REGISTRATION NO. 333-42452
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 3 TO FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GENEREX BIOTECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 82-0490211
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
33 HARBOR SQUARE, SUITE 202
TORONTO, ONTARIO
CANADA M5J 2G2
416/364-2551
(Address, including zip code and telephone number,
including area code, of registrant's principal executive offices)
E. Mark Perri, Chairman
and Chief Financial Officer
33 Harbor Square, Suite 202
Toronto, Ontario
Canada M5J 2G2
416/364-2551
copies to:
John G. Chou, 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)
Approximate Date of Commencement of Proposed Sale to the Public:
FROM TIME TO TIME 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. |_|
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.
Calculation of Registration Fee
====================================================================================================
[PRIVATE]
Title of Each
Class of Amount Proposed Maximum Proposed Maximum Amount of
Securities to be To be Offering Price Aggregate Registration
Registered (1) Registered Per Share (1) Offering Price (1) Fee
----------------------------------------------------------------------------------------------------
Common Stock, 700,000 shs (2) $11.0625 (2) $ 7,743,750 $2,044
$.001 par value
----------------------------------------------------------------------------------------------------
Common Stock, 775,000 shs (3) $11.0625 (2) $ 8,573,438 $2,264
$.001 par value
----------------------------------------------------------------------------------------------------
Totals 1,475,000 shs 11.0625 $16,317,188 $4,308
----------------------------------------------------------------------------------------------------
----------------------
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457, based on the average of the high and low prices
reported on the Nasdaq National Market for July 18, 2000.
(2) These shares are issuable upon the exercise of options to purchase common
stock granted to employees, consultants and advisors under the our 1998
Incentive Stock Option Plan and are registered for resale only.
(3) These shares are issuable upon the exercise of warrants to purchase common
stock issued to certain of our consultants and advisors as partial
compensation for their services to us and are registered for resale only.
ii
LEGEND FOR FIRST PAGE OF PROSPECTUS:
We will amend and complete the information in this Prospectus. Although we are
permitted by US federal securities law to offer these securities using this
Prospectus, we may not sell them or accept your offer to buy them until the
documentation filed with the SEC relating to these securities has been declared
effective by the SEC. This Prospectus is not an offer to sell these securities
or our solicitation of your offer to buy these securities in any jurisdiction
where that would not be permitted or legal.
iii
SUBJECT TO COMPLETION, DATED FEBRUARY ____, 2001
PROSPECTUS
1,475,000 Shares
GENEREX BIOTECHNOLOGY CORPORATION
COMMON STOCK
Generex is a development stage company and has not received any revenues
from operations to date. This prospectus relates to the resale of up to
1,475,000 shares of Generex common stock that presently are reserved for
issuance upon the exercise of outstanding options and warrants. Specifically,
this prospectus relates to the resale of:
o up to 700,000 shares of common stock reserved for issuance upon the
exercise of options granted to certain of our employees, consultants and
advisors under our 1998 Stock Option Plan; and
o up to 775,000 shares of common stock reserved for issuance upon the
exercise of warrants issued to certain consultants and advisors in
partial compensation for services provided to us by such consultants and
advisors.
We will not receive any of the proceeds from the resale of shares covered
by this prospectus. Rather, the holders of the options and warrants referred to
above, who are listed on page 11 of this prospectus, will sell these shares for
their own accounts. We will refer to the holders of these options and warrants
as the "Selling Shareholders."
Our common stock is listed on the Nasdaq National Market under the symbol
"GNBT." The high, low and last sale prices of our common stock on _________,
2001, as reported by Nasdaq, were $_____, $_____ and $_____, respectively.
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 5 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 February ____, 2001.
TABLE OF CONTENTS
PROSPECTUS SUMMARY..................................................... 3
NOTE ABOUT FORWARD LOOKING STATEMENTS.................................. 4
RISK FACTORS........................................................... 5
AVAILABILITY OF ADDITIONAL INFORMATION................................. 10
DILUTION............................................................... 11
USE OF PROCEEDS........................................................ 11
SELLING SHAREHOLDERS................................................... 11
PLAN OF DISTRIBUTION................................................... 12
LEGAL MATTERS.......................................................... 14
EXPERTS................................................................ 14
In making a decision whether or not to buy any shares offered by this
prospectus you should rely only on the information contained in the prospectus.
