As filed with the Securities and Exchange Commission on September 27, 1996.
Registration Statement No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMERICAN DRUG COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 13-3729186
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization)
Identification Number)
1730 Rhode Island Avenue, N.W.
Washington, D.C. 20036
(202) 833-9223
(Address, including zip code, and telephone number, including
area code, or registrant's principal executive offices)
Andrea D. Kantor, Esq.
Associate General Counsel
9 West 57th Street
Suite 4170
New York, New York 10019
(212) 230-9516
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box, and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
Title of each Amount to Proposed Proposed Amount of
Class of be Maximum Maximum Registration
Securities to registered Offering Aggregate Fee
be Registered price per Offering
(1)(2) share (1) Price (1) (1)
Common Stock, 6,015,395 $.50 $3,007,697.50 $1,037.14
par value $.01
per share
(1) Represents 6,015,395 shares of Common Stock issuable upon exercise of
warrants at an exercise price equal to $.50 per share.
(2) There is also registered hereunder such indeterminate additional number
of shares of Common Stock as may become issuable pursuant to the anti-
dilutional provisions of such warrants.
____________________________
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
Subject to Completion, Dated September 27, 1996
PROSPECTUS
AMERICAN DRUG COMPANY
6,015,395 Shares of Common Stock
This Prospectus relates to the possible issuance by American
Drug Company, a Delaware corporation (the "Company") from time
to time of up to 6,015,395 shares of the Company's common
stock, par value $.01 per share ("Common Stock")to the holders
of currently outstanding Warrants to purchase shares of Common
Stock (the "Warrants") upon the exercise thereof by such
holders in accordance with a Warrant Agreement dated as of
August 5, 1994 (the "Warrant Agreement") relating to the
Warrants between the Company and The Harris Trust Company of
New York, as warrant agent, (the "Warrant Agent"). Each
Warrant entitles the holder to purchase one share of Common
Stock at a price of $.50 per share, subject to adjustment as
provided in the Warrant Agreement. Subject to the
effectiveness of the Registration Statement of which this
Prospectus is a part, the Warrants may be exercised at any time
prior to the close of business on August 5, 1998. The Warrants
will be exercisable to purchase an aggregate of 6,015,395
shares of Common Stock, representing approximately 31.6 % of
the Company's then outstanding Common Stock on a diluted basis
as of June 30, 1996. The Warrant Agreement provides that the
Company has the right to cancel the Warrants if the closing
price of the Common Stock as quoted by the OTC Bulletin Board
during any ten consecutive trading days shall equal or exceed
$1.00 per share.
The Common Stock issuable upon exercise of the Warrants is
quoted on the OTC Bulletin Board under the symbol "ADRG." On
September 27, 1996, the last reported sale price of the Common
Stock on the OTC Bulletin Board was $0.406 per share.
____________________________
INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS.
__________________________
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 ,
1996 AVAILABLE INFORMATION
The Prospectus omits certain of the information contained
in the Registration Statement relating to the securities
offered hereby which is on file with the Securities and
Exchange Commission (the "Commission"). 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 periodic reports with the Commission. Such
Registration Statement and reports can be inspected without
charge and copied at the public reference facilities maintained
by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at its regional offices
located at 7 World Trade Center, 13th Floor, New York, New
York, 10048, and Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60051. Copies of such material can
be obtained at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the
Commission are incorporated in this Prospectus by reference:
(a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1995;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996 and June 30, 1996;
(c) the description of the Common Stock contained in the Company's
Prospectus included in the Company's Registration Statement on Form S-1,
File No. 33-78252, as filed under the Securities Act of 1933, as amended (the
"Securities Act").
All documents filed by the Company pursuant to Section
15(d) of the Exchange Act on or after the date of this
Prospectus and prior to the termination of the offering hereby
of the Common Stock shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the
date of filing 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 modifies,
supersedes, or replaces such statement. Any statement so
modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this
Prospectus. Any person receiving a copy of this Prospectus may
obtain without charge, upon written or oral request, a copy of
any documents incorporated by reference herein, except for
exhibits to such documents (unless such exhibits are
specifically incorporated by reference into the documents which
this Prospectus incorporates). Requests should be directed to:
Corporate Secretary, American Drug Company, 1730 Rhode Island
Avenue, N.W., Washington, D.C. 20036.
