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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-71809
PROSPECTUS
GLOBAL PHARMACEUTICAL CORPORATION
623,254 Shares
Common Stock
These 623,254 shares of our common stock are being offered for sale by the
selling stockholders named on page 8 of this prospectus. We will not receive
any part of the proceeds from these sales.
Our common stock trades on the Nasdaq SmallCap Market under the symbol
"GLPC." On May 19, 1999, the closing sale price of our common stock was $3.00
per share.
Our principal executive offices are located at Global Pharmaceutical
Corporation, Castor & Kensington Avenues, Philadelphia, Pennsylvania 19124 and
our telephone number is (215) 289-2220.
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You are urged to carefully read the "Risk Factors" section beginning on
page 1 of this Prospectus, which describes specific risks and certain other
information associated with an investment in our company that should be
considered before you make your investment decision.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy of this Prospectus. Any representation to the contrary is a criminal
offense.
The date of this Prospectus is June 2, 1999
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TABLE OF CONTENTS
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Risk Factors ............................................................................. 1
Our limited supply of cash and cash equivalents may require us to modify our business
operations and plans .................................................................. 1
Our limited capital may make it difficult for us to repay the substantial amount of our
outstanding indebtedness .............................................................. 1
The time necessary to develop generic drugs may adversely affect when and the rate at
which we receive a return on our capital .............................................. 1
We have and continue to experience operating losses, and the highly regulated nature of
our business makes our future profitability uncertain ................................. 1
Our revenues and profitability have fluctuated and could fluctuate significantly in the
future, which may have a material adverse effect on our results of operations and
stock price ........................................................................... 2
The FDA may not approve our future products, in which case our ability to generate
product revenues will be adversely affected ........................................... 2
Our comparative lack of experience in producing new products and formulations may
materially adversely affect our business condition and operations ..................... 2
We are subject to an outstanding court order governing manufacture of our products which
may adversely affect our product introduction plans and results of operations ......... 3
Generic drug makers are most profitable when they are the first producer of a generic
drug, and we do not know if we will be the first maker of any generic drug product .... 3
The high level of competition we face in the generic drug industry from competitors who
often have greater resources than us adversely affects our profitability .............. 3
We are dependent on a small number of products to generate revenues to fund our business
and operations ........................................................................ 4
We are dependent on a small number of suppliers for our raw materials, and any delay or
unavailability of raw materials can materially adversely affect our ability to produce
products .............................................................................. 4
We do not have any arrangements regarding our products with any independent distributors
or wholesalers, and our inability to enter into these arrangements may materially
adversely affect our ability to sell products ......................................... 4
We may have difficulty obtaining licenses in the future, which could adversely affect
our ability to develop, manufacture and market commercially viable products ........... 4
Our compliance with environmental laws may necessitate uncertain expenditures in the
future, the capital for which may not be available to us .............................. 4
Generic drug makers face an inherent risk of product liability litigation and any claims
brought against us could have a material adverse effect upon us ....................... 5
We have exposure under DES-related product liability claims, which could have a material
adverse effect upon our financial condition ........................................... 5
Rights of certain holders of our equity to acquire shares of common stock may dilute the
future value of the common stock ...................................................... 5
We have and may in the future issue additional preferred stock which could adversely
affect the rights of holders of our common stock ...................................... 5
Control of our company is concentrated among a limited number of stockholders, who can
exercise significant influence over all matters requiring stockholder approval ........ 6
We are dependent on key officers and qualified scientific and technical employees and
our limited resources may make it more difficult to attract and retain these personnel 6
Our chief executive officer has no experience as a chief executive officer .............. 6
Failure to obtain year 2000 compliance may have adverse effects on our business and
results of operations ................................................................. 6
Where You Can Find More Information ...................................................... 7
Use of Proceeds .......................................................................... 8
Selling Stockholders .................................................................... 8
Plan of Distribution .................................................................... 10
Legal Matters ........................................................................... 11
Experts ................................................................................. 11
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should consider carefully the following risk factors, as well as the other
information included in this prospectus, in deciding whether to invest in our
common stock. This prospectus contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from the
results discussed in the forward-looking statements. Factors that could cause
or contribute to these differences include, but are not limited to, those
discussed in this "Risk Factors" Section, and elsewhere in this prospectus.
Our limited supply of cash and cash equivalents may require us to modify our
business operations and plans.
