UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 28, 2005
GENEREX BIOTECHNOLOGY CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 000-25169 98-0178636
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(State of Other (Commission (IRS Employer
Jurisdiction of File Number) Identification
Incorporation) Number)
33 Harbour Square, Suite 202, Toronto, Ontario Canada M5J 2G2
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (416) 364-2551
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N/A
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
Item 3.02 Unregistered Sales of Equity Securities.
On March 28, 2005, Generex Biotechnology Corporation (the "Company")
entered into a Promissory Note and Agreement with Cranshire Capital, L.P.
("Cranshire") pursuant to which Cranshire loaned the Company the principal
amount of $500,000, which amount will accrue interest at the rate of 10% per
annum (the "Note"). The outstanding principal balance under the Note and any
accrued but unpaid interest thereon is due and payable on May 15, 2005 to the
extent that Cranshire has not exercised its conversion rights under the Note as
described below. Interest on the outstanding principal balance under the Note
will accrue after the maturity date, default or judgment against the Company,
and interest on overdue amounts, including accrued but unpaid interest, will
accrue at the rate of 10% per annum.
As additional consideration for the loan, on April 28, 2005, the
Company will issue Cranshire a warrant to purchase an aggregate of 1,219,512
shares of the Company's Common Stock, par value $0.001 per share ("Common
Stock"), which will expire on April 27, 2010 (the "Warrant"). At any time after
April 28, 2005 and at Cranshire's option, the outstanding principal balance
under the Note, together with any accrued but unpaid interest thereon, and the
Warrant will be convertible or exercisable into shares of Common Stock at the
conversion/exercise price of $0.82 per share. Cranshire has agreed that it will
neither convert the Note nor exercise the Warrant if such conversion or exercise
would cause Cranshire, together with its affiliates, to beneficially own more
than 9.99% of the shares of Common Stock then outstanding. The Company has
agreed to register the shares of Common Stock issued upon conversion of the Note
and exercise of the Warrant for resale in the next registration statement that
the Company files with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act").
Cranshire's right to convert the Note is subject to certain
participation rights of Iroquois Capital, L.P., Omicron Master Trust and
Smithfield Fiduciary, LLC, which, together with Cranshire, are the holders of
the Company's 6% Secured Convertible Debentures (the "Debentures") issued
pursuant to a Securities Purchase Agreement, which closed on November 15, 2004
(the "Securities Purchase Agreement"). The Securities Purchase Agreement is
discussed in and filed as an exhibit to the Company's Current Report on Form
8-K, filed November 12, 2004. The participation rights granted to the holders of
the Debentures under the Securities Purchase Agreement provide that, upon any
financing by the Company or any of its subsidiaries of Common Stock or debt or
securities convertible or exercisable into Common Stock, each such holder will
have the right to purchase up to 100% of such financing. The Company does not
anticipate that the other holders of Debentures will elect to exercise their
participation rights with respect to the Note.
The Company is obligated to use a portion of the proceeds from the Note
to pay two of the holders of the Debentures (not including Cranshire) the full
amount of the March 1, 2005 monthly amortization payments due under the
Debentures. The Note is subordinate to the obligations of the Company under the
Debentures.
The offer and sale of the Note and the Warrant, including shares of
Common Stock into which the Note and Warrant are convertible or exercisable
(collectively, the "Securities"), by the Company to Cranshire was exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof and
Rule 506 of Regulation D promulgated thereunder. Cranshire has previously
represented and warranted to the Company that it is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D. Any certificates issued
representing the Warrant and shares of Common Stock issued upon
conversion/exercise of the Note and the Warrant will be legended to indicate
that they are restricted. No sale of the Securities involved the use of
underwriters, and no commissions were paid in connection with the issuance or
sale of the Securities.
