SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
Amendment No. 2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PACIFICHEALTH LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3367588
----------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1480 Route 9 North, Suite 204
Woodbridge, NJ 07095
732/636-6141
(Address, including zip code, telephone number and
area code, of registrant's principal executive offices)
Stephen P. Kuchen, Vice President, Finance
1480 Route 9 North, Suite 204
Woodbridge, NJ 07095
Telephone 732/636-6141
Facsimile 732/636-7410
copies to:
Gary A. Miller, Esquire
Eckert Seamans Cherin & Mellott, LLC
1515 Market Street - 9th Floor
Philadelphia, PA 19102
215/851-8410
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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 Class Proposed Maximum Amount of
Of Securities to be Amount to be Proposed Maximum Aggregate Registration
Registered Registered Offering Price(1) Offering Price(1) Fee
------------------------------------------------------------------------------------------------------------------------------------
Common Stock, 56,875(2) $3.75(3) $213,281
$.001 par value
Common Stock 120,000(2) $8.70(4) $1,044,000
..001 par value
Common Stock 100,000(2) $3.27(5) $327,000
..001 Par Value
Common Stock 751,711(6) $3.27(7) $2,458,095
..001 Par Value
Totals 1,028,586 $4,042,376 $ 966.13
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457.
(2) These shares are issuable upon the exercise of warrants to purchase common
stock and are registered for resale.
(3) Based upon warrant exercise price of $3.75.
(4) Based upon warrant exercise price of $8.70.
(5) Based upon warrant exercise price of $.875.
(6) These shares are outstanding shares being offered for resale by certain of
our shareholders.
(7) Based on the average of the high and low prices reported on the Nasdaq
SmallCap Market for January 18, 2002.
WE HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL WE 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.
LEGEND FOR FIRST PAGE OF PROSPECTUS:
The information set forth in this prospectus is not complete and may be changed.
The selling shareholders may not sell these securities (except pursuant to a
transaction exempt from the registration requirements of the Securities Act of
1933) until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these
securities or a solicitation of an offer to buy these securities in any
jurisdiction where that would not be permitted or legal.
SUBJECT TO COMPLETION, DATED MAY __, 2002
PROSPECTUS
1,028,586 SHARES
PACIFICHEALTH LABORATORIES, INC.
COMMON STOCK
The shareholders named on page 10 may sell up to 1,028,586 shares of
our common stock. 751,711 of these shares are currently outstanding. 276,875
shares may be issued upon the exercise of outstanding warrants.
We will not receive any proceeds from the sale of these shares by our
shareholders. We may receive up to $1,344,781 from the exercise of the warrants.
Our common stock is quoted on the Nasdaq SmallCap Market under the
symbol "PHLI". The high, low and last sale prices of our common stock on May 13,
2002, as reported by Nasdaq, were $4.43, $4.43 and $4.04, respectively.
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 3 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined
whether this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of this prospectus is ________________, 2002.
TABLE OF CONTENTS
PROSPECTUS SUMMARY......................................................... 1
NOTE ABOUT FORWARD-LOOKING STATEMENTS...................................... 2
RISK FACTORS............................................................... 3
AVAILABILITY OF ADDITIONAL INFORMATION..................................... 7
DILUTION................................................................... 8
USE OF PROCEEDS............................................................ 8
SELLING SHAREHOLDERS....................................................... 9
PLAN OF DISTRIBUTION....................................................... 10
LEGAL MATTERS.............................................................. 11
EXPERTS.................................................................... 11
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION....................... 12
In making a decision whether or not to buy any shares offered by this
prospectus you should rely only on the information contained in this prospectus.
We have not authorized anyone to provide information different from the
information in this prospectus. The information in this prospectus is accurate
only as of the date of this prospectus, regardless of the time this prospectus
is delivered or any shares are sold.
For investors outside the United States: Neither we nor, to our
knowledge, any other person has done anything that would permit this offering or
possession or distribution of this prospectus in any jurisdiction where action
for that purpose is required, other than in the United States. You are required
to inform yourselves about and to observe any restrictions relating to this
offering and the distribution of this prospectus.
PROSPECTUS SUMMARY
Company Summary
We are a research based nutrition technology company that researches,
develops and commercializes functionally unique proprietary products for sports
performance, weight loss and Type 2 diabetes which can be marketed without prior
Food and Drug Administration approval under current regulatory guidelines. Our
principal executive offices are located at 1480 Route 9 North, Suite 204,
Woodbridge, New Jersey, 07095 and our telephone number is (732) 636-6141.
We select product categories in which we believe: (1) there has been
little prior innovation, (2) market potential justifies broad scale consumer
advertising and (3) a proprietary position can be established and maintained.
