GENEREX BIOTECHNOLOGY CORP - Annual Report: 2005 (Form 10-K)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
[
X ]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the
fiscal year ended July 31, 2005
[
]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the
transition period from _______ to _______
Commission
file number 000-25169
GENEREX
BIOTECHNOLOGY CORPORATION
(Exact
name of registrant as specified in its charter)
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Delaware
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98-0178636
|
|
|
(State
or other jurisdiction
of
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(IRS
Employer Identification
No.)
|
|
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incorporation
or
organization)
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33
Harbour Square, Suite 202, Toronto,
Canada
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M5J
2G2
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(Address
of principal executive offices)
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(Zip
Code)
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Telephone
Number: (416)
364-2551
Internet
Website: www.generex.com
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to section 12(g) of the Act:
Common
Stock, par value $.001 per share
(Title
of
Class)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such report(s), and (2) has been subject to such filing requirements
for
the past 90 days. Yes [X] No [ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment
to this
Form 10-K. [X]
Indicate
by check mark whether the registrant is an accelerated filer (as defined
in Rule
12b-2 of the Act). Yes [ ] No [X]
Indicated
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes [ ] No [X]
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant computed by reference to the prices at which
the common equity was last sold as of January 31, 2005, the last business
day of
the registrant’s most recently completed second fiscal quarter, was
approximately $20,523,075.
At
October 13, 2005, the registrant had 46,830,957 shares of common stock
outstanding.
Documents
incorporated by reference: Proxy Statement, or an amendment to this Annual
Report on Form 10-K, to be filed within 120 days after the end of the fiscal
year.
1
Generex
Biotechnology Corporation
Form
10-K
July
31, 2005
Index
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Page
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Forward-Looking
Statements
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Part
I
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Item
1.
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Business.
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4
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Item
2.
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Properties.
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28
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Item
3.
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Legal
Proceedings.
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29
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Item
4.
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Submission
of Matters to a Vote of Security Holders.
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31
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Part
II
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Item
5.
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Market
For Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
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31
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Item
6.
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Selected
Financial Data.
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33
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Item
7.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
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34
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Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk.
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58
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Item
8.
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Financial
Statements and Supplementary Data.
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59
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Item
9.
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Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure.
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108
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Item
9A.
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Controls
and Procedures.
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108
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Item
9B.
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Other
Information.
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Part
III
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Item
10.
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Directors
and Executive Officers of the Registrant.
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111
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Item
11.
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Executive
Compensation.
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111
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
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111
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Item
13.
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Certain
Relationships and Related Transactions.
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111
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Item
14.
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Principal
Accountant Fees and Services.
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111
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Part
IV
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Item
15.
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Exhibits
and Financial Statement Schedules.
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111
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Signatures
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122
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Schedule
II
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123
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As
used
herein, the terms the “Company,”“Generex,”“we,”“us,” or “our” refer to Generex
Biotechnology Corporation, a Delaware corporation
2
Forward-Looking
Statements
We
have
made statements in Item
7. Management's Discussion and Analysis of Financial Condition and Results
of
Operations
and
elsewhere in this Annual Report on Form 10-K of Generex Biotechnology
Corporation for the fiscal year ended July 31, 2005 that may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Act"). The Act limits our liability in
any
lawsuit based on forward-looking statements we have made. All statements,
other
than statements of historical facts, included in this Annual Report that
address
activities, events or developments that we expect or anticipate will or may
occur in the future, including such matters as our projections, future capital
expenditures, business strategy, competitive strengths, goals, expansion,
market
and industry developments and the growth of our businesses and operations,
are
forward-looking statements. 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:
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Ÿ
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our
expectations concerning product candidates for our
technologies;
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Ÿ
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our
expectations concerning existing or potential development and license
agreements for third-party collaborations and joint
ventures;
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our
expectations of when different phases of clinical activity may
commence;
and
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our
expectations of when regulatory submissions may be filed or when
regulatory approvals may be
received.
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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:
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Ÿ
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the
inherent uncertainties of product development based on our new
and as yet
not fully proven technologies;
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the
risks and uncertainties regarding the actual effect on humans of
seemingly
safe and efficacious formulations and treatments when tested
clinically;
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the
inherent uncertainties associated with clinical trials of product
candidates; and
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the
inherent uncertainties associated with the process of obtaining
regulatory
approval to market product candidates;
and
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Ÿ
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the
inherent uncertainties associated with commercialization of products
that
have received regulatory approval.
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Additional
factors that could affect future results are set forth below under the caption
Item
1. Business
and the
subsection thereunder entitled “Certain Additional Risk Factors.” We caution
investors that the forward-looking statements contained in this Report must
be
interpreted and understood in light of conditions and circumstances that
exist
as of the date of this Report. We expressly disclaim any obligation or
undertaking to update or revise forward-looking statements made in this Report
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.
3
Part
I
Item
1. Business.
Overview
We
are
engaged primarily in the research and development of drug delivery technologies.
Our primary focus at the present time is our proprietary technology for the
administration of formulations of large molecule drugs to the oral (buccal)
cavity using a hand-held aerosol applicator.
A
substantial number of large molecule drugs (i.e.,
drugs
composed of molecules with a higher than specified molecular weight) have
been
approved for sale in the United States or are presently undergoing clinical
trials as part of the process to obtain such approval, including various
proteins, peptides, monoclonal antibodies, hormones and vaccines. Unlike
small
molecule drugs, which generally can be administered by various methods, large
molecule drugs historically have been administered predominately by injection.
The principal reasons for this have been the vulnerability of large molecule
drugs to digestion and the relatively large size of the molecule itself,
which
makes absorption into the blood stream through the skin or mucosa inefficient
or
ineffective.
All
injection therapies involve varying degrees of discomfort and inconvenience.
With chronic and sub-chronic diseases, the discomfort and inconvenience
associated with injection therapies frequently results in less than optimal
patient acceptance of, and compliance with, the prescribed treatment plan.
Poor
acceptance and compliance can lead to medical complications and higher disease
management costs. Also, elderly, infirm and pediatric patients with chronic
or
sub-chronic conditions may not be able to self-inject their medications.
In such
cases, assistance is required which increases both the cost and inconvenience
of
the therapy.
Our
goal
is to develop proprietary formulations of large molecule drugs that can be
administered through the buccal mucosa, primarily the inner cheek walls,
thereby
eliminating or reducing the need for injections. We believe that our buccal
delivery technology is a platform technology that has application to many
large
molecule drugs, and provides a convenient, non-invasive, accurate and
cost-effective way to administer such drugs. We have identified several large
molecule drugs as possible candidates for development, but to date have focused
our development efforts on a buccal insulin product.
Our
first
product is an insulin formulation that is administered as a fine spray into
the
oral cavity using a hand-held aerosol spray applicator. Between January 1999
and
September 2000, we conducted limited clinical trials on this product in the
United States, Canada and Europe. In September 2000, we entered into an
agreement (the "Development and License Agreement") to develop this product
with
Eli Lilly and Company ("Lilly"). To date, over 1,100 patients with diabetes
have
been dosed with our oral insulin product at approved facilities in seven
countries. We conducted several clinical trials with insulin supplied by
Lilly
under our Development and License Agreement. Lilly did not, however, authorize
or conduct any clinical trials or provide financial support for those trials.
We
did receive a $1,000,000 upfront payment from Lilly. On May 23, 2003, we
announced that we had agreed with Lilly to end the Development and License
Agreement for the development and commercialization of buccal delivery of
insulin. On November 5, 2003, we entered into a termination agreement with
Lilly
terminating the Development and License Agreement, effective as of June 2,
2003.
In accordance with the termination agreement, we retained all of the
intellectual property and commercialization rights with respect to buccal
spray
drug delivery technology, and we have the continuing right to develop and
commercialize the product. We also entered into a Bulk Supply Agreement (the
"Bulk Supply Agreement") for the sale of human insulin crystals by Lilly
to us
over a three-year period. The Bulk Supply Agreement establishes purchase
prices,
minimum purchase requirements, maximum amounts which may be purchased in
each
year and a non-refundable prepayment of $1,500,000 to be applied against
amounts
due for purchases.
4
In
January 2001, we established a joint venture with Elan International Services,
Ltd. ("EIS"), a wholly-owned subsidiary of Elan Corporation, plc (EIS and
Elan
Corporation, plc being collectively referred to as "Elan"), to pursue the
application of certain of our and Elan's drug delivery technologies, including
our platform technology for the buccal delivery of pharmaceutical products,
for
the treatment of prostate cancer, endometriosis and/or the suppression of
testosterone and estrogen. In January 2002, we and Elan agreed to expand
the
joint venture to encompass the buccal delivery of morphine for the treatment
of
pain and agreed to pursue buccal morphine as the initial pharmaceutical product
for development under Generex (Bermuda) Ltd., the entity through which the
joint
venture was being conducted. This expansion of the joint venture occurred
after
we successfully completed a proof of concept clinical study of morphine delivery
using our proprietary buccal delivery technology.
In
connection with the joint venture, EIS purchased 1,000 shares of our Series
A
Preferred Stock for $12,015,000, which EIS transferred, shortly thereafter,
to
Elan Pharmaceuticals Investment III, an affiliate of Elan ("EPIL III"). We
applied the proceeds from the sale of the Series A Preferred Stock to subscribe
for an 80.1% equity ownership interest in Generex (Bermuda), Ltd. EIS paid
in
capital of $2,985,000 to subscribe for a 19.9% equity ownership interest
in the
joint venture entity. In accordance with the terms of the Series A Preferred
Stock, if any shares of Series A Preferred Stock were to be outstanding on
January 16, 2007, we would have been required to redeem the shares of Series
A
Preferred Stock at a redemption price equal to the aggregate Series A Preferred
Stock liquidation preference, either in cash, or in shares of common stock
with
a fair market value equal to the redemption price. Alternatively, the Series
A
Preferred Stock could have been converted, under certain conditions, into
shares
of our common stock. EIS also purchased 344,116 shares of our common stock
for
$5,000,000. We were permitted to use the proceeds of this sale for any corporate
purpose.
On
December 27, 2004, we entered into an agreement (the "Termination Agreement")
with Elan, whereby we and Elan agreed to terminate the joint venture through
Generex (Bermuda) Ltd. Pursuant to the terms of the Termination Agreement,
(i)
except for a common stock purchase warrant that was issued by us to Elan,
which
was amended to permit Elan or any other holder thereof to transfer the warrant
without our consent, the parties agreed to terminate all agreements entered
into
in connection with the joint venture, and (ii) Elan agreed to transfer all
shares of capital stock of Generex (Bermuda) owned by it to us. Accordingly,
all
rights granted by each party to the other terminated, including, without
limitation, Elan's right to appoint a member to our Board of Directors, all
other rights granted under the terms of the joint venture terminated, each
party
retained its intellectual property rights, we obtained full ownership of
Generex
(Bermuda), and all representatives of Elan who were officers and/or directors
of
Generex (Bermuda) resigned.
In
connection with negotiating the Termination Agreement, EPIL III approached
us
for consent to transfer the Series A Preferred Stock by way of an auction
process. Although we provided our consent to the transfer, it was contingent
upon EPIL III agreeing to satisfy the following conditions: (i) the auction
process could conclude no later than December 15, 2004 and EPIL III's
disposition of the shares could conclude no later than December 31, 2004
(the
"Closing Date"), (ii) the buyer had to immediately convert the Series A
Preferred Stock at the voluntary conversion price of $25.77 (calculated pursuant
to the terms of the certificate of designation for the Series A Preferred
Stock
resulting in the issuance of 534,085 shares of common stock), (iii) EPIL
III's
registration rights could not be transferred, and (iv) for a period of two
(2)
years after the Closing Date, the purchaser of the Series A Preferred Stock
could not transfer the shares of common stock issuable upon conversion thereof
and we would have the right to redeem the shares of common stock at a per
share
price of 150% of the average closing price of the common stock on The Nasdaq
SmallCap Market for the twenty (20) days immediately preceding the Closing
Date.
On or about December 15, 2004, EPIL III conducted the auction and received
an
offer to buy the shares of Series A Preferred Stock. On or about December
31,
2004, EPIL III sold the shares of Series A Preferred Stock, and the purchaser
thereof immediately converted the Series A Preferred Stock into shares of
our
common stock.
5
The
conversion of the Series A Preferred Stock was particularly critical because
the
mandatory redemption feature required us to classify the Series A Preferred
Stock as approximately $14,300,000 of mezzanine equity. Upon conversion of
the
Series A Preferred Stock, however, we were able to reclassify the approximately
$14,300,000 of mezzanine equity as common equity on our balance sheet. This,
in
turn, allowed us to regain compliance with NASDAQ's Marketplace Rule
4310(c)(2)(B), which requires us to have a minimum of $2,500,000 in
stockholders' equity or $35,000,000 market value of listed securities or
$500,000 of net income from continuing operations for the most recently
completed fiscal year or two of the three most recently completed fiscal
years.
In
August
2003, we acquired Antigen Express, Inc. Antigen is engaged in the research
and
development of technologies and immunomedicines for the treatment of malignant,
infectious, autoimmune and allergic diseases.
Our
immunomedicine products work by stimulating the immune system to either attack
offending agents (i.e., cancer cells, bacteria, and viruses) or to stop
attacking benign elements (i.e., self proteins and allergens). Our
immunomedicine products are based on two platform technologies that were
discovered by an executive officer of Antigen, the Ii-Key hybrid peptides
and
Ii-Suppression. The immunomedicine products are in the pre-clinical stage
of
development except for a current Phase 1 clinical trial in human patients
with
stage II HER-2/neu positive breast cancer. Development efforts are underway
in
melanoma, prostate cancer, HIV, influenza virus, smallpox, SARS and Type
I
diabetes mellitus. We are seeking to establish collaborations with clinical
investigators at academic centers to advance the technology.
With
the
anticipated launch of commercial sales of our oral insulin product in Ecuador
in
2005, we expect to receive revenues from product sales in the fiscal year
ending
July 31, 2006. We do not expect this revenue to be sufficient for all of
our
cash needs during the year. In the past we were able to fund Antigen expenses
with some revenue from research grants for Antigen's immunomedicine products.
During the fiscal year ended July 31, 2005, we received a total of $392,112
in
such research grants, and we have received a total of $1,019,296 in such
research grants. We do not expect to receive such grants on the going forward
basis. We expect to satisfy the majority of our cash needs during the current
year from capital raised through equity financings.
We
are a
development stage company, and from inception through the end of the 2005
fiscal
year had not received any revenues from operations other than the up-front
payment from Lilly. We have begun the regulatory approval process for only
three
products, our oral insulin formulation, morphine and fentanyl. We have only
one
product, our oral insulin formulation, that has been approved for commercial
marketing and sale by drug regulatory authorities, and that approval was
obtained in Ecuador in early May 2005. We believe that our buccal delivery
technology is a platform technology that has application to a large number
of
large molecule drugs in addition to insulin. Estrogen, heparin, monoclonal
antibodies, human growth hormone, fertility hormone, as well as a number
of
vaccines are among the compounds that we have identified as possible candidates
for product development.
Buccal
Delivery Technology
Our
buccal delivery technology involves the preparation of a proprietary formulation
in which an active pharmaceutical agent is placed in a solution with a
combination of absorption enhancers and other excipients classified generally
recognized as safe ("GRAS") by the United States Food and Drug Administration
(the "FDA") when used in accordance with specified quantity and other
limitations. The resulting formulation is aerosolized with a pharmaceutical
grade chemical propellant and is administered to the patient using our
proprietary RapidMist™ device. The device is a small, lightweight, hand-held,
easy-to-use aerosol applicator comprised of a container for the formulation,
a
metered dose valve, an actuator and dust cap. Using the device, the patient
self-administers the formulation by spraying it into the mouth. The device
contains multiple applications, the number being dependent, among other things,
on the concentration of the formulation. Absorption of the pharmaceutical
agent
occurs in the buccal cavity, principally through the inner cheek walls. In
clinical studies of our insulin product Oral-lyn™, insulin absorption in the
buccal cavity has been shown to be very efficacious. We are also evaluating
the
use of our RapidMist™ device for the delivery of both morphine and fentanyl.
6
Buccal
Insulin Product
Insulin
is a hormone that is naturally secreted by the pancreas to regulate the level
of
glucose, a type of sugar, in the bloodstream. The term diabetes refers to
a
group of disorders that are characterized by the inability of the body to
properly regulate blood glucose levels. When glucose is abundant, it is
converted into fat and stored for use when food is not available. When glucose
is not available from food, these fats are broken down into free fatty acids
that stimulate glucose production. Insulin acts by stimulating the use of
glucose as fuel and by inhibiting the production of glucose. In a healthy
individual, a balance is maintained between insulin secretion and glucose
metabolism.
There
are
two major types of diabetes. Type 1 diabetes (juvenile onset diabetes or
insulin
dependent diabetes) refers to the condition where the pancreas produces little
or no insulin. Type 1 diabetes accounts for 5-10 percent of diabetes cases.
It
often occurs in children and young adults. Type 1 diabetics must take daily
insulin injections, typically three to five times per day, to regulate blood
glucose levels.
In
Type 2
diabetes (adult onset or non-insulin dependent diabetes mellitus), the body
does
not produce enough insulin, or cannot properly use the insulin produced.
Type 2
diabetes is the most common form of the disease and accounts for 90-95 percent
of diabetes cases. In addition to insulin therapy, Type 2 diabetics may take
oral drugs that stimulate the production of insulin by the pancreas or that
help
the body to more effectively use insulin.
If
not
treated, diabetes can lead to blindness, kidney disease, nerve disease,
amputation, heart disease and stroke. Each year, between 12,000 and 24,000
people lose their sight because of diabetes. Diabetes is also the leading
cause
of end-stage renal disease (kidney failure), accounting for about 40% of
new
cases.
In
addition, about 60-70 percent of people with diabetes have mild to severe
forms
of diabetic nerve damage, which, in severe forms, can lead to lower limb
amputations. Diabetics are also 2 to 4 times more likely to have heart disease,
which is present in 75 percent of diabetes-related deaths, and are 2 to 4
times
more likely to suffer a stroke.
There
is
no known cure for diabetes. The World Health Organization estimates that
there
are currently over 1.5 billion diabetics worldwide. It is further estimated
that
this number will almost double by the year 2025. There are estimated to be
17
million people suffering from diabetes in North America alone, approximately
5
million of whom are undiagnosed, and diabetes is the second largest cause
of
death by disease in North America.
We
conducted the first clinical trials of our buccal insulin formulation with
human
subjects in Ecuador in January 1998. We ultimately conducted a number of
studies
in Ecuador in 1998, each of which involved a selection of between 8 and 10
patients. The principal purpose of these studies was to evaluate the
effectiveness of our oral insulin formulation in humans compared with injected
insulin and placebos. In March 2004, we entered into a Letter of Intent for
the
establishment of a joint venture with PharmaBrand S.A., a distributor of
pharmaceutical products in Central and Latin America. In August 2004, we
sought
approval for the manufacturing, marketing, distribution and sale of Oral-lyn™
and the RapidMist™ Diabetes Management System from the Ecuador Ministry of
Public Health. In May 2005, we received approval from the Ecuadorian Ministry
of
Public Health for the commercial marketing and sale of Oral-lyn™ for treatment
of Type 1 and Type 2 diabetes. PharmaBrand is making preparations for the
commercial launch of Oral-lyn™ in Ecuador, and we are continuing our efforts to
secure the participation of a multi-national pharmaceutical co-marketing
partner
for the balance of South America.
7
On
the
basis of the test results in Ecuador and other pre-clinical data, we made
an
Investigatory New Drug submission to the Health Protection Branch in Canada
(Canada's equivalent to the FDA) in July 1998, and received permission from
the
Canadian regulators to proceed with clinical trials in September 1998. We
filed
an Investigational New Drug Application with the FDA in October 1998, and
received FDA approval to proceed with human trials in November 1998. Annual
reports have been filed with the FDA each year since that time.
We
began
our clinical trial programs in Canada and the United States in January 1999.
Between January 1999 and September 2000, we conducted clinical trials of
our
insulin formulation involving approximately 200 Type 1 and Type 2 diabetic
patients and healthy volunteers. The study protocol in most trials involved
administration of two different doses of our insulin formulation following
either a liquid Sustacal meal or a standard meal challenge. The objective
of
these studies was to evaluate our insulin formulation's efficacy in controlling
post-prandial (meal related) glucose levels. These trials demonstrated that
our
insulin formulation controlled post-prandial hyperglycemia in a manner
comparable to injected insulin.
In
April
2003, a Phase II-B clinical trial protocol was approved in Canada. Thereafter,
a
pilot trial was successfully undertaken in Ecuador (the results of which
have
been reported at several scientific symposia) to optimize the oral insulin
formulation to transition to Phase III clinical trials. We are currently
in the
process of finalizing our submission to Canadian Health Authorities for the
approval of initiation of Phase III trials.
We
anticipate being in a position to commence Phase III clinical trials of
Oral-lynTM
in
Europe and Canada subject to the receipt of regulatory approvals pursuant
to
meetings we anticipate being held before the end of the second calendar quarter
of 2006. We continue to conduct limited clinical studies and seek additional
collaborative partners in the United States, and other countries.
Other
Large Molecule Drug Projects
We
have
identified numerous compounds, other than insulin, as candidates for product
development.
Morphine
and Fentanyl
The
delivery of morphine and fentanyl by oral formulation (pills) and injection
for
the treatment of moderate to severe breakthrough and postoperative pain often
fails to provide patients with adequate relief and control (breakthrough
and
postoperative pain are characterized as being moderate to severe in intensity,
having a rapid onset of action and a short to medium duration). Not only
does
delivery by pills have a slow onset of action, it is often difficult for
patients to adjust their doses, with the result that patients are either
over or
under medicated. Injections are invasive and require an attendant to administer
the medication which reduces the patient's control over the pain and may
cause
increased anxiety. Often, patients must wait in pain until an attendant can
medicate them.
8
We
seek
to develop a buccal delivery formulation for morphine and fentanyl that will
have a critical series of attributes well suited for the treatment of
breakthrough and post operative pain and which will be cost-effective and
will
have a demonstrable improvement over current delivery methods. These include
fast access to the circulatory system, precise dosing control and a simple,
self-administration procedure.
We
made
an Investigatory New Drug submission for buccal morphine to the Health
Protection Branch in Canada in January 2002, and received permission from
the
Canadian regulators to proceed with clinical trials in March 2002.
We
made
an Investigatory New Drug submission for fentanyl to the Health Protection
Branch in Canada in August 2002, and received permission from the Canadian
regulators to proceed with clinical trials in October 2002.
During
fiscal year ended July 31, 2005, we did not actively pursue our buccal morphine
and buccal fentanyl projects.
Other
Products
We
have
had discussions of possible research collaborations with various pharmaceutical
companies concerning use of our large molecule drug delivery technology with
insulin, morphine, fentanyl and other compounds, including monoclonal
antibodies, human growth hormone, fertility hormone, estrogen and heparin,
and a
number of vaccines. We have also developed a proprietary formulated glucose
spray, Gluco-gyn™, for the treatment of hypoglycemia in people with diabetes.
Gluco-gyn™ works quickly to raise blood sugar, has no side effects, and is
effective to counteract the effects of low blood sugar or insulin
reaction.
We
have
not aggressively pursued development opportunities apart from insulin because
we
believe it is more advantageous to concentrate our resources, particularly
our
financial resources, on developing the insulin product. While the insulin
product remains our first priority, we continue developmental work for buccal
delivery formulation for morphine and fentanyl.
Immunomedicine
Technology and Products
Our
new
subsidiary, Antigen, is engaged in research and development of technologies
and
immunomedicines for the treatment of malignant, infectious, autoimmune and
allergic diseases. Our immunomedicine products work by stimulating the immune
system to either attack offending agents (i.e., cancer cells, bacteria, and
viruses) or to stop attacking benign elements (i.e., self proteins and
allergens). Our immunomedicine products are based on two platform technologies
that were discovered by an executive officer of Antigen, the Ii-Key hybrid
peptides and Ii-Suppression. These technologies are expected to greatly boost
immune cell responses which treat the ailments and conditions.
We
have
not filed an Investigational New Drug application to begin clinical trials
other
than a Physician’s Investigational New Drug application for a Phase 1 trial in
human patients with stage II HER-2/neu positive breast cancer. Other than
the
breast cancer trial, our immunomedicine products are in the pre-clinical
stage
of development and trials in human patients are not expected for at least
six
months.
Corporate
History
We
were
incorporated in Delaware in September 1997 for the purpose of acquiring Generex
Pharmaceuticals, Inc., a Canadian corporation formed in November 1995 to
engage
in pharmaceutical and biotechnological research and other activities. Our
acquisition of Generex Pharmaceuticals was completed in October 1997 in a
transaction in which the holders of all outstanding shares of Generex
Pharmaceuticals exchanged their shares for shares of our common stock.
9
In
January 1998, we participated in a "reverse acquisition" with Green Mt. P.
S.,
Inc., a previously inactive Idaho corporation formed in 1983. As a result
of
this transaction, our shareholders (the former shareholders of Generex
Pharmaceuticals) acquired a majority (approximately 90%) of the outstanding
capital stock of Green Mt., we became a wholly-owned subsidiary of Green
Mt.,
Green Mt. changed its corporate name to Generex Biotechnology Corporation
("Generex Idaho"), and we changed our corporate name to GB Delaware, Inc.
Because the reverse acquisition resulted in our shareholders becoming the
majority holders of Generex Idaho, we were treated as the acquiring corporation
in the transaction for accounting purposes. Thus, our historical financial
statements, which essentially represented the historical financial statements
of
Generex Pharmaceuticals, were deemed to be the historical financial statements
of Generex Idaho.
In
April
1999, we completed a reorganization in which we merged with Generex Idaho.
In
this transaction, all outstanding shares of Generex Idaho were converted
into
our shares, Generex Idaho ceased to exist as a separate entity, and we changed
our corporate name back to "Generex Biotechnology Corporation." This
reorganization did not result in any material change in our historical financial
statements or current financial reporting.
In
August
2003, we acquired Antigen Express, Inc. Antigen is engaged in the research
and
development of technologies and immunomedicines for the treatment of malignant,
infectious, autoimmune and allergic diseases.
Government
Regulation
Our
research and development activities, and the eventual manufacturing and
marketing of our products, are subject to extensive regulation by the Food
and
Drug Administration in the United States (the "FDA") and comparable regulatory
authorities in other countries. Among other things, extensive regulation
puts a
burden on our ability to bring products to market. While these regulations
apply
to all competitors in our industry, many of our competitors have more experience
in dealing with the FDA and other regulators. Also, other companies in our
industry are not limited primarily to products which still need to be approved
by government regulators, as we are now.
If
requisite regulatory approvals are not obtained and maintained, our business
will be substantially harmed. In many if not all cases, we expect that our
development partners will participate extensively in the regulatory approval
process once a development agreement is in place. The following discussion
summarizes the principal features of food and drug regulation in the United
States and other countries as they affect our business.
United
States
All
aspects of our research, development and foreseeable commercial activities
are
subject to extensive regulation by the FDA and other regulatory authorities
in
the United States. United States federal and state statutes and regulations
govern, among other things, the testing, manufacturing, safety, efficacy,
labeling, storage, record keeping, approval, advertising and promotion of
pharmaceutical products. The regulatory approval process, including clinical
trials, usually takes several years and requires the expenditure of substantial
resources. If regulatory approval of a product is granted, the approval may
include significant limitations on the uses for which the product may be
marketed. The steps required before a pharmaceutical product may be marketed
in
the United States include:
10
|
Ÿ
|
preclinical
tests;
|
|
Ÿ
|
the
submission to the FDA of an Investigational New Drug application,
which
must become effective before human clinical trials
commence;
|
|
Ÿ
|
human
clinical trials to establish the safety and efficacy of the
drug;
|
|
Ÿ
|
the
submission of a New Drug Application to the FDA;
and
|
|
Ÿ
|
FDA
approval of the New Drug Application, including approval of all
product
labeling and advertising.
|
Pre-clinical
tests include laboratory evaluation of product chemistry, formulation and
stability, as well as animal studies to assess the potential safety and efficacy
of each product. The results of the pre-clinical tests are submitted to the
FDA
as part of the Investigational New Drug application and are reviewed by the
FDA
before the commencement of human clinical trials. Unless the FDA objects
to the
Investigational New Drug application, the Investigational New Drug application
becomes effective 30 days following its receipt by the FDA. The Investigational
New Drug application for our oral insulin formulation became effective in
November 1998. We filed an Investigational New Drug application for buccal
morphine in January 2002.
Clinical
trials involve the administration of the new drug to humans under the
supervision of a qualified investigator. The protocols for the trials must
be
submitted to the FDA as part of the Investigational New Drug application.
Also,
each clinical trial must be approved and conducted under the auspices of
an
Institutional Review Board, which considers, among other things, ethical
factors, the safety of human subjects, and the possible liability of the
institution conducting the clinical trials.
Clinical
trials are typically conducted in three sequential phases (Phase I, Phase
II,
and Phase III), but the phases may overlap. Phase I clinical trials test
the
drug on healthy human subjects for safety and other aspects, but not
effectiveness. Phase II clinical trials are conducted in a limited patient
population to gather evidence about the efficacy of the drug for specific
purposes, to determine dosage tolerance and optimal dosages, and to identify
possible adverse effects and safety risks. When a compound has shown evidence
of
efficacy and acceptable safety in Phase II evaluations, Phase III clinical
trials are undertaken to evaluate clinical efficacy and to test for safety
in an
expanded patient population at clinical trial sites in different geographical
locations. The FDA and other regulatory authorities require that the safety
and
efficacy of therapeutic product candidates be supported through at least
two
adequate and well-controlled Phase III clinical trials. The successful
completion of Phase III clinical trials is the precursor to the receipt of
the
approval of regulatory authorities for the manufacturing, marketing, and
sale of
products.
In
the
United States, the results of pre-clinical studies and clinical trials, if
successful, are submitted to the FDA in a New Drug Application to seek approval
to market and commercialize the drug product for a specified use. The FDA
may
deny a New Drug Application if it believes that applicable regulatory criteria
are not satisfied. The FDA also may require additional testing for safety
and
efficacy of the drug. We cannot be sure that any of our proposed products
will
receive the FDA approval. Even if approved by the FDA, our products and the
facilities used to manufacture our products will remain subject to review
and
periodic inspection by the FDA.
To
supply
drug products for use in the United States, foreign and domestic manufacturing
facilities must be registered with, and approved by, the FDA. Manufacturing
facilities must also comply with the FDA's Good Manufacturing Practices,
and
such facilities are subject to periodic inspection by the FDA. Products
manufactured outside the United States are inspected by regulatory authorities
in those countries under agreements with the FDA. To comply with Good
Manufacturing Practices, manufacturers must expend substantial funds, time
and
effort in the area of production and quality control. The FDA stringently
applies its regulatory standards for manufacturing. Discovery of previously
unknown problems with respect to a product, manufacturer or facility may
result
in consequences with commercial significance. These include restrictions
on the
product, manufacturer or facility, suspensions of regulatory approvals,
operating restrictions, delays in obtaining new product approvals, withdrawals
of the product from the market, product recalls, fines, injunctions and criminal
prosecution.
11
Foreign
Countries
Before
we
are permitted to market any of our products outside of the United States,
those
products will be subject to regulatory approval by foreign government agencies
similar to the FDA. These requirements vary widely from country to country.
Generally, however, no action can be taken to market any drug product in
a
country until an appropriate application has been approved by the regulatory
authorities in that country. Although an important consideration, FDA approval
does not assure approval by other regulatory authorities. The current approval
process varies from country to country, and the time spent in gaining approval
varies from that required for FDA approval. The Canadian regulatory process
is
substantially similar to that of the United States. We obtained regulatory
approval to begin clinical trials of our oral insulin formulation in Canada
in
November 1998. We obtained regulatory approval to begin clinical trials of
our
buccal morphine product in Canada in March 2002. In April 2003, we received
approval of an Oral-lyn™ Phase II-B clinical trial protocol in Canada. We
received regulatory approval to begin clinical trials of our fentanyl product
in
Canada in October 2002. In May 2005, we received approval from the Ecuadorian
Ministry of Public Health for the commercial marketing and sale of Oral-
lyn™
for treatment of Type 1 and Type 2 diabetes.
Marketing
We
intend
to rely on contracting or collaborative arrangements with one or more other
companies that possess strong pharmaceutical marketing and distribution
resources to perform these functions for us. Accordingly, we may not have
the
same control over marketing and distribution that we would have if we conducted
these functions ourselves.
PharmaBrand,
our joint venture partner, is making preparations for the commercial launch
of
Oral-lynTM
in
Ecuador, and we are continuing our efforts to secure the participation of
a
multi-national pharmaceutical co-marketing partner in the commercial launch
of
Oral-lynTM
in
the
balance of South America. Except for these arrangements, we do not have any
agreements with any other companies for marketing or distributing our products.
With respect to our insulin product, we possess the worldwide marketing rights
to this product after they reverted to us upon the termination in June 2003
of
the Development and License Agreement with Lilly.
Manufacturing
To
date,
we have produced our oral insulin formulation only on a small scale. In December
2000, we completed our pilot manufacturing facility in Toronto in the same
commercial complex in which our original laboratory is located. We believe
that
this facility will be capable of producing our insulin product at levels
necessary to supply our needs for late stage human clinical trials of the
product and for initial commercial sales outside the United States. We will
need
to significantly increase our manufacturing capability in order to manufacture
any product in significant commercial quantities. We plan to establish a
manufacturing facility in Ecuador for the purposes of commercial supply and
sales in that country and, as we procure other registrations, in other South
American markets.
Our
subsidiary Antigen leases office and laboratory space in Worcester,
Massachusetts, which is sufficient for its present needs. The laboratory
is
approximately 820 square feet and has permission to store and use biohazardous
(including recombinant DNA materials) and flammable chemicals.
12
Raw
Material Supplies
The
excipients used in our formulation are available from numerous sources in
sufficient quantities for clinical purposes, and we believe that they will
be
available in sufficient quantities for commercial purposes when required,
although we have not yet attempted to secure a commercial supply of any such
products.
Components
suitable for our RapidMist™ device are available from a limited number of
potential suppliers, as is the chemical propellant used in the device. The
components which now comprise the device will be utilized with the commercial
version of our insulin product in Ecuador and other South American countries.
We
also expect to use the RapidMist™ device in connection with our buccal morphine
and fentanyl products. We have also secured supply arrangements with the
manufacturers of all other components and the propellant that we presently
use
in our RapidMist™ device for commercial quantities of such components and the
propellant. All such suppliers are prominent, reputable and reliable suppliers
to the pharmaceutical industry. Because we now have a single supplier for
each
of these components and propellant, however, we are more vulnerable to supply
interruptions than would be the case if we had multiple suppliers for each
component. We do not believe that the risk of a single source of supply for
proprietary raw materials or device components is unusual in the pharmaceutical
industry.
Insulin
is available worldwide from only a few sources. However, alternative supplies
of
insulin are under development in Europe. Upon termination in June 2003 of
our
license agreement with Lilly, we entered into a Bulk Supply Agreement with
Lilly, pursuant to which Lilly has been contracted to provide us with human
insulin crystals over a three-year period for clinical development purposes.
We
also believe future development and marketing partners under licensing and
development agreements, if any, will provide, or assist us to obtain,
pharmaceutical compounds that are used in products covered under such
agreements.
While
morphine is a controlled substance, it is readily available for use in clinical
trials. We currently have the appropriate licenses and facilities for acquiring
and storing morphine in Canada. Various regulatory issues surround the import
of
morphine into the United States, and we will need to address these issues
prior
to commencing clinical trials in the United States.
Raw
materials for our pre-clinical development stage immunomedicine products
include
amino acids (for peptide therapeutics) and oligonucleotides (for genetic
constructs). These materials are readily available from commercial suppliers.
We
utilize the services of several commercial laboratories for the manufacturing
of
our pre-clinical development stage immunomedicine products.
Intellectual
Property
We
currently have seventeen issued U.S. patents and four pending U.S. patent
applications (one of which as been allowed) pertaining to aspects of buccal
delivery technology including oral administration of macromolecular formulations
(including insulin) as well as pain relief medications (e.g. morphine,
fentanyl). We currently hold two issued Canadian patents and eleven
pending Canadian patent applications also relating to aspects of buccal drug
delivery technology. We also hold forty-nine issued patents and forty-two
pending patent applications covering our drug delivery technology in
jurisdictions other than the U.S. and Canada. In addition, we have
three
issued Canadian patents and two pending U.S. patent applications pertaining
to
delivery technologies other than our buccal delivery technology.
We
also
have an indirect interest in three drug delivery patents held by another
company, Centrum Biotechnologies, Inc.
13
Our
subsidiary Antigen currently holds six issued U.S. patents, two Australian
patents, and a number of pending U.S. and foreign patent applications concerning
technology for modulating the immune system via activation of antigen-specific
helper T lymphocytes. Some of these patents are held under exclusive licenses
from the University of Massachusetts. Dr. Humphreys and Dr. Xu, officers
of
Antigen, are the listed inventors or co-inventors on all of these patents
and
patent applications, including those licensed from the University of
Massachusetts.
Our
long-term success will substantially depend upon our ability to obtain patent
protection for our technology and our ability to protect our technology from
infringement, misappropriation, discovery and duplication. We cannot be sure
that any of our pending patent applications will be granted, or that any
patents
which we own or obtain in the future will fully protect our position. Our
patent
rights, and the patent rights of biotechnology and pharmaceutical companies
in
general, are highly uncertain and include complex legal and factual issues.
We
believe that our existing technology and the patents which we hold or for
which
we have applied do not infringe any one else's patent rights. We believe
our
patent rights will provide meaningful protection against others duplicating
our
proprietary technologies. We cannot be sure of this, however, because of
the
complexity of the legal and scientific issues that could arise in litigation
over these issues. See Part
I - Item 3. Legal Proceedings
for a
discussion of certain legal proceedings involving intellectual property issues.
We
also
rely on trade secrets and other unpatented proprietary information. We seek
to
protect this information, in part, by confidentiality agreements with our
employees, consultants, advisors and collaborators.
Competition
We
expect
that products based upon our buccal delivery technology and any other products
that we may develop will compete directly with products developed by other
pharmaceutical and biotechnology companies, universities, government agencies
and public and private research organizations.
Products
developed by our competitors may use a different active pharmaceutical agent
or
treatment to treat the same medical condition or indication as our product
or
may provide for the delivery of substantially the same active pharmaceutical
ingredient as our products using different methods of administration. For
example, a number of pharmaceutical and biotechnology companies are engaged
in
various stages of research, development and testing of alternatives to insulin
therapy for the treatment of diabetes, as well as new methods of delivering
insulin. These methods, including nasal, transdermal, needle-free (high
pressure) injection and pulmonary, may ultimately successfully deliver insulin
to diabetic patients. Some biotechnology companies also have developed different
technologies to enhance the presentation of peptide antigens. Some of our
competitors and potential competitors have substantially greater scientific
research and product development capabilities, as well as financial, marketing
and human resources, than we do.
Where
the
same or substantially the same active ingredient is available using alternative
delivery means or the same or substantially the same result is achievable
with a
different treatment or technology, we expect that competition among products
will be based, among other things, on product safety, efficacy, ease of use,
availability, price, marketing and distribution. When different active
pharmaceutical ingredients are involved, these same competitive factors will
apply to both the active agent and the delivery method.
We
consider other drug delivery and biotechnology companies to be direct
competitors for the cooperation and support of major drug and biotechnology
companies that own or market proprietary pharmaceutical compounds and
technologies, as well as for the ultimate patient market. Of primary concern
to
us are the competitor companies that are known to be developing delivery
systems
for insulin and other pharmaceutical agents that we have identified as product
candidates and technologies to enhance the presentation of peptide antigens.
14
Buccal
Insulin Product
Nektar
Therapeutics, formerly Inhale Therapeutic Systems, Inc. ("Nektar"), is
developing a customized insulin formulation that is processed into a fine,
dry
powder and administered to the deep lung using a proprietary inhalation device
developed for this purpose. Nektar is developing its insulin product
in
collaboration with Pfizer, Inc. and the sanofi-aventis Group, the world’s third
largest pharmaceutical company. On September 8, 2005, Pfizer Inc
and the
sanofi-aventis Group announced that a FDA advisory committee panel has
recommended the approval of Exubera®, an inhaleable, dry powder insulin
developed in conjunction with Nektar, for the treatment of adults with Type
1
and Type 2 diabetes. Nektar also is developing pulmonary products
with
large molecule drugs other than insulin and has stated that it is investigating
the use of its inhalation technology with small molecule drugs.
Aradigm
Corporation ("Aradigm"), which has announced a joint development agreement
with
Novo Nordisk A/S to jointly develop a pulmonary delivery system for insulin
by
inhalation, also may be considered a direct competitor of ours in the insulin
area. Novo Nordisk is one of the two leading manufacturers of insulin in
the
world, the other being Lilly. Aradigm and Novo Nordisk initiated
Phase III
clinical trials in September 2002. In April 2004, Novo Nordisk announced
results from a planned interim analysis of the initial Phase III trial and
has
decided to amend the current trial protocol. Novo Nordisk will make
decisions concerning the structure and timing of additional clinical trials
after these observations have been fully assessed.
Other
companies have announced development efforts relating to non-injection methods
of delivering insulin or other large molecule drugs, including Alkermes
Pharmaceuticals, Inc., which announced a collaboration with Lilly in April
2000
to develop a pulmonary method of administering insulin and is currently
conducting Phase III clinical trials. MannKind Corporation is developing
an inhaled insulin product named Technosphere™ Insulin, which is currently
conducting phase III clinical trials in the United States and in Europe.
There are also a number of companies developing alternative means of delivering
insulin in the form of oral pills, transdermal patches, and intranasal methods,
which are at early stages of development.
In
addition to other delivery systems for insulin, there are numerous products
which have been approved for use in the treatment of Type 2 diabetics in
substitution of, or in addition to, insulin therapy. These products may also
be
considered competitive with insulin products.
Buccal
Morphine and Fentanyl Products
Cephalon,
Inc. currently markets Actiq® in the United States and has recently acquired the
rights to the product in Europe. Actiq® delivers buccal transmucosal fentanyl to
the cheek walls through the use of a lollipop. On November 4, 1998, the FDA
cleared Actiq® for marketing for use in the management of breakthrough cancer
pain. The product was launched in March 1999 in the United States.
Aradigm
is developing the hand-held AERx Pain Management System for the treatment
of
breakthrough cancer pain. The AERx Pain Management System is a pulmonary
delivery system to deliver the drug through inhalation. AERx has distinct
advantages over the administration by injection of morphine and similar
opiate-derived pain control drugs. Aradigm is in progress to complete both
Phase
I and II clinical trials of these formulations.
15
Nastech
Pharmaceuticals is developing an intranasal formulation of morphine that
is in
Phase II clinical trials. Results reported to date show the product
to be
safe and efficacious in the treatment of episodes of breakthrough pain. Nastech
is currently seeking a licensing partner for this product.
Immunomedicine
Technology and Products
A
number
of companies that are engaged in the development of immunomedicines employ
technologies that are competitive to our subsidiary Antigen. Zycos Inc. has
developed the Biotope® technology, Cel-Sci Corporation has developed the LEAPS
delivery technology, and Epimmune Inc. has developed the PADRE® technology.
These companies have initiated early stage clinical trials for several products
for the treatment of cancer, autoimmune, and allergic diseases. These companies
also have established collaborations with academic centers and other companies
for the development of certain products. We have not initiated clinical trials
with any of our immunomedicine products, nor have we established commercial
collaborations to date.
Environmental
Compliance
Our
manufacturing, research and development activities involve the controlled
use of
hazardous materials and chemicals. We believe that our procedures for handling
and disposing of these materials comply with all applicable government
regulations. However, we cannot eliminate the risk of accidental contamination
or injury from these materials. If an accident occurred, we could be held
liable
for damages, and these damages could severely impact our financial condition.
We
are also subject to many environmental, health and workplace safety laws
and
regulations, particularly those governing laboratory procedures, exposure
to
blood-borne pathogens, and the handling of hazardous biological materials.
Violations and the cost of compliance with these laws and regulations could
adversely affect us. However, we do not believe that compliance with the
United
States, Canadian or other environmental laws will have a material effect
on us
in the foreseeable future.
Research
and Development Expenditures
A
substantial portion of our activities to date have been in research and
development. In the period from inception to July 31, 2005, our expenditures
on
research and development were $55,138,663. These included $7,750,731 in the
year
ended July 31, 2005, $8,522,984 in the year ended July 31, 2004 and $5,150,075
in the year ended July 31, 2003. The decrease in our research and development
activities in 2005 compared to 2004 is due primarily to reduction of our
level
of research and development activities, offset by increased activities of
Antigen and regulatory consultants. The increase in our research and development
expenses in 2004 compared to 2003 was due principally to activities of Antigen
and our increased development of oral insulin formulation compared to the
prior
year, including the purchase of bulk insulin.
Financial
Information About Geographic Areas
The
regions in which we had identifiable assets and revenues and the amounts
of such
identifiable assets and revenues for each of the last three fiscal years
are
presented Note 19 in the Notes
to Consolidated Financial Statements
in
Part
II - Item. 8 Financial Statements and Supplementary Data
of this
Annual Report on Form 10-K. Identifiable assets are those that can be directly
associated with a geographic area.
16
Employees
At
September 30, 2005, we had twenty-one full-time employees, including our
executive officers and other individuals who work for us full-time but are
employed by management companies that provide their services, and ten employees
of our subsidiary Antigen. Twelve of our employees are executive and
administrative, seven are scientific and technical personnel who engage
primarily in development activities and in preparing formulations for testing
and clinical trials, and two are engaged in corporate and product promotion,
public relations and investor relations. We believe our employee relations
are
good. None of our employees is covered by a collective bargaining agreement.
We
will
continue to need qualified scientific personnel and personnel with experience
in
clinical testing, government regulation and manufacturing. We may have
difficulty in obtaining qualified scientific and technical personnel as there
is
strong competition for such personnel from other pharmaceutical and
biotechnology companies, as well as universities and research institutions.
Our
business could be materially harmed if we are unable to recruit and retain
qualified scientific, administrative and executive personnel to support our
expanding activities, or if one or more members of our limited scientific
and
management staff were unable or unwilling to continue their association with
us.
We do not have fixed term agreements with any of our key management or
scientific staff, other than Dr. Pankaj Modi who, on August 26, 2004, resigned
from his position as Vice President, Research and Development. While Dr.
Modi’s
resignation was effective immediately, pursuant to the terms of the Consulting
Agreement, the effective date of termination of the Consulting Agreement
was
August 25, 2005. For more information about the termination of Dr. Modi’s
Consulting Agreement, see "Developments in Fiscal 2005" under Part
II - Item 7. Management's Discussion and Analysis of Financial Condition
and
Results of Operations.
