REGISTRATION NO. 333-________
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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. |_|
Calculation of Registration Fee
========================================================================================================
Title of Each
Class of Amount Proposed Maximum Proposed Maximum Amount of
Securities to be To be Offering Price Aggregate Registration
Registered * Registered(1) Per Share(1) Offering Price(1) Fee
--------------------------------------------------------------------------------------------------------
Common Stock, 1,627,732(2) $ 8.42(3) $13,705,503 $3,426.38
$.001 par value
--------------------------------------------------------------------------------------------------------
Common Stock, 695,000(4) $ 8.42(3) $ 5,851,900 $1,462.98
$.001 par value
--------------------------------------------------------------------------------------------------------
Common Stock 467,328(5) $25.71(6) $12,015,002 $3,003.75
$.001 par value
--------------------------------------------------------------------------------------------------------
Common Stock 313,515(7) $ 8.42(3) $ 2,639,796 $ 659.95
$.001 par value
--------------------------------------------------------------------------------------------------------
Common Stock 75,000(7) $25.15(8) $ 1,886,250 $ 471.56
$.001 par value
--------------------------------------------------------------------------------------------------------
Common Stock 5,230(7) $12.99(9) $ 67,938 $ 16.98
$.001 par value
--------------------------------------------------------------------------------------------------------
Common Stock 3,243(7) $14.53(10) $ 47,121 $ 11.78
$.001 par value
--------------------------------------------------------------------------------------------------------
Totals 3,187,048 $36,213,510 $9,053.38
--------------------------------------------------------------------------------------------------------
------------------------------------
* This registration statement also includes an indeterminate number of
additional shares of common stock as may from time to time become issuable upon
conversion of the Series A Preferred Stock and exercising the options and
warrants by reason of stock splits, stock dividends and other similar
transactions; which shares are registered hereunder pursuant to Rule 416 under
the Securities Act of 1933, as amended.
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457.
(2) These shares are outstanding shares being offered for resale by certain of
our stockholders.
(3) Based on the average of the high and low prices reported on the Nasdaq
National Market for July 31, 2001.
(4) These shares are issuable upon the exercise of options to purchase common
stock granted to employees, consultants and advisors under our 2000 Stock
Option Plan and are registered for resale.
(5) These shares are issuable upon conversion of our Series A Preferred Stock
and are registered for resale.
(6) Based upon conversion price of $25.71
(7) These shares are issuable upon the exercise of warrants to purchase common
stock and are registered for resale.
(8) Based upon warrant exercise price of $25.15.
2
(9) Based upon warrant exercise price of $12.99
(10) Based upon warrant exercise price of $14.53.
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.
3
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.
4
SUBJECT TO COMPLETION, DATED AUGUST 6, 2001
PROSPECTUS
3,187,048 SHARES
GENEREX BIOTECHNOLOGY CORPORATION
COMMON STOCK
Generex Biotechnology Corporation is a development stage company and
has not received any revenues from operations to date. This prospectus relates
to shares of Generex common stock that certain of our shareholders and holders
of options, warrants and other convertible securities may resell for their own
accounts. We will not receive any proceeds from the sale of these shares.
Specifically, this prospectus relates to the resale of:
o Up to 1,277,837 shares of common stock that are presently outstanding and
that were issued in connection with two private placements that we
completed in July 2001.
o Up to 321,988 shares of common stock reserved for issuance upon exercise
of (i) warrants issued in connection with the two July 2001 private
placements and (ii) warrants issued to investors in our October 2000
private placement as a result of anti-dilution adjustments triggered by
the prices at which we sold our shares in the two July 2001 private
placements.
o Up to 695,000 shares of common stock issuable upon the exercise of options
granted to certain of our employees, consultants and advisors under our
2000 Stock Option Plan.
o Up to 542,328 shares of common stock issuable upon conversion of shares of
our Series A Preferred Stock by Elan Pharmaceutical Investments III, Ltd.
or upon exercise of warrants held by Elan.
o 349,895 shares of common stock that are presently outstanding and that
were issued to Elan in connection with a transaction we undertook with
Elan in January 2001 and in connection with anti-dilution adjustments
triggered by the price at which we sold our shares in the two July 2001
private placements.