The Company
The Company commenced operations in January 1990 as NPD
Trading (USA), Inc., which is now its wholly-owned subsidiary.
Since its inception, the Company has focused on assisting
western businesses to develop trade, manufacturing and
investment opportunities in Russia, the Czech and Slovak
Republics and to a lesser extent, other countries of the
Commonwealth of Independent States (the "CIS"). In late 1993,
the Company began the implementation of its plan for the export
of American-made generic prescription drugs and over-the-
counter healthcare products in both Russia and the CIS and the
Company received certain regulatory approvals in 1994 and 1995
to market its products. The Company's strategy is to focus its
efforts and resources, in 1996 and thereafter, on marketing and
distribution in the generic pharmaceutical business, on over
the counter pharmaceuticals and on the sale of medical
equipment. In September 1996, the Company announced the
creation of a new brand of vitamins to be marketed under the
brand name "REVITALIZE" exclusively for the Russian market.
RECENT DEVELOPMENTS
In July 1996, the Company issued a convertible note (the
"Note") in the principal amount of $1,000,000 in a private
offering (the "Offering") and received net proceeds of $950,000
from the Offering. The Note matures on June 30, 2001, bears
interest at the rate of 7% per annum, and is convertible into
shares of Common Stock at a conversion price of $.25 per share.
In connection with the Offering, National Patent Development
Corporation ("National Patent") issued warrants to purchase an
aggregate of 82,306 shares of National Patent common stock,
exercisable at a price of $12.15 per share, provided that the
Warrants may only be exercised utilizing the Note. In the
event that the closing price of the Common Stock is at least
$1.00 per share for at least 20 consecutive trading days, the
Notes shall be subject to redemption at the election of the Company,
at a redemption price of 100% of the principal amount called for
redemption, together with accrued interest.
The Company and National Patent have agreed that (i) if
the Notes are used to exercise the warrants prior to a default
on the Notes, National Patent will receive from the Company, in
exchange for the Notes shares of the Company's Common Stock at
a price equal to 60% of its then current market value, and (ii)
if the Notes are used to exercise the warrants after a default
on the Notes, National Patent will receive from the Company, in
exchange for the Notes, shares of the Company's Common Stock at
a price equal to 25% of its then current market value.
On July 18, 1996, The Board of Directors of the Company
approved an extension of the expiration date of Warrants until
5:00 p.m., New York City time, on August 5, 1998 and a
reduction of the exercise price to $.50 per share, subject to
adjustment in certain circumstances. In addition, the Board
amended Section 5 of the Warrant Agreement to provide that the
Company has the right to cancel the Warrants if the closing
price of the Common Stock as quoted by the OTC Bulletin Board
during any ten consecutive trading days shall equal or exceed
$1.00 per share. Except as amended thereby, all other
provisions of the Warrant Agreement remained in full force and
effect in accordance with their respective terms.
RISK FACTORS
Prospective investors should consider carefully the
following factors, together with the other information
contained or incorporated by reference in this Prospectus, in
evaluating an investment in the Common Stock offered hereby.
Limited Operating History; Operating Losses
The Company commenced operations in January 1990 and
therefore has a limited operating history. The Company began
to lay the foundation for its generic pharmaceuticals
marketing operations late in 1993, began sales of some of its products
in 1995 and received certain regulatory approvals in 1994 and 1995
to market its products. Additionally, the Company has incurred
net losses in each year since its inception. For the year
ended December 31, 1995, the Company generated $529,000 in
revenues and had a net loss of $1,604,000. The Company's
revenues to date have been insufficient to offset the Company's
operating expenses. See "Risk Factors - Dependence on Generic
Drug and Medical Equipment Business."
Liquidity; Future Capital Requirements
At June 30, 1996, the Company had cash of $61,000 and the
Company had borrowed the full $2.5 million under its loan
agreement from National Patent. These proceeds were to be used
as part of the Company's working capital. Such borrowings bear
interest at the prime rate, with principal and accrued interest
due on August 5, 1999. As of September 1, 1996, the Company had
approximately $900,000 of cash and cash equivalents.
National Patent had agreed to continue funding the Company
through June 30, 1996 pursuant to the same terms and conditions
as the existing loan agreement. As of June 30, 1996, the
Company had borrowed $3,167,000 from National Patent and had
incurred interest of $317,000.
