As filed with the Securities and Exchange Commission on JUNE 11, 1997
Registration No.333-28077
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
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, Mehlman & Katz
405 Lexington Avenue
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
Post-Effective Amendment to the 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
PROSPECTUS
PHARMHOUSE CORP.
Warrants to Purchase 209,195 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 209,195 Common Shares, $.01 par value per share
(the "Common Shares" or the "Shares"), of Pharmhouse Corp.
(the "Company") and (ii) 209,195 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 by the Company to the
Selling Shareholder in December 1991 in connection with the
Selling Shareholder's extension of a secured credit facility
to the Company in December 1991 and the Selling Shareholder's
participation in previous secured lending arrangements with
the Company.
All of the Warrants expire on December 31,1997 and
consist of Class A, Class B and Class C Warrants exercisable
at exercise prices ranging from $.1884 per Share to $1.914
per Share. For further information, see "Description of
Securities."
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 9, 1997
was $8.75. 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 there is no
assurance that any such market for the Warrants 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 its 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 (other
than the exercise prices of the Warrants payable to the
Company for the issuance of the Common Shares). 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 Company.
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.
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 11, 1997
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 1, 1997; and
(ii) THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR
ITS FISCAL QUARTER ENDED MAY 3, 1997; AND
(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 the Company's
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 pursuant to
this Prospectus 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) 4779400).
GENERAL AND RECENT DEVELOPMENTS
Pharmhouse Corp. (the "Company") currently operates a
chain of 35 deep discount drugstores, 13 of which are
operated under the name of Pharmhouse (the "Pharmhouse
Stores") and 22 of which are operated under the name of The
Rx Place (the "Rx Stores"). The Rx Stores were acquired by
the Company from F.W. Woolworth Co. in late April 1995 and,
by reason of a recent settlement of litigation between the
Company and Woolworth permitting the Company to return up to
seven Rx Stores to Woolworth, SUBJECT TO THE CONDITIONS NOTED
BELOW, TWO of which have already been returned, and the
closing of one Pharmhouse Store, it is anticipated that the
Company will be operating between 30 and 32 stores in the
near future.
On January 31, 1997, the Company entered into an
agreement with F.W. Woolworth Co. and Woolworth Corporation
(collectively "Woolworth") pursuant to which the parties
settled litigation instituted by the Company against
Woolworth in January 1996 and related arbitration proceedings
arising out of the Company's acquisition of the assets of 24
Rx Stores from Woolworth in late April 1995 (the "Woolworth
Settlement"). Among other matters, the Woolworth Settlement
provided for the forgiveness and cancellation of all then
outstanding indebtedness owing by the Company to Woolworth
for the deferred portion of the purchase price of the Rx
Stores' assets (which, as of February 1, 1997, equaled
approximately $9,500,000 including accrued interest) except
for $1,000,000 which was converted to a non interest bearing
contingent obligation and which is to be canceled on July 30,
1998, subject to certain conditions. Pursuant to the
Woolworth Settlement the Company also obtained the right to
return to Woolworth up to seven Rx Stores, two of which have
already been reassigned or redelivered to Woolworth, and the
remaining five of which may, at the Company's option and
subject to the conditions of the Woolworth Settlement, be
reassigned to Woolworth by July 31, 1997 if they do not show
a store operating profit for a stipulated period (as
calculated by the Company) or such stores may be reacquired
by Woolworth. Woolworth further agreed to pay or reimburse
the Company for the rental and other carrying costs of these
seven Rx Stores from January 15, 1997 through the date of the
reassignment or redelivery of the leases by the Company to
Woolworth. Under the Woolworth Settlement, the Company
agreed to pay Woolworth approximately $195,000 for certain
outstanding rentals and other charges which had previously
been accrued in the Company's financial statements and the
Company's right to use the service mark "The Rx Place" has
been extended to April 2001. For further information, see
"Risk Factors" and "The Company."