The shareholders and holders of options, warrants and other convertible
securities who may resell shares according to this prospectus are listed on
pages 17-18 of this prospectus. We will refer to these shareholders and holders
of options, warrants and other convertible securities as the "Selling
Shareholders."
Our common stock is quoted on the Nasdaq National Market under the
symbol "GNBT." The high, low and last sale prices of our common stock on July
31, 2001, as reported by Nasdaq, were $8.70, $8.14 and $8.50, respectively.
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 6 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 August 6, 2001.
2
TABLE OF CONTENTS
PROSPECTUS SUMMARY................................................... 4
NOTE ABOUT FORWARD-LOOKING STATEMENTS................................ 6
RISK FACTORS......................................................... 7
AVAILABILITY OF ADDITIONAL INFORMATION............................... 15
DILUTION............................................................. 17
USE OF PROCEEDS...................................................... 17
SELLING SHAREHOLDERS................................................. 17
POSSIBLE ISSUANCE OF EQUITY DRAW DOWN LINE........................... 20
PLAN OF DISTRIBUTION................................................. 20
LEGAL MATTERS ....................................................... 22
EXPERTS.............................................................. 22
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 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.
3
PROSPECTUS SUMMARY
General
Generex Biotechnology Corporation 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. 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.
Clinical trials have not yet been commenced under the Lilly Agreement, and, at
this time, we cannot predict with any certainty when or if such activity might
commence.
Notwithstanding Lilly's participation, 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 preliminary research and development work on other applications, but we have
not devoted significant time or resources to this effort to date.
On January 16, 2001, we entered into a joint venture with Elan
Corporation, plc and its affiliates to pursue the application of certain of our
and Elan's drug delivery technologies -- including
4
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. Various opportunities have been proposed for
development, though no product has yet identified for research and development
under the joint venture.
Information on Outstanding Shares
Common stock outstanding before the offering.......... 20,686,634 shares
Common stock to be outstanding after the offering..... 22,245,950 shares
In the above table, the number of shares of common stock outstanding
before the offering is the number of shares outstanding on July 31, 2001. 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, warrants and other convertible
securities that may be resold pursuant to this prospectus. Thus, the number of
shares stated to be outstanding after the offering assumes: (i) the exercise of
695,000 options granted under our 2000 Stock Option Plan; (ii) the exercise of
the warrants issued in connection the July 2001 private placements; (iii) the
exercise of the anti-dilution warrants issued to investors in connection with
the October 2000 Private Placement; (iv) the exercise of warrants issued to Elan
Pharmaceutical Investments III, Ltd.; and (v) the conversion of the Series A
preferred stock issued to Elan Pharmaceutical Investments III, Ltd. The holders
of the options, warrants and other convertible securities 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 options ranges from $7.56 to $25.15 per
share. The exercise price of the warrants ranges between $8.42 to $25.15 per
share. The conversion price of the Series A Preferred Stock is $25.71 per share
of our common stock.
Other Outstanding Options, Warrants and Convertible Securities
The figures on outstanding shares in this prospectus do not include:
o 7,680,803 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 $7.61 per share.
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 or conversion of the options, warrants or other convertible
securities covered by this prospectus.
5
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 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 except as we are
required to do by law.
6
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.
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 may not 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 participation of Lilly in the
research and development process 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.
7
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.
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 the immediately
foreseeable future. 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, should we reach that stage of activity. 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 develop or acquire other delivery technologies or other lines of
business;
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.
In the future, 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 July 31, 2001, we had options and warrants outstanding (including
the options and warrants underlying the 1,484,316 shares issuable upon their
exercise that are covered by this prospectus) to purchase 7,680,803 shares of
our common stock at an average exercise price of $7.61. From August 1, 2000
through July 31, 2001, we have received over $3.4 million from the exercise
8
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 addition, the provisions of the warrants issued to investors in
our October 2000 private placement and the agreement under which we sold shares
of our common stock to Elan International Services, Ltd. in January 2001 require
anti-dilution adjustments in their favor if additional financings fail to attain
certain per share pricing thresholds. Such anti-dilution adjustments would
result in further dilution for existing shareholders.
In the past, we have funded most of our development and other costs
through equity financing. Unforeseen problems, including materially negative
developments in the Lilly Agreement or our relationship with Lilly, 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.
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.
9
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 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.
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.
