PROSPECTUS
GENEREX BIOTECHNOLOGY CORPORATION
10,528,522 Shares of Common Stock
We are registering 10,528,522 shares of our common stock for resale by the
selling shareholders listed on pages 10-11.
o 3,391,441 of these shares are currently outstanding; and
o 7,137,081 of these shares are issuable upon exercise of outstanding
warrants and additional investment rights.
The prices at which the selling shareholders may sell shares of our common stock
will be determined by the prevailing market price for such shares or in
negotiated transactions.
Our common stock is quoted on the NASDAQ SmallCap Market under the symbol
"GNBT." The last sale price of our common stock on September 10, 2004, as
reported by NASDAQ, was $1.18 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 2 TO READ ABOUT THE FACTORS YOU SHOULD CONSIDER BEFORE
INVESTING.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is September 14, 2004
TABLE OF CONTENTS
PROSPECTUS SUMMARY.......................................................... 1
RISK FACTORS................................................................ 2
NOTE ABOUT FORWARD-LOOKING STATEMENTS....................................... 8
AVAILABILITY OF ADDITIONAL INFORMATION...................................... 9
DILUTION.................................................................... 10
USE OF PROCEEDS............................................................. 10
SELLING SHAREHOLDERS........................................................ 10
PLAN OF DISTRIBUTION........................................................ 12
LEGAL MATTERS............................................................... 13
EXPERTS..................................................................... 14
PROSPECTUS SUMMARY
ABOUT GENEREX
Generex Biotechnology Corporation is a Delaware corporation engaged in the
research and development of injection-free methods for delivery of large
molecule drugs. We are a development stage company.
To date, we have focused most of our efforts and resources on a platform
technology to orally administer large molecule drugs by absorption through the
walls of the mouth cavity. The mouth cavity is also known as the "buccal"
cavity. Large molecule drugs include proteins, hormones, peptides and vaccines.
Large molecule drugs, such as synthetic insulin, are presently administered
almost exclusively by injection.
The initial product that we have been trying to develop 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 small and lightweight aerosol
applicator that administers a metered dose for absorption. Absorption occurs
through the mucous membranes in the buccal cavity.
We have also pursued the application of our technology for the buccal delivery
of pharmaceutical products in addition to insulin, such as the buccal delivery
of morphine, fentanyl citrate and low molecular weight heparin.
In August 2003, after the end of our most recent fiscal year, we acquired
Antigen Express, Inc. (Antigen). Antigen is engaged in the research and
development of technologies for the treatment of malignant, infectious,
autoimmune and allergic diseases.
Our principal offices are located at 33 Harbour Square, Suite 202, Toronto,
Ontario, Canada M5J 2G2 and our telephone number is (416) 364-2551.
ABOUT THIS PROSPECTUS
We are registering our common stock for resale by selling shareholders. The
selling shareholders and the specific number of shares that they each may resell
through this prospectus are listed on pages 10-12.
The shares offered for resale by this prospectus include the following:
o 6,012,882 shares of Common Stock; and
o 4,515,640 warrants to purchase shares of Common Stock.
We issued an aggregate of 2,621,441 shares of our common stock to certain
selling shareholders, of which 93,750 shares were issued pursuant to the terms
of a Securities Purchase Agreement, dated February 11, 2004; 68,675 shares were
issued pursuant to the terms of a Securities Purchase Agreement, dated February
13, 2004; and 2,459,016 shares were issued pursuant to the terms of a Securities
Purchase Agreement, dated June 23, 2004. Additionally, in accordance with the
foregoing Securities Purchase Agreements, we issued to the same selling
shareholders (i) warrants to purchase 23,438 shares of our common stock, 17,169
shares of our common stock, and 1,967,213 shares of our common stock,
respectively, for a total 2,007,820 shares of our common stock and (ii)
additional investment rights to purchase, for a period of time, the same number
of shares of common stock and warrants initially purchased by each investor. In
addition we issued 770,000 shares and 500,000 warrants to purchase our common
stock to consultants in exchange for services.
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This prospectus may only be used where it is legal to offer and sell the
shares covered by this prospectus. We have not taken any action to register or
obtain permission for this offering or the distribution of this prospectus in
any country other than the United States.