Our three primary areas of research to date have been sports nutrition, weight
loss and diabetes. Our primary products are:
o ENDUROX(R). ENDUROX(R) is a dietary supplement with the
principal ingredient being the herb ciwujia. ENDUROX(R) is
sold in caplet form and is used to improve exercise
performance and recovery.
o ENDUROX EXCEL(R). ENDUROX EXCEL(R)is a stronger strength
ENDUROX(R)marketed to serious athletes.
o ENDUROX R4(R) Performance/Recovery Drink. ENDUROX R4(R) is
marketed for increased exercise and athletic performance and
recovery.
o SATIETROL(R). SATIETROL(R) is an appetite control product
based on the use of nutritional ingredients to stimulate
cholecystokinin, a protein released after eating which has
shown to be an important satiety signal in humans.
o ACCELERADE(R). ACCELERADE(R) is a sports drink, to be used
during exercise, based on the same technology as ENDUROX(R).
Although we were profitable in 2001, at December 31, 2001, we had an
accumulated deficit of approximately $9,000,000. In the past, we have not been
able to generate sufficient revenues from operations, and relied upon the
proceeds of equity investments.
About this Prospectus
We have registered our common stock for resale by the selling
shareholders listed on page 10. The shares offered for resale by this prospectus
include the following:
o 751,711 shares that are presently outstanding and owned by the
selling shareholders, and
o 276,875 shares that may be acquired by the selling
shareholders upon the exercise of outstanding warrants.
We will not receive any proceeds from the resale of any shares of this
prospectus, but may receive proceed from the exercise of warrants.
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Information on Outstanding Shares
Common stock outstanding before the offering............... 6,064,203
=========
Common stock outstanding after the offering................ 6,341,078
=========
In the above table, the number of shares of common stock outstanding
before the offering is the number of shares outstanding on May 13, 2002. The
number of shares of common stock outstanding after the offering is based on the
number of shares outstanding before the offering plus the maximum number of
shares issuable upon the exercise of warrants that may be resold pursuant to
this prospectus. The holders of the warrants are not required to exercise them,
however, and it is unlikely that any holder would do so unless the market price
of our common stock exceeded the exercise price of the warrants. The exercise
price of the warrants ranges from $.875 to $8.70.
NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have made statements under the captions "Prospectus Summary" and
"Risk Factors" in this prospectus that are forward-looking statements. Similar
statements are made in documents that we have incorporated by reference into
this prospectus. You can identify these statements by forward-looking words such
as "may", "will", "expect", "anticipate", "believe", "estimate", and similar
terminology. Forward-looking statements address, among other things:
o the development of new products and the expansion of the market for
current products;
o implementing aspects of our business plans;
o financing goals and plans; and
o our expectations regarding actions to be taken by parties other than
us.
We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
accurately predict and/or which we do not fully control that will cause actual
results to differ materially from those expressed or implied by our
forward-looking statements. Although we believe that the expectations reflected
in our forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. Our forward-looking
statements are made as of the date of this prospectus, and we assume no duty to
update them or to explain why actual results may differ except as we are
required to do by law.
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RISK FACTORS
You should carefully consider the following risks and other information
in this prospectus before deciding to purchase our common stock. The market
price of our common stock could decline due to any of these risks, and you could
lose all or part of your investment.
We have no manufacturing capabilities and we are dependent upon other companies
to manufacture our products.
We have no manufacturing facilities and have no present intention to
manufacture any of our products. We are dependent upon relationships with
independent manufacturers to fulfill our product needs. We use at least six
manufacturers for various parts of the manufacturing processes for our products.
We believe these are small privately held firms. We have no contracts, oral or
written, with these manufacturers other than individual purchase orders for
current quantities which do not contain any terms other than those related to
the current quantities. Because the manufacturing processes which our contract
manufacturers perform are fairly standard in the industry, we believe that there
are a large number of manufacturers who could provide us with these services if
our current contract manufacturers are unavailable for any reason or seek to
impose unfavorable terms. Our ability to market and sell our products requires
that such products be manufactured in commercial quantities and in compliance
with applicable federal and state regulatory requirements. In addition, we must
be able to manufacture our products at a cost that permits us to charge a price
acceptable to the customer while also accommodating distribution costs and third
party sales compensation. Competitors who do own their own manufacturing may
have an advantage over us with respect to pricing, availability of product and
in other areas through their control of the manufacturing process.
We have a single source for an ingredient of one of our products, SATIETROL(R).
One of the ingredients for SATIETROL is currently available from a
single source, Lyckeby Starkelson, a large European company. We do not have any
written or oral agreements with this supplier. Although this company is
currently the only source that processes the ingredient, the materials for the
ingredient are commodity products readily available. Therefore, the Company
believes that if this supplier were to become unavailable to us, or unwilling to
deal with us on reasonable terms, we would eventually be able to obtain the
ingredient elsewhere, but a material delay would be caused by the requirement
for a new supplier to make the preparations necessary to process the ingredient
to our specifications.