As of March 31, 1999, we had approximately $2,841,000 of unrestricted cash
and cash equivalents. We estimate that these funds, together with the
$2,000,000 raised by us on May 18, 1999, are sufficient for the next twelve
months of operations at our planned expenditure levels. If our actual cash
receipts or expenditures are different than we had estimated, our business
operations and plans may need to be modified. This will most likely include
modifying the expected expansion of our research and product development
activities and sales and marketing capabilities. These modifications may
materially adversely affect our business.
Our limited capital may make it difficult for us to repay the substantial
amount of our outstanding indebtedness.
We may not have or be able to maintain adequate capital at any given time
or from time to time in the future. As of March 31, 1999, we had outstanding
approximately $3,340,000 of indebtedness, bearing interest at rates ranging
from 2% to 9% annually. Of this indebtedness, $406,000 principal amount is due
to the Philadelphia Industrial Development Corporation in December 2000 and an
additional $1,254,000 is owed to General Electric Credit Corporation under our
revolving credit facility. The facility expires in July 2001. Additionally, as
of March 31, 1999, we had a stockholders' accumulated deficit of approximately
$23,412,000. We also cannot give any assurance that additional capital or
waivers relating to defaulted loans, if needed by us, will be available to us.
In this regard, you should also review the "Our limited supply of cash and cash
equivalents may require us to modify our business operations and plans" risk
factor earlier in this Section.
The time necessary to develop generic drugs may adversely affect when and the
rate at which we receive a return on our capital.
The development of a new generic drug product, including its formulation,
testing and FDA approval, generally takes approximately three or more years;
development activities typically begin several years in advance of the patent
expiration date of the brand name drug equivalent. Consequently, we may select
drugs for development several years in advance of their anticipated entry to
market. This program potentially will require that considerable capital be
devoted to activities that do not concurrently provide an immediate return.
Also, because of the significant time necessary to develop a product, the
actual market for a product at the time it is available for sale may be
significantly less than the originally projected market for the product. Our
return on investment to develop the product will then be adversely affected.
We have and continue to experience operating losses, and the highly regulated
nature of our business makes our future profitability uncertain.
We do not know whether or when we will successfully implement our business
plan or that our business will ever be profitable. We have generated minimal
revenues to date and have experienced operating losses since our inception. As
of March 31, 1999, our accumulated deficit was $23,412,000. As of March 31,
1999, we also had outstanding indebtedness in an aggregate principal amount of
$3,340,000 at interest rates ranging from 2% to 9% annually. Operating our
business requires, among other things, FDA approval of our products based on
our drug applications and negotiation of satisfactory raw material supply
contracts with FDA-approved sources. To remain operational, we must also:
o Properly receive, warehouse and store raw materials and supplies;
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o Maintain work in progress in compliance with regulatory requirements and
properly store finished goods;
o Properly manufacture various formulations, dosages and configurations of
a potentially broad product line;
o Meet strict security requirements for virtually every activity undertaken
at the plant;
o Maintain appropriate laboratory, quality control and quality assurance
practices and procedures; and
o Comply with the many complex governmental regulations that deal with
virtually every aspect of our proposed business activities.
Operating our business successfully also will depend, in part, on a
variety of factors outside of our control, including:
o Changes in raw material supplies and suppliers;
o Changes in governmental programs and requirements;
o Changes in physician or consumer preferences; and
o Changes in FDA and similar regulatory requirements.
Our revenues and profitability have fluctuated and could fluctuate
significantly in the future, which may have a material adverse effect on our
results of operations and stock price.
Our revenues and profitability may vary significantly from fiscal quarter
to fiscal quarter as well as in comparison to the corresponding fiscal quarter
of the preceding year. Variations of those types may result from, among other
factors:
o The timing of FDA reapprovals we receive;
o The timing of process validation for particular generic drug products;
o The timing of any significant initial shipments of newly approved drugs;
and
o Competition from other generic drug manufacturers that receive FDA
approvals for competing products.
We cannot predict whether our business will be seasonal in nature.
Products that we manufacture and distribute pertaining to seasonal ailments
such as allergies or colds may experience seasonal patterns in sales and
profitability. The potential seasonality of our business may have a material
adverse effect on our results of operations and stock price.
The FDA may not approve our future products, in which case our ability to
generate product revenues will be adversely affected.
The testing, manufacturing and marketing of our products generally are
subject to extensive regulation and approvals by numerous government
authorities in the United States and other countries. We may not receive FDA
approvals for additional products on a timely basis, or at all. Any delay in
our obtaining or any failure to obtain these approvals would adversely affect
our ability to generate product revenue. Also, the process of seeking FDA
approvals can be costly, time consuming, and subject to unanticipated and
significant delays.