INFORMATION ON OUTSTANDING SHARES
The number of shares outstanding before and after this offering are set forth
below:
o Common stock outstanding before the offering.................34,004,648
shares of Common Stock
o Common stock to be outstanding after the offering............44,533,170
shares of Common Stock
The number set forth above for the shares of common stock outstanding before
this offering is the number of shares outstanding on September 10, 2004,
excluding the shares of common stock offered for resale by this prospectus.
The numbers set forth above do not include (i) 8,017,159 shares of our common
stock that, as of the date of this prospectus, are issuable upon the exercise of
outstanding options and (ii) 7,278,059 shares of our common stock that, as of
the date of this prospectus, are issuable upon the exercise of outstanding
warrants other than those covered by this prospectus. These additional options
and warrants are exercisable at prices ranging from $.89 to $25.15 per share,
with a weighted average exercise price for the options of $3.69 per share and a
weighted average exercise price for the warrants of $3.38 per share. The numbers
set forth above also do not include shares of common stock that, as of the date
of this prospectus, are issuable upon conversion of outstanding shares of our
Series A Preferred Stock.
RISK FACTORS
An investment in our stock is very speculative and involves a high degree of
risk. You should carefully consider the following important factors, as well as
the other information in this Report and the other reports that we have filed
heretofore (and will file hereafter) with the Securities and Exchange
Commission, before purchasing our stock. The following discussion outlines
certain factors that we think could cause our actual outcomes and results to
differ materially from our forward-looking statements.
RISKS RELATED TO OUR FINANCIAL CONDITION
WE HAVE A HISTORY OF LOSSES, AND WILL INCUR ADDITIONAL LOSSES.
We are a development stage company with a limited history of operations, and do
not expect ongoing revenues from operation in the immediately foreseeable
future. To date, we have not been profitable and our accumulated net loss before
preferred stock dividend was $89,155,698 at April 30, 2004. Our losses have
resulted principally from costs incurred in research and development, including
clinical trials, and from general and administrative costs associated with our
operations. While we seek to attain profitability, we cannot be sure that we
will ever achieve product and other revenue sufficient for us to attain this
objective.
Our product candidates are in research or early stages of pre-clinical and
clinical development. We will need to conduct substantial additional research,
development and clinical trials. We will also need to receive necessary
regulatory clearances both in the United States and foreign countries and obtain
meaningful patent protection for and establish freedom to commercialize each of
our product candidates. We cannot be sure that we will obtain required
regulatory approvals, or successfully research, develop, commercialize,
manufacture and market any other product candidates. We expect that these
activities, together with future general and administrative activities, will
result in significant expenses for the foreseeable future.
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THE NEED FOR ADDITIONAL CAPITAL
To progress in product development or marketing, we will need additional capital
which may not be available to us. This may delay our progress in product
development or market.
We will require funds in excess of our existing cash resources:
o to proceed with the development of our buccal insulin product
o to proceed under our joint venture with Elan, which requires us to fund
80.1% of initial product development costs;
o to develop other buccal and immunomedicine products;
o to develop new products based on our buccal delivery and immunomedicine
technologies, including clinical testing relating to new products;
o to develop or acquire other technologies or other lines of business;
o to establish and expand our manufacturing capabilities;
o to finance general and administrative and research activities that are
not related to specific products under development; and
o to finance the research and development activities of our new subsidiary
Antigen. We have agreed to fund at least $2,000,000 of Antigen
expenditures during the first two years following the acquisition. To
date we have funded approximately $900,000 of those expenditures.
In the past, we have funded most of our development and other costs through
equity financing. We anticipate that our existing capital resources will enable
us to maintain currently planned operations through the next seven months.
However, this expectation is based on our current operating plan, which could
change as a result of many factors, and we may need additional funding sooner
than anticipated. Because our operating and capital resources are insufficient
to meet future requirements, we will have to raise additional funds in the near
future to continue the development and commercialization of our products.
Unforeseen problems, including materially negative developments in our joint
venture with Elan, 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.
Recent changes in the application of the rules of the NASDAQ Stock Market may
also make it more difficult for us to raise private equity capital.