We have not authorized anyone to provide you with information different from the
information in the prospectus. The information in the prospectus is accurate
only as of the date of the prospectus, regardless of the time the prospectus is
delivered or any shares are sold.
In this prospectus, unless the context indicates otherwise, the terms
"Generex", "we", "us" and "our" refer to Generex Biotechnology Corporation.
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.
2
PROSPECTUS SUMMARY
General
Generex is a Delaware corporation engaged in the research and development
of drug delivery systems and technology. Our executive offices are located at 33
Harbour Square, Suite 202, Toronto, Canada M5J 2G2, and our telephone number at
that address is 416/364-2551.
We are a development stage company. To date, we have devoted a
substantial majority of our efforts and resources in developing a technology to
orally administer "large molecule" drugs. These include proteins, hormones,
peptides, vaccines and other pharmaceutical products. Large molecule drugs, such
as synthetic insulin, are now administered almost exclusively by injection
because their molecular size makes it difficult or impossible for the body to
absorb them if they are administered by other means.
The initial application that we have developed of our large molecule
drug delivery technology is an oral insulin formulation for use in the treatment
of diabetes. The formulation is sprayed into the mouth using our RapidMist(TM)
device, a light-weight, easy to use, hand-held aerosol applicator. Absorption
occurs through the mucous membranes in the mouth and upper gastro-intestinal
tract. On September 5, 2000, we entered into a Development and License Agreement
with Eli Lilly and Company ("Lilly") to continue development of this product.
Under the terms of this Agreement (the "Lilly Agreement"), we will receive
certain initial fees and milestone payments, and we will be entitled to
royalties based on product sales. Depending on the success of this initial
product, Lilly has the option of developing a number of additional products
using our drug delivery technology.
Prior to entering into the Lilly Agreement, we had conducted clinical
trials of our oral insulin product in the United States, Canada and Europe. Our
clinical program, however, had not reached a point at which we were prepared to
apply for regulatory approvals to market the product in any country. We did not
anticipate receiving any such approvals until 2003 at the earliest. Under the
terms of the Lilly Agreement, Lilly, generally, will be responsible for
conducting clinical trials and securing regulatory approvals on a worldwide
basis for all products developed under the Lilly Agreement. Lilly also will have
the exclusive right to market the products worldwide. Our principal
responsibilities under the Lilly Agreement will be to continue development, as
required, on our oral insulin formulation and on the RapidMist(TM) device.
Notwithstanding Lilly's participation and support, we continue to face
numerous risks and uncertainties in developing our oral insulin product and
other products that may be considered for development under the Lilly Agreement.
There is no assurance that any products will be successfully developed or
marketed, or that we will receive significant revenues, under the Lilly
Agreement.
We believe that we can use the technology upon which our oral insulin
product is based successfully with other large molecule drugs. We have engaged
in pre-clinical research and development work on two other applications, but we
have not devoted significant resources to this effort to date. On January 16,
2001, we entered into a joint venture with Elan Corporation, plc to pursue the
application of certain of our and Elan's drug delivery technologies -- including
our large molecule drug delivery technology -- to pharmaceutical products for
the treatment of prostate cancer and endometriosis and/or the suppression of
testosterone and estrogen. There has been no product yet identified for research
and development under the joint venture.
Information on Outstanding Shares
Common stock outstanding before the offering............. 19,181,018 shares
Common stock to be outstanding after the offering........ 20,656,018 shares
In the above table, 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 options and
warrants that the Selling Shareholders may resell according to this prospectus.
Thus, the number of shares stated to be outstanding after the offering assumes
that all such options and
3
warrants are exercised. The holders of these options and warrants are not
committed 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
such holder's options or warrants at the time of exercise. The exercise price of
the options and warrants referred to above range from $2.50 per share to $10.00
per share, and the weighted average exercise price is $5.19.
