GENEREX BIOTECHNOLOGY CORPORATION (OTCMKTS:GNBT) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement
Item 3.02 Unregistered Sales of Equity
Securities.
Generex Biotechnology Corporation (referred to as the Company or
Generex) is reporting on an amendment to its letter of intent
with Emmaus Life Sciences, Inc. as well as the terms of a
convertible note financing, the proceeds of which will be used to
fund a deposit payable to Emmaus.
Amendment to Emmaus Letter of Intent
In our Current Report on Form 8-K, dated January 16, 2017, we
reported that the Company had entered into a letter of intent
(LOI) with Emmaus Life Sciences, Inc. (Emmaus) contemplating that
the Company will acquire a controlling interest in the
outstanding capital stock of Emmaus for a total consideration of
$225,000,000 in accordance with the terms and conditions therein
(the Proposed Acquisition).
The LOI required that Generex shall pay a deposit of One Million
Five Hundred Thousand Dollars ($1,500,000) to Emmaus within three
(3) weeks of January 16, 2017, which was February 6, 2017. As
previously reported, on February 6, 2017 and February 20, 2017,
Emmaus and Generex entered into waiver agreements extending the
time for Generex to make the deposit until February 24, 2107 and
otherwise amending the LOI (the Prior Waivers)..
On March 3, 2017, the Generex and Emmaus entered into a further
waiver and amendment to the LOI which provides the following:
Generex must provide a $500,000deposit on or prior to March 6,
2017. Generex is paying this deposit with the proceeds of the
sale of the convertible note described below under Convertible
Note Financing.
Within ten (10) trading days after the date of effectiveness of
the Companys planned reverse stock split of its common stock, the
Company shall pay an additional deposit of $3,000,000.
The failure of the reverse stock split to occur on or prior to
March 30, 2017 shall constitute a breach of the LOI. Generex has
applied to FINRA, in its oversight capacity with respect to the
over-the-counter trading market, for approval of the reverse
stock split, and is in the process of satisfying additional
document and information requests from FINRA.
Emmaus and Generex will use best efforts to negotiate and sign a
definitive formal Purchase Agreement no later than March 30,
2017.
The remaining$6,000,000will be paid at closing of the formal
Purchase Agreement, which will be done no later than the date
that is five (5) trading days after the date (the Filing Date)
upon which Generex files with the Delaware Secretary of State an
Amendment to its Restated Certificate of Incorporation effecting
an increase in its authorized capital, provided however that the
Filing Date shall be no later than May 1, 2017 and the date of
Closing shall be no later than May 8, 2017. Generex shall provide
satisfactory proof of funds for the $6,000,000 no later than
three (3) business days prior to the Filing Date.
If the $500,000 or $3,00,000 deposit is not paid, or the reverse
stock split is not consummated, the formal Purchase Agreement is
not executed or the closing does not occur within the required
time periods, all deposits then made to will be refunded to
Generex within sixty (60) days after the termination.
Notwithstanding the standstill provisions of the LOI, Emmaus
shall have the right to negotiate and enter into financing
transactions without notice to or consent of Generex, provided
that such transactions do not constitute a sale of assets of
Emmaus except in the ordinary course of business or an initial
public offering of Emmaus common stock, and provided further that
Emmaus shall continue to have a sufficient number of authorized
and unissued shares of common stock so that it would be able to
issue the 51% of outstanding shares as contemplated in the LOI.
Convertible Note Financing
On March 6, 2017, Generex entered into a Securities Purchase
Agreement with an investor, to which the Company agreed to sell
its Convertible Note Due March __, 2018 (Note) in the principal
amount of $674,854.96. The purchase price of the
Note was $562,379.13 comprised of $500,000 in cash, the
cancellation of a $50,000 demand Note the Company had issued to
the investor in May, 2016, $3,879.13 in accrued interest on the
prior note and $8,500 in legal fees for the investors counsel,
which the Company was obligated to pay to the Securities Purchase
Agreement. The remaining $112,475.83 of principal amount
represents original issue discount.
Joseph Moscato, the Companys CEO and Chairman, has guaranteed the
Companys obligations under the Note and subordinated any debts
the Company owes to him to the Companys obligations under the
Note.
The $500,000 net proceeds of the Note will be paid directly on
the Companys behalf to Emmaus Life Sciences, Inc., as an
additional deposit under the LOI described above.
Subject to certain ownership limitations, the Note will be
convertible at the option of the holder at any time into shares
of the Companys common stock at a conversion price of $0.01 per
share.
The conversion price of the Note will be subject to adjustment in
the case of stock splits, stock dividends, combinations of
shares, similar recapitalization transactions and certain
pro-rata distributions to common stockholders. In addition, the
holder of the Note will be entitled to receive any securities or
rights to acquire securities or property granted or issued by the
Company pro rata to the holders of its common stock to the same
extent as if such holder had converted the Note in full. In the
event of a fundamental transaction, such as a merger,
consolidation, sale of substantially all assets and similar
reorganizations or recapitalizations, the holder of Note will be
entitled to receive, upon conversion of the Note, any securities
or other consideration received by the holders of the Companys
common stock to the fundamental transaction.
The Company will become obligated to repay the Note prior to
maturity upon the occurrence of certain triggering events,
including, breach of the covenants under the Note, breach of
certain other contractual obligations, the occurrence of a change
in control of the Company, sale of substantially all of the
Companys assets, failure of the Company to timely complete its
transactions under the Emmaus Letter of Intent, certain
restatements of the Companys financial statements, or the failure
of the Companys common stock to continue to be listed or quoted
for trading on one or more specified regulated quotation
services.