On March 30, 2005, the Company also entered into an Assistance
Agreement with Eckert Seamans Cherin & Mellott, LLC, ("Eckert Seamans"),
pursuant to which Eckert Seamans has advanced the Company funds in the amount of
$325,179.48 for the sole purpose of making the interest payment and the monthly
redemption payment due on March 31, 2005 and April 1, 2005, respectively, under
the Debentures (the "Assistance Agreement"). The Company has agreed to repay
such advance without interest in three equal installments due on October 1,
2005, November 1, 2005 and December 1, 2005. If the Company fails to pay any
installment when due, all amounts owed to Eckert Seamans will be payable on
demand, and interest on such unpaid amounts will accrue at the rate of 8% per
annum. In connection with this transaction, the Company executed a release in
favor of Eckert Seamans.
Eckert Seamans has represented the Company in various transactions and
matters since 1998 and represented the Company with respect to the Securities
Purchase Agreement and certain other transactions relating to the Debentures but
did not represent the Company with respect to the Assistance Agreement or the
release executed in connection therewith.
THE ABOVE DESCRIPTION OF, AMONG OTHER THINGS, THE TERMS OF THE NOTE,
THE WARRANT, AND THE ASSISTANCE AGREEMENT, IS QUALIFIED IN ITS ENTIRETY BY THE
NOTE AND THE ASSISTANCE AGREEMENT, WHICH ARE INCORPORATED BY REFERENCE HEREIN.
THE COMPANY IS FILING THE NOTE AND THE ASSISTANCE AGREEMENT AS EXHIBITS 4 AND
10, RESPECTIVELY, TO THIS CURRENT REPORT ON FORM 8-K.
Item 9.01. Financial Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
4 Promissory Note and Agreement, dated March 28, 2005 by and between
Generex Biotechnology Corporation and Cranshire Capital, L.P.
10 Assistance Agreement, dated March 30, 2005 by and between Generex
Biotechnology Corporation and Eckert Seamans Cherin & Mellott, LLC
Forward-Looking Statements
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This Report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Act"), which are subject
to the safe harbors created thereby. The Act limits the Company's liability in
any lawsuit based on forward-looking statements it has made. All statements,
other than statements of historical facts, included in this Report that address
activities, events or developments that the Company expects or anticipates will
or may occur in the future, including such matters as the Company's projections,
future capital expenditures, business strategy, competitive strengths, goals,
expansion, market and industry developments and the growth of its businesses and
operations, are forward-looking statements. These statements can be identified
by introductory words such as "anticipate" or words of similar meaning, and by
the fact that they do not relate strictly to historical or current facts. Any or
all of the Company's forward-looking statements may turn out to be wrong. They
may be affected by inaccurate assumptions that the Company might make or by
known or unknown risks and uncertainties. Actual outcomes and results may differ
materially from what is expressed or implied in the Company's forward-looking
statements. Among the factors that could affect future results are: the
inability to raise additional capital; depression of the market price of the
Company's Common Stock and dilution of the holders of Common Stock in the event
that the Company raises additional equity financing; the inherent uncertainties
of product development based on the Company's new and as yet not fully proven
technologies; the risks and uncertainties regarding the actual effect on humans
of seemingly safe and efficacious formulations and treatments when tested
clinically; the inherent uncertainties associated with clinical trials of
product candidates; and the inherent uncertainties associated with the process
of obtaining regulatory approval to market product candidates. The Company
cautions investors that the forward-looking statements contained in this Report
must be interpreted and understood in light of conditions and circumstances that
exist as of the date of this Report. The Company expressly disclaims any
obligation or undertaking to update or revise forward-looking statements made in
this Report to reflect any changes in management's expectations resulting from
future events or changes in the conditions or circumstances upon which such
expectations are based.
SIGNATURE
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Pursuant 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 hereunto duly authorized.
GENEREX BIOTECHNOLOGY CORPORATION
Dated: April 1, 2005 By: /s/ Rose C. Perri
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Chief Operating Officer and
Acting Chief Financial Officer
(principal financial officer)
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
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4 Promissory Note and Agreement, dated March 28, 2005 by and
between Generex Biotechnology Corporation and Cranshire
Capital, L.P.
10 Assistance Agreement, dated March 30, 2005 by and between
Generex Biotechnology Corporation and Eckert Seamans Cherin &
Mellott, LLC