Based upon the proceeds from the $1,000,000 Convertible
Note (See "Recent Developments") and anticipated increased
revenues, the Company believes that it will have sufficient
cash and cash equivalents to satisfy its cash requirements
through June 30, 1997. However, to fund the Company's
operations beyond such date, the Company will require
additional funding, whether from financial markets or
collaborative or other arrangements with corporate partners,
which may not be available when needed or on terms acceptable
to the Company.
Uncertain Ability to Repay Affiliated Company Indebtedness
As of June 30, 1996, the Company had borrowed $3,167,000
from National Patent and had incurred interest of $317,000.
However, at the present time there can be no assurance that the
Company will have the financial resources to repay the
$3,167,000 and $317,000 of interest or any additional
indebtedness to National Patent when it becomes due on August
5, 1999. From time to time, the Company will attempt to raise
additional capital through the issuance of additional debt or
equity securities.
Dependence on Generic Drug and Medical Equipment Business
The success of the Company depends upon the success of its
American-made generic drug, over-the-counter products and
medical equipment marketing business. The increase in revenues
of $613,000 for the six months ended June 30, 1996 as compared
to the six months ended June 30, 1995 was primarily due to the
sale of medical equipment and generic drugs in the CIS.
However, there can be no assurance that the Company will be
able to continue to obtain agreements with foreign distributors
to distribute and sell such products in Russia and the CIS on
favorable terms, that the Company will continue to receive any
foreign government approvals necessary to market such products
abroad, or that it will secure contracts to sell such products
on favorable terms to foreign hospitals, clinics and
pharmacies. Political and Economic Situation in Russia
The political situation in Russia, where the Company
expects to generate most of its revenues in the near future,
has in recent years been in constant transition. Since the
arrival of the Yeltsin government in December 1991, Russia has
experienced a proliferation of political parties, an increase
of nationalist sentiment, a fragmentation of its economic and
political institutions and a dramatic increase in crime. The
viability of the Russian government has been tested by various
political factions gaining strength and two unsuccessful coup
d'etats; there can be no assurance that a coup d'etat will not
again be attempted or that any future attempts will not be
successful. In addition, the privatization process in Russia has been
sporadic. Russian private businesses have generally encountered
difficulty obtaining capital from local financial sources.
International Operations
The internal political climate of the countries of Eastern
Europe and the openness of such foreign markets to American
trade is essential to the success of the Company. The
transformation in Eastern Europe, where former totalitarian,
centrally-planned economies have committed themselves to
political pluralism and market economies, has been dramatic; it
has also been influenced by both internal and external
political and economic developments in the countries throughout
the region. Any reversal in this regard, or in international
trade policy generally, could materially adversely affect the
Company's operations.
In addition, foreign firms operating in this region may be
subject to numerous other risks which are not present in
domestic operations, including political strife, the
possibility of expropriation, inadequate distribution
facilities, telecommunication deficiencies, restrictions on
royalties, dividends and currency remittances, inflation,
fluctuations of foreign currencies, high and unpredictable
levels of taxation, requirements for governmental approvals for
new ventures and local participation in operations. Such
problems could have a material adverse effect on the Company by
affecting the Company's direct operations abroad and by
discouraging trade and investment by other western businesses
to whom the Company provides services.
Dependence on Key Personnel
The Company is dependent, to a substantial degree, on the
efforts and experience of its founder, Chief Executive Officer,
President and Director, Mr. Martin M. Pollak, who is 69 years
old. Mr. Pollak dedicates approximately one-half of his time
to his duties at the Company and the loss or unavailability of
his services could have a material adverse effect on the Company.
The Company does not maintain key man life insurance for Mr.
Pollak. Additionally, because of the nature of its business,
the Company must continually be able to attract and retain
qualified personnel; there can be no assurance that the
Company will be successful in attracting such personnel.
Dividend Policy
The Company has not declared any cash dividends during or
since its two most recent fiscal years. The current policy of
the Company's Board of Directors is to retain earnings, if
any, to finance the operation of the Company's business. The
payment of cash dividends on the Common Stock in the future
will depend on the Company's earnings, financial condition and
capital needs and on other factors deemed pertinent by the
Company's Board of Directors.
Competition
Competition for business by Western companies in Russia,
the CIS and Eastern Europe is intense. The Company's
consulting business competes with other specialized service
companies, as well as divisions of large multinational
corporations which perform "in-house" the type of services
rendered by the Company. In addition, the Company's generics
business competes with Russian and foreign drug companies and
large international pharmaceutical manufacturers. Most of the
Company's competitors have greater financial, technical and
marketing resources than the Company. There can be no
assurance that the Company will be able to compete effectively
in any aspect of its business or that developments by others
will not render the Company's product noncompetitive.