We
also
use non-employee consultants to assist us in formulating research and
development strategy, in preparing regulatory submissions, in developing
protocols for clinical trials, and in designing, equipping and staffing our
manufacturing facilities. We also use non-employee consultants to assist
us in
business development. These consultants and advisors usually have the right
to
terminate their relationship with us on short notice. Loss of some of these
key
advisors could interrupt or delay development of one or more of our products
or
otherwise adversely affect our business plans.
Executive
Officers and Directors
|
Name
|
Age
|
Position
Held with Generex
|
|
Anna
E. Gluskin
|
54
|
Chairman,
President, Chief Executive Officer and Director
|
|
Rose
C. Perri
|
38
|
Chief
Operating Officer, Chief Financial Officer, Treasurer, Secretary
and
Director
|
|
Gerald
Bernstein, M.D.
|
72
|
Director,
Vice President Medical Affairs
|
|
Mark
Fletcher, Esquire
|
40
|
Executive
Vice President and General Counsel
|
|
John
P. Barratt
|
61
|
Director
|
|
Mindy
J. Allport-Settle
|
38
|
Director
|
|
Brian
T. McGee
|
44
|
Director
|
|
Peter
G. Amanatides
|
41
|
Director
|
17
All
directors are elected to hold office until the next annual meeting of
stockholders following election and until their successors are duly elected
and
qualified. Executive officers are appointed by the Board of Directors and
serve
at the discretion of the Board.
Anna
E. Gluskin:
Director since September 1997. Ms. Gluskin has served as the President and
Chief
Executive Officer of Generex since October 1997 and the Chairman since November
2002. She held comparable positions with Generex Pharmaceuticals, Inc. from
its
formation in 1995 until its acquisition by Generex in October 1997.
Rose
C. Perri.
Director since September 1997. Ms. Rose Perri has served as Treasurer and
Secretary of Generex since October 1997, and as Chief Operating Officer since
August 1998. She served as Acting Chief Financial from November 2002 until
April
2005 when she was appointed Chief Financial Officer. She was an officer of
Generex Pharmaceuticals, Inc. from its formation in 1995 until its acquisition
by Generex in October 1997.
Gerald
Bernstein, M.D.
Director since October 2002. Dr. Bernstein has served as Vice President Medical
Affairs of Generex since October 1, 2001. Dr. Bernstein acts as a key liaison
for Generex on medical and scientific affairs to the medical, scientific
and
financial communities and consults with Generex under a consulting agreement
on
research and medical affairs and on development activities. Dr. Bernstein
has
been an associate clinical professor at the Albert Einstein College of Medicine
in New York and an attending physician at Beth Israel Medical Center, Lenox
Hill
Hospital and Montefore Medical Center, all in New York since 1999. He was
president of the American Diabetes Association from 1997 to 1998.
Mark
Fletcher, Esq.
Mr.
Fletcher has served as our Executive Vice President and General Counsel since
April 2003. From October 2001 to March 2003, Mr. Fletcher was engaged in
the
private practice of law as a partner at Goodman and Carr LLP, a leading Toronto
law firm. From March 1993 to September 2001, Mr. Fletcher was a partner at
Brans, Lehun, Baldwin LLP, a law firm in Toronto. Mr. Fletcher received his
LL.B. from the University of Western Ontario in 1989 and was admitted to
the
Ontario Bar in 1991.
John
P. Barratt.
Director since March 2003. Mr. Barratt currently serves as the Chief Operating
Officer of The Caldwell Partners International, a role he commenced in April
2005. The Caldwell Partners International is a Canadian based human capital
professional services company. Mr. Barratt continues, concurrently, as the
court-appointed Responsible Person and Liquidation Manager of Beyond.com
Corporation, Debtor-in-Possession, a U.S. Chapter 11 Bankruptcy case, in
which
capacity Mr. Barratt reports to the bankruptcy court and to the U.S. Trustee’s
Office. The Beyond.com case is expected to be granted final decree by the
end of
2005 at which point the Chapter 11 case will terminate as will his duties
to the
court and the U.S. Trustee’s Office. From September 2000 until the date of its
Chapter 11 bankruptcy filing in January 2002, Mr. Barratt acted in the capacity
of Chief Operating Officer of Beyond.com Corporation, an electronic fulfillment
provider. Between 1996 and 2000, Mr. Barratt was partner-in-residence with
the
Quorum Group of Companies, an international investment partnership specializing
in providing debt and/or equity capital coupled with strategic direction
to
emerging technology companies. Between 1988 and 1995, Mr. Barratt held a
number
of positions with Coscan Development Corporation, a real estate development
company, the last position of which was Executive Vice-President and Chief
Operating Officer. Mr. Barratt currently serves on a number of Boards of
Directors, including GLP NT Corporation and BNN Split Corporation, and is
a
member of the Board of Directors and Chairman of the Board Credit Committee
of
the Bank of China (Canada). Mr. Barratt also serves on the Advisory Boards
of
the following Brascan SoundVest funds: Diversified Income Fund, Total Return
Fund, Rising Distribution Split Trust and Focused Business Trust. In addition,
Mr. Barratt is a member of the Advisory Board of the Brascan Adjustable Rate
Trust I.
18
Mindy
J. Allport-Settle.
Director since February 2004. Ms. Allport-Settle has been President and Chief
Executive Officer of Integrated Development, LLC ("Integrated") since 1998.
Integrated is an independent consulting firm to the pharmaceutical
industry, providing informed guidance in operational, project and contract
management, new business development and regulatory compliance. In
addition to her position with Integrated, Ms. Allport-Settle has been a
Vice-President of Impact Management Services, Inc. ("IMS") from 2003 to 2005,
which also provides consulting services to the pharmaceutical industry.
In
her positions at Integrated and IMS, Ms. Allport-Settle has worked with several
major pharmaceutical companies. From 2001 to 2002, Ms. Allport-Settle was
Director of Client Services for Scriptorium Publishing Services.
From 1992
to 1994, Ms. Allport-Settle was an Eye Bank Technician/Organ Procurement
Surgeon
for the NC Eye & Human Tissue Bank; and from 1991 to 1998, Ms.
Allport-Settle was a healthcare and general medical compliance training
consultant and a contract writer and photographer. Ms. Allport-Settle
holds
a
Bachelor’s degree from the University of North Carolina, a Master of Business
Administration in Global Management from the University of Phoenix, and
completed Harvard
Business School's executive education program Compensation
Committees: Preparing for the Challenges Ahead.
Brian
T. McGee.
Director since March 2004. Mr. McGee has been a partner of Zeifman &
Company, LLP ("Zeifman") since 1995. Mr. McGee began working at Zeifman shortly
after receiving a B.A. degree in Commerce from the University of Toronto
in
1985. Zeifman is a Chartered Accounting firm based in Toronto, Ontario. A
significant element of Zeifman's business is public corporation accounting
and
auditing. Mr. McGee is a Chartered Accountant. Throughout his career, Mr.
McGee
has focused on, among other areas, public corporation accounting and auditing.
In 1992, Mr. McGee completed courses focused on International Taxation and
Corporation Reorganizations at the Canadian Institute of Chartered Accountants
and in 2003, Mr. McGee completed corporate governance courses on compensation
and audit committees at Harvard Business School. In April 2004 Mr. McGee
received his CPA designation from The American Institute of Certified Public
Accountants.
Peter
G. Amanatides.
Director since April 2005. Mr. Amanatides has been working in the pharmaceutical
and biotechnology industry since 1988. Since November 2004, Mr. Amanatides
has
been President and Chief Operating Officer of Pharmalogika, Inc., a North
Carolina-based service provider for the pharmaceutical and biotechnology
industry. Since April 2002, Mr. Amanatides has held the positions of Director,
and most recently, Vice President within the Quality Organization for DSM
Pharmaceuticals and DSM Biologics, both divisions of DSM Pharmaceutical
Products, Inc. From February 1999 to April 2002, Mr. Amanatides served as
Director of Quality Systems for Celera Genomics, a division of Applied
Biosystems involved in genomics and pharmaceutical discovery. Mr. Amanatides
received a B.S. degree in biology from Regents College, Albany, New York
and a
M.S. degree in Biotechnology and Molecular Biology from Hood College, Frederick,
Maryland. Mr. Amanatides has also held ASQ Certification as a certified Quality
Manager.
Mr.
Amanatides filled the vacancy of J. Michael Rosen who declined to stand for
re-election at Generex’s Annual Meeting of Stockholders held on April 5,
2005.
Other
Key Employees and Consultants
Slava
Jarnitskii is our Financial Controller. He began his employment with Generex
Pharmaceuticals in September 1996 and has been in the employment of Generex
since its acquisition of Generex Pharmaceuticals in October 1997. Before
his
employment with Generex Pharmaceuticals, Mr. Jarnitskii received a Masters
of
Business Administration degree from York University in September
1996.
19
Dr.
Robert E. Humphreys, M.D., Ph.D., is currently Executive Vice-President and
Chief Operating Officer of our subsidiary, Antigen. Dr. Humphreys founded
Antigen in 1996 and was its President. He has extensive experience in the
National Institute of Health arthritis, cancer and diabetes study sections.
Dr.
Humphreys is an inventor on six awarded U.S. patents and has over 150
peer-reviewed publications. Prior to founding Antigen, Dr. Humphreys was
Professor of Medicine and Pharmacology at University of Massachusetts Medical
School. He received his M.D. and Ph.D. degrees from Yale University and was
a
post-doctoral fellow in biochemistry at Harvard University. He also received
his
clinical training at Bethesda Naval Hospital and was an Officer at the Naval
Medical Research Institute.
Eric
von
Hofe, Ph.D., is currently Vice President of Technology Development of Antigen.
He has extensive experience with technology development projects, including
his
previous position at Millennium Pharmaceuticals as Director of Programs &
Operations, Discovery Research. Prior to that, Dr. von Hofe was Director,
New
Targets at Hybridon, Inc., where he coordinated in-house and collaborative
research that critically validated gene targets for novel antisense medicines.
Dr. von Hofe also held the position of Assistant Professor of Pharmacology
at
the University of Massachusetts Medical School, where he received a National
Cancer Institute Career Development Award for defining mechanisms by which
alkylating carcinogens create cancers. He received his Ph.D. from the University
of Southern California in Experimental Pathology and was a postdoctoral fellow
at both the University of Zurich and Harvard School of Public Health. His
work
has been published in twenty-eight articles in peer-reviewed journals, and
he
has been an inventor on four patents.
Dr.
Minzhen Xu is Vice President - Biology of Antigen. Dr. Xu received an M.D.
from
Shanghai Medical University in China and a Ph.D. in immunology from University
of Massachusetts Medical School. He has been with Antigen since its inception
and is the company’s chief experimentalist.
Certain
Additional Risk Factors
In
addition to historical facts or statements of current condition, this Annual
Report on Form 10-K contains forward-looking statements. Forward-looking
statements provide our current expectations or forecasts of future events.
The
following discussion outlines certain factors that we think could cause our
actual outcomes and results to differ materially from our forward-looking
statements. These factors are in addition to those set forth elsewhere in
this
Annual Report on Form 10-K.
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 sufficient revenues to support our operation in the immediately
foreseeable future. We do expect to receive some revenue from the sale of
our
oral insulin product in Ecuador in fiscal 2006. To date, we have not been
profitable and our accumulated net loss before preferred stock dividend was
$118,233,051 at July 31, 2005. 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.
20
With
the
exception of our oral insulin formulation which was approved for commercial
sale
in Ecuador in early May 2005, 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.
We
need 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:
|
•
|
to
proceed with the development of our buccal insulin
product;
|
|
•
|
to
develop other buccal and immunomedicine
products;
|
|
•
|
to
develop new products based on our buccal delivery and immunomedicine
technologies, including clinical testing relating to new
products;
|
|
•
|
to
develop or acquire other technologies or other lines of
business;
|
|
•
|
to
establish and expand our manufacturing capabilities;
|
|
•
|
to
finance general and administrative and research activities that
are not
related to specific products under
development;
|
|
•
|
to
finance the research and development activities of our subsidiary
Antigen;
and
|
|
•
|
to
otherwise carry on business.
|
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 three 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 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.
Our
independent auditors have expressed substantial doubt about our ability to
continue as a going concern.
In
their
audit opinion issued in connection with our consolidated balance sheets as
of
July 31, 2005 and our consolidated statements of operation, stockholder’s equity
and cash flows for the year then ended and for the period from November 2,
1995
(date of inception) to July 31, 2005, our auditors have expressed a substantial
doubt about our ability to continue as a going concern given our recurring
net
losses, negative cash flows from operations and working capital
deficiency.
21
The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. The financial statements
do
not include any adjustments relating to the recoverability and classification
of
recorded asset amounts or amounts of liabilities that might be necessary
should
we be unable to continue in existence.
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.
Our
research and development and marketing efforts may 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
With
the exception of Oral-lyn™, our technologies and products are at an early stage
of development and we cannot expect revenues in respect thereof in the
foreseeable future.
With
the
exception of Oral-lyn™, our proprietary oral insulin spray formulation which has
been approved for commercial marketing and sale in Ecuador for the treatment
of
Type-1 and Type-2 diabetes, we have no products approved for commercial sale
at
the present time. To be profitable, we must not only successfully research,
develop and obtain regulatory approval for our products under development,
but
also manufacture, introduce, market and distribute them once development
is
completed. We may not be successful in one or more of these stages of the
development or commercialization of our products, and/or any of the products
we
develop may not be commercially viable.
While
over 1,100 patients with diabetes have been dosed with our oral insulin
formulation at approved facilities in seven countries, our insulin product
has
only recently been approved for marketing in Ecuador. Until we can manufacture,
market and distribute our oral insulin product in Ecuador and can establish
that
it is a commercially viable product, we will not receive revenues from ongoing
operations.
Until
we receive regulatory approval to sell our products in one or more countries
other than Ecuador, our ability to generate revenues from operations may
be
limited and those revenues may be insufficient to sustain operations. Many
factors impact our ability to obtain approvals for commercially viable
products.
22
Only
one
of our products has been approved for commercial sale by drug regulatory
authorities, and that approval was obtained in Ecuador. We have begun the
regulatory approval process for our oral insulin formulation, buccal morphine
and fentanyl products in other countries. Our immunomedicine products are
in the
pre-clinical stage of development, with the exception of our Phase 1 trial
in
human patients with stage II HER-2/neu positive breast cancer.
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 in any country other than Ecuador.
In
addition, we cannot be sure when or if we will be permitted by regulatory
agencies to undertake additional clinical trials or to commence any particular
phase of clinical trials. Because of this, statements in this Annual Report
on
Form 10-K regarding the expected timing of clinical trials cannot be regarded
as
actual predictions of when we will obtain regulatory approval for any "phase"
of
clinical trials.
Delays
in
obtaining United States or other 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 in any country other than Ecuador, 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.
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 the Company 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.
23
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 in another country other than Ecuador, many factors may
prevent the product from ever being sold in commercial quantities. Some of
these
factors are beyond our control, such as:
|
•
|
acceptance
of the formulation or treatment by health care professionals and
diabetic
patients;
|
|
•
|
the
availability, effectiveness and relative cost of alternative diabetes
or
immunomedicine treatments that may be developed by competitors;
and
|
|
•
|
the
availability of third-party (i.e., insurer and governmental agency)
reimbursements.
|
We
will
not receive revenues from our oral insulin formulation in Ecuador or any
of our
other products that may receive regulatory approval until we can successfully
manufacture, market and distribute them in the relevant market.
We
will
have to depend upon others for marketing and distribution of our products,
including Oral-lyn™ in Ecuador, 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.
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.
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. Some 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.
24
If
government programs and insurance companies do not agree to pay for or reimburse
patients for our products, our success will be impacted.
Sales
of
our oral insulin formulation in Ecuador and our potential products in other
markets depend in part on the availability of reimbursement by third-party
payers such as government health administration authorities, private health
insurers and other organizations. Third-party payers often challenge the
price
and cost-effectiveness of medical products and services. Governmental approval
of health care products does not guarantee that these third-party payers
will
pay for the products. Even if third-party payers 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.
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.
25
On
August
17, 2004, the Arbitration Panel of the New York Stock Exchange issued a final
award in the case of Sands versus us, awarding Sands $150,000 in reliance
damages. A motion to confirm this award has been awarded to Sands. In September
2005, Sands filed a motion seeking leave from the New York Court of Appeals
to
appeal the prior orders of the Appellate Division vacating the prior Arbitration
Panel's warrant awards. Accordingly, $150,000 has been recorded in the
accompanying financial statements, but the case may be subject to further
legal
proceedings.
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. Apart from $150,000 accrual, 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
Our
common stock may be delisted from The Nasdaq SmallCap Market.
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 July 31, 2004, our stockholders'
equity was $529,751. As a result, on November 19, 2004, we received notice
from
The Nasdaq Stock Market informing us that we do not comply with Marketplace
Rule
4310(c)(2)(B), which requires us to have a minimum of $2,500,000 in
stockholders' equity or $35,000,000 market value of listed securities or
$500,000 of net income from continuing operations for the most recently
completed fiscal year or two of the three most recently completed fiscal
years.
On December 22, 2004, all outstanding shares of our Series A Convertible
Preferred Stock were converted to common stock, resulting in the elimination
of
approximately $14,300,000 of mezzanine equity and an equal amount was added
to
additional paid-in capital attributable to the common stock, increasing
stockholders' equity by that amount. Based on this, the delisting proceeding
relating to failure to meet stockholders’ equity standards was terminated.
Because we are still in the development stage, there is no guarantee that
we
will sustain compliance with this standard. In the event we cannot sustain
compliance, our shares of common stock may be delisted from The Nasdaq SmallCap
Market and begin trading on the over-the-counter bulletin board.
In
addition, for continued listing on both The Nasdaq National Market and SmallCap
Market, our stock price must be at least $1.00. Since October of 2004, our
stock
price has traded below this minimum per share requirement for thirty (30)
consecutive business days. As a result, on November 24, 2004, we received
notice
from The Nasdaq Stock Market informing us that we do not comply with Market
Rule
4310(c)(4), which requires us to have a minimum bid price per share of at
least
$1.00 for thirty (30) consecutive business days. We had 180 calendar days,
or
until May 23, 2005, subject to extension by The Nasdaq Stock Market under
certain circumstances, to regain compliance with the Rule.
On
May
25, 2005, we received notice from the Staff of The Nasdaq Stock Market informing
us that, during the 180 calendar day period ending May 23, 2005, we had not
regained compliance with Marketplace Rule 4310(c)(4); however, the Staff
noted
that on May 23, 2005, we met all initial inclusion criteria for the SmallCap
Market set forth in Marketplace Rule 4310(c), except for bid price. Therefore,
in accordance with Marketplace Rule 4310(c)(8)(D), we have an additional
180
calendar days to regain compliance with Rule 4310(c)(4). Although we have
until
November 21, 2005 to regain compliance with the Rule, there is no guarantee
that
the bid price of our common stock will close at $1.00 per share or more for
a
minimum period of ten (10) consecutive business days, which is the minimum
period of time The Nasdaq Stock Market requires to regain
compliance.
26
In
the
event that we cannot demonstrate compliance with Marketplace Rule 4310(c)(4)
by
November 21, 2005 and are not eligible for an additional compliance period,
the
Staff will notify us that our stock will be delisted, at which time we may
appeal the Staff’s determination to a Listing Qualifications Panel. Pending the
decision of the Listing Qualification Panel, our common stock will continue
to
trade on the SmallCap Market. If we are not successful in such an appeal,
our
stock will likely trade on NASDAQ’s over-the-counter bulletin board, assuming we
meet the requisite criteria.
If
our stock is delisted from NASDAQ SmallCap Market, it may become subject
to
Penny Stock Regulations and 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.
The
price of our common stock may be volatile.
There
may
be wide fluctuations in the price of our common stock. These fluctuations
may be
caused by several factors including:
|
•
|
announcements
of research activities and technology innovations or new products
by us or
our competitors;
|
|
•
|
changes
in market valuation of companies in our industry
generally;
|
|
•
|
variations
in operating results;
|
|
•
|
changes
in governmental regulations;
|
|
•
|
developments
in patent and other proprietary
rights;
|
|
•
|
public
concern as to the safety of drugs or treatments developed by us
or
others;
|
|
•
|
results
of clinical trials of our products or our competitors' products;
and
|
|
•
|
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.
27
Holders
of our Special Voting Rights Preferred Stock have the ability to prevent
any
change of control in us. Dr. Pankaj Modi, a former officer and director of
Generex, 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.
Item
2. Properties.
Our
executive and principal administrative offices occupy approximately 5,000
square
feet of office space in the Business Centre at 33 Harbour Square in downtown
Toronto, Ontario, Canada. We own the Business Centre, which comprises
approximately 9,100 square feet of usable space. The space in the Business
Centre that is not used by us is leased to third parties.
We
own a
laboratory facility in Toronto that we have used for limited production of
our
oral insulin formulation for clinical purposes, and have completed a pilot
manufacturing facility for our insulin product in the same commercial complex.
Our laboratory facility is approximately 2,650 square feet. Our pilot
manufacturing facility, which also includes laboratory facilities, is
approximately 4,800 square feet. We also own all additional units in the
same
building where our pilot manufacturing facility is located. These units are
currently leased to third parties and one is being used for storage. These
units
are reflected in Assets Held for Investments on accompanying consolidated
balance sheets. All of these spaces could be used for manufacturing facilities
if necessary. We have obtained regulatory approval for the laboratory facility,
and we are currently in the process of obtaining regulatory approval for
the
pilot manufacturing facility.
We
have
mortgages on our Toronto properties totaling $3,307,362 at July 31, 2005.
These
mortgages require the payment of interest, with minimal principal reduction,
prior to their due dates. These mortgages currently require an aggregate
$30,511
in monthly debt service payments. Aggregate principal maturities for these
mortgages will be $2,571,530 in fiscal 2006 and $735,832 in fiscal 2007.
We
lease
approximately 1,710 square feet of office and laboratory space in Worcester,
Massachusetts that Antigen uses for its research and development activities
at
an annual rent of $94,085. This space is sufficient for Antigen’s present
activities.
We
do not
expect to need additional manufacturing capabilities in Canada related to
our
insulin product beyond our pilot facility before the end of the current fiscal
year. We own an 11,625 square foot building in Brampton, Ontario, which is
approximately 25 miles outside Toronto, and a 13,500 square foot building
in
Mississauga, Ontario, which is about 20 miles from downtown Toronto, for
ultimate use in manufacturing. We have done preliminary work on these
facilities, but we do not expect to make a substantial investment in improving
and equipping them for manufacturing operations until our requirements in
this
area are better defined. Both properties are currently leased to third
parties.
We
could
use our other properties to expand research, development or testing of our
buccal and immunomedicine products if current facilities prove inadequate
for
our needs.
28
Item
3. Legal
Proceedings.
Sands
Brothers & Co. Ltd. v. Generex Biotechnology Corporation.
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, 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.
Pursuant
to an arbitration award dated September 22, 1999, the arbitration panel that
heard this case awarded Sands $14,070 and issued a declaratory judgment
requiring us to issue to Sands a warrant to purchase 1,530,020 shares of
our
common stock pursuant to and in accordance with the terms of the purported
October 1997 letter agreement. On October 13, 1999, Sands commenced a special
proceeding to confirm the arbitration award in the Supreme Court of the State
of
New York, County of New York (the "New York Supreme Court"). On November
10,
1999, we moved to vacate the arbitration award. On March 20, 2000, the New
York
Supreme Court granted Sands’ petition to confirm the award and denied our motion
to vacate the award. We appealed, and on January 23, 2001, the New York State
Appellate Division, First Department (the "Appellate Division"), modified
the
judgment of the New York Supreme Court that had confirmed the arbitration
award
against us. The Appellate Division affirmed the portion of the New York Supreme
Court judgment that had confirmed the granting of monetary relief of $14,070
to
Sands but modified the judgment to vacate the portion of the arbitration
award
directing the issuance to Sands of a warrant to purchase 1,530,020 shares
of our
common stock. The Appellate Division held that the portion of the award
directing us to issue warrants to Sands is too indefinite to be enforceable
and
remanded the matter to the arbitration panel for a final and definite award
with
respect to such relief or its equivalent (including possibly an award of
monetary damages). The arbitration panel commenced hearings on the matters
remanded by the Appellate Division in June 2001. On November 7, 2001, the
arbitration panel issued an award again requiring us to issue to Sands a
warrant
to purchase 1,530,020 shares of our common stock purportedly pursuant to
and in
accordance with the terms of the October 1997 letter agreement. Thereafter,
Sands submitted a motion to the New York Supreme Court to modify and confirm
the
arbitration panel’s award, while we filed a motion with the court to vacate the
arbitration award. On February 25, 2002, the New York Supreme Court vacated
the
arbitration panel’s award. The Supreme Court concluded that the arbitration
panel had "disregarded the plain meaning" of the directive given by the
Appellate Division in the Appellate Division’s January 23, 2001 decision that
remanded the matter of the warrant for reconsideration by the panel. The
Supreme
Court found that the arbitration panel’s award "lack[ed] a rational basis". The
Supreme Court also remanded the matter to the New York Stock Exchange on
the
issue of whether the arbitration panel should be disqualified. Sands appealed
the February 25, 2002 order of the Supreme Court to the Appellate Division.
We
filed a cross-appeal on issues relating to the disqualification of the
arbitration panel.
On
October 29, 2002, the Appellate Division issued a decision and order unanimously
modifying the lower court's order by remanding the issue of damages to a
new
panel of arbitrators and otherwise affirming the lower court's order. The
Appellate Division's decision and order limited the issue of damages before
the
new panel of arbitrators to reliance damages which would not to include an
award
of lost profits. Reliance damages are out-of-pocket damages incurred by Sands.
The Appellate Division stated that the lower court properly determined that
the
arbitration award, which had granted Sands warrants for 1,530,020 shares
of the
registrant's stock, was incorrect.
29
On
March
18, 2003, the Appellate Division of the Supreme Court of New York denied
a
motion by Sands for re-argument of the October 29, 2002 decision, or, in
the
alternative, for leave to appeal to the Court of Appeals. A new arbitration
took
place in early June 2004.
On
August
17, 2004, the Arbitration Panel of the New York Stock Exchange issued a final
award in the case of Sands versus us, awarding Sands $150,000 in reliance
damages. A motion to confirm this award has been awarded to Sands. In September
2005, Sands filed a motion seeking leave from the New York Court of Appeals
to
appeal the prior orders of the Appellate Division vacating the prior Arbitration
Panel's warrant awards. Accordingly, $150,000 has been recorded in the
accompanying financial statements, but the case may be subject to further
legal
proceedings.
Subash
Chandarana et al. v. Generex Biotechnology Corporation.
In
February 2001, a former business associate of Dr. Pankaj Modi ("Modi") and
an
entity called Centrum Technologies Inc. ("CTI") commenced an action in the
Ontario Superior Court of Justice against us and Modi seeking, among other
things, damages for alleged breaches of contract and tortious acts related
to a
business relationship between this former associate and Modi that ceased
in July
1996. The plaintiffs’ statement of claim also seeks to enjoin the use, if any,
by us of three patents allegedly owned by CTI. On July 20, 2001, we filed
a
preliminary motion to dismiss the action of CTI as a nonexistent entity or,
alternatively, to stay such action on the grounds of want of authority of
such
entity to commence the action. The plaintiffs brought a cross motion to amend
the statement of claim to substitute Centrum Biotechnologies, Inc. ("CBI")
for
CTI. CBI is a corporation of which 50 percent of the shares are owned by
the
former business associate and the remaining 50 percent are owned by us.
Consequently, the shareholders of CBI are in a deadlock. The court granted
our
motion to dismiss the action of CTI and denied the plaintiffs’ cross motion
without prejudice to the former business associate to seek leave to bring
a
derivative action in the name of or on behalf of CBI. The former business
associate subsequently filed an application with the Ontario Superior Court
of
Justice for an order granting him leave to file an action in the name of
and on
behalf of CBI against Modi and us. We opposed the application. In September
2003, the Ontario Superior Court of Justice granted the request and issued
an
order giving the former business associate leave to file an action in the
name
of and on behalf of CBI against Modi and us. A statement of claim was served
in
July 2004. We are not able to predict the ultimate outcome of this legal
proceeding at the present time or to estimate an amount or range of potential
loss, if any, from this legal proceeding.
Pankaj
Modi vs. Generex Biotechnology Corporation.
In
February 2005, a consultant filed a Statement of Claim in the Ontario Superior
Court of Justice, File No., 05-CV-284560 PD1, seeking approximately $600,000
in
damages for alleged contract breaches in respect of unpaid remuneration and
other compensation allegedly owed to him. We are of the view that we have
no
liability in this matter and intend to defend this action vigorously. Due
to the
early stage of this action, we are not able to predict the ultimate outcome
of
this legal proceeding at the present time or estimate an amount or range
of
potential loss, if any, from this legal proceeding.
We
are
involved in certain other legal proceedings in addition to those specifically
described herein. Subject to the uncertainty inherent in all litigation,
we do
not believe at the present time that the resolution of any of these legal
proceedings is likely to have a material adverse effect on our financial
position, operations or cash flows.
With
respect to all litigation matters, as additional information concerning the
estimates used by us becomes known, we reassess each matter’s position both with
respect to accrued liabilities and other potential exposures.
30
Item
4. Submission
of Matters to a Vote of Security Holders.
None
PART
II
Item
5. Market
For Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases
of Equity Securities.
Market
Information
Our
common stock has been listed on the NASDAQ SmallCap Market since June 5,
2003.
From May 5, 2000 to June 4, 2003, our common stock was listed on the NASDAQ
National Market. From February 1998 to May 2000, the "bid" and "asked" prices
for our common stock were quoted on the OTC Bulletin Board operated by the
National Association of Securities Dealers. Prior to February 1998, there
was no
public market for our common stock.
The
table
below also sets forth the high and low closing "bid" prices for our common
stock
reported on the NASDAQ SmallCap Market for each fiscal quarter in the prior
two
years ended July 31, 2005. High and low closing "bid" prices, which represent
prices between dealers, do not include retail mark-up, mark-down or commission
and may not represent actual transactions.
|
Bid
Prices
|
|||||||
|
High
|
Low
|
||||||
|
Fiscal
2004
|
|||||||
|
First
Quarter
|
$
|
2.47
|
$
|
1.12
|
|||
|
Second
Quarter
|
$
|
2.32
|
$
|
1.23
|
|||
|
Third
Quarter
|
$
|
2.02
|
$
|
1.26
|
|||
|
Fourth
Quarter
|
$
|
1.86
|
$
|
1.00
|
|||
|
Fiscal
2005
|
|||||||
|
First
Quarter
|
$
|
1.25
|
$
|
0.80
|
|||
|
Second
Quarter
|
$
|
0.90
|
$
|
0.60
|
|||
|
Third
Quarter
|
$
|
0.89
|
$
|
0.52
|
|||
|
Fourth
Quarter
|
$
|
0.98
|
$
|
0.58
|
|||
The
closing “bid” price for our common stock reported on October 13, 2005 was $0.73.
At
October 13, 2005, there were 720 holders of record of our common
stock.
Dividends
We
have
not paid dividends on our common stock in the past and have no present intention
of paying dividends in the foreseeable future.
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table sets forth information as of July 31, 2005 regarding our
existing compensation plans and individual compensation arrangements pursuant
to
which our equity securities are authorized for issuance to employees or
non-employees (such as directors, consultants and advisors) in exchange for
consideration in the form of services:
31
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|||||||
|
(a)
|
(b)
|
(c)
|
||||||||
|
Equity
compensation
plans
approved by
security
holders
|
||||||||||
|
2000
Stock Option Plan
|
240,000
|
$
|
7.19
|
1,760,000
|
||||||
|
2001
Stock Option Plan
|
11,367,269
|
$
|
1.39
|
632,731
|
||||||
|
Total
|
11,607,269
|
$
|
1.51
|
2,392,731
|
||||||
|
Equity
compensation
plans
not approved by security holders
|
0
|
0
|
0
|
|||||||
|
Total
|
11,607,269
|
$
|
1.51
|
2,392,731
|
||||||
Sales
of Unregistered Securities
In
the
fiscal year ended July 31, 2005 and the subsequent period, we sold common
stock
and other securities in transactions in reliance upon exemptions from the
registration requirements of the Securities Act of 1933, as amended (the
“Securities Act”), as we have reported on Current Reports on Form 8-K and on
Quarterly Reports on Form 10-Q filed during the period covered by this Annual
Report on Form 10-K and the subsequent period. In addition, during the fiscal
quarter ended July 31, 2005, we sold common stock and other securities in
transactions in reliance upon exemptions from the registration requirements
of
the Securities Act as follows:
In
June
2005, we issued G&H Associates LTD (“G&H”) 63,207 shares of our common
stock as consideration for G&H’s financial consulting services pursuant to
the terms of the Corporate Consulting Agreement entered into by us and G&H
on November 4, 2004. The sale of the shares to G&H was exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof.
We
believe that G&H is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D under the Securities Act. The certificates issued
for the
shares of common stock were legended to indicate that they are restricted.
The
sales of such securities did not involve the use of underwriters, and no
commissions were paid in connection with the issuance or sale, if any,
thereof.
On
July
22, 2005, Cranshire Capital, L.P. (“Cranshire”) agreed to extend the interest
payment date and the maturity date under the March 28, 2005 Promissory Note
and
Agreement with us from July 22, 2005 to September 20, 2005. On the same date,
Omicron Master Trust (“Omicron”) agreed to extend the interest payment date and
the maturity date under the April 6, 2005 Promissory Note and Agreement with
us
from July 22, 2005 to September 20, 2005. As consideration for the extensions
from Cranshire and Omicron, we contemporaneously issued on a warrant to
Cranshire to purchase an aggregate of 1,219,512 shares of our common stock
and a
warrant to Omicron to purchase an aggregate of 243,902 shares of our common
stock, both of which will expire on July 22, 2010. The rights of Cranshire
and
Omicron under the July 22 2005 warrants are described in this Annual Report
on
Form 10-K below under the caption Financial
Condition, Liquidity and Resources
of
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
The
offer and sale of the July 22, 2005 warrants, including shares of common
stock
into which the July 22, 2005 warrants are exercisable, by us to Cranshire
and
Omicron was exempt from registration under Section 4(2) of the Securities
Act.
Each of Cranshire and Omicron has previously represented and warranted to
us
that it is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D promulgated under the Securities Act. Any certificates issued
representing the July 22, 2005 warrants and shares of common stock issued
upon
exercise of the July 22, 2005 warrants will be legended to indicate that
they
are restricted. No sale of these securities involved the use of underwriters,
and no commissions were paid in connection with the issuance or sale of the
Securities.
32
In
the
fiscal quarter ended July 31, 2005, we issued 910,447 shares of restricted
common stock to certain suppliers of goods and services in satisfaction of
an
additional aggregate amount of US $746,566 representing accounts payable
owed by
us. The number of shares awarded was calculated using a price per share of
$0.82. The sales of the restricted stock were exempt from registration under
the
Securities Act in reliance upon Section 4(2) thereof. Each of the suppliers
to
which we have issued restricted shares of common stock has represented to
us
that he or it is an “accredited investor” as that term is defined in Rule 501(a)
of Regulation D. The certificates issued for the shares of common stock issued
to such suppliers were legended to indicate that they are restricted. The
sales
of such shares did not involve the use of underwriters, and no commissions
were
paid in connection with the issuance or sale, if any, thereof.
Issuer
Purchases of Equity Securities
Neither
we nor any affiliated purchaser (as defined in Section 240.10 b-18(a)(3)
of the
Exchange Act) purchased any of our equity securities during the fourth quarter
of the fiscal year ending July 31, 2005.
Item
6. Selected
Financial Data.
The
following selected financial data are derived from and should be read in
conjunction with our financial statements and related notes, which appear
elsewhere in this Annual Report on Form 10-K. Our financial statements for
the
years ended July 31, 2005, 2004 and 2003 were audited by BDO Dunwoody, LLP.
Our
financial statements for the years ended July 31, 2002 and 2001 were audited
by
Deloitte & Touche LLP.
|
in
thousands
|
2005
|
2004
|
2003
|
2002
|
2001
|
|||||||||||
|
Operating
Results:
|
||||||||||||||||
|
Revenue
|
$
|
392
|
$
|
627
|
--
|
--
|
$
|
1,000
|
||||||||
|
Net
Loss
|
(24,002
|
)
|
$ |
(18,363
|
)
|
$
|
(13,262
|
)
|
$
|
(13,693
|
)
|
$
|
(27,097
|
)
|
||
|
Net
Loss Available to
Common
Stockholders
|
(24,002
|
)
|
$ |
(19,173
|
)
|
$
|
(14,026
|
)
|
$
|
(14,414
|
)
|
$
|
(27,097
|
)
|
||
|
Cash
Dividends per share
Common
Stockholders
|
--
|
--
|
--
|
--
|
--
|
|||||||||||
|
Loss
per Common Share:
|
||||||||||||||||
|
Basic
and Diluted Net Loss
Per
Common Share
|
(.66
|
)
|
(.64
|
)
|
(.67
|
)
|
(.70
|
)
|
(1.44
|
)
|
||||||
|
Financial
Positions:
|
||||||||||||||||
|
Total
Assets
|
$
|
13,466
|
$
|
19,012
|
$
|
22,639
|
$
|
28,161
|
$
|
42,666
|
||||||
|
Long-Term
Debt
|
$
|
3,288
|
$
|
2,225
|
$
|
1,895
|
$
|
663
|
$
|
693
|
||||||
|
Convertible
Debentures
|
$
|
1,315
|
--
|
--
|
--
|
--
|
||||||||||
|
Series
A, Preferred Stock
|
--
|
$
|
14,310
|
$
|
13,501
|
$
|
12,736
|
$
|
12,015
|
|||||||
|
Stockholder's
Equity
|
$
|
6,127
|
$
|
530
|
$
|
5,857
|
$
|
12,863
|
$
|
27,307
|
||||||
33
Item
7. Management’s
Discussion and Analysis of Financial Condition and Results
of
Operations.
Corporate
History
We
were
incorporated in Delaware in September 1997 for the purpose of acquiring Generex
Pharmaceuticals, Inc., a Canadian corporation formed in November 1995 to
engage
in pharmaceutical and biotechnological research and other activities. Our
acquisition of Generex Pharmaceuticals was completed in October 1997 in a
transaction in which the holders of all outstanding shares of Generex
Pharmaceuticals exchanged their shares for shares of our common stock.
In
January 1998, we participated in a "reverse acquisition" with Green Mt. P.
S.,
Inc., a previously inactive Idaho corporation formed in 1983. As a result
of
this transaction, our shareholders (the former shareholders of Generex
Pharmaceuticals) acquired a majority (approximately 90%) of the outstanding
capital stock of Green Mt., we became a wholly-owned subsidiary of Green
Mt.,
Green Mt. changed its corporate name to Generex Biotechnology Corporation
("Generex Idaho"), and we changed our corporate name to GB Delaware, Inc.
Because the reverse acquisition resulted in our shareholders becoming the
majority holders of Generex Idaho, we were treated as the acquiring corporation
in the transaction for accounting purposes. Thus, our historical financial
statements, which essentially represented the historical financial statements
of
Generex Pharmaceuticals, were deemed to be the historical financial statements
of Generex Idaho.
In
April
1999, we completed a reorganization in which we merged with Generex Idaho.
In
this transaction, all outstanding shares of Generex Idaho were converted
into
our shares, Generex Idaho ceased to exist as a separate entity, and we changed
our corporate name back to "Generex Biotechnology Corporation." This
reorganization did not result in any material change in our historical financial
statements or current financial reporting.
In
August
2003, we acquired Antigen Express, Inc. Antigen is engaged in the research
and
development of technologies and immunomedicines for the treatment of malignant,
infectious, autoimmune and allergic diseases.
Business
History
We
are
engaged primarily in the research and development of drug delivery technologies.
Our primary focus at the present time is our proprietary technology for the
administration of formulations of large molecule drugs to the oral (buccal)
cavity using a hand-held aerosol applicator.
34
Our
first
product is an insulin formulation that is administered as a fine spray into
the
oral cavity using a hand-held aerosol spray applicator. Between January 1999
and
September 2000, we conducted limited clinical trials on this product in the
United States, Canada and Europe. In September 2000, we entered into an
agreement (the "Development and License Agreement") to develop this product
with
Eli Lilly and Company ("Lilly"). To date, over 1,100 patients with diabetes
have
been dosed with our oral insulin product at approved facilities in seven
countries. We conducted several clinical trials with insulin supplied by
Lilly
under our Development and License Agreement. Lilly did not, however, authorize
or conduct any clinical trials or provide financial support for those trials.
We
did receive a $1,000,000 upfront payment from Lilly. On May 23, 2003, we
announced that we had agreed with Lilly to end the Development and License
Agreement for the development and commercialization of buccal delivery of
insulin. On November 5, 2003, we entered into a termination agreement with
Lilly
terminating the Development and License Agreement, effective as of June 2,
2003.
In accordance with the termination agreement, we retained all of the
intellectual property and commercialization rights with respect to buccal
spray
drug delivery technology, and we have the continuing right to develop and
commercialize the product. We also entered into a Bulk Supply Agreement (the
"Bulk Supply Agreement") for the sale of human insulin crystals by Lilly
to us
over a three-year period.
In
January 2001, we established a joint venture with Elan International Services,
Ltd. ("EIS"), a wholly-owned subsidiary of Elan Corporation, plc (EIS and
Elan
Corporation, plc being collectively referred to as "Elan"), to pursue the
application of certain of our and Elan's drug delivery technologies, including
our platform technology for the buccal delivery of pharmaceutical products,
for
the treatment of prostate cancer, endometriosis and/or the suppression of
testosterone and estrogen. In January 2002, we and Elan agreed to expand
the
joint venture to encompass the buccal delivery of morphine for the treatment
of
pain and agreed to pursue buccal morphine as the initial pharmaceutical product
for development under Generex (Bermuda) Ltd., the entity through which the
joint
venture was being conducted. This expansion of the joint venture occurred
after
we successfully completed a proof of concept clinical study of morphine delivery
using our proprietary buccal delivery technology.
In
connection with the joint venture, EIS purchased 1,000 shares of our Series
A
Preferred Stock for $12,015,000, which EIS transferred, shortly thereafter,
to
Elan Pharmaceuticals Investment III, an affiliate of Elan ("EPIL III"). We
applied the proceeds from the sale of the Series A Preferred Stock to subscribe
for an 80.1% equity ownership interest in Generex (Bermuda), Ltd. EIS paid
in
capital of $2,985,000 to subscribe for a 19.9% equity ownership interest
in the
joint venture entity. In accordance with the terms of the Series A Preferred
Stock, if any shares of Series A Preferred Stock were to be outstanding on
January 16, 2007, we would have been required to redeem the shares of Series
A
Preferred Stock at a redemption price equal to the aggregate Series A Preferred
Stock liquidation preference, either in cash, or in shares of common stock
with
a fair market value equal to the redemption price. Alternatively, the Series
A
Preferred Stock could have been converted, under certain conditions, into
shares
of our common stock. EIS also purchased 344,116 shares of our common stock
for
$5,000,000. We were permitted to use the proceeds of this sale for any corporate
purpose.
On
December 27, 2004, we entered into an agreement (the "Termination Agreement")
with Elan, whereby we and Elan agreed to terminate the joint venture through
Generex (Bermuda) Ltd. Pursuant to the terms of the Termination Agreement,
(i)
except for a common stock purchase warrant that was issued by us to Elan,
which
was amended to permit Elan or any other holder thereof to transfer the warrant
without our consent, the parties agreed to terminate all agreements entered
into
in connection with the joint venture, and (ii) Elan agreed to transfer all
shares of capital stock of Generex (Bermuda) owned by it to us. Accordingly,
all
rights granted by each party to the other terminated, including, without
limitation, Elan's right to appoint a member to our Board of Directors, all
other rights granted under the terms of the joint venture terminated, each
party
retained its intellectual property rights, we obtained full ownership of
Generex
(Bermuda), and all representatives of Elan who were officers and/or directors
of
Generex (Bermuda) resigned.
35
In
connection with negotiating the Termination Agreement, EPIL III approached
us
for consent to transfer the Series A Preferred Stock by way of an auction
process. Although we provided our consent to the transfer, it was contingent
upon EPIL III agreeing to satisfy the following conditions: (i) the auction
process could conclude no later than December 15, 2004 and EPIL III's
disposition of the shares could conclude no later than December 31, 2004
(the
"Closing Date"), (ii) the buyer had to immediately convert the Series A
Preferred Stock at the voluntary conversion price of $25.77 (calculated pursuant
to the terms of the certificate of designation for the Series A Preferred
Stock
resulting in the issuance of 534,085 shares of common stock), (iii) EPIL
III's
registration rights could not be transferred, and (iv) for a period of two
(2)
years after the Closing Date, the purchaser of the Series A Preferred Stock
could not transfer the shares of common stock issuable upon conversion thereof
and we would have the right to redeem the shares of common stock at a per
share
price of 150% of the average closing price of the common stock on The Nasdaq
SmallCap Market for the twenty (20) days immediately preceding the Closing
Date.
On or about December 15, 2004, EPIL III conducted the auction and received
an
offer to buy the shares of Series A Preferred Stock. On or about December
31,
2004, EPIL III sold the shares of Series A Preferred Stock, and the purchaser
thereof immediately converted the Series A Preferred Stock into shares of
our
common stock.
The
conversion of the Series A Preferred Stock was particularly critical because
the
mandatory redemption feature required us to classify the Series A Preferred
Stock as approximately $14,300,000 of mezzanine equity. Upon conversion of
the
Series A Preferred Stock, however, we were able to reclassify the approximately
$14,300,000 of mezzanine equity as common equity on our balance sheet. This,
in
turn, allowed us to regain compliance with NASDAQ's Marketplace Rule
4310(c)(2)(B), which requires us to have a minimum of $2,500,000 in
stockholders' equity or $35,000,000 market value of listed securities or
$500,000 of net income from continuing operations for the most recently
completed fiscal year or two of the three most recently completed fiscal
years.
In
August
2003, we acquired Antigen Express, Inc. Antigen is engaged in the research
and
development of technologies and immunomedicines for the treatment of malignant,
infectious, autoimmune and allergic diseases.