Government regulation of the processing, formulation, packaging, labeling and
advertising of our products can impact our ability to market products.
We market products that fall under two types of Food and Drug
Administration regulations: dietary supplements and nutritional supplements. A
dietary supplement:
o is a product (other than tobacco) that is intended to supplement the
diet that bears or contains one or more of the following dietary
ingredients: a vitamin, a mineral, an herb or other botanical, an amino
acid, a dietary substance for use by man to supplement the diet by
increasing the total daily intake, or a concentrate, metabolite,
constituent, extract, or combinations of these ingredients.
o is intended for ingestion in pill, capsule, tablet, or liquid form.
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o is not represented for use as a conventional food or as the sole item of
a meal or diet.
o is labeled as a "dietary supplement."
Nutritional supplements are food products and contain Generally
Regarded As Safe (GRAS) ingredients.
Nutritional supplements and dietary supplements must follow labeling
guidelines outlined by the FDA. Neither nutritional supplements nor dietary
supplements require FDA or other government approval or notification to market
in the United States.
Under the Dietary Supplement Health and Education Act of 1994,
companies that manufacture and distribute dietary supplements are limited in the
statements that they are permitted to make about nutritional support on the
product label without FDA approval. In addition, a manufacturer of a dietary
supplement must have substantiation for any such statement made and must not
claim to diagnose, mitigate, treat, cure or prevent a specific disease or class
of disease. The product label must also contain a prominent disclaimer. These
restrictions may restrict our flexibility in marketing our product.
We believe that all of our existing and proposed products are
nutritional supplements or dietary supplements that do not require governmental
approvals to market in the United States. Our current products are classified as
follows:
Dietary Supplements
ENDUROX(R) Natural Workout Supplement
ENDUROX EXCEL(R) Natural Training Supplement
Nutritional Supplements
ENDUROX(R) R4 Performance/Recovery Drink
ACCELERADE(R) Sports Drink
SATIETROL(R) Natural Appetite Control
SATIETROL COMPLETE(R) Meal Replacement
The processing, formulation, packaging, labeling and advertising of
such products, however, are subject to regulation by one or more federal
agencies including the FDA, the Federal Trade Commission, the Consumer Products
Safety Commission, the Department of Agriculture and the Environmental
Protection Agency. Our activities also are subject to regulation by various
agencies of the states and localities in which our products are sold. Among
other things, such regulation puts a burden on our ability to bring products to
market. Any changes in the current regulatory environment could impose
requirements which would make bringing new products to market more expensive or
restrict the ways we can market our products.
No governmental agency or other third party makes a determination as to
whether our products qualify as nutritional supplements, dietary supplements or
neither. We make this determination based on the ingredients contained in the
products and the claims we make for the products.
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We are dependent upon our President and the loss of his services could have a
material adverse impact on us.
We have relied extensively on the services of Dr. Robert Portman. Dr.
Portman will continue to play a key role in our management and the loss of his
services would materially and adversely affect us and our prospects. We have
obtained a $2,000,000 "key man" life insurance policy covering Dr. Portman, but
it is unlikely that the proceeds from such policy would be adequate to fully
compensate us for the loss of Dr. Portman's services.
We have an employment agreement with Dr. Portman which expires December
31, 2002. Among other terms, this agreement provides:
o If we terminate Dr. Portman's employment without cause, or he
terminates his employment with cause, his options will
immediately vest and will be retained by him, notwithstanding
his termination.
o In the event Dr. Portman's employment is terminated by us
without cause or by him with cause, he is entitled to receive
a lump sum payment of an amount equal to his salary for the
lesser of one year or the remaining term of the agreement.
o Upon Dr. Portman's termination for any reason, including his
voluntary termination, Dr. Portman will not be bound by any
non-competition agreement unless the Company continues to pay
his salary, in which case he will be subject to a one year
non-competition agreement.
We face substantial competition.
The dietary and nutritional supplement industry is highly competitive.
It is relatively easy for new companies to enter the industry due to the
availability of numerous contract manufacturers, a ready availability of natural
ingredients and a relatively relaxed regulatory environment. Numerous companies
compete with us in the development, manufacture and marketing of supplements as
their sole or principal business. Generally, these companies are well funded and
sophisticated in their marketing approaches.