It is possible that we will be unable to obtain additional funding as and when
we need it. If we were unable to obtain additional funding as and when needed,
we could be forced to delay the progress of certain development efforts. Such a
scenario 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.
NEW EQUITY FINANCING COULD DILUTE CURRENT STOCKHOLDERS.
If we raise funds through equity financing to meet the needs discussed above, it
will have a dilutive effect on existing holders of our shares by reducing their
percentage ownership. The shares may be sold at a time when the market price is
low because we need the funds. This will dilute existing holders more than if
our stock price was higher. In addition, equity financings normally involve
shares sold at a discount to the current market price.
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OUR RESEARCH AND DEVELOPMENT AND MARKETING EFFORTS ARE LIKELY TO BE HIGHLY
DEPENDENT ON CORPORATE COLLABORATORS AND OTHER THIRD PARTIES WHO MAY NOT DEVOTE
SUFFICIENT TIME, RESOURCES AND ATTENTION TO OUR PROGRAMS, WHICH MAY LIMIT OUR
EFFORTS TO SUCCESSFULLY DEVELOP AND MARKET POTENTIAL PRODUCTS.
Because we have limited resources, we have sought to enter into collaboration
agreements with other pharmaceutical companies that will assist us in
developing, testing, obtaining governmental approval for and commercializing
products using our buccal delivery and immunomedicine technologies. Any
collaborator with whom we may enter into such collaboration agreements may not
support fully our research and commercial interests since our program may
compete for time, attention and resources with such collaborator's internal
programs. Therefore, these collaborators may not commit sufficient resources to
our program to move it forward effectively, or that the program will advance as
rapidly as it might if we had retained complete control of all research,
development, regulatory and commercialization decisions.
RISKS RELATED TO OUR TECHNOLOGIES
BECAUSE OUR TECHNOLOGIES AND PRODUCTS ARE AT AN EARLY STAGE OF DEVELOPMENT, WE
CANNOT EXPECT REVENUES IN THE FORESEEABLE FUTURE.
We have no products approved for commercial sale at the present time. To be
profitable, we must successfully research, develop, obtain regulatory approval
for, manufacture, introduce, market and distribute our products under
development. We may not be successful in one or more of these stages of the
development of our products, and/or any of the products we develop may not be
commercially viable.
While over 750 patients with diabetes have been dosed with our oral insulin
formulation at approved facilities in seven countries, our clinical program has
not reached a point where we are prepared to apply for regulatory approvals to
market the product in any country. Until we have developed a commercially viable
product which receives regulatory approval, we will not receive revenues from
ongoing operations.
WE WILL NOT RECEIVE REVENUES FROM OPERATIONS UNTIL WE RECEIVE REGULATORY
APPROVAL TO SELL OUR PRODUCTS. MANY FACTORS IMPACT OUR ABILITY TO OBTAIN
APPROVALS FOR COMMERCIALLY VIABLE PRODUCTS.
We have no products approved for commercial sale by drug regulatory authorities.
We have begun the regulatory approval process for our oral insulin formulation,
buccal morphine and fentanyl products. Our immunomedicine products are in the
pre-clinical stage of development.
Pre-clinical and clinical trials of our products, and the manufacturing and
marketing of our technologies, are subject to extensive, costly and rigorous
regulation by governmental authorities in the United States, Canada and other
countries. The process of obtaining required regulatory approvals from the FDA
and other regulatory authorities often takes many years, is expensive and can
vary significantly based on the type, complexity and novelty of the product
candidates. For these reasons, it is possible we will never receive approval for
one or more product candidates.
Delays in obtaining United States or foreign approvals for our products could
result in substantial additional costs to us, and, therefore, could adversely
affect our ability to compete with other companies. If regulatory approval is
ultimately granted, the approval may place limitations on the intended use of
the product we wish to commercialize, and may restrict the way in which we are
permitted to market the product.
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DUE TO LEGAL AND FACTUAL UNCERTAINTIES REGARDING THE SCOPE AND PROTECTION
AFFORDED BY PATENTS AND OTHER PROPRIETARY RIGHTS, WE MAY NOT HAVE MEANINGFUL
PROTECTION FROM COMPETITION.
