Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act 1934
Date
of
Report (date of earliest event reported): May
30, 2008
GENESIS
PHARMACEUTICALS ENTERPRISES, INC.
(Exact
name of registrant as specified in charter)
Florida
(State
or
other jurisdiction of incorporation)
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333-86347
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65-1130026
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(Commission
File Number)
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(IRS
Employer Identification No.)
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Middle
Section, Longmao Street, Area A, Laiyang Waixiangxing Industrial
Park
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Laiyang
City, Yantai, Shandong Province, People’s Republic of China
710075
|
(Address
of principal executive offices and zip code)
(Registrant's
telephone number including area code)
(Registrant's
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 registrant under any of the following
provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to
Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b))
o Pre-commencement
communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
The
statements contained in this Form 8-K that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934,
as amended. These include statements about the Registrant’s expectations,
beliefs, intentions or strategies for the future, which are indicated by words
or phrases such as “anticipate,” “expect,” “intend,” “plan,” “will,” “the
Registrant believes,” “management believes” and similar words or phrases. The
forward-looking statements are based on the Registrant’s current expectations
and are subject to certain risks, uncertainties and assumptions. The
Registrant’s actual results could differ materially from results anticipated in
these forward-looking statements. All forward-looking statements included in
this document are based on information available to the Registrant on the date
hereof, and the Registrant assumes no obligation to update any such
forward-looking statements.
Item
1.01 Entry
into a Material Definitive Agreement.
See
Item
3.02 below.
Item
2.03 Creation
of a Direct Financial Obligation.
See
Item
3.02 below.
Item
3.02 Unregistered
Sales of Equity Securities.
On
May
30, 2008, Genesis Pharmaceuticals Enterprises, Inc. (the “Company”) entered into
a Securities Purchase Agreement (the “Securities Purchase Agreement”), with
Karmoya International Ltd., a British Virgin Islands company, Genesis Jiangbo
(Laiyang) Biotech Technologies Co., Ltd., a wholly owned foreign enterprise
in
the People’s Republic of China, Wubo Cao (“Mr. Cao”) and certain investors (the
“Investors”), pursuant to which, on May 30, 2008, the Company sold to the
Investors 6% convertible notes (the “Notes”) and warrants to purchase shares of
the Company’s common stock (“Warrants”) for the aggregate amount of $30,000,000
(the “Purchase Price”), in transactions exempt from registration under the
Securities Act of 1933, as amended (the “Financing”). Pursuant to the terms of
the Securities Purchase Agreement, the Company will use the net proceeds from
the Financing for working capital purposes. Also pursuant to the terms of the
Securities Purchase Agreement, the Company must, among other things, increase
the number of its authorized shares of common stock to 900,000,000 by August
31,
2008 and is prohibited from issuing any “Future Priced Securities” as such term
is described by NASD IM-4350-1 for one year following the closing of the
Financing.
The
Notes
are due May 30, 2011 and are convertible into shares of the Company’s common
stock at a conversion price equal to $0.20, subject to adjustment pursuant
to
customary anti-dilution provisions and automatic downward adjustments in the
event of certain sales or issuances by the Company of common stock at a price
per share less than $0.20. Interest
on the outstanding principal balance of the Notes is payable at the rate of
6%
per annum, in semi-annual installments payable on November 30th
and May
30th
of each
year, with the first interest payment due on November 30, 2008. At any time
after the issuance of the Note, any Investor may convert its Note, in whole
or
in part, into shares of the Company’s common stock, provided that such Investor
shall not effect any conversion if immediately after such conversion, such
Investor and its affiliates would in the aggregate beneficially own more than
9.99% of the Company’s outstanding common stock. The Notes are convertible at
the option of the Company if the following four conditions are met: (i)
effectiveness of a registration statement with respect to the shares of the
Company’s common stock underlying the Notes and the Warrants; (ii) the VWAP of
the common stock has been equal to or greater than 250% of the conversion price,
as adjusted, for 20 consecutive trading days on its principal trading market;
(iii) the average dollar trading volume of the common stock exceeds $500,000
on
its principal trading market for the same 20 days; and (iv) the Company achieves
2008 Guaranteed EBT (as hereinafter defined) and 2009 Guaranteed EBT (as
hereinafter defined). A holder of a Note may require the Company to redeem
all
or a portion of such Note for cash at a redemption price as set forth in the
Notes, in the event of a change in control of the Company, an event of default
or if any governmental agency in the People’s Republic of China challenges or
takes action that would adversely affect the transactions contemplated by the
Securities Purchase Agreement.
The
Warrants are exercisable for a five-year period beginning on May 30, 2008 at
an
initial exercise price of $0.25 per share.
In
connection with the Financing, the Company entered into a holdback escrow
agreement (the “Holdback Escrow Agreement”), dated as of May 30, 2008, with the
Investors and Loeb & Loeb LLP, as Escrow Agent, pursuant to which $4,000,000
of the Purchase Price was deposited into an escrow account with the Escrow
Agent
at the closing of the Financing. Pursuant to the terms of the Holdback Escrow
Agreement, (i) $2,000,000 of the escrowed funds will be released to the Company
upon the Company’s satisfaction no later than 120 days following the closing of
the Financing of an obligation that the board of directors be comprised of
at
least five members (at least two of whom are to be fluent English speakers
who
possess necessary experience to serve as a director of a public company), a
majority of whom will be independent directors acceptable to Pope Investments
LLC (“Pope”) and (ii) $2,000,000 of the escrowed funds will be released to the
Company upon the Company’s satisfaction no later than six months following the
closing of the Financing of an obligation to hire a full-time chief financial
officer acceptable to Pope who has experience as the chief financial officer
of
a U.S. public company and who is a certified public accountant, fluent in
English and an expert in GAAP and auditing procedures and compliance for U.S.
public companies. In the event that either or both of these obligations is
not
so satisfied, the applicable portion of the escrowed funds will be released
pro
rata to the Investors.