Depending on the product category, our competition varies. The sports
drink market in which Endurox R4 and Accelerade compete is dominated by such
brands as Gatorade and Powerade who sell ready-to-drink products, as well as
smaller companies such as Cytosport (Cytomax), Champion Nutrition (Revenge), and
Twin Labs (Ultrafuel) who sell powdered, ready-to-mix products. In addition,
there are a number of new foreign entries such as Enervit and Extran that have
recently introduced sports drinks into the U.S. focusing on the endurance
athlete. Increased competitive activity from such companies could make it more
difficult for us to increase or keep market share, since such companies have
greater financial and other resources available to them and possess far more
extensive manufacturing, distribution and marketing capabilities.
The competitive market for weight loss products is divided into four
basic segments: herbal supplements (e.g., Metabolite), meal replacement products
(e.g., Slim Fast), food plans (e.g., Weight Watchers) and prescription products
(e.g., Xenical). Today, weight loss products are manufactured by dietary
supplement manufacturers, pharmaceutical manufacturers, diet food companies
(e.g. Slim Fast Foods Company) and over-the-counter drug companies. Intense
competitive activity in this market could make it more difficult for us to
increase or keep market share as most of the companies who have products in this
category have greater financial, marketing, sales, manufacturing and
distribution resources.
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We are dependent on a significant customer and may be adversely affected if that
customer discontinues its relationship with us.
Our largest customer, General Nutrition Centers, accounted for
approximately 44% of net sales in 2000, and 37% of net sales in 2001. Another
customer, Performance, Inc., accounted for approximately 12% of sales in 2001.
The loss of General Nutrition Centers as a customer, the loss of a significant
number of other major customers, or a significant reduction in purchase volume
by or financial difficulty of such customers could significantly reduce our
revenues. We have no agreement with or commitment from any customer to make
future purchases. Because we have no agreement with General Nutrition Centers,
we cannot be certain that General Nutrition Centers will continue as a major
customer. During the fourth quarter of 2001, General Nutrition Centers
discontinued the sale of SATIETROL in its corporate stores. Although we did not
receive any official communication from General Nutrition Centers, we believe
that the product was discontinued because it did not meet General Nutrition
Center's target sales projections. In the year ended December 31, 2000,
Satietrol accounted for 43% of our sales to General Nutrition Centers and, in
2001, after taking returns into account, Satietrol accounted for 26% of our
sales to General Nutrition Centers. Our total sales to General Nutrition Centers
in 2001 remained approximately the same as our sales in 2000, despite the
discontinuance of Satietrol and the return of some product by General Nutrition
Centers in connection with the discontinuance.
We may be subject to products liability claims and may not have adequate
insurance to cover such claims.
Like other retailers, distributors and manufacturers of products that
are designed to be ingested, we face an inherent risk of exposure to product
liability claims in the event that the use of our products results in injury.
With respect to product liability claims, we have coverage of $5,000,000 per
occurrence and in the aggregate. Because our policies are purchased on a year to
year basis, industry conditions or our own claims experience could make it
difficult for us to secure the necessary insurance at a reasonable cost. In
addition, we may not be able to secure insurance that will be adequate to cover
liabilities. We generally do not obtain contractual indemnification from parties
supplying raw materials or marketing our products. In any event, any such
indemnification is limited by its terms and, as a practical matter, to the
creditworthiness of the other party. In the event that we do not have adequate
insurance or contractual indemnification, liabilities relating to defective
products could require us to pay the injured parties' damages which are
significant compared to our net worth or revenues.
We may be adversely affected by unfavorable publicity relating to our product or
similar products manufactured by our competitors.
We believe that the dietary and nutritional supplement market is
affected by national media attention regarding the consumption of these
products. Future scientific research or publicity may be unfavorable to the
dietary and nutritional supplement market generally or to any particular product
and may be inconsistent with earlier favorable research or publicity. Adverse
publicity associated with illness or other adverse effects resulting from the
consumption of products distributed by other companies which are similar to our
products could reduce consumer demand for our products and consequently our
revenues. This may occur even if the publicity did not relate to our products.
Adverse publicity directly concerning our products could be expected to have an
immediate negative effect on the market for that product.
6
We depend on patents and other proprietary technologies that we may not be able
to obtain, and the patents we hold may not protect our position.
Our long-term success will substantially depend upon protecting our
technology from infringement, misappropriation, discovery and duplication. To
the extent we do not have patents on our products, a competitor could replicate
our products. Patents which we do obtain may not provide meaningful protection
or significant competitive advantages over competing products, due to the
complexity of the legal and scientific issues involved in patent defense and
litigation. For example, our use patent on ciwujia might not prevent sale of a
product using this herb with a claimed benefit or use that was not covered by
our patent.