Control of the Company
National Patent holds approximately 54% of the Common
Stock issued and outstanding (without taking into account
outstanding options or warrants). The Company's by-laws
do not provide for cumulative voting. National Patent has
entered into a Voting Agreement pursuant to which it has agreed
that, for a period of three years from August 1994, it will vote its
shares of Common Stock (i) such that not more than 50% of the
Company's directors will be officers or directors of National
Patent and (ii) on all matters presented to a vote of
stockholders, other than the election of directors, in the
same proportion as the remaining stockholders of the Company
vote. National Patent, nonetheless, will be able to influence
substantially the affairs of the Company.
In addition, options to purchase an aggregate of 500,000
and 250,000 shares of Common Stock, respectively, at an
exercise price of $.50 share, have been granted to two
National Patent officers and directors pursuant to certain
employment and consulting agreements entered into by the
Company and options to purchase an additional 860,000 shares
of the Company's Common Stock have been granted to officers,
directors and employees of the Company, some of whom are also
officers of National Patent, pursuant to the Company's Stock
Option Plan.
Lack of Steady Client Base
The Company's consulting business is project driven and
therefore lacks both client and workflow continuity. Because
the Company historically has concluded only a few projects a
year, the successful completion of a single large project may
dramatically affect revenues. Although the Company expects to
attract additional customers in the future, there can be no
assurance that it will be able to do so.
Foreign Government Regulation
The Company's generic pharmaceutical products
(prescription and over-the-counter formulas) require
registration with the appropriate unit of the Russian
government and the governments of the other countries of the
CIS before they may be marketed and sold in such regions.
Pursuant to an accord reached between the American and Russian
governments on February 16, 1994, however, the Russian Health
Ministry has agreed to approve American-made pharmaceutical
products which have received the approval of the United States
Food and Drug Administration (the "FDA") within 90 days of submission
of a request therefor, without requiring the lengthy and expensive
duplication of clinical studies inside Russia or the
submission of U.S. - performed test data in Russian, as was
characteristic of Russia's previous system. Pursuant to the
current terms of the accord, the Company will be required to
submit only a basic description of the product, a copy of the
official FDA approval letter and the latest Federal inspection
reports from the manufacturer in Russian before its product
will be approved for marketing.
At present, no other countries of the CIS have accepted
American regulatory approval, although some have accepted
Russian regulatory approval. In such countries, the Company
would therefore be required to submit an application for
approval with the appropriate agency in the country where the
product is to be marketed. The time required for regulatory
approval of any of the Company's products in such regions
cannot be predicted. There can be no assurance that problems
will not arise that could delay or prevent the
commercialization of the Company's products or that such
foreign regulatory agencies will approve the marketing of any
of the Company's products. Possible Volatility of Stock Price
The price at which shares of the Common Stock trade may
fluctuate significantly. Prices for shares of Common Stock
will be determined in the market and may be influenced by many
factors, including the depth and liquidity of the market for
the shares, investor perception of the Company, prospects for
the industry in which the Company participates and general
economic and market conditions.
Potential Adverse Effect of Cancellation of Warrants
The Warrants may be canceled by the Company upon 20
trading days' notice to holders thereof by the Warrant Agent if
the closing price of the Common Stock as quoted by the OTC
Bulletin Board equals or exceeds $1.00 per share (subject to
adjustment) for any ten consecutive trading days ending within
five days of the notice of cancellation by the Company to the
Warrant Agent. Cancellation of the Warrants could force the
holders to exercise the Warrants and pay the exercise price at
a time when it may be disadvantageous for the holders to do so,
to sell the Warrants at the then current market price when they
might otherwise wish to hold the Warrants, or to accept
cancellation, receiving no value for their Warrants.
Capitalization
The following table sets forth the capitalization of the
Company (i) as of June 30, 1996 and (ii) as adjusted to give
effect (a) to the issuance of $1,000,000 of convertible notes
in July 1996, and (b) to the exercise of the warrants in the
offering.