Other Outstanding Options, Warrants and Convertible Securities
The figures on outstanding shares in this prospectus do not include:
o 4,954,803 shares of our common stock that, as of the date of this
prospectus, are reserved for issuance upon the exercise of outstanding
options and warrants other than those covered by this prospectus. These
options and warrants are exercisable at prices ranging from $2.50 per
share to $25.15 per share, with a weighted average exercise price of
$6.92 per share.
o 467,328 shares that may be issued upon the conversion of 1,000 shares of
Series A Preferred Stock that are outstanding as of the date of this
prospectus. The Series A Preferred Stock may be converted into our
common stock after January 16, 2004.
o Up to $50,000,000 of our common stock that we may elect to sell to
Tradersbloom Limited, a British Virgin Islands corporation, under an
"equity draw down line" facility.
o Issuance of any other shares of our common stock after the date of this
prospectus other than the shares that may be issued upon the exercise
of the options and warrants covered by this prospectus.
NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have made statements under the captions "Risk Factors" and "Use of
Proceeds" 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 implementing our clinical programs and other aspects of our business
plans;
o financing goals and plans; and
o our expectations of when regulatory approvals will be received or other
actions will 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 unless we are required
to by law.
4
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. This statement of risks is not intended to
be exhaustive, i.e., these are not the only risks relating to our common stock,
this offering or our business.
Our Technologies And Products Are At An Early Stage Of Development, And We Have
Not Received Any Revenues From Operations To Date.
We are a development stage company. We have a very limited history of
operations, and we have not received any revenues from operations. We have no
products approved for commercial sale at the present time. We may not be
successful in obtaining regulatory clearance for the sale of existing or any
future products, or any of these products maynot be commercially viable.
We Have Not And May Not Receive Regulatory Approval To Sell Our Products.
We have engaged primarily in research and development activities since
our inception. We have no products approved for commercial sale by drug
regulatory authorities. We have begun the regulatory approval process for only
one product, our oral insulin formulation.
In September 2000, we entered into a Development and License Agreement
with Eli Lilly and Company that covers our oral insulin product. Under the Lilly
Agreement, Lilly is responsible for conducting clinical trials and securing
regulatory approvals for a formulation of insulin administered as a fine spray
to the buccal (oral) cavity using technology that is proprietary to Generex. Our
principal role in the future development of this product is to continue
development, as required, of our proprietary insulin formulation and the
RapidMist(TM) device used to administer the formulation.
Notwithstanding the Lilly Agreement and the support that we expect to
receive from Lilly under that Agreement, we may not be able to develop our
insulin product successfully. In order to obtain regulatory approvals for our
insulin product, it will be necessary to demonstrate, among other things, that:
o the product is physically and chemically stable under a range of
storage, shipping and usage conditions;
o the results of administering the product to patients are
reproducible in terms of the amounts of insulin delivered to the
oral cavity and absorbed in the bloodstream; and
o that there are no serious adverse safety issues associated with
use of the product.
There is even greater uncertainty and risk related to the regulatory
approval process for other products besides our insulin product that may be
developed under the Lilly Agreement or independently of Lilly. This is because
no other product candidate has progressed to the point of development of the
insulin product.
We May Not Become Or Stay Profitable Even If Our Products Are Approved for Sale.
Even if regulatory approval to market our oral insulin product is
obtained, many factors may prevent the product from ever being sold in
commercial quantities. Some of these factors are beyond our control, such as:
o acceptance of the formulation by health care professionals and
diabetic patients;
o the availability, effectiveness and relative cost of alternative
diabetes treatments that may be developed by competitors; and
o the availability of third-party (i.e., insurer and governmental
agency) reimbursements.
5
We Will Need Additional Capital, Which May Not Be Available To Us.
We have incurred substantial losses from operations from our inception,
and we expect to continue to incur substantial losses for at least another 12 to
18 months. Under the Lilly Agreement, we expect Lilly to fund substantially all
costs relating to the clinical program and securing regulatory approvals for our
insulin product and other products that may be developed under the Agreement. We
may, however, incur significant costs to fulfill our responsibilities under the
Lilly Agreement. We also may require funds in excess of our existing cash
resources:
o to develop new products based on our oral delivery technology,
including clinical testing relating to new products;
o to establish and expand our manufacturing capabilities; and
o to finance general and administrative and research activities
that are not related to specific products under development.
Over the next 12 to 18 months, we expect to receive revenues in the
form of signing fees, license fees, milestone payments and similar payments from
companies with which we collaborate on the development of products. At the
present time, apart from the Lilly Agreement, we have no collaboration
agreements with other companies that provide for such payments. The Lilly
Agreement provides for a signing fee and for milestone payments at various
stages of the development process for our insulin product and other products
that may be developed under that Agreement. However, except for the initial
signing fee, payments to us under the Lilly Agreement are contingent upon
attaining the milestones provided in the Agreement. We cannot be certain of when
or if we will receive any further payments from Lilly. In any event, we do not
expect to receive revenues under the Lilly Agreement or under any future
development agreements that are sufficient to satisfy all of our cash
requirements.