10
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. We
currently have been issued four U.S. patents, including the patent applicable to
our large molecule delivery technology, and we have twelve U.S. patent
applications pending that cover our drug delivery technologies including the
technologies specifically pertaining to oral insulin delivery. We also own an
indirect interest in three drug delivery patents held by another company,
Centrum Biotechnologies, Inc., 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.
In February 2001, Subash Chandarana, a former business associate of Dr.
Pankaj Modi, and an entity identified as "Centrum Technologies, Inc." commenced
a legal proceeding in the Ontario Superior Court of Justice against the Company
and Dr. Modi, seeking, among other things, damages for alleged breaches of
contract and tortious acts related to a business relationship between Chandaran
and Dr. Modi that ceased in July 1996. The plaintiffs' statement of claim also
seeks to stop the use, if any, by the Company of three patents owned by Centrum
Technologies, Inc. While we do not believe that any of our existing or planned
products or technology incorporates or infringes upon any intellectual
proprietary interest of this individual, we cannot predict the ultimate outcome
of this matter.
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
11
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.
Enforcement Of An Arbitration Award May Result In Dilution To Stockholders Or
Adverse Effects Upon Generex.
Sands Brothers & Co., Ltd. ("Sands"), a New York City-based investment
banking and brokerage firm, initiated arbitration against the Company under New
York Stock Exchange rules in January 1998. Sands claimed that it has the right
to purchase, for nominal consideration, approximately 1.5 million shares of the
Company's Common Stock. This claim is based upon a January 1997 letter agreement
which purportedly confirmed the terms of an agreement appointing Sands as the
exclusive financial advisor to Generex Pharmaceuticals, Inc. ("GPI") and
granting Sands the right to receive shares representing 17 percent of the
outstanding capital stock of GPI on a fully diluted basis. Following the
acquisition of GPI by GBC - Delaware, Inc., Sands claimed a right to receive
shares of GPI common stock that would, allegedly, now apply to the Company's
Common Stock. Sands also claimed that it is entitled to additional shares of the
Company as a result of the GBC - Delaware, Inc.'s acquisition of GPI
(approximately 460,000 shares), and $144,000 in fees under the terms of the
purported agreement.
Sands has never performed any services for the Company, and the Company
and GPI have denied that the individual who is alleged to have entered into the
purported agreement between Sands and GPI, had the authority to act on GPI's
behalf. Accordingly, the Company is defending against Sands' claim primarily on
the basis that no agreement has ever existed between GPI and Sands.
During a series of hearings before a NYSE arbitration panel commencing
June 8, 1999, Sands amended its claim to include, in the alternative, an
entitlement in the form of an order of specific performance with regard to the
issuance of the warrant as discussed in the January 1997 letter.
By an award dated September 24, 1999, the panel awarded Sands $12,000
plus $2,070 in interest, a declaratory judgment that the Company is required to
issue Sands a warrant for 1,530,020 shares in accordance with the January 1997
letter, and denied all other relief and split the $22,800 in forum fees equally
between Sands and the Company. On October 13, 1999, Sands commenced a special
proceeding to confirm the Arbitration Award in New York State Supreme Court, New
York County. On November 10, 1999, the Company moved to vacate the arbitration
award on the grounds that the arbitration panel had exceeded its authority and
had manifestly disregarded the relevant law of agency in issuing the award. On
March 20, 2000, the New York State Supreme Court granted Sands' petition to
confirm the arbitration award and denied the Company's motion to vacate the
12
award. The Court entered judgment against the Company. The Company appealed the
lower court's judgment to the New York State Appellate Division, First
Department ("the Appellate Division"). On January 23, 2001, the Appellate
Division modified the judgment of the Supreme Court that had confirmed the
arbitration award against the Company. The Appellate Division affirmed the
portion of the judgment that had confirmed the granting of monetary relief of
$14,070 to Sands but modified the judgment to vacate the portion of the
arbitration award directing the issuance to Sands of a warrant to purchase
1,530,020 shares of the Company's common stock. The Appellate Division held that
the portion of the award directing the Company to issue warrants to Sands 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). A hearing before the
arbitration panel for such purpose has commenced, but it is not expected to be
concluded until later this calendar year.
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 legal proceeding, 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 expose 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.
13
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.
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.