Our
immunomedicine products work by stimulating the immune system to either attack
offending agents (i.e., cancer cells, bacteria, and viruses) or to stop
attacking benign elements (i.e., self proteins and allergens). Our
immunomedicine products are based on two platform technologies that were
discovered by an executive officer of Antigen, the Ii-Key hybrid peptides
and
Ii-Suppression. The immunomedicine products are in the pre-clinical stage
of
development, and trials in human patients are not expected for at least six
months. Development efforts are underway in melanoma, breast cancer, prostate
cancer, HIV, influenza virus, smallpox, SARS and Type I diabetes mellitus.
We
are establishing collaborations with clinical investigators at academic centers
to advance the technology, with the ultimate goal of conducting human clinical
testing.
With
the
anticipated launch of commercial sales of our oral insulin product in Ecuador
in
2005, we expect to receive revenues from product sales in the fiscal year
ending
July 31, 2006. We do not expect this revenue to be sufficient for all of
our
cash needs during the year. In the past we were able to fund Antigen expenses
with some revenue from research grants for Antigen's immunomedicine products.
During the fiscal year ended July 31, 2005, we received a total of $392,112
in
such research grants, and we have received a total of $1,019,296 in such
research grants. We do not expect to receive such grants on the going forward
basis. We expect to satisfy the majority of our cash needs during the current
year from capital raised through equity financings.
36
Disclosure
Regarding Research and Development Projects
Our
major
research and development projects are the refinement of our basic buccal
delivery technology, our buccal insulin project and our buccal morphine product.
Both
our
insulin product and our morphine product are in clinical trials. During last
fiscal year we did not expend resources to further our buccal morphine product.
In Canada, we are in the process of finalizing submission to Canadian HPB
to
start Phase III trials for our insulin. In order to obtain FDA and Canadian
HPB
approval for any of our product candidates, we will be required to complete
"Phase III" trials which involve testing our product with a large number
of
patients over a significant period of time. The conduct of Phase III trials
will
require significantly greater funds than we either have on hand or have
experience in raising in any year or two years' time. We will therefore need
to
receive funding from a corporate collaborator, or engage in fundraising on
a
scale with which we have no experience.
Our
insulin product, Oral-lyn™, was approved for commercial sale by drug regulatory
authorities in Ecuador in early May 2005. It is our intention that our South
American joint venture partner, PharmaBrand S.A., will handle the commercial
launch of Oral-lyn™ in Ecuador, subject to obtaining financing needed for launch
and a suitable production facility. We will require substantial amounts in
additional funding to successfully launch Oral-lyn™ on a commercial basis in
Ecuador.
Because
of various uncertainties, we cannot predict the timing of completion and
commercialization of our buccal insulin or buccal morphine products. These
uncertainties include the success of current studies, our ability to obtain
the
required financing and the time required to obtain regulatory approval even
if
our research and development efforts are completed and successful. For the
same
reasons, we cannot predict when any products may begin to produce net cash
inflows.
Most
of
our buccal delivery research and development activities to date have involved
developing our platform technology for use with insulin and morphine.
Insubstantial amounts have been expended on projects with other drugs, and
those
projects involved a substantial amount of platform technology development.
Therefore, in the past, we have not made significant distinctions in the
accounting for research and development expenses among products, as a
significant portion of all research has involved improvements to the platform
technology in connection with insulin, which may benefit all of our potential
products. During fiscal 2005, approximately 84% of our $7,750,731 in research
expenses was attributable to insulin and platform technology development,
and
did not spend any money on morphine and fentanyl projects. As morphine and
fentanyl are both narcotic painkillers, the research is related. In the same
period of fiscal 2004, approximately 90% of our $8,522,984 of research and
development was expended for insulin and platform technology, and approximately
1% for morphine and fentanyl.
Approximately
16% or $1,210,512 of our research and development expenses for the fiscal
year
ended July 31, 2005 were related to Antigen's immunomedicine products
compared to approximately 11% or $937,385 for the fiscal year ended July
31,
2004. Because these products are in a very early, pre-clinical stage of
development, all of the expenses were accounted for as basic research and
no
distinctions were made as to particular products. Because of the early stage
of
development, we cannot predict the timing of completion of any products arising
from this technology, or when products from this technology might begin
producing revenues.
37
Developments
in Fiscal 2005
On
August
10, 2004, we issued an aggregate 620,000 shares of our common stock and 500,000
warrants to purchase our common stock to certain consultants in exchange
for
financial services recognizing expense of $1,090,800 to financial
services.
On
August
26, 2004, Dr. Pankaj Modi resigned from his position as an officer of Generex.
Also, on August 26, 2004, Dr. Modi notified us that the Consulting Agreement
between Dr. Modi and us would terminate effective August 25, 2005. We do
not
believe that Dr. Modi's resignation or the termination of his Consulting
Agreement with us has, or will, materially adversely affect us.
On
October 26, 2004, we granted a total of 1,942,000 options to purchase shares
of
our common stock to certain employees and consultants at $0.94 per share
and
150,000 options to an employee to purchase shares of our common stock at
$1.10
per share. The options issued to non-employees resulted in $75,600 charge
to
operations.
On
November 10, 2004, we entered into a Securities Purchase Agreement with four
accredited investors for a private placement of 6% Secured Convertible
Debentures (the “Debentures”) and warrants for an aggregate purchase price of
$4,000,000. We completed this private placement on November 12, 2004. The
Debentures have a term of fifteen months and amortize over thirteen months
in
thirteen equal monthly installments beginning on the first day of the third
month following their issuance. Interest on the principal amount outstanding
will accrue at a rate of six percent (6%) per annum. We may pay principal
and
accrued interest in cash or, at our option, in shares of our common stock.
If we
elect to pay principal and interest in shares of our common stock, the value
of
each share of common stock will be equal to the lesser of (i) $0.82 and (ii)
ninety percent (90%) of the average of the twenty (20) trading day volume
weighted average price for the common stock for the twenty (20) trading day
period immediately preceding the date of payment. At the option of the holder
of
each Debenture, the principal amount outstanding under each Debenture is
initially convertible at any time after the closing of the private placement
into shares of our common stock at a conversion price of $0.82. The conversion
price of each Debenture is based on the average of the ten (10) trading day
volume weighted average price for our common stock for the ten (10) trading
day
period immediately preceding the date definitive agreements were signed.
The
warrants are initially exercisable into the same number of shares of our
common
stock initially issuable upon conversion of the Debentures. The initial exercise
price of each warrant is equal to 110% of the conversion price of the
Debentures, or $0.91. The conversion price of the Debentures and the exercise
price of the warrants are each subject to an anti-dilution adjustment upon
the
issuance by us of securities at a price per share less than the then conversion
price or exercise price, as applicable. In accordance with the terms of the
private placement, we were required to register for resale the shares of
common
stock issuable upon conversion of the Debentures and upon exercise of the
warrants. On December 15, 2004, we filed a Registration Statement on Form
S-3
(File No. 333-121309) in connection with this transaction. The Registration
Statement became effective on January 24, 2005.
In
connection with the November 12, 2004 transaction, we granted an Additional
Investment Right to each investor. Pursuant to the terms of each Additional
Investment Right, each investor has the right at any time prior to January
24,
2006, to purchase on the same terms and conditions as the private placement,
up
to the same number of Debentures and warrants purchased by such investor
at the
closing of the private placement. In addition, we paid to a placement agent
(i)
a cash fee equal to seven percent (7%) of the gross proceeds received by
us and
(ii) warrants exercisable into approximately 145,000 shares of our common
stock
at the same exercise price as the investors' warrants.
38
The
aggregate number of shares of common stock issuable pursuant to the November
12,
2004 transaction exceeds 19.99% of the outstanding shares of our common stock
prior to such issuance. Because the rules and regulations of The Nasdaq Stock
Market prohibit, under certain circumstances, the issuance, without prior
stockholder approval, of shares of common stock in excess of 19.99% of an
issuer's outstanding common stock prior to such issuance, certain insiders
entered into a voting agreement with the investors, whereby such insiders
agreed
to vote at the 2005 Annual Meeting of Stockholders all shares of our common
stock held by them in favor of authorizing the issuance of an amount of shares
of our common stock in excess of 19.99% of the outstanding common stock prior
to
consummating the transaction. As discussed above in Part
I - Item 4. Submission of Matters to a Vote of Security Holders,
at the
2005 Annual Meeting of Stockholders, this proposal was approved by our
stockholders. We undertook this offering in reliance upon Rule 506 of Regulation
D and Section 18(b)(4)(D) of the Securities Act.
On
November 19, 2004, we received notice from The Nasdaq Stock Market informing
us
that we did not comply with Marketplace Rule 4310(c)(2)(B), which requires
us to
have a minimum of $2,500,000 in stockholders' equity or $35,000,000 market
value
of listed securities or $500,000 of net income from continuing operations
for
the most recently completed fiscal year or two of the three most recently
completed fiscal years. However, upon consummation in December 2004 of the
transactions contemplated by a Termination Agreement we entered into with
Elan,
as more fully described below, we regained compliance with Marketplace Rule
4310(c)(2)(B).
On
November 24, 2004, we received notice from The Nasdaq Stock Market informing
us
that we did not comply with Marketplace Rule 4310(c)(4), which requires us
to
have a minimum bid price per share of at least $1.00 for thirty (30) consecutive
business days. In accordance with Marketplace Rule 4310(c)(8)(D), we had
180
calendar days from the date of the notice, or until May 23, 2005, to regain
compliance with the Rule. As more fully described below, because we met all
initial inclusion criteria for the SmallCap Market set forth in Marketplace
Rule
4310(c), except for bid price, as of May 23, 2005, we have until November
21,
2005 to regain compliance with Marketplace Rule 4310(c)(4).
On
December 27, 2004, we entered into an agreement (the "Termination Agreement")
with Elan, whereby we and Elan agreed to terminate the joint venture through
Generex (Bermuda) Ltd. Pursuant to the terms of the Termination Agreement,
(i)
except for a common stock purchase warrant that was issued by us to Elan,
which
was amended to permit Elan or any other holder thereof to transfer the warrant
without our consent, the parties agreed to terminate all agreements entered
into
in connection with the joint venture, and (ii) Elan agreed to transfer all
shares of capital stock of Generex (Bermuda) owned by it to us. Accordingly,
all
rights granted by each party to the other terminated, including, without
limitation, Elan's right to appoint a member to our Board of Directors, all
other rights granted under the terms of the joint venture terminated, each
party
retained its intellectual property rights, we obtained full ownership of
Generex
(Bermuda), and all representatives of Elan who were officers and/or directors
of
Generex (Bermuda) resigned.
In
connection with negotiating the Termination Agreement, EPIL III approached
us
for consent to transfer the Series A Preferred Stock by way of an auction
process. Although we provided our consent to the transfer, it was contingent
upon EPIL III agreeing to satisfy the following conditions: (i) the auction
process could conclude no later than December 15, 2004 and EPIL III's
disposition of the shares could conclude no later than December 31, 2004
(the
"Closing Date"), (ii) the buyer had to immediately convert the Series A
Preferred Stock at the voluntary conversion price of $25.77 (calculated pursuant
to the terms of the certificate of designation for the Series A Preferred
Stock
resulting in the issuance of 534,085 shares of common stock), (iii) EPIL
III's
registration rights could not be transferred, and (iv) for a period of two
(2)
years after the Closing Date, the purchaser of the Series A Preferred Stock
could not transfer the shares of common stock issuable upon conversion thereof
and we would have the right to redeem the shares of common stock at a per
share
price of 150% of the average closing price of the common stock on The Nasdaq
SmallCap Market for the twenty (20) days immediately preceding the Closing
Date.
On or about December 15, 2004, EPIL III conducted the auction and received
an
offer to buy the shares of Series A Preferred Stock. On or about December
31,
2004, EPIL III sold the shares of Series A Preferred Stock, and the purchaser
thereof immediately converted the Series A Preferred Stock into shares of
our
common stock.
39
The
conversion of the Series A Preferred Stock was particularly critical because
the
mandatory redemption feature required us to classify the Series A Preferred
Stock as approximately $14,300,000 of mezzanine equity. Upon conversion of
the
Series A Preferred Stock, however, we were able to reclassify the approximately
$14,300,000 of mezzanine equity as common equity on our balance sheet. This,
in
turn, allowed us to regain compliance with NASDAQ's Marketplace Rule
4310(c)(2)(B), which requires us to have a minimum of $2,500,000 in
stockholders' equity or $35,000,000 market value of listed securities or
$500,000 of net income from continuing operations for the most recently
completed fiscal year or two of the three most recently completed fiscal
years.
In
February 2005, a consultant commenced an action in the Ontario Superior Court
of
Justice against us seeking approximately $600,000 in damages for alleged
contract breaches in respect of unpaid remuneration and other compensation
allegedly owed to him. We are of the view that the claims are wholly without
merit and intends to defend this action vigorously. We are not able to predict
the ultimate outcome of this legal proceeding at the present time or estimate
an
amount or range of potential loss, if any, from this legal
proceeding.
We
entered into a Promissory Note and Agreement with Cranshire Capital, L.P.
("Cranshire") on March 28, 2005 and entered into a Promissory Note and Agreement
with Omicron Master Trust ("Omicron") on April 6, 2005 pursuant to which
Cranshire and Omicron loaned us the principal amount of $500,000 and $100,000,
respectively. As additional consideration for the loans from Cranshire and
Omicron, we issued on April 28, 2005 a warrant to Cranshire to purchase an
aggregate of 1,219,512 shares of our common stock and a warrant to Omicron
to
purchase an aggregate of 243,902 shares of our common stock, both of which
will
expire on April 27, 2010. The terms and conditions of the loans from Cranshire
and Omicron, as well as the rights of Cranshire and Omicron under the warrants,
are described below under the caption Financial
Condition, Liquidity and Resources
of this
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
On
March
30, 2005, we entered into an Assistance Agreement with Eckert Seamans Cherin
& Mellott, LLC, ("Eckert Seamans"), pursuant to which Eckert Seamans
advanced us funds in the amount of $325,179 for the sole purpose of making
the
interest payment and the monthly redemption payment due on March 31, 2005
and
April 1, 2005, respectively, under our 6% Secured Convertible Debentures.
The
terms and conditions of the Assistance Agreement with Eckert Seamans, as
well as
our obligations with respect to the 6% Secured Convertible Debentures, are
described below under the caption Financial
Condition, Liquidity and Resources
of this
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
On
March
31, 2005 Generex Pharmaceuticals, Inc. (“GPI”), our wholly-owned subsidiary,
entered into a mortgage loan transaction pursuant to which GPI borrowed
approximately $183,804 ($230,000 CND) (the “March GPI Loan”). The net proceeds
to GPI after fees and disbursements were approximately $159,596 ($200,800
CND).
The March GPI Loan was secured by, inter
alia,
a
charge registered against real property owned by GPI. The loan was for a
term of
two years with an annual interest rate of 13.5 % calculated
monthly.
40
On
April
5, 2005, our Board of Directors granted stock options to purchase shares
of our
common stock under our 2001 Stock Option Plan, as amended, to the following
officers and directors of the Company:
|
Anna
E. Gluskin, Chairman of the
Board
of Directors, President
and
Chief Executive Officer
|
250,000
shares
|
|
Rose
C. Perri, Chief Operating Officer,
Chief
Financial Officer,
Treasurer
Secretary and Director
|
250,000
shares
|
|
Mark
Fletcher, Executive
Vice
President and General Counsel
|
250,000
shares
|
|
Dr.
Gerald Bernstein, Vice President of
Medical
Affairs and Director
|
100,000
shares
|
The
effective date of the grant of all of the above-mentioned options is December
13, 2004, and the exercise price is $0.61 per share, which represents the
closing price of our common stock on The Nasdaq SmallCap Market on such date.
All of the options became exercisable immediately upon grant and expire on
December 13, 2009. The option grant to Dr. Bernstein was made pursuant to
the
terms of his employment agreement with us, dated April 1, 2002, in respect
of
contract years ending March 31, 2004 and 2005.
On
April
5,2005, in recognition of Company management achievements, our Board of
Directors also awarded bonuses to certain of our executive officers and
directors in the form of stock options to purchase shares of our common stock
under the 2001 Stock Option Plan as follows: Ms. Gluskin - 819,672 shares;
Ms.
Perri - 409,836 shares; and Mr. Fletcher - 327,869 shares. The exercise price
for the foregoing options is $0.001 per share. All of the options became
exercisable immediately upon grant and expire on April 4, 2010. Our Board
of
Directors also increased the annual base salaries of certain executive officers
effective as of August 1, 2004. Ms. Gluskin’s annual base salary was increased
from $350,000 to $425,000; Ms. Perri’s annual base salary was increased from
$295,000 to $325,000; and Mr. Fletcher’s annual base salary was increased from
$130,000 to $250,000. These were the first salary adjustments for Ms. Gluskin
and Ms. Perri since August 1, 2002 and for Mr. Fletcher since April 1, 2003.
The
Board directed that the payment of any and all unpaid salary amounts to Ms.
Gluskin, Ms. Perri and Mr. Fletcher as of April 4, 2005, including all unpaid
amounts arising from such retroactive increases and any and all salary amounts
foregone by Ms. Gluskin and Ms. Perri, be satisfied by the issuance under
the
2001 Stock Option Plan of stock options to purchase shares of our common
stock
at the exercise price of $0.001 per share. The number of shares awarded was
calculated using the closing price of our common stock on The Nasdaq SmallCap
Market on April 4, 2005 ($0.56 per share). Accordingly, Ms. Gluskin, Ms.
Perri
and Mr. Fletcher received options to purchase 301,032, 166,916 and 142,857
shares of our common stock, respectively, in respect of such retroactive
salary
adjustments calculated for the period from August 1, 2004 to March 31, 2005
and salary accrued through March 31, 2005. All of the options became
exercisable immediately upon grant and expire on April 4, 2010.
On
April
5, 2005, our Board of Directors also awarded a cash bonus to Dr. Bernstein
in
the amount of $82,500 that was paid through monthly advances against potential
cash bonuses pursuant to the terms of his employment agreement, dated April
1,
2002. On April 5, 2005, we and Dr. Bernstein also agreed to amend Dr.
Bernstein’s employment agreement, which expired on March 31, 2005, as follows:
the term was extended for three years until March 31, 2008; Dr. Bernstein’s
annual base compensation was increased from $150,000 to $200,000 effective
April
1, 2005; and the provision entitling Dr. Bernstein to monthly advances against
cash bonuses in the amount of $2,500 was deleted as of April 1,
2005.
On
April
5, 2005, our Board of Directors also awarded each of our non-employee directors,
John P. Barratt, Mindy J. Allport-Settle, Brian T. McGee and Peter G.
Amanatides, an option to purchase 100,000 shares of our common stock under
the
2001 Stock Option Plan at an exercise price equal to the closing price of
our
common stock on The Nasdaq SmallCap Market as of April 4, 2005 ($0.56 per
share). Each such option became exercisable immediately upon grant and will
be
exercisable until the fifth anniversary of the date of grant.
41
On
April
12, 2005, we issued 175,316 shares of common stock resulting from the conversion
of $143,500 of convertible debenture principal.
On
April
27, 2005, GPI entered into a mortgage loan transaction pursuant to which
GPI
borrowed approximately $345,738 ($435,000 CND) (the “April GPI Loan”). The net
proceeds to GPI after fees and disbursements were approximately $265,145
($333,600 CND). The April GPI Loan was secured by, inter
alia,
charges
registered against real property owned by GPI. The loan was for a term of
one
year with an annual interest rate of 16.5 % calculated monthly.
In
May
2005, we issued an aggregate of 1,163,573 shares of common stock resulting
from
the conversion of $954,000 of convertible debenture principal and $130 of
accrued interest.
On
May 3,
2005, we announced that Oral-lyn™, our proprietary oral insulin spray
formulation, was approved for commercial marketing and sale by the Ecuadorian
Ministry of Public Health for the treatment of both Type-1 and Type-2 diabetes.
Oral-lyn™ is delivered via our proprietary RapidMist™ device into the human
mouth where it is absorbed with no lung deposition. We expect that our South
American joint venture partner, PharmaBrand S.A., will handle the commercial
launch of Oral-lyn™ in Ecuador, subject to obtaining financing needed for launch
and a suitable production facility. We are continuing our efforts to secure
the
participation of a multi-national pharmaceutical co-marketing partner for
the
balance of South America.
On
May
19, 2005, the March GPI Loan and the April GPI Loan were consolidated and
restructured (the “Consolidated GPI Loan”). Pursuant to the revised arrangement,
GPI repaid an aggregate of approximately $210,622 ($265,000 CND) (the
“Consolidated GPI Loan Repayment”) in respect of the March GPI Loan and the
April GPI Loan, leaving a Consolidated GPI Loan principal of approximately
$317,920 ($400,000 CND). GPI paid an aggregate of approximately $28,595 in
fees
and disbursements in connection with the Consolidated GPI Loan. The Consolidated
GPI Loan is secured by, inter
alia,
charges
against real property owned by GPI. The loan was for a term of 1 year with
an
annual interest rate of 16.5 % calculated monthly.
On
May
19, 2005, GPI entered into two additional mortgage loan transactions pursuant
to
which GPI borrowed an aggregate of approximately $643,788 ($810,000 CND)
(together, the “May GPI Loans”). The net proceeds to GPI after fees and
disbursements (including fees and disbursements in connection with the
Consolidated GPI Loan) and the Consolidated GPI Loan Repayment were
approximately $377,029 ($474,369 CND). The May GPI Loans are secured by,
inter
alia,
charges
registered against real property owned by GPI. Both loans are for a term
of one
year with an annual interest rate of 4.924% as to the $246,388 loan and 4.913%
as to the $397,400 loan calculated semi-annually.
On
May
25, 2005, we received notice from the Staff of The Nasdaq Stock Market that,
during the 180 calendar day period ending May 23, 2005, we had not regained
compliance with Marketplace Rule 4310(c)(4), which requires us to have a
minimum
bid price per share of at least $1.00 for 30 consecutive business days; however,
the Staff noted that on May 23, 2005, we met all initial inclusion criteria
for
the SmallCap Market set forth in Marketplace Rule 4310(c), except for bid
price.
Therefore, in accordance with Marketplace Rule 4310(c)(8)(D), we have additional
180 calendar days, or until November 21, 2005, to regain compliance with
Rule
4310(c)(4). If, at any time before November 21, 2005, the bid price of our
common stock closes at $1.00 per share or more for a minimum of 10 consecutive
business days, we will regain compliance with the Rule. In the event that
we
cannot demonstrate compliance with Marketplace Rule 4310(c)(4) by November
21,
2005 and we are not eligible for an additional compliance period, the Staff
will
notify us that our securities will be delisted, at which time we may appeal
the
Staff’s determination to a Listing Qualifications Panel. Pending the decision of
the Listing Qualification Panel, our common stock will continue to trade
on the
SmallCap Market.
42
On
June
7, 2005, Cranshire agreed to extend the interest payment date and the maturity
date under the March 28, 2005 Promissory Note and Agreement with us from
May 15,
2005 to July 22, 2005. On June 7, 2005, Omicron agreed to an identical extension
of the interest payment date and the maturity date under the April 6, 2005
Promissory Note and Agreement with us. As consideration for the extensions
from
Cranshire and Omicron, we contemporaneously issued on a warrant to Cranshire
to
purchase an aggregate of 1,219,512 shares of our common stock and a warrant
to
Omicron to purchase an aggregate of 243,902 shares of our common stock, both
of
which will expire on June 7, 2010. The rights of Cranshire and Omicron under
the
June 7, 2005 warrants are described below under the caption Financial
Condition, Liquidity and Resources
of this
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
On
June
16, 2005, we and each of the investors party to the November 12, 2004 private
placement described above entered into Amendment No. 1 to the Securities
Purchase Agreement, dated November 10, 2004, and the Registration Rights
Agreement, dated November 10, 2004 (“Amendment No. 1”), pursuant to which the
investors agreed to exercise of 50% of their Additional Investment Rights
in the
aggregate amount of $2,000,000. As of June 17, 2005, funding of the transaction
occurred, and the closing conditions specified under Amendment No. 1 were
satisfied. In consideration for the investors’ exercise of their Additional
Investment Rights:
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Ÿ
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we
issued the investors Debentures in the aggregate amount of $2,000,000
(the
“AIR Debentures”) and reduced the conversion of the AIR Debentures from
$0.82 as originally agreed to $0.60; but such reduction in the
conversion
price of the AIR Debentures will not trigger any anti-dilution
adjustments
to the existing Debentures and warrants;
|
|
Ÿ
|
we
issued the investors warrants to purchase an aggregate of 2,439,024
shares
of our common stock at the exercise price of $0.82 per share (the
“AIR
Warrants”);
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Ÿ
|
we
granted each investor a further Additional Investment Right (each
an
“Additional AIR” and collectively, the “Additional AIRs”), pursuant to
which each investor will have the right to purchase detachable
units
consisting of (a) additional AIR Debentures in principal amount
equal to
the principal amount of AIR Debentures issuable to each investor
upon the
AIR Exercise with a conversion price of $0.82 (the “Additional AIR
Debentures”) and (b) additional AIR Warrants entitling the holder thereof
to purchase a number of shares of our common stock equal to 100%
of the
shares of common stock issuable upon the conversion in full at
a $0.82
conversion price (subject to adjustment as set forth therein) (without
regard to any restrictions on conversion therein contained) of
the AIR
Debentures contemplated in clause (a) above, at an exercise price
equal to
the “AIR Warrant Exercise Price” (as such term is defined in the
Additional Investment Rights) (the “Additional AIR Warrants”).
|
Under
the
terms of Amendment No. 1, we also agreed to provide registration rights with
respect to the securities issuable upon conversion/exercise of the AIR
Debentures, the Additional AIR Debentures and the Additional AIR Warrants
consistent with the investors’ existing registration rights under the
Registration Rights Agreement, dated November 10, 2004. On July 15, 2005,
we
filed a Registration Statement on Form S-3 (File No. 333-126624) in connection
therewith. This Registration Statement was declared effective on July 29,
2005
by the Securities and Exchange Commission (the “SEC”).
43
The
terms
of the AIR Debentures, including the interest rate at which they will accrue,
their payment terms and the material terms under which they may be accelerated
and increased, are described below under the caption Financial
Condition, Liquidity and Resources
of this
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
The
AIR
Warrants will be initially exercisable into an aggregate of 2,439,024 shares
of
our common stock, and the initial exercise price of each AIR Warrant will
be
equal to $0.82. The conversion price of the AIR Debentures and the exercise
price of the AIR Warrants will be subject to an anti-dilution adjustment
upon
the issuance by us of securities at a price per share less than the then
conversion price or exercise price, as applicable.
Each
investor may exercise its Additional AIR at any time after the 181st day
after
closing and on or prior to the earlier of (i) the close of business on the
one-year anniversary after the registration statement for the shares of common
stock underlying the AIR Debentures and AIR Warrants has gone effective and
(ii)
June 17, 2007.
In
addition, in connection with the transactions contemplated by Amendment No.
1,
we issued to a placement agent (i) 170,732 shares of common stock in lieu
of a
cash fee equal to 7% of the gross proceeds received by us and (ii) warrants
exercisable into approximately 60,000 shares of our common stock at the same
exercise price as the AIR Warrants.
As
we
obtained shareholder approval at our April 5, 2005 Annual Meeting of
Stockholders for the issuance of up to an aggregate of 10,000,000 shares
of
common stock or securities convertible into common stock for a price of not
less
than 70% of the market price at the time of issuance and for aggregate
consideration not to exceed $50,000,000, in excess of the number of shares
that
NASDAQ’s Marketplace Rules 4350(i)(1)(c) and (D) permit us to issue without
prior stockholder approval, no further stockholder approval was necessary
in
connection with the transactions contemplated by Amendment No. 1. We undertook
the offer and sale of the AIR Debentures, AIR Warrants and Additional AIRs
in
reliance upon Rule 506 of Regulation D and Section 18(b)(4)(D) of the Securities
Act.
In
June
2005, we issued an aggregate of 483,594 shares of common stock resulting
from
the conversion of $290,000 of convertible debenture principal and $156 of
accrued interest.
On
July
22, 2005, Cranshire and Omicron agreed to extend the interest payment date
and
the maturity date under the March 28, 2005 and April 6, 2005 Promissory Note
and
Agreements with us from July 22, 2005 to September 20, 2005. As consideration
for the extensions from Cranshire and Omicron, we contemporaneously issued
on a
warrant to Cranshire to purchase an aggregate of 1,219,512 shares of our
common
stock and a warrant to Omicron to purchase an aggregate of 243,902 shares
of our
common stock, both of which will expire on July 22, 2010. The rights of
Cranshire and Omicron under the July 22 2005 warrants are described below
under
the caption Financial
Condition, Liquidity and Resources
of this
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
In
July
2005, we issued an aggregate of 153,398 shares of common stock resulting
from
the conversion of $92,000 of convertible debenture principal and $199 of
accrued
interest.
44
Developments
Subsequent to Fiscal 2005
On
September 8, 2005, we and each of the investors party to the November 12,
2004
private placement and Amendment No. 1 described above entered into an Amendment
No. 2 to the Securities Purchase Agreement, dated November 10, 2004 as amended,
and the Registration Rights Agreement, dated November 10, 2004 as amended
(“Amendment No. 2”), pursuant to which the investors agreed to exercise an
additional $2,000,000 in principal amount of Additional Investment Rights
(the
“Second AIR Exercise”). In connection with this investment:
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Ÿ
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we
issued the investors Debentures in the aggregate amount of $2,000,000
(the
“AIR Debentures”) and reduced the conversion price of the AIR Debentures
from $0.82 as originally agreed to $0.60; but such reduction in
the
conversion price of the AIR Debentures will not trigger any anti-dilution
adjustments to the outstanding Debentures and Warrants;
|
|
Ÿ
|
we
issued the investors warrants to purchase an aggregate of 2,439,024
shares
of the Company’s common stock at the exercise price of $0.82 per share
(the “AIR Warrants”); exercisable for five years commencing six months
following the issuance thereof;
|
|
Ÿ
|
we
granted each investor a further Additional Investment Right (each
an
“Additional AIR” and collectively, the “Additional AIRs”), pursuant to
which each investor will have the right to purchase detachable
units
consisting of (a) additional AIR Debentures in principal amount
equal to
the principal amount of AIR Debentures issuable to each investor
upon the
Second AIR Exercise with a conversion price of $0.82 (the “Additional AIR
Debentures”) and (b) additional AIR Warrants entitling the holder thereof
to purchase a number of shares of our common stock equal to 100%
of the
shares of common stock issuable upon the conversion in full at
a $0.82
conversion price (subject to adjustment as set forth therein) (without
regard to any restrictions on conversion therein contained) of
the
Additional AIR Debentures contemplated in clause (a) above, at
an exercise
price equal to the “AIR Warrant Exercise Price” (as such term is defined
in the Additional Investment Rights), being $0.82 (the “Additional AIR
Warrants”).
|
Under
the
terms of Amendment No. 2, we agreed to register for resale the securities
issuable upon conversion/exercise of the Additional AIR Debentures and the
Additional AIR Warrants, as well as additional shares issuable upon conversion
of the AIR Debentures due to the decrease in conversion price, consistent
with
the investors’ existing registration rights under the Registration Rights
Agreement, dated November 10, 2004, with the exception that we would have
45
days to file the registration statement rather than 30 days.
The
AIR
Debentures issued in connection with Amendment No. 2 are identical to the
AIR
Debentures issued in connection with Amendment No. 1, except that the principal
amount outstanding under each AIR Debenture, at the option of the holder,
is
initially convertible at any time after the closing of Amendment No. 2 into
shares of our common stock at a conversion price of $0.60. The terms of the
AIR
Debentures issued in connection with Amendment No. 1 are described below
under
the caption Financial
Condition, Liquidity and Resources
of this
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
The
occurrence of an Event of Default with respect to an AIR Debenture issued
in
connection with Amendment No. 2 will have the same effect as an Event Default
with respect to an AIR Debenture issued in connection with Amendment No.
1 as
discussed below under the caption Financial
Condition, Liquidity and Resources
of this
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
45
The
AIR
Warrants issued in connection with Amendment No. 2 are initially exercisable
into an aggregate of 2,439,024 shares of our common stock, and the initial
exercise price of each AIR Warrant is equal to $0.82. The conversion price
of
the AIR Debentures and the exercise price of the AIR Warrants are each subject
to an anti-dilution adjustment upon the issuance by us of securities at a
price
per share less than the then conversion price or exercise price, as applicable.
Each
investor may exercise its Additional AIR issued in connection with Amendment
No.
2 at any time on or after the 181st day after closing and on or prior to
the
earlier of (i) the close of business on the one-year anniversary after the
registration statement for the shares of common stock underlying the AIR
Debentures and AIR Warrants has gone effective and (ii)
September 8, 2007.
In
addition, in connection with the transactions contemplated Amendment No.
2, we
issued to a placement agent (i) 170,732 shares of our common stock in lieu
of a
cash fee equal to 7% of the gross proceeds received by us and (ii) warrants
exercisable into approximately 60,000 shares of our common stock at the same
exercise price as the AIR Warrants. We are seeking to register these shares,
along with the securities issuable upon conversion/exercise of the Additional
AIR Debentures and the Additional AIR Warrants issued in connection with
Amendment No. 2 and additional shares issuable upon conversion of the AIR
Debentures due to the decrease in conversion price, for resale on a Registration
Statement on Form S-3 (File No. 333-128328) filed with the SEC on September
15,
2005 and became effective on September 28, 2005.
We
undertook the offer and sale of the AIR Debentures, AIR Warrants and Additional
AIRs in connection with Amendment No. 2 in reliance upon Rule 506 of Regulation
D and Section 18(b)(4)(D) of the Securities Act.
In
September and October 2005, we issued an aggregate of 4,763,856 shares of
common
stock resulting from the conversion of $2,938,419 of convertible debentures
principal and interest.
On
September 20, 2005, we failed to pay the outstanding principal balances under
the $500,000 convertible promissory note entered into with Cranshire on March
28, 2005 and the $100,000 convertible promissory note entered into with Omicron
on April 6, 2005. On October 19, 2005 Cranshire converted outstanding principal
and accrued interest on its note ($528,082 in total) into 664,003 shares
of our
common stock. On October 27, 2005 Omicron converted outstanding principal
and
accrued interest on its note ($105,644 in total) into 128,834 shares of our
common stock. The terms and conditions of the notes are described below under
the caption Financial
Condition, Liquidity and Resources
of this
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operation.
On
October 1, 2005, we failed to pay the first installment due under the Assistance
Agreement with Eckert Seamans pursuant to which we borrowed $325,179. We
are
currently in negotiations with Eckert Seamans and are seeking to extend the
payment dates or to pay the outstanding balance with shares of our common
stock.
As of October 1, 2005, all amounts due thereunder became payable on demand,
and
interest began accruing at the rate of 8% per annum. The total arrearage
to date
under the Assistance Agreement, as well as the terms and conditions of the
Assistance Agreement with Eckert Seamans, are described below under the caption
Financial
Condition, Liquidity and Resources
of this
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operation.
In
October 2005, in consideration for the exercise of certain outstanding warrants
previously issued to each of Cranshire and Iroquois Capital L.P. (“Iroquois”) in
connection with their purchase of our 6% Secured Convertible Debentures pursuant
to the Securities Purchase Agreement dated November 10, 2004, we issued a
five-year warrant to purchase 300,000 shares of our common stock at $1.20
per
share to Cranshire and a five-year warrant to purchase 609,756 shares of
our
common stock at $1.20 per share to Iroquois. We received aggregate proceeds
of
$1,492,000 in connection with Cranshire’s partial exercise of its outstanding
warrant to purchase 1,219,512 shares of our common stock and Iroquois’ full
exercise of its outstanding warrant to purchase 1,219,512 shares of our common
stock. The rights of Cranshire and Iroquois under the October 2005 warrants
are
described in this Annual Report on Form 10-K under the caption Financial
Condition, Liquidity and Resources
of
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
46
In
October 2005, in consideration for the exercise of certain outstanding warrants
previously issued to the holders of our 6% Secured Convertible Debentures
pursuant to the Securities Purchase Agreement dated November 10, 2004, we
issued to three of the holders five-year warrant to purchase
an
aggregate of 1,529,289 shares of our common stock at $1.25 per share. We
received aggregate proceeds of approximately $2,508,000 in connection with
the
exercise of holder’s outstanding warrants to purchase shares of our common
stock. The rights of the holders of these warrants are described in this
Annual
Report on Form 10-K under the caption Financial
Condition, Liquidity and Resources
of
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
Results
of Operations
Year
Ended July 31, 2005 Compared to Year Ended July 31, 2004
We
had a
net loss of $24,001,735 for the year ended July 31, 2005 (fiscal 2005) compared
to a net loss of $18,362,583 in the year ended July 31, 2004 (fiscal 2004).
The
net loss for fiscal 2005 and 2004 excludes $0 and $810,003, respectively,
in
non-cash stock dividend on preferred shares. The main reason for the increase
in
net loss for the year is attributed to interest expense and loss on
extinguishment of debt incurred in connection with convertible debentures
entered during 2005 fiscal year. Our operation loss for the year decreased
to
$18,558,421 compared to $18,565,341 in operating loss for the fiscal year
ended
July 31, 2004. The decrease in our fiscal 2005 operating loss resulted from
a
decrease in research and development expenses (to $7,750,731 from $8,522,984),
despite an increase in general and administrative expenses (to $11,199,802
from
$10,669,541). Our revenue had also decreased from $627,184 in 2004 to $392,112
in the fiscal year ended July 31, 2005.
The
increase in general and administrative expenses for fiscal 2005 reflects
the
increase in legal, audit and accounting, financial and consulting services
and
executive compensation. The increase in general and administrative expenses
was
partially offset by a decrease in level of participation in industry shows
and
seminars, travel associated with shows and financing activities, as well
as
decreased advertising and fewer payments on termination agreements.
The
decrease in research and development expenses for fiscal 2005 reflects decreased
level of research and development activities despite the increase in activities
of Antigen. Numbers for fiscal 2004 also reflected bulk insulin purchases
that
were absent this year.
Our
interest expense in fiscal 2005 increased to $4,300,512 compared to interest
expense of $116,473 in fiscal 2004 due to interest paid in connection with
convertible debentures entered into during the current fiscal year. Our interest
and miscellaneous income decreased to $93,213 in 2005 compared to $245,671
l in
fiscal 2004 primarily due to lower cash and short term investments balances
during the current fiscal year. Our loss on extinguishment of debt, also
incurred in connection with convertible debentures, was $1,346,341 in 2005
compared to $0 in fiscal 2004. We received higher income from rental operations
(net of expense) of $110,326 in fiscal 2005 compared to $73,560 in fiscal
2004.
Results
of Operations
Year
Ended July 31, 2004 Compared to Year Ended July 31, 2003
We
had a
net loss of $18,362,583 for the year ended July 31, 2004 (fiscal 2004) compared
to a net loss of $13,261,764 in the year ended July 31, 2003 (fiscal 2003).
The
net loss for fiscal 2004 and 2003 excludes $810,003 and $764,154, respectively,
in non-cash stock dividend on preferred shares. The increase in our fiscal
2004
net loss resulted from an increase in research and development expenses (to
$8,522,984 from $5,150,075) and an increase in general and administrative
expenses (to $10,669,541 from $8,698,615).
47
The
increase in research and development expenses for fiscal 2004 reflects research
and development activities of Antigen, the increase in activities of regulatory
consultants, bulk insulin purchases and an increase in depreciation of the
patents due to additional patents acquired in the acquisition of Antigen.
The
increase in general and administrative expenses for fiscal 2004 reflects
the
increase in consulting services, increased level of participation in industry
shows and seminars, travel associated with shows and financing activities,
increased insurance and depreciation expenses as well as termination agreements.
The increase in general and administrative expenses was partially offset
by a
decrease in legal and litigation expenses and a reduction in executive
compensation.
Our
interest and miscellaneous income (net of interest expense) in fiscal 2004
decreased to $129,198 from $565,511 in fiscal 2003 due to decreases in our
cash
and short-term investments and lower interest rates. We received higher income
from rental operations (net of expense) of $73,560 in fiscal 2004 compared
to
$20,790 in fiscal 2003.
In
both
of the last two fiscal years, we incurred substantial expenses for financial
advisory and other financing services that were not related to a specific
financing and, therefore, were accounted for as general and administrative
expenses. These expenses ($2,256,503 in fiscal 2004 and $2,239,431 in fiscal
2003) were paid partially through the issuance of common stock and/or warrants
and options to purchase common stock.
Financial
Condition, Liquidity and Resources
To
date
we have financed our development stage activities primarily through private
placements of our common stock and securities convertible into our common
stock.
At
July
31, 2005, we had cash and short-term investments of approximately $586,530.
At
July 31, 2004, our cash and short term investments were approximately
$5,000,000. The decrease was attributable to the use of cash for ongoing
operations. At July 31, 2005, we believed that our anticipated cash position
was
sufficient to meet our working capital needs for the next three months based
on
the pace of our planned development activities. Beyond that, we will likely
require additional funds to support our working capital requirements or for
other purposes. From time to time as deemed appropriate by management, we
may
seek to raise funds through private or public equity financing or from other
sources. If we are unable to raise additional capital as needed, we could
be
required to "scale back" or otherwise revise our business plan. Any significant
scale back of operations or modification of our business plan due to a lack
of
funding could be expected to affect our prospects materially and adversely.
We
entered into a Securities Purchase Agreement dated November 10, 2004 (the
“Securities Purchase Agreement”) and issued 6% Secured Convertible Debentures
(the “Debentures”) and related warrants on November 12, 2004 in
connection with a private placement for an aggregate purchase price of
$4,000,000. The Debentures have a term of fifteen months and amortize over
thirteen months in thirteen equal monthly installments beginning on February
1,
2005. Interest on the principal amount outstanding will accrue at a rate
of six
percent per annum. We may pay principal and accrued interest in cash or,
at our
option, in shares of common stock. If we elect to pay principal and interest
in
shares of our common stock, the value of each share of common stock will
be
equal to the lesser of (i) $0.82 and (ii) ninety percent (90%) of the average
of
the twenty (20) trading day volume weighted average price for the common
stock
for the twenty (20) trading day period immediately preceding the date of
payment. At the option of the holder of each Debenture, the principal amount
outstanding under each Debenture is initially convertible at any time after
the
closing of the private placement into shares of our common stock at a conversion
price of $0.82. The conversion price of each Debenture is based on the average
of the ten trading day volume weighted average price for the common stock
for
the ten trading day period immediately preceding the date definitive agreements
for purchase of the Debentures were signed. The warrants are initially
exercisable into the same number of shares of the common stock initially
issuable upon conversion of the Debentures. The initial exercise price of
each
warrant is equal to 110% of the conversion price of the Debentures, or $0.91.
The conversion price of the Debentures and the exercise price of the warrants
are each subject to an anti-dilution adjustment upon the issuance by us of
securities at a price per share less than the then conversion price or exercise
price, as applicable.
48
In
connection with the issuance of the Debentures, we granted an Additional
Investment Right to holders of the Debentures. Pursuant to the terms of each
Additional Investment Right, each holder has the right at any time prior
to
January 24, 2006, to purchase on the same terms and conditions as the private
placement, up to the same number of Debentures and warrants purchased by
such
holder at the closing of the private placement. We also issued to a placement
agent a warrant exercisable into approximately 145,000 shares of common stock
at
the same exercise price as the warrants issued to the holders of the Debentures.
The
aggregate number of shares of common stock issuable pursuant to the November
2004 private placement of Debentures and related warrants exceeded 19.99%
of the
outstanding shares of our common stock prior to such issuance. Because the
rules
and regulations of The Nasdaq Stock Market prohibit, under certain
circumstances, the issuance, without prior stockholder approval, of shares
of
common stock in excess of 19.99% of an issuer's outstanding common stock
prior
to such issuance, certain insiders entered into a voting agreement with the
holders of the Debentures, whereby such insiders agreed to vote at the next
meeting of the Company’s stockholders all shares of common stock held by them in
favor of authorizing the issuance of an amount of shares of common stock
in
excess of 19.99% of the outstanding common stock prior to consummating the
private placement. The issuance of such shares was approved by our stockholders
at the Annual Meeting of Stockholders held on April 5, 2005 as described
above
in Part
I - Item 4. Submission of Matters to a Vote of Security Holders.
We
entered into a Promissory Note and Agreement with Cranshire Capital, L.P.
("Cranshire") on March 28, 2005 and entered into a Promissory Note and Agreement
with Omicron Master Trust ("Omicron") on April 6, 2005 pursuant to which
Cranshire and Omicron loaned us the principal amount of $500,000 and $100,000,
respectively (the "Notes"). The outstanding principal balance under the Notes
and any accrued but unpaid interest thereon was due and payable on May 15,
2005
to the extent that Cranshire and Omicron had not exercised their respective
conversion rights under the Notes as described below. The Notes are subordinate
to our obligations under the Debentures. We were obligated to use a portion
of
the proceeds received from Cranshire to pay two of the holders (not including
Cranshire or Omicron) of the Debentures the full amount of the March 1, 2005
monthly amortization payments due under the Debentures.
On
April
28, 2005, as additional consideration for the loans from Cranshire and Omicron,
we issued Cranshire a warrant to purchase an aggregate of 1,219,512 shares
of
our common stock and issued Omicron a warrant to purchase an aggregate of
243,902 shares of our common stock, both of which will expire on April 27,
2010.
At the holders’ option, the outstanding principal balance under the Notes,
together with any accrued but unpaid interest thereon, and the April 28,
2005
warrants are convertible or exercisable into shares of common stock at the
conversion/exercise price of $0.82 per share. Cranshire and Omicron have
agreed
that they will neither convert the Notes nor exercise the April 28, 2005
warrants if such conversion or exercise would cause Cranshire and Omicron,
together with their respective affiliates, to beneficially own more than
9.99%
of the shares of common stock then outstanding. We have registered the shares
of
common stock issued upon conversion of the Notes and exercise of the April
28,
2005 warrants for resale on the Registration Statement on Form S-3 (File
No.
333-126624) that became effective on July 29, 2005.
49
Cranshire's
and Omicron’s right to convert the Notes is subject to certain participation
rights of Iroquois Capital, L.P. and Smithfield Fiduciary, LLC, which, together
with Cranshire and Omicron, are the holders of the Debentures issued pursuant
to
the Securities Purchase Agreement. The Securities Purchase Agreement is
discussed in, and filed as an exhibit to, our Current Report on Form 8-K,
filed
November 12, 2004. The participation rights granted to the holders of the
Debentures under the Securities Purchase Agreement provide that, upon any
financing by us or any of our subsidiaries of common stock or debt or securities
convertible or exercisable into common stock, each such holder will have
the
right to purchase up to 100% of such financing. To our knowledge, none of
the
other holders of Debentures elected to exercise their participation rights
with
respect to the Notes.