As of January 25, 2001, we had options and warrants outstanding
(including the warrants underlying the 538,773 shares issuable upon their
exercise that are covered by this prospectus) to purchase 6,429,803 shares of
our common stock at an average exercise price of $7.87. From July 31, 2000
through January 29, 2001, we have received approximately $2.21 million from the
exercise of warrants. We cannot rely upon this source of funds, however, since
the timing of option and warrant exercises is wholly within the discretion of
the holders of the options and warrants. We also have arranged a $50,000,000
"equity draw down line" facility with Tradersbloom Limited, a British Virgin
Islands corporation, but our ability to draw upon this facility is subject to a
number of conditions that we have not yet satisfied.
Any funds received through the equity draw down line facility with
Tradersbloom will be from sales of common stock at a 10% discount to the then
prevailing market price of our common stock. Similarly, we expect that the
exercise price of any options or warrants exercised will be below the then
prevailing market price of our common stock. The terms on which we obtain
additional financing from other sources also could result in dilution in the
investment of existing shareholders, could or otherwise adversely affect their
position.
In the past, we have funded most of our development and other costs
through equity financing. Unforeseen problems, including materially negative
developments in our clinical trials or in general economic conditions, could
interfere with our ability to raise additional equity capital or materially
adversely affect the terms upon which such funding is available.
It is also 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. A scenario like this poses risks. For example, our ability to bring a
product to market and obtain revenues could be delayed; our competitors could
develop products ahead of us; and/or we could be forced to relinquish rights to
technologies, products or potential products.
6
We Will Have To Depend Upon Others For Marketing And Distribution Of Our
Products, And We May Be Forced To Enter Into Contracts Hindering The Benefits We
May Receive And The Control We Have Over Our Products
We intend to rely on collaborative arrangements with one or more other
companies that possess strong marketing and distribution resources to perform
these functions. Except for the Lilly Agreement with respect to our oral insulin
product, we do not have any agreements with other companies for marketing or
distributing our products. We may be forced to enter into contracts for the
marketing and distribution of our products that substantially limit the
potential benefits to us from commercializing these products. In addition, we
will not have the same control over marketing and distribution that we would
have if we conducted these functions ourselves.
We Have No Experience In Manufacturing And Insufficient Capacity To Produce
Product In Large Quantities.
To date, we have produced our oral insulin formulation only under
laboratory conditions on a small scale. We have established a pilot
manufacturing facility that we believe is capable of producing the product at
levels necessary to supply our needs for late stage human clinical trials of the
product and for initial commercial sales outside the United States. However, we
have not yet actually produced product at those levels. In any event, we will
need to significantly increase our manufacturing capability to manufacture our
product in commercial quantities. Under the Lilly Agreement, Lilly may select,
but is not required to select, Generex to manufacture products developed under
that Agreement. In order to qualify for consideration in this role, we will have
to satisfy Lilly that Generex can supply such products at the requisite levels
of quality, cost and reliability in compliance with all applicable regulatory
requirements.
Under the Lilly Agreement, Lilly may select Generex to manufacture
products developed under that Agreement. Lilly, however, is not required to
select Generex for these functions. In order to qualify for consideration in
this role, we will have to satisfy Lilly that Generex can supply such products
at the requisite levels of quality, cost and reliability in compliance with all
applicable regulatory requirements.
We have no experience in resolving the staffing, manufacturing,
regulatory and quality control problems that are likely to come up in developing
and running a large scale manufacturing operation. Our failure to solve problems
of this nature would lead to loss of any opportunity to manufacture products
developed under the Lilly Agreement, and could delay or prevent our ability to
bring other products to market and inhibit sales after a product comes to
market.
If We Fail To Retain Executive Management And Other Key Personnel And Hire,
Train And Retrain Qualified Employees, We May Not Be Able To Develop Or
Commercialize Our Products.
If one or more members of our limited scientific and management staff
discontinued their association with us this could materially harm our business.