Our long-term success will substantially depend upon our ability to protect our
proprietary technologies from infringement, misappropriation, discovery and
duplication and avoid infringing the proprietary rights of others. Our patent
rights, and the patent rights of biotechnology and pharmaceutical companies in
general, are highly uncertain and include complex legal and factual issues.
Because of this, our pending patent applications may not be granted. These
uncertainties also mean that any patents that we own or will obtain in the
future could be subject to challenge, and even if not challenged, may not
provide us with meaningful protection from competition. Due to our financial
uncertainties, we may not possess the financial resources necessary to enforce
our patents. Patents already issued to us or our pending applications may become
subject to dispute, and any dispute could be resolved against us.
Because a substantial number of patents have been issued in the field of
alternative drug delivery and because patent positions can be highly uncertain
and frequently involve complex legal and factual questions, the breadth of
claims obtained in any application or the enforceability of our patents cannot
be predicted. Consequently, we do not know whether any of our pending or future
patent applications will result in the issuance of patents or, to the extent
patents have been issued or will be issued, whether these patents will be
subject to further proceedings limiting their scope, will provide significant
proprietary protection or competitive advantage, or will be circumvented or
invalidated.
Also because of these legal and factual uncertainties, and because pending
patent applications are held in secrecy for varying periods in the United States
and other countries, even after reasonable investigation we may not know with
certainty whether any products that we (or a licensee) may develop will infringe
upon any patent or other intellectual property right of a third party. For
example, we are aware of certain patents owned by third parties that such
parties could attempt to use in the future in efforts to affect our freedom to
practice some of the patents that we own or have applied for. Based upon the
science and scope of these third party patents, we believe that the patents that
we own or have applied for do not infringe any such third party patents,
however, we cannot know for certain whether we could successfully defend our
position, if challenged. We may incur substantial costs if we are required to
defend ourselves in patent suits brought by third parties. These legal actions
could seek damages and seek to enjoin testing, manufacturing and marketing of
the accused product or process. In addition to potential liability for
significant damages, we could be required to obtain a license to continue to
manufacture or market the accused product or process.
RISKS RELATED TO MARKETING OF OUR POTENTIAL PRODUCTS
WE MAY NOT BECOME, OR STAY, PROFITABLE EVEN IF OUR PRODUCTS ARE APPROVED FOR
SALE.
Even if we obtain regulatory approval to market our oral insulin product or any
other product candidate, 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 or treatment by health care professionals
and diabetic patients;
o the availability, effectiveness and relative cost of alternative
diabetes or immunomedicine treatments that may be developed by
competitors; and
o the availability of third-party (i.e., insurer and governmental agency)
reimbursements.
WE MAY NOT BE ABLE TO COMPETE WITH TREATMENTS NOW BEING MARKETED AND DEVELOPED,
OR WHICH MAY BE DEVELOPED AND MARKETED IN THE FUTURE BY OTHER COMPANIES.
Our products will compete with existing and new therapies and treatments. 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. We are also aware of a number of companies currently seeking to
develop alternative means of enhancing and suppressing peptides. In the longer
term, we also face competition from companies that seek to develop cures for
diabetes and other malignant, infectious, autoimmune and allergic diseases
through techniques for correcting the genetic deficiencies that underlie such
diseases.
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We will have to depend upon others for marketing and distribution of our
products, and we may be forced to enter into contracts limiting 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 for us. We may
not be able to enter into beneficial contracts, and 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.
Numerous pharmaceutical, biotechnology and drug delivery companies, hospitals,
research organizations, individual scientists and nonprofit organizations are
engaged in the development of alternatives to our technologies. Many of these
companies have greater research and development capabilities, experience,
manufacturing, marketing, financial and managerial resources than we do.
Accordingly, our competitors may succeed in developing competing technologies,
obtaining FDA approval for products or gaining market acceptance more rapidly
than we can.
IF GOVERNMENT PROGRAMS AND INSURANCE COMPANIES DO NOT AGREE TO PAY FOR OR
REIMBURSE PATIENTS FOR OUR PRODUCTS, WE WILL NOT BE SUCCESSFUL.
