued) for sale from time to time at the prices prevailing on the
NASDAQ Small Cap Market on the date of sale. The Selling Shareholder also may
sell the securities which are the subject of this Prospectus privately, either
directly to purchasers or through one or more brokers or dealers. The Company
shall take such actions, including filing post-effective amendments to the
Registration Statement of which this Prospectus is a part and/or preparing
supplements to this Prospectus, as shall be required to enable the Selling
Shareholder lawfully to sell the Shares during a period terminating on the 180th
day following the date hereof.
All costs, expenses and fees incurred in connection with the
registration of the Warrants and the Shares and the offer and sale thereof,
including but not limited to all registration and filing fees, printing expenses
and fees of the Company's counsel and accountants, are being borne by the
Selling Shareholder.
The Selling Shareholder, and the brokers or dealers through whom sales
of the Warrants and the Shares are made, may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act of 1933, as amended.
In addition, any profits realized by the Selling Shareholder or such brokers or
dealers may be deemed to be underwriting commissions.
The Company has informed the Selling Shareholder that the
anti-manipulative Rules 10b-6 and 10b-7 promulgated under the Exchange Act may
apply to its sales of Shares and has furnished the Selling Shareholder with a
copy of these rules and has informed the Selling Shareholder of the need for
delivery of a copy of this Prospectus.
There is no assurance that the Selling Shareholder will offer for sale
or sell any or all of the Warrants or Shares offered pursuant to this
Prospectus. In the event Warrants or Shares are sold by the Selling Shareholder,
the Company will receive none of the proceeds from any such sale.
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DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Company's Bylaws provide that the Company will indemnify any person
against judgments, fines, amounts paid in settlement and expenses actually and
reasonably incurred by him in connection with any action or threatened action,
suit or proceeding, whether civil or criminal, administrative or investigative
(other than an action by or in the right of the Company to procure a judgment in
its favor) by reason of the fact that he or she was a director or officer of the
Company or was serving any other entity at the request of the Company, if such
director or officer acted in good faith and in a manner reasonably believed to
be in the best interests of the Company or, in the case of service to such other
entity, not opposed to the best interests of the Company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
In addition, the Company's Certificate of Incorporation provides that
no director shall be liable to the Company or its shareholders for damages for
any breach of duty in such capacity. However, such provision does not eliminate
or limit the liability of any director if a judgment or other final adjudication
adverse to him or her establishes that his or her acts or omissions were in bad
faith or involved intentional misconduct or a knowing violation of law or that
he personally gained in fact a financial profit or other advantage to which he
or she was not legally entitled or that his or her acts violated Section 719 of
the New York Business Corporation Law (the "BCL") (relating to the making of
illegal distributions to shareholders or loans to directors).
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Company as to which
indemnification is being sought nor is the Company aware of any threatened
litigation that may result in claims for indemnification by any director,
officer, employee or other agent.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for
the Company by Maloney, Gerra, Mehlman & Katz, New York City.
12
<PAGE> 13
EXPERTS
The Company's consolidated balance sheets at January 28, 1995 and
February 3, 1996 and consolidated statements of operations, cash flows and
stockholders' equity for the years ended January 29, 1994, January 28, 1995 and
February 3, 1996 incorporated in this Prospectus by reference to the Company's
Annual Report on Form 10-K for its fiscal year ended February 3, 1996, have been
so incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
13
<PAGE> 14
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection
with the registration and distribution of the securities being registered, all
of which are to be borne by the Selling Shareholder:
SEC registration fee........................$ 123
Legal fees and expenses.....................$ 10,000
Accounting fees and expenses ...............$ 7,000
Filing and Miscellaneous....................$ 700
---------
Total.......................................$ 17,823
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 722 of the BCL permits a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation), by reason of the fact that he or she is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful.
A corporation also may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation. However, in such an action by or on behalf of
a corporation, no indemnification may be made in respect of any claim, issue or
matter as to which the person is adjudged liable to the corporation unless and
only to the extent that the court determines that, despite the adjudication of
liability but in view of all the circumstances, the person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
In addition, the indemnification provided by Section 722 shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his official capacity and
II-1
<PAGE> 15
as to action in another capacity while holding such office. Section 726 of the
BCL provides that a corporation may purchase and maintain insurance to, among
other matters, indemnify directors and officers of the corporation as permitted
by Section 722.
The Company's Bylaws provide that the Company will indemnify any person
against judgments, fines, amounts paid in settlement and expenses actually and
reasonably incurred by him or her in connection with any action or threatened
action, suit or proceeding, whether civil or criminal, administrative or
investigative (other than an action by or in the right of the Company to procure
a judgment in its favor) by reason of the fact that he or she was a director or
officer of the Company or was serving any other entity at the request of the
Company, if such director or officer acted in good faith and in a manner
reasonably believed to be in the best interests of the Company or, in the case
of service to such other entity, not opposed to the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
The Company's Certificate of Incorporation provides that no director
shall be liable to the Company or its shareholders for damages for any breach of
duty in such capacity. However, such provision does not eliminate or limit the
liability of any director if a judgment or other final adjudication adverse to
him or her establishes that his or her acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law or that he or she
personally gained in fact a financial profit or other advantage to which he or
she was not legally entitled or that his or her acts violated Section 719 of the
New York Business Corporation Law (the "BCL") (relating to the making of illegal
distributions to shareholders or loans to directors).
The Company has purchased and currently maintains directors and
officers liability insurance covering certain liabilities incurred by its
directors and officers in connection with the performance of their duties to the
Company and its affiliates.