If any of these events occur, the Company must pay a minimum of
120% of the outstanding balance under the Note. The Company may
be required to pay a higher amount based on a formula that
compares the market value of the shares into which the Note could
be converted, to the price of those shares at the effective
conversion price under the Note. Late fees will apply on all
amounts not paid within five trading days of the payment date.
In the event that the Company fails to timely deliver
certificates for shares of common stock issuable upon conversion
of the Note (conversion shares) and the holder is required by its
brokerage firm to purchase (in an open market transaction or
otherwise) or such holders brokerage firm otherwise purchases,
shares of common stock to deliver in satisfaction of a sale by
such holder of the conversion shares, the Company will:
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pay the holder in cash the amount, if any, by which such holders total purchase price (including any brokerage commissions) for the shares of common stock purchased exceeds the product of (1) the aggregate number of conversion shares due to the holder multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and |
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at the option of such holder, either reissue (if surrendered) the principal amount of the Note submitted for conversion (in which case, such conversion shall be deemed rescinded) or deliver to such holder the number of shares of common stock that would have been issued if the Company had timely complied with its delivery requirements. |
The securities purchase agreement and the Note include certain
agreements and covenants for the benefit of the holder of the
Note, including restrictions on the Companys ability to amend its
certificate of incorporation and bylaws, pay cash dividends or
distributions with respect to its common stock or preferred
stock, and repurchase more than a de minimis number of
shares of its common stock or other junior securities. In
addition, the Company is prohibited from incurring more than
$100,00 in debt, unless the other lender expressly subordinates
to the Note.
While the Note is outstanding, the Company may not enter into any
equity line of credit or and is prohibited from issuing certain
types of securities which may be exercised for or converted into
common stock at variable rates. These prohibited securities
include securities which may be exercised or converted at a rate
which varies with market prices after the initial issuance or
which is adjusted based on the effective price at which the
Company issues additional securities. The prohibition of this
type of transaction will not apply if all of the proceeds are
used to fund the Companys transactions with Emmaus to the LOI.
With very limited exceptions, the investor will have a pro rata
right of first refusal in respect of participation in any private
debt or equity financings undertaken by the Company during the 18
months following the closing of the transaction.
The securities purchase agreement contains a most favored nation
provision. With limited exceptions, for so long as the investor
holders the Note or any shares issued on conversion of the Note,
in the event that the Company issues or sells any common stock or
securities or rights convertible into or exercisable for common
stock, at the option of the Investor, the Company shall amend the
terms of the note and the securities purchase agreement, so as to
give the Investor the benefit of such more favorable terms or
conditions.
The investor may, immediately upon written notice to the Company,
terminate the securities purchase agreement at any time, if the
closing has not been consummated on the closing date; provided,
however, no such termination will affect the right of any party
to sue for any breach by any other party. The securities purchase
agreement contains representations and warranties and covenants
for each party, which must be true and have been performed at
each closing. The Company has agreed to indemnify and hold the
investor harmless against certain liabilities in connection with
the issuance and sale of the Note under the securities purchase
agreement.
The Note and the shares of common stock underlying the Note, were
offered privately to Rule 506(b) of Regulation D under the
Securities Act of 1933.
In addition, the securities purchase agreement provides that if
at any time prior to the time all the Note and the shares
issuable upon conversion of the Note may be sold without the
Company meeting the current public information requirement under
Securities Act Rule 144(c)(1), the Company fails to meet such
requirement, the Company will pay liquidate damages equal to 2.0%
of the purchase price paid by each investor. Such payments will
be made in cash every 30 days until current public information
for the Company is available or is no longer required for the
investors to rely on Securities Act Rule 144 to transfer the
securities (including underlying securities) acquired under the
securities purchase agreement.
The foregoing description of the terms of the Note the securities
purchase agreement, the form of warrant, and the registration
rights agreement are subject to, and qualified in their entirety
by, such documents attached hereto as Exhibits 4.1 and 4.2
respectively, and incorporated herein by reference. A copy of the
press release announcing the private placement is attached hereto
as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The list of exhibits called for by this Item is incorporated by
reference to the Exhibit Index filed with this report.
to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
| GENEREX BIOTECHNOLOGY CORPORATION. | ||
| Date: March 6, 2017 | /s/ Mark A. Fletcher | |
| Mark A. Fletcher | ||
| Executive Vice President and General Counsel | ||
Exhibit Index
| Exhibit No. | Description | |
| 4.1 |
Form of Securities Purchase Agreement, dated May 3, 2017, by and among Generex Biotechnology Corporation and the purchaser(s) listed on the |
About GENEREX BIOTECHNOLOGY CORPORATION (OTCMKTS:GNBT)
Generex Biotechnology Corporation is a development-stage company. The Company is engaged primarily in the research and development of drug delivery systems and technologies. The Company is focused on its technology for the administration of formulations of large molecule drugs to the oral (buccal) cavity using a hand-held aerosol applicator. Its buccal delivery technology is a platform technology that has application to various large molecule drugs and provides a non-invasive way to administer such drugs. The Company focuses its development efforts on Generex Oral-lyn, an insulin formulation administered as a fine spray into the oral cavity using its hand-held aerosol spray applicator known as RapidMist. Its subsidiary, Antigen Express, Inc., focuses on developing vaccine formulations that work by stimulating the immune system to either attack offending agents, such as cancer cells, bacteria and viruses, or to stop attacking benign elements, such as self proteins and allergens. GENEREX BIOTECHNOLOGY CORPORATION (OTCMKTS:GNBT) Recent Trading Information
GENEREX BIOTECHNOLOGY CORPORATION (OTCMKTS:GNBT) closed its last trading session down -0.00042 at 0.00948 with 4,072,896 shares trading hands.