Sales of our potential products depend in part on the availability of
reimbursement by third-party payors such as government health administration
authorities, private health insurers and other organizations. Third-party payors
often challenge the price and cost-effectiveness of medical products and
services. FDA approval of health care products does not guarantee that these
third party payors will pay for the products. Even if third party payors do
accept our product, the amounts they pay may not be adequate to enable us to
realize a profit. Legislation and regulations affecting the pricing of
pharmaceuticals may change before our products are approved for marketing and
any such changes could further limit reimbursement.
RISKS RELATED TO POTENTIAL LIABILITIES
WE FACE SIGNIFICANT PRODUCT LIABILITY RISKS, WHICH MAY HAVE A NEGATIVE EFFECT ON
OUR FINANCIAL CONDITION.
The administration of drugs or treatments to humans, whether in clinical trials
or commercially, can result in product liability claims whether or not the drugs
or treatments are actually at fault for causing an injury. Furthermore, our
products may cause, or may appear to have caused, serious adverse side effects
(including death) or potentially dangerous drug interactions that we may not
learn about or understand fully until the drug or treatment has been
administered to patients for some time. Product liability claims can be
expensive to defend and may result in large judgments or settlements against us,
which could have a severe negative effect on our financial condition. We
maintain product liability insurance in amounts we believe to be commercially
reasonable for our current level of activity and exposure, but claims could
exceed our coverage limits. Furthermore, due to factors in the insurance market
generally and our own experience, we may not always be able to purchase
sufficient insurance at an affordable price. Even if a product liability claim
is not successful, the adverse publicity and time and expense of defending such
a claim may interfere with our business.
OUTCOME OF AN ARBITRATION PROCEEDING WITH SANDS BROTHERS MAY HAVE AN ADVERSE
IMPACT ON US.
On October 2, 1998, Sands Brothers & Co. Ltd., a New York City-based investment
banking and brokerage firm, initiated an arbitration against us under New York
Stock Exchange rules. Sands alleged that it had the right to receive, for
nominal consideration, approximately 1.5 million shares of our common stock.
Sands based its claim upon an October 1997 letter agreement that was purported
by Sands to confirm an agreement appointing Sands as the exclusive financial
advisor to Generex Pharmaceuticals, Inc., a subsidiary that we acquired in late
1997. In exchange therefor, the letter agreement purported to grant Sands the
right to acquire 17% of Generex Pharmaceuticals' common stock for nominal
consideration. Sands claimed that its right to receive shares of Generex
Pharmaceuticals' common stock applies to our common stock since outstanding
shares of Generex Pharmaceuticals' common stock were converted into shares of
our common stock in the acquisition. Sands' claims also included additional
shares allegedly due as a fee related to that acquisition, and $144,000 in
monthly fees allegedly due under the terms of the purported agreement.
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After several arbitration and court proceedings, on October 29, 2002, the
Appellate Division of the New York Supreme Court issued a decision remanding the
issue of damages to a new panel of arbitrators and limiting the issue of damages
before the new panel to reliance damages which is not to include an award of
lost profits. Reliance damages are out-of-pocket damages incurred by Sands.
On November 27, 2002, Sands filed with the Appellate Division a motion to
reargue the appeal, or, in the alternative, for leave to appeal to the Court of
Appeals of New York from the order of the Appellate Division. On March 18, 2003,
the Appellate Division denied Sands' motion. A new arbitration hearing was held
in early June, 2004. A decision has not yet been rendered by the new arbitration
panel which held that hearing.
Despite the recent favorable decisions, the case is still ongoing and our
ultimate liability cannot yet be determined with certainty. Our financial
condition would be materially adversely affected to the extent that Sands
receives shares of our common stock for little or no consideration or
substantial monetary damages as a result of this legal proceeding. We are not
able to estimate an amount or range of potential loss from this legal proceeding
at the present time.
RISKS RELATED TO THE MARKET FOR OUR COMMON STOCK
IF OUR COMMON STOCK IS DELISTED FROM THE NASDAQ SMALLCAP MARKET AND/OR BECOMES
SUBJECT TO PENNY STOCK REGULATIONS, THE MARKET PRICE FOR OUR STOCK MAY BE
REDUCED AND IT MAY BE MORE DIFFICULT FOR US TO OBTAIN FINANCING.