Our comparative lack of experience in producing new products and formulations
may materially adversely affect our business condition and operations.
Our ability to effectively produce new products and dosage forms will be
materially affected by our ability to master new and different production
techniques and to receive all required governmental approvals. Our inability to
effectively do this will have a material adverse effect on our financial
condition and results of operations. We do not have the level of experience or
staff to produce new products and formulations that some of our competitors
have.
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We are subject to an outstanding court order governing manufacture of our
products which may adversely affect our product introduction plans and results
of operations.
On May 25, 1993, the United States District Court for the Eastern District
of Pennsylvania issued an order against Richlyn Laboratories, Inc. that, among
other things, permanently enjoined Richlyn from selling any drug manufactured,
processed, packed or labeled at its Philadelphia facility unless it met certain
stipulated conditions. When we acquired the facilities and drug applications of
Richlyn, we became subject to the conditions in that court order. The order
requires, in part, that FDA find that products manufactured, processed and
packed at the Richlyn facility conform with FDA regulations concerning current
Good Manufacturing Practices before the products can be marketed.
Although we were informed in January 1998 that product by product
inspection and prior authorization was no longer required in order for us to
manufacture and sell products, we cannot give any assurance that the FDA will
not reverse or reconsider its position and again require product by product
inspection and prior authorization. Any reversal or reconsideration by FDA will
adversely affect our product introduction plans and results of operations.
The order against Richlyn also requires that we hire and retain a person,
subject to FDA approval, who is qualified to inspect our drug manufacturing
facilities to determine that our methods, facilities and controls are operated
and administered in compliance with current good manufacturing practices. This
person must examine all drug products manufactured, processed, packed and held
at our facility and certify in writing to the FDA our compliance with related
current good manufacturing practices. We have contracted with a local
consultant to conduct this compliance review. We may not be able to maintain
compliance with current good manufacturing practices.
Generic drug makers are most profitable when they are the first producer of a
generic drug, and we do not know if we will be the first maker of any generic
drug product.
The first generic drug manufacturers receiving FDA approval for generic
equivalents of related brand name products usually capture significant market
share and extract greater profits from the branded product than later arriving
manufacturers. The development of a new generic drug product, including its
formulation, testing and FDA approval, generally takes approximately three or
more years. Consequently, we may select drugs for development several years in
advance of their anticipated entry to market, and cannot know what the market
or level of competition will be for that particular product when we begin
selling the product. Our profitability, if any, will depend, in part, on:
o Our ability to develop and rapidly introduce new products;
o The timing of FDA approvals of our products; and
o The number and timing of FDA approvals for competing products.
In addition, by introducing generic versions of their own branded products
prior to the expiration of the patents for those drugs, brand name drug
companies have attempted to prevent generic drug manufacturers from producing
certain products. Brand name companies have also attempted to prevent competing
generic drug products from being treated as equivalent to their brand name
products. We expect efforts of this type to continue.
The high level of competition we face in the generic drug industry from
competitors who often have greater resources than us adversely affects our
profitability.
The generic drug industry is highly competitive. Our competitors are both
generic drug manufacturers and brand name drug companies. Many of our
competitors have greater financial and other resources than us, and can spend
significantly more than we can in research, marketing and product development.
Relatively large research and development expenditures enable a company to
support many FDA applications simultaneously. This improves the likelihood that
these greater resourced companies will be among the first to obtain approval of
at least some generic drugs. In addition, the generic drug industry is
currently undergoing a consolidation which may exacerbate this situation.
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We are dependent on a small number of products to generate revenues to fund our
business and operations.
Our long-term success is dependent, among other factors, on our ability to
offer and sell a broad line of products. We intend to introduce products on a
selected basis. Consequently, we will be dependent, particularly in the
near-term, upon a relatively small number of products to generate revenues. As
a result, if we misjudge the market for or are delayed in the production of a
particular product, our business can be materially adversely affected.
We are dependent on a small number of suppliers for our raw materials, and any
delay or unavailability of raw materials can materially adversely affect our
ability to produce products.
The FDA requires specification of raw material suppliers in applications
for approval of drug products. If raw materials were unavailable from a
specified supplier, FDA approval of a new supplier could delay the manufacture
of the drug involved. In addition, some materials used in our products are
currently available from only one or a limited number of suppliers. Further, a
significant portion of our raw materials may be available only from foreign
sources. Foreign sources can be subject to the special risks of doing business
abroad, including:
o Greater possibility for disruption due to transportation or communication
problems;
o The relative instability of foreign governments and economies;
o Interim price volatility based on labor unrest or materials or equipment
shortages; and
o Uncertainty regarding recourse to a dependable legal system for the
enforcement of contracts and other rights.