We
did
not pay the outstanding principal balances originally due on May 15, 2005
under
the Notes. Interest on the outstanding principal balances under the Notes
began
accruing before the maturity date at the rate of 10% per annum. On June 7,
2005,
Cranshire and Omicron agreed to extend the interest payment date and the
maturity date of each of the Notes from May 15, 2005 to July 22, 2005. In
consideration for the foregoing extension, we contemporaneously issued Cranshire
a warrant to purchase an aggregate of 1,219,512 shares of our common stock
and
issued Omicron a warrant to purchase an aggregate of 243,902 shares of our
common stock, both of which will expire on June 7, 2010. At the holder’s option,
each of the June 7, 2005 warrants will be exercisable into shares of our
common
stock at the exercise price of $0.82 per share. Each of Cranshire and Omicron
has agreed that it will not exercise its June 7, 2005 warrant if such exercise
would cause it, together with its affiliates, to beneficially own more than
9.99% of the shares of our common stock then outstanding. We registered the
shares of common stock issuable upon exercise of the Amendment Warrants on
the
Registration Statement on Form S-3 (File No. 333-126624) that became effective
on July 29, 2005.
On
July
22, 2005, Cranshire and Omicron agreed to extend the interest payment date
and
the maturity date under the Notes from July 22, 2005 to September 20, 2005.
As
consideration for the extensions from Cranshire and Omicron, we
contemporaneously issued on a warrant to Cranshire to purchase an aggregate
of
1,219,512 shares of our common stock and a warrant to Omicron to purchase
an
aggregate of 243,902 shares of our common stock, both of which will expire
on
July 22, 2010. At the holder’s option, each of the July 22, 2005 warrants will
be exercisable into shares of our common stock at the exercise price of $0.82
per share. Each of Cranshire and Omicron has agreed that it will not exercise
its July 22, 2005 warrant if such exercise would cause it, together with
its
affiliates, to beneficially own more than 9.99% of the shares of our common
stock then outstanding.
On
September 20, 2005, we failed to pay the outstanding principal balances under
the Notes. On October 19, 2005 Cranshire converted outstanding principal
and
accrued interest on its Note ($528,082 in total) into 664,003 shares of our
common stock. On October 27, 2005 Omicron converted outstanding principal
and
accrued interest on its Note ($105,644 in total) into 128,834 shares of common
stock.
On
March
30, 2005, we entered into an Assistance Agreement with Eckert Seamans Cherin
& Mellott, LLC, ("Eckert Seamans"), pursuant to which Eckert Seamans
advanced us funds in the amount of $325,179 for the sole purpose of making
the
interest payment and the monthly redemption payment due on March 31, 2005
and
April 1, 2005, respectively, under the Debentures (the "Assistance Agreement").
In connection with this transaction, we executed a release in favor of Eckert
Seamans. Eckert Seamans has represented us in various transactions and matters
since 1998 and represented us with respect to the Securities Purchase Agreement
and certain other transactions relating to the Debentures but did not represent
us with respect to the Assistance Agreement or the release executed in
connection therewith.
50
Under
the
terms of the Assistance Agreement, we agreed to repay such advance without
interest in three equal installments due on October 1, 2005, November 1,
2005
and December 1, 2005. On October 1, 2005, we failed to pay the first installment
of $108,393 due under the Assistance Agreement. As of such date, all amounts
owed to Eckert Seamans became payable on demand, and interest on such unpaid
amounts began accruing at the rate of 8% per annum. Attached financial
statements reflect interest accrual on this advance as of July 31, 2005.
We are
currently in negotiations with Eckert Seamans and are seeking to extend the
payment dates or to pay the outstanding balance with shares of our common
stock.
The total arrearage to date under the Assistance Agreement is approximately
$15,000.
On
June
16, 2005, we and each of the investors party to the November 12, 2004 private
placement described above entered into Amendment No. 1 to the Securities
Purchase Agreement and the Registration Rights Agreement, dated November
10,
2004 (“Amendment No. 1”), pursuant to which the investors agreed to exercise of
50% of their Additional Investment Rights in the aggregate amount of $2,000,000.
As of June 17, 2005, funding of the transaction occurred, and the closing
conditions specified under Amendment No. 1 were satisfied. In consideration
for
the investors’ exercise of their Additional Investment Rights:
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we
issued the investors Debentures in the aggregate amount of $2,000,000
(the
“AIR Debentures”) and reduced the conversion of the AIR Debentures from
$0.82 as originally agreed to $0.60; but such reduction in the
conversion
price of the AIR Debentures will not trigger any anti-dilution
adjustments
to the existing Debentures and warrants;
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we
issued the investors warrants to purchase an aggregate of 2,439,024
shares
of our common stock at the exercise price of $0.82 per share (the
“AIR
Warrants”);
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we
granted each investor a further Additional Investment Right (each
an
“Additional AIR” and collectively, the “Additional AIRs”), pursuant to
which each investor will have the right to purchase detachable
units
consisting of (a) additional AIR Debentures in principal amount
equal to
the principal amount of AIR Debentures issuable to each investor
upon the
AIR Exercise with a conversion price of $0.82 (the “Additional AIR
Debentures”) and (b) additional AIR Warrants entitling the holder thereof
to purchase a number of shares of our common stock equal to 100%
of the
shares of common stock issuable upon the conversion in full at
a $0.82
conversion price (subject to adjustment as set forth therein) (without
regard to any restrictions on conversion therein contained) of
the AIR
Debentures contemplated in clause (a) above, at an exercise price
equal to
the “AIR Warrant Exercise Price” (as such term is defined in the
Additional Investment Rights) (the “Additional AIR Warrants”).
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The
AIR
Debentures have a term of fifteen months and amortize over thirteen months
in
thirteen equal monthly installments beginning on the first day of the third
month following their issuance. Interest on the principal amount outstanding
will accrue at a rate of 6% per annum. We may pay principal and accrued interest
in cash or, at our option, in shares of common stock. If we elect to pay
principal and interest in shares of our common stock, the value of each share
of
common stock will be equal to the lesser of (i) $0.60 and (ii) ninety percent
(90%) of the average of the twenty trading day volume weighted average price
for
the common stock for the twenty trading day period immediately preceding
the
date of payment. At the option of the holder of each AIR Debenture, the
principal amount outstanding under each AIR Debenture will be initially
convertible at any time after the closing of Amendment No. 1 into shares
of our
common stock at a conversion price of $0.60.
51
Upon
the
occurrence of an “Event of Default,” including a default in payment of principal
or interest (including late fees) which is not cured within three trading
days,
the full principal amount of each AIR Debenture, together with interest and
other amounts owing in respect thereof, to the date of acceleration will
become,
at the holder’s election, due and payable in cash. The aggregate amount payable
upon an Event of Default shall be equal to the “Mandatory Prepayment Amount.”
The Mandatory Prepayment Amount for any AIR Debentures shall equal the sum
of
(i) the greater of: (A) 130% of the principal amount of AIR Debentures to
be
prepaid, plus all accrued and unpaid interest thereon, or (B) the principal
amount of AIR Debentures to be prepaid, plus all other accrued and unpaid
interest thereof, divided by the conversion price on (x) the date the Mandatory
Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is less, multiplied by the daily
volume weighted average price of the common stock on (x) the date the Mandatory
Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is greater, and (ii) all other
amounts, costs, expenses and liquidated damages due in respect of such AIR
Debentures. The interest rate on the AIR Debentures will accrue at the rate
of
18% per annum, or such lower maximum amount of interest permitted to be charged
under applicable law, beginning five days after the occurrence of any Event
of
Default that results in the acceleration of the AIR Debentures. A late fee
of
18% per annum, or such lower maximum amount of interest permitted to be charged
under applicable law, will accrue on a daily basis on all overdue accrued
and
unpaid interest under the AIR Debentures from the due date to the date of
payment.
The
AIR
Warrants are initially exercisable into an aggregate of 2,439,024 shares
of our
common stock, and the initial exercise price of each AIR Warrant is equal
to
$0.82. The conversion price of the AIR Debentures and the exercise price
of the
AIR Warrants are subject to an anti-dilution adjustment upon the issuance
by us
of securities at a price per share less than the then conversion price or
exercise price, as applicable.
Each
investor may exercise its Additional AIR at any time after the 181st day
after
closing and on or prior to the earlier of (i) the close of business on the
one-year anniversary after the registration statement for the shares of common
stock underlying the AIR Debentures and AIR Warrants has gone effective and
(ii)
June 17, 2007.
In
addition, in connection with the transactions contemplated by Amendment No.
1,
we issued to a placement agent (i) 170,732 shares of common stock in lieu
of a
cash fee equal to 7% of the gross proceeds received by us and (ii) warrants
exercisable into approximately 60,000 shares of our common stock at the same
exercise price as the AIR Warrants.
As
we
obtained shareholder approval at our April 5, 2005 Annual Meeting of
Stockholders for the issuance of up to an aggregate of 10,000,000 shares
of
common stock or securities convertible into common stock for a price of not
less
than 70% of the market price at the time of issuance and for aggregate
consideration not to exceed $50,000,000, in excess of the number of shares
that
NASDAQ’s Marketplace Rules 4350(i)(1)(c) and (D) permit us to issue without
prior stockholder approval, no further stockholder approval was necessary
in
connection with the transactions contemplated by Amendment
No. 1.
On
September 8, 2005, we and each of the investors party to the November 12,
2004
private placement and Amendment No. 1 described above entered into an Amendment
No. 2 to the Securities Purchase Agreement, as amended, and the Registration
Rights Agreement, dated November 10, 2004 as amended (“Amendment No. 2”),
pursuant to which the investors agreed to exercise an additional $2,000,000
in
principal amount of Additional Investment Rights (the “Second AIR Exercise”). In
connection with the Second AIR Investment:
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we
issued the investors Debentures in the aggregate amount of $2,000,000
(the
“AIR Debentures”) and reduced the conversion price of the AIR Debentures
from $0.82 as originally agreed to $0.60; but such reduction in
the
conversion price of the AIR Debentures will not trigger any anti-dilution
adjustments to the outstanding Debentures and Warrants;
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52
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we
issued the investors warrants to purchase an aggregate of 2,439,024
shares
of the Company’s common stock at the exercise price of $0.82 per share
(the “AIR Warrants”); exercisable for five years commencing six months
following the issuance thereof;
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we
granted each investor a further Additional Investment Right (each
an
“Additional AIR” and collectively, the “Additional AIRs”), pursuant to
which each investor will have the right to purchase detachable
units
consisting of (a) additional AIR Debentures in principal amount
equal to
the principal amount of AIR Debentures issuable to each investor
upon the
Second AIR Exercise with a conversion price of $0.82 (the “Additional AIR
Debentures”) and (b) additional AIR Warrants entitling the holder thereof
to purchase a number of shares of our common stock equal to 100%
of the
shares of common stock issuable upon the conversion in full at
a $0.82
conversion price (subject to adjustment as set forth therein) (without
regard to any restrictions on conversion therein contained) of
the
Additional AIR Debentures contemplated in clause (a) above, at
an exercise
price equal to the “AIR Warrant Exercise Price” (as such term is defined
in the Additional Investment Rights), being $0.82 (the “Additional AIR
Warrants”).
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The
AIR
Debentures issued in connection with Amendment No. 2 are identical to the
AIR
Debentures issued in connection with Amendment No. 1 as described above,
except
that the principal amount outstanding under each AIR Debenture, at the option
of
the holder, is initially convertible at any time after the closing of Amendment
No. 2 into shares of our common stock at a conversion price of $0.60. The
occurrence of an Event of Default with respect to an AIR Debenture issued
in
connection with Amendment No. 2 will have the same effect as an Event Default
with respect to an AIR Debenture issued in connection with Amendment No.
1 as
discussed above.
The
AIR
Warrants issued in connection with Amendment No. 2 are initially exercisable
into an aggregate of 2,439,024 shares of our common stock, and the initial
exercise price of each AIR Warrant is equal to $0.82. The conversion price
of
the AIR Debentures and the exercise price of the AIR Warrants are each subject
to an anti-dilution adjustment upon the issuance by us of securities at a
price
per share less than the then conversion price or exercise price, as applicable.
Each
investor may exercise its Additional AIR issued in connection with Amendment
No.
2 at any time on or after the 181st day after closing and on or prior to
the
earlier of (i) the close of business on the one-year anniversary after the
registration statement for the shares of common stock underlying the AIR
Debentures and AIR Warrants has gone effective and (ii)
September 8, 2007.
In
addition, in connection with the transactions contemplated Amendment No.
2, we
issued to a placement agent (i) 170,732 shares of our common stock in lieu
of a
cash fee equal to 7% of the gross proceeds received by us and (ii) warrants
exercisable into approximately 60,000 shares of our common stock at the same
exercise price as the AIR Warrants.
In
October 2005, in consideration for the exercise of certain outstanding warrants
previously issued to each of Cranshire and Iroquois Capital L.P. (“Iroquois”) in
connection with their purchase of our Debentures pursuant to the Securities
Purchase Agreement, we issued a five-year warrant to pur chase 300,000
shares
of our common stock to Cranshire and a five-year warrant to purchase 609,756
shares of our common stock to Iroquois. We received aggregate proceeds of
$1,492,000 in connection with Cranshire’s partial exercise of its outstanding
warrant to purchase 1,219,512 shares of our common stock and Iroquois’ full
exercise of its outstanding warrant to purchase 1,219,512 shares of our common
stock. At
the
holder’s option, each of the October 2005 warrants is exercisable into shares of
common stock at the exercise price of $1.20 per share. The exercise price
is
subject to an anti-dilution adjustment upon the issuance by us of securities
at
a price per share less than the then exercise price. If, at any time after
the
first anniversary of the date of issuance of the October 2005 warrants, there
is
no effective registration statement registering for resale the shares of
common
stock into which the warrants are exercisable, each holder may exercise its
warrant through a cashless exercise. The number of shares to be issued upon
a
cashless exercise will be equal to the quotient resulting from the following
calculation: [(the VWAP on the trading day immediately preceding the date
of
such election less the exercise price, as adjusted) multiplied by the number
of
shares issuable upon exercise of the warrant by means of a cash exercise]
divided by the VWAP on the trading day immediately preceding the date of
such
election. Each holder has agreed that it will not exercise its October 2005
warrant if such exercise would cause the holder, together with its respective
affiliates, to beneficially own more than 4.99% of our shares of common stock
then outstanding.
53
In
October 2005, in consideration for the exercise of certain outstanding warrants
previously issued pursuant to the Securities Purchase Agreement, we
issued to Cranshire, Omicron and Smithfield Fuduciary LLC five-year
warrants to purchase an aggregate of 1,529,289 shares of our common
stock
at $1.25 per share. We received aggregate proceeds of approximately $2,508,000
in connection with their exercise of outstanding warrants to purchase
shares of our common stock. At
the
holder’s option, each of the October 2005 warrants is exercisable into shares of
common stock at the exercise price of $1.25 per share. The exercise price
is
subject to an anti-dilution adjustment upon the issuance by us of securities
at
a price per share less than the then exercise price. If, at any time after
the
first anniversary of the date of issuance of the October 2005 warrants, there
is
no effective registration statement registering for resale the shares of
common
stock into which the warrants are exercisable, each holder may exercise its
warrant through a cashless exercise. The number of shares to be issued upon
a
cashless exercise will be equal to the quotient resulting from the following
calculation: [(the VWAP on the trading day immediately preceding the date
of
such election less the exercise price, as adjusted) multiplied by the number
of
shares issuable upon exercise of the warrant by means of a cash exercise]
divided by the VWAP on the trading day immediately preceding the date of
such
election. Each holder has agreed that it will not exercise its October 2005
warrant if such exercise would cause the holder, together with its respective
affiliates, to beneficially own more than 4.99% of our shares of common stock
then outstanding.
In
the
past, we have funded most of our development and other costs with equity
financing. While we have been able to raise equity capital as required,
unforeseen problems with our clinical program or materially negative
developments in general economic conditions could interfere with our ability
to
raise additional equity capital as needed, or materially adversely affect
the
terms upon which such capital is available.
Going
Concern Uncertainty
In
their
audit opinion issued in connection with our consolidated balance sheets as
of
July 31, 2005 and our consolidated statements of operation, stockholder’s equity
and cash flows for the year then ended and for the period from November 2,
1995
(date of inception) to July 31, 2005, our auditors have expressed substantial
doubt about our ability to continue as a going concern given our recurring
net
losses, negative cash flows from operations and working capital deficiency.
The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. We have experienced negative
cash flows from operations since inception and had an accumulated deficit
at
July 31, 2005 of approximately $120 million. We have funded our activities
to
date almost exclusively from debt and equity financings.
54
We
are in
the development stage and have realized minimal revenues to date. We will
continue to require substantial funds to continue research and development,
including preclinical studies and clinical trials of its product candidates,
and
to commence sales and marketing efforts, if the FDA or other regulatory
approvals are obtained. Management’s plans in order to meet our operating cash
flow requirements include financing activities such as private placement
of our
common stock, preferred stock offerings, debt and convertible debt instruments.
Management is also actively pursuing industry collaboration activities including
product licensing and specific project financing.
While
we
believe that we will be successful in obtaining the necessary financing to
fund
our operations, there are no assurances that such additional funding will
be
achieved and that we will succeed in our future operations. The financial
statements do not include any adjustments relating to the recoverability
and
classification of recorded asset amounts or amounts of liabilities that might
be
necessary should we be unable to continue in existence.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations
is
based on our consolidated financial statements which have been prepared in
conformity with accounting principles generally accepted in the United States
of
America. It requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
We
consider certain accounting policies related to impairment of long-lived
assets,
intangible assets and accrued liabilities to be critical to our business
operations and the understanding of our results of operations:
Impairment
of Long-Lived Assets.
Management reviews for impairment whenever events or changes in circumstances
indicate that the carrying amount of property and equipment may not be
recoverable under the provisions of Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
If it
is determined that an impairment loss has occurred based upon expected future
cash flows, the loss is recognized in the Statement of Operations.
Intangible
Assets.
We have
intangible assets related to patents. The determination of the related estimated
useful lives and whether or not these assets are impaired involves significant
judgments. In assessing the recoverability of these intangible assets, we
use an
estimate of undiscounted operating income and related cash flows over the
remaining useful life, market conditions and other factors to determine the
recoverability of the asset. If these estimates or their related assumptions
change in the future, we may be required to record impairment charges against
these assets.
Estimating
accrued liabilities, specifically litigation accruals.
Management's current estimated range of liabilities related to pending
litigation is based on management's best estimate of future costs. While
the
final resolution of the litigation could result in amounts different than
current accruals, and therefore have an impact on our consolidated financial
results in a future reporting period, management believes the ultimate outcome
will not have a significant effect on our consolidated results of operations,
financial position or cash flows.
55
Off-Balance
Sheet Arrangements
We
have
no off-balance sheet arrangements that have or are reasonably likely to have
a
current or future effect on the Company’s financial condition, changes in
financial condition, revenue or expenses, results of operations, liquidity
capital expenditures or capital resources that is material to investors,
and the
Company does not have any non-consolidated special purpose
entities.
Contractual
Obligations
|
Payments
Due by Period
|
|||||
|
Contractual
Obligations
|
Total
|
Less
than 1 year
|
1-3
years
|
3-5
years
|
More
than
5
years
|
|
Long-Term
Debt Obligations
|
6,730,755
|
5,994,915
|
735,840
|
0
|
0
|
|
Capital
Lease Obligations
|
0
|
0
|
0
|
0
|
0
|
|
Operating
Lease Obligations
|
78,241
|
40,586
|
29,047
|
8,608
|
0
|
|
Purchase
Obligations
|
0
|
0
|
0
|
0
|
0
|
|
Other
Long-Term Liabilities Reflected on the Registrant's Balance Sheet
under
GAAP
|
0
|
0
|
0
|
0
|
0
|
|
Total
|
$6,808,996
|
$6,035,501
|
$764,887
|
$8,608
|
$0
|
Related
Party Transactions
On
May 3,
2001, we advanced $334,300 to each of three senior officers, who are also
our
stockholders, in exchange for promissory notes. These notes bore interest
at
8.5% per annum and were payable in full on May 1, 2002. These notes were
guaranteed by a related company owned by these officers and secured by a
pledge
of 2,500,000 shares of our common stock owned by this related company. On
June
3, 2002, our Board of Directors extended the maturity date of the loans to
October 1, 2002. The other terms and conditions of the loans and guaranty
remained unchanged and in full force and effect. As of July 31, 2002, the
balance outstanding on these notes, including accrued interest, was $1,114,084.
Pursuant to a decision made by the Compensation Committee as of August 30,
2002,
these loans were satisfied through the application of 592,716 shares of pledged
stock, at a value of $1.90 per share, which represented the lowest closing
price
during the sixty days prior to August 30, 2002.
Prior
to
January 1, 1999, a portion of our general and administrative expenses resulted
from transactions with affiliated persons, and a number of capital transactions
also involved affiliated persons. Although these transactions were not the
result of "arms-length" negotiations, we do not believe that this fact had
a
material impact on our results of operations or financial position. Prior
to
December 31, 1998, we classified certain payments to executive officers for
compensation and expense reimbursements as "Research and Development - related
party" and "General and Administrative - related party" because the executive
officers received such payments through personal services corporations rather
than directly. After December 31, 1998, these payments have been and will
continue to be accounted for as though the payments were made directly to
the
officers, and not as a related party transaction. With the exception of our
arrangement with our management company described below, we do not foresee
a
need for, and therefore do not anticipate, any related party transactions
in the
current fiscal year.
On
August
7, 2002, we purchased real estate with an aggregate purchase price of
approximately $1.6 million from an unaffiliated party. In connection with
that
transaction, Angara Enterprises, Inc., a licensed real estate broker that
is an
affiliate of Anna Gluskin, our Chairman, President and Chief Executive Officer,
received a commission from the proceeds of the sale to the seller in the
amount
of 3% of the purchase price, or $45,714. We believe that this is less than
the
aggregate commission which would have been payable if a commission had been
negotiated with an unaffiliated broker on an arm's length basis.
56
We
utilize a management company to manage all of our real properties. The property
management company is owned by Rose Perri, our Chief Operating Officer, Chief
Financial Officer, Treasurer and Secretary, Anna Gluskin and the estate of
Mark
Perri, our former Chairman of the Board. In the fiscal years ended July 31,
2005
and 2004 we paid the management company approximately $44,024 and $40,180,
respectively, in management fees.
New
Accounting Pronouncements
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
123R “Share Based Payment.” This statement is a revision to SFAS 123 and
supersedes Accounting Principles Board (APB) Opinion No. 25, “Accounting for
Stock Issued to Employees,” and amends FASB Statement No. 95, “Statement of Cash
Flows”. This statement requires a public entity to expense the cost of employee
services received in exchange for an award of equity instruments using the
fair-value-based method. This statement also provides guidance on valuing
and
expensing these awards, as well as disclosure requirements of these equity
arrangements. This statement is effective for the next fiscal year that begins
after June 15, 2005.
SFAS
123R
permits public companies to choose between the following two adoption methods:
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A
“modified prospective” method in which compensation cost is recognized
beginning with the effective date (a) based on the requirements
of
SFAS 123R for all share-based payments granted after the effective
date
and (b) based on the requirements of Statement 123 for all
awards
granted to employees prior to the effective date of SFAS 123R that
remain
unvested on the effective date; or
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A
“modified retrospective” method which includes the requirements of the
modified prospective method described above, but also permits entities
to
restate based on the amounts previously recognized under SFAS 123
for
purposes of pro forma disclosures either (a) all prior periods
presented
or (b) prior interim periods of the year of adoption.
|
As
permitted by SFAS 123, we currently account for share-based payments to
employees using APB Opinion 25’s intrinsic value method and, as such, we
generally recognize no compensation cost for employee stock options. The
impact
of the adoption of SFAS 123R cannot be predicted at this time because it
will be
depend on levels of share-based payments granted in the future. However,
valuation of employee stock options under SFAS 123R is similar to SFAS 123,
with
minor exceptions. The impact on the results of operations and earnings per
share
had we adopted SFAS 123, is described in the stock-based compensation section
of
Note 2 in the Notes
to Consolidated Financial Statements
in
Part
II - Item. 8 Financial Statements and Supplementary Data
of this
Annual Report on Form 10-K. Accordingly, the adoption of SFAS 123R’s fair value
method will have a significant impact on our results of operations, although
it
will have no impact on our overall financial position. SFAS 123R also requires
the benefits of tax deductions in excess of recognized compensation cost
to be
reported as a financing cash flow, rather than as an operating cash flow
as
required under current literature. This requirement will reduce net operating
cash flows and increase net financing cash flows in periods after adoption.
Due
to timing of the release of SFAS 123R, we have not yet completed the analysis
of
the ultimate impact that this new pronouncement will have on our results
of
operations, nor the method of adoption for this new standard.
In
December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
-
an amendment of APB Opinion No. 29." The statement addresses the measurement
of
exchanges of nonmonetary assets and eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets and replaces
it with an exception for exchanges that do not have commercial substance.
SFAS
No. 153 is effective for nonmonetary asset exchanges occurring in fiscal
periods
beginning after June 15, 2005. We are currently evaluating the impact of
adopting this statement.
57
In
May
2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.”
This statement replaces APB No. 20 and SFAS No. 3 and changes the requirements
for the accounting for and reporting of a change in accounting principle.
APB
No. 20 previously required that most voluntary changes in accounting principle
be recognized by including in net income of the period of the change the
cumulative effect of changing to the accounting principle. SFAS No. 154 requires
retrospective application to prior periods’ financial statements of voluntary
changes in accounting principle. SFAS No. 154 is effective for accounting
changes and corrections of errors made in fiscal years beginning after December
15, 2005. We are currently evaluating the impact of adopting this
statement.
Item.
7A. Quantitative
and Qualitative Disclosures About Market Risk.
We
are
exposed to market risks associated with changes in the exchange rates between
U.S. and Canadian currencies and with changes in the interest rates related
to
our fixed rate debt. We do not believe that any of these risks will have
a
material impact on our financial condition, results of operations and cash
flows.
At
the
present time, we maintain our cash in short-term government or government
guaranteed instruments, short-term commercial paper, interest bearing bank
deposits or demand bank deposits which do not earn interest. A substantial
majority of these instruments and deposits are denominated in U.S. dollars,
with
the exception of funds denominated in Canadian dollars on deposit in Canadian
banks to meet short-term operating needs in Canada. At the present time,
with
the exception of professional fees and costs associated with the conduct
of
clinical trials in the United States and Europe, substantially all of our
operating expense obligations are denominated in Canadian dollars. We do
not
presently employ any hedging or similar strategy intended to mitigate against
losses that could be incurred as a result of fluctuations in the exchange
rates
between U.S. and Canadian currencies.
As
of
July 31, 2005, we have fixed rate debt totaling $3,307,362. This amount consists
of the following:
|
Loan
Amount
|
Interest
Rate per Annum
|
|
$790,337
|
5.8%
|
|
$407,790
|
4.913%
|
|
$252,830
|
4.924%
|
|
$612,524
|
6.85%
|
|
$327,040
|
8.5%
|
|
$197,353
|
10%
|
|
$408,800
|
11.5%
|
|
$310,688
|
16.5%
|
|
$3,307,362
|
Total
|
These
debt instruments mature from October 2005 through August 2006. As our fixed
rate
debt instruments mature, we will likely refinance such debt at the existing
market interest rates which may be more or less than interest rates on the
maturing debt. Since this debt is fixed rate debt, if interest rates were
to
increase 100 basis points prior to maturity, there would be no impact on
earnings or cash flows.
We
have
neither issued nor own any long-term debt instruments, or any other financial
instruments, for trading purposes and as to which we would be subject to
material market risks.
58
Item
8. Financial
Statements and Supplementary Data.
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
PAGE
|
|
|
Report
of Independent Registered Public Accounting Firm
|
60
|
|
Consolidated
Balance Sheets
|
|
|
July
31, 2005
and 2004
|
61
|
|
Consolidated
Statements of Operations
|
|
|
For
the Years Ended July 31, 2005,
2004
and 2003
|
|
|
and
Cumulative From Inception to July 31, 2005
|
62
|
|
Consolidated
Statements of Changes in Stockholders’ Equity
|
|
|
For
the Period November 2, 1995 (Date of Inception)
|
|
|
to
July 31, 2005
|
63-72
|
|
Consolidated
Statements of Cash Flows
|
|
|
For
the Years Ended July 31, 2005,
2004
and 2003
|
|
|
and
Cumulative From Inception to July 31, 2005
|
73
|
|
Notes
to Consolidated Financial Statements
|
74-102
|
59
Report
of Independent Registered Public Accounting Firm
Board
of
Directors and Stockholders
Generex
Biotechnology Corporation
(A
Development Stage Company)
We
have
audited the accompanying consolidated balance sheets of Generex Biotechnology
Corporation (a development stage company) as of July 31, 2005 and 2004
and the
related consolidated statements of operations, stockholders’ equity, and cash
flows for each of the three years in the period ended July 31, 2005
and for the
period from November 2, 1995 (date of inception) to July 31, 2005.
We have also
audited the Schedule II. These financial statements and schedule are
the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audits.
We
conducted our audits in accordance with the standards of the Public
Company
Accounting Oversight Board (United States). Those standards require
that we plan
and perform the audit to obtain reasonable assurance about whether
the financial
statements and Schedule II are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an
audit of its
internal control over financial reporting. Our
audits included consideration of internal control over financial reporting
as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness
of the
Company’s internal control over financial reporting. Accordingly, we express
no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements
and Schedule
II, assessing the accounting principles used and significant estimates
made by
management, as well as evaluating the overall financial statement and
schedule
presentation. We believe that our audits provide a reasonable basis
for our
opinion.
In
our
opinion, the consolidated financial statements referred to above present
fairly,
in all material respects, the financial position of Generex Biotechnology
Corporation (a development stage company) at July 31, 2005 and 2004
and the
results of its operations and its cash flows for each of the three
years in the
period ended July 31, 2005 and for the period from November 2, 1995
(date of
inception) to July 31, 2005, in conformity with accounting principles
generally
accepted in the United States of America.
Also,
in
our opinion, Schedule II presents fairly, in all material respects,
the
information set forth therein.
The
accompanying financial statements have been prepared assuming that
the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has suffered recurring net losses and negative
cash
flows from operations and has a working capital deficiency. These matters
raise
substantial doubt about its ability to continue as a going concern.
Management’s
plans in regard to these matters are also described in Note 1. The
financial
statements do not include any adjustments that might result from the
outcome of
this uncertainty.
/s/
BDO
Dunwoody LLP
Toronto,
Ontario
September
30, 2005
60
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
BALANCE SHEETS
|
July
31,
|
July
31,
|
||||||
|
2005
|
2004
|
||||||
|
ASSETS
|
|||||||
| Current Assets | |||||||
|
Cash
and cash equivalents
|
$
|
586,530
|
$
|
4,950,419
|
|||
|
Restricted
cash
|
204,734
|
206,421
|
|||||
|
Other
current assets
|
165,586
|
870,934
|
|||||
|
Deferred
debt issuance costs
|
337,798
|
--
|
|||||
|
Total
Current Assets
|
1,294,648
|
6,027,774
|
|||||
|
Property
and Equipment, Net
|
3,976,742
|
4,291,622
|
|||||
|
Assets
Held for Investment, Net
|
2,371,749
|
2,250,506
|
|||||
|
Patents,
Net
|
5,443,094
|
5,696,905
|
|||||
|
Deposits
|
--
|
395,889
|
|||||
|
Due
From Related Party
|
379,612
|
349,294
|
|||||
|
TOTAL
ASSETS
|
$
|
13,465,845
|
$
|
19,011,990
|
|||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
| Current Liabilites | |||||||
|
Accounts
payable and accrued expenses
|
$
|
2,410,846
|
$
|
1,947,399
|
|||
|
Short-term
advance
|
325,179
|
--
|
|||||
|
Current
maturities of long-term debt
|
2,571,530
|
1,366,122
|
|||||
|
Convertible
Debentures, Net of Debt Discount of $2,108,459 and
|
|||||||
|
$-0-
at July 31, 2005 and 2004, respectively
|
1,314,926
|
--
|
|||||
|
Total
Current Liabilities
|
6,622,481
|
3,313,521
|
|||||
| Long-Term Debt, Net |
716,361
|
858,661
|
|||||
| Commitments and Contingencies | |||||||
|
1,000,000
shares, stated at redemption value,
|
|||||||
|
-0-
and 1,191 shares issued and outstanding
|
|||||||
|
at
July 31, 2005 and 2004, respectively
|
--
|
14,310,057
|
|||||
| Stockholders’ Equity | |||||||
|
Special
Voting Rights Preferred stock, $.001 par value;
|
|||||||
|
authorized,
issued and outstanding 1,000 shares at
|
|||||||
|
July
31, 2005 and 2004
|
1
|
1
|
|||||
|
Common
stock, $.001 par value; authorized 150,000,000 shares at
|
|||||||
|
July
31, 2005 and 2004; 41,933,898 and 34,262,448 shares issued
|
|||||||
|
and
outstanding
|
41,935
|
34,264
|
|||||
|
Additional
paid-in capital
|
126,044,326
|
97,110,291
|
|||||
|
Notes
receivable - common stock
|
--
|
(384,803
|
)
|
||||
|
Deficit
accumulated during the development stage
|
(120,528,108
|
)
|
(96,526,373
|
)
|
|||
|
Accumulated
other comprehensive income
|
568,849
|
296,371
|
|||||
|
Total
Stockholders’ Equity
|
6,127,003
|
529,751
|
|||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY |
$
|
13,465,845
|
$
|
19,011,990
|
|||
The
Notes
to Consolidated Financial Statements are an integral part of these
statements.
61
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
Cumulative
From
|
|||||||||||||
|
November
2, 1995
|
|||||||||||||
|
For
the Years Ended
|
(Date
of Inception)
|
||||||||||||
|
July
31,
|
to
July 31,
|
||||||||||||
|
2005
|
2004
|
2003
|
2005
|
||||||||||
|
Revenues
|
$
|
392,112
|
$
|
627,184
|
$
|
--
|
$
|
2,019,296
|
|||||
|
Operating
Expenses:
|
|||||||||||||
|
Research
and development
|
7,750,731
|
8,522,984
|
5,150,075
|
54,918,445
|
|||||||||
|
Research
and development - related party
|
--
|
--
|
--
|
220,218
|
|||||||||
|
General
and administrative
|
11,199,802
|
10,669,541
|
8,698,615
|
65,451,114
|
|||||||||
|
General
and administrative - related party
|
--
|
--
|
--
|
314,328
|
|||||||||
|
Total
Operating Expenses
|
18,950,533
|
19,192,525
|
13,848,690
|
120,904,105
|
|||||||||
|
Operating
Loss
|
(18,558,421
|
)
|
(18,565,341
|
)
|
(13,848,690
|
)
|
(118,884,809
|
)
|
|||||
|
Other
Income (Expense):
|
|||||||||||||
|
Miscellaneous
income (expense)
|
70,345
|
(3,593
|
)
|
94,376
|
195,693
|
||||||||
|
Income
from Rental Operations, net
|
110,326
|
73,560
|
20,790
|
204,676
|
|||||||||
|
Interest
income
|
22,868
|
249,264
|
543,336
|
3,394,480
|
|||||||||
|
Interest
expense
|
(4,300,512
|
)
|
(116,473
|
)
|
(72,201
|
)
|
(4,834,935
|
)
|
|||||
|
Loss
on extinguishment of debt
|
(1,346,341
|
)
|
--
|
--
|
(1,346,341
|
)
|
|||||||
|
Net
Loss Before Undernoted
|
(24,001,735
|
)
|
(18,362,583
|
)
|
(13,262,389
|
)
|
(121,271,236
|
)
|
|||||
|
Minority
Interest Share of Loss
|
--
|
--
|
625
|
3,038,185
|
|||||||||
|
Net
Loss
|
(24,001,735
|
)
|
(18,362,583
|
)
|
(13,261,764
|
)
|
(118,233,051
|
)
|
|||||
|
Preferred
Stock Dividend
|
--
|
810,003
|
764,154
|
2,295,057
|
|||||||||
|
Net
Loss Available to Common Shareholders
|
$
|
(24,001,735
|
)
|
$
|
(19,172,586
|
)
|
$
|
(14,025,918
|
)
|
$
|
(120,528,108
|
)
|
|
|
Basic
and Diluted Net Loss Per Common Share
|
$
|
(.66
|
)
|
$
|
(.64
|
)
|
$
|
(.67
|
)
|
||||
|
Weighted
Average Number of Shares of
|
|||||||||||||
|
Common
Stock Outstanding
|
36,537,318
|
30,167,535
|
20,885,164
|
||||||||||
The
Notes
to Consolidated Financial Statements are an integral part of these
statements.
62
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
FOR
THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2005
|
Deficit
|
||||||||||||||||||||||||||||||||||
|
SVR
|
Notes
|
Accumulated
|
Accumulated
|
|||||||||||||||||||||||||||||||
|
Preferred
|
Common
|
Treasury
|
Additional
|
Receivable
-
|
During
the
|
Other
|
Total
|
|||||||||||||||||||||||||||
|
Stock
|
Stock
|
Stock
|
Paid-In
|
Common
|
Development
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stock
|
Stage
|
Income
(Loss)
|
Equity
|
||||||||||||||||||||||||
|
Balance
November 2, 1995
|
||||||||||||||||||||||||||||||||||
|
(Inception)
|
-
|
$
|
-
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
February
1996,
$.0254
|
-
|
-
|
321,429
|
321
|
-
|
-
|
7,838
|
-
|
-
|
-
|
8,159
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
February
1996,
$.0510
|
-
|
-
|
35,142
|
35
|
-
|
-
|
1,757
|
-
|
-
|
-
|
1,792
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
February
1996,
$.5099
|
-
|
-
|
216,428
|
216
|
-
|
-
|
110,142
|
-
|
-
|
-
|
110,358
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
March
1996,
$10.2428
|
-
|
-
|
2,500
|
3
|
-
|
-
|
25,604
|
-
|
-
|
-
|
25,607
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
April
1996,
$.0516
|
-
|
-
|
489,850
|
490
|
-
|
-
|
24,773
|
-
|
-
|
-
|
25,263
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
May
1996,
$.0512
|
-
|
-
|
115,571
|
116
|
-
|
-
|
5,796
|
-
|
-
|
-
|
5,912
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
May
1996,
$.5115
|
-
|
-
|
428,072
|
428
|
-
|
-
|
218,534
|
-
|
-
|
-
|
218,962
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
May
1996,
$10.2302
|
-
|
-
|
129,818
|
130
|
-
|
-
|
1,327,934
|
-
|
-
|
1,328,064
|
||||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
-
|
|||||||||||||||||||||||||||||||||
|
July
1996,
$.0051
|
-
|
-
|
2,606,528
|
2,606
|
-
|
-
|
10,777
|
-
|
-
|
13,383
|
||||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
July
1996,
$.0255
|
-
|
-
|
142,857
|
143
|
-
|
-
|
3,494
|
-
|
-
|
-
|
3,637
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
July
1996,
$.0513
|
-
|
-
|
35,714
|
36
|
-
|
-
|
1,797
|
-
|
-
|
-
|
1,833
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
July
1996,
$10.1847
|
-
|
-
|
63,855
|
64
|
-
|
-
|
650,282
|
-
|
-
|
-
|
650,346
|
|||||||||||||||||||||||
|
Costs
related
to issuance of common
|
||||||||||||||||||||||||||||||||||
|
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
(10,252
|
)
|
-
|
-
|
-
|
(10,252
|
)
|
|||||||||||||||||||||
|
Founders
Shares transferred for services
|
||||||||||||||||||||||||||||||||||
|
rendered
|
-
|
-
|
-
|
-
|
-
|
-
|
330,025
|
-
|
-
|
-
|
330,025
|
|||||||||||||||||||||||
|
Comprehensive
Income (Loss):
|
||||||||||||||||||||||||||||||||||
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(693,448
|
)
|
-
|
(693,448
|
)
|
|||||||||||||||||||||
|
Other
comprehensive income (loss)
|
||||||||||||||||||||||||||||||||||
|
Currency
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,017
|
)
|
(4,017
|
)
|
|||||||||||||||||||||
|
Total
Comprehensive Income (Loss)
|
(693,448
|
)
|
(4,017
|
)
|
(697,465
|
)
|
||||||||||||||||||||||||||||
|
Balance,
July
31, 1996
|
-
|
$
|
-
|
4,587,764
|
$
|
4,588
|
-
|
$
|
-
|
$
|
2,708,501
|
$
|
-
|
$
|
(693,448
|
)
|
$
|
(4,017
|
)
|
$
|
2,015,624
|
|||||||||||||
The
Notes
to Consolidated Financial Statements are an integral part of these
statements.
63
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
FOR
THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2005
|
Deficit
|
||||||||||||||||||||||||||||||||||
|
SVR
|
Notes
|
Accumulated
|
Accumulated
|
|||||||||||||||||||||||||||||||
|
Preferred
|
Common
|
Treasury
|
Additional
|
Receivable
-
|
During
the
|
Other
|
Total
|
|||||||||||||||||||||||||||
|
Stock
|
Stock
|
Stock
|
Paid-In
|
Common
|
Development
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stock
|
Stage
|
Income
(Loss)
|
Equity
|
||||||||||||||||||||||||
|
Balance,
August 1, 1996
|
-
|
$
|
-
|
4,587,764
|
$
|
4,588
|
-
|
$
|
-
|
$
|
2,708,501
|
$
|
-
|
$
|
(693,448
|
)
|
$
|
(4,017
|
)
|
$
|
2,015,624
|
|||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
September
1996, $.0509
|
-
|
-
|
2,143
|
2
|
-
|
-
|
107
|
-
|
-
|
-
|
109
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
December
1996,
$10.2421
|
-
|
-
|
1,429
|
1
|
-
|
-
|
14,635
|
-
|
-
|
-
|
14,636
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
January
1997,
$.0518
|
-
|
-
|
1,466
|
1
|
-
|
-
|
75
|
-
|
-
|
-
|
76
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
March
1997,
$10.0833
|
-
|
-
|
12
|
-
|
-
|
-
|
121
|
-
|
-
|
-
|
121
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
May
1997,
$.0512
|
-
|
-
|
4,233
|
4
|
-
|
-
|
213
|
-
|
-
|
-
|
217
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
May
1997,
$.5060
|
-
|
-
|
4,285,714
|
4,286
|
-
|
-
|
2,164,127
|
-
|
-
|
-
|
2,168,413
|
|||||||||||||||||||||||
|
Costs
related
to issuance of common
|
||||||||||||||||||||||||||||||||||
|
stock,
May
1997
|
-
|
-
|
-
|
-
|
-
|
-
|
(108,421
|
)
|
-
|
-
|
-
|
(108,421
|
)
|
|||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
May
1997,
$10.1194
|
-
|
-
|
18,214
|
18
|
-
|
-
|
184,297
|
-
|
-
|
-
|
184,315
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
June
1997,
$.0504
|
-
|
-
|
10,714
|
11
|
-
|
-
|
529
|
-
|
-
|
-
|
540
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
June
1997,
$.5047
|
-
|
-
|
32,143
|
32
|
-
|
-
|
16,190
|
-
|
-
|
-
|
16,222
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
June
1997,
$8.9810
|
-
|
-
|
29,579
|
30
|
-
|
-
|
265,618
|
-
|
-
|
-
|
265,648
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
June
1997,
$10.0978
|
-
|
-
|
714
|
1
|
-
|
-
|
7,209
|
-
|
-
|
-
|
7,210
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
July
1997,
$10.1214
|
-
|
-
|
25,993
|
26
|
-
|
-
|
263,060
|
-
|
-
|
-
|
263,086
|
|||||||||||||||||||||||
|
Costs
related
to issuance of common
|
||||||||||||||||||||||||||||||||||
|
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
(26,960
|
)
|
-
|
-
|
-
|
(26,960
|
)
|
|||||||||||||||||||||
|
Founders
Shares transferred for services
|
||||||||||||||||||||||||||||||||||
|
rendered
|
-
|
-
|
-
|
-
|
-
|
-
|
23,481
|
-
|
-
|
-
|
23,481
|
|||||||||||||||||||||||
|
Comprehensive
Income (Loss):
|
||||||||||||||||||||||||||||||||||
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,379,024
|
)
|
-
|
(1,379,024
|
)
|
|||||||||||||||||||||
|
Other
comprehensive income (loss)
|
||||||||||||||||||||||||||||||||||
|
Currency
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
3,543
|
3,543
|
|||||||||||||||||||||||
|
Total
Comprehensive Income (Loss)
|
(1,379,024
|
)
|
3,543
|
(1,375,481
|
)
|
|||||||||||||||||||||||||||||
|
Balance,
July
31, 1997
|
-
|
$
|
-
|
9,000,118
|
$
|
9,000
|
-
|
$
|
-
|
$
|
5,512,782
|
$
|
-
|
$
|
(2,072,472
|
)
|
$
|
(474
|
)
|
$
|
3,448,836
|
|||||||||||||
The
Notes
to Consolidated Financial Statements are an integral part of these
statements.