14
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 April 31,
2001 filed June 14, 2001.
o Quarterly Report on Form 10-Q for the fiscal quarter ended January 31,
2001, as amended by a Form 10-Q/A filed March 21, 2001.
o Quarterly Report on Form 10-Q for the fiscal quarter ended October 31,
2000, as amended by a Form 10-Q/A filed December 19, 2000.
o Proxy Statement filed on March 23, 2001.
o Current Report on Form 8-K filed on July 17, 2001.
o Current Report on Form 8-K filed on May 22, 2001.
o Current Report on Form 8-K filed on April 27, 2001.
o Current Report on Form 8-K filed on August 28, 2000.
o Current Report on Form 8-K filed on September 6, 2000, as amended by a
Form 8-K/A filed on September 7, 2000 and by a Form 8-K/A filed on
January 24, 2001.
o Current Report on Form 8-K filed on September 7, 2000.
15
o Current Report on Form 8-K filed on October 16, 2000, as amended by a
Form 8-K/A filed on December 6, 2000.
o Current Report on Form 8-K filed on January 23, 2001, as amended by a
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, as amended by a Form
10/A February 24, 1999, and 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-_______) 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 Harbour 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.
16
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 July 31, 2001, our net tangible book value was
approximately $4.01 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 Prior to Offering
-----------------------
Shares Issuable Shares
Upon Exercise Shares Owned
Outstanding Of Convertible Registered After
Shares Securities (1) for Sale Offering(2)
------ --------------- -------- -----------
Elan Pharmaceutical Investments III, Ltd. 349,895 542,328(3) 892,223 -0-
Cranshire Capital, L.P. 216,216 54,054 270,270 -0-
RAM Trading Ltd. 162,162 40,844(4) 203,006 -0-
Alpha Capital Aktiengesellschaft 162,162 40,541 202,703 -0-
Gryphon Master Fund 140,000 35,000 175,000 -0-
Capital Ventures International 108,108 27,027 135,135 -0-
WEC Asset Management, LLC 108,108 27,027 135,135 -0-
Langley Partners, L.P. 85,000 21,250 106,250 -0-
Montrose Investments, Ltd. 54,054 13,845(5) 67,899 -0-
Kodiak Opportunity Offshore, Ltd. 53,918 13,600(6) 67,518 -0-
The dotCOM Fund, LLC 43,244 10,811 54,055 -0-
ZLP Master Technology Fund, Ltd. 35,135 8,784 43,919 -0-
Kodiak Opportunity 3C7, L.P. 8,812 2,244(7) 11,056 -0-
Novelly Exempt Trust 7,748 1,937 9,685 -0-
17
Kodiak Opportunity, L.P. 4,522 1,211(8) 5,733 -0-
The Shemano Group, Inc. 23,784 -0- 23,784 -0-
Elliott Associates, L.P. 32,432 8,108 40,540 -0-
Elliott International, L.P. 32,432 8,108 40,540 -0-
Ladenburg Thalmann & Co., Inc. -0- 3,243(9) 3,243 -0-
Clipperbay & Co. -0- 2,617(10) 2,617 1,079,000
Protius Overseas Limited -0- 413(11) 413 -0-
Nob Hill Capital Partners, L.P. -0- 242(12) 242 -0-
Castle Creek Healthcare Partners LLC -0- 220(13) 220 -0-
AEOW 2000 L.P. -0- 165(14) 165 68,182
Fidelity National Title Insurance Co. -0- 110(15) 110 45,455
Velocity Investment Partners LTD -0- 110(16) 110 -0-
Prism Partners 1, L.P. -0- 99(17) 99 -0-
Willow Creek Capital Partners, Ltd. -0- 61(18) 61 -0-
Willow Creek Offshore Fund -0- 61(19) 61 -0-
CCL Fund LLC -0- 55(20) 55 -0-
Prism Partners II Offshore Fund -0- 49(21) 49 -0-
Nob Hill Capital Associates L.P. -0- 48(22) 48 -0-
Ascend Partners L.P. -0- 33(23) 33 -0-
Bognor Regis, Inc. -0- 33(24) 33 -0-
Ascend Offshore Funds Ltd. -0- 22(25) 22 -0-
Prism Partners Offshore Fund -0- 16(26) 16 -0-
Ed Cowle -0- 50,000 50,000 233,500
Todd Falls -0- 75,000 75,000 -0-
Andrew Reid -0- 300,000 300,000 750
Paul Gambin -0- 200,000 200,000 -0-
Shayne Gilliatt -0- 70,000 70,000 -0-
Total 1,627,732 1,559,316 3,187,048 1,426,887
(1) Convertible securities include options, warrants and Series A Preferred
Stock.