We do not have fixed term agreements with any of our key management or
scientific staff, other than Dr. Pankaj Modi. Our fixed term contract with Dr.
Modi, however, does not guarantee his continued availability.
We depend upon non-employee consultants to assist us in
o formulating research and development strategy;
o preparing regulatory submissions;
o developing protocols for clinical trials; and
o designing, equipping and staffing our manufacturing facilities.
These consultants and advisors usually have the right to terminate
their relationship with us on short notice. Loss of some of these key advisors
could interrupt or delay development of one or more of our products or otherwise
adversely affect our business plans.
7
We will continue to need qualified scientific personnel and personnel
with experience in clinical testing, government regulation and manufacturing. We
may have difficulty in obtaining qualified scientific and technical personnel
due to strong competition for these people from other pharmaceutical and
biotechnology companies as well as universities and research institutions.
We Depend On Patents And Other Proprietary Technologies That We May Not 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. The
first patent applicable to our large molecule delivery technology was issued in
the US on January 25, 2000. We also have thirteen patent applications pending in
the US and foreign jurisdictions, and one Canadian patent and one Canadian
patent application for which there is no US counterpart, which cover our drug
delivery technologies. We also own an indirect interest in three drug delivery
patents held by another company that is fifty (50%) percent owned by us.
We cannot be sure that any of our pending patent applications will be
granted, or that any patents that we own or will obtain in the future will fully
protect our position. Our patent rights, and the patent rights of biotechnology
and pharmaceutical companies in general, are highly uncertain and include
complex legal and factual issues. We believe that our existing technology and
the patents we hold or have applied for do not infringe any one else's patent
rights. We believe our patent rights will provide meaningful protection against
others duplicating our proprietary technologies. We cannot be sure of this,
however, 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 presently are involved in litigation with a former consultant in
which the former consultant has claimed that we misappropriated proprietary
information belonging to the consultant in developing our insulin product. We
also have been threatened with litigation by an individual named as a
co-inventor of a patented buccal delivery technology in which we now hold a 50%
interest. We do not believe that any of our existing or planned products or
technology incorporates or infringes upon any intellectual proprietary interest
of these claimants.
We also rely on trade secrets and other unpatented proprietary
information. We seek to protect this information, in part, by confidentiality
agreements with our employees, consultants, advisors and collaborators. These
agreements may be breached, however, in which case the remedies available to us
may not adequately compensate us for our loss. Furthermore, trade secrets
protection does not protect us against a competitor's independent development of
the same technology.
Our Ability To Respond To Business Opportunities And Introduce New Products Is
Subject To Extensive Government Regulation Of Our Business.
Our research and development activities, and the eventual manufacture
and marketing of our products, are subject to extensive regulation by the Food
and Drug Administration in the United States and comparable regulatory
authorities in other countries. Among other things, extensive regulation puts a
burden on our ability to bring products to market. These regulations apply to
all competitors in our industry. However, many of our competitors have extensive
experience in dealing with FDA and other regulators while we do not. Also, other
companies in our industry do not depend completely on products that still need
to be approved by government regulators, as we now do. If we do not obtain
regulatory approvals for our products, or if we fail to comply with government
regulations in the future, our business will be substantially harmed.
We May Not Be Able To Compete With Diabetes Treatments Now Being Marketed And
Developed By Other Companies.
Our oral insulin product will compete with existing and new therapies
for treating diabetes, including administration of insulin by injection. We are
aware of a number of companies currently seeking to develop alternative means of
delivering insulin, as well as new drugs intended to replace insulin therapy at
least in part.
8
Enforcement Of A Recent Arbitration Award May Result In Dilution To
Stockholders.