64
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
FOR
THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2005
|
Deficit
|
||||||||||||||||||||||||||||||||||
|
SVR
|
Notes
|
Accumulated
|
Accumulated
|
|||||||||||||||||||||||||||||||
|
Preferred
|
Common
|
Treasury
|
Additional
|
Receivable
-
|
During
the
|
Other
|
Total
|
|||||||||||||||||||||||||||
|
Stock
|
Stock
|
Stock
|
Paid-In
|
Common
|
Development
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stock
|
Stage
|
Income
(Loss)
|
Equity
|
||||||||||||||||||||||||
|
Balance,
August 1, 1997
|
-
|
$
|
-
|
9,000,118
|
$
|
9,000
|
-
|
$
|
-
|
$
|
5,512,782
|
$
|
-
|
$
|
(2,072,472
|
)
|
$
|
(474
|
)
|
$
|
3,448,836
|
|||||||||||||
|
Issuance
of
warrants in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, October 1997, $.50
|
-
|
-
|
-
|
-
|
-
|
-
|
234,000
|
-
|
-
|
-
|
234,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock in exchange
|
||||||||||||||||||||||||||||||||||
|
for
services
rendered, December 1997, $0.05
|
-
|
-
|
234,000
|
234
|
-
|
-
|
10,698
|
-
|
-
|
-
|
10,932
|
|||||||||||||||||||||||
|
Issuance
of
SVR Preferred Stock in exchange
|
||||||||||||||||||||||||||||||||||
|
for
services
rendered, January 1998, $.001
|
1,000
|
1
|
-
|
-
|
-
|
-
|
99
|
-
|
-
|
-
|
100
|
|||||||||||||||||||||||
|
Shares
issued
pursuant to the January 9, 1998
|
||||||||||||||||||||||||||||||||||
|
reverse
merger
between GBC-Delaware, Inc.
|
||||||||||||||||||||||||||||||||||
|
and
Generex
Biotechnology Corporation
|
-
|
-
|
1,105,000
|
1,105
|
-
|
-
|
(1,105
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
|
Issuance
of
common stock for cash, March
|
||||||||||||||||||||||||||||||||||
|
1998,
$2.50
|
-
|
-
|
70,753
|
71
|
-
|
-
|
176,812
|
-
|
-
|
-
|
176,883
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash, April
|
||||||||||||||||||||||||||||||||||
|
1998,
$2.50
|
-
|
-
|
60,000
|
60
|
-
|
-
|
149,940
|
-
|
-
|
-
|
150,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock in exchange
|
||||||||||||||||||||||||||||||||||
|
for
services
rendered, April 1998, $2.50
|
-
|
-
|
38,172
|
38
|
-
|
-
|
95,392
|
-
|
-
|
-
|
95,430
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash, May
|
||||||||||||||||||||||||||||||||||
|
1998,
$2.50
|
-
|
-
|
756,500
|
757
|
-
|
-
|
1,890,493
|
-
|
-
|
-
|
1,891,250
|
|||||||||||||||||||||||
|
Issuance
of
common stock in exchange
|
||||||||||||||||||||||||||||||||||
|
for
services
rendered, May 1998, $2.50
|
-
|
-
|
162,000
|
162
|
-
|
-
|
404,838
|
-
|
-
|
-
|
405,000
|
|||||||||||||||||||||||
|
Issuance
of
warrants in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, May 1998, $.60
|
-
|
-
|
-
|
-
|
-
|
-
|
300,000
|
-
|
-
|
-
|
300,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash, June
|
||||||||||||||||||||||||||||||||||
|
1998,
$2.50
|
-
|
-
|
286,000
|
286
|
-
|
-
|
714,714
|
-
|
-
|
-
|
715,000
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, June
|
||||||||||||||||||||||||||||||||||
|
1998,
$0.0667
|
-
|
-
|
234,000
|
234
|
-
|
-
|
15,374
|
-
|
-
|
-
|
15,608
|
|||||||||||||||||||||||
|
Issuance
of
common stock in exchange
|
||||||||||||||||||||||||||||||||||
|
for
services
rendered, June 1998, $2.50
|
-
|
-
|
24,729
|
24
|
-
|
-
|
61,799
|
-
|
-
|
-
|
61,823
|
|||||||||||||||||||||||
|
Comprehensive
Income (Loss):
|
||||||||||||||||||||||||||||||||||
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,663,604
|
)
|
-
|
(4,663,604
|
)
|
|||||||||||||||||||||
|
Other
comprehensive income (loss)
|
||||||||||||||||||||||||||||||||||
|
Currency
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(198,959
|
)
|
(198,959
|
)
|
|||||||||||||||||||||
|
Total
Comprehensive Income (Loss)
|
(4,663,604
|
)
|
(198,959
|
)
|
4,862,563
|
|||||||||||||||||||||||||||||
|
Balance,
July
31, 1998
|
1,000
|
$
|
1
|
11,971,272
|
$
|
11,971
|
-
|
$
|
-
|
$
|
9,565,836
|
$
|
-
|
$
|
(6,736,076
|
)
|
$
|
(199,433
|
)
|
$
|
2,642,299
|
|||||||||||||
The
Notes
to Consolidated Financial Statements are an integral part of these
statements.
65
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
FOR
THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31,
2005
|
Deficit
|
||||||||||||||||||||||||||||||||||
|
SVR
|
Notes
|
Accumulated
|
Accumulated
|
|||||||||||||||||||||||||||||||
|
Preferred
|
Common
|
Treasury
|
Additional
|
Receivable
-
|
During
the
|
Other
|
Total
|
|||||||||||||||||||||||||||
|
Stock
|
Stock
|
Stock
|
Paid-In
|
Common
|
Development
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stock
|
Stage
|
Income
(Loss)
|
Equity
|
||||||||||||||||||||||||
|
Balance,
August 1, 1998
|
1,000
|
$
|
1
|
11,971,272
|
$
|
11,971
|
-
|
$
|
-
|
$
|
9,565,836
|
$
|
-
|
$
|
(6,736,076
|
)
|
$
|
(199,433
|
)
|
$
|
2,642,299
|
|||||||||||||
|
Issuance
of common stock for cash, August
|
||||||||||||||||||||||||||||||||||
|
1998,
$3.00
|
-
|
-
|
100,000
|
100
|
-
|
-
|
299,900
|
-
|
-
|
-
|
300,000
|
|||||||||||||||||||||||
|
Issuance
of common stock for cash, August
|
||||||||||||||||||||||||||||||||||
|
1998,
$3.50
|
-
|
-
|
19,482
|
19
|
-
|
-
|
68,168
|
-
|
-
|
-
|
68,187
|
|||||||||||||||||||||||
|
Redemption
of common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
September
1998, $7.75
|
-
|
-
|
(15,357
|
)
|
(15
|
)
|
-
|
-
|
(119,051
|
)
|
-
|
-
|
-
|
(119,066
|
)
|
|||||||||||||||||||
|
Issuance
of common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
September
- October 1998, $3.00
|
-
|
-
|
220,297
|
220
|
-
|
-
|
660,671
|
-
|
-
|
-
|
660,891
|
|||||||||||||||||||||||
|
Issuance
of common stock for cash, August -
|
||||||||||||||||||||||||||||||||||
|
October
1998, $4.10
|
-
|
-
|
210,818
|
211
|
-
|
-
|
864,142
|
-
|
-
|
-
|
864,353
|
|||||||||||||||||||||||
|
Issuance
of common stock in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, August - October 1998, $2.50
|
-
|
-
|
21,439
|
21
|
-
|
-
|
53,577
|
-
|
-
|
-
|
53,598
|
|||||||||||||||||||||||
|
Issuance
of common stock in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, August - October 1998, $4.10
|
-
|
-
|
18,065
|
18
|
-
|
-
|
74,048
|
-
|
-
|
-
|
74,066
|
|||||||||||||||||||||||
|
Issuance
of common stock in exchange
|
||||||||||||||||||||||||||||||||||
|
for
services rendered, September 1998, $4.10
|
-
|
-
|
180,000
|
180
|
-
|
-
|
737,820
|
-
|
-
|
-
|
738,000
|
|||||||||||||||||||||||
|
Issuance
of warrants in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, October 1998, $.26
|
-
|
-
|
-
|
-
|
-
|
-
|
2,064
|
-
|
-
|
-
|
2,064
|
|||||||||||||||||||||||
|
Issuance
of stock options in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, November 1998, $1.85
|
-
|
-
|
-
|
-
|
-
|
-
|
92,500
|
-
|
-
|
-
|
92,500
|
|||||||||||||||||||||||
|
Issuance
of warrants in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, November 1998, $1.64
|
-
|
-
|
-
|
-
|
-
|
-
|
246,000
|
-
|
-
|
-
|
246,000
|
|||||||||||||||||||||||
|
Issuance
of common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
November
1998 - January 1999, $3.50
|
-
|
-
|
180,000
|
180
|
-
|
-
|
629,820
|
-
|
-
|
-
|
630,000
|
|||||||||||||||||||||||
|
Issuance
of common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
November
1998 - January 1999, $4.00
|
-
|
-
|
275,000
|
275
|
-
|
-
|
1,099,725
|
-
|
-
|
-
|
1,100,000
|
|||||||||||||||||||||||
|
Issuance
of common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
November
1998 - January 1999, $4.10
|
-
|
-
|
96,852
|
97
|
-
|
-
|
397,003
|
-
|
-
|
-
|
397,100
|
|||||||||||||||||||||||
|
Issuance
of common stock in exchange
|
||||||||||||||||||||||||||||||||||
|
for
services rendered, November 1998 -
|
||||||||||||||||||||||||||||||||||
|
January
1999, $4.10
|
-
|
-
|
28,718
|
29
|
-
|
-
|
117,715
|
-
|
-
|
-
|
117,744
|
|||||||||||||||||||||||
|
Issuance
of common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
November
1998 - January 1999, $5.00
|
-
|
-
|
20,000
|
20
|
-
|
-
|
99,980
|
-
|
-
|
-
|
100,000
|
|||||||||||||||||||||||
|
Issuance
of common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
November
1998 - January 1999, $5.50
|
-
|
-
|
15,000
|
15
|
-
|
-
|
82,485
|
-
|
-
|
-
|
82,500
|
|||||||||||||||||||||||
|
Issuance
of common stock in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, January 1999, $5.00
|
-
|
-
|
392
|
-
|
-
|
-
|
1,960
|
-
|
-
|
-
|
1,960
|
|||||||||||||||||||||||
|
Issuance
of common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
February
1999, $5.00
|
-
|
-
|
6,000
|
6
|
-
|
-
|
29,994
|
-
|
-
|
-
|
30,000
|
|||||||||||||||||||||||
|
Issuance
of common stock in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, February 1999, $6.00
|
-
|
-
|
5,000
|
5
|
-
|
-
|
29,995
|
-
|
-
|
-
|
30,000
|
|||||||||||||||||||||||
|
Issuance
of common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
March
1999, $6.00
|
-
|
-
|
11,000
|
11
|
-
|
-
|
65,989
|
-
|
-
|
-
|
66,000
|
|||||||||||||||||||||||
|
Issuance
of common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
April
1999, $5.50
|
-
|
-
|
363,637
|
364
|
-
|
-
|
1,999,640
|
-
|
-
|
-
|
2,000,004
|
|||||||||||||||||||||||
|
Issuance
of warrants in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, April 1999, $3.21
|
-
|
-
|
-
|
-
|
-
|
-
|
160,500
|
-
|
-
|
-
|
160,500
|
|||||||||||||||||||||||
|
Issuance
of warrants in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, April 1999, $3.17
|
-
|
-
|
-
|
-
|
-
|
-
|
317,000
|
-
|
-
|
-
|
317,000
|
|||||||||||||||||||||||
|
Issuance
of warrants in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, April 1999, $2.89
|
-
|
-
|
-
|
-
|
-
|
-
|
144,500
|
-
|
-
|
-
|
144,500
|
|||||||||||||||||||||||
|
Issuance
of warrants in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, April 1999, $3.27
|
-
|
-
|
-
|
-
|
184,310
|
-
|
-
|
-
|
184,310
|
|||||||||||||||||||||||||
|
Stock
adjustment
|
-
|
-
|
714
|
1
|
-
|
-
|
(1
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
|
Issuance
of common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
May
1999, $5.50
|
-
|
-
|
272,728
|
273
|
-
|
-
|
1,499,731
|
-
|
-
|
-
|
1,500,004
|
|||||||||||||||||||||||
|
Issuance
of common stock in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered, May - June 1999, $5.50
|
-
|
-
|
60,874
|
61
|
-
|
-
|
334,746
|
-
|
334,807
|
|||||||||||||||||||||||||
|
Exercise
of warrants for cash, June 1999, $5.50
|
-
|
-
|
388,375
|
389
|
-
|
1,941,484
|
-
|
-
|
-
|
1,941,873
|
||||||||||||||||||||||||
|
Exercise
of warrants in exchange for note
|
||||||||||||||||||||||||||||||||||
|
receivable,
June 1999, $5.00
|
-
|
-
|
94,776
|
95
|
-
|
-
|
473,787
|
(473,882
|
)
|
-
|
-
|
-
|
||||||||||||||||||||||
|
Exercise
of warrants in exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
June 1999, $5.00
|
-
|
-
|
13,396
|
13
|
-
|
-
|
66,967
|
-
|
-
|
-
|
66,980
|
|||||||||||||||||||||||
|
Reduction
of note receivable in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
38,979
|
-
|
-
|
38,979
|
|||||||||||||||||||||||
|
Shares
tendered in conjunction with warrant
|
||||||||||||||||||||||||||||||||||
|
exercise,
June 1999, $7.8125
|
-
|
-
|
(323,920
|
)
|
(324
|
)
|
-
|
-
|
(2,530,301
|
)
|
-
|
-
|
-
|
(2,530,625
|
)
|
|||||||||||||||||||
|
Exercise
of warrants for shares tendered,
|
||||||||||||||||||||||||||||||||||
|
June
1999, $5.00
|
-
|
-
|
506,125
|
506
|
-
|
-
|
2,530,119
|
-
|
-
|
-
|
2,530,625
|
|||||||||||||||||||||||
|
Cost
of warrants redeemed for cash
|
-
|
-
|
-
|
-
|
-
|
(3,769
|
)
|
-
|
-
|
-
|
(3,769
|
)
|
||||||||||||||||||||||
|
Cost
related to warrant redemption, June 1999
|
-
|
-
|
-
|
-
|
-
|
-
|
(135,431
|
)
|
-
|
-
|
-
|
(135,431
|
)
|
|||||||||||||||||||||
|
Costs
related to issuance of common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,179,895
|
)
|
-
|
-
|
-
|
(1,179,895
|
)
|
|||||||||||||||||||||
|
Comprehensive
Income (Loss):
|
||||||||||||||||||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(6,239,602
|
)
|
-
|
(6,239,602
|
)
|
|||||||||||||||||||||
|
Other
comprehensive income (loss):
|
||||||||||||||||||||||||||||||||||
|
Currency
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,393
|
1,393
|
|||||||||||||||||||||||
|
Total
Comprehensive Income (Loss)
|
(6,239,602
|
)
|
1,393
|
(6,238,209
|
)
|
|||||||||||||||||||||||||||||
|
Balance,
July 31, 1999
|
1,000
|
$
|
1
|
14,740,683
|
$
|
14,741
|
-
|
$
|
-
|
$
|
20,903,728
|
$
|
(434,903
|
)
|
$
|
(12,975,678
|
)
|
$
|
(198,040
|
)
|
$
|
7,309,849
|
||||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
66
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
FOR
THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2005
|
Deficit
|
||||||||||||||||||||||||||||||||||
|
SVR
|
Notes
|
Accumulated
|
Accumulated
|
|||||||||||||||||||||||||||||||
|
Preferred
|
Common
|
Treasury
|
Additional
|
Receivable
-
|
During
the
|
Other
|
Total
|
|||||||||||||||||||||||||||
|
Stock
|
Stock
|
Stock
|
Paid-In
|
Common
|
Development
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stock
|
Stage
|
Income
(Loss)
|
Equity
|
||||||||||||||||||||||||
|
Balance,
August 1, 1999
|
1,000
|
$
|
1
|
14,740,683
|
$
|
14,741
|
-
|
$
|
-
|
$
|
20,903,728
|
$
|
(434,903
|
)
|
$
|
(12,975,678
|
)
|
$
|
(198,040
|
)
|
$
|
7,309,849
|
||||||||||||
|
Adjustment
for
exercise of warrants recorded
|
||||||||||||||||||||||||||||||||||
|
June
1999,
$5.00
|
-
|
-
|
(2,300
|
)
|
(2
|
)
|
-
|
-
|
2
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
|
Issuance
of
common stock for cash,
|
||||||||||||||||||||||||||||||||||
|
September
1999, $6.00
|
-
|
-
|
2,500
|
2
|
-
|
-
|
14,998
|
-
|
-
|
-
|
15,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to private placement, January 2000,
$4.25
|
- | - |
470,590
|
471 | - | - |
1,999,537
|
- | - | - |
2,000,008
|
|||||||||||||||||||||||
|
Financing
costs associated with private placement,
|
||||||||||||||||||||||||||||||||||
|
January,
2000
|
-
|
-
|
-
|
-
|
-
|
-
|
(220,192
|
)
|
-
|
-
|
-
|
(220,192
|
)
|
|||||||||||||||||||||
|
Issuance
of
stock in exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
January 2000, $5.00
|
-
|
-
|
8,100
|
8
|
-
|
-
|
40,492
|
-
|
-
|
-
|
40,500
|
|||||||||||||||||||||||
|
Granting
of
stock options for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
January 2000
|
-
|
-
|
-
|
-
|
-
|
-
|
568,850
|
-
|
-
|
-
|
568,850
|
|||||||||||||||||||||||
|
Granting
of
warrants for services rendered,
|
||||||||||||||||||||||||||||||||||
|
January
2000
|
-
|
-
|
-
|
-
|
-
|
-
|
355,500
|
-
|
-
|
-
|
355,500
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, February 2000, $5.50
|
-
|
-
|
2,000
|
2
|
-
|
-
|
10,998
|
-
|
-
|
-
|
11,000
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, March 2000, $5.50
|
-
|
-
|
29,091
|
29
|
-
|
-
|
159,972
|
-
|
-
|
-
|
160,001
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, March 2000, $6.00
|
-
|
-
|
2,000
|
2
|
-
|
-
|
11,998
|
-
|
-
|
-
|
12,000
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, March 2000, $7.50
|
-
|
-
|
8,000
|
8
|
-
|
-
|
59,992
|
-
|
-
|
-
|
60,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to private placement, June 2000,
$6.00
|
-
|
-
|
1,041,669
|
1,042
|
-
|
-
|
6,248,972
|
-
|
-
|
-
|
6,250,014
|
|||||||||||||||||||||||
|
Financing
costs associated with private
|
||||||||||||||||||||||||||||||||||
|
placement,
June 2000
|
-
|
-
|
-
|
-
|
-
|
-
|
(385,607
|
)
|
-
|
-
|
-
|
(385,607
|
)
|
|||||||||||||||||||||
|
Issuance
of
common stock for services,
|
||||||||||||||||||||||||||||||||||
|
June
2000,
$6.00
|
-
|
-
|
4,300
|
4
|
-
|
-
|
25,796
|
-
|
-
|
-
|
25,800
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, July 2000, $6.00
|
-
|
-
|
3,000
|
3
|
-
|
-
|
17,997
|
-
|
-
|
-
|
18,000
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, July 2000, $7.50
|
-
|
-
|
16,700
|
17
|
-
|
-
|
125,233
|
-
|
-
|
-
|
125,250
|
|||||||||||||||||||||||
|
Granting
of
stock options for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
July
2000
|
-
|
-
|
-
|
-
|
-
|
-
|
496,800
|
-
|
-
|
-
|
496,800
|
|||||||||||||||||||||||
|
Reduction
of
note receivable in exchange for
|
||||||||||||||||||||||||||||||||||
|
services
rendered
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
384,903
|
-
|
-
|
384,903
|
|||||||||||||||||||||||
|
Accrued
interest on note receivable
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,118
|
)
|
-
|
-
|
(4,118
|
)
|
|||||||||||||||||||||
|
Comprehensive
Income (Loss):
|
||||||||||||||||||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(8,841,047
|
)
|
-
|
(8,841,047
|
)
|
|||||||||||||||||||||
|
Other
comprehensive income (loss):
|
||||||||||||||||||||||||||||||||||
|
Currency
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
32,514
|
32,514
|
|||||||||||||||||||||||
|
Total
Comprehensive Income (Loss)
|
(8,841,047
|
)
|
32,514
|
(8,808,533
|
)
|
|||||||||||||||||||||||||||||
|
Balance,
July
31, 2000
|
1,000
|
$
|
1
|
16,326,333
|
$
|
16,327
|
-
|
$
|
-
|
$
|
30,435,066
|
$
|
(54,118
|
)
|
$
|
(21,816,725
|
)
|
$
|
(165,526
|
)
|
$
|
8,415,025
|
||||||||||||
The
Notes to Consolidated Financial Statements are an
integral part of these statements.
67
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
FOR
THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2005
|
Deficit
|
||||||||||||||||||||||||||||||||||
|
SVR
|
Notes
|
Accumulated
|
Accumulated
|
|||||||||||||||||||||||||||||||
|
Preferred
|
Common
|
Treasury
|
Additional
|
Receivable
-
|
During
the
|
Other
|
Total
|
|||||||||||||||||||||||||||
|
Stock
|
Stock
|
Stock
|
Paid-In
|
Common
|
Development
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stock
|
Stage
|
Income
(Loss)
|
Equity
|
||||||||||||||||||||||||
|
Balance,
August 1, 2000
|
1,000
|
$
|
1
|
16,326,333
|
$
|
16,327
|
-
|
$
|
-
|
$
|
30,435,066
|
$
|
(54,118
|
)
|
$
|
(21,816,725
|
)
|
$
|
(165,526
|
)
|
$
|
8,415,025
|
||||||||||||
|
Exercise
of
warrants for cash, August 2000, $6.00
|
-
|
-
|
2,000
|
2
|
-
|
-
|
11,998
|
-
|
-
|
-
|
12,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock for services rendered
|
||||||||||||||||||||||||||||||||||
|
August
2000
|
-
|
-
|
35,000
|
35
|
-
|
-
|
411,215
|
-
|
-
|
-
|
411,250
|
|||||||||||||||||||||||
|
Issuance
of
warrants in exchange for equity line
|
||||||||||||||||||||||||||||||||||
|
agreement,
August 2000
|
-
|
-
|
-
|
-
|
-
|
-
|
3,406,196
|
-
|
-
|
-
|
3,406,196
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, August 2000, $7.50
|
-
|
-
|
30,300
|
30
|
-
|
-
|
227,220
|
-
|
-
|
-
|
227,250
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, August 2000, $8.6625
|
-
|
-
|
30,000
|
30
|
-
|
-
|
259,845
|
-
|
-
|
-
|
259,875
|
|||||||||||||||||||||||
|
Cashless
exercise of warrants, August 2000
|
-
|
-
|
8,600
|
9
|
-
|
-
|
(9
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
|
Exercise
of
warrants for cash, August 2000, $10.00
|
-
|
-
|
10,000
|
10
|
-
|
-
|
99,990
|
-
|
-
|
-
|
100,000
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, September 2000, $8.6625
|
-
|
-
|
63,335
|
63
|
-
|
-
|
548,576
|
-
|
-
|
-
|
548,639
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, September 2000, $5.50
|
-
|
-
|
16,182
|
16
|
-
|
-
|
88,986
|
-
|
-
|
-
|
89,002
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, September 2000, $6.00
|
-
|
-
|
53,087
|
53
|
-
|
-
|
318,470
|
-
|
-
|
-
|
318,523
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, September 2000, $10.00
|
-
|
-
|
9,584
|
10
|
-
|
-
|
95,830
|
-
|
-
|
-
|
95,840
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, September 2000, $7.50
|
-
|
-
|
32,416
|
32
|
-
|
-
|
243,088
|
-
|
-
|
-
|
243,120
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to private placement, October
2000, $11.00 |
-
|
-
|
2,151,093
|
2,151
|
-
|
-
|
23,659,872
|
-
|
-
|
-
|
23,662,023
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, Oct. 2000, $6.00
|
-
|
-
|
1,000
|
1
|
-
|
-
|
5,999
|
-
|
-
|
-
|
6,000
|
|||||||||||||||||||||||
|
Financing
costs associated with private placement, October 2000
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,956,340
|
)
|
-
|
-
|
-
|
(1,956,340
|
)
|
|||||||||||||||||||||
|
Exercise
of
warrants for cash, November - December 2000, $4.25
|
-
|
-
|
23,528
|
23
|
-
|
-
|
99,971
|
-
|
-
|
-
|
99,994
|
|||||||||||||||||||||||
|
Cashless
exercise of warrants, December 2000
|
-
|
-
|
3,118
|
3
|
-
|
-
|
(3
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
|
Exercise
of
warrants for cash, November - December 2000, $6.00
|
-
|
-
|
22,913
|
23
|
-
|
-
|
137,455
|
-
|
-
|
-
|
137,478
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, December 2000, $7.00
|
-
|
-
|
8,823
|
9
|
-
|
-
|
61,752
|
-
|
-
|
-
|
61,761
|
|||||||||||||||||||||||
|
Issuance
of
common stock as employee
|
||||||||||||||||||||||||||||||||||
|
compensation,
December 2000
|
-
|
-
|
8,650
|
8
|
-
|
-
|
100,548
|
-
|
-
|
-
|
100,556
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, January 2001, $6.00
|
-
|
-
|
3,000
|
3
|
-
|
-
|
17,997
|
-
|
-
|
-
|
18,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to
|
||||||||||||||||||||||||||||||||||
|
private
placement, January 2001, $14.53
|
-
|
-
|
344,116
|
344
|
-
|
-
|
4,999,656
|
-
|
-
|
-
|
5,000,000
|
|||||||||||||||||||||||
|
Financing
costs associated with private placement,
|
||||||||||||||||||||||||||||||||||
|
January
2001
|
-
|
-
|
-
|
-
|
-
|
-
|
(200,000
|
)
|
-
|
-
|
-
|
(200,000
|
)
|
|||||||||||||||||||||
|
Issuance
of
common stock pursuant to litigation
|
||||||||||||||||||||||||||||||||||
|
settlement,
January 2001
|
-
|
-
|
2,832
|
2
|
-
|
-
|
21,096
|
-
|
-
|
-
|
21,098
|
|||||||||||||||||||||||
|
Granting
of
stock options in exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
January 2001
|
-
|
-
|
-
|
-
|
-
|
-
|
745,000
|
-
|
-
|
-
|
745,000
|
|||||||||||||||||||||||
|
Granting
of
stock options in exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
February 2001
|
-
|
-
|
-
|
-
|
-
|
-
|
129,600
|
-
|
-
|
-
|
129,600
|
|||||||||||||||||||||||
|
Exercise
of
stock options for cash,
|
||||||||||||||||||||||||||||||||||
|
February
2001,
$5.00
|
-
|
-
|
50,000
|
50
|
-
|
-
|
249,950
|
-
|
-
|
-
|
250,000
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, March 2001, $6.00
|
-
|
-
|
500
|
1
|
-
|
-
|
2,999
|
-
|
-
|
-
|
3,000
|
|||||||||||||||||||||||
|
Exercise
of
stock options in exchange for note
|
||||||||||||||||||||||||||||||||||
|
receivable,
March 2001
|
-
|
-
|
50,000
|
50
|
-
|
-
|
249,950
|
(250,000
|
)
|
-
|
-
|
-
|
||||||||||||||||||||||
|
Issuance
of
common stock in exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
March 2001, $5.50
|
-
|
-
|
8,000
|
8
|
-
|
-
|
43,992
|
-
|
-
|
-
|
44,000
|
|||||||||||||||||||||||
|
Granting
of
stock options in exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
May
2001
|
-
|
-
|
-
|
-
|
-
|
-
|
592,300
|
-
|
-
|
-
|
592,300
|
|||||||||||||||||||||||
|
Exercise
of
stock options for cash, June 2001, $5.00
|
-
|
-
|
75,000
|
75
|
-
|
-
|
374,925
|
-
|
-
|
-
|
375,000
|
|||||||||||||||||||||||
|
Exercise
of
stock options for cash, June 2001, $5.50
|
-
|
-
|
12,500
|
12
|
-
|
-
|
68,738
|
-
|
-
|
-
|
68,750
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, June 2001, $6.00
|
-
|
-
|
4,000
|
4
|
-
|
-
|
23,996
|
-
|
-
|
-
|
24,000
|
|||||||||||||||||||||||
|
Exercise
of
stock options for cash, July 2001, $5.00
|
-
|
-
|
7,500
|
8
|
-
|
-
|
37,492
|
-
|
-
|
-
|
37,500
|
|||||||||||||||||||||||
|
Exercise
of
stock options for cash, July 2001, $5.50
|
-
|
-
|
2,500
|
3
|
-
|
-
|
13,747
|
-
|
-
|
-
|
13,750
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, July 2001, $6.00
|
-
|
-
|
2,000
|
2
|
-
|
-
|
11,998
|
-
|
-
|
-
|
12,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to
|
||||||||||||||||||||||||||||||||||
|
private
placement, July 2001, $9.25
|
-
|
-
|
1,254,053
|
1,254
|
-
|
-
|
11,598,736
|
-
|
-
|
-
|
11,599,990
|
|||||||||||||||||||||||
|
Financing
costs associated with private placement, July 2001
|
-
|
-
|
-
|
-
|
-
|
-
|
(768,599
|
)
|
-
|
-
|
-
|
(768,599
|
)
|
|||||||||||||||||||||
|
Shares
issued
in exchange for services rendered,
|
||||||||||||||||||||||||||||||||||
|
July
2001,
$9.25
|
-
|
-
|
23,784
|
24
|
-
|
-
|
219,978
|
-
|
-
|
-
|
220,002
|
|||||||||||||||||||||||
|
Shares
issued
for Anti-Dilution Provisions, July 2001
|
-
|
-
|
5,779
|
6
|
-
|
-
|
53,450
|
-
|
-
|
-
|
53,456
|
|||||||||||||||||||||||
|
Issuance
of
warrants in exchange for services rendered, July 2001
|
-
|
-
|
-
|
-
|
-
|
-
|
19,134
|
-
|
-
|
-
|
19,134
|
|||||||||||||||||||||||
|
Accrued
interest on note receivable
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(10,182
|
)
|
-
|
-
|
(10,182
|
)
|
|||||||||||||||||||||
|
Comprehensive
Income (Loss):
|
||||||||||||||||||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(27,097,210
|
)
|
-
|
(27,097,210
|
)
|
|||||||||||||||||||||
|
Other
comprehensive income (loss):
|
||||||||||||||||||||||||||||||||||
|
Currency
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(81,341
|
)
|
(81,341
|
)
|
|||||||||||||||||||||
|
Total
Comprehensive Income (Loss)
|
(27,097,210
|
)
|
(81,341
|
)
|
(27,178,551
|
)
|
||||||||||||||||||||||||||||
|
Balance
at
July 31, 2001
|
1,000
|
$
|
1
|
20,681,526
|
$
|
20,681
|
-
|
$
|
-
|
$
|
76,761,860
|
$
|
(314,300
|
)
|
$
|
(48,913,935
|
)
|
$
|
(246,867
|
)
|
$
|
27,307,440
|
||||||||||||
The
Notes to Consolidated Financial Statements are an
integral part of these statements.
68
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
FOR
THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2005
|
Deficit
|
||||||||||||||||||||||||||||||||||
|
SVR
|
Notes
|
Accumulated
|
Accumulated
|
|||||||||||||||||||||||||||||||
|
Preferred
|
Common
|
Treasury
|
Additional
|
Receivable
-
|
During
the
|
Other
|
Total
|
|||||||||||||||||||||||||||
|
Stock
|
Stock
|
Stock
|
Paid-In
|
Common
|
Development
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stock
|
Stage
|
Income
(Loss)
|
Equity
|
||||||||||||||||||||||||
|
Balance,
August 1, 2001
|
1,000
|
$
|
1
|
20,681,526
|
$
|
20,681
|
-
|
$
|
-
|
$
|
76,761,860
|
$
|
(314,300
|
)
|
$
|
(48,913,935
|
)
|
$
|
(246,867
|
)
|
$
|
27,307,440
|
||||||||||||
|
Exercise
of
stock options for cash,
|
||||||||||||||||||||||||||||||||||
|
August
2001,
$5.50
|
-
|
-
|
5,000
|
5
|
-
|
-
|
27,495
|
-
|
-
|
-
|
27,500
|
|||||||||||||||||||||||
|
Purchase
of
Treasury Stock for cash
|
||||||||||||||||||||||||||||||||||
|
October
2001,
$3.915
|
-
|
-
|
-
|
-
|
(10,000
|
)
|
(39,150
|
)
|
-
|
-
|
-
|
-
|
(39,150
|
)
|
||||||||||||||||||||
|
Issuance
of
stock options in exchange for services rendered, December 2001
|
-
|
-
|
-
|
-
|
-
|
-
|
25,000
|
-
|
-
|
-
|
25,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock as employee
|
||||||||||||||||||||||||||||||||||
|
compensation,
January 2002
|
-
|
-
|
10,800
|
11
|
-
|
-
|
71,161
|
-
|
-
|
-
|
71,172
|
|||||||||||||||||||||||
|
Preferred
stock dividend paid January 2002
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(720,900
|
)
|
-
|
(720,900
|
)
|
|||||||||||||||||||||
|
Purchase
of
Treasury Stock for cash
|
||||||||||||||||||||||||||||||||||
|
February
2002,
$4.693
|
-
|
-
|
-
|
-
|
(31,400
|
)
|
(147,346
|
)
|
-
|
-
|
-
|
-
|
(147,346
|
)
|
||||||||||||||||||||
|
Issuance
of
warrants in exchange for services rendered, March 2002
|
-
|
-
|
-
|
-
|
-
|
-
|
202,328
|
-
|
-
|
-
|
202,328
|
|||||||||||||||||||||||
|
Purchase
of
Treasury Stock for cash
|
||||||||||||||||||||||||||||||||||
|
March
2002,
$4.911
|
-
|
-
|
-
|
-
|
(7,700
|
)
|
(37,816
|
)
|
-
|
-
|
-
|
-
|
(37,816
|
)
|
||||||||||||||||||||
|
Purchase
of
Treasury Stock for cash
|
||||||||||||||||||||||||||||||||||
|
April
2002,
$4.025
|
-
|
-
|
-
|
-
|
(12,800
|
)
|
(54,516
|
)
|
-
|
-
|
-
|
-
|
(54,516
|
)
|
||||||||||||||||||||
|
Issuance
of
stock options in exchange for services rendered, June 2002
|
-
|
-
|
-
|
-
|
-
|
-
|
132,387
|
-
|
-
|
-
|
132,387
|
|||||||||||||||||||||||
|
Purchase
of
Treasury Stock for cash
|
-
|
|||||||||||||||||||||||||||||||||
|
July
2002,
$4.025
|
-
|
-
|
-
|
-
|
(34,600
|
)
|
(116,703
|
)
|
-
|
-
|
-
|
-
|
(116,703
|
)
|
||||||||||||||||||||
|
Accrued
interest on note receivable
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(22,585
|
)
|
-
|
-
|
(22,585
|
)
|
|||||||||||||||||||||
|
Comprehensive
Income (Loss):
|
||||||||||||||||||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(13,693,034
|
)
|
-
|
(13,693,034
|
)
|
|||||||||||||||||||||
|
Other
comprehensive income (loss):
|
||||||||||||||||||||||||||||||||||
|
Currency
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(71,185
|
)
|
(71,185
|
)
|
|||||||||||||||||||||
|
Total
Comprehensive Income (Loss)
|
(13,693,034
|
)
|
(71,185
|
)
|
(13,764,219
|
)
|
||||||||||||||||||||||||||||
|
Balance
at
July 31, 2002
|
1,000
|
$
|
1
|
20,697,326
|
$
|
20,697
|
(96,500
|
)
|
$
|
(395,531
|
)
|
$
|
77,220,231
|
$
|
(336,885
|
)
|
$
|
(63,327,869
|
)
|
$
|
(318,052
|
)
|
$
|
12,862,592
|
||||||||||
The
Notes to Consolidated Financial Statements are an
integral part of these statements.
69
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
FOR
THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2005
|
Deficit
|
||||||||||||||||||||||||||||||||||
|
SVR
|
Notes
|
Accumulated
|
Accumulated
|
|||||||||||||||||||||||||||||||
|
Preferred
|
Common
|
Treasury
|
Additional
|
Receivable
-
|
During
the
|
Other
|
Total
|
|||||||||||||||||||||||||||
|
Stock
|
Stock
|
Stock
|
Paid-In
|
Common
|
Development
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stock
|
Stage
|
Income
(Loss)
|
Equity
|
||||||||||||||||||||||||
|
Balance,
August 1, 2002
|
1,000
|
$
|
1
|
20,697,326
|
$
|
20,697
|
(96,500
|
)
|
$
|
(395,531
|
)
|
$
|
77,220,231
|
$
|
(336,885
|
)
|
$
|
(63,327,869
|
)
|
$
|
(318,052
|
)
|
$
|
12,862,592
|
||||||||||
|
Receipt
of
restricted shares of common stock as
|
||||||||||||||||||||||||||||||||||
|
settlement
for
executive loan, September 2002, $1.90
|
-
|
-
|
-
|
-
|
(592,716
|
)
|
(1,126,157
|
)
|
-
|
-
|
-
|
-
|
(1,126,157
|
)
|
||||||||||||||||||||
|
Purchase
of
Treasury Stock for cash
|
||||||||||||||||||||||||||||||||||
|
October
2002,
$1.5574
|
-
|
-
|
-
|
-
|
(40,000
|
)
|
(62,294
|
)
|
-
|
-
|
-
|
-
|
(62,294
|
)
|
||||||||||||||||||||
|
Issuance
of
warrants in exchange for the services
|
||||||||||||||||||||||||||||||||||
|
rendered,
November 2002, $2.50
|
-
|
-
|
-
|
-
|
-
|
-
|
988,550
|
-
|
-
|
-
|
988,550
|
|||||||||||||||||||||||
|
Issuance
of
stock options in exchange for services
|
||||||||||||||||||||||||||||||||||
|
receivable,
November 2002, $2.10
|
-
|
-
|
-
|
-
|
-
|
-
|
171,360
|
-
|
-
|
-
|
171,360
|
|||||||||||||||||||||||
|
Issuance
of
common stock in exchange for services rendered, November 2002,
$2.10
|
-
|
-
|
30,000
|
30
|
-
|
-
|
62,970
|
-
|
-
|
-
|
63,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock as employee compensation, January 2003, $2.10
|
-
|
-
|
9,750
|
10
|
-
|
-
|
20,465
|
-
|
-
|
-
|
20,475
|
|||||||||||||||||||||||
|
Purchase
of
Treasury Stock for cash December 2002, $2.0034
|
-
|
-
|
-
|
-
|
(13,000
|
)
|
(26,044
|
)
|
-
|
-
|
-
|
-
|
(26,044
|
)
|
||||||||||||||||||||
|
Preferred
stock dividend paid January 2003
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(764,154
|
)
|
-
|
(764,154
|
)
|
|||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||
|
Issuance
of
common stock in exchange for services rendered, March 2003, $1.00
|
-
|
-
|
70,000
|
70
|
-
|
-
|
69,930
|
-
|
-
|
-
|
70,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to
|
||||||||||||||||||||||||||||||||||
|
private
placement, May 2003, $1.15
|
-
|
-
|
2,926,301
|
2,926
|
-
|
-
|
3,362,324
|
-
|
-
|
-
|
3,365,250
|
|||||||||||||||||||||||
|
Financing
costs associated with private placement, May 2003
|
-
|
-
|
-
|
-
|
-
|
-
|
(235,568
|
)
|
-
|
-
|
-
|
(235,568
|
)
|
|||||||||||||||||||||
|
Exercise
of
warrants for cash, May 2003, $1.50
|
-
|
-
|
35,000
|
35
|
-
|
-
|
52,465
|
-
|
-
|
-
|
52,500
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to
|
||||||||||||||||||||||||||||||||||
|
private
placement, June 2003, $1.50
|
-
|
-
|
666,667
|
667
|
-
|
-
|
999,333
|
-
|
-
|
-
|
1,000,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock as employee compensation, June 2003, $2.00
|
-
|
-
|
100
|
-
|
-
|
-
|
200
|
-
|
-
|
-
|
200
|
|||||||||||||||||||||||
|
Exercise
of
warrants for cash, June 2003, $1.50
|
-
|
-
|
1,496,001
|
1,496
|
-
|
-
|
2,242,506
|
-
|
-
|
-
|
2,244,002
|
|||||||||||||||||||||||
|
Cashless
exercise of warrants, June 2003
|
-
|
-
|
16,379
|
16
|
-
|
-
|
(16
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
|
Exercise
of
stock options for cash, June 2003, $1.59
|
-
|
-
|
70,000
|
70
|
-
|
-
|
111,230
|
-
|
-
|
-
|
111,300
|
|||||||||||||||||||||||
|
Accrued
interest on note receivable
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(23,113
|
)
|
-
|
-
|
(23,113
|
)
|
|||||||||||||||||||||
|
Comprehensive
Income (Loss):
|
||||||||||||||||||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(13,261,764
|
)
|
-
|
(13,261,764
|
)
|
|||||||||||||||||||||
|
Other
comprehensive income (loss)
|
||||||||||||||||||||||||||||||||||
|
Currency
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
406,830
|
406,830
|
|||||||||||||||||||||||
|
Total
Comprehensive Income (Loss)
|
(13,261,764
|
)
|
406,830
|
(12,854,934
|
)
|
|||||||||||||||||||||||||||||
|
Balance
at
July 31, 2003
|
1,000
|
$
|
1
|
26,017,524
|
$
|
26,017
|
(742,216
|
)
|
$
|
(1,610,026
|
)
|
$
|
85,065,980
|
$
|
(359,998
|
)
|
$
|
(77,353,787
|
)
|
$
|
88,778
|
$
|
5,856,965
|
|||||||||||
The
Notes to Consolidated Financial Statements are an
integral part of these statements.
70
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
FOR
THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2005
|
Deficit
|
||||||||||||||||||||||||||||||||||
|
SVR
|
Notes
|
Accumulated
|
Accumulated
|
|||||||||||||||||||||||||||||||
|
Preferred
|
Common
|
Treasury
|
Additional
|
Receivable
-
|
During
the
|
Other
|
Total
|
|||||||||||||||||||||||||||
|
Stock
|
Stock
|
Stock
|
Paid-In
|
Common
|
Development
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stock
|
Stage
|
Income
(Loss)
|
Equity
|
||||||||||||||||||||||||
|
Balance,
August 1, 2003
|
1,000
|
$
|
1
|
26,017,524
|
$
|
26,017
|
(742,216
|
)
|
$
|
(1,610,026
|
)
|
$
|
85,065,980
|
$
|
(359,998
|
)
|
$
|
(77,353,787
|
)
|
$
|
88,778
|
$
|
5,856,965
|
|||||||||||
|
Shares
issued
pursuant to acquisition of Antigen
|
||||||||||||||||||||||||||||||||||
|
Express
Inc.,
August 2003
|
-
|
-
|
2,779,974
|
2,780
|
-
|
-
|
4,639,777
|
-
|
-
|
-
|
4,642,557
|
|||||||||||||||||||||||
|
Cost
of stock
options to be assumed in conjunction
|
||||||||||||||||||||||||||||||||||
|
with
merger
|
-
|
-
|
-
|
-
|
-
|
-
|
154,852
|
-
|
-
|
-
|
154,852
|
|||||||||||||||||||||||
|
Exercise
of
stock options for cash, September 2003,
|
||||||||||||||||||||||||||||||||||
|
$1.59
|
-
|
-
|
10,000
|
10
|
-
|
-
|
15,890
|
-
|
-
|
-
|
15,900
|
|||||||||||||||||||||||
|
Exercise
of
stock options for cash, October 2003, $2.10
|
-
|
-
|
14,900
|
15
|
-
|
-
|
31,275
|
-
|
-
|
-
|
31,290
|
|||||||||||||||||||||||
|
Exercise
of
stock options for cash, October 2003, $1.59
|
-
|
-
|
10,000
|
10
|
-
|
-
|
15,890
|
-
|
-
|
-
|
15,900
|
|||||||||||||||||||||||
|
Exercise
of
stock options for cash, October 2003, $0.30
|
-
|
-
|
65,000
|
65
|
-
|
-
|
19,435
|
-
|
-
|
-
|
19,500
|
|||||||||||||||||||||||
|
Exercise
of
stock options for cash, October 2003, $0.55
|
-
|
-
|
40,000
|
40
|
-
|
-
|
21,960
|
-
|
-
|
-
|
22,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock In exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
October 2003, $1.98
|
-
|
-
|
150,000
|
150
|
-
|
-
|
296,850
|
-
|
-
|
-
|
297,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock In exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
October 2003, $1.84
|
-
|
-
|
337,500
|
338
|
-
|
-
|
620,662
|
-
|
-
|
-
|
621,000
|
|||||||||||||||||||||||
|
Issuance
of
warrants in exchange for the services
|
||||||||||||||||||||||||||||||||||
|
rendered
October 2003 (at $1.35)
|
-
|
-
|
-
|
-
|
-
|
-
|
27,000
|
-
|
-
|
-
|
27,000
|
|||||||||||||||||||||||
|
Exercise
of
stock options for cash, November 2003,
|
||||||||||||||||||||||||||||||||||
|
$2.10
|
-
|
-
|
10,500
|
10
|
-
|
-
|
22,040
|
-
|
-
|
-
|
22,050
|
|||||||||||||||||||||||
|
Redemption
of
Treasury Stock, November 2003, $2.17
|
-
|
-
|
(742,216
|
)
|
(742
|
)
|
742,216
|
1,610,026
|
(1,609,284
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
|
Granting
of
stock options in exchange for services,
|
||||||||||||||||||||||||||||||||||
|
November
2003
(at $1.71)
|
-
|
-
|
-
|
-
|
-
|
-
|
151,433
|
-
|
-
|
-
|
151,433
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to
|
||||||||||||||||||||||||||||||||||
|
private
placement, Jan 2004, $1.47
|
-
|
-
|
1,700,680
|
1,701
|
-
|
-
|
2,498,299
|
-
|
-
|
-
|
2,500,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to
|
||||||||||||||||||||||||||||||||||
|
private
placement, Jan 2004, $1.80
|
-
|
-
|
55,556
|
56
|
-
|
-
|
99,944
|
-
|
-
|
-
|
100,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to
|
||||||||||||||||||||||||||||||||||
|
private
placement, Jan 2004, $1.75
|
-
|
-
|
228,572
|
229
|
-
|
-
|
399,771
|
-
|
-
|
-
|
400,000
|
|||||||||||||||||||||||
|
Financing
costs associated with private placement,
|
||||||||||||||||||||||||||||||||||
|
January
2004
|
-
|
-
|
-
|
-
|
-
|
-
|
(68,012
|
)
|
-
|
-
|
-
|
(68,012
|
)
|
|||||||||||||||||||||
|
Preferred
Stock Dividend paid in January
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(810,003
|
)
|
-
|
(810,003
|
)
|
|||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to
|
||||||||||||||||||||||||||||||||||
|
private
placement, Feb 2004, $1.60
|
-
|
-
|
93,750
|
94
|
-
|
-
|
149,906
|
-
|
-
|
-
|
150,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to
|
||||||||||||||||||||||||||||||||||
|
private
placement, Feb 2004, $1.66
|
-
|
-
|
68,675
|
69
|
-
|
-
|
113,932
|
-
|
-
|
-
|
114,001
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to
|
||||||||||||||||||||||||||||||||||
|
private
placement, Feb 2004, $1.50
|
-
|
-
|
666,667
|
667
|
-
|
-
|
999,334
|
-
|
-
|
-
|
1,000,001
|
|||||||||||||||||||||||
|
Issuance
of
common stock as employee
|
||||||||||||||||||||||||||||||||||
|
compensation,
Feb 2004, $1.48
|
-
|
-
|
8,850
|
8
|
-
|
-
|
13,089
|
-
|
-
|
-
|
13,097
|
|||||||||||||||||||||||
|
Issuance
of
common stock In exchange for services rendered, Feb 2004,
$1.48
|
-
|
-
|
175,000
|
175
|
-
|
-
|
258,825
|
-
|
-
|
-
|
259,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock In exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
Feb
2004, $1.51
|
-
|
-
|
112,500
|
113
|
-
|
-
|
169,762
|
-
|
-
|
-
|
169,875
|
|||||||||||||||||||||||
|
Issuance
of
common stock for cash pursuant to
|
||||||||||||||||||||||||||||||||||
|
private
placement, July 2004, $1.22
|
-
|
-
|
2,459,016
|
2,459
|
-
|
-
|
2,997,541
|
-
|
-
|
-
|
3,000,000
|
|||||||||||||||||||||||
|
Financing
costs associated with private placement, July 2004
|
-
|
-
|
-
|
-
|
-
|
-
|
(41,250
|
)
|
-
|
-
|
-
|
(41,250
|
)
|
|||||||||||||||||||||
|
Variable
accounting non-cash compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
45,390
|
-
|
-
|
-
|
45,390
|
|||||||||||||||||||||||
|
Accrued
interest on note receivable
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(24,805
|
)
|
-
|
-
|
(24,805
|
)
|
|||||||||||||||||||||
|
Comprehensive
Income (Loss):
|
||||||||||||||||||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(18,362,583
|
)
|
-
|
(18,362,583
|
)
|
|||||||||||||||||||||
|
Other
comprehensive income (loss)
|
||||||||||||||||||||||||||||||||||
|
Currency
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
207,593
|
207,593
|
|||||||||||||||||||||||
|
Total
Comprehensive Income (Loss)
|
(18,362,583
|
)
|
207,593
|
(18,154,990
|
)
|
|||||||||||||||||||||||||||||
|
Balance
at
July 31, 2004
|
1,000
|
$
|
1
|
34,262,448
|
$
|
34,264
|
-
|
$
|
-
|
$
|
97,110,291
|
$
|
(384,803
|
)
|
$
|
(96,526,373
|
)
|
$
|
296,371
|
$
|
529,751
|
|||||||||||||
The
Notes to Consolidated Financial Statements are an
integral part of these statements.