The delay or unavailability of raw materials can materially adversely
affect our ability to produce products. This can materially adversely affect
our business and operations.
We do not have any arrangements regarding our products with any independent
distributors or wholesalers, and our inability to enter into these arrangements
may materially adversely affect our ability to sell products.
Our ability to establish markets for our proposed products is expected to
be substantially dependent on the efforts of independent distributors and
wholesalers. We cannot give any assurances that we will enter into any
arrangements with independent distributors or wholesalers on terms favorable to
us, if at all. Our inability to enter into satisfactory arrangements with
distributors or wholesalers may materially adversely affect our ability to sell
products. This can materially adversely affect our results of operations.
We may have difficulty obtaining licenses in the future, which could adversely
affect our ability to develop, manufacture and market commercially viable
products.
We currently have no licenses other than our secondary site packaging
arrangement with Genpharm and two licensing agreements with Eurand America (a
unit of American Home Products). We may in the future need or want to obtain
other licenses to develop, manufacture and market commercially viable products.
We cannot give any assurance that licenses will be obtainable on commercially
reasonable terms, if at all, or that any licensed patents or proprietary rights
will be valid and enforceable.
Our compliance with environmental laws may necessitate uncertain expenditures
in the future, the capital for which may not be available to us.
We cannot accurately predict the outcome or timing of future expenditures
that we may be required to pay in order to comply with comprehensive federal,
state and local environmental laws and regulations. We must comply with
environmental laws which govern, among other things, all emissions, waste water
discharge and solid and hazardous waste disposal, and the remediation of
contamination associated with generation, handling and disposal activities. We
are subject periodically to environmental compliance reviews by various
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regulatory offices. Environmental laws have changed in recent years and we may
become subject to stricter environmental standards in the future and face
larger capital expenditures in order to comply with environmental laws. Our
limited capital makes it uncertain whether we will be able to pay for these
larger than expected capital expenditures. Also, future developments,
administrative actions or liabilities relating to environmental matters may
have a material adverse effect on our financial condition or results of
operations. In this regard, you should also review the "Our limited supply of
cash and cash equivalents may require us to modify our business operations and
plans" risk factor earlier in this section.
Generic drug makers face an inherent risk of product liability litigation and
any claims brought against us could have a material adverse effect upon us.
The design, development and manufacture of our products involve an
inherent risk of product liability claims and associated adverse publicity.
Insurance coverage is expensive, difficult to obtain and may not be available
in the future on acceptable terms or at all. Any claims brought against us,
whether fully covered by insurance or not, could have a material adverse effect
upon us.
We have exposure under DES-related product liability claims, which could have a
material adverse effect upon our financial condition.
When we acquired the business of Richlyn Laboratories, we also assumed its
liabilities in connection with Diethyl Stilbestrol, commonly known as DES,
which was manufactured by Richlyn and many other drug manufacturers during the
late 1950's and early 1960's. DES was prescribed to pregnant women during that
period and has been alleged to cause birth defects, in particular an increased
risk of uterine cancer and sterility of female children whose mothers took the
drug during their pregnancy. There have been numerous claims brought against
drug manufacturers relating to DES and, since 1987, Richlyn Laboratories'
insurers have paid approximately $136,000 on their behalf and our behalf to
settle approximately 143 DES-related suits. No other legal actions have been
brought or, to our knowledge, threatened against Richlyn Laboratories or us in
connection with DES-related claims. We do not expect to be held liable for
DES-related claims other than claims based on products manufactured by Richlyn
Laboratories. Claims settlements to date have been based on market share and
Richlyn Laboratories' share of the DES market during the relevant periods is
believed by us to have been substantially less than 1%.
Rights of certain holders of our equity to acquire shares of common stock may
dilute the future value of the common stock.
As of May 15, 1999, there were outstanding a total of 59,000 shares of our
convertible preferred stock. These shares presently are convertible, at any
time at the option of their holders, into an aggregate of 2,950,000 shares of
our common stock. The shares of preferred stock also have certain anti-dilution
protections, which could make them convertible into additional shares of common
stock.
As of May 15, 1999, we also had issued warrants to purchase 1,065,000
shares of our common stock at exercise prices ranging from $1.75 to $13.175 per
share of common stock. In addition, under our arrangement with Merck KGaA, a
German company, we issued warrants which are exercisable for 40,000 shares of
our common stock for each aggregate $1 million in gross profit, if any, earned
by us under our agreement with a subsidiary of Merck KGaA (up to a total of
700,000 shares of common stock). The exercise price for these warrants may be
at prices below the then trading market price for our common stock.