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:
Results of Operations; Losses in Prior Years. For its
fiscal year ended February 1, 1997 ("fiscal 1997"), the
Company earned $1,334,000 after giving effect to an
extraordinary gain of $7,142,000 (net of certain provisions
and expenses) resulting from the Woolworth Settlement
described elsewhere under this caption compared to a net loss
sustained by the Company of $2,507,000 for its fiscal year
ended February 3, 1996 ("fiscal 1996"). The Company also
sustained net losses in each of its three previous fiscal
years. Its loss from operations, before interest and
extraordinary items, in fiscal 1997 was $1,578,000 and,
except for income from operations of $419,000 in fiscal 1996,
the Company has sustained operating losses from continuing
operations since it commenced operation of its first
Pharmhouse Store in 1990. Management believes, however,
that, as a result of continuing improvements in its
operations and the terms of the recent Woolworth Settlement
pursuant to which, among other matters, the Company received
the right to return to Woolworth up to seven under-performing
Rx Stores, the Company will be able to achieve profitable
operations in the future. There can be no assurance,
however, when or whether such profitable operations will be
achieved. THE Company SUSTAINED A LOSS DURING THE FIRST
QUARTER OF ITS CURRENT FISCAL YEAR AND, ALTHOUGH THAT LOSS
WAS SUBSTANTIALLY LESS THAN THE LOSS SUSTAINED BY THE COMPANY
FOR THE COMPARABLE QUARTER IN FISCAL 1997, IT may continue to
incur losses in future fiscal periods.
Effect of Woolworth Settlement. Management believes
that, by reason of the substantial cancellation of indebtedness
pursuant to the Woolworth Settlement, the Company's financial
condition has improved significantly. Management also
believes that the Company's right to return up to seven Rx
Stores to Woolworth and not to continue to bear their
increased rental and other occupancy costs has and will have
a material positive effect upon the Company's cash flow as
well as enhance the Company's ability to achieve profitable
operations in the future. Same store revenues of these seven
Rx Stores, as a group, declined by 12.6% during the last nine
months of fiscal 1997 compared to the same nine month period
in fiscal 1996, whereas same store revenues for the Company's
remaining 17 Rx Stores, as a group, declined during that nine
month period by 7.9% before, and 5.6% after, adjusting for
the one week shorter period in fiscal 1997 compared to the
same period in fiscal 1996. However, management also
estimates that same store revenues of the Company's
Pharmhouse Stores, one of which is currently being closed,
also declined in fiscal 1997 compared to fiscal 1996,
although the percentage of such decline (estimated by
management at 3.3% before, and 1.3% after, adjustment for the
one week shorter fiscal 1997) was substantially less than
that experienced by the Rx Stores. Furthermore, despite
improvements in the gross profit margins of the Pharmhouse
Stores in recent years, the Company has not experienced
consistent revenue growth from the operation of the
Pharmhouse Stores in prior years and the sales revenues
generated by its remaining 17 Rx Stores have been
disappointing since their acquisition in 1995. Therefore,
while management believes that the financial and cash flow
benefits derived from the Woolworth Settlement will assist
the Company in improving the results of its operations, the
ability of the Company's remaining Pharmhouse Stores and Rx
Stores to generate such levels of revenues as will enable the
Company to achieve profitable results of operations in future
fiscal periods cannot now be determined.
Dependence Upon Secured Financing; Increased Interest
Expense. In connection with its acquisition of the Rx Stores
in April 1995, the Company (1) 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 (2)
borrowed an additional $3,000,000, on a subordinated secured
basis, from an unaffiliated trade supplier (the "Subordinated
Secured Loan"). The Company had longterm indebtedness
(including the current portion thereof) as at February 1,
1997 of approximately $32,040,000, compared to long-term
indebtedness (including the current portion thereof) as at
February 3, 1996 of approximately $38,460,000. The Company's
interest expense for fiscal 1997 was $4,230,000 compared to
the lesser interest expense of $3,544,000, reflecting the
costs of the operation of the Rx Stores for but nine months
of fiscal 1996. For the foreseeable future, the Company will
continue to rely upon the Revolving Credit Facility 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. In
addition, the initial term of the Revolving Credit Facility
expires on April 28, 1998 subject to renewal, at the option
of the secured lender or the Company, for successive one year
periods thereafter. The failure of the secured lender to
elect to renew the Revolving Credit Facility and of the
Company to obtain alternative sources of financing its
operations would have a material adverse effect upon the
Company and its business.
Restrictive Financial and Other Covenants. The
agreements governing the Revolving Credit Facility and the
Subordinated Secured 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, expanding
its operations or paying cash dividends to its shareholders
and will also require the Company to continue to satisfy
minimum tangible net worth requirements. Net losses, if any,
from continuing operations will render it increasingly
difficult for the Company to continue to satisfy these
financial covenants. During the third and fourth quarters of
fiscal 1997, the Company's net worth fell below the minimum
net worth requirements under the Revolving Credit Facility.