(In thousands except shares
and par value per share
data)
June 30, 1996
Actual As Adjusted
Long-Term Debt to National Patent
due 1999 $3,484 $3,484
Convertible Debt due June 2001
1,000
Stockholders' deficiency:
Common Stock, par value $.01 per
share, authorized 30,000,000 shares;
issued and outstanding 13,020,155
shares; issued and outstanding as
adjusted 19,035,550 shares(1) 130 190
Capital in excess of par value 1,682 4,630
Deficit (4,786) (4,786)
Deferred compensation (40) (40)
Total Stockholders' Deficiency (3,014) (6)
Total Capitalization $470 $4,478
(1) Does not include (i) 1,510,000 shares of Common Stock
reserved for issuance upon the exercise of options outstanding
under the Company's stock option plan, and (ii) 6,015,395
shares of Common Stock reserved for issuance upon the exercise
of currently outstanding warrants.
Use of Proceeds
The net proceeds from any issuance of Common Stock upon
exercise of the Warrants are expected to be used for working
capital.
Plan of Distribution
The Company may from time to time issue up to 6,015,395
shares of Common Stock to the holders of the Warrants upon
exercise thereof by such holders and in accordance with the
Warrant Agreement. The Company will issue the Common Stock
directly or through agents to the holders of the Warrants.
LEGAL MATTERS
The legality of the securities offered hereby will be
passed on for the Company by Andrea D. Kantor, Associate
General Counsel of the Company. Ms. Kantor owns 675 shares of
Common Stock and has options to purchase 15,000 shares of
Common Stock, all of which are currently exercisable.
EXPERTS
The audited consolidated financial statements of the
Company and its subsidiary at December 31, 1995 and 1994, and
for each of the years in the three year period ended December
31, 1995, incorporated by reference herein have been
incorporated by reference herein in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the
authority of said firm as experts in auditing and accounting.
The report of KPMG Peat Marwick, LLP contains an explanatory
paragraph that states that the Company's recurring losses from
operations and accumulated deficit raise substantial doubt about
its ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration
Statement on Form S-3 under the Securities Act with respect to
the shares of Common Stock being offered by this Prospectus.
This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto,
certain portions of which have been omitted as permitted by the
rules and regulations of the Commission. For further
information with respect to the Company and the Offering,
reference is made to the Registration Statement, including the
exhibits thereto, which may be inspected without charge at the
Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of the Registration Statement
may be obtained from the Commission at its principal office
upon payment of prescribed fees. Statements contained in this
Prospectus as to the contents of any contract or other document
are not necessarily complete, and in each instance where such
contract or other document is an exhibit to the Registration
Statement, reference is made to the copy of such contract or
other document filed as an exhibit to the Registration
Statement, each statement being qualified in all respects by
such reference.
No dealer, salesperson, or any other person has been
authorized to give any information or to make any
representations other than those contained in this Prospectus,
and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or
the Underwriter. This Prospectus does not constitute an offer
to sell or the solicitation of any offer to buy any of the
securities offered hereby to anyone in any jurisdiction in which such
offer or solicitation is unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any
circumstances, imply that there has been no change in the
affairs of the Company or that the information herein is
correct as of any time subsequent to the dates as of which such
information is given.
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following tables sets forth an itemized statement of
all estimated expenses in connection with the issuance and
distribution of the securities being registered hereby other
than the SEC fee.
SEC registration fee $1,037.14
Accounting fees and expenses 3,000.00
Blue Sky fees and expenses -0-
Legal fees and expenses -0-
Cost of printing -0-
Miscellaneous -0-
Total $4,037.14
Item 15. Indemnification of Directors and Officers
Article 8 of the Company's Certificate of Incorporation
provides that the Company shall, indemnify its officers,
directors, employees and agents to the extent permitted by the
General Corporation Law of Delaware. In addition, article 7
of the Company's Certificate of Incorporation eliminates
personal liability of its directors to the full extent
permitted by Section 102(b)(7) of the General Corporation Law
of the State of Delaware.
Section 145 of the General Corporation law of the State
of Delaware permits a corporation to indemnify its directors and
officers against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by them in connection with any action, suit
or proceeding brought by third parties, if such directors or
officers acted in good faith and in a manner they 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 reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right
of the corporation, indemnification may be made only for
expenses actually and reasonably incurred by directors and
officers in connection with the defense or settlement of an
action or suit, and only with respect to a matter as to which
they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best
interest of the corporation, unless and only to the extent that
the court in which the action or suit was brought shall
determine upon application that the defendant officers or
directors are reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
Section 102(b)(7) of the General Corporation Law of the
State of Delaware provides that a corporation may eliminate or
limit the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the
General Corporation Law of the State of Delaware, or (iv) for
any transaction from which the director derived an improper
personal benefit. No such provision shall eliminate or limit
the liability of a director for any act or omission occurring
prior to the date when such provision becomes effective.