On June 5, 2003, our common stock was delisted from the NASDAQ National Market
because of our failure to maintain a minimum of $10,000,000 in stockholders'
equity. On June 5, 2003, our stock began trading on the NASDAQ SmallCap Market.
The NASDAQ SmallCap Market has its own standards for continued listing,
including a minimum of $2.5 million stockholders' equity. As of April 30, 2004,
our stockholders' equity was $2,549,472.
In addition, for continued listing on both the NASDAQ National Market and
SmallCap Market, our stock price must be at least $1.00. During periods in
fiscal 2002 and the beginning of fiscal 2003, our stock price dropped close to
$1.00 per share. If we do not meet this requirement in the future, we may be
subject to delisting by NASDAQ.
If our stock is delisted from NASDAQ, there will be less interest for our stock
in the market. This may result in lower prices for our stock and make it more
difficult for us to obtain financing.
If our stock is not listed on NASDAQ and fails to maintain a price of $5.00 or
more per share, our stock would become subject to the Securities and Exchange
Commission's "Penny Stock" rules. These rules require a broker to deliver, prior
to any transaction involving a Penny Stock, a disclosure schedule explaining the
Penny Stock Market and its risks. Additionally, broker/dealers who recommend
Penny Stocks to persons other than established customers and accredited
investors must make a special written suitability determination and receive the
purchaser's written agreement to a transaction prior to the sale. In the event
our stock becomes subject to these rules, it will become more difficult for
broker/dealers to sell our common stock. Therefore, it may be more difficult for
us to obtain financing.
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THE PRICE OF OUR COMMON STOCK MAY BE VOLATILE.
There may be wide fluctuation in the price of our common stock. 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 developments in patent and other proprietary rights;
o public concern as to the safety of drugs or treatments developed by us
or others;
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.
From time to time, we may hire companies to assist us in pursuing investor
relations strategies to generate increased volumes of investment in our common
stock. Such activities may result, among other things, in causing the price of
our common stock to increase on a short-term basis.
Furthermore, the stock market generally and the market for stocks of companies
with lower market capitalizations and small biopharmaceutical companies, like
us, have from time to time experienced, and likely will again experience
significant price and volume fluctuations that are unrelated to the operating
performance of a particular company.
OUR OUTSTANDING SPECIAL VOTING RIGHTS PREFERRED STOCK AND PROVISIONS OF OUR
RESTATED CERTIFICATE OF INCORPORATION COULD DELAY OR PREVENT THE ACQUISITION OR
SALE OF OUR BUSINESS.
Holders of our Special Voting Rights Preferred Stock have the ability to prevent
any change of control in us. Our Vice President of Research and Development, Dr.
Pankaj Modi, owns all of our Special Voting Rights Preferred Stock. In addition,
our Restated 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 our stockholders. 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 stockholder
approval for an acquisition of our business or increase the cost of any such
acquisition.
NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have made statements in this prospectus that may be forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements can be identified by introductory words such as
"expects," "plans," "intends," "believes," "will," "estimates," "forecasts,"
"projects" or words of similar meaning, and by the fact that they do not relate
strictly to historical or current facts. Our forward-looking statements address,
among other things:
o our expectations concerning product candidates for our technology;
o our expectations concerning existing or potential development and
license agreements for third party collaborations and joint ventures;
o our expectations of when different phases of clinical activity may
commence;
o our expectations of when regulatory submissions may be filed or when
regulatory approvals may be received; and
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o our expectations of receiving additional financing.
Any or all of our forward-looking statements may turn out to be wrong. They may
be affected by inaccurate assumptions that we might make or by known or unknown
risks and uncertainties. Actual outcomes and results may differ materially from
what is expressed or implied in our forward-looking statements. Among the
factors that could affect future results are:
o the inherent uncertainties of product development based on a new and as
yet not fully proven drug delivery technology;
o the risks and uncertainties regarding the actual effect on humans of
seemingly safe and efficacious formulations when tested clinically;
o the inherent uncertainties associated with identification and initial
development of product candidates;
o the inherent uncertainties associated with clinical trials of product
candidates; and
o the inherent uncertainties associated with the process of obtaining
regulatory approval to market product candidates.
