Item 1.01 Entry into a Material Definitive Agreement.
Investment by Nostrum Pharmaceuticals LLC
On May 22, 2020, we entered into a Preferred Stock Purchase Agreement with
Nostrum Pharmaceuticals, LLC, a Delaware limited liability company ("Nostrum")
pursuant to which we sold to Nostrum 1,700,000 shares of our newly designated
Series B Convertible Preferred Stock, for a total purchase price of $1.7
million. Nostrum is the parent of Nostrum Laboratories, Inc., a privately-held
pharmaceutical company engaged in the formulation and commercialization of
specialty pharmaceutical products and controlled-release, orally administered,
branded and generic drug products.
The Series B Convertible Preferred Stock is convertible into shares of our
Common Stock at an initial conversion ratio of .0113 shares of Series B
Convertible Preferred Stock for each share of Common Stock. Accordingly, the
Series B Convertible Preferred Stock is currently convertible in the aggregate
into 150,442,478 shares of our Common Stock.
We will use the proceeds from the sale of the Series B Convertible Preferred
Stock to fund working capital requirements in preparation for conducting a Phase
3 clinical trial in the United States for our Generx® product candidate. We
believe that Nostrum's assets and experience in the formulation and
commercialization of pharmaceutical products will facilitate the administration
and completion of the Phase 3 clinical trial on a cost-effective basis.
Under the Preferred Stock Purchase Agreement, we have agreed to use our best
efforts to become current in our reporting obligations under the Securities
Exchange Act of 1934, as amended. We have engaged Marcum LLP as our independent
public accounting firm to perform audits of our financial statements for the
years ended December 31, 2017, 2018 and 2019. We intend to file a "super 10-K"
report with the SEC covering each of those three fiscal years promptly following
the completion of the audits, and thereafter to remain compliant with our public
company reporting requirements.
We will need additional capital to complete the Phase 3 clinical trial for
Generx. We anticipate raising that capital from the sale of additional debt or
equity securities to Nostrum or to third parties. However, there are no
agreements or arrangements in place with Nostrum or any third party for
additional funding at this time. If we are able to secure additional financing,
it may be on terms that are dilutive or otherwise unfavorable to existing
stockholders.
On May 28, 2020, we issued a press release announcing the investment. A copy of
the press release is attached as Exhibit 99.1 hereto.
Transactions with Shanxi Taxus Pharmaceuticals Co., Ltd.
In connection with the Preferred Stock Purchase Agreement, we entered into
certain arrangements with Shanxi Taxus Pharmaceuticals Co., Ltd. ("Shanxi").
Shanxi has previously paid a subscription of $600,000 to acquire shares of our
Common Stock or shares of capital stock in our Angionetics Inc. subsidiary. On
April 10, 2020 we entered into a Reaffirmation and Ratification Agreement with
Shanxi (the "Ratification Agreement") confirming that we have applied the
$600,000 payment to the purchase of license rights to our Generx® product
candidate in greater China and have assigned our residual rights to Excellagen
to Shanxi. We previously entered into a strategic cooperation agreement and a
subscription agreement with Shanxi. Mr. Jiayue Zhang, a member of our Board of
Directors, is the Chairman and substantial stockholder of Shanxi. In connection
with the entry into the agreements described below, we terminated all prior
agreements with Shanxi and entered into a mutual release of claims.
On April 10, 2020, our Angionetics, Inc. subsidiary entered into a Distribution
and License Agreement with Shanxi, as amended by the First Amendment to
Distribution and License Agreement dated April 14, 2020 (as amended, the "Shanxi
License Agreement"), granting Shanxi certain license rights with respect to our
Generx product candidate. The distribution and license rights commence only
. . .
Item 3.02 Unregistered Sales of Equity Securities.
On May 22, 2020 we sold 1,700,000 shares of our newly designated Series B
Preferred Stock to Nostrum in exchange for $1,700,000 in cash. There were no
underwriting discounts or commissions. The sale was conducted as a privately
negotiated transaction with a single investor, pursuant to the exemption from
registration contained in Section 4(a)(2) of the Securities Act of 1933, as
amended.
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Item 3.03 Material Modification to Rights of Security Holders.
The shares of Series B Convertible Preferred Stock have a liquidation preference
over holders of our Common Stock or any other class of junior stock. In the
event of any liquidation, dissolution or winding up of our company, the holders
of our Series B Convertible Preferred Stock will first be entitled to be paid an
amount equal to $1.00 per share plus any other fees, liquidated damages or
dividends then owing, before our remaining assets will be distributed among the
holders of our Common Stock or the other classes or series of shares of our
capital stock.
Item 5.01 Changes in Control of Registrant.
The sale of the Series B Convertible Preferred Stock resulted in a change of
control in our company. The 1,700,000 shares of Series B Convertible Preferred
Stock issued to Nostrum vote on an as converted basis with the equivalence of
150,442,478 shares of Common Stock.