The Company is currently covered under National Patent's
Directors and Officers' Liability Insurance, which includes the
Company's Reimbursement Policy. Subject to the policy
conditions, the insurance provides coverage for amounts payable
by National Patent to its directors and officers pursuant to
the Company's by-laws.
Item 16. Exhibits and Financial Statements Schedules.
5.1 - Opinion of Andrea D. Kantor, Associate General
Counsel, Registrant, as to the legality of the
securities being registered.*
10.8 Warrant Agreement, dated as of August 5, 1994,
among American Drug Company, The Harris
Trust Company of New York, as Warrant Agent,
and the holders of Warrants. Incorporated
by reference to Exhibit 10.8 of the Company's
Registration Statement on Form S-1, File No. 33-78252.
23.1 - Consent of Independent Auditors*
23.2 - Consent of Andrea D. Kantor (included in Exhibit
5.1)*
(b) Financial Statement Schedules
None
_________
* Filed herewith
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under
the Securities Act, as amended (the "Securities Act") may be
permitted to directors and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities 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 advertised 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 and
will be governed by the final adjudication of such issue.
A. The undersigned Registrant hereby undertakes that,
for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in 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.
B. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement.
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement(or the most recent post-effective amendment thereof)
which individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such
information in the registration statement;
Provided, however,that paragraphs (1)(i) and (1)(ii) do
not apply if the information required to be included in a post
effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by
the Registration pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act, 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 remains unsold at the termination of the offering.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3
and has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in
the City of New York, New York and the State of New York, on
this 27th day of September, 1996.
AMERICAN DRUG COMPANY
Martin M. Pollak
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1934,
the Registration Statement has been signed by the following
persons in their capacities on September 27, 1996.
Signature Title
Martin M. Pollak President, Chief Executive Officer and Director
(Principal, Executive and Operating Officer)
Jerome I. Feldman Chairman of the Board
Scott N. Greenberg Chief Financial Officer and
(Principal Financial and Accounting Officer)
Edward Dunay Director
John D. Scanlan Director
Arthur T. Downey Director
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description
Page
5.1 Opinion of Andrea D. Kantor, Esq.,
Associate General Counsel, Registrant,
as to the legality of the securities
being registered*
10.8 Warrant Agreement, dated as of August 5, 1994,
among American Drug Company, The Harris
Trust Company of New York, as Warrant Agent, and
the holder of Warrants Incorporated herein by
reference to Exhibit 10.8 of the Company's
Registration Statement on Form S-1, File No. 33-78252.
23.1 Consent of Independent Auditors*
23.2 Consent of Andrea D. Kantor (included
in Exhibit 5.1)*
___________
* Filed herewith.
Exhibit 5.1
September 27, 1996
American Drug Company
1730 Rhode Island Avenue, N.W.
Suite 1215
Washington, D.C. 20036
Gentlemen:
Reference is made to the Registration Statement on Form
S-3 of American Drug Company, (the "Company") relating to
the registration of shares of the Company's common stock,
par value $.01 per share (the "Common Stock").
I am Assistant General Counsel of the Company, and have
examined such corporate records and other documents as I
have deemed relevant. Based upon the above, I am of the
opinion that the Common Stock to be sold pursuant to the
Registration Statement, by the holders of currently
outstanding warrants to purchase shares of Common Stock upon
the exercise thereof, is validly authorized and issued,
fully paid, and non-assessable.
I hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and the use of my name
in the Prospectus.
Very truly yours,
Andrea D. Kantor
Associate General Counsel
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
American Drug Company:
We consent to the use of our report incorporated herein by
reference and to the reference to our firm under the heading
"Experts" in the prospectus.
Our report dated March 26, 1996 contains an explanatory
paragraph that states that the Company has suffered
recurring losses from operations and has an accumulated
deficit, which raise substantial doubt about its ability to
continue as a going concern. The consolidated financial
statements do not include any adjustments that might result
from the outcome of this uncertainty.
KPMG Peat Marwick
LLP
New York, New York
September 27, 1996