We have and may in the future issue additional preferred stock which could
adversely affect the rights of holders of our common stock.
Our Board of Directors has the authority to issue up to 2,000,000 shares
of our preferred stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the
stockholders. We presently have outstanding 9,000 shares of Series C
Convertible Preferred Stock and 50,000 shares of Series D Convertible Preferred
Stock. Preferred stockholders could adversely affect the rights of holders of
common stock by:
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o Exercising voting, redemption and conversion rights to the detriment of
the holders of common stock;
o Receiving preferences over the holders of common stock regarding assets
or surplus funds in the event of our dissolution or liquidation;
o Delaying, deferring or preventing a change in control of our company;
o Discouraging bids for our common stock at a premium over the market price
of the common stock; and
o Otherwise adversely affecting the market price of the common stock.
In this regard, you should also review the "Control of our company is
concentrated among a limited number of stockholders, who can exercise
significant influence over all matters requiring stockholder approval" risk
factor later in this Section.
Control of our company is concentrated among a limited number of stockholders,
who can exercise significant influence over all matters requiring stockholder
approval.
As of May 15, 1999, our present directors, executive officers and their
respective affiliates and related entities beneficially owned approximately
48.4% of our common stock and common stock equivalents. These stockholders can
exercise significant influence over all matters requiring stockholder approval,
including the election of directors and the approval of significant corporate
transactions. This concentration of ownership may also potentially delay or
prevent a change in control of our company. In this regard, you should also
review the "Rights of certain holders of our equity to acquire shares of common
stock may dilute the future value of the common stock" and "We have and may in
the future issue additional preferred stock which could adversely affect the
rights of holders of our common stock" risk factors in other parts of this
Section, and the "Selling Stockholders" Section later in this Prospectus.
We are dependent on key officers and qualified scientific and technical
employees and our limited resources may make it more difficult to attract and
retain these personnel.
As a small company with only 67 employees, the success of our present and
future operations will depend to a great extent on the collective experience,
abilities and continued service of certain of our executive officers. If we
lose the services of any of these executive officers, it could have a material
adverse effect on us. Because of the specialized scientific nature of our
business, we are also highly dependent upon our ability to continue to attract
and retain qualified scientific and technical personnel. Loss of the services
of, or failure to recruit, key scientific and technical personnel would be
significantly detrimental to our product development programs. Our small size
and limited resources may make it more difficult for us to attract and retain
our executive officers and qualified scientific and technical personnel.
Our chief executive officer has no experience as a chief executive officer.
Barry R. Edwards is our President and Chief Executive Officer. Mr.
Edwards, who was recently named Chief Executive Officer of our Company, has no
experience as a chief executive officer.
Failure to obtain year 2000 compliance may have adverse effects on our business
and results of operations.
Our software vendors have advised us that all databases used by our
current systems are Year 2000 compliant. We are also in the process of
addressing the Year 2000 issues with customers, suppliers, service providers
and other constituents. We cannot give any assurance that we have correctly
identified or will be able to identify all aspects of our business that are
subject to Year 2000 problems or of our customers or suppliers that affect our
business. We also cannot give any assurance that our software vendors are
correct in their assertions that the software is Year 2000 compliant, or that
our estimate of the costs of systems preparation for Year 2000 compliance will
prove ultimately to be accurate. Should either our internal systems or internal
systems of one or more of our significant suppliers or customers fail to
achieve Year 2000 compliance, or our estimate of the costs of becoming Year
2000 compliant prove to be materially inaccurate, our business and results of
operations could be adversely affected.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may inspect and
copy any document we file at the SEC's Public Reference Room at 450 Fifth
Street, N.W. Washington, D.C. 20549 or at the SEC's other public reference
facilities in New York, New York, or Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from the SEC's web site on the
Internet at http:[\]www.sec.gov. This web site contains reports, proxy and
information statements and other information regarding our company and other
registrants that file electronically with the SEC.
We have filed a registration statement on Form S-3 with the SEC covering
the shares of common stock being offered by means of this prospectus. We are
allowed to "incorporate by reference" the information contained in documents we
file with the SEC, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and later information
that we file 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 the selling stockholders sell all
the shares:
1. Our annual report on Form 10-KSB for the year ended December 31, 1998;
2. Our quarterly report on Form 10-QSB for the quarter ended March 31,
1999;
3. Our proxy statement dated April 12, 1999; and
4. The description of our common stock contained in our registration
statement on Form 8-A filed on December 8, 1995, as amended on December
14, 1995 and as amended on December 5, 1997.