The lender waived the Company's non-compliance and
established a new minimum net worth requirement of $6,000,000
for future fiscal quarters subject to future adjustment. The
inability of the Company to continue to satisfy such
financial 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,
although the significant increase in its net worth resulting
from the extraordinary gain realized by the Company from the
debt forgiveness pursuant to the Woolworth Settlement should
enhance the Company's ability to satisfy its net worth
covenant in future fiscal periods.
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
outstanding indebtedness. The Company has received increased
trade credit from a greater number of its merchandise
suppliers since the closing of the acquisition of the Rx
Stores in late April 1995; 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.
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 presented 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 Rx Stores.
Effect of Economic and Other Conditions. Revenues
generated by the Company's Pharmhouse and Rx Stores have
been, and will continue to be, affected by general and local
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.
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 cash dividends
in the foreseeable future. In addition, the Company is
restricted under the terms of the agreements governing the
Revolving Credit Facility and the Subordinated Secured 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. 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
April 18, 1997, 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) and members of
their families, owned, as a group, approximately 34.1% of the
outstanding Common Shares (not including the Shares issuable
upon exercise of the Warrants and which are the subject of
this Prospectus or other Common Shares issuable upon the
exercise of outstanding stock options), 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 that neither the Warrants nor other outstanding
stock options were exercised, the Brecker-Davis family would
own approximately 45.9% 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. The Warrants
will not be listed for trading on any securities exchange or
quoted on any interdealer quotations system. There is no
public trading market for the Warrants; and no such market is
expected to develop for the Warrants. The Shares, if issued
upon exercise of the Warrants, will be listed for trading on
the NASDAQ Small Cap Market. While there is an active trading
market for the Common Shares issuable upon exercise of the
Warrants, the 209,195 Shares issuable upon exercise of the
Warrants represent approximately 8.1% of the Company's
currently outstanding Common Shares and the effect of the
sale thereof upon the prevailing market prices for its Common
Shares cannot now be determined, although it is anticipated
that the sale of such a significant number of such Shares
might well result in a decline in such prevailing market
prices. Furthermore, by reason of the fact that the Company
has a relatively limited number of outstanding Common Shares
which are free of restrictions and which are currently
trading on the NASDAQ Small Cap Market, the sale of such
Shares pursuant to this Prospectus may create further
volatility in the prevailing market prices for its
outstanding Common Shares. 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 Prospectus, the Company
has reserved, in addition to the 209,195 Common Shares
issuable upon exercise of the Warrants, an aggregate of
916,170 Common Shares for issuance upon the exercise of (i)
outstanding stock options granted to executives and employees
(collectively, the "Outstanding Derivative Securities").
Most 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
prices 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 its then existing shareholders. The
holders of the 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 subject to certain resale restrictions in
Rule 144 under the Securities Act of 1933. As now in effect,
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 one year prior to 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 two years, sell all of
such restricted securities without a limitation. (Affiliates
of issuers whose securities are not subject to holding period
requirements are nonetheless subject to the quantitative
resale limitations described above).
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
The Warrants consist of Class A, Class B and Class C
Warrants, all of which expire on December 31, 1997, but which
are exercisable at the following exercise prices with respect
to the following respective number of Common Shares:
Class of Number of Exercise Price
Warrants Shares Per Share
Class A 59,770 $ .1884
Class B 119,540 .435
Class C 29,885 1.914
All of the Warrants are subject to standard anti-dilution
provisions set forth in the Warrant Agreement, as amended,
governing the issuance of the Warrants. The Warrants may be
exercised at any time or from time to time until they expire
on December 31, 1997.
The Preferred Shares
The Company's certificate of incorporation, as amended
(the "Certificate of Incorporation"), authorizes the issuance
of up to 2,500,000 Preferred Shares, $.10 par value, none of
which has been issued to date. As authorized, the Board of
Directors of the Company has the power to issue such
Preferred Shares in such series and subject to such dividend,
redemption and conversion rights and such other rights,
preferences and limitations as it deems appropriate with
respect to such series.