71
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
FOR
THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2005
|
Deficit
|
||||||||||||||||||||||||||||||||||
|
SVR
|
Notes
|
Accumulated
|
Accumulated
|
|||||||||||||||||||||||||||||||
|
Preferred
|
Common
|
Treasury
|
Additional
|
Receivable
-
|
During
the
|
Other
|
Total
|
|||||||||||||||||||||||||||
|
Stock
|
Stock
|
Stock
|
Paid-In
|
Common
|
Development
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stock
|
Stage
|
Income
(Loss)
|
Equity
|
||||||||||||||||||||||||
|
Balance,
August 1, 2004
|
1,000
|
$
|
1
|
34,262,448
|
$
|
34,264
|
-
|
$
|
-
|
$
|
97,110,291
|
$
|
(384,803
|
)
|
$
|
(96,526,373
|
)
|
$
|
296,371
|
$
|
529,751
|
|||||||||||||
|
Issuance
of
common stock In exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
Aug
2004, $1.09
|
-
|
-
|
620,000
|
620
|
-
|
-
|
675,180
|
-
|
-
|
-
|
675,800
|
|||||||||||||||||||||||
|
Issuance
of
warrants in exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered
Aug
2004, $1.08
|
-
|
-
|
-
|
-
|
-
|
-
|
415,000
|
-
|
-
|
-
|
415,000
|
|||||||||||||||||||||||
|
Granting
of
stock options in exchange for services, Oct 2004, $0.94
|
-
|
-
|
-
|
-
|
-
|
-
|
75,600
|
-
|
-
|
-
|
75,600
|
|||||||||||||||||||||||
|
Cancellation
of common stock for non-performance of services, Oct 2004,
$0.94
|
-
|
-
|
(75,000
|
)
|
(75
|
)
|
-
|
-
|
(137,925
|
)
|
-
|
-
|
-
|
(138,000
|
)
|
|||||||||||||||||||
|
Issuance
of
warrants in conjunction with financing,
|
||||||||||||||||||||||||||||||||||
|
Nov
2004,
$0.91
|
-
|
-
|
-
|
-
|
-
|
-
|
89,900
|
-
|
-
|
-
|
89,900
|
|||||||||||||||||||||||
|
Issuance
of
warrants in conjunction with convertible
|
||||||||||||||||||||||||||||||||||
|
debentures,
$4,000,000, Nov 2004 $0.91
|
-
|
-
|
-
|
-
|
-
|
-
|
1,722,222
|
-
|
-
|
-
|
1,722,222
|
|||||||||||||||||||||||
|
Value
of
beneficial conversion feature on convertible
|
||||||||||||||||||||||||||||||||||
|
debentures,
$4,000,000, Nov 2004 $0.91
|
-
|
-
|
-
|
-
|
-
|
-
|
1,722,222
|
-
|
-
|
-
|
1,722,222
|
|||||||||||||||||||||||
|
Issuance
of
common stock In exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
Dec
2004, $0.71
|
-
|
-
|
48,000
|
48
|
-
|
-
|
34,032
|
-
|
-
|
-
|
34,080
|
|||||||||||||||||||||||
|
Conversion
of
Series A Preferred Stock, Dec 2004
|
||||||||||||||||||||||||||||||||||
|
$25.77
|
-
|
-
|
534,085
|
534
|
-
|
-
|
14,309,523
|
-
|
-
|
-
|
14,310,057
|
|||||||||||||||||||||||
|
Issuance
of
common stock In exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
Jan
2005, $0.85
|
-
|
-
|
18,000
|
18
|
-
|
-
|
15,282
|
-
|
-
|
-
|
15,300
|
|||||||||||||||||||||||
|
Issuance
of
common stock In exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
Jan
2005, $0.75
|
-
|
-
|
40,000
|
40
|
-
|
-
|
29,960
|
-
|
-
|
-
|
30,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock In exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
Feb
2005, $0.69
|
-
|
-
|
18,000
|
18
|
-
|
-
|
12,402
|
-
|
-
|
-
|
12,420
|
|||||||||||||||||||||||
|
Issuance
of
common stock as repayment of principal
|
||||||||||||||||||||||||||||||||||
|
and
interest
due, $4,000,000, Feb 2005
|
-
|
-
|
250,910
|
251
|
-
|
-
|
181,262
|
-
|
-
|
-
|
181,513
|
|||||||||||||||||||||||
|
Issuance
of
common stock In exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered,
Feb
2005, $0.68
|
-
|
-
|
50,000
|
50
|
-
|
-
|
33,950
|
-
|
-
|
-
|
34,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock as repayment of principal
|
||||||||||||||||||||||||||||||||||
|
and
interest
due, $4,000,000, Mar 2005
|
-
|
-
|
265,228
|
265
|
-
|
-
|
162,197
|
-
|
-
|
-
|
162,462
|
|||||||||||||||||||||||
|
Issuance
of
common stock as repayment of principal
|
||||||||||||||||||||||||||||||||||
|
and
interest
due, $4,000,000, Apr 2005
|
-
|
-
|
314,732
|
315
|
-
|
-
|
162,275
|
-
|
-
|
-
|
162,590
|
|||||||||||||||||||||||
|
Issuance
of
common stock in connection with conversion of
|
||||||||||||||||||||||||||||||||||
|
$143,500
of
$4,000,000 debenture, Apr 2005
|
-
|
-
|
175,316
|
175
|
-
|
-
|
143,584
|
-
|
-
|
-
|
143,759
|
|||||||||||||||||||||||
|
Issuance
of
common stock as employee
|
||||||||||||||||||||||||||||||||||
|
compensation,
Apr 2005, $0.56
|
-
|
-
|
8,800
|
9
|
-
|
-
|
4,919
|
-
|
-
|
-
|
4,928
|
|||||||||||||||||||||||
|
Issuance
of
warrants in conjunction with convertible
|
||||||||||||||||||||||||||||||||||
|
debentures,
$500,000, Apr 2005, $0.82
|
-
|
-
|
-
|
-
|
-
|
-
|
245,521
|
-
|
-
|
-
|
245,521
|
|||||||||||||||||||||||
|
Value
of
beneficial conversion feature on convertible
|
||||||||||||||||||||||||||||||||||
|
debentures,
$500,000, Apr 2005, $0.82
|
-
|
-
|
-
|
-
|
-
|
-
|
86,984
|
-
|
-
|
-
|
86,984
|
|||||||||||||||||||||||
|
Issuance
of
warrants in conjunction with convertible
|
||||||||||||||||||||||||||||||||||
|
debentures,
$100,000, Apr 2005, $0.82
|
-
|
-
|
-
|
-
|
-
|
-
|
49,104
|
-
|
-
|
-
|
49,104
|
|||||||||||||||||||||||
|
Value
of
beneficial conversion feature on convertible
|
||||||||||||||||||||||||||||||||||
|
debentures,
$100,000, Apr 2005, $0.82
|
-
|
-
|
-
|
-
|
-
|
-
|
17,397
|
-
|
-
|
-
|
17,397
|
|||||||||||||||||||||||
|
Issuance
of
warrants in exchange for services
|
||||||||||||||||||||||||||||||||||
|
rendered
Apr
2005, $0.82
|
-
|
-
|
-
|
-
|
-
|
-
|
40,000
|
-
|
-
|
-
|
40,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock In exchange for services rendered, Apr 2005,
$0.82
|
-
|
-
|
350,000
|
350
|
-
|
-
|
286,650
|
-
|
-
|
-
|
287,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock in satisfaction of
|
||||||||||||||||||||||||||||||||||
|
accounts
payable, Apr 2005, $0.82
|
-
|
-
|
950,927
|
951
|
-
|
-
|
778,809
|
-
|
-
|
-
|
779,760
|
|||||||||||||||||||||||
|
Granting
of
stock options in exchange for outstanding liabilities, Apr 2005,
$0.001
|
-
|
-
|
-
|
-
|
-
|
-
|
1,332,052
|
-
|
-
|
-
|
1,332,052
|
|||||||||||||||||||||||
|
Issuance
of
common stock as repayment of principal and interest due,
$4,000,000, May 2005
|
-
|
-
|
482,071
|
482
|
-
|
-
|
321,877
|
-
|
-
|
-
|
322,359
|
|||||||||||||||||||||||
|
Issuance
of
common stock in connection with conversion of
|
||||||||||||||||||||||||||||||||||
|
$300,000
of
$4,000,000 debenture, May 2005
|
-
|
-
|
365,914
|
366
|
-
|
-
|
299,683
|
-
|
-
|
-
|
300,049
|
|||||||||||||||||||||||
|
Issuance
of
common stock in connection with conversion of $244,000 of
$4,000,000 debenture, May 2005
|
-
|
-
|
297,659
|
298
|
-
|
-
|
243,783
|
-
|
-
|
-
|
244,081
|
|||||||||||||||||||||||
|
Issuance
of
common stock in connection with conversion of $410,000 of
$4,000,000 debenture, May 2005
|
-
|
-
|
500,000
|
500
|
-
|
-
|
409,500
|
-
|
-
|
-
|
410,000
|
|||||||||||||||||||||||
|
Issuance
of
warrants in conjunction with 1st extension of due date of
$600,000
convertible debentures, May 2005, $0.82
|
- | - | - | - | - | - |
717,073
|
- | - | - |
717,073
|
|||||||||||||||||||||||
|
Issuance
of
common stock as repayment of principal and interest due,
$4,000,000, June 2005
|
-
|
-
|
311,307
|
311
|
-
|
-
|
244,644
|
-
|
-
|
-
|
244,955
|
|||||||||||||||||||||||
|
Issuance
of
common stock in conjunction with financing, $2,000,000, June 2005,
$0.82
|
-
|
-
|
170,732
|
171
|
-
|
-
|
139,829
|
-
|
-
|
-
|
140,000
|
|||||||||||||||||||||||
|
Issuance
of
warrants in conjunction with financing, $2,000,000,
|
||||||||||||||||||||||||||||||||||
| June 2005, $0.82 |
-
|
-
|
-
|
-
|
-
|
-
|
20,300
|
-
|
-
|
-
|
20,300
|
|||||||||||||||||||||||
|
Issuance
of
warrants in conjunction with convertible debentures, $2,000,000,
June 2005, $0.82
|
-
|
-
|
-
|
-
|
-
|
-
|
828,571
|
-
|
-
|
-
|
828,571
|
|||||||||||||||||||||||
|
Value
of
beneficial conversion feature on convertible
|
||||||||||||||||||||||||||||||||||
|
debentures,
$2,000,000, June 2005, $0.82
|
-
|
-
|
-
|
-
|
-
|
-
|
1,171,429
|
-
|
-
|
-
|
1,171,429
|
|||||||||||||||||||||||
|
Issuance
of
common stock in connection with conversion of $100,000 of
$2,000,000 debenture, June 2005
|
-
|
-
|
166,667
|
167
|
-
|
-
|
99,833
|
-
|
-
|
-
|
100,000
|
|||||||||||||||||||||||
|
Issuance
of
common stock in connection with conversion of
|
||||||||||||||||||||||||||||||||||
|
$190,000
of
$2,000,000 debenture, June 2005
|
-
|
-
|
316,927
|
317
|
-
|
-
|
189,839
|
-
|
-
|
-
|
190,156
|
|||||||||||||||||||||||
|
Issuance
of
common stock In exchange for services rendered, June 2005, $0.60
|
-
|
-
|
63,207
|
63
|
-
|
-
|
37,861
|
-
|
-
|
-
|
37,924
|
|||||||||||||||||||||||
|
Issuance
of
common stock in satisfaction of
|
||||||||||||||||||||||||||||||||||
|
accounts
payable, June 2005, $0.82
|
-
|
-
|
90,319
|
90
|
-
|
-
|
73,971
|
-
|
-
|
-
|
74,061
|
|||||||||||||||||||||||
|
Issuance
of
common stock in connection with conversion of $17,000 of $2,000,000
debenture, July 2005
|
-
|
-
|
28,398
|
28
|
-
|
-
|
17,011
|
-
|
-
|
-
|
17,039
|
|||||||||||||||||||||||
|
Issuance
of
common stock in connection with conversion of $75,000 of $2,000,000
debenture, July 2005
|
-
|
-
|
125,000
|
125
|
-
|
-
|
75,035
|
-
|
-
|
-
|
75,160
|
|||||||||||||||||||||||
|
Issuance of warrants in conjunction with
2nd extension of
due date of $600,000 convertible debentures, July 2005,
$0.82
|
-
|
-
|
-
|
-
|
-
|
-
|
629,268
|
-
|
-
|
-
|
629,268
|
|||||||||||||||||||||||
|
Issuance
of
common stock as repayment of principal and interest due,
$4,000,000, July 2005
|
-
|
-
|
364,123
|
364
|
-
|
-
|
237,586
|
-
|
-
|
-
|
237,950
|
|||||||||||||||||||||||
|
Issuance
of
common stock in satisfaction of
|
||||||||||||||||||||||||||||||||||
|
accounts
payable, July 2005, $0.82
|
-
|
-
|
820,128
|
820
|
-
|
-
|
671,685
|
-
|
-
|
-
|
672,505
|
|||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||
|
Granting
of
stock options in exchange for services, July 2004,
$0.63
|
-
|
-
|
-
|
-
|
-
|
-
|
17,155
|
-
|
-
|
-
|
17,155
|
|||||||||||||||||||||||
|
Accrued
interest on note receivable
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(6,300
|
)
|
-
|
-
|
(6,300
|
)
|
|||||||||||||||||||||
|
Write-off
of
uncollectible notes receivable - common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
391,103
|
-
|
-
|
391,103
|
|||||||||||||||||||||||
|
Variable
accounting non-cash compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||
|
Comprehensive
Income (Loss):
|
||||||||||||||||||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(24,001,735
|
)
|
-
|
(24,001,735
|
)
|
|||||||||||||||||||||
|
Other
comprehensive income (loss)
|
||||||||||||||||||||||||||||||||||
|
Currency
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
272,478
|
272,478
|
|||||||||||||||||||||||
|
Total
Comprehensive Income (Loss)
|
(24,001,735
|
)
|
272,478
|
(23,729,257
|
)
|
|||||||||||||||||||||||||||||
|
Balance
at
July 31, 2005
|
1,000
|
$
|
1
|
41,933,898
|
$
|
41,935
|
-
|
$
|
-
|
$
|
126,044,326
|
$
|
-
|
$
|
(120,528,108
|
)
|
$
|
568,849
|
$
|
6,127,003
|
||||||||||||||
The
Notes to Consolidated Financial Statements are an
integral part of these statements.
72
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
Cumulative
From
|
|||||||||||||
|
November
2, 1995
|
|||||||||||||
|
For
the Years Ended
|
(Date
of Inception)
|
||||||||||||
|
July
31,
|
to
July 31,
|
||||||||||||
|
2005
|
2004
|
2003
|
2005
|
||||||||||
|
Cash
Flows From Operating Activities:
|
|||||||||||||
|
Net
loss
|
$
|
(24,001,735
|
)
|
$
|
(18,362,583
|
)
|
$
|
(13,261,764
|
)
|
$
|
(118,233,051
|
)
|
|
|
Adjustments
to reconcile net loss to net cash used
|
|||||||||||||
|
in
operating activities:
|
|||||||||||||
|
Depreciation
and amortization
|
1,103,948
|
1,014,572
|
589,836
|
3,581,180
|
|||||||||
|
Minority
interest share of loss
|
--
|
--
|
(625
|
)
|
(3,038,185
|
)
|
|||||||
|
Reduction
of notes receivable - common stock in exchange
|
|||||||||||||
|
for
services rendered
|
--
|
--
|
--
|
423,882
|
|||||||||
|
Write-off
of uncollectible notes receivable - common stock
|
391,103
|
--
|
391,103
|
||||||||||
|
Write-off
of deferred offering costs
|
--
|
--
|
--
|
3,406,196
|
|||||||||
|
Write-off
of abandoned patents
|
66,952
|
--
|
9,134
|
76,086
|
|||||||||
|
Loss
on extinguishment of debt
|
1,346,341
|
--
|
--
|
1,346,341
|
|||||||||
|
Common
stock issued for services rendered
|
1,131,452
|
1,359,973
|
153,675
|
4,786,264
|
|||||||||
|
Non-cash
compensation expense
|
--
|
45,390
|
--
|
45,390
|
|||||||||
|
Stock
options and warrants issued for services rendered
|
547,755
|
178,433
|
1,159,910
|
6,833,873
|
|||||||||
|
Preferred
stock issued for services rendered
|
--
|
--
|
--
|
100
|
|||||||||
|
Treasury
stock redeemed for non-performance of services
|
(138,000
|
)
|
--
|
--
|
(138,000
|
)
|
|||||||
|
Amortization
of deferred debt issuance costs and loan origination fees
|
248,107
|
--
|
--
|
248,107
|
|||||||||
|
Amortization
of discount on convertible debentures
|
3,734,811
|
--
|
--
|
3,734,811
|
|||||||||
|
Common
stock issued as interest payment on convertible debentures
|
76,996
|
76,996
|
|||||||||||
|
Founders’
shares transferred for services rendered
|
--
|
--
|
--
|
353,506
|
|||||||||
|
Fees
in connection with short-term refinancing of long-term
debt
|
105,300
|
--
|
--
|
105,300
|
|||||||||
|
Changes
in operating assets and liabilities (excluding the effects
of
acquisition):
|
|||||||||||||
|
Miscellaneous
receivables
|
--
|
--
|
13,192
|
43,812
|
|||||||||
|
Other
current assets
|
731,656
|
(538,795
|
)
|
(78,886
|
)
|
(112,241
|
)
|
||||||
|
Accounts
payable and accrued expenses
|
3,255,169
|
421,052
|
(553,606
|
)
|
5,874,417
|
||||||||
|
Other,
net
|
--
|
--
|
--
|
110,317
|
|||||||||
|
Net
Cash Used in Operating Activities
|
(11,400,145
|
)
|
(15,881,958
|
)
|
(11,969,134
|
)
|
(90,083,796
|
)
|
|||||
|
Cash
Flows From Investing Activities:
|
|||||||||||||
|
Purchase
of property and equipment
|
(63,735
|
)
|
(646,383
|
)
|
(506,108
|
)
|
(4,292,716
|
)
|
|||||
|
Costs
incurred for patents
|
(193,429
|
)
|
(285,350
|
)
|
(108,576
|
)
|
(1,494,986
|
)
|
|||||
|
Change
in restricted cash
|
19,333
|
(7,246
|
)
|
(177,488
|
)
|
(170,996
|
)
|
||||||
|
Proceeds
from maturity of short term investments
|
--
|
7,000,854
|
20,570,283
|
126,687,046
|
|||||||||
|
Purchases
of short-term investments
|
--
|
(4,638,783
|
)
|
(10,069,597
|
)
|
(126,687,046
|
)
|
||||||
|
Cash
received in conjunction with merger
|
--
|
82,232
|
--
|
82,232
|
|||||||||
|
Advances
to Antigen Express, Inc.
|
--
|
(32,000
|
)
|
--
|
(32,000
|
)
|
|||||||
|
Increase
in officers’ loans receivable
|
--
|
--
|
(12,073
|
)
|
(1,126,157
|
)
|
|||||||
|
Change
in deposits
|
395,889
|
(395,889
|
)
|
107,755
|
(477,194
|
)
|
|||||||
|
Change
in notes receivable - common stock
|
(6,300
|
)
|
(24,805
|
)
|
(23,113
|
)
|
(91,103
|
)
|
|||||
|
Change
in due from related parties
|
--
|
32,807
|
--
|
(2,222,390
|
)
|
||||||||
|
Other,
net
|
--
|
--
|
--
|
89,683
|
|||||||||
|
Net
Cash Provided by (Used in) Investing Activities
|
151,758
|
1,085,437
|
9,781,083
|
(9,735,627
|
)
|
||||||||
|
Cash
Flows From Financing Activities:
|
|||||||||||||
|
Proceeds
from short-term advance
|
325,179
|
--
|
--
|
325,179
|
|||||||||
|
Proceeds
from issuance of long-term debt
|
815,832
|
161,167
|
--
|
1,970,148
|
|||||||||
|
Repayment
of long-term debt
|
(98,447
|
)
|
(73,140
|
)
|
(60,004
|
)
|
(1,206,938
|
)
|
|||||
|
Change
in due to related parties
|
--
|
--
|
--
|
154,541
|
|||||||||
|
Proceeds
from exercise of warrants
|
--
|
--
|
2,296,502
|
4,552,984
|
|||||||||
|
Proceeds
from exercise of stock options
|
--
|
126,640
|
111,300
|
1,010,440
|
|||||||||
|
Proceeds
from minority interest investment
|
--
|
--
|
625
|
3,038,185
|
|||||||||
|
Proceeds
from issuance of preferred stock
|
--
|
--
|
--
|
12,015,000
|
|||||||||
|
Proceeds
from issuance of convertible debentures, net
|
6,299,930
|
--
|
--
|
6,299,930
|
|||||||||
|
Repayments
of convertible debentures
|
(461,358
|
)
|
--
|
--
|
(461,358
|
)
|
|||||||
|
Purchase
of treasury stock
|
--
|
--
|
(88,338
|
)
|
(483,869
|
)
|
|||||||
|
Proceeds
from issuance of common stock, net
|
--
|
7,154,739
|
4,129,682
|
73,283,715
|
|||||||||
|
Purchase
and retirement of common stock
|
--
|
--
|
--
|
(119,066
|
)
|
||||||||
|
Net
Cash Provided by (Used in) Financing Activities
|
6,881,136
|
7,369,406
|
6,389,767
|
100,378,891
|
|||||||||
|
Effect
of Exchange Rates on Cash
|
3,362
|
20,956
|
23,399
|
27,062
|
|||||||||
|
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(4,363,889
|
)
|
(7,406,159
|
)
|
4,225,115
|
586,530
|
|||||||
|
Cash
and Cash Equivalents, Beginning of Period
|
4,950,419
|
12,356,578
|
8,131,463
|
--
|
|||||||||
|
Cash
and Cash Equivalents, End of Period
|
$
|
586,530
|
$
|
4,950,419
|
$
|
12,356,578
|
$
|
586,530
|
|||||
The
Notes to Consolidated Financial Statements are an
integral part of these statements.
73
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
1 - Organization and Business:
Generex
Biotechnology Corporation (the Company) is engaged in the research and
development of drug delivery systems and technology. Since its inception,
the
Company has devoted its efforts and resources to the development of a platform
technology for the oral administration of large molecule drugs, including
proteins, peptides, monoclonal antibodies, hormones and vaccines, which
historically have been administered by injection, either subcutaneously
or
intravenously.
The
Company’s subsidiary, Antigen Express, Inc. (Antigen), is engaged in research
and development of technologies and immunomedicines for the treatment of
malignant, infectious, autoimmune and allergic diseases. The Company’s
immunomedicine products work by stimulating the immune system to either
attack
offending agents (i.e., cancer cells, bacteria, and viruses) or to stop
attacking benign elements (i.e., self proteins and allergens). The
immunomedicine products are based on two platform technologies that were
discovered by an executive officer of Antigen, the Ii-Key hybrid peptides
and
Ii-Suppression. These technologies are expected to greatly boost immune
cell
responses which diagnose and treat the ailments and conditions.
During
the year ended July 31, 2005, the Company acquired the minority interest
in
Generex (Bermuda), Ltd., making it a wholly-owned subsidiary of the Company
(see
Note 20).
The
Company is a development stage company, which has a limited history of
operations and has not generated any revenues from operations prior to
the
acquisition of Antigen (see Note 3) with the exception of the $1 million
received in conjunction with the execution of a development agreement.
Subsequent to the acquisition of Antigen, the Company has grant revenue
from
government agencies related to Antigen’s operations. During the year ended July
31, 2005, the Company received $50,000 in conjunction with the execution
of a
licensing agreement (see Note 10). The Company has no products approved
for
commercial sale at the present time with the exception of its oral insulin
formulation which was approved for commercial sale in Ecuador in early
May 2005.
The Company’s products candidates are in research or early stages of
pre-clinical and clinical development. There can be no assurance that the
Company will be successful in obtaining regulatory clearance for the sale
of
existing or any future products or that any of the Company’s products will be
commercially viable.
The
accompanying financial statements have been prepared on a going concern
basis,
which contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. The Company has experienced
negative cash flows from operations since inception and had an accumulated
deficit at July 31, 2005
of
approximately $120 million. The Company has funded its activities to date
almost
exclusively from debt and equity financings.
The
Company will continue to require substantial funds to continue research
and
development, including preclinical studies and clinical trials of its product
candidates, and to commence sales and marketing efforts, if the FDA or
other
regulatory approvals are obtained. Management’s plans in order to meet its
operating cash flow requirements include financing activities such as private
placement of its common stock, preferred stock offerings, debt and convertible
debt instruments. Management is also actively pursuing industry
collaboration activities including product licensing and specific project
financing.
While
the
Company believes that it will be successful in obtaining the necessary
financing
to fund its operations, there are no assurances that such additional funding
will be achieved and that it will succeed in its future operations. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts
of
liabilities that might be necessary should the Company be unable to continue
in
existence.
74
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
2 - Summary of Significant Accounting Policies:
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and
all of
its subsidiaries in which a controlling interest is maintained. For those
consolidated subsidiaries where the Company ownership is less than 100
percent,
the outside stockholders’ interests are shown as minority interests. All
significant intercompany transactions and balances have been
eliminated.
Development
Stage Corporation
The
accompanying consolidated financial statements have been prepared in accordance
with the provisions of Statement of Financial Accounting Standard (SFAS)
No. 7,
“Accounting and Reporting by Development Stage Enterprises.”
Cash
and Cash Equivalents
The
Company considers all
highly liquid investments purchased with a maturity of three months or
less to
be cash equivalents.
Property
and Equipment
Property
and equipment are recorded at cost less accumulated depreciation. Depreciation
is provided on the straight-line method over the estimated useful lives
of the
assets, which range from three to thirty years. Gains and losses on depreciable
assets retired or sold are recognized in the statement of operations in
the year
of disposal. Repairs and maintenance expenditures are expensed as
incurred.
Property
Held for Investment
Property
held for investment is recorded at cost less accumulated depreciation.
Depreciation is provided on the straight-line method over the estimated
useful
lives of the assets of thirty years. Gains and losses on depreciable assets
retired or sold are recognized in the statement of operations in the year
of
disposal. Repairs and maintenance expenditures are expensed as incurred.
Patents
Legal
costs incurred to establish patents are capitalized. Capitalized costs
are
amortized on the straight-line method over the related patent term. As
patents
are abandoned, the net book value of the patent is written off.
Impairment
or Disposal of Long-Lived Assets
The
Company assesses the impairment of patents under SFAS No. 144, “Accounting for
the Impairment or Disposal of Long-Lived Assets” whenever events or changes in
circumstances indicate that the carrying value may not be recoverable.
For
long-lived assets to be held and used, the Company recognizes an impairment
loss
only if its carrying amount is not recoverable through its undiscounted
cash
flows and measures the impairment loss based on the difference between
the
carrying amount and fair value.
Convertible
Debentures
In
accordance with Emerging Issues Task Force Issue 98-5, Accounting for
Convertible Securities with a Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios ("EITF 98-5"), the Company recognized an imbedded
beneficial conversion feature present in the Convertible Notes. The Company
allocated a portion of the proceeds equal to the intrinsic value of that
feature
to additional paid-in capital. The debt discount attributed to the beneficial
conversion feature is amortized over the convertible debenture's maturity
period
as interest expense using the effective yield method.
75
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
2 - Summary of Significant Accounting Policies
(Continued):
Convertible
Debentures
(Continued)
In
accordance with Emerging Issues Task Force Issue 00-27, Application of
Issue No.
98-5 to Certain Convertible Instruments ("EITF 00-27"), the Company recognized
the value attributable to the warrants to additional paid-in capital and
a
discount against the convertible debentures. The Company valued the warrants
in
accordance with EITF 00-27 using the Black-Scholes pricing model. The debt
discount attributed to the value of the warrants issued is amortized over
the
convertible debenture’s maturity period as interest expense using the effective
yield method.
Revenue
Recognition
Revenue
is derived principally from grants provided by government agencies. The
Company
recognizes revenue from restricted grants in the period which the Company
has
incurred the expenditures in compliance with the specific
restrictions.
Included
in miscellaneous income are fees received under licensing agreements.
Nonrefundable fees received under licensing agreements are recognized as
revenue
when received if the Company has not continuing obligations to the other
party.
Research
and Development Costs
Expenditures
for research and development are expensed as incurred and include, among
other
costs, those related to the production of experimental drugs, including
payroll
costs, and amounts incurred for conducting clinical trials. Amounts expected
to
be received from governments under research and development tax credit
arrangements are offset against current income tax expense.
Income
Taxes
Income
taxes are accounted for under the asset and liability method prescribed
by SFAS
No. 109, “Accounting for Income Taxes.”
Deferred income taxes are recorded for temporary differences between financial
statement carrying amounts and the tax basis of assets and liabilities.
Deferred
tax assets and liabilities reflect the tax rates expected to be in effect
for
the years in which the differences are expected to reverse. A valuation
allowance is provided if it is more likely than not that some or all of
the
deferred tax asset will not be realized.
Stock-Based
Compensation
The
Company has elected to continue to account for its stock compensation plans
under the recognition and measurement principles of Accounting Principles
Board
Opinion (APB) No. 25, "Accounting for Stock Issued to Employees" and related
interpretations. Under APB 25, no compensation cost is generally recognized
for
fixed stock options in which the exercise price is greater than or equal
to the
market price on the grant date. In connection with the termination of certain
employees, the company repriced 1,240,000 options. The repriced options
are
accounted for under variable accounting and compensation cost is recognized
for
the difference between the exercise price and the market price of the common
shares until such options are exercised, expired or forfeited. During the
years
ended July 31, 2005,
2004
and
2003, the Company recognized $-0-, $45,390 and $-0- of compensation expense
in
connection with these options, respectively.
76
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies (Continued):
Stock-Based
Compensation (Continued)
The
following table illustrates the effect on net loss and loss per share as
if the
Company had applied the fair value recognition provisions of SFAS No.
123.
|
|
|
For
the Years Ended July
31
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||
|
|
|
2005
|
|
2004
|
|
2003
|
|
|||
|
|
|
|||||||||
|
Net
Loss Available to Common
|
|
|
|
|
|
|
|
|||
|
Stockholders,
as Reported
|
|
$
|
(24,001,735
|
)
|
$
|
(19,172,586
|
)
|
$
|
(14,025,918
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add:
Total Stock-Based Employee
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
Expense Included
|
|
|
|
|
|
|
|
|
|
|
|
In
Reported Net Loss
|
|
|
--
|
|
|
(45,930
|
)
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deduct:
Total Stock-Based Employee
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
Expense Determined
|
|
|
|
|
|
|
|
|
|
|
|
Under
Fair Value Based Method
|
|
|
2,199,300
|
|
|
1,786,920
|
|
|
3,335,731
|
|
|
|
||||||||||
|
Pro
Forma Net Loss Available
|
|
|
|
|
|
|
|
|
|
|
|
to
Common Stockholders
|
|
$
|
(26,201,035
|
)
|
$
|
(20,913,576
|
)
|
$
|
(17,361,649
|
)
|
|
|
||||||||||
|
Loss
Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted, as reported
|
|
$
|
(0.66
|
)
|
$
|
(0.64
|
)
|
$
|
(0.67
|
)
|
|
Basic
and diluted, pro forma
|
|
$
|
(0.72
|
)
|
$
|
(0.69
|
)
|
$
|
(0.83
|
)
|
In
the
event the Company utilizes equity instruments to acquire
goods or services in share-based payment transactions, the fair value
of the
equity instrument is recorded in the statement of operations, in the
underlying
expense, and stockholders’ equity.
Net
Loss Per Common Share
Basic
EPS
is computed by dividing income (loss) available to common stockholders
by the
weighted average number of common shares outstanding during the period.
Diluted
EPS gives effect to all dilutive potential common shares outstanding
during the
period. The computation of Diluted EPS does not assume conversion, exercise
or
contingent exercise of securities that would have an anti-dilutive effect
on
earnings. Refer to Note 17 for methodology for determining net loss per
share.
Comprehensive
Loss
Other
comprehensive income (loss), which includes only foreign currency translation
adjustments, is shown in the Statement of Changes in Stockholders’
Equity.
Concentration
of Credit Risk
The
Company maintains cash balances, at times, with financial institutions
in excess
of amounts insured by the Canada Deposit Insurance Corporation and the
Federal
Deposit Insurance Corporation. Management monitors the soundness of these
institutions and considers the Company’s risk negligible.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and disclosure
of
contingent assets and liabilities at the dates of the financial statements
and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
77
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
2 - Summary of Significant Accounting Policies
(Continued):
Foreign
Currency Translation
Foreign
denominated assets and liabilities of the Company are translated into
U.S.
dollars at the prevailing exchange rates in effect at the end of the
reporting
period. Income statement accounts are translated at a weighted average
of
exchange rates which were in effect during the period. Translation adjustments
that arise from translating the foreign subsidiary’s financial statements from
local currency to U.S. currency are recorded in the other comprehensive
loss
component of stockholders’ equity.
Financial
Instruments
The
carrying values of miscellaneous receivables, accounts payable and accrued
expenses approximate their fair values due to their short-term nature.
Due from
related party approximates its fair value as it is due on demand and
long-term
debt approximates its fair value based upon the borrowing rates available
for
the nature of the underlying debt.
The
Company follows the provisions of SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities.” This statement requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at
fair
value. Gains or losses resulting from changes in the values of those
derivatives
would be accounted for depending on the use of the derivative and whether
it
qualifies for hedge accounting.
Effects
of Recent Accounting Pronouncements
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
123R “Share Based Payment.” This statement is a revision to SFAS 123 and
supersedes Accounting Principles Board (APB) Opinion No. 25, “Accounting for
Stock Issued to Employees,” and amends FASB Statement No. 95, “Statement of Cash
Flows”. This statement requires a public entity to expense the cost of employee
services received in exchange for an award of equity instruments using
the
fair-value-based method. This statement also provides guidance on valuing
and
expensing these awards, as well as disclosure requirements of these equity
arrangements. This statement is effective as of the beginning of the
interim
reporting period or the annual reporting period that begins after June
15, 2005.
| 1. |
A
“modified prospective” method in which compensation cost is recognized
beginning with the effective date (a) based on the requirements
of SFAS
123R for all share-based payments granted after the effective
date and
(b) based on the requirements of Statement 123 for all
awards granted
to employees prior to the effective date of SFAS 123R that
remain unvested
on the effective date, or
|
| 2. |
A
“modified retrospective” method which includes the requirements of the
modified prospective method described above, but also permits
entities to
restate based on the amounts previously recognized under SFAS
123 for
purposes of pro forma disclosures either (a) all prior periods
presented
or (b) prior interim periods of the year of
adoption.
|
78
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
2 - Summary of Significant Accounting Policies
(Continued):
Effects
of Recent Accounting Pronouncements (Continued)
As
permitted by SFAS 123, the Company currently accounts for share-based
payments
to employees using APB Opinion 25’s intrinsic value method and, as such, the
Company generally recognizes no compensation cost for employee stock
options.
The impact of the adoption of SFAS 123R cannot be predicted at this time
because
it will be depend on levels of share-based payments granted in the future.
However, valuation of employee stock options under SFAS 123R is similar
to SFAS
123, with minor exceptions. The impact on the results of operations and
earnings
per share had the Company adopted SFAS 123, is previously described in
the stock
based compensation section of this Note. Accordingly, the adoption of
SFAS
123R’s fair value method will have a significant impact on the Company’s results
of operations, although it will have no impact on the Company’s overall
financial position. SFAS 123R also requires the benefits of tax deductions
in
excess of recognized compensation cost to be reported as a financing
cash flow,
rather than as an operating cash flow as required under current literature.
This
requirement will reduce net operating cash flows and increase net financing
cash
flows in periods after adoption. Due to timing of the release of SFAS
123R, the
Company has not yet completed the analysis of the ultimate impact that
this new
pronouncement will have on the results of operations, nor the method
of adoption
for this new standard.
In
December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets -
an amendment of APB Opinion No. 29." The statement addresses the measurement
of
exchanges of nonmonetary assets and eliminates the exception from fair
value
measurement for nonmonetary exchanges of similar productive assets and
replaces
it with an exception for exchanges that do not have commercial substance.
SFAS
No. 153 is effective for nonmonetary asset exchanges occurring in fiscal
periods
beginning after June 15, 2005. The Company does not expect that the adoption
of
SFAS No. 153 will have a significant impact on the Company’s consolidated
financial position or results of operations.
In
May
2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.”
This statement replaces APB No. 20 and SFAS No. 3 and changes the requirements
for the accounting for and reporting of a change in accounting principle.
APB
No. 20 previously required that most voluntary changes in accounting
principle
be recognized by including in net income of the period of the change
the
cumulative effect of changing to the accounting principle. SFAS No. 154
requires
retrospective application to prior periods’ financial statements of voluntary
changes in accounting principle. SFAS No. 154 is effective for accounting
changes and corrections of errors made in fiscal years beginning after
December
15, 2005. The Company does not expect that the adoption of SFAS No. 154
will
have a significant impact on the consolidated results of operations or
financial
position of the Company.
Note
3 - Acquisitions:
On
August
8, 2003, the Company acquired all of the outstanding capital stock of
Antigen
Express, Inc. pursuant to an Agreement and Plan of Merger (“Merger Agreement”)
and Antigen became a wholly-owned subsidiary of the Company.
Antigen's
facilities and headquarters are located in Worcester, Massachusetts.
Antigen is
engaged in research and development efforts focused on the development
of
immunomedicines for the treatment of malignant, infectious, autoimmune
and
allergic diseases.
79
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
3 - Acquisitions (Continued):
The
acquisition of Antigen brought two additional platform technologies to
the
Company. The immunomedicines based on these technologies allow for specific
modulation of the immune system to allow for activation and re-activation
against cancer and infectious agents and de-activation in the case of
if allergy
and autoimmune disease. The delivery technologies currently possessed
by the
Company, when used with Antigen’s active immunotherapies may provide for
breakthrough therapeutics.
The
Merger Agreement provided that each holder of Antigen common stock and
each
holder of each of the four outstanding series of Antigen preferred stock
received shares of the Company’s common stock, par value $0.001 per share, for
each share of Antigen common stock or preferred stock held by such holder.
The
Merger Agreement established exchange rates for the conversion of Antigen
common
and the various series of preferred stock into the Company’s common stock. An
aggregate of 2,779,974 shares of the Company’s common stock was issued to the
former Antigen stockholders in connection with the Merger. These shares
were
valued based upon the average trading price as quoted on the NASDAQ for
the five
days prior and subsequent to the announcement of the acquisition for
a total of
$4,645,059 or $1.6709 per share. In addition, pursuant to the Merger
Agreement,
the Company assumed Antigen common stock purchase options. The option
holders
received 105,000 shares of the Company’s common stock.
In
conjunction with this acquisition, the Company recorded approximately
$4,878,012
of intangible assets, consisting of granted patents and pending patent
applications, which are being amortized on a straight-line basis over
their
estimated useful lives which range from ten to twenty years. The following
table
summarizes the fair value of the assets acquired and liabilities assumed
in the
acquisition:
|
Current
assets
|
$
|
100,558
|
||
|
Property
and equipment
|
10,026
|
|||
|
Patents
|
4,878,012
|
|||
|
Total
assets acquired
|
$
|
4,988,596
|
||
|
Current
liabilities
|
191,187
|
|||
|
Net
assets acquired
|
$
|
4,797,409
|
The
results of operations of Antigen have been included in the consolidated
financial statements since the date of acquisition.
The
following unaudited pro forma financial information assumes that the
acquisition
consummated in 2003 had occurred as of the beginning of each
period:
|
July
31,
|
|||||||
|
2004
|
2003
|
||||||
|
Total
Revenue
|
$
|
627,184
|
$
|
584,475
|
|||
|
Net
Loss Available to Common Stockholders
|
$
|
19,172,586
|
$
|
14,286,258
|
|||
|
Basic
and Diluted Net Loss per Common Share
|
$
|
(0.64
|
)
|
$
|
(0.60
|
)
|
|
80
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
4 - Property and Equipment:
The
costs
and accumulated depreciation of property and equipment are summarized
as
follows:
|
July
31,
|
|||||||
|
2005
|
2004
|
||||||
|
Land
|
$
|
367,478
|
$
|
338,129
|
|||
|
Buildings
and Improvements
|
2,325,813
|
2,140,055
|
|||||
|
Furniture
and Fixtures
|
87,524
|
83,957
|
|||||
|
Office
Equipment
|
141,209
|
125,289
|
|||||
|
Lab
Equipment
|
3,763,869
|
3,576,570
|
|||||
|
Total
Property and Equipment
|
6,685,893
|
6,264,000
|
|||||
|
Less
Accumulated Depreciation
|
2,709,151
|
1,972,378
|
|||||
|
Property
and Equipment, Net
|
$
|
3,976,742
|
$
|
4,291,622
|
|||
Depreciation
expense amounted to $631,134, $575,709 and $474,764 for the years ended
July 31,
2005,
2004
and
2003,
respectively.
Note
5 - Property Held for Investment, Net:
The
costs
and accumulated depreciation of assets held for investment are summarized
as
follows:
|
July
31,
|
|||||||
|
2005
|
2004
|
||||||
|
Assets
Held For Investment
|
$
|
2,581,703
|
$
|
2,375,507
|
|||
|
Less:
Accumulated Depreciation
|
209,954
|
125,001
|
|||||
|
Assets
Held For Investment, Net
|
$
|
2,371,749
|
$
|
2,250,506
|
|||
Depreciation
expense amounted to $73,077, $59,715 and $57,877 for the years ended
July 31,
2005,
2004
and
2003,
respectively.
The
Company’s intent is to hold this property for investment purposes and collect
rental income. Included in income from rental operations, net is $315,514,
$237,040 and $252,416 of rental income and $205,188, $163,480 and $231,626
of
rental expenses, including interest charges of $75,531, $49,693 and $77,033,
for
the years ended July 31, 2005,
2004
and 2003, respectively.
Note
6 - Patents:
The
costs
and accumulated amortization of patents are summarized as follows:
|
July
31,
|
|||||||
|
2005
|
2004
|
||||||
|
Patents
|
$
|
6,338,104
|
$
|
6,199,402
|
|||
|
Less:
Accumulated Amortization
|
895,010
|
502,497
|
|||||
|
Patents,
Net
|
$
|
5,443,094
|
$
|
5,696,905
|
|||
|
Weighted
Average Life
|
15.1
years
|
16.4
years
|
|||||
Amortization
expense amounted to $399,737, $377,719 and $57,195 for the years ended
July 31,
2005,
2004
and
2003,
respectively. Amortization expense is expected to be approximately $400,000
per
year for the years ended July 31, 2006, 2007, 2008, 2009 and 2010. During
the
year ended July 31, 2005,
the
Company wrote off approximately $67,000 of patents to general and administrative
expenses.
81
82
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
7 - Income Taxes:
The
Company has incurred losses since inception, which have generated net operating
loss carryforwards. The net operating loss carryforwards arise from both
United
States and Canadian sources. Pretax losses arising from domestic operations
(United States) were
$20,937,976 and $15,357,321 for the years ended July 31, 2005
and
2004,
respectively. Pretax losses arising from foreign operations (Canada and
Bermuda)
were $3,063,759 and $3,815,265 for the years ended July 31, 2005
and
2004,
respectively. As of July 31, 2005,
the
Company has net operating loss carryforwards in Generex Biotechnology
Corporation of approximately $68,554,295, which expire in 2014 through
2025, and
in Generex Pharmaceuticals Inc. of approximately $26,801,162, which expire
in
2007 through 2012. These loss carryforwards are subject to limitation in
future
years should certain ownership changes occur.
For
the
years ended July 31, 2005,
2004
and 2003,
the
Company’s effective tax rate differs from the federal statutory rate principally
due to net operating losses and other temporary differences for which no
benefit
was recorded.