You may request a copy of these filings, at no cost, by writing or
telephoning our Secretary at Global Pharmaceutical Corporation, Castor &
Kensington Avenues, Philadelphia, Pennsylvania 19124, telephone number (215)
289-2220.
You should rely on the information incorporated by reference or provided
in this prospectus or any supplement. We have not authorized anyone else to
provide you with different information. The selling stockholders will not make
an offer of these shares in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any supplement is
accurate as of any date other than the date on the front of those documents.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus (including the documents incorporated by reference in this
prospectus) contains certain "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995 and information relating to us
that are based on the beliefs of our management, as well as assumptions made by
and information currently available to our management. When used in this
prospectus, the words "estimate," "project," "believe," "anticipate," "intend,"
"expect" and similar expressions are intended to identify forward-looking
statements. Such statements reflect our current views with respect to future
events. These statements are subject to risks and uncertainties that could
cause actual results to differ materially from those contemplated in the
forward-looking statements. Many of these risks are discussed under the "Risk
Factors" Section of this prospectus immediately following. You are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date of this prospectus. We do not have any obligation to
publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date of this prospectus or to reflect the
occurrence of unanticipated events.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of our common
stock by the selling stockholders.
SELLING STOCKHOLDERS
The following table sets forth information as of April 30, 1999 except as
otherwise noted, with respect to the number of shares of common stock
beneficially owned by each of the selling stockholders. The selling
stockholders who, as of April 30, 1999, beneficially owned more than one
percent of the outstanding common stock (assuming conversion of the Series B
Preferred Stock held by them) are M. Kingdon Offshore N.V. (20%), Kingdon
Associates, L.P. (8%), Kingdon Partners, L.P. (8%), Udi Toledano (5%), Small
Cap Value Portfolio (19%), Max L. Mendelsohn (4%) and Gary Escandon (3%).
The selling stockholders of Global Pharmaceutical Corporation are offering
for sale up to 623,254 shares of our common stock. These shares of common stock
have been issued to the selling stockholders upon the conversion of shares of
our Series B Convertible Preferred Stock owned by the selling stockholders. The
Series B Preferred Stock was issued to the selling stockholders on December 1,
1997. As disclosed in footnote 2 to the "Selling Stockholders" table on page 17
of registration statement no. 333-44217, the number of shares of our common
stock which the selling stockholders received upon conversion depended upon our
common stock price and certain antidilution provisions applicable to the Series
B Preferred Stock. Using the original $2.75 conversion price, we initially
registered 1,818,182 shares of our common stock which could be issued upon the
conversion of the outstanding shares of Series B Preferred Stock (registration
statement no. 333-44217). Because of the antidilution provisions of the Series
B Preferred Stock, the conversion price fell in some cases to $2.00 per share,
and required the issuance of the additional 623,254 shares of our common stock
registered on this registration statement. The number of shares beneficially
owned includes shares issuable within 60 days upon exercise of outstanding
options and warrants and upon conversion of the Series B Preferred Stock.
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Number of Shares Number of Shares
of Common Stock of Common Stock
Selling Stockholder Beneficially Owned Registered Herein
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M. Kingdon Offshore N.V. ................ 1,129,412 256,685
Kingdon Associates, L.P. ................ 376,470 85,561
Kingdon Partners, L.P. .................. 376,471 85,562
Udi Toledano (Director)(1) .............. 242,592 3,409
Max. L. Mendelsohn ...................... 165,766 682
(Director)
Small Cap Value ......................... 1,435,253 3,387
Portfolio (of Bear Stearns Asset
Management)
Gary Escandon ........................... 128,227 6,819
(Director)(2)
Arnold S. Penner Foundation ............. 49,383 13,020
Futurtec, L.P. .......................... 50,000 13,637
Hollywell Investments Pty. Ltd........... 13,500 13,500
Matthew J. Morahan ...................... 15,750 9,000
Ronald J. DelMauro ...................... 23,571 5,571
Philip Chapman .......................... 14,013 3,255
(Director)(3)
David Purvis ............................ 11,905 2,814
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Number of Shares
of Common Stock of Common Stock
Registered on Beneficially Owned After
Registration Statement the Completion of this
No. 33-44217 Relating Offering and the Offering
to Conversion of Series B of Shares on Registration
Selling Stockholder Preferred Stock Statement No. 333-44217
- ----------------------------------------- --------------------------- --------------------------
<S> <C> <C>
M. Kingdon Offshore N.V. ................ 872,727 0
Kingdon Associates, L.P. ................ 290,909 0
Kingdon Partners, L.P. .................. 290,909 0
Udi Toledano (Director)(1) .............. 9,091 230,092
Max. L. Mendelsohn ...................... 1,818 163,266
(Director)
Small Cap Value ......................... 9,453 1,422,413
Portfolio (of Bear Stearns Asset
Management)
Gary Escandon ........................... 18,181 103,227
(Director)(2)
Arnold S. Penner Foundation ............. 36,363 0
Futurtec, L.P. .......................... 36,363 0
Hollywell Investments Pty. Ltd........... 0 0
Matthew J. Morahan ...................... 36,000 0
Ronald J. DelMauro ...................... 18,000 0
Philip Chapman .......................... 9,091 1,667
(Director)(3)
David Purvis ............................ 9,091 0
</TABLE>
8
<PAGE>
- ------------
(1) Includes 68,568 shares of common stock owned by Mr. Toledano's wife and
22,529 shares of common stock owned by a trust for the benefit of minor
children of Mr. Toledano, all of which shares Mr. Toldeano disclaims
beneficial ownership.