The Common Shares
The Company's Certificate of Incorporation, as amended,
authorizes the issuance of up to 25,000,000 Common Shares,
$.01 par value. As of April 18, 1997, 2,374,443 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
liquidation, dissolution or winding up of the affairs of the
Company. (As noted, however, under "Risk Factors", the
Company is subject to restrictions against the payment of
cash dividends under the Revolving Credit Facility and
Subordinated Secured Loan.) Holders of Common Shares do not
have preemptive, subscription or conversion rights. 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 nonassessable. 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
American Stock Transfer Company, 40 Wall Street, New York,
New York 10005, is the transfer agent and registrar for the
Company's Common Shares.
THE COMPANY
Pharmhouse Corp. (the "Company") currently operates a chain
of 35 deep discount drugstores, 13 of which are operated
under the name of Pharmhouse (the "Pharmhouse Stores") and 22
of which are operated under the name of The Rx Place (the "Rx
Stores"). The Rx Stores were acquired by the Company from
F.W. Woolworth Co. in late April 1995 and, by reason of a
recent settlement of litigation between the Company and
Woolworth permitting the Company to return up to seven Rx
Stores to Woolworth SUBJECT TO THE CONDITIONS DESCRIBED UNDER
"GENERAL AND RECENT DEVELOPMENTS," TWO of which HAVE already
been returned, and the closing of one Pharmhouse Store, it is
anticipated that the Company will be operating between 30 and
32 stores in the near future.
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 April 18,
1997, the Company employed approximately 2,000 persons in its
operations, including a substantial number of part-time
employees. The Company is not a party to any collective
bargaining agreements pertaining to its employees.
Eleven Pharmhouse Stores are located in smaller
communities and three of such Stores are located in more
densely populated areas, reflecting management's decision to
expand into such markets. The Rx Stores are also located in
more densely populated areas than the older Pharmhouse
Stores. As of the date hereof, most of the 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.
SELLING SHAREHOLDER
The Warrants which are the subject of this Prospectus
are owned by Rosenthal & Rosenthal, Inc., a privately held
asset based lending institution based in New York City (the
"Selling Shareholder"). The Shares are issuable to the holder
of the Warrants upon the exercise thereof. The Warrants were
issued to the Selling Shareholder in connection with the
Selling Shareholder's granting a secured revolving credit
facility to the Company in December 1991 and participating in
a prior secured revolving credit facility extended to the
Company in 1990. For further information concerning the
Warrants, see "Description of Securities-The Warrants."
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
Company.
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 provisions of Regulation M promulgated
under the Exchange Act may apply to its sales of Shares and
has furnished the Selling Shareholder with a copy of that
regulation and has also informed the Selling Shareholder of
the rules governing the required delivery of copies of this
Prospectus in connection with the sale of such shares.
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 except
for the payment to the Company of the exercise prices of the
Warrants as a condition to the issuance of the Shares.
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 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.
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, Mehlman & Katz, New York
City.
EXPERTS
The Company's consolidated balance sheets at February 1,
1997 and February 3, 1996 and consolidated statements of
operations, cash flows and shareholders' equity for the years
ended February 1, 1997, February 3, 1996 and January 28,
1995, incorporated in this Prospectus by reference to the
Company's Annual Report on Form 10-K for its fiscal year
ended February 1, 1997, 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.
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 Company:
SEC registration fee $ 547
Legal fees and expenses $ 7,500
Accounting fees and expenses $ 5,000
Filing and Miscellaneous $ 1,953
--------
Total $ 15,000
========
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 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, Mehlman & Katz
10.1 Warrant Agreement between the Company and
Rosenthal & Rosenthal, Inc., dated December 24, 1991
10.14 Amendment to Warrant Agreement between the Company
and Rosenthal & Rosenthal, Inc., dated July 17,1996.
23.1 Consent of Maloney, Mehlman & Katz (included in
Exhibit 5.1)
23.2 Consent of Price Waterhouse LLP
24.1 Power of Attorney (see Signature Page of this
Registration Statement)
* FILED WITH FORM S-3 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 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 posteffective
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.
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 AMENDMENT TO THE
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 11,1997.
PHARMHOUSE CORP.
By: /s/ Kenneth A. Davis
-------------------------
Kenneth A. Davis, President and
Chief Executive Officer
By: /s/ Kenneth A. Davis
-------------------------
Kenneth A. Davis, ATTORNEY-
IN-FACT AND AGENT FOR
DIRECTORS AND OFFICERS
SIGNATORIES TO FORM S-3
REGISTRATION STATEMENT
FILED WITH THE COMMISSION
ON MAY 29, 1997
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 hereto, 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-infact and agent or his substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