Sands Brothers and Co. Ltd., a New York City based investment banking
and brokerage firm, initiated an arbitration against us in 1998 claiming that it
had the right to receive warrants to purchase, for nominal consideration, shares
of our common stock pursuant to a letter agreement dated October 9, 1997. We
defended the claim on the basis that the letter agreement was not a binding
contract. In October 1999 we were informed that the arbitration panel that heard
this case had awarded Sands Brothers $14,070 and issued a declaratory judgment
to the effect that we are required to issue to Sands Brothers a warrant to
purchase 1,530,020 shares of our common stock pursuant to and in accordance with
the terms of the October 9, 1997 letter agreement. We filed a motion in the
Supreme Court of the State of New York (the "Supreme Court") to set the award
aside. On March 16, 2000, the Supreme Court denied our motion and granted Sands
Brothers' petition to confirm the award. We then appealed this decision. On
January 23, 2001, the New York State Appellate Division, First Department (the
"Appellate Division"), affirmed the portion of the Supreme Court's judgment that
had confirmed the granting of monetary relief of $14,070 to Sands Brothers but
modified the judgment to vacate the portion of the arbitration award directing
the issuance to Sands Brothers of a warrant to purchase 1,530,020 shares of our
common stock. The Appellate Division held that the portion of the award
directing us to issue warrants to Sands Brothers is too indefinite to be
enforceable and remanded the matter to the arbitration panel for a final and
definite award with respect to such relief or its equivalent (including possibly
an award of monetary damages).
Our ultimate legal and financial liability in this matter, including a
range of possible losses with respect to the award, cannot be estimated at this
time. To the extent that Sands Brothers receives shares of our common stock for
little or no consideration as a result of this arbitration award, our existing
shareholders' investment would be proportionately diluted.
We Have Substantial Exposure To Product Liability, And Our Insurance Coverage
May Provide Insufficient Protection.
The use of our products in clinical trials and the commercial sale of
our products exposes us to liability claims by consumers and pharmaceutical
companies. We have obtained limited product liability insurance of two million
dollars per occurrence and total coverage. We cannot be sure that this would be
sufficient coverage in the case of any substantial liability claim.
The Price Of Our Shares May Be Volatile, And You Could Lose All Or Part Of Your
Investment.
There may 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.
Our Outstanding Special Voting Rights Preferred Stock And Provisions Of Our
Certificate of Incorporation Could Delay Or Prevent The Acquisition Or Sale Of
Generex.
Holders of our Special Voting Rights Preferred Stock have the ability
to prevent any change of control of Generex. Our Vice President of Research and
Development, Dr. Pankaj Modi, owns all of our Special Voting Rights Preferred
Stock. In addition, our Certificate of Incorporation permits our Board of
Directors to designate new series of preferred stock and issue those shares
without any vote or action by the shareholders. Such newly authorized and issued
shares of preferred stock could contain terms that grant special voting rights
to the holders of such shares that make it more difficult to obtain shareholder
approval for an acquisition of Generex or increase the cost of any such
acquisition.
9
Future Sales Of Shares By Current Shareholders May Adversely Affect The Price Of
Our Stock.
The market price of our common stock could decline as a result of sales
of shares by:
o Selling Shareholders following the exercise of options and
warrants now held by them;
o other existing shareholders many of whom purchased shares from us
in private transactions at prices below the then current market
price for such shares, and who now are free to sell the shares
publicly; or
o holders of other outstanding options and warrants who may
exercise such options and warrants and resell the shares so
purchased to the public.
We Have Engaged In Numerous Transactions With Our Affiliates.
We previously have engaged in numerous transactions with our affiliates
that were not the result of arms-length negotiations. For that reason,
institutional investors and other potential purchasers of our shares may be less
willing to make these purchases due to a belief that the terms of these
transactions may not be as favorable to Generex as could have been obtained
through arms-length negotiations with nonaffiliated parties.
AVAILABILITY OF ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission ("SEC"). 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.
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 10-K for the fiscal year ended July 31,
2000.
o Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 2000.
o Current Report on Form 8-K filed August 28, 2000.
o Current Report on Form 8-K filed September 6, 2000, as amended by
Form 8-K/A filed on September 7, 2000 and by Form 8-K/A filed on
January 24, 2001.
o Current Report on Form 8-K filed on September 7, 2000.
o Current Report on Form 8-K filed on October 16, 2000, as amended
by Form 8-K/A filed on December 6, 2000.
o Current Report on Form 8-K filed January 23, 2001, as amended by
Form 8-K/A filed on February 1, 2001.
o Current Report on Form 8-K filed on January 25, 2001.
o The description of our common stock contained in our registration
statement on Form 10 filed on December 14, 1998, and amended
February 24, 1999, including any amendment or report subsequently
filed for the purpose of updating the description.