Additional factors that could affect future results are set forth above under
the caption "Risk Factors". We caution investors that the forward-looking
statements contained in this prospectus must be interpreted and understood in
light of conditions and circumstances that exist as of the date of this
prospectus. We expressly disclaim any obligation or undertaking to update or
revise forward-looking statements made in this prospectus 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.
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. 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, 2003, as
amended.
o Quarterly Reports on Form 10-Q for the fiscal quarters ended October 31,
2003, January 31, 2004 and April 30, 2004, respectively.
o Current Reports on Form 8-K filed on August 15, 2003 and 8-K/A filed on
September 9, 2003.
o Current Reports on Form 8-K filed on January 6, 2004 and 8-K/A filed on
March 24, 2004.
o Current Reports on Form 8-K filed on February 3, 2004, on February 12,
2004, on March 1, 2004, on March 22, 2004 and on July 14, 2004.
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o Definitive Proxy Statement on Schedule 14A filed on October 14, 2003.
o Preliminary Proxy Statements on Schedule 14A filed on filed on October
3, 2003 and October 7, 2003.
o Definitive Proxy Statement on Schedule 14A filed on April 8, 2004.
o Preliminary Proxy Statement on Schedule 14A filed on January 27, 2004.
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 filed on February 24, 1999, and including any amendment or report
subsequently filed for the purpose of updating the description.
You may request a copy of these filings at no cost. Please direct your requests
to Mark Fletcher, Executive Vice President and General Counsel, 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.
This prospectus is part of a registration statement on Form S-3 (Registration
No. 333-117822) 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 entire registration statement for further
information about us and our common stock.
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 stockholders' equity per
share of the shares. As of April 30, 2004, the book value of our stockholders'
equity was approximately $0.08 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 outstanding common stock registered for sale and
beneficially owned by each prior to the offering;
o the number of shares registered for sale by each in the offering and
issuable upon exercise of warrants and additional investment rights;
o the total number of shares registered for sale by each in the offering;
and
o the number of shares of common stock owned by each after the offering,
assuming each sells all of the shares registered for his or her benefit.
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REGISTERED SHARES TOTAL OUTSTANDING
ISSUABLE UPON SHARES SHARES
OUTSTANDING EXERCISE OF REGISTERED OWNED AFTER
NAME SHARES(1) WARRANTS(2) FOR SALE (3) OFFERING(4)
---- --------- ----------- ------------ -----------
CityPlatz Limited 3,688,524(5) 1,639,344 3,688,524 0
Omicron Master Trust 3,294,801(5)(6) 1,311,476 2,950,820 343,981
Iroquois Capital, LP 1,475,410(5) 655,738 1,475,410 0
Howard Horberg 772,486(5) 327,868 772,486 34,782
Michael Sourlis 234,376 46,876 234,376 0
Zapfe Holdings, Inc. 191,688 34,338 191,688 0
CEOcast Inc. 225,000 0 225,000 0
Charmed Investments Limited 100,000 0 100,000 0
Sound Capital, Inc. 875,000(5) 500,000 875,000 0
Quickstringer Limited 50,000 0 50,000 0
---------- --------- ---------- -------
TOTAL STOCK 10,907,285 4,515,640 10,528,522 378,763
-----------------
(1) Includes all outstanding shares beneficially owned by the shareholder as of
the date hereof.
(2) Includes all warrants owned by the shareholder which are exercisable within
60 days of the date hereof.
(3) See (1) and (2).
(4) Assumes sale of all shares offered by this prospectus.
(5) Beneficially own more than 1% of our common stock.
(6) All warrants and additional investment rights held by Omicron contain
provisions that prevent Omicron from exercising any such securities if, as a
result, Omicron would own greater than 9.9% of Generex's then issued and
outstanding shares of common stock. Accordingly, Omicron beneficially owns
9.9% of the issued and outstanding shares of common stock of Generex.