(2) Assuming all shares registered in resale are sold.
(3) Includes 75,000 shares issuable upon exercise of warrants and 467,328
shares issuable upon conversion of Series A Preferred Stock.
(4) Does not include 18,750 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(5) Does not include 20,455 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(6) Does not include 7,439 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
18
(7) Does not include 2,534 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(8) Does not include 5,028 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(9) Warrants issued to Ladenburg Thalmann & Co., Inc. for placement services
rendered in the July 2001 Private Placements.
(10) Does not include 161,850 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(11) Does not include 25,545 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(12) Does not include 15,000 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(13) Does not include 113,637 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(14) Does not include 19,227 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(15) Does not include 6,818 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(16) Does not include 6,818 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(17) Does not include 6,120 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(18) Does not include 3,750 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(19) Does not include 3,750 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(20) Does not include 28,409 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(21) Does not include 3,060 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
19
(22) Does not include 3,000 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(23) Does not include 2,045 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(24) Does not include 2,045 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(25) Does not include 1,364 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(26) Does not include 1,020 shares issuable upon the exercise of warrants held
by this Selling Shareholder as of July 31, 2001 that are covered by a
previous registration statement.
(27) Heights Capital Management, Inc., as Capital Ventures International's
authorized agent, has discretionary authority to vote and dispose of these
shares and may be deemed to be a beneficial owner of these shares. Capital
Ventures International does not have, and within the past three years has
not had, any position, office or other material relationship with Generex.
POSSIBLE ISSUANCE OF 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
20
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 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.
Holders of the warrants may use a "cashless" form of exercise in which
the difference between the exercise price of the warrant and the market price
for our publicly traded shares is applied to pay the exercise price of the
warrants. Fewer shares would be outstanding after the offering if the "cashless
exercise" method were used, than if all warrants were exercised for cash.
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.
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;
21
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.
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.
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 upon the
exercise of warrants in June 1999 (98,172 shares). The firm also has been
granted options exercisable for 30,000 shares at $7.56 per share under the
Company's 2000 Stock Option Plan. 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 consolidated financial statements as of 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 WithumSmith+Brown, independent auditors, as set forth in their
reports on such financial statements
22
Our consolidated financial statements as of July 31, 2000 and 1999 and
for the years ended July 31, 2000, 1999 and 1998 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.
23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant 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.......................... $ 9,053.38
Legal fees and expenses....................... 15,000.00
Accounting fees and expenses.................. 5,000.00
Other......................................... 1,000.00
Total......................................... $30,053.28
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation's 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 Registrant's Restated Certificate of Incorporation (Exhibit
3.1 hereto) and Bylaws (Exhibit 3.2 hereto) provide indemnification of its
directors and officers to the maximum extent permitted by the Delaware General
Corporation Law.
Under the registration rights agreement (Exhibit 4.4 hereto) applicable
to securities registered hereby, the Registrant has agreed to indemnify the
selling stockholders and persons controlling the selling stockholders against
certain liabilities, including liabilities under the Securities Act of 1933, and
the selling stockholders have agreed to indemnify the Registrant, its directors,
its officers and certain control and related persons against certain
liabilities, including liabilities under the Securities Act of 1933.
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 Form of Securities Purchase Agreement entered into with Cranshire
Capital, L.P.; RAM Trading Ltd.; Gryphon Master Fund; Kodiak
Opportunity, L.P.; Kodiak Opportunity 3C7, L.P.; Kodiak
24
Exhibit
Number Description
------- -----------
Opportunity Offshore, Ltd.; Novelly Exempt Trust; Langley
Partners, L.P.; Montrose Investments, Ltd.; WEC Asset Management,
LLC; ZLP Master Technology Fund, Ltd.; Alpha Capital
Aktiengesellschaft; and The dotCOM Fund, LLC, dated July 3, 2001
filed as an exhibit to our Report on Form 8-K dated July 17, 2001
is incorporated herein by reference.