Deferred
income taxes consist of the following:
|
July
31,
|
|||||||
|
2005
|
2004
|
||||||
|
Deferred
Tax Assets:
|
|||||||
|
Net
operating loss carry forwards
|
$
|
32,989,041
|
$
|
27,417,561
|
|||
|
Other
timing difference
|
3,567,485
|
1,769,094
|
|||||
|
Total
Deferred Tax Assets
|
36,556,526
|
29,186,655
|
|||||
|
Valuation
Allowance
|
(34,950,200
|
)
|
(27,443,257
|
)
|
|||
|
Deferred
Tax Liabilities
|
|||||||
|
Intangible
assets
|
(1,449,881
|
)
|
(1,552,501
|
)
|
|||
|
Other
timing difference
|
(156,445
|
)
|
(190,897
|
)
|
|||
|
Total
Deferred Tax Liabilities
|
(1,606,326
|
)
|
(1,743,398
|
)
|
|||
|
Net
Deferred Income Taxes
|
$
|
--
|
$
|
--
|
|||
A
reconciliation of the United States Federal Statutory rate to the Company’s
effective tax rate for the years ended July 31, 2005,
2004
and
2003
is as
follows:
|
2005
|
2004
|
2003
|
||||||||
|
|
||||||||||
|
Federal
statutory rate
|
(34.0
|
)%
|
(34.0
|
)%
|
(34.0
|
)
|
||||
|
Increase
(decrease) in income taxes resulting from:
|
||||||||||
|
Imputed
interest income on intercompany receivables
|
||||||||||
|
from
foreign subsidiaries
|
--
|
1.6
|
1.4
|
|||||||
|
Foreign
taxes booked at different rates
|
--
|
--
|
.7
|
|||||||
|
Nondeductible
items
|
3.0
|
1.8
|
1.9
|
|||||||
|
Other
|
--
|
--
|
.7
|
|||||||
|
Change
in valuation allowance
|
31.0
|
30.6
|
29.3
|
|||||||
|
Effective
tax rate
|
--
|
%
|
--
|
%
|
--
|
%
|
||||
83
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
8 - Accounts Payable and Accrued Expenses:
Accounts
payable and accrued expenses consist of the following:
|
July
31,
|
|||||||
|
2005
|
2004
|
||||||
|
Accounts
Payable
|
$
|
999,726
|
$
|
1,173,609
|
|||
|
Accrued
Legal and Settlements
|
599,461
|
252,537
|
|||||
|
Termination
Agreements and Severance Pay
|
265,720
|
411,452
|
|||||
|
Audit
and Accounting
|
274,627
|
100,000
|
|||||
|
Executive
Compensation
|
271,312
|
9,801
|
|||||
|
Total
|
$
|
2,410,846
|
$
|
1,947,399
|
|||
Note
9 - Short-Term Advance:
On
March
30, 2005, the Company entered into an agreement with an affiliated party
to
provide the Company with approximately $325,000 in funding. The funds
were
designated to assist the Company in satisfying its obligations under
the terms
of the November convertible debenture agreements. The Company is obligated
to
repay the advance, without interest, in three equal installments on October
1,
2005, November 1, 2005 and December 1, 2005. Upon failure to repay any
installment when due, all amounts become payable on demand and interest
on such
unpaid amounts will accrue interest at the rate of 8 percent per annum.
As of
July 31, 2005, the Company has accrued approximately $9,000 in interest
expense
on the outstanding advance.
Note
10 - Commitments and Contingent Liabilities:
Consulting
Services
The
Company’s Consulting Agreement with its Vice President of Research and
Development (the V.P.), as amended and supplemented, continues through
July 31,
2010, subject to termination without cause by the V.P. or the Company
at any
time after January 31, 2003 upon 12 months prior written notice. The
Consulting
Agreement provides for an annual base compensation of $250,000 per year
(starting August 1, 2000), subject to annual increases. In addition,
the
Consulting Agreement provides for certain bonus compensation to be paid
to the
V.P. for achievement of certain milestones under the Company’s development
agreements with pharmaceutical companies. During the 2001 fiscal year,
the
Company paid the V.P. $300,000 for his involvement in securing a development
agreement for a specific product with a pharmaceutical company. The Consulting
Agreement also provides for the V.P. to be granted options to purchase
150,000
shares of common stock in each of the next 10 fiscal years, starting
with the
2001 fiscal year. The options must be granted under option plans approved
by the
Company’s stockholders.
In
connection with amending and supplementing the Consulting Agreement in
January
1998, the Company issued 1,000 shares of Special Voting Rights Preferred
Stock
to the V.P. See Note 15 for description of Special Voting Rights Preferred
Stock.
On
August
26, 2004, the Vice President of Research and Development resigned from
his
position as an officer of the Company. The V.P. also gave notice to the
Company
that the Consulting Agreement between the V.P. and the Company will terminate
effective August 25, 2005.
84
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
10 - Commitments and Contingent Liabilities (Continued):
Leases
The
Company has entered into various operating lease agreements for the use
of
vehicles and office equipment.
Aggregate
minimum annual lease commitments of the Company under non-cancelable
operating
leases as of July 31, 2005
are as
follows:
|
Year
|
Amount
|
|||
|
2006
|
$
|
40,586
|
||
|
2007
|
21,669
|
|||
|
2008
|
7,378
|
|||
|
2009
|
7,378
|
|||
|
2010
|
1,230
|
|||
|
Thereafter
|
--
|
|||
|
Total
Minimum Lease Payments
|
$
|
78,241
|
||
Lease
expense amounted to $37,400,
$40,239 and $42,504 for the years ended July 31, 2005,
2004
and
2003,
respectively.
The
preceding data reflects existing leases and does not include replacements
upon
their expiration. In the normal course of business, operating leases
are
generally renewed or replaced by other leases.
Rental
Operations
The
Company leases a portion of the floor that it owns in an office building
located
in Toronto, Canada, as well as two commercial buildings. The following
represents the approximate minimum amount of sublease income under current
lease
agreements to be received in years ending after July 31, 2005:
|
Year
|
Amount
|
|||
|
2006
|
$
|
134,644
|
||
|
2007
|
121,429
|
|||
|
2008
|
79,990
|
|||
|
2009
|
33,033
|
|||
|
Thereafter
|
--
|
|||
|
Total
|
$
|
369,096
|
||
Property
Held for Investment
The
Company leases units of property that it owns located in Toronto, Canada.
The
following represents the approximate minimum amount in lease income under
current lease agreements to be received in years ending after July 31,
2005:
|
Year
|
Amount
|
|||
|
2006
|
$
|
183,961
|
||
|
2007
|
158,595
|
|||
|
2008
|
102,108
|
|||
|
2009
|
29,469
|
|||
|
Thereafter
|
--
|
|||
|
Total
|
$
|
474,133
|
||
85
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
10 - Commitments and Contingent Liabilities (Continued):
Supply
Agreements
The
Company has a supply agreement with Valois, S.A. and Valois of America,
Inc.
(collectively Valois), to supply the Company with certain products developed
and
manufactured by Valois. Pursuant to the agreement, the Company shall
pay
milestone payments to Valois within 30 days of July 19 beginning in fiscal
2001
for the next five years. These milestone payments are based on exceeding
certain
specified levels of product purchases. If the milestone obligations are
not met
after a five-year period, the Company may elect to pay Valois an annual
payment
of $50,000 until the milestone obligation is met in order to maintain
exclusive
rights under the agreement. In the event the Company chooses to end the
agreement after the fifth anniversary, the Company shall pay Valois a
one-time
payment of $350,000. There were no milestone payments required by the
agreement
in the years ended July 31, 2005, 2004 and 2003.
The
Company has a supply agreement with Presspart Manufacturing Limited,
whereby the
Company will purchase its entire requirements for products to use in
the
administration of insulin through the buccal mucosa and shall not purchase
the
products or any metal containers competitive to the products from any
other
person in exchange for an exclusive non-transferable royalty-free irrevocable
license to use the products. The contract shall continue for a minimum
period of
four contract years from the end of the first contract year in which
the
quantity of products purchased by the Company from Presspart exceeds
10,000,000
units, and thereafter, shall continue until terminated by either party
by giving
twelve months written notice.
On
November 5, 2003, the Company entered into a Bulk Supply Agreement with
a
pharmaceutical company for the sale of human insulin crystals to the
Company
over a three year period. The Bulk Supply Agreement established purchase
prices,
minimum purchase requirements, maximum amounts which may be purchased
in each
year and a non-refundable prepayment of $1,500,000 to be applied against
amounts
due for purchases. The prepayment was expensed as purchases were made.
As of
July 31, 2005 and 2004, $-0- and $495,000, respectively, is included
in other
current assets.
Pending
Litigation
On
October 2, 1998, Sands Brothers & Co. Ltd., a New York City-based investment
banking and brokerage firm, initiated an arbitration against the Company
under
New York Stock Exchange rules. Sands alleged that it had the right to
receive,
for nominal consideration, approximately 1.5 million shares of the Company’s
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 of the
Company
that was acquired in late 1997. In exchange, the letter agreement purported
to
grant Sands the right to acquire 17 percent of Generex Pharmaceuticals’ common
stock for nominal consideration. Sands claimed that its right to receive
shares
of Generex Pharmaceuticals’ common stock applies to the Company’s common stock
since outstanding shares of Generex Pharmaceuticals’ common stock were converted
into shares of the Company’s 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.
86
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
10 - Commitments and Contingent Liabilities (Continued):
Pending
Litigation (Continued)
Pursuant
to an arbitration award dated September 22, 1999, the arbitration panel
that
heard this case awarded Sands $14,070 and issued a declaratory judgment
requiring the Company to issue to Sands a warrant to purchase 1,530,020
shares
of the Company’s common stock pursuant to and in accordance with the terms of
the purported October 1997 letter agreement. On October 13, 1999, Sands
commenced a special proceeding to confirm the arbitration award in the
Supreme
Court of the State of New York, County of New York (the “New York Supreme
Court”). On November 10, 1999, the Company moved to vacate the arbitration
award. On March 20, 2000, the New York Supreme Court granted Sands’ petition to
confirm the award and denied the Company’s motion to vacate the award. The
Company appealed and on January 23, 2001, the New York State Appellate
Division,
First Department (the “Appellate Division”), modified the judgment of the New
York Supreme Court that had confirmed the arbitration award against the
Company.
The Appellate Division affirmed the portion of the New York Supreme Court
judgment that had confirmed the granting of monetary relief of $14,070
to Sands
but modified the judgment to vacate the portion of the arbitration award
directing the issuance to Sands of a warrant to purchase 1,530,020 shares
of the
Company’s common stock. The Appellate Division held that the portion of the
award directing the Company to issue warrants to Sands is too indefinite
to be
enforceable and remanded the matter to the arbitration panel for a final
and
definite award with respect to such relief or its equivalent (including
possibly
an award of monetary damages). The arbitration panel commenced hearings
on the
matters remanded by the Appellate Division in June 2001. On November
7, 2001,
the arbitration panel issued an award again requiring the Company to
issue to
Sands a warrant to purchase 1,530,020 shares of the Company’s common stock
purportedly pursuant to and in accordance with the terms of the October
1997
letter agreement. Thereafter, Sands submitted a motion to the New York
Supreme
Court to modify and confirm the arbitration panel’s award while the Company
filed a motion with the court to vacate the arbitration award. On February
25,
2002, the New York Supreme Court vacated the arbitration panel’s award. The
Supreme Court concluded that the arbitration panel had “disregarded the plain
meaning” of the directive given by the Appellate Division in the Appellate
Division’s January 23, 2001 decision that remanded the matter of the warrant for
reconsideration by the panel. The Supreme Court found that the arbitration
panel’s award “lacks a rational basis”. The Supreme Court also remanded the
matter to the New York Stock Exchange on the issue of whether the arbitration
panel should be disqualified. Sands has appealed the February 25, 2002
order of
the Supreme Court to the Appellate Division. The Company filed a
cross-appeal on issues relating to the disqualification of the arbitration
panel.
On
October 29, 2002, the Appellate Division issued a decision and order
unanimously
modifying the lower court's order by remanding the issue of damages to
a new
panel of arbitrators and otherwise affirming the lower court's order.
The
Appellate Division's decision and order limits the issue of damages before
the
new panel of arbitrators to reliance damages which is not to include
an award of
lost profits. Reliance damages are out-of-pocket damages incurred by
Sands. The
Appellate Division stated that the lower court properly determined that
the
arbitration award, which had granted Sands warrants for 1,530,020 shares
of the
registrant's stock, was incorrect.
On
March
18, 2003, the Appellate Division of the Supreme Court of New York denied
a
motion by Sands for re-argument of the October 29, 2002 decision, or,
in the
alternative, for leave to appeal to the Court of Appeals. A new arbitration
took
place in early June 2004.
87
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
10 - Commitments and Contingent Liabilities (Continued):
Pending
Litigation (Continued)
On
August
17, 2004, the Arbitration Panel of the New York Stock Exchange issued
a final
award in the case of Sands vs. the Company, awarding Sands $150,000 in
reliance
damages. A motion to confirm this award has been filed by Sands
and was
granted on February 1, 2005. In September 2005 Sands filed a
motion
seeking leave from the New York Court of Appeals to appeal to the prior
orders
of the Appellate Division vacating the prior Arbitration Panel’s warrant award.
As such, the award may be subject to further legal proceedings. The Company
has
accrued $150,000 and it is included in the balance sheet under the caption
accounts payable and accrued expenses.
In
February 2001, a former business associate of the former Vice President
of
Research and Development (VP), and an entity called Centrum Technologies
Inc.
(“CTI”) commenced an action in the Ontario Superior Court of Justice against
the
Company and the VP seeking, among other things, damages for alleged breaches
of
contract and tortious acts related to a business relationship between
this
former associate and the VP that ceased in July 1996. The plaintiffs’ statement
of claim also seeks to enjoin the use, if any, by the Company of three
patents
allegedly owned by the company called CTI. On July 20, 2001, the Company
filed a
preliminary motion to dismiss the action of CTI as a nonexistent entity
or,
alternatively, to stay such action on the grounds of want of authority
of such
entity to commence the action. The plaintiffs brought a cross motion
to amend
the statement of claim to substitute Centrum Biotechnologies, Inc. (“CBI”) for
CTI. CBI is a corporation of which 50 percent of the shares are owned
by the
former business associate and the remaining 50 percent are owned by the
Company.
Consequently, the shareholders of CBI are in a deadlock. The court granted
the
Company’s motion to dismiss the action of CTI and denied the plaintiffs’ cross
motion without prejudice to the former business associate to seek leave
to bring
a derivative action in the name of or on behalf of CBI. The former business
associate subsequently filed an application with the Ontario Superior
Court of
Justice for an order granting him leave to file an action in the name
of and on
behalf of CBI against the VP and the Company. The Company has opposed
the
application which is now pending before the Court. In September 2003,
the
Ontario Superior Court of Justice granted the request and issued an order
giving
the former business associate leave to file an action in the name of
and on
behalf of CBI against the VP and the Company. A statement of claim was
served in
July 2004. The Company is not able to predict the ultimate outcome of
this legal
proceeding at the present time or to estimate an amount or range of potential
loss, if any, from this legal proceeding.
In
February 2005, a consultant commenced an action in the Ontario Superior
Court of
Justice against the Company seeking approximately $600,000 in damages
for
alleged contract breaches in respect of unpaid remuneration and other
compensation allegedly owed to him. The Company is of the view that the
claims
are wholly without merit and intends to defend this action vigorously.
The
Company is not able to predict the ultimate outcome of this legal proceeding
at
the present time or estimate an amount or range of potential loss, if
any, from
this legal proceeding.
The
Company is involved in certain other legal proceedings in addition to
those
specifically described herein. Subject to the uncertainty inherent in
all
litigation, the Company does not believe at the present time that the
resolution
of any of these legal proceedings is likely to have a material adverse
effect on
the Company’s financial position, operations or cash flows.
With
respect to all litigation, as additional information concerning the estimates
used by the Company becomes known, the Company reassesses its position
both with
respect to accrued liabilities and other potential exposures.
88
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
10 - Commitments and Contingent Liabilities (Continued):
Employment
Agreements
On
March
17, 2003, the Company entered into an employment agreement for an initial
term
of five years, whereby the Company is required to pay an annual base
salary and
bonus of $130,000 to the employee. In the event the agreement is terminated
within the initial five-year term, by reason other than cause, death,
voluntary
retirement or disability, the Company is required to pay the employee
in one
lump sum twelve months base salary and the average annual bonus.
On
August
6, 2003, in conjunction with the Antigen acquisition, (see Note 3) the
Company
entered into at will employment agreements with five Antigen employees
requiring
the Company to pay an annual aggregate salary of $621,500 to the five
employees.
In the event any agreement is terminated by reason other than death,
disability,
a voluntary termination not for good reason (as defined in the agreement)
or a
termination for cause, the Company is required to pay the employee severance
in
accordance with the terms of the individual employment agreement. On
November
19, 2003, the Company terminated an employment agreement with one of
these
individuals. Subsequent to the termination, the Company is required to
pay an
annual aggregate salary of $456,500 to the remaining four
employees.
On
April
5, 2005, the Company agreed to extend an employment agreement, which
expired
March 31, 2005, whereby, the Company is required to pay an annual base
salary of
$200,000, effective April 1, 2005. In the event the agreement is terminated
within the three-year term, by reason other than cause, death, voluntary
retirement or disability, the Company is required to pay the employee
the
remaining amounts of base compensation, for the lesser of twelve months
or the
remainder of the term of this agreement, as well as any other compensation
earned by the employee that payment was deferred.
License
Agreements
On
June
15, 2005 the Company entered into a five-year product licensing and distribution
agreement with MedGen Corp.(MedGen) for assistance in the application
to the
Lebanese Ministry of Public Health seeking approval for the commercial
sale of
Oral-lyn™. The agreement also sets forth terms including product registration,
manufacturing marketing and promotion, selling price and payment and
minimum
purchase obligations.
In
conjunction with the execution of this license agreement, MedGen is obligated
to
pay the Company a license fee of $500,000, to be received as follows:
(i)
non-refundable $50,000 fee payable upon execution of the agreement, (ii)
$200,000 on or before July 25, 2005 (which was subsequently postponed
until
November 2005), and (iii) $250,000 on or before the date of certain milestones
as stated in the agreement. During the fiscal year end July 31, 2005
the Company
received $50,000 under this agreement, which is included in miscellaneous
income
as all necessary requirements have been satisfied.
Termination
Agreements
On
March
9, 2004, the Company entered into a Memorandum of Agreement as a result
of the
termination of one of its employees whereby the Company has committed
to pay
approximately $432,000 ($575,000 Canadian dollars), the unpaid portion
of
$265,720 ($325,000 Canadian dollars) is included in accounts payable
and accrued
expenses at July 31, 2005,
and
issue options to purchase 450,000 shares of common stock at an exercise
price of
$1.47.
89
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
10 - Commitments and Contingent Liabilities (Continued):
Termination
Agreements (Continued)
On
December 17, 2004, the Company and Elan International Services, Ltd.
(EIS)
agreed to terminate their joint venture through Generex (Bermuda) Ltd.
EIS has
agreed to transfer all shares of capital stock or Generex (Bermuda) owned
by it
to the Company. (See Note 20)
Note
11 - Related Party Transactions:
The
amount due from a related party at July 31, exclusive of the officers’ loans
receivable, is as follows:
|
EBI,
Inc.
|
||||
|
Beginning
Balance, August 1, 2003
|
$
|
362,779
|
||
|
Payment
Made During 2004
|
(32,807
|
)
|
||
|
Effect
of Foreign Currency Translation Adjustments
|
19,322
|
|||
|
Ending
Balance, July 31, 2004
|
349,294
|
|||
|
Effect
of Foreign Current Transaction Adjustment
|
30,318
|
|||
|
Ending
Balance, July 31, 2005
|
$
|
379,612
|
||
This
amount, which is due from EBI, Inc., is non-interest bearing, unsecured
and has
no fixed terms of repayment. EBI, Inc. is a shareholder of the Company
and is
controlled by the estate of the Company’s former Chairman of the
Board.
The
Company estimates the following additional amounts would have been recorded
if
such transaction was consummated under arms-length agreements:
|
For
the Years Ended July
31,
|
||||||||||
|
2005
|
2004
|
2003
|
||||||||
| Interest Income | $ | 15,854 | $ | 19,012 | $ | 12,207 | ||||
The
interest income amounts were computed at estimated prevailing rates based
on the
average receivable balance outstanding during the periods reflected.
During
the years ended July 31, 2005
and
2004, the Company’s three senior officers, and during the year ended July 31,
2003,
the
Company’s four senior officers, who are also shareholders of the Company, were
compensated indirectly by the Company through management services contracts
between the Company and management firms of which they are owners. The
amounts
paid to these management firms amounted to $183,319, $927,523, and $1,319,238
for the years ended July 31, 2005,
2004
and
2003,
respectively.
See
Note
10 for a discussion of the consulting agreement with the Company’s Vice
President of Research and Development.
The
Company utilizes a management company to manage all of its real properties.
The
property management company is owned by two of the Company’s senior officers and
the estate of the Company’s former Chairman of the Board. For the years ended
July 31, 2005,
2004
and
2003,
the
Company has paid the management company $44,024, $40,180 and $33,237,
respectively, in management fees.
90
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
12 - Long-Term Debt:
Long-term
debt consists of the following:
|
July
31,
|
|||||||
|
2005
|
2004
|
||||||
|
Mortgage
payable - interest at 4.924 percent per annum, monthly principal
and
interest payments of $1,655, final payment due June 2006,
secured by real
property located at 98 Stafford Drive, Brampton, ON
|
$
|
252,830
|
$
|
--
|
|||
|
Mortgage
payable - interest at 16.5 percent per annum, monthly principal
payments
of $8,176 plus interest, final payment due May 2006, secured
by real
property located at Brampton and Mississauga, ON
|
310,688
|
--
|
|||||
|
Mortgage
payable - interest at 4.913 percent per annum, monthly principal
and
interest payments of $2,667, final payment due June 2006,
secured by real
property located at 1740 Sismet Road, Mississauga, ON
|
407,790
|
--
|
|||||
|
Mortgage
payable - interest at 6.85 percent per annum, monthly payments
of
principal and interest of $4,678, final payment due May 2006,
secured by
first mortgage over real property located at 17 Carlaw Avenue
and 33
Harbour Square, Toronto, Canada
|
612,524
|
573,184
|
|||||
|
Mortgage
payable - interest at 10 percent per annum, monthly payments
of principal
and interest of $2,140, final payment due October 2005, secured
by real
property located at 11 Carlaw Avenue, Toronto, Canada
|
197,353
|
187,127
|
|||||
|
Mortgage
payable - interest at 8.5 percent per annum, monthly payments
of interest
only of $2,316, principal payment due August 2006, secured
by real
property located at 11 Carlaw Avenue, Toronto, Canada
|
327,040
|
300,920
|
|||||
|
Demand
Term Loan payable - interest at 5.8 percent per annum, monthly
principal
and interest payments of $5,451, final payment due November
2005, secured
by real property located at 11 Carlaw Avenue, Toronto, Canada
and
restricted cash of $204,734
|
790,337
|
787,402
|
|||||
|
Mortgage
payable - interest at 11.5 percent per annum, monthly interest
payments of
$3,428, principal due August 1, 2006, secured by secondary
rights to real
property located at 11 Carlaw Avenue, Toronto, Canada
|
408,800
|
376,150
|
|||||
|
Total
Debt
|
3,307,362
|
2,224,783
|
|||||
|
Less
Loan Origination Fees, Net
|
19,471
|
--
|
|||||
|
Total
Debt, Net of Loan Origination Fees
|
$
|
3,287,891
|
$
|
2,224,783
|
|||
91
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
12 - Long-Term Debt (Continued):
|
July
31,
|
|||||||
|
2005
|
2004
|
||||||
|
Total
Debt, Net of Loan Origination Fees
|
$
|
3,287,891
|
$
|
2,224,783
|
|||
|
Less
Current Maturities of Long-Term Debt, Net of
|
|||||||
|
Loan
Origination Fees of $19,471 and $-0-, respectively
|
2,552,059
|
1,366,122
|
|||||
|
Total
Long-Term Debt
|
$
|
735,832
|
$
|
858,661
|
|||
Aggregate
maturities of long-term debt of the Company due within the next five
years are
as follows:
|
Year
|
Amount
|
|||
|
2006
|
$
|
2,571,530
|
||
|
2007
|
735,832
|
|||
|
Thereafter
|
--
|
|||
|
Total
|
$
|
3,307,362
|
||
Note
13 - Convertible Debentures:
$4
Million Convertible Debenture
On
November 8, 2004, the Company entered into four definitive agreements
with
accredited investors, pursuant to which the Company would issue four
$1,000,000
convertible promissory notes (“convertible debentures”) for aggregate gross
proceeds of $4,000,000. The notes carry a 6% coupon and a 15 month term
and
amortize in 13 equal monthly installments commencing in the third month
of the
term. The convertible debentures are convertible into registered common
stock of
the Company at $0.82 per share. The principal and interest payments are
payable
in cash or, at the Company's option, in registered stock valued at a
10%
discount to the average of the 20-day VWAP at as the payment date, subject
to
certain restrictions. The transaction terms include 100% five-year warrant
coverage at a per share exercise price equal to a 10% premium to the
10-day VWAP
on the closing date and a 100% additional investment right exercisable
for up to
twelve months following the effective date of the registration statement
in
respect of the transaction.
During
December 2004, the Company issued the aforementioned convertible debentures.
Proceeds related to the issuance, net of issuance costs of $389,970,
amounted to
$3,699,930. Included in the issuance costs were warrants issued to a
third party
to purchase 145,000 shares of common stock at $0.91 per share. The fair
value of
the warrant was determined to be $89,900 using the Black Scholes pricing
model
assuming a risk-free rate of 1.79 percent, an expected volatility of
1.0463 and
a five year life. The fair value of the warrant, which has been allocated
to
additional paid in capital, and together with the $300,070 of issuance
costs is
being amortized over the life of the debt as a deferred debt issuance
cost. As
of July 31, 2005 $233,982 has been amortized as expense and the remaining
$155,988 is included in deferred debt issuance costs.
92
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
13 - Convertible Debentures (Continued):
$4
Million Convertible Debenture (Continued)
The
holders of the convertible debentures also received warrants to purchase
4,878,048 of common stock at $0.91 per share. In accordance with Emerging
Issues
Task Force Issue 00-27, Application of Issue No. 98-5 to Certain Convertible
Instruments ("EITF 00-27"), the Company recognized the value attributable
to the
warrants in the amount of $1,722,222 to additional paid-in capital and
a
discount against the convertible debenture. The Company valued the warrants
in
accordance with EITF 00-27 using the Black-Scholes pricing model assuming
a
risk-free rate of 1.79 percent, an expected volatility of 1.0463 and
a five year
life. The debt discount attributed to the value of the warrants issued
is
amortized over the convertible debenture’s maturity period as interest expense
using the effective yield method.
In
accordance with Emerging Issues Task Force Issue 98-5, Accounting for
Convertible Securities with a Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios ("EITF 98-5"), the Company recognized the
value
attributable to the beneficial conversion feature, valued at $1,722,222,
to
additional paid-in capital and a discount against the convertible debenture.
The
debt discount attributed to the beneficial conversion feature is amortized
over
the convertible debenture's maturity period as interest expense using
the
effective yield method.
The
Company amortized the convertible debenture debt discount attributed
to the
beneficial conversion feature and the value of the warrants and recorded
non-cash interest expense of $2,060,068 for the year ended July 31, 2005.
As of
July 31, 2005, the Company has issued 1,338,415 shares of common stock
to the
holders of the convertible debentures upon receipt of the holders’ notice of
conversions totaling $1,097,500. In conjunction with the conversions,
the
Company recognized $753,923 of the unamortized debt discount attributed
to the
beneficial conversion feature and the value of the warrants as interest
expense.
The
Company has repaid the note holders $506,564 of the principal and interest
in
cash and $1,311,829 of the principal and interest in 1,988,731 shares
of common
stock as of July 31, 2005.
$500,000
Convertible Debenture
On
March
28, 2005, the Company entered into a definitive agreement pursuant to
which the
Company would issue a convertible promissory note for aggregate gross
proceeds
of $500,000. The note bears interest at 10 percent per annum payable
in common
stock at the holders option and was due on May 15, 2005. The note is
convertible
into registered common stock of the Company at a per share price equal
$0.82.
The
holder of the convertible debenture also received warrants to purchase
1,219,512
of common stock at $0.82 per share. In accordance with EITF 00-27 the
Company
recognized the value attributable to the warrants, in the amount of $245,521,
to
additional paid-in capital and a discount against the convertible debenture.
The
Company valued the warrants in accordance with EITF 00-27 using the
Black-Scholes pricing model assuming a risk-free rate of 2.78 percent,
an
expected volatility of 1.0054 and a five year life. The debt discount
attributed
to the value of the warrants issued is amortized over the convertible
debenture’s maturity period as interest expense using the effective yield
method.
In
accordance with EITF 98-5, the Company recognized the value attributable
to the
beneficial conversion feature valued at $86,984, to additional paid-in
capital
and a discount against the convertible debenture. The debt discount attributed
to the beneficial conversion feature is amortized over the convertible
debenture's maturity period as interest expense using the effective yield
method.
93
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
13 - Convertible Debentures (Continued):
$500,000
Convertible Debenture (Continued)
The
Company amortized the convertible debenture debt discount attributed
to the
beneficial conversion feature and the value of the warrants and recorded
non-cash interest expense of $332,505 for the year ended July 31, 2005.
On
June
7, 2005 the Company entered into an agreement with the note holder to
extend the
maturity date of the convertible debenture to July 22, 2005. In consideration
for the holder’s agreement to amend the original convertible debenture the
Company granted a warrant to purchase 1,219,512 shares of common stock
at $0.82
per share with an expiration of June 10, 2010. In accordance with EITF
98-5 the
fair value of the warrants, $597,561, was determined to be the reacquisition
price on the debt on the extinguishment date and was recorded as a loss
on
extinguishment of the debt. It was then determined that new debt did
not have a
beneficial conversion feature.
On
July
22, 2005 the Company entered into an agreement with the note holder to
extend
the maturity date of the convertible debenture to September 20, 2005.
In
consideration for the holder’s agreement to amend the original convertible
debenture the Company granted a warrant to purchase 1,219,512 shares
of common
stock at $0.82 per share with an expiration of July 22, 2010. In accordance
with
EITF 98-5 the fair value of the warrants, $524,390, was determined to
be the
reacquisition price on the debt on the extinguishment date and was recorded
as a
loss on extinguishment of the debt. It was then determined that new debt
did not
have a beneficial conversion feature.
$100,000
Convertible Debenture
On
April
4, 2005, the Company entered into a definitive agreement pursuant to
which the
Company would issue a convertible promissory note for aggregate gross
proceeds
of $100,000. The note bears interest at 10 percent per annum payable
in common
stock at the holders option and is due on May 15, 2005. The note is convertible
into registered common stock of the Company at a per share price equal
$0.82.
The
holder of the convertible debenture also received warrants to purchase
243,902
of common stock at $0.82 per share. In accordance with EITF 00-27, the
Company
recognized the value attributable to the warrants in the amount of $49,104
to
additional paid-in capital and a discount against the convertible debenture.
The
Company valued the warrants in accordance with EITF 00-27 using the
Black-Scholes pricing model assuming a risk-free rate of 2.78 percent,
an
expected volatility of 1.0054 and a five year life. The debt discount
attributed
to the value of the warrants issued is amortized over the convertible
debenture’s maturity period as interest expense using the effective yield
method.
In
accordance with EITF 98-5, the Company recognized the value attributable
to the
beneficial conversion feature valued at $17,397, to additional paid-in
capital
and a discount against the convertible debenture. The debt discount attributed
to the beneficial conversion feature is amortized over the convertible
debenture's maturity period as interest expense using the effective yield
method.
The
Company amortized the convertible debenture debt discount attributed
to the
beneficial conversion feature and the value of the warrants and recorded
non-cash interest expense of $66,501 for the year ended July 31, 2005.
94
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
13 - Convertible Debentures (Continued):
$100,000
Convertible Debenture (Continued)
On
June
7, 2005 the Company entered into an agreement with the note holder to
extend the
maturity date of the convertible debenture to July 22, 2005. In consideration
for the holder’s agreement to amend the original convertible debenture the
Company granted a warrant to purchase 243,902 shares of common stock
at $0.82
per share with an expiration of June 10, 2010. In accordance with EITF
98-5 the
fair value of the warrants, $119,512 was determined to be the reacquisition
price on the debt on the extinguishment date and was recorded as a loss
on
extinguishment of the debt. It was then determined that new debt did
not have a
beneficial conversion feature.
On
July
22, 2005 the Company entered into an agreement with the note holder to
extend
the maturity date of the convertible debenture to September 20, 2005.
In
consideration for the holder’s agreement to amend the original convertible
debenture the Company granted a warrant to purchase 243,902 shares of
common
stock at $0.82 per share with an expiration of July 22, 2010. In accordance
with
EITF 98-5 the fair value of the warrants, $104,878 was determined to
be the
reacquisition price on the debt on the extinguishment date and was recorded
as a
loss on extinguishment of the debt. It was then determined that new debt
did not
have a beneficial conversion feature.
$2
Million Convertible Debenture
On
June
17, 2005, the holders of the $4 million convertible debenture exercised
50
percent of their additional investment right “AIR Exercise” resulting in four
$500,000 convertible promissory notes (“convertible debentures”) for an
aggregate proceeds of $2,000,000. The notes carry a 6% coupon and a 15
month
term and amortize in 13 equal monthly installments commencing in the
third month
of the term. The convertible debentures are convertible into registered
common
stock of the Company at $0.82 per share. The principal and interest payments
are
payable in cash or, at the Company's option, in registered stock valued
at a 10%
discount to the average of the 20-day VWAP at as the payment date, subject
to
certain restrictions. The transaction terms include 100% five-year warrant
coverage at a per share exercise price equal to a 10% premium to the
10-day VWAP
on the closing date and a 100% additional investment right exercisable
for up to
twelve months following the effective date of the registration statement
in
respect of the transaction. In consideration of the AIR Exercise the
Company
reduced the conversion price of the convertible debentures issuable upon
the AIR
Exercise from $0.82 to $0.60 per share.
Proceeds
related to the AIR Exercise, net of issuance costs of $160,300, amounted
to
$1,839,700. Included in the issuance costs were warrants to purchase
35,000
shares of common stock at $0.82 per share and 170,732 shares of common
stock
valued at $0.82 per share issued to a third party. The fair value of
the warrant
was determined to be $20,300 using the Black Scholes pricing model assuming
a
risk-free rate of 3.02 percent, an expected volatility of 0.9775 and
a five year
life. The fair value of the warrant, which has been allocated to additional
paid
in capital, together with the $140,000 of issuance costs is being amortized
over
the life of the debt as a deferred debt issuance cost. As of July 31,
2005
$5,171 has been amortized as expense and the remaining $155,129 is included
in
deferred debt issuance costs.
95
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
13 - Convertible Debentures (Continued):
$2
Million Convertible Debenture (Continued)
The
holders of the convertible debentures also received warrants to purchase
2,439,024 of common stock at $0.82 per share. In accordance with EITF
00-27, the
Company recognized the value attributable to the warrants in the amount
of
$828,571 to additional paid-in capital and a discount against the convertible
debenture. The Company valued the warrants in accordance with EITF 00-27
using
the Black-Scholes pricing model assuming a risk-free rate of 3.02 percent,
an
expected volatility of 0.9775 and a five year life. The debt discount
attributed
to the value of the warrants issued is amortized over the convertible
debenture’s maturity period as interest expense using the effective yield
method.
In
accordance with EITF 98-5 the Company recognized the value attributable
to the
beneficial conversion feature valued at $1,171,429, to additional paid-in
capital and a discount against the convertible debenture. The debt discount
attributed to the beneficial conversion feature is amortized over the
convertible debenture's maturity period as interest expense using the
effective
yield method.
The
Company amortized the convertible debenture debt discount attributed
to the
beneficial conversion feature and the value of the warrants and recorded
non-cash interest expense of $522,378 for the year ended July 31, 2005.
As of
July 31, 2005, the Company has issued 636,992 shares of common stock
to the
holders of the convertible debentures upon receipt of the holders’ notice of
conversions totaling $382,000 and related accrued interest of $195. In
conjunction with the conversions, the Company recognized $382,033 of
the
unamortized debt discount attributed to the beneficial conversion feature
and
the value of the warrants as interest expense.
Note
14 - Series A Preferred Stock:
During
2001, the Company issued 1,000 shares of Series A Preferred Stock (Series
A)
with a par value of $.001 per share. The holder had the right at any
time after
January 16, 2004 to convert Series A shares into shares of common stock
of the
Company; the number of shares of common stock issuable upon conversion
was
variable based on a formula which reflects the common stock price. The
holder
also had the option to exchange the shares of the Company’s Series A Preferred
stock for 3,612 shares of the Company’s convertible preferred shares of Generex
(Bermuda), Ltd. which represents 30.1 percent of the Company’s equity ownership
in Generex (Bermuda) Ltd. Upon exercise, the holder and the Company would
each
own 50 percent of Generex (Bermuda) Ltd. (See Note 20 for discussions
of Generex
(Bermuda), Ltd.) Holders of Series A shares were not entitled to vote.
In
addition, the holders of Series A shares were entitled to receive a dividend
per
share equal to the dividend declared and paid on shares of the Company’s common
stock as and when dividends are declared and paid on the Company’s common stock,
and were also entitled to receive a mandatory annual dividend equal to
6 percent
per year on the original issue price of $12,015 per share. This dividend
was to
be compounded each anniversary of the date of issuance of the Series
A shares
and payable by issuance of additional Series A shares valued at the original
issue price. Any Series A shares outstanding on January 16, 2007, were
to be
redeemed for cash or shares of common stock.
On
January 15, 2002, the Company paid a 6 percent stock dividend on the
Company’s
Series A Preferred Stock. The dividend was paid in shares of Series A
Preferred
Stock, and resulted in a charge to accumulated deficit of $720,900, which
was
calculated based upon the original issue price of the preferred
shares.
96
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
14 - Series A Preferred Stock (Continued):
On
January 15, 2003, the Company paid a 6 percent stock dividend on the
Company’s
Series A Preferred Stock. The dividend was paid in shares of Series A
Preferred
Stock, and resulted in a charge to accumulated deficit of $764,154, which
was
calculated based upon the original issue price of the preferred
shares.
On
January 15, 2004, the Company paid a 6 percent stock dividend on the
Company’s
Series A Preferred Stock. The dividend was paid in shares of Series A
Preferred
Stock, and resulted in a charge to accumulated deficit of $810,003, which
was
calculated based upon the original issue price of the preferred
shares.
In
December 2004, the holder of the Series A Preferred Stock sold its holdings
to a
third party. In conjunction with sale, all of the Company’s outstanding Series A
Preferred Stock was automatically converted to common stock. As a result,
the
buyer received 534,085 shares of common stock and the Company no longer
has any
outstanding shares of Series A Preferred Stock. (See Note 20)
At
July
31, 2005
and
2004,
the
Series A had an aggregate liquidation preference of $-0- and $14,310,057,
respectively.
97
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
15 - Stockholders’ Equity:
Warrants
As
of
July 31, 2005,
the
Company has the following warrants to purchase common stock
outstanding:
|
Number
of Shares
|
Warrant
Exercise
|
Warrant
|
||
|
To
be Purchased
|
Price
Per Share
|
Expiration
Date
|
||
|
214,484
|
$6.50
|
September
29, 2005
|
||
|
114,055
|
$6.60
|
September
29, 2005
|
||
|
239,222
|
$11.13
|
September
29, 2005
|
||
|
226
|
$12.99
|
September
29, 2005
|
||
|
75,000
|
$25.15
|
January
16, 2006
|
||
|
666,667
|
$1.80
|
June
6, 2006
|
||
|
188,656
|
$5.09
|
July
6, 2006
|
||
|
124,859
|
$10.18
|
July
6, 2006
|
||
|
50,000
|
$12.99
|
March
18, 2007
|
||
|
1,269,519
|
$1.71
|
May
27, 2007
|
||
|
70,000
|
$1.25
|
November
29, 2007
|
||
|
60,000
|
$1.88
|
November
29, 2007
|
||
|
505,000
|
$2.50
|
November
29, 2007
|
||
|
30,000
|
$3.00
|
November
29, 2007
|
||
|
20,000
|
$2.50
|
October
30, 2008
|
||
|
425,170
|
$1.86
|
January
9, 2009
|
||
|
57,143
|
$2.20
|
January
9, 2009
|
||
|
13,889
|
$2.25
|
January
9, 2009
|
||
|
166,667
|
$1.89
|
February
13, 2009
|
||
|
23,438
|
$2.02
|
February
13, 2009
|
||
|
17,169
|
$2.10
|
February
13, 2009
|
||
|
1,967,213
|
$1.68
|
July
12, 2009
|
||
|
500,000
|
$1.09
|
August
10, 2009
|
||
|
5,023,048
|
$0.91
|
November
10, 2009
|
||
|
1,563,414
|
$0.82
|
April
27, 2010
|
||
|
1,463,414
|
$0.82
|
June
7, 2010
|
||
|
1,463,414
|
$0.82
|
July
22, 2010
|
||
|
2,474,024
|
$0.82
|
December
15, 2010
|
98
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
15 - Stockholders’ Equity (Continued):
Notes
Receivable - Common Stock
Notes
receivable - common stock consist of two separate promissory notes. The
first
promissory note was issued in conjunction with the redemption of Series
A
Redeemable Common Stock Purchase Warrants in June 1999, and was for $50,000.
This note, which was originally due on December 1, 1999, was initially
extended
until October 1, 2000, and then extended until June 1, 2001. On July
31, 2001,
the uncollected balance on this note, including accrued interest at 7
percent
per annum, was $57,720 and a new promissory note was signed. Under the
terms of
the July 31, 2001 note, the principal of $57,720, together with accrued
interest
at 7 percent per annum, was due July 31, 2002. On July 31, 2002, the
uncollected
balance on this note, including accrued interest, was $61,867 and a new
promissory note was signed. Under the terms of the July 31, 2002 note,
the
principal of $61,867, together with accrued interest at 7 percent per
annum, was
due July 31, 2003. On July 31, 2003, the uncollected balance on this
note,
including accrued interest, was $66,198 and a new promissory note was
signed.
Under the terms of the July 31, 2003 note, the principal of $66,198,
together
with accrued interest at 7 percent per annum, is due July 31, 2004. As
of July
31, 2004,
the
outstanding balance on this note, including accrued interest at 7 percent
per
annum, was $70,857. In January 2005, the Company deemed this note as
uncollectible and, therefore, has taken a charge to general and administrative
expenses for the outstanding principal and accrued interest in the amount
of
$72,107.
The
second promissory note was issued in conjunction with the exercise of
50,000
Common Stock Options in March 2001, and was for $250,000. This note was
originally due on March 15, 2002, when a new promissory note was signed,
effectively extending the due date to March 15, 2003. On March 15, 2003
a new
promissory note was signed, effectively extending the due date to March
15,
2004. As of July 31, 2004,
the
outstanding balance on this note, including accrued interest at 7 percent
per
annum, was $313,946. In January 2005, the Company deemed this note as
uncollectible and, therefore, has taken a charge to general and administrative
expenses for the outstanding principal and accrued interest in the amount
of
$318,996.
Preferred
Stock
The
Company has authorized 1,000,000 shares of preferred stock with a par
value of
one-tenth of a cent ($.001) per share. The preferred stock may be issued
in
various series and shall have preference as to dividends and to liquidation
of
the Company. The Company’s Board of Directors is authorized to establish the
specific rights, preferences, voting privileges and restrictions of such
preferred stock, or any series thereof.
Special
Voting Rights Preferred Stock
In
1997,
the Company issued 1,000 shares of Special Voting Rights Preferred Stock
(SVR
Shares) with a par value of $.001. The Company has the right at any time
after
December 31, 2000, upon written notice to all holders of preferred shares,
to
redeem SVR Shares at $.10 per share. Holders of SVR Shares are not entitled
to
vote, except as specifically required by applicable law or in the event
of
change in control, as defined. In addition, holders of SVR Shares are
entitled
to receive a dividend per share equal to the dividend declared and paid
on
shares of the Company’s common stock as and when dividends are declared and paid
on the Company’s common stock.
99
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
16 - Stock Based Compensation:
Stock
Option Plans
The
Company has three stock option plans under which options exercisable
for shares
of common stock have been or may be granted to employees, directors,
consultants
and advisors. A total of 1,500,000 shares of common stock are reserved
for
issuance under the 1998 Stock Option Plan (the 1998 Plan), a total of
2,000,000
shares of common stock are reserved for issuance under the 2000 Stock
Option
Plan (the 2000 Plan) and a total of 12,000,000 shares of common stock
are
reserved for issuance under the 2001 Stock Option Plan (the 2001 Plan).
The
1998,
2000 and 2001 Plans (the Plans) are administered by the Compensation
Committee
(the Committee). The Committee is authorized to select from among eligible
employees, directors, advisors and consultants those individuals to whom
options
are to be granted and to determine the number of shares to be subject
to, and
the terms and conditions of, the options. The Committee is also authorized
to
prescribe, amend and rescind terms relating to options granted under
the Plans.
Generally, the interpretation and construction of any provision of the
Plans or
any options granted hereunder is within the discretion of the
Committee.
The
Plans
provide that options may or may not be Incentive Stock Options (ISOs)
within the
meaning of Section 422 of the Internal Revenue Code. Only employees of
the
Company are eligible to receive ISOs, while employees and non-employee
directors, advisors and consultants are eligible to receive options which
are
not ISOs, i.e. “Non-Qualified Options.” The options granted by the Board in
connection with its adoption of the Plans are Non-Qualified
Options.
The
following is a summary of the common stock options granted, canceled
or
exercised under the Plan:
|
Weighted
Average
|
|||
|
Shares
|
Exercise
Price Per Share
|
||
|
Outstanding
- August 1, 2002
|
4,882,159
|
$6.18
|
|
|
Granted
|
2,860,000
|
$1.85
|
|
|
Canceled
|
1,077,000
|
$5.95
|
|
|
Exercised
|
70,000
|
$1.59
|
|
|
Outstanding
- July 31, 2003
|
6,595,159
|
$4.38
|
|
|
Granted
|
1,846,000
|
$1.63
|
|
|
Canceled
|
1,181,600
|
$5.61
|
|
|
Exercised
|
45,400
|
$1.88
|
|
|
Outstanding
- July 31, 2004
|
7,214,159
|
$3.49
|
|
|
Granted
|
6,046,110
|
$0.50
|
|
|
Canceled
|
1,653,000
|
$6.49
|
|
|
Exercised
|
--
|
$
--
|
|
|
Outstanding
- July 31, 2005
|
11,607,269
|
$1.51
|
100
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
16 - Stock Based Compensation (Continued):
Stock
Option Plans (Continued)
The
following table summarizes information on stock options outstanding at
July 31,
2005:
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
|
|
|
Weighted
|
||||||||||||||
|
|
Number
|
Average
|
Weighted
|
Number
|
Weighted
|
|||||||||||
|
|
Outstanding
|
Contractual
|
Average
|
Exercisable
|
Average
|
|||||||||||
|
Range
of
|
at
|
Life
|
Exercise
|
at
|
Exercise
|
|||||||||||
|
Exercise
Price
|
July
31, 2005
|
(Years)
|
Price
|
July
31, 2005
|
Price
|
|||||||||||
|
$0.001
|
2,239,610
|
4.68
|
$
|
0.001
|
2,239,610
|
$
|
0.001
|
|||||||||
|
$0.56
- $0.94
|
3,656,500
|
4.42
|
$
|
0.78
|
3,028,500
|
$
|
0.75
|
|||||||||
|
$1.00
- $2.19
|
4,706,000
|
2.60
|
$
|
1.74
|
4,706,000
|
$
|
1.74
|
|||||||||
|
$5.15
- $6.54
|
680,159
|
1.04
|
$
|
5.20
|
680,159
|
$
|
5.20
|
|||||||||
|
$7.50
- $8.70
|
225,000
|
1.09
|
$
|
8.31
|
225,000
|
$
|
8.31
|
|||||||||
|
$10.21
|
100,000
|
0.50
|
$
|
10.21
|
100,000
|
$
|
10.21
|
|||||||||
Options
typically vest over a period of two years and have a contractual life
of five
years.