No selling shareholder has held a position as a director or executive officer
nor has had a material employment relationship with us or any of our affiliates,
or our or their predecessors, within the past 3 years.
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PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, donees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of Common Stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholders may use any one or more of
the following methods when selling shares:
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits Investors;
o block trades in which the broker-dealer will attempt 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;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales (other than short sales established prior to the effectiveness
of the Registration Statement to which this Prospectus is a part)
o broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a
security interest in some or all of the shares of Common Stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell shares of Common Stock from time
to time under this prospectus, or under an amendment to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus.
Upon the Company being notified in writing by a Selling Stockholder
that any material arrangement has been entered into with a broker-dealer for the
sale of Common Stock through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, to
this prospectus will be filed an amendment disclosing (i) the name of each such
Selling Stockholder and of the participating broker-dealer(s), (ii) the number
of shares involved, (iii) the price at which such the shares of Common Stock
were sold, (iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this prospectus, and (vi) other facts material to the transaction.
In addition, upon the Company being notified in writing by a Selling Stockholder
of any material changes in the "Selling Stockholder" table, including, without
limitation, that a donee or pledgee intends to sell more than 500 shares of
Common Stock, such changes will be identified in pre-effective or post-effective
amendment(s) or prospectus supplement(s), as necessary. Unless a change is
material (which includes a Selling Stockholder entering into a material
arrangement with a broker-dealer for a sale, distribution or purchase of these
securities), revisions in identified Selling Stockholders may be reflected by
the filing of a Rule 424(b) prospectus supplement which will describe the change
and set forth the information required by Item 507 of Regulation S-K.
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The Selling Stockholders also may transfer the shares of common stock
in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The Selling Stockholders are not broker-dealers and are not affiliated
with any broker-dealers. Accordingly, the Selling Stockholders will not be
deemed "underwriters" within the meaning of the Securities Act in connection
with any sales of the securities. Any broker-dealers or agents that are involved
in selling the shares are "underwriters" within the meaning of the Securities
Act in connection with such sales. In such event, any commissions received by
such broker-dealers or agents and any profit on the resale of the shares
purchased by them will be deemed to be underwriting commissions or discounts
under the Securities Act. Each Selling Stockholders has represented and
warranted to the Company that it does not have any agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock.
The Company is required to pay all fees and expenses incident to the
registration of the shares. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
The Selling Stockholders and any other persons participating in a
distribution of the shares of Common Stock will be subject to applicable
provisions of the Securities Exchange Act of 1934 and the rules and regulations
thereunder, including Regulation M, which may restrict certain activities of,
and limit the timing of purchases and sales of the Common Stock by the Selling
Stockholders and other persons participating in a distribution of the shares of
Common Stock. Furthermore, under Regulation M, persons engaged in a distribution
of the shares of Common Stock are prohibited from simultaneously engaging in
market making and certain other activities with respect to the shares for a
specified period of time prior to the commencement of such distributions subject
to specified exceptions or exemptions. All of the foregoing may affect the
marketability of the shares offered hereby. We have notified the Selling
Stockholders that they will be subject to applicable provisions of the
Securities Exchange Act of 1934 and its rules and regulations, including, among
others, Rule 102 under Regulation M. These provisions may limit the timing of
purchases and sales of any of the shares of Common Stock by the Selling
Stockholders.
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 128,172 shares of common stock which it received
in payment of legal fees and expenses in 1998 (60,000 shares of which the firm
currently owns 30,000 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 our 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.
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EXPERTS
The consolidated financial statements incorporated by reference in this
prospectus have been audited by BDO Dunwoody LLP, an independent registered
public accounting firm, to the extent and for the periods set forth in their
report incorporated herein by reference, and are incorporated herein in reliance
upon such report given upon the authority of said firm as experts in auditing
and accounting.
The financial statements as of July 31, 2002, and for each of the two years in
the period ended July 31, 2002, incorporated by reference in this prospectus
from the Company's Annual Report on Form 10-K for the year ended July 31, 2003
have been audited by Deloitte & Touche LLP, independent registered chartered
accountants, as stated in their report, which is incorporated by reference
herein, and have been so incorporated in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
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