4.3 Form of Registration Rights Agreement entered into with Cranshire
Capital, L.P.; RAM Trading Ltd.; Gryphon Master Fund; Kodiak
Opportunity, L.P.; Kodiak Opportunity 3C7, L.P.; Kodiak
Opportunity Offshore, Ltd.; Novelly Exempt Trust; Langley
Partners, L.P.; Montrose Investments, Ltd.; WEC Asset Management,
LLC; ZLP Master Technology Fund, Ltd.; Alpha Capital
Aktiengesellschaft; and The dotCOM Fund, LLC, dated July 3, 2001
filed as an exhibit to our Report on Form 8-K dated July 17, 2001
is incorporated herein by reference.
4.4 Form of Warrant granted to Cranshire Capital, L.P.; RAM Trading
Ltd.; Gryphon Master Fund; Kodiak Opportunity, L.P.; Kodiak
Opportunity 3C7, L.P.; Kodiak Opportunity Offshore, Ltd.; Novelly
Exempt Trust; Langley Partners, L.P.; Montrose Investments, Ltd.;
WEC Asset Management, LLC; ZLP Master Technology Fund, Ltd.;
Alpha Capital Aktiengesellschaft; and The dotCOM Fund, LLC, dated
July 6, 2001 filed as an exhibit to our Report on Form 8-K dated
July 17, 2001 is incorporated herein by reference.
4.5 Securities Purchase Agreement entered into with Capital Ventures
International, dated July 3, 2001 filed as an exhibit to our
Report on Form 8-K dated July 17, 2001 is incorporated herein by
reference.
4.6 Registration Rights Agreement entered into with Capital Ventures
International, dated July 3, 2001 filed as an exhibit to our
Report on Form 8-K dated July 17, 2001 is incorporated herein by
reference.
4.7 Warrant granted to Capital Ventures International, dated July 3,
2001 filed as an exhibit to our Report on Form 8-K dated July 17,
2001 is incorporated herein by reference.
4.8 Form of Securities Purchase Agreement entered into with Elliott
International, L.P.; and Elliott Associates, L.P., dated July 3,
2001 filed as an exhibit to our Report on Form 8-K dated July 17,
2001 is incorporated herein by reference.
25
Exhibit
Number Description
------- -----------
4.9 Form of Registration Rights Agreement entered into with Elliott
International, L.P.; and Elliott Associates, L.P., dated July 3,
2001 filed as an exhibit to our Report on Form 8-K dated July 17,
2001 is incorporated herein by reference.
4.10 Warrant issued to Elliott International, L.P.; and Elliott
Associates, L.P., dated July 5, 2001 filed as an exhibit to our
Report on Form 8-K dated July 17, 2001 is incorporated herein by
reference.
4.11 Securities Purchase Agreement dated January 16, 2001, between
Generex Biotechnology Corporation, Elan International Services,
Ltd. and Elan Corporation, plc. filed as an exhibit to our Report
on Form 8-K/A dated February 1, 2001 is incorporated herein by
reference.
4.12 Form of Securities Purchase Agreement entered into with certain
other parties to October 2000 Private Placement filed as an
exhibit to our Report on Form 8-K dated October 4, 2000 is
incorporated herein by reference.
4.13 Form of Registration Rights Agreement entered into with certain
parties to October 2000 Private Placement filed as an exhibit to
our Report on Form 8-K dated October 4, 2000 is incorporated
herein by reference.
4.14 Form of Warrant issued to certain parties to October 2000 Private
Placement filed as an exhibit to our Report on Form 8-K dated
October 4, 2000 is incorporated herein by reference.
4.15 Form of Warrant issued to Ladenburg Thalmann & Co., Inc. dated
July 6, 2001
23.1.1 Consent of WithumSmith+Brown
23.1.2 Consent of Eckert Seamans Cherin & Mellott, LLC
26
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.
27
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 to the
Registration Statement to be signed on our behalf by the undersigned, our
President, on the 6th day of August, 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
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 August 6, 2001
------------------------------------- Director
Anna E. Gluskin
/s/ E. Mark Perri Chairman of the Board, Chief Financial August 6, 2001
------------------------------------- Officer and Director
E. Mark Perri
/s/ Rose C. Perri Director August 6, 2001
-------------------------------------
Rose C. Perri
/s/ Pankaj Modi, Ph.D. Director August 6, 2001
-------------------------------------
Pankaj Modi, Ph.D.
28