Because of the complexity of the legal and scientific issues involved
in patent prosecutions, we cannot be sure that any future patent applications
for new products will be granted, and we cannot be sure that any of our pending
patent applications will be granted. We cannot be sure our patent rights will
provide meaningful protection against other duplicating our products because of
the complexity of the legal and scientific issues that could arise in litigation
over these issues. Furthermore, patent applications are maintained in secrecy in
the United States until the patents are approved, and in most foreign countries
for a period of time following the date from which priority is claimed. A third
party's pending patent applications may cover any technology that we currently
are developing.
We have limited the liability of our directors and officers for breaches of the
duty of care.
Our Certificate of Incorporation limits the liability of our directors
for monetary damages for breaches of directors' fiduciary duty of care. This
provision may reduce the likelihood of derivative litigation against directors
and may discourage or deter shareholders or management from suing directors for
breaches of their duty of care, even though such an action, if successful, might
otherwise benefit us and our shareholders. In addition, our Bylaws provide for
the indemnification of directors and officers in connection with civil,
criminal, administrative or investigative proceedings when acting in their
capacities as agents for us.
We have had operating deficits and may need additional capital, which may not be
available to us.
Through the end of calendar year 2000 and the first five months of
2001, we were not able to sustain our operations from revenues provided by
operations, and were required to rely on the proceeds of our 1997 initial public
offering and private placement of securities. Although we were profitable in
calendar year 2001, at December 31, 2001, we still had an accumulated deficit of
approximately $9,000,000.
We may require funds in excess of our existing cash resources to
develop new products, to develop or acquire other products or other lines of
business, to establish and expand our manufacturing capabilities, and to finance
general and administrative and research activities that are not related to
specific products under development. We do not now have any definite plans which
would require this funding.
Due to market conditions at the time we may need additional funding, or
due to our own financial condition at that time, it is possible that we will be
unable to obtain additional funding as and when we need it. If we were unable to
obtain additional funding as and when needed, we could be forced to delay the
progress of certain development efforts.
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If our stock price drops, our stock may be delisted from NASDAQ and become
subject to Penny Stock regulations.
During periods at the end of 2000 and the beginning of 2001, our share
price was below $1.00 per share. The Nasdaq SmallCap Market requires our stock
price to be at least $1.00. If we do not meet this requirement in the future, we
may be subject to delisting by Nasdaq. We may also be subject to delisting by
Nasdaq for failure to meet other criteria, which we currently now meet, such as
minimum net tangible assets and net income requirements.
If our stock is delisted from Nasdaq, there will be less interest for
our stock in the market. This may result in lower prices for our stock and make
it more difficult for you to sell your shares. In addition, if our stock is not
listed on Nasdaq and fails to maintain a price of $5.00 or more per share, our
stock would become subject to the SEC's "Penny Stock" rules. These rules require
a broker to deliver, prior to any transaction involving a Penny Stock, a
disclosure schedule explaining the Penny Stock Market and its risks. In
addition, broker/dealers who recommend Penny Stocks to persons other than
established customers and accredited investors must make a special written
suitability determination and receive the purchaser's written agreement to a
transaction prior to the sale. In the event our stock became subject to these
rules, it will become more difficult for broker/dealers to sell our common
stock. Therefore shareholders may have more difficulty selling our common stock
in the public market.
The price of our shares may be volatile, and you could lose all or part of your
investment.
During the past two years, the market price of our common stock has
ranged from $0.25 per share to $8.38 per share. There may continue to be wide
fluctuation in the price of our shares. Because of this potential volatility,
our shares may be an unsuitable investment for investors who might be required
to sell the shares at a time when the market price of the shares is depressed.
These fluctuations may be caused by several factors including:
o announcements of research activities and technology innovations or new
products by us or our competitors;
o changes in market valuation of companies in our industry generally;
o variations in operating results;
o changes in governmental regulations;
o results of clinical trials of our products or our competitors'
products; and
o regulatory action or inaction on our products or our competitors'
products.
AVAILABILITY OF ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. Our filings are
available to the public over the internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
Public Reference Rooms in Washington, D.C., New York, New York and Chicago,
Illinois. The Public Reference Room in Washington, D.C. is located at 450 Fifth
Street, N.W. Please call the SEC at 1-800-SEC-0330 for further information on
the Public Reference Rooms.
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The SEC allows us to "incorporate by reference" in this prospectus the
information we file with it, which means that we can disclose important
information to you by referring you to those documents. Information incorporated
by reference is an important part of this prospectus, and information that we
file later with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until all shares offered by this prospectus are
sold:
o Annual Report on Form 10KSB for the fiscal year ended December 31,
2001 filed March 20, 2002.
o Quarterly Report on Form 10QSB for the quarter ended March 31, 2002
filed May 14, 2002.
o Current Report on Form 8-K filed April 8, 2002.
o Current Report on Form 8-K filed April 10, 2002, as amended by
Current Report filed on May 2, 2002.
o Current Report on Form 8-K filed May 3, 2002
o The description of our common stock contained in our registration
statement on Form 8-A, filed December 12, 1997, and including any
amendment or report subsequently filed for the purpose of updating
the descriptions
This prospectus is part of a registration statement on Form S-3
(Registration No. 333-81320) filed with the SEC under the Securities Act of
1933. This prospectus does not contain all of the information set forth in the
registration statement. You should read the registration statement for further
information about PacificHealth and our common stock. You may request a copy of
these filings at no cost. Please direct your requests to David Portman,
Secretary, 1480 Route 9 North, Suite 204, Woodbridge, New Jersey 07095, or call
(732)-636-6141.