(2) Includes 7,500 shares of common stock owned by Alvaro P. Escandon Inc.
Money Purchase Pension Plan dated 12/1/80, with respect to which Mr.
Escandon disclaims beneficial ownership.
(3) Does not include 575,350 shares of common stock held by the Frederick R.
Adler Intangible Asset Management Trust, of which Susan R. Chapman, spouse
of Philip R. Chapman, is trustee. Also does not include 50,000 shares of
common stock held by Longview Partners, L.P., of which Susan R. Chapman is
the General Partner. Mr. Chapman disclaims beneficial ownership of all of
these shares.
9
<PAGE>
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the selling
stockholders. We will pay all costs, expenses and fees in connection with this
registration, except that the selling stockholders will pay underwriting
discounts and selling commissions, if any. We will not receive any of the
proceeds from the sale of the shares by the selling stockholders. When we refer
to the "selling stockholders" in this prospectus, that term includes donees and
pledgees selling shares of common stock under this prospectus which were
received from the selling stockholders.
The selling stockholders may sell their shares at various times in one or
more of the following transactions:
o on the Nasdaq SmallCap Market (or any other exchange on which the shares
may be listed);
o in the over-the-counter market;
o in negotiated transactions other than on such exchange;
o by pledge to secure debts and other obligations;
o in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions, in covering previously established short
positions and in settlement of other transactions in standardized or
over-the-counter options; or
o in a combination of any of the above transactions.
The selling stockholders may sell their shares at market prices prevailing
at the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices. The selling stockholders may sell shares
directly or may use broker-dealers to sell their shares. The broker-dealers
will either receive discounts or commissions from the selling stockholders, or
they will receive commissions from purchasers of shares. This compensation may
be in excess of customary commission.
The selling stockholders may also sell all or a portion of their shares
under Rule 144 under the Securities Act of 1933, or may pledge shares as
collateral for margin accounts. These shares could then further be resold
pursuant to the terms of such accounts.
Under certain circumstances, the selling stockholders and any
broker-dealers that participate in the distribution might be deemed to be
"underwriters" within the meaning of the Securities Act and any commission
received by them and any profit on the resale of the shares of common stock as
principal might be deemed to be underwriting discounts and commissions under
the Securities Act. The selling stockholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of
the shares against certain liabilities, including liabilities arising under the
Securities Act. Liabilities under the federal securities laws cannot be waived.
Because the selling stockholders may be deemed to be "underwriters" under
the Securities Act, the selling stockholders will be subject to prospectus
delivery requirements under the Securities Act. Furthermore, in the event of a
"distribution" of their shares, the selling stockholders, any selling broker or
dealer and any "affiliated purchasers" may be subject to Rule 10b-6 under the
Exchange Act or Regulation M under the Exchange Act, which prohibits, with
certain exceptions, any such person from bidding for or purchasing any security
which is the subject of such distribution until such person's participation in
that distribution is completed. In addition, Rule 10b-7 under the Exchange Act
or Regulation M prohibits any "stabilizing bid" or "stabilizing purchase" for
the purpose of pegging, fixing or stabilizing the price of the common stock in
connection with this offering. We have informed the selling stockholders that
the anti-manipulative provisions of Regulation M promulgated under the Exchange
Act may apply to their sales in the market.