In
connection with the Financing, Mr. Cao, the Company’s chief executive officer
and chairman of the board, placed 150,000,000 shares of common stock of the
Company owned by him into an escrow account pursuant to a make good escrow
agreement, dated as of May 30, 2008 (the “Make Good Escrow Agreement”). In the
event that either (i) the Company’s adjusted 2008 earnings before taxes is less
than US$26,700,000 (“2008 Guaranteed EBT”) or (ii) the Company’s 2008 adjusted
fully diluted earnings before taxes per share is less than US$0.040 (“2008
Guaranteed Diluted EBT”), 60,000,000 of such shares (the “2008 Make Good
Shares”) are to be released pro rata to the Investors. In the event that either
(i) the Company’s adjusted 2009 earnings before taxes is less than US$38,400,000
(“2009 Guaranteed EBT”) or (ii) the Company’s adjusted fully diluted earnings
before taxes per share is less than US$0.058 (or US$0.056 if the 20,000,000
shares of common stock held in escrow in connection with the November 2007
private placement have been released from escrow)(“2009 Guaranteed Diluted
EBT”), 90,000,000 of such shares (the “2009 Make Good Shares”) are to be
released pro rata to the Investors. Should the Company successfully satisfy
these respective financial milestones, the 2008 Make Good Shares and 2009 Make
Good Shares will be returned to Mr. Cao. In addition, Mr. Cao is required to
deliver shares of common stock owned by him to the Investors on a pro rata
basis
equal to the number of shares (the “Settlement Shares”) required to satisfy all
costs and expenses associated with the settlement of all legal and other matters
pertaining to the Company prior to or in connection with the completion of
the
Company’s October 2007 share exchange in accordance with formulas set forth in
the Securities Purchase Agreement.
Pursuant
to a Registration Rights Agreement, the Company agreed to file a registration
statement covering the resale of the shares of common stock underlying the
Notes
and Warrants, (ii) the 2008 Make Good Shares, (iii) the 2009 Make Good Shares,
and (iv) the Settlement Shares. The Company must file an initial registration
statement covering the shares of common stock underlying the Notes and Warrants
no later than 45 days from the closing of the Financing and to have such
registration statement declared effective no later than 180 days from the
closing of the Financing. If the Company does not timely file such registration
statement or cause it to be declared effective by the required dates, then
the
Company will be required to pay liquidated damages to the Investors equal to
1.0% of the aggregate Purchase Price paid by such Investors for each month
that
the Company does not file the registration statement or cause it to be declared
effective. Notwithstanding the foregoing, in no event shall liquidated damages
exceed 10% of the aggregate amount of the Purchase Price.
In
connection with the Financing, Mr. Cao entered into a Lock-up Agreement with
the
Company, by which he agreed not to transfer any shares of the Company’s common
stock owned by him until 18 months after the effective date of the initial
registration statement filed by the Company with respect to the resale of the
shares of common stock underlying the Notes and the Warrants.
The
foregoing descriptions of the Securities Purchase Agreement, the Notes, the
Warrants, the Make Good Escrow Agreement, the Holdback Escrow Agreement, the
Registration Rights Agreement and the Lock-up Agreement are merely summaries,
are not intended to be complete and are qualified in their entirety by reference
to the full text of each of these agreements.. The Securities Purchase Agreement
is filed as exhibit 10.1, a form of the Notes is filed as exhibit 4.1, a form
of
the Warrants is filed as exhibit 4.2, the Make Good Escrow Agreement is filed
as
exhibit 10.2, the Holdback Escrow Agreement is filed as exhibit 10.3, the
Registration Rights Agreement is filed as exhibit 10.4 and the Lock-up Agreement
is filed as exhibit 10.5 to this Form 8-K, and the full text of each such
exhibit is incorporated herein by reference.
Item
9.01 Financial
Statements and Exhibits.
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Exhibit
No.
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Description
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4.1
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Form
of 6% Convertible Note
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4.2
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Form
of Class A Common Stock Purchase Warrant
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10.1
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Securities
Purchase Agreement, dated May 30, 2008, by and among the Company,
Karmoya
International Ltd., Genesis Jiangbo (Laiyang) Biotech Technologies
Co.,
Ltd., Wubo Cao and the investors party thereto
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10.2
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Make
Good Escrow Agreement, dated May 30, 2008, by and among the Company,
the
investors party thereto, Pope Investments LLC, Wubo Cao and Loeb
&
Loeb LLP
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10.3
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Holdback
Escrow Agreement, dated May 30, 2008, by and among the Company, the
investors party thereto and Loeb & Loeb LLP
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10.4
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Registration
Rights Agreement, dated May 30, 2008, by and among the Company and
the
investors party thereto
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10.5
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Lock-up
Agreement, dated May 30, 2008, between the Company and Wubo
Cao
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99.1
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Press
Release dated June 3, 2008
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SIGNATURES
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.
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GENESIS
PHARMACEUTICALS ENTERPRISES, INC. |
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By: |
/s/ Wubo
Cao |
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Name:
Wubo Cao
Title:
Chief Executive Officer
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Dated:
June 3, 2008