Generex Biotechnology Corporation (the "Company") (www.generex.com) (OTCBB: GNBT) today announced that it entered into a securities purchase agreement with certain institutional investors on July 8, 2011. The investors have agreed to purchase at the initial closing an aggregate of 2,575 shares of the Company's newly designated non-voting Series A 9% Convertible Preferred Stock ("convertible preferred stock") and warrants to purchase up to an aggregate of 100% of the shares of its common stock issuable upon conversion of the convertible preferred stock ("warrants") at the initial closing. The convertible preferred stock and warrants will be sold in units, with each unit consisting of one share of convertible preferred stock and a warrant to purchase 100% of the shares of the Company's common stock issuable upon conversion of such share of convertible preferred stock. Each unit will be sold at a negotiated price of $1,000, for an aggregate purchase price of $2,575,000 at the initial closing. An aggregate of 34,333,334 shares of the Company's common stock will be issuable upon conversion of, or exercise of, the convertible preferred stock and warrants issued at the initial closing. In addition, until July 8, 2012, each investor may, in its sole determination, elect to purchase, severally and not jointly with the other investors, in one or more purchases, in the ratio of such investor's original subscription amount to the original aggregate subscription amount of all investors, additional units consisting of convertible preferred stock and warrants at a purchase price of $1,000 per unit with an aggregate subscription amount thereof of up to $2,575,000, which units will be identical to the units of convertible preferred stock and warrants issued in connection with the initial closing.
The convertible preferred stock has an effective conversion price of $0.15 per share, subject to adjustment under certain circumstances. The convertible preferred stock will accrue a 9% dividend until July 8, 2014 and, beginning on July 8, 2014 and on each one year anniversary thereafter, such dividend rate will increase by an additional 3%. The dividend will be payable quarterly in cash, or at the Company's option, in shares of common stock. In the event that the convertible preferred stock is converted prior to July 8, 2014, the Company will pay the holder of the converted preferred stock an amount equal to $270 per $1,000 of stated value of the convertible preferred stock, less the amount of all prior quarterly dividends paid on such converted preferred stock before the relevant conversion date. Such "make-whole payment" may be made in cash or, at the Company's option, in shares of its common stock.
Subject to certain ownership limitations, the warrants will be exercisable at any time after their date of issuance and on or before the fifth-year anniversary thereafter at an exercise price of $0.25 per share of common stock, subject to adjustment under certain circumstances. The exercise price and number of shares of common stock issuable upon exercise will also be adjusted if the Company sells or grants any shares of common stock or securities convertible into, or rights to acquire, common stock at an effective price per share that is lower than the then exercise price, except in the event of certain exempt issuances.
Generex intends to use the net proceeds (approximately $2,295,000) from the offering for general corporate purposes which will include, inter alia, funding research and development, preclinical and clinical trials, the preparation and filing of new drug applications, and general working capital.
The initial closing is expected to take place on or about July 11, 2011, subject to the satisfaction of customary closing conditions.
Seahawk Capital Partners, Inc. will be paid a finder's fee by the Company in connection with this offering.
Mark Fletcher, the Generex President & Chief Executive Officer, stated: "This financing will permit Generex to proceed in a measured fashion with our previously announced strategic development initiatives, including the spinout of Antigen Express and the next stage of the Generex Oral-lyn™ clinical and regulatory development plan."
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