DILUTION
Purchasers of common stock offered pursuant to this prospectus will
incur dilution in their investment that is approximately equal to the difference
between the price which they pay for the shares and the net tangible book value
of the shares. As of December 31, 2001, our net tangible book value was
approximately $.77 per share of common stock.
USE OF PROCEEDS
We will not receive any proceeds from the resale of shares covered by
this prospectus. We will, however, receive proceeds if any of the warrants
listed in the table on page 10 are exercised. If all of these warrants were
exercised, we would receive an aggregate of $1,344,781. If we receive any
proceeds from the exercise of warrants, we would use those proceeds for working
capital. We have made no plans in anticipation of the receipt of any of these
proceeds.
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SELLING SHAREHOLDERS
The following table lists each person who may resell shares pursuant to
this prospectus, and, in addition, sets forth:
o the number of shares of common stock beneficially owned by each Selling
Shareholder prior to the offering;
o the number of shares of common stock registered for sale by each
Selling Shareholder in the offering; and
o the number of shares of common stock and the percentage of the common
stock owned by each Selling Shareholder after the offering, assuming
that the Selling Shareholders sell all of the shares registered for
their benefit and that the Selling Shareholders exercise all of the
warrants held by them.
Outstanding
Shares Owned Shares Issuable Shares
Prior to Upon Exercise Registered Shares Owned
Selling Shareholder Offering of Warrants For Sale After Offering
------------------- ------------ --------------- ---------- --------------
Eleanor M. Harvey -0- 2,500 2,500 0*
Kathleen F. Heine -0- 2,500 2,500 0*
Russell J. Lucas 5,000 25,937 25,937 5,000*
George B. Lucas 15,000 25,938 25,938 15,000*
First Montauk Securities Corp. (1) 10,000 120,000 130,000 0*
David Portman (2) 188,500 100,000 100,000 188,500(4)
GlaxoSmithKline PLC (3) 541,711 -0- 541,711 0*
Jean-Francois Formela 50,000 -0- 50,000 0*
Cooperative Holding Corp 70,000 -0- 70,000 0*
Charles Kramer 53,755 -0- 25,000 28,755*
Lawrence J. & Camille S. Rubenstein 30,000 -0- 30,000 0*
Frank J. Vecchione 37,607 -0- 25,000 12,607*
Totals 1,001,573 276,875 1,028,586 249,862
-----------------------------------------------------------------------------------------------------------------------
* Equals less than 1% of the outstanding common stock after the offering.
(1) First Montauk Securities Corp. received these warrants pursuant to an
Underwriting Agreement in connection with our initial public offering in
December of 1997.
(2) Mr. Portman has served as Secretary and a Director since our inception. Mr.
Portman also has served as a director of First Montauk Securities Corp.
since 1983.
(3) In the second quarter of 2001, we entered into an exclusive license
agreement with GlaxoSmithKline ("GSK") that provides GSK with worldwide
rights to the trademarks, technology, patents and know-how for SATIETROL.
(4) Mr. Portman will own 3.0% of our common stock after the offering.
10
PLAN OF DISTRIBUTION
We are registering the shares of common stock covered by this
prospectus on behalf of the Selling Shareholders. The Selling Shareholders may
offer and sell shares from time to time. In addition, a Selling Shareholder's
donees, pledgees, transferees and other successors in interest may sell shares
received from a named Selling Shareholder after the date of this prospectus. In
that case, the term "Selling Shareholder" as used in this prospectus includes
such donees, pledgees, transferees and other successors in interest. The Selling
Shareholders will act independently of us in making decisions with respect to
the timing, manner and size of each sale. Sales may be made over the Nasdaq
SmallCap Market or otherwise, at then prevailing market prices, at prices
related to prevailing market prices or at negotiated prices. The shares may be
sold by way of any legally available means, including in one or more of the
following transactions:
o a block trade in which a broker-dealer engaged by a Selling Shareholder
attempts to sell the shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-
dealer for its account pursuant to this prospectus; and
o ordinary brokerage transactions and transactions in which a broker-
dealer solicits purchasers.