Options
exercisable at July 31, are as follows:
|
Number
of
|
Weighted
Average
|
|||
|
Year
|
Options
|
Exercise
Price
|
||
|
2003
|
5,858,659
|
$
4.62
|
||
|
2004
|
6,654,659
|
$
3.65
|
||
|
2005
|
10,979,269
|
$
1.54
|
During
the years ended July 31, 2005,
2004
and
2003,
$-0-,
$45,390, and $-0-, respectively, was charged to compensation expense
with
respect to options granted to employees and directors of the
Company.
The
fair
value of each option granted is estimated on grant date using the Black-Scholes
option pricing model which takes into account as of the grant date the
exercise
price and expected life of the option, the current price of the underlying
stock
and its expected volatility, expected dividends on the stock and the
risk-free
interest rate for the term of the option. The following is the average
of the
data used to calculate the fair value:
|
|
Risk-Free
|
Expected
|
Expected
|
Expected
|
|||||||||
|
|
Interest
Rate
|
Life
(Years)
|
Volatility
|
Dividends
|
|||||||||
|
July
31, 2005
|
2.32
|
%
|
5.00
|
1.0215
|
--
|
||||||||
|
July
31, 2004
|
1.00
|
%
|
5.01
|
1.0604
|
--
|
||||||||
|
July
31, 2003
|
0.90
|
%
|
4.29
|
1.0219
|
--
|
||||||||
The
weighted average fair value of the Company’s stock options calculated using the
Black-Scholes option-pricing model for options granted during the years
ended
July 31, 2005,
2004
and
2003
was
$0.59, $1.24 and $1.35 per share, respectively.
101
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
16 - Stock Based Compensation (Continued):
Stock
Option Plans (Continued)
During
the year ended July 31, 2005 the Company issued 2,239,610 options at
an exercise
price of $0.001 for outstanding executive compensation. Accordingly,
the Company
has included a charge for the fair value of these options in the amount
of
$1,332,052 in the statement of operations.
Equity
Instruments Issued for Services Rendered
During
the years ended July 31, 2005,
2004
and
2003,
the
Company issued stock options, warrants and shares of common stock in
exchange
for services rendered to the Company. The fair value of each stock option
and
warrant was valued using the Black Scholes pricing model which takes
into
account as of the grant date the exercise price and expected life of
the stock
option or warrant, the current price of the underlying stock and its
expected
volatility, expected dividends on the stock and the risk free interest
rate for
the term of the stock option or warrant. Shares of common stock are valued
at
the quoted market price on the date of grant. The fair value of each
grant was
charged to the related expense in the statement of operations for the
services
received.
Note
17 - Net Loss Per Share:
Basic
EPS
and Diluted EPS for the years ended July 31, 2005,
have
been computed by dividing the net loss available to common stockholders
for each
respective period by the weighted average shares outstanding during that
period.
All outstanding warrants, options and shares to be issued upon conversion
of the
outstanding convertible debentures, representing approximately 35,291,316
incremental shares, have been excluded from the 2005
computation of Diluted EPS as they are antidilutive due to the losses
generated.
Basic
EPS
and Diluted EPS for the years ended July 31, 2004
and
2003
have
been computed by dividing the net loss available to common stockholders
for each
respective period by the weighted average shares outstanding during that
period.
All outstanding warrants, options and shares to be issued upon conversion
of
Series A Preferred stock, representing approximately 15,058,348 and 12,741,679
incremental shares, have been excluded from the 2004
and
2003,
respectively, computation of Diluted EPS as they are antidilutive due
to the
losses generated.
Note
18 - Supplemental Disclosure of Cash Flow Information:
|
|
For
the Years Ended July 31,
|
|||||||||
|
|
2005
|
2004
|
2003
|
|||||||
|
Cash
paid during the year for:
|
||||||||||
|
Interest
|
$
|
184,655
|
$
|
166,166
|
$
|
149,233
|
||||
|
Income
taxes
|
$
|
--
|
$
|
--
|
$
|
--
|
||||
Disclosure
of non-cash investing and financing activities:
102
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
18 - Supplemental Disclosure of Cash Flow Information
(Continued):
|
Year
Ended July 31, 2005
|
||||
|
Costs
associated with convertible debentures paid from proceeds
|
$
|
300,070
|
||
|
Value
of common stock issued in conjunction with capitalized
|
||||
|
services
upon issuance of convertible debentures
|
$
|
140,000
|
||
|
Value
of warrants issued in conjunction with capitalized
|
||||
|
services
upon issuance of convertible debentures
|
$
|
110,200
|
||
|
Sale
of Series A Preferred Stock and mandatorily converted
|
||||
|
to
common shares
|
$
|
14,310,057
|
||
|
Value
of warrants issued in conjunction with issuance of
|
||||
|
convertible
debentures and related beneficial conversion feature
|
$
|
5,843,450
|
||
|
Satisfaction
of accounts payable through the issuance of
|
||||
|
common
stock
|
$
|
1,526,326
|
||
|
Principal
repayment of convertible debentures through the
|
||||
|
issuance
of common stock
|
$
|
1,235,577
|
||
|
Issuance
of common stock in conjunction with convertible
|
||||
|
debenture
conversions
|
$
|
1,479,500
|
||
|
Issuance
of below market stock options in satisfaction of
|
||||
|
accounts
payable and accrued expenses
|
$
|
1,332,052
|
||
|
Costs
paid from proceeds of issuance of long-term debt
|
$
|
54,466
|
||
|
Non-cash
repayment of long-term debt from proceeds
|
||||
|
of
refinancing
|
$
|
323,301
|
||
|
Year
Ended July 31, 2004
|
||||
|
Issuance
of Series A Preferred Stock as preferred stock dividend
|
$
|
810,003
|
||
|
Application
of deposit to advances to Antigen Express, Inc.
|
$
|
25,000
|
||
|
Acquisition
of Antigen Express, Inc through the issuance of common
|
||||
|
stock
and the assumption of stock options
|
$
|
4,797,409
|
||
|
Retirement
of treasury stock
|
$
|
1,610,026
|
||
|
Purchase
of assets held for investment in exchange for long-term
debt
|
$
|
138,001
|
||
|
Year
Ended July 31, 2003
|
||||
|
Issuance
of Series A Preferred Stock as preferred stock dividend
|
$
|
764,154
|
||
|
Settlement
of officer loans receivable in exchange for shares of
|
||||
|
common
stock held in treasury
|
$
|
1,126,157
|
||
|
Assumption
of long-term debt in conjunction with building purchase
|
$
|
1,080,486
|
||
|
Utilization
of deposit in conjunction with building purchase
|
$
|
501,839
|
||
Note
19 - Segment Information:
The
Company follows SFAS No. 131, “Disclosures about Segments of an Enterprise and
Related Information” (SFAS No. 131). SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating
segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports.
SFAS
No. 131 also establishes standards for related disclosures about products
and
services, geographic areas, and major customers.
SFAS
No.
131 uses a management approach for determining segments. The management
approach
designates the internal organization that is used by management for making
operating decisions and assessing performance as the source of the Company’s
reportable segments. The Company’s management reporting structure provides for
only one segment.
103
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
19 - Segment Information (Continued):
The
regions in which the Company had identifiable assets and revenues are
presented
in the following table. Identifiable assets are those that can be directly
associated with a geographic area.
|
2005
|
2004
|
2003
|
||||||||
|
Identifiable
Assets
|
||||||||||
|
Canada
|
$
|
8,722,630
|
$
|
14,006,834
|
$
|
22,638,708
|
||||
|
United
States
|
|
4,743,215
|
5,005,156
|
--
|
||||||
|
Total
|
$
|
13,465,845
|
$
|
19,011,990
|
$
|
22,638,708
|
||||
|
Revenue
|
||||||||||
|
Canada
|
$
|
--
|
$
|
--
|
$
|
--
|
||||
|
United
States
|
|
392,112
|
627,184
|
|
--
|
|||||
|
Total
|
$
|
392,112
|
$
|
627,184
|
$
|
-
-
|
||||
Note
20 - Collaborative Agreements:
The
Company has a collaboration agreement with Stallergenes, S.A., a European
firm
in immunological treatments and asthma. Through the collaboration the
parties
agreed to pursue the design and test of li-key/allergen epitope hybid
pepticles
to create a novel approach for the control of both dangerous forms of
asthma and
functionally disabling allergic reactions.
The
Company had a joint venture with Elan International Services, Ltd. (“EIS”), a
wholly owned subsidiary of Elan Corporation, plc (EIS and Elan Corporation,
plc
being collectively referred to as “Elan”). Through the joint venture, the
parties agreed to pursue the application of certain of the Company’s and Elan’s
drug delivery technologies, including the Company’s platform technology for the
buccal delivery of large molecule drugs, to pharmaceutical products for
the
treatment of prostate cancer, endometriosis and/or the suppression of
testosterone and estrogen. In January 2002, the parties expanded the
joint
venture agreement to include buccal morphine for the management of pain.
The
parties conducted the joint venture through Generex (Bermuda), Ltd. (Generex
Bermuda), a Bermuda limited liability company.
The
Company applied the $12,015,000 that it received from Elan for the shares
of the
Company’s Series A Preferred Stock (see Note 14) to form Generex Bermuda. The
Company’s interest in this company consists of 6,000 shares of Generex Bermuda
common stock and 3,612 shares of convertible preferred stock, representing
an
80.1 percent equity ownership interest in Generex Bermuda. At the same
time,
Elan remitted $2,985,000 to purchase 2,388 shares of Generex Bermuda
convertible
preferred stock, representing a 19.9 percent equity ownership interest
in
Generex Bermuda. The Series A Preferred stock had an exchange feature
which
allowed Elan to acquire an additional 30.1 percent equity ownership interest
in
Generex Bermuda. As of July 31, 2005,
2004
and
2003,
the
minority interest has been reduced to $-0- due to their share of Generex
Bermuda’s net loss.
104
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
20 - Collaborative Agreements (Continued):
Generex
Bermuda was granted rights to use the Company’s buccal delivery technology and
certain Elan drug delivery technologies for purposes of the joint venture.
Using
the funds from the initial capitalization, Generex Bermuda paid a nonrefundable
license fee of $15,000,000 to Elan in consideration for being granted
rights to
use the Elan drug delivery technologies during the year ended July 31,
2001. The
Company expensed the entire cost of the license as a research and development
expense because of the uncertainties surrounding the future realization
of
revenue from the use of the license. During the years ended July 31,
2003 and
2002, Generex Bermuda continued to incur research and development and
operational expenses in conjunction with the joint venture’s operations. There
has been no research and development and operational activity for the
years
ended July 31, 2005 and 2004.
On
December 17, 2004, the Company entered into a Termination Agreement with
Elan.
Pursuant to the terms of the Termination Agreement, (i) the parties have
agreed
to terminate the Joint Venture Agreements and the Securities Agreements,
except
for the Warrant, which was amended to permit Elan or any other holder
thereof to
transfer the Warrant without the consent of the Company, and (ii) Elan
agreed to
transfer all shares of capital stock of Generex (Bermuda) owned by it
to the
Company. All rights granted by each party to the other terminate, including
without limitation, Elan’s right to appoint a member to the Company’s Board of
Directors, all other rights granted under the terms of the joint venture
terminate, each party retains its intellectual property rights, the Company
obtains full ownership of Generex (Bermuda), and all representatives
of Elan who
are officers and directors of Generex (Bermuda) were required to resign
pursuant
to the terms of the Termination Agreement.
In
connection with negotiating the Termination Agreement, Elan approached
the
Company for consent to transfer the Series A Preferred Stock by way of
an
auction process. The Company responded to Elan request by delivering
a proposal
letter describing the terms and conditions pursuant to which the Company
would
consent to the transfer of the Series A Preferred Stock (the Proposal).
The
Proposal required that (i) the auction process conclude no later than
December
15, 2004 and the Elan’s disposition of the shares conclude no later than
December 31, 2004 (the Closing Date), (ii) the buyer immediately convert
the
preferred stock at the voluntary conversion price of $25.77 (calculated
pursuant
to the terms of the certificate of designation for the preferred stock
resulting
in the issuance of 534,085 shares of common stock), (iii) Elan’s registration
rights may not be transferred, and (iv) for a period of two (2) years
after the
Closing Date, the purchaser of the Series A Preferred Stock may not transfer
the
shares of common stock issuable upon conversion thereof of the Company
shall
have the right to redeem the shares of common stock at a per share price
of 150
percent of the average closing price of the common stock on the Nasdaq
SmallCap
Market for the twenty (20) days immediately preceding the Closing
Date.
Subsequently,
the purchaser of the Series A Preferred Stock converted all outstanding
shares
into 534,085 shares of common stock of the Company and, the Company no
longer
has any outstanding shares of Series A Preferred Stock.
105
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
21 - Quarterly Information (Unaudited):
The
following schedule sets forth certain unaudited financial data for the
preceding
eight quarters ending July 31, 2005.
In our
opinion, the unaudited information set forth below has been prepared
on the same
basis as the audited information and includes all adjustments necessary
to
present fairly the information set forth herein. The operating results
for the
quarter are not indicative of results for any future period.
|
Q1
|
Q2
|
Q3
|
Q4
|
||||||||||
|
Fiscal
Year July 31, 2005:
|
|||||||||||||
|
Contract
research revenue
|
$
|
142,750
|
$
|
76,750
|
$
|
43,750
|
$
|
128,862
|
|||||
|
Operating
loss
|
$
|
(6,674,618
|
)
|
$
|
(5,555,641
|
)
|
$
|
(3,324,521
|
)
|
$
|
(3,003,641
|
)
|
|
|
Net
loss
|
$
|
(6,658,028
|
)
|
$
|
(6,298,182
|
)
|
$
|
(4,696,670
|
)
|
$
|
(6,348,855
|
)
|
|
|
Net
loss available to common
|
|||||||||||||
|
stockholders
|
$
|
(6,658,028
|
)
|
$
|
(6,298,182
|
)
|
$
|
(4,696,670
|
)
|
$
|
(6,348,855
|
)
|
|
|
Net
loss per share
|
$
|
(.19
|
)
|
$
|
(.18
|
)
|
$
|
(.13
|
)
|
$
|
(.16
|
)
|
|
|
Fiscal
Year July 31, 2004:
|
|||||||||||||
|
Contract
research revenue
|
$
|
68,061
|
$
|
117,503
|
$
|
235,129
|
$
|
206,491
|
|||||
|
Operating
loss
|
$
|
(3,790,784
|
)
|
$
|
(4,746,528
|
)
|
$
|
(4,908,093
|
)
|
$
|
(5,119,936
|
)
|
|
|
Net
loss
|
$
|
(3,612,270
|
)
|
$
|
(4,774,620
|
)
|
$
|
(4,900,075
|
)
|
$
|
(5,075,618
|
)
|
|
|
Net
loss available to common
|
|||||||||||||
|
stockholders
|
$
|
(3,612,270
|
)
|
$
|
(5,584,623
|
)
|
$
|
(4,900,075
|
)
|
$
|
(5,075,618
|
)
|
|
|
Net
loss per share
|
$
|
(.13
|
)
|
$
|
(.19
|
)
|
$
|
(.16
|
)
|
$
|
(.17
|
)
|
|
|
Fiscal
Year July 31, 2003:
|
|||||||||||||
|
Contract
research revenue
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
--
|
|||||
|
Operating
loss
|
$
|
(2,805,371
|
)
|
$
|
(4,700,645
|
)
|
$
|
(2,763,741
|
)
|
$
|
(3,578,933
|
)
|
|
|
Net
loss
|
$
|
(2,668,662
|
)
|
$
|
(4,575,030
|
)
|
$
|
(2,607,871
|
)
|
$
|
(3,410,201
|
)
|
|
|
Net
loss available to common
|
|||||||||||||
|
stockholders
|
$
|
(2,668,662
|
)
|
$
|
(5,331,975
|
)
|
$
|
(2,607,871
|
)
|
$
|
(3,417,410
|
)
|
|
|
Net
loss per share
|
$
|
(.13
|
)
|
$
|
(.27
|
)
|
$
|
(.13
|
)
|
$
|
(.14
|
)
|
|
Note
22 - Subsequent Events:
In
August
2005, the Company entered into an agreement with a consultant to provide
investor relation services for a term of one year in exchange for 225,000
shares
of the Company’s restricted common stock plus an additional 7,143 shares of the
Company’s restricted common stock as monthly payments. The issuance of the above
shares is subject to the approval by the Company’s Board of
Directors.
In
September and October 2005, the Company issued an aggregate of 2,363,353
shares
of common stock resulting from the conversion of $1,418,012 of principal
and
accrued interest of the original $2,000,000 convertible debenture (see
Note
13).
106
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
22 - Subsequent Events (Continued):
In
September 2005, the Company and each of the holders of the $4 million
convertible debenture (see Note 13) entered into an Amendment No. 2 to
Securities Purchase Agreement and Registration Rights Agreement pursuant
to
which the investors agreed to exercise an additional $2,000,000 in principal
amount of Additional Investment Rights (AIR). In connection with this
investment, the Company agreed to reduce the conversion price from $0.82
to
$0.60 per share, issue warrants to purchase an aggregate of 2,439,024
shares of
the Company’s common stock at the exercise price of $0.82 per share exercisable
for five years commencing six months following the issuance thereof and
to grant
each investor further AIR. In addition, in connection with the transaction
contemplated by Amendment No. 2, the Company will issue to a placement
agent (i)
170,732 shares of common stock in lieu of a cash fee equal to 7 percent
of the
gross proceeds received by the Company and (ii) warrants exercisable
into
approximately 60,000 shares of common stock at the same exercise price
as the
AIR warrants.
In
September and October 2005, the Company issued an aggregate of 2,036,390
shares
of common stock resulting from the conversion of $1,221,834 of principal
and
accrued interest of the aforementioned additional $2,000,000 convertible
debenture.
Subsequent
to year-end, the Company issued 473,649 shares of common stock to various
vendors for the satisfaction of $388,392 of accounts payable and accrued
liabilities. The shares were valued at $0.82 per share.
In
October 2005, the Company issued an aggregate of 364,113 shares of common
stock
resulting from the conversion of $298,573 of principal and accrued interest
of
the original $4,000,000 convertible debenture (see Note 13).
In
October 2005, the $500,000 convertible debenture (see Note 13) exercised
its
right to convert the principal and accrued interest amount of $528,082
as of the
date of conversion into 644,003 shares of our stock at $0.82 per share.
In
October 2005, the Company issued an aggregate of 909,756 warrants to
certain
financial consultants. All warrants have a five year term and have an
exercise
price of $1.20 per share.
In
October 2005, the $100,000 convertible debenture (see Note 13) exercised
its
right to convert the principal and accrued interest amount of $105,644
as of the
date of conversion into 128,834 shares of our stock at $0.82 per share.
In
October 2005, the Company issued an aggregate of 1,529,289 warrants to
certain
financial consultants. All warrants have a five year term and have an
exercise
price of $1.25 per share.
In
October 2005, the Company received aggregate cash
proceeds of approximately 6.4 million from an exercise of the existing
warrants.
The Company issued 7,804,966 shares of common stock as a result of these
transactions.
107
Item
9. Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure.
Not
applicable.
Item
9A. Controls
and Procedures.
Evaluation
of disclosure controls and procedures
Based
on
our management's evaluation (with the participation of our principal executive
officer and principal financial officer), as of the end of the period covered
by
this Annual Report on Form 10-K, our chief executive officer and chief financial
officer have concluded that our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange
Act
of 1934, as amended (the "Exchange Act")) are effective to ensure that
information required to be disclosed by us in the reports that we file or
submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms.
Changes
in internal controls
There
was
no change in our internal controls over financial reporting (as defined in
Rules
13a-15(f) and 15(d)-15(f) under the Exchange Act) during the period covered
by
this Annual Report on Form 10-K that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
Item
9B. Other
Information.
In
January 2005 we issued DP Morton and Associates LLC (“DP Morton”) 40,000 shares
of our common stock as consideration for DP Morton’s financial consulting
services pursuant to the terms of the Corporate Consulting Agreement entered
into by us and DP Morton on January 18, 2005. Under the Corporate Consulting
Agreement, we agreed to register the shares of common stock issued to DP
Morton
for resale. The sale of the shares to DP Morton was exempt from registration
under the Securities Act in reliance upon Section 4(2) thereof. We believe
that
DP Morton is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D under the Securities Act. The certificates issued for the shares
of
common stock were legended to indicate that they are restricted. The sales
of
such securities did not involve the use of underwriters, and no commissions
were
paid in connection with the issuance or sale, if any, thereof.
In
June
2005, we issued G&H Associates LTD (“G&H”) 63,207 shares of our common
stock as consideration for G&H’s financial consulting services pursuant to
the terms of the Corporate Consulting Agreement entered into by us and G&H
on November 4, 2004. The sale of the shares to G&H was exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof.
We
believe that G&H is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D under the Securities Act. The certificates issued
for the
shares of common stock were legended to indicate that they are restricted.
The
sales of such securities did not involve the use of underwriters, and no
commissions were paid in connection with the issuance or sale, if any,
thereof.
On
June
15, 2005, we entered into a five-year product licensing and distribution
agreement with MedGen Corp.(“MedGen”) for assistance in the application to the
Lebanese Ministry of Public Health seeking approval for the commercial sale
of
Oral-lyn™. The agreement also sets forth terms including product registration,
manufacturing marketing and promotion, selling price and payment and minimum
purchase obligations. Under the terms of the agreement, MedGen is obligated
to
pay the Company a license fee in the aggregate amount of $500,000, $50,000
of
which was paid upon execution of the agreement.
108
In
August
2005, we
entered
into an agreement with CEOcast, Inc., a consultant, to provide investor relation
services for a term of one year in exchange for 225,000 shares of our restricted
common stock plus an additional 7,143 shares of our restricted common stock
as
monthly payments. The issuance of these shares is subject to approval by
our
Board of Directors. The
sale
of
such
shares
is
exempt
from registration under the Securities Act in reliance upon Section 4(2)
thereof. We believe that CEOcast,
Inc.
is an
“accredited investor” as that term is defined in Rule 501(a) of Regulation D
under the Securities Act. The certificates issued for the shares of common
stock
will
be
legended to indicate that they are restricted. The sales of such securities
did
not involve the use of underwriters, and no commissions were paid in connection
therewith.
On
July
22, 2005, Cranshire Capital, L.P. (“Cranshire”) agreed to extend the interest
payment date and the maturity date under the March 28, 2005 Promissory Note
and
Agreement with us from July 22, 2005 to September 20, 2005. On the same date,
Omicron Master Trust (“Omicron”) agreed to extend the interest payment date and
the maturity date under the April 6, 2005 Promissory Note and Agreement with
us
from July 22, 2005 to September 20, 2005. As consideration for the extensions
from Cranshire and Omicron, we contemporaneously issued a warrant to Cranshire
to purchase an aggregate of 1,219,512 shares of our common stock and a warrant
to Omicron to purchase an aggregate of 243,902 shares of our common stock,
both
of which will expire on July 22, 2010. The rights of Cranshire and Omicron
under
the July 22 2005 warrants are described in this Annual Report on Form 10-K
above
under the caption Financial
Condition, Liquidity and Resources
of
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
The
offer and sale of the July 22, 2005 warrants, including shares of common
stock
into which such warrants are exercisable, by us to Cranshire and Omicron
was
exempt from registration under Section 4(2) of the Securities Act. Each of
Cranshire and Omicron has previously represented and warranted to us that
it is
an “accredited investor” as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act. Any certificates issued representing
the
July 22, 2005 warrants and shares of common stock issued upon exercise of
such
warrants will be legended to indicate that they are restricted. No sale of
these
securities involved the use of underwriters, and no commissions were paid
in
connection with the issuance or sale of the securities.
On
September 20, 2005, we failed to pay the outstanding principal balances under
the $500,000 convertible promissory note entered into with Cranshire on March
28, 2005 and the $100,000 convertible promissory note entered into with Omicron
on April 6, 2005. On October 19, 2005 Cranshire converted outstanding principal
and accrued interest on its note ($528,082 in total) into 664,003 shares
of our
common stock. On October 27, 2005 Omicron converted outstanding principal
and
accrued interest on its Note ($105,644 in total) into 128,834 shares of common
stock. Terms and conditions of the note, are described in this Annual Report
on
Form 10-K above under the caption Financial
Condition, Liquidity and Resources
of
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operation.
On
October 1, 2005, we failed to pay the first installment of $108,393 due under
the Assistance Agreement with Eckert Seamans Cherin & Mellott, LLC (“Eckert
Seamans”) pursuant to which Eckert Seamans advanced us funds in the amount of
$325,179 for the sole purpose of making the interest payment and the monthly
redemption payment due on March 31, 2005 and April 1, 2005, respectively,
under
our 6% Secured Convertible Debentures. We are currently in negotiations with
Eckert Seamans and are seeking to extend the payment dates or to pay the
outstanding balance with shares of our common stock. As of October 1, 2005,
all
amounts due thereunder became payable on demand, and interest began accruing
at
the rate of 8% per annum. The total arrearage to date, as well as the terms
and
conditions of the Assistance Agreement with Eckert Seamans, are described
in
this Annual Report on Form 10-K above under the caption Financial
Condition, Liquidity and Resources
of
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operation.
109
On
October 20, 2005,
in
consideration for the exercise of certain outstanding warrants previously
issued
to each of Cranshire and Iroquois Capital L.P. (“Iroquois”) in connection with
their purchase of our 6% Secured Convertible Debentures pursuant to the
Securities Purchase Agreement dated November 10, 2004, we issued a five-year
warrant to purchase 300,000 shares of our common stock at $1.20 per share
to
Cranshire and a five-year warrant to purchase 609,756 shares of our common
stock
at $1.20 per share to Iroquois. We received aggregate proceeds of $1,492,000
in
connection with Cranshire’s partial exercise of its outstanding warrant to
purchase 1,219,512 shares of our common stock and Iroquois’ full exercise of its
outstanding warrant to purchase 1,219,512 shares of our common stock. The
rights
of Cranshire and Iroquois under the October 2005 warrants are described in
this
Annual Report on Form 10-K under the caption Financial
Condition, Liquidity and Resources
of
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
The
offer and sale of such warrants, including the shares of common stock into
which
such warrants are exercisable, are exempt from registration under the Securities
Act in reliance upon Section 4(2) thereof. Each of Cranshire and Iroquois
has
previously represented and warranted to us that it is an “accredited investor”
as that term is defined in Rule 501(a) of Regulation D promulgated under
the
Securities Act. Any certificates representing such warrants and shares of
common
stock issued upon exercise of such warrants will be legended to indicate
that
they are restricted. The sale of such securities did not involve the use
of
underwriters, and no commissions were paid in connection therewith.
On
October 28, 2005, in consideration for their exercise of certain outstanding
warrants previously issued pursuant to the Securities Purchase Agreement
dated
November 10, 2004, we issued to Cranshire, Omicron and Smithfield
Fiduciary
LLC ("Smithfield") five-year warrants to purchase an aggregate of
1,529,289
shares of our common stock at $1.25 per share. We received aggregate proceeds
of
approximately $2,508,000 in connection with their exercise of holder’s
outstanding warrants to purchase shares of our common stock. The rights of
holders of these warrants are described in this Annual Report on Form 10-K
under
the caption Financial
Condition, Liquidity and Resources
of
Part
II - Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
The
offer and sale of such warrants, including the shares of common stock into
which
such warrants are exercisable, are exempt from registration under the Securities
Act in reliance upon Section 4(2) thereof. Each of Cranshire, Omicron and
Smithfield has previously represented and warranted to us that it is an
“accredited investor” as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act. Any certificates representing such
warrants and shares of common stock issued upon exercise of such warrants
will
be legended to indicate that they are restricted. The sale of such securities
did not involve the use of underwriters, and no commissions were paid in
connection therewith.
As
previously reported on our Quarterly Report on Form 10-Q for the period ending
April 30, 2005, prior to April 30, 2005, we issued an aggregate of 950,927
shares of restricted common stock to certain suppliers of goods and services
in
satisfaction of an aggregate of US $779,760 in accounts payable owed by us.
Subsequent to April 30, 2005 and prior to July 31, 2005, we issued an additional
910,447 shares of restricted common stock to certain suppliers of goods and
services in satisfaction of an additional aggregate amount of US $746,566
representing accounts payable owed by us. In the period subsequent to year-end,
we issued additional 473,649 restricted shares in satisfaction of $388,392
in
accounts payable. The number of shares awarded was calculated using a price
per
share of $0.82. The sales of the restricted stock were exempt from registration
under the Securities Act in reliance upon Section 4(2) thereof. Each of the
suppliers to which we have issued restricted shares of common stock has
represented to us that he or it is an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D. The certificates issued for the shares
of common stock issued to such suppliers were legended to indicate that they
are
restricted. The sales of such shares did not involve the use of underwriters,
and no commissions were paid in connection with the issuance or sale, if
any,
thereof.
110
PART
III
Item
10. Directors
and Executive Officers of the Registrant.
The
information required by this Item is incorporated by reference from the Proxy
Statement, or an amendment to this Annual Report on Form 10-K, to be filed
with
the Commission not later than 120 days after the end of the fiscal year to
which
this report relates.
Item
11. Executive
Compensation.
The
information required by this Item is incorporated by reference from the Proxy
Statement, or an amendment to this Annual Report on Form 10-K, to be filed
with
the Commission not later than 120 days after the end of the fiscal year to
which
this report relates.
Item
12. Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder
Matters.
The
information required by this Item is incorporated by reference from the Proxy
Statement, or an amendment to this Annual Report on Form 10-K, to be filed
with
the Commission not later than 120 days after the end of the fiscal year to
which
this report relates.
Item
13. Certain
Relationships and Related Transactions.
The
information required by this Item is incorporated by reference from the Proxy
Statement, or an amendment to this Annual Report on Form 10-K, to be filed
with
the Commission not later than 120 days after the end of the fiscal year to
which
this report relates.
Item
14. Principal
Accounting Fees and Services.
The
information required by this Item is incorporated by reference from the Proxy
Statement, or an amendment to this Annual Report on Form 10-K, to be filed
with
the Commission not later than 120 days after the end of the fiscal year to
which
this report relates.
PART
IV
Item.
15 Exhibits
and Financial Statements and Schedules.
(a) 1. Financial
Statements - See Part
II - Item 8. Financial Statements and Supplementary Data
hereof
on page 59.
The
financial statements include the following:
Consolidated
Balance Sheets as of July 31, 2005 and 2004
Consolidated
Statements of Operations for the Year Ended July 31, 2005, 2004 and 2003
and
Cumulative from Inception to July 31, 2005
Consolidated
Statements of Changes in Stockholders’ Equity for the Period November 2, 1995
(Date of Inception) to July 31, 2005
Consolidated
Statements of Cash Flows for the Years Ended July 31, 2005, 2004 and 2003
and
Cumulative from Inception to July 31, 2005
111
2. Financial
Statement Schedule and Auditor’s Report
Schedule
I - Condensed financial information of registrant
This
schedule is not applicable.
Schedule
II - Valuation and qualifying accounts
See
Schedule II on page 123
3. Exhibits
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
2
|
Agreement
and Plan of Merger among Generex Biotechnology Corporation,
Antigen
Express, Inc. and AGEXP Acquisition Inc. (incorporated by reference
to
Exhibit 2.1 to Generex Biotechnology Corporation’s Current Report on Form
8-K filed on August 15, 2003)
|
|
3(I)
|
Restated
Certificate of Incorporation of Generex Biotechnology Corporation,
as
amended (incorporated by reference to Exhibit 3.1 to Generex
Biotechnology
Corporation’s Report on Form 10-Q filed on March 15,
2004)
|
|
3(II)
|
Bylaws
of Generex Biotechnology Corporation (incorporated by reference
to Exhibit
3.2 to Generex Biotechnology Corporation’s Registration Statement on Form
S-1 (File No. 333-82667) filed on July 12, 1999)
|
|
4.1
|
Form
of common stock certificate (incorporated by reference to Exhibit
4.1 to
Generex Biotechnology Corporation’s Registration Statement on Form S-1
(File No. 333-82667) filed on July 12, 1999)
|
|
4.2
|
Certificate
of Designations, Preferences and Rights of Series A Preferred
Stock
(incorporated by reference to Exhibit 4.4 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on January 23,
2001)
|
|
4.3
|
Form
of Warrant issued to Ladenburg Thalmann & Co., Inc. dated July 6, 2001
(incorporated by reference to Exhibit 4.15 to Generex Biotechnology
Corporation’s Registration Statement on Form S-3 (File No. 333-67118)
filed on August 8, 2001)
|
|
4.4
|
Form
of Warrant granted to Cranshire Capital, L.P.; RAM Trading
Ltd.; Gryphon
Master Fund; Kodiak Opportunity, L.P.; Kodiak Opportunity 3C7,
L.P.;
Kodiak Opportunity Offshore, Ltd.; Novelly Exempt Trust; Langley
Partners,
L.P.; Montrose Investments, Ltd.; WEC Asset Management, LLC;
ZLP Master
Technology Fund, Ltd.; Alpha Capital Aktiengesellschaft; and
The dotCOM
Fund, LLC, dated July 6, 2001 (incorporated by reference to
Exhibit 3 to
Generex Biotechnology Corporation’s Report on Form 8-K filed on July 17,
2001)
|
|
4.5
|
Warrant
granted to Capital Ventures International, dated July 3, 2001
(incorporated by reference to Exhibit 6 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on July 17,
2001)
|
112
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
4.6
|
Warrant
issued to Elliott International, L.P. and Elliott Associates,
L.P., dated
July 5, 2001 (incorporated by reference to Exhibit 9 to Generex
Biotechnology Corporation’s Report on Form 8-K filed on July 17,
2001)
|
|
4.7
|
Form
of Warrant issued to certain parties to October 2000 Private
Placement
(incorporated by reference to Exhibit 4 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on October 16,
2000)
|
|
4.8
|
Form
of Warrant (GCR Series) held by Robert P. Carter, Harvey
Kaye, Fittube,
Inc., Edward Maskaly and Gulfstream Capital Group, L.C. (incorporated
by
reference to Exhibit 4.4.2 to Generex Biotechnology Corporation’s
Registration Statement on Form 10 filed on December 14, 1998,
as amended
February 24, 1999)
|
|
4.9
|
Letter
Agreement and Warrant with M. H. Meyerson & Co., Inc. dated November
17, 1998 (incorporated by reference to Exhibit 4.4.4 to Generex
Biotechnology Corporation’s Registration Statement on Form 10 filed on
December 14, 1998, as amended February 24, 1999)
|
|
4.10.1
|
Form
of Securities Purchase Agreement entered into with Cranshire
Capital,
L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore
Capital,
Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard
Todd
Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated
by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 10-Q/A for the quarter ended April 30, 2003 filed on
August 13,
2003)
|
|
4.10.2
|
Form
of Registration Rights Agreement entered into with Cranshire
Capital,
L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore
Capital,
Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard
Todd
Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated
by
reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
Form 10-Q/A for the quarter ended April 30, 2003 filed on
August 13,
2003)
|
|
4.10.3
|
Form
of Warrant granted to Cranshire Capital, L.P.; Gryphon Partners,
L.P.;
Langley Partners, L.P.; Lakeshore Capital, Ltd.; LH Financial;
Omicron
Capital; Photon Fund, Ltd.; Howard Todd Horberg and Vertical
Ventures, LLC
dated May 29, 2003 (incorporated by reference to Exhibit
4.3 to Generex
Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended
April 30, 2003 filed on August 13, 2003)
|
|
4.10.4
|
Form
of Securities Purchase Agreement entered into with Cranshire
Capital, L.P.
dated June 6, 2003 (incorporated by reference to Exhibit
4.4 to Generex
Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended
April 30, 2003 filed on August 13, 2003)
|
|
4.10.5
|
Form
of Registration Rights Agreement entered into with Cranshire
Capital, L.P.
dated June 6, 2003 (incorporated by reference to Exhibit
4.5 to Generex
Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended
April 30, 2003 filed on August 13, 2003)
|
| 4.10.6 |
Form
of Warrant granted to Cranshire Capital, L.P. dated June
6, 2003
(incorporated by reference to Exhibit 4.6 to Generex Biotechnology
Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003
filed on August 13, 2003)
|
113
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
4.10.7
|
Form
of replacement Warrant issued to warrant holders exercising
at reduced
exercise price in May and June 2003 (incorporated by reference
to Exhibit
4.13.7 to Generex Biotechnology Corporation’s Report on Form 10-K for the
period ended July 31, 2003 filed on October 29, 2003)
|
|
4.11.1
|
Securities
Purchase Agreement, dated December 19, 2003, by and among
Generex
Biotechnology Corporation and the investors named therein
(incorporated by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K/A filed on March 24, 2004)
|
|
4.11.2
|
Registration
Rights Agreement, dated December 19, 2003, by and among
Generex
Biotechnology Corporation and the investors named therein
(incorporated by
reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
Form 8-K/A filed on March 24, 2004)
|
|
4.11.3
|
Form
of Warrant issued in connection with Exhibit 4.11.1 (incorporated
by
reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
Form 8-K/A filed on March 24, 2004)
|
|
4.11.4
|
Form
of Additional Investment Right issued in connection with
Exhibit 4.11.1
(incorporated by reference to Exhibit 4.4 to Generex Biotechnology
Corporation’s Report on Form 8-K/A filed on March 24,
2004)
|
|
4.12.1
|
Securities
Purchase Agreement, dated January 7, 2004, by and between
Generex
Biotechnology Corporation and ICN Capital Limited (incorporated
by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.12.2
|
Registration
Rights Agreement, dated January 7, 2004, by and between
Generex
Biotechnology Corporation and ICN Capital Limited (incorporated
by
reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.12.3
|
Warrant
issued in connection with Exhibit 4.12.1 (incorporated
by reference to
Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
4.12.4
|
Additional
Investment Right issued in connection with Exhibit 4.12.1
(incorporated by
reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.13.1
|
Securities
Purchase Agreement, dated January 9, 2004, by and between
Generex
Biotechnology Corporation and Vertical Ventures, LLC (incorporated
by
reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.13.2
|
Registration
Rights Agreement, dated January 9, 2004, by and between
Generex
Biotechnology Corporation and Vertical Ventures, LLC (incorporated
by
reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.13.3
|
Warrant
issued in connection with Exhibit 4.13.1 (incorporated
by reference to
Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
4.13.4
|
Additional
Investment Right issued in connection with Exhibit 4.13.1
(incorporated by
reference to Exhibit 4.8 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
114
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
4.14.1
|
Securities
Purchase Agreement, dated February 6, 2004, by and
between Generex
Biotechnology Corporation and Alexandra Global Master
Fund, Ltd.
(incorporated by reference to Exhibit 4.9 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on March 1,
2004)
|
|
4.14.2
|
Registration
Rights Agreement, dated February 6, 2004, by and between
Generex
Biotechnology Corporation and Alexandra Global Master
Fund, Ltd.
(incorporated by reference to Exhibit 4.10 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on March 1,
2004)
|
|
4.14.3
|
Warrant
issued in connection with Exhibit 4.14.1 (incorporated
by reference to
Exhibit 4.11 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
4.14.4
|
Additional
Investment Right issued in connection with Exhibit
4.14.1 (incorporated by
reference to Exhibit 4.12 to Generex Biotechnology
Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.14.5
|
Escrow
Agreement, dated February 26, 2004, by and among Generex
Biotechnology
Corporation, Eckert Seamans Cherin & Mellott, LLC and Alexandra Global
Master Fund, Ltd. (incorporated by reference to Exhibit
4.13 to Generex
Biotechnology Corporation’s Report on Form 8-K filed on March 1,
2004)
|
|
4.15.1
|
Securities
Purchase Agreement, dated February 11, 2004, by and
between Generex
Biotechnology Corporation and Michael Sourlis (incorporated
by reference
to Exhibit 4.14 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
4.15.2
|
Registration
Rights Agreement, dated February 11, 2004, by and between
Generex
Biotechnology Corporation and Michael Sourlis (incorporated
by reference
to Exhibit 4.15 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
4.15.3
|
Warrant
issued in connection with Exhibit 4.15.1 (incorporated
by reference to
Exhibit 4.16 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
4.15.4
|
Additional
Investment Right issued in connection with Exhibit
4.15.1 (incorporated by
reference to Exhibit 4.17 to Generex Biotechnology
Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.16.1
|
Securities
Purchase Agreement, dated February 13, 2004, by and
between Generex
Biotechnology Corporation and Zapfe Holdings, Inc.
(incorporated by
reference to Exhibit 4.18 to Generex Biotechnology
Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.16.2
|
Registration
Rights Agreement, dated February 13, 2004, by and between
Generex
Biotechnology Corporation and Zapfe Holdings, Inc.
(incorporated by
reference to Exhibit 4.19 to Generex Biotechnology
Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.16.3
|
Warrant
issued in connection with Exhibit 4.16.1 (incorporated
by reference to
Exhibit 4.20 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
115
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
4.16.4
|
Additional
Investment Right issued in connection with Exhibit
4.16.1 (incorporated by
reference to Exhibit 4.21 Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.17.1
|
Securities
Purchase Agreement, dated June 23, 2004, by and among
Generex
Biotechnology Corporation and the investors named therein
(incorporated by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on July 14, 2004)
|
|
4.17.2
|
Registration
Rights Agreement, dated June 23, 2004, by and among
Generex Biotechnology
Corporation and the investors (incorporated by reference
to Exhibit 4.2 to
Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14,
2004)
|
|
4.17.3
|
Form
of Warrant issued in connection with Exhibit 4.17.1
(incorporated by
reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on July 14, 2004)
|
|
4.17.4
|
Form
of Additional Investment Right issued in connection
Exhibit 4.17.1
(incorporated by reference to Exhibit 4.4 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on July 14,
2004)
|
|
4.18.1
|
Securities
Purchase Agreement, dated November 10, 2004, by and
among Generex
Biotechnology Corporation and the investors named therein
(incorporated by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on November 12, 2004)
|
|
4.18.2
|
Form
of 6% Secured Convertible Debenture issued in connection
with Exhibit
4.21.1 (incorporated by reference to Exhibit 4.2 to
Generex Biotechnology
Corporation’s Report on Form 8-K filed on November 12,
2004)
|
|
4.18.3
|
Registration
Rights Agreement, dated November 10, 2004, by and among
Generex
Biotechnology Corporation and the investors named therein
(incorporated by
reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on November 12, 2004)
|
|
4.18.4
|
Form
of Warrant issued in connection with Exhibit 4.18.1
(incorporated by
reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on November 12, 2004)
|
|
4.18.5
|
Form
of Additional Investment Right issued in connection
with Exhibit 4.18.1
(incorporated by reference to Exhibit 4.5 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on November 12,
2004)
|
|
4.18.6
|
Custodial
and Security Agreement, dated November 10, 2004, by
and among Generex
Biotechnology Corporation, Feldman Weinstein LLP, as
custodian, and the
investors named therein (incorporated by reference
to Exhibit 4.6 to
Generex Biotechnology Corporation’s Report on Form 8-K filed on November
12, 2004)
|
|
4.18.7
|
Form
of Voting Agreement entered into in connection with
Exhibit 4.18.1
(incorporated by reference to Exhibit 4.7 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on November 12,
2004)
|
116
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
4.19
|
Termination
Agreement, dated December 17, 2004, by and among Generex
Biotechnology
Corporation and Elan Corporation plc and Elan International
Services, Ltd.
(incorporated by reference to Exhibit 4.19 to Generex
Biotechnology
Corporation’s Quarterly Report on Form 10-Q filed on June 14,
2005)
|
|
4.20
|
Warrant
issued to The Aethena Group, LLC on April 28, 2005
(incorporated by
reference to Exhibit 4.20 to Generex Biotechnology
Corporation’s Quarterly
Report on Form 10-Q filed on June 14, 2005)
|
|
4.21.1
|
Promissory
Note and Agreement, dated March 28, 2005 by and between
Generex
Biotechnology Corporation and Cranshire Capital, L.P.
(incorporated by
reference to Exhibit 4 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on April 1, 2005)
|
|
4.21.2
|
Warrant
issued to Cranshire Capital, L.P. entered into in connection
with Exhibit
4.21.1 (incorporated by reference to Exhibit 4.21.2
to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)
|
|
4.22.1
|
Promissory
Note and Agreement,
entered into April
6, 2005 by and between Generex Biotechnology Corporation
and Omicron
Master Trust (incorporated by reference to Exhibit
4.22.1 to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)
|
|
4.22.2
|
Warrant
issued to Omicron Master Trust entered into in connection
with Exhibit
4.22.1 (incorporated by reference to Exhibit 4.22.2
to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)
|
|
4.23.1
|
June
7, 2005 Amendment to Promissory Note and Agreement,
dated March 28, 2005
by and between Generex Biotechnology Corporation and
Cranshire Capital,
L.P. (incorporated by reference to Exhibit 4.1 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on June 10,
2005)
|
|
4.23.2
|
Warrant
issued by Generex Biotechnology Corporation to Cranshire
Capital, L.P. on
June 7, 2005 in connection with Exhibit 4.23.1 (incorporated
by reference
to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on June 10, 2005)
|
|
4.24.1
|
June
7, 2005 Amendment to Promissory Note and Agreement,
entered into April 6,
2005 by and between Generex Biotechnology Corporation
and Omicron Master
Trust (incorporated
by reference to Exhibit 4.24.1 to Generex Biotechnology
Corporation’s
Quarterly Report on Form 10-Q filed on June 14, 