Concurrently with the sale of the Series B Convertible Preferred Stock, Nostrum
acquired 220 shares of our Series A Convertible Preferred Stock from Sabby
Master Heathcare Ltd. and agreed to purchase the remaining 570 shares of Series
A Convertible Preferred Stock that are outstanding and held by Sabby. As a
result of the issuance of the Series B Convertible Preferred Stock, each share
of our Series A Convertible Preferred Stock became convertible into 88,496
shares of our Common Stock. The Certificate of Designation of Preferences,
Rights and Limitations of Series A Convertible Preferred Stock restricts Nostrum
from converting any Series A Preferred Stock if Nostrum would beneficially own a
number of shares of Common Stock in excess of 9.99% of the shares of Common
Stock then issued and outstanding. As a result of its ownership of the Series B
Convertible Preferred Stock, Nostrum is currently limited in its entirety from
converting any shares of Series A Convertible Preferred Stock. The Series A
Convertible Preferred Stock has no voting rights on general corporate matters,
provided that the Series A Convertible Preferred Stock contain customary
protective provisions. We were not a party to, and did not receive any proceeds
from, the sale of the Series A Convertible Preferred Stock between Nostrum and
Sabby.
We currently have 14,489,399 shares of Common Stock outstanding. Consequently,
Nostrum's current investment in the Series B Convertible Preferred Stock
represents control of 91.2 percent of the voting power of the Company.
Nostrum acquired the Series B Convertible Preferred Stock in exchange for $1.7
million, which was funded from working capital. We are not aware of any other
transaction that could result in a subsequent change in control of the Company.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Board of Directors
On May 22, 2020, Andrew Leitch, John Wallace, Jiayue Zhang and Wei-Wei Zhang
resigned from their positions as members of the Company's Board of Directors.
The resignations were required under the terms of the Preferred Stock Purchase
Agreement; none of the resigning directors resigned as the result of any
disagreement with the Company on any matter relating to the Company's
operations, policies or procedures. Christopher J. Reinhard and Murray
Hutchinson each remain a director of the Company.
On May 22, 2020, at the request of Nostrum, James Grainer and Kaushik K. Vyas
were appointed to the Company's Board of Directors and James L. Grainer was
appointed to serve as Chairman of the Board.
James L. Grainer, currently serves as the Chief Financial Officer of Nostrum and
its various subsidiaries including Nostrum Laboratories, Inc. He has been Chief
Financial Officer of Nostrum since 2015. Prior to joining Nostrum, Mr. Grainer
served as the Chief Financial Officer of Chatterjee Asset Management
(2007-2015), President and Chief Financial Officer of Greenshift Corporation
(2004-2007), Managing Director at Zanett Securities (2001-2004) and Managing
Director of Prudential Securities (1993-2001).
Kaushik K. Vyas, currently serves as the Chief Executive Officer of Nostrum
Energy, LLC a majority owned subsidiary of Nostrum Pharmaceuticals LLC and is a
member of the Board of Directors of Nostrum Pharmaceuticals LLC. Mr. Vyas has
served as the Chief Executive Officer of Nostrum Energy LLC since 2012. From
1995 to 2012 Mr. Vyas was employed by Science Applications International
Corporation (NYSE: SAIC), a government services and information technology
company, in a variety of positions culminating in Corporate VP.
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Following these resignations and appointments, the Board of Directors is
currently comprised of four members consisting of Messrs. Grainer, Hutchinson,
Reinhard and Vyas.
Executive Officers
On May 22, 2020, the following individuals have been appointed the executive
officers of the Company to serve until the next annual meeting of the Board of
Directors and until their successors are duly elected and qualified:
Chief Executive Officer Christopher J. Reinhard
Chief Financial Officer James L. Grainer
Chief Scientific Officer Ronald J. Shebuski
Chief Operating Officer Lois Chandler
Secretary James L. Grainer
Ronald J. Shebuski, Phd. currently serves as the Company's Chief Scientific
Officer. Dr. Shebuski has over 25 years of experience in the pharmaceutical
industry. From 2016 to 2020 he served as the Vice President of Research and
Development for InspiRx, Inc. From 1998 to 2016 he established Cardiovascular
Research Consulting, LLC, an advisory firm serving small, mid and large pharma
companies in many aspects of drug discovery. From 1990 to 1998 he served as the
Director of Cardiovascular Therapeutics at Pharmacia & Upjohn, where he managed
the team responsible for FDA approval of the Class III anti-arrhythmic agent,
Corvert®. Prior to Pharmacia & Upjohn, Dr. Shebuski was a Senior Scientist
responsible for leading cardiovascular drug discovery teams at Merck Research
Laboratories and Smith Kline & French in the Philadelphia area. His primary
field of research has focused on thrombosis and the development of effective new
thrombolytic, anti-platelet and anti-coagulant therapies. At Merck, Ron led the
in vivo discovery and development effort which culminated in the identification
and eventual FDA approval of the anti-platelet GPIIb/IIIa antagonist,
Aggrastat®. He also led development teams in identification of novel factor Xa
and P- selectin antagonists at Merck and Pharmacia & Upjohn, respectively. Dr.