10
<PAGE>
If we are notified by the selling stockholders that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, we will file a supplement to
this prospectus, if required, under Rule 424(b) under the Securities Act,
disclosing the following:
o the names of the selling stockholders and of the participating
broker-dealer(s);
o the number of shares involved;
o the price at which such shares were sold;
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
o that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this prospectus;
and
o other facts material to the transaction.
In addition, if we are notified by the selling stockholders that a donee
or pledgee intends to sell more than 500 shares, we will file a supplement to
this prospectus.
The selling stockholders may be entitled under agreements entered into
with us to indemnification from us against liabilities under the Securities
Act.
In order to comply with certain state securities laws, if applicable,
these shares of common stock will not be sold in a particular state unless they
have been registered or qualified for sale in that state or any exemption from
registration or qualification is available and complied with.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered by this
Prospectus will be passed upon for us by Fulbright & Jaworski L.L.P., New York,
New York. Frederick R. Adler, who is of counsel to the firm, as of December 31,
1998, beneficially owned 136,495 shares of our common stock (owned by 1520
Partners, Ltd.) and warrants to purchase 17,500 shares of common stock at an
exercise price of $8.50 per share. In addition, The Adler Family Foundation,
Inc., of which Mr. Adler, Catherine G. Adler, the wife of Mr. Adler, and
William Bush, a partner of Fulbright & Jaworski L.L.P., serve as trustees and
officers, owns 138,668 shares of common stock. The Frederick R. Adler
Intangible Asset Management Trust, of which Mr. Adler is a beneficiary, and
Susan R. Chapman, spouse of Philip R. Chapman, a director of the Company, is
trustee, owns 575,350 shares of common stock.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-KSB for the year ended December 31, 1998, have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
11
<PAGE>
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our corporation is organized under the laws of the State of Delaware.
Section 145 of the Delaware General Corporation Law (the "DGCL"), in general,
empowers a Delaware corporation to indemnify any person who was or is a party
or is threatened to be made a party to any lawsuit or proceeding (other than an
action by or in the right of that corporation) due to the fact that such person
is or was a director, officer, employee or agent of that corporation, or is or
was serving at the request of that corporation as a director, officer, employee
or agent of another corporation or entity. A corporation is also allowed, in
advance of the final disposition of a lawsuit or proceeding, to pay the
expenses (including attorneys' fees) incurred by any officer, director,
employee or agent in defending the action, as long as the person undertakes to
repay this amount if it is ultimately determined that he or she is not entitled
to be indemnified by the corporation. In addition, Delaware law allows a
corporation to indemnify these persons against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by any of them in connection with the lawsuit or proceeding if (a) he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the corporation, and (b) with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful.
A Delaware corporation also can indemnify its officers and directors in an
action by or in the right of the corporation to procure a judgment in its favor
under the same conditions, except that judicial approval is needed to indemnify
any officer or director who is adjudged to be liable to the corporation. Where
an officer or director is successful on the merits or otherwise in the defense
of any such action, the corporation must indemnify him or her against the
expenses (including attorneys' fees) which he or she actually and reasonably
incurred in connection with this action. The indemnification provided by
Delaware law is not deemed to be exclusive of any other rights to which an
officer or director may be entitled under any corporation's own organizational
documents, agreements or otherwise.
As permitted by Section 145 of the DGCL, Section TWELFTH of our
Certificate of Incorporation (our "Certificate") provides that we will
indemnify each person who is or was our director, officer, employee or agent
(including the heirs, executors, administrators or estate of these individuals)
or is or was serving at our request as a director, officer, employee or agent
of another entity, to the fullest extent that the law permits. This
indemnification is exclusive of any other rights to which any of these
individuals otherwise may be entitled. The indemnification also continues after
a person ceases to be a director, officer, employee or agent of our company and
inures to the benefit of the heirs, executors and administrators of these
individuals. Expenses (including attorneys' fees) incurred in defending any
lawsuit or proceeding are also paid by us in advance of the final disposition
of these lawsuits or proceedings after we receive an undertaking from the
indemnified person to repay this amount if it is ultimately determined that he
or she is not entitled to be indemnified by us. Section ELEVENTH of our
Certificate further provides that our directors are not personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of his or her duty of loyalty
to us or our stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (which deals with unlawful dividends or stock purchases
or redemptions), or (iv) for any transaction from which he or she derived an
improper personal benefit. Our By-laws also provide that, to the fullest extent
permitted by law, we will indemnify any person who is a party or otherwise
involved in any proceeding because of the fact that he or she is or was a
director or officer of our company or was serving at our request.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to any of these foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
12