This prospectus is part of a registration statement on Form S-3
(registration no. 333-42452) 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 Generex and our common stock. You may request a copy of these
filings at no cost. Please direct your requests to Rose C. Perri, Secretary and
Chief Operating Officer, 33 Harbor Square, Suite 202, Toronto, Ontario, Canada
M5J 2G2 (telephone 416/364-2551).
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. You should not assume
that the information in this prospectus or any prospectus supplement is accurate
as of any date other than the date on the front page of those documents.
10
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. On October 31, 2000, our net tangible book value was
approximately $1.76 per share of common stock.
USE OF PROCEEDS
We will not receive any proceeds from the resale of shares covered by this
prospectus.
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 prior
to the offering;
o the number of shares of common stock registered for sale by each in
the offering; and
o the percentage of common stock owned by each after the offering,
assuming each sells all of the shares registered for his benefit.
Shares Beneficially
Owned as of the Date of the Prospectus
--------------------------------------
Shares Owned
After the
Shares Issuable Upon Offering
Outstanding Exercise of Options and (% of Total
Name Shares Warrants(1) Outstanding)(2)
---- ----------- ----------------------- ---------------
Robert P. Carter 85,000 100,000 85,000(*)
Edward Cowle 253,000 50,000 253,000(1.4%)
Todd Falls _0_ 50,000 _0_
Fittube, Inc. _0_ 20,000 _0_
Paul Gambin _0_ 200,000 _0_
Shayne Gilliatt _0_ 50,000 _0_
Gulfstream Capital Group, L.C. _0_ 130,000 _0_
Harvey Kaye (3) 63,375 200,000 63,375(*)
M. H. Meyerson & Co., Inc. (4) _0_ 150,000 _0_
Edward Maskaly 135,200 50,000 135,200(*)
Andrew Reid 55,000 300,000 55,000(*)
William Steinbrink _0_ 50,000 _0_
Wolfe Axelrod Weinberger LLC _0_ 125,000 _0_
---------
1,475,000
----------------------
*Less than one (1%) percent.
(footnotes continued on page 12)
11
------------------------
Footnotes to table on page 11.
(1) All of these shares are registered for resale.
(2) Assuming all shares registered for resale are sold.
(3) Does not include 130,000 shares issuable upon the exercise of warrants
owned by Gulfstream Capital Group, L.C., which is majority-owned and
controlled by Mr. Kaye, or 76,675 shares owned by Mr. Kaye's spouse as to
which he disclaims beneficial ownership.
(4) M. H. Meyerson & Co., Inc. is a market maker in our common stock. Shares
owned before and after the offering in the above table exclude shares held
in such firm's trading or customers' accounts.
POSSIBLE ISSUANCE OF SHARES UNDER EQUITY DRAW DOWN LINE
Under our agreement with Tradersbloom Ltd., we may elect to sell to
Tradersbloom up to $50,000,000 of our common stock. Tradersbloom's commitment to
purchase shares under this agreement, however, is subject to a number of terms
and conditions. These include the condition that we register for resale under
the Securities Act of 1933 (the "Securities Act") the shares that may be sold
under the agreement and the limitation that Tradersbloom may not be required to
purchase more than $5,000,000 of common stock during any
22-consecutive-trading-day period.
Subject to these terms and conditions in the Common Stock Purchase
Agreement, we may elect to sell shares to Tradersbloom over an 18-month period
commencing on the effective date of the registration of shares referred to in
the preceding paragraph. The price of shares sold to Tradersbloom, if any, will
be 90% of the weighted average market price of shares of our common stock traded
on the date of sale, subject to a minimum sale price that we may establish in
our discretion. If the weighted average market price of our common stock on a
scheduled date of sale is less than the minimum price that we establish, we will
not be obligated to sell and Tradersbloom will not be obligated to purchase any
of the shares scheduled for sale on that day.
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 Shareholders" 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 National Market
or otherwise, at then prevailing market prices, at prices related to prevailing
market prices or at negotiated prices. The shares may be sold 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 according 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.
12
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:
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 which 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. Because
Selling Shareholders may be deemed to be underwriters within the meaning of the
Securities Act, the Selling Shareholders will be subject to the prospectus
delivery requirements of 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.
The Company 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.