ITEM 16. EXHIBITS
5.1 Opinion of Maloney, Gerra, Mehlman & Katz
10.1 Warrant Agreement between the Company and Brenner Securities
Corporation, incorporated by reference to Exhibit 10.8 of the
Company's Annual Report on Form 10-K for its fiscal year ended
February 3, 1996 (Commission File Number 1-7090)
23.1 Consent of Maloney, Gerra, Mehlman & Katz (included in Exhibit
5.1)
23.2 Consent of Price Waterhouse LLP
24.1 Powers of Attorney (see page II-4 of this Registration
Statement)
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 to include any
material information with respect to the plan
II-2
<PAGE> 16
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for purposes 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 purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
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 provisions described in Item 15, 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 Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-3
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
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 New York, State of New York, on June 24, 1996.
PHARMHOUSE CORP.
By: /s/ Kenneth A. Davis
-----------------------------------------
Kenneth A. Davis
President and Chief Executive Officer
POWER OF ATTORNEY
Know all men by these presents that each person whose signature appears
below constitutes and appoints Kenneth A. Davis his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the respective dates indicated below:
Signature Title Date
--------- ----- ----
/s/ Manfred Brecker Chairman of the Board June 24, 1996
- ----------------------
Manfred Brecker
/s/ Kenneth A. Davis
- ---------------------- President, Chief Executive June 24, 1996
Kenneth A. Davis Officer, Chief Operating
Officer (Principal Executive
Officer) and Director
II-4
<PAGE> 18
/s/ Marcie B. Davis
- ----------------------- Executive Vice President, June 24, 1996
Marcie B. Davis Treasurer, Secretary and
Director
/s/ Joseph Keller
- ------------------------- Senior Vice President- June 24, 1996
Joseph Keller Administration and
Operations and Director
/s/ Richard Davis
- ------------------------ Senior Vice President - June 24, 1996
Richard Davis Finance and Chief Financial
Officer (Principal Financial
and Accounting Officer)
/s/ Melvin Katz Director June 24, 1996
- ------------------------
Melvin Katz
- ------------------------ Director
Raymond L. Steele
- ------------------------ Director
Michael A. Feder
- ------------------------ Director
Peter Gerard
II-5
<PAGE> 19
EXHIBIT INDEX
Document
--------
5.1 Opinion of Maloney, Gerra, Mehlman & Katz
10.1 Warrant Agreement between the Company and Brenner Securities
Corporation, incorporated by reference to Exhibit 10.8 of the
Company's Annual Report on Form 10-K for its fiscal year ended
February 3, 1996 (Commission File Number 1-7090)
23.1 Consent of Maloney, Gerra, Mehlman & Katz (included in
Exhibit 5.1)
23.2 Consent of Price Waterhouse LLP
24.1 Powers of Attorney (see page II-4 of this Registration
Statement)
II-6
<PAGE> 1
Exhibit 5.1
Maloney Gerra Mehlman & Katz
405 Lexington Avenue
New York, New York
Tel: (212) 973-6900
Fax: (212) 973-6097
June 25, 1996
Pharmhouse Corp.
860 Broadway
New York, New York 10003
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Pharmhouse Corp., a New York
corporation (the "Company"), in connection with the preparation and filing of
the registration statement on Form S-3 (the "Registration Statement") filed with
the Securities and Exchange Commission for the purpose of registering for sale
under the Securities Act of 1933, as amended (i) warrants (the "Warrants") to
purchase up to 85,867 Common Shares, $.01 par value, of Pharmhouse Corp. (the
"Common Shares") owned by Brenner Securities Corporation ("Brenner") and (ii)
85,867 Common Shares issuable upon exercise of such warrants.
We have examined copies of the Company's Certificate of
Incorporation and By-Laws, each as amended through the date hereof, the Warrant
Agreement dated as of January 23, 1996 between the Company and Brenner (the
"Warrant Agreement") and the Warrant Certificate issued by the Company to
Brenner on such date, the Registration Statement and all exhibits thereto,
corporate proceedings of the Board of Directors and shareholders of the Company
and originals, photocopies or certified copies of all such records of the
Company, and all such agreements, certificates of public officials, certificates
of officers and representatives of the Company and others, and such other
documents, papers, statutes and authorities, as we deemed necessary to form the
basis of the opinion hereinafter expressed. In such examination, we have assumed
the genuineness of signatures and the conformity to original documents of the
documents supplied to us as copies. As
<PAGE> 2
Pharmhouse Corp.
June 25, 1996
Page 2
to various questions of fact material to such opinion, we have relied upon
statements and certificates of officers of the Company and others.
Based upon the foregoing, we are of the opinion that (a)
subject to payment of the exercise price thereunder and compliance with the
other terms of the Warrant Agreement by the holder(s) thereof, the Warrants
represent a legally binding obligation of the Company, enforceable against the
Company in accordance with the terms of the Warrant Agreement, except as
enforceability may be limited by laws of bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general equitable principles, and
(b) all of the Common Shares to be issued upon exercise of the Warrants and sold
by the selling shareholder will, when issued in accordance with the Warrant
Agreement, have been duly authorized and issued and, when sold in accordance
with the terms described in the prospectus forming a part of the Registration
Statement (the "Prospectus"), will be validly issued, fully paid and
nonassessable.
We hereby consent to the reference to our firm under the
caption "Legal Matters" in the Prospectus. We further consent to your filing a
copy of this opinion as an exhibit to the Registration Statement.
Very truly yours,
MALONEY, GERRA, MEHLMAN & KATZ
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our reports
dated April 26, 1996 appearing on pages F-1 and F-18 of Pharmhouse Corp.'s
Annual Report on Form 10-K for the year ended February 3, 1996. We also consent
to the reference to us under the headings "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
New York, New York
June 24, 1996