Shebuski received his B.S. Degree in Microbiology from the University of
Wisconsin at Madison and Ph.D. Degree in Pharmacology from the University of
Minnesota Medical School. Further, Dr. Shebuski is expert in FDA regulations and
has an ongoing appointment (since 2009) with FDA as a Special Government
Employee (SGE) in the CardioRenal Division of CDER (Center for Drug Evaluation
and Research).
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year
Amendment to Certificate of Incorporation
On May 21, 2020, we amended our Certificate of Incorporation with the filing of
a Certificate of Designation to establish the rights, privileges and preferences
of a new class of our preferred stock designated Series B Convertible Preferred
Stock. The material terms and provisions of the shares of our Series B
Convertible Preferred Stock are summarized below.
Dividends. Each share of our Series B Convertible Preferred Stock is entitled to
receive dividends when, as, and if dividends are paid on shares of our Common
Stock. Dividends are payable on each share Series B Convertible Preferred Stock
on an "as-converted" basis, in the same amount and form as dividends actually
paid on shares of our Common Stock. We have never paid dividends on shares of
our common stock and we do not intend to do so for the foreseeable future.
Voting Rights. Each share of our Series B Convertible Preferred Stock will have
the same voting rights as shares of our Common Stock, on an "as-converted"
basis, and will vote on all matters with the Common Stock as a single class. In
addition, the Series B Convertible Preferred Stock has voting rights that
require the approval of a majority of the outstanding shares of Series B
Convertible Preferred Stock for any action to: (1) alter or change adversely the
powers, preferences or rights given to the shares of our Series B Convertible
Preferred Stock or alter or amend its certificate of designation, (2) authorize
or create any class of shares ranking as to dividends, redemption or
distribution of assets upon liquidation senior to, or otherwise pari passu with,
the shares of our Series B Convertible Preferred Stock, (3) amend our
Certificate of Incorporation or other charter documents in any manner that
adversely affects any rights of the holders of our Series B Convertible
Preferred Stock, (4) increase the number of authorized shares of our Series B
Convertible Preferred Stock, or (5) enter into any agreement with respect to any
of the foregoing.
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Conversion. The shares of our Series B Convertible Preferred Stock are
convertible at any time at the option of the holder into shares of our Common
Stock at a ratio determined by dividing the Stated Value of such share of Series
B Preferred Stock by the conversion price of $0.0113 per share of Common Stock.
Accordingly, each share of our Series B Convertible Preferred Stock is initially
convertible into 88.5 shares of our Common Stock. The conversion price is
subject to adjustment in the case of share splits, share dividends, combinations
of shares and similar recapitalization transactions. In addition, if the Company
sells shares of Common Stock or Common Stock equivalents at a price less than
the current conversion price, the conversion price of the Series B Convertible
Preferred Stock will be reduced to equal eighty percent (80%) of the price at
which such Common Stock or Common Stock equivalents are sold.
Liquidation. The Series B Convertible Preferred Stock has a liquidation
preference. Upon any liquidation, dissolution or winding up of our company,
after payment or provision for payment of our debts and other liabilities and
before any distribution or payment is made to the holders of our common stock or
any junior securities, the holders of our Series B Convertible Preferred Stock
will first be entitled to be paid an amount equal to $1.00 per share plus any
other fees, liquidated damages or dividends then owing, before our remaining
assets will be distributed among the holders of the other classes or series of
shares of our capital stock in accordance with our Certificate of Incorporation.
The foregoing description of the Certificate of Designation does not purport to
be complete and is qualified in its entirety by reference to the complete
Certificate of Designation which is filed as Exhibit 3.1 to this report and
incorporated herein by reference.
Amendment to Bylaws
On May 22, 2020, the Board amended the Company's bylaws to eliminate the
classified Board. Directors will each serve one year terms until the next annual
meeting of stockholders or until their successors are duly elected and
qualified.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. Description
3.1 Certificate of Designation of Preferences, Rights and Limitations
of Series B Convertible Preferred Stock
10.1 Preferred Stock Purchase Agreement dated May 22, 2020 for the
purchase of Series B Convertible Preferred Stock
10.2 Reaffirmation and Ratification Agreement dated April 10, 2020
between Gene Biotherapeutics, Inc. and Shanxi Taxus Pharmaceuticals
Co., Ltd.
10.3 Distribution and License Agreement dated April 10, 2020 between
Angionetics, Inc. and Shanxi Taxus Pharmaceuticals Co., Ltd.
10.4 Amendment No. 1 to Distribution and License Agreement dated April
14, 2020 between Angionetics, Inc. and Shanxi Taxus Pharmaceuticals
Co., Ltd.
10.5 License and Patent Assignment Agreement dated April 10, 2020
between Activation Therapeutics, Inc. and Shanxi Taxus
Pharmaceuticals Co., Ltd.
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