13
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered in this
prospectus will be passed upon for us by Eckert Seamans Cherin & Mellott, LLC,
1515 Market Street, 9th Floor, Philadelphia, PA 19102. The firm of Eckert
Seamans Cherin & Mellott owns 128,181 shares of common stock which it received
in payment of legal fees and expenses in 1998 (60,000 shares) and the exercise
of warrants in June 1999 (98,172 shares). Members of the firm own additional
shares (less than one percent in total) that they purchased from time to time
for cash, either from us or in the public market.
EXPERTS
Our financial statement as of and for the years ended July 31, 2000 and
1999 and for the years ended July 31, 2000, 1999 and 1998, included in our
Annual Report on Form 10-K for the year ended July 31, 2000 (our "2000 10-K")
have been audited by Withum Smith & Brown, independent accountants, as set forth
in their report on such financial statements.
Our financial statements for the fiscal year ended July 31, 2000 and 1999
are incorporated by reference in this prospectus, and elsewhere in the
registration statement, in reliance upon the reports of WithumSmith & Brown on
the financial statements, given on their authority as experts in accounting and
auditing.
14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS.
Exhibit
Number Description
------- -----------
3.1 Restated Certificate of Incorporation of Generex Biotechnology
Corporation filed as Exhibit 3.1 to our Quarterly Report on Form
10-Q for the quarter ended April 30, 1999, filed June 14, 1999, is
incorporated herein by reference.
3.2 Bylaws of the Company filed as Exhibit 3.2 to our Registration
Statement on Form S-1 filed July 12, 1999 ("1999 S-1") is
incorporated hereby by reference.
4.1 Form of common stock certificate filed as Exhibit 4.2 with our 1999
S-1 is incorporated herein by reference.
4.2 1998 Stock Option Plan filed as Exhibit 4.3 to our 1999 S-1 is
incorporated herein by reference.
4.3 Form of Warrant (GCR Series) held by Robert P. Carter, Harvey Kaye,
Fittube, Inc., Edward Maskaly and Gulfstream Capital Group, L.C.
filed as Exhibit 4.4.2 to our Registration Statement on Form 10
filed December 14, 1998 ("Form 10") is incorporated herein by
reference.
4.4 Letter Agreement and Warrant dated November 17, 1998 with M. H.
Meyerson & Co., Inc. filed as Exhibit 4.4.4 to our Form 10 is
incorporated herein by reference.
4.5 Option Agreement with Wolfe Axelrod Weinberger LLC dated January 3,
2000, filed as Exhibit 4.5 to our Quarterly Report on Form 10-Q for
the quarter ended January 31, 2000, is incorporated herein by
reference.
*5 Opinion of Eckert Seamans Cherin & Mellott, LLC regarding the
legality of the securities being registered
*23.1.1 Consent of Withum Smith & Brown, independent auditors
*23.1.2 Consent of Mintz & Partners, independent auditors
23.1.3 Consent of Eckert Seamans Cherin & Mellott, LLC (included in
Exhibit 5)
----------------
* Previously filed.
II-1
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;
(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. That, for the purpose of determining any liability under the Securities
Act, each filing of our annual report pursuant to Section 13(a) or Section 15(d)
of the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement 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.
5. To deliver or cause to be delivered with the prospectus, to each person
to whom the prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Exchange Act; and, where interim financial information required to be presented
by Article 3 of Regulation S-X are not set forth in the prospectus is sent or
given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
6. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Generex
pursuant to the foregoing provisions, or otherwise, Generex 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 Generex of expenses incurred or paid by a director, officer, or
controlling person of Generex 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, Generex 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.
II-2
SIGNATURES
In accordance with 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. 3 to
the Registration Statement to be signed on our behalf by the undersigned, our
President, on the 5th day of February 2001.
GENEREX BIOTECHNOLOGY CORPORATION
By: /s/ Anna E. Gluskin
------------------------------
Anna E. Gluskin, President
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 3 to the Registration Statement was signed by the following
persons in the capacities and on the dates stated:
Signature Title Date
--------- ----- ----
/s/ Anna E. Gluskin
______________________________ President, Chief Executive Officer and
Anna E. Gluskin Director February 5, 2001
/s/ E. Mark Perri
______________________________ Chairman of the Board, Chief Financial
E. Mark Perri Officer and Director February 5, 2001
/s/ Rose C. Perri
------------------------------
Rose C. Perri Director February 5, 2001
/s/ Pankaj Modi
------------------------------
Pankaj Modi, Ph.D. Director February 5, 2001
II-3