Transactions under this prospectus may or may not involve brokers or
dealers. The selling shareholders may sell shares directly to purchasers or to
or through broker-dealers, who may act as agents or principals. Broker-dealers
engaged by the selling shareholders may arrange for other broker-dealers to
participate in selling shares. Broker-dealers or agents may receive compensation
in the form of commissions, discounts or concessions from the selling
shareholders in amounts to be negotiated in connection with the sale.
Broker-dealers or agents also may receive compensation in the form of discounts,
concessions or commissions from the purchasers of shares for whom the
broker-dealers may act as agents or to whom they sell as principal, or both.
This compensation as to a particular broker-dealer might exceed customary
commissions.
A portion of the shares registered pursuant to this Prospectus are
reserved for issuance upon the exercise of warrants owned by First Montauk
Securities Corp., one of the selling shareholders and a registered
broker/dealer. FMSC received these warrants pursuant to an Underwriting
Agreement in connection with our initial public offering in December of 1997, in
which FMSC acted as lead underwriter. Currently, FMSC is a market-maker in our
stock. NASD rules may require that FMSC cease its activities as a market-maker
when it attempts to sell the shares registered for its benefit pursuant to this
Prospectus.
One of our directors is also a director of one of the selling
shareholders. Mr. Portman has served as Secretary and a Director of
PacificHealth since our inception. Mr. Portman also has served as a director of
FMSC since 1983.
The selling shareholders have advised us that they have not, as of the
date of this prospectus, entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers for the sale of shares, nor
is there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the Selling Shareholders. To our knowledge, the
selling shareholders have not entered into any agreement, arrangement or
understanding with any particular broker or market maker with respect to the
sale of the shares covered by this prospectus.
In connection with distributions of the shares or otherwise, the selling
shareholders may enter into hedging transactions with broker-dealers or other
financial institutions. In connection with these transactions, broker-dealers or
financial institutions may engage in short sales of the shares in the course of
hedging the positions they assume with selling shareholders. The selling
shareholders may also:
11
o sell shares short and redeliver the shares to close out these short
positions;
o enter into option or other transactions with broker-dealers or other
financial institutions that require the delivery to the broker-dealer
or financial institution of the shares, which the broker-dealer or
financial institution may resell or otherwise transfer under this
prospectus;
o loan or pledge the shares to a broker-dealer or other financial
institution that may sell the shares so loaned under this prospectus
upon a default; or
o sell shares covered by this prospectus that qualify for sale under Rule
144 under the Securities Act pursuant to that Rule rather than under
this prospectus.
The selling shareholders and any broker-dealers participating in the
sale of shares covered by this prospectus may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with sales of such
shares. Any commission, discount or concession received by a broker-dealer and
any profit on the resale of shares sold by them while acting as principals might
be deemed to be underwriting discounts or commissions under the Securities Act.
We have agreed to pay the expenses of registering the shares under the
Securities Act, including registration and filing fees, printing expenses,
administrative expenses and certain legal and accounting fees. The selling
shareholders will bear all discounts, commissions or other amounts payable to
underwriters, dealers or agents, as well as fees and disbursements for legal
counsel retained by any selling shareholder.
In certain cases, PacificHealth and the selling shareholders have
agreed to indemnify each other and other related parties against specified
liabilities, including liabilities arising under the Securities Act. The selling
shareholders also may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of shares against liabilities,
including liabilities arising under the Securities Act.
A supplement to this prospectus will be filed, if required, under Rule
424(b) under the Securities Act to include additional disclosure before offers
and sales of the securities in question are made.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered
hereby will be passed upon for us by Eckert Seamans Cherin & Mellott, LLC,
Philadelphia, Pennsylvania.
EXPERTS
Our financial statements as of December 31, 2001 and 2000, and for the
years then ended incorporated by reference in this Prospectus and Registration
Statement have been audited by Larson, Allen, Weishair & Co., LLP, independent
certified public accountants, as set forth in their report which are
incorporated by reference herein and in the Registration Statement, and are
included in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
12
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES.
Section 145 of the Delaware General Corporation Law authorizes a
corporation to indemnify its directors, officers, employees or other agents in
terms sufficiently broad to permit indemnification (including reimbursement for
expenses incurred) under certain circumstances for liabilities arising under the
Securities Act.
Our Certificate of Incorporation contains a provision permitted by
Delaware law which eliminates the personal liability of our directors for
monetary damages for breach or alleged breach of their fiduciary duty of care
which arises under state law. Although this does not change the directors' duty
of care, it limits legal remedies which are available for breach of that duty to
equitable remedies, such as an injunction or rescission. This provision of our
Certificate of Incorporation has no effect on directors' liability for: (1)
breach of the directors' duty of loyalty; (2) acts or omissions not in good
faith or involving intentional misconduct or known violations of law; and (3)
approval of any transactions from which the directors derive an improper
personal benefit.
Our Amended and Restated Bylaws contains a provision that provides for
the indemnification of any individual who was, is, or is threatened to be made a
party, by reason of the fact that the individual is a director or officer of
PacificHealth or serves in a similar role, to any pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative.
Pursuant to this provision, the individual is indemnified against all expenses,
liability and loss actually and reasonably incurred to the extent such
individual is not otherwise indemnified and to the extent such indemnification
is permitted by law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
PacificHealth pursuant to the forgoing provisions, or otherwise, we have been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company will pay all reasonable expenses incident to the
registration of shares other than any commissions and discounts of underwriters,
dealers or agents. Such expenses are set forth in the following table. All of
the amounts shown are estimates except the SEC registration fee.
SEC registration fee................................ $ 966.13
Legal fees and expenses............................. 10,000.00
Accounting fees and expenses........................ 2,500.00
State Filing Fees................................... 2,000.00
Other............................................... 0.00
----------
Total............................................... $15,466.13
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a
corporation to indemnify its directors, officers, employees or other agents in
terms sufficiently broad to permit indemnification (including reimbursement for
expenses incurred) under certain circumstances for liabilities arising under the
Securities Act.
The Company's Certificate of Incorporation contains a provision
permitted by Delaware law which eliminates the personal liability of the
Company's directors for monetary damages for breach or alleged breach of their
fiduciary duty of care which arises under state law. Although this does not
change the directors' duty of care, it limits legal remedies which are available
for breach of that duty to equitable remedies, such as an injunction or
rescission. This provision of the Company's Certificate of Incorporation has no
effect on directors' liability for: (1) breach of the directors' duty of
loyalty; (2) acts or omissions not in good faith or involving intentional
misconduct or known violations of law; and (3) approval of any transactions from
which the directors derive an improper personal benefit.
The Company's Amended and Restated Bylaws contains a provision that
provides for the indemnification of any individual who was, is, or is threatened
to be made a party, by reason of the fact that the individual is a director or
officer of the Company or serves in a similar role, to any pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative. Pursuant to this provision, the individual is indemnified against
all expenses, liability and loss actually and reasonably incurred to the extent
such individual is not otherwise indemnified and to the extent such
indemnification is permitted by law.
14
ITEM 16. EXHIBITS.
Incorporated by
Exhibit Number Description Reference
-------------- ----------- ---------
3.1 Certificate of Incorporation of the Company and all amendments thereto A
3.2 Amended and Restated Bylaws of the Company B
4.1 Specimen Common Stock Certificate B
4.2 Underwriter's Warrant Agreement and Form of Warrant B
5.1 Opinion of Eckert Seamans Cherin & Mellott, LLP *
23.1 Consent of Larson, Allen, Weishair & Co., LLP *
23.2 Consent of Eckert Seamans Cherin & Mellott, LLP *
(contained in Exhibit 5.1)
---------
* Filed herewith
A Filed with Registration Statement on Form SB-2 (Registration No. 333-36379)
(the "1997 SB-2") on September 25, 1997.
B Filed with Amendment No. 3 to the 1997 SB-2 on December 17, 1997.
Item 17. UNDERTAKINGS.
We hereby undertake:
1. To file, during any period in which offers or sales are being made, a post-
effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) 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; and
(c) 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 (a) and (b) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by us pursuant to Section
13 or Section 15(d) of the Exchange Act that are incorporated by reference
in the 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 remain unsold at the termination of
the offering.
4. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of
PacificHealth Laboratories, Inc. ("PacificHealth") pursuant to the foregoing
provisions, or otherwise, PacificHealth has been advised that in the opinion
of the SEC 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
PacificHealth of expenses incurred or paid by a director, officer, or
controlling person of PacificHealth 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, PacificHealth
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.
15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, we certify
that we have reasonable grounds to believe that we meet all of the requirements
of filing on Form S-3 and have authorized this Amendment No. 2 to Registration
Statement to be signed on our behalf by the undersigned, our President, on the
14th day of May, 2002.
PacificHealth Laboratories, Inc.
By: /s/ Robert Portman
-----------------------------------------------------
Robert Portman, President,
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933 and the requirements
of Form S-3, this registration statement has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dated
indicated.
/s/ Robert Portman Director and Chief Executive Officer May 14, 2002
-----------------------------------
Robert Portman
/s/ Stephen P. Kuchen Director and Principal Financial and May 14, 2002
---------------------------------- Accounting Officer
Stephen P. Kuchen
/s/ T. Colin Campbell Director May 14, 2002
---------------------------------
T. Colin Campbell
/s/ Michael Cahr Director May 14, 2002
------------------------
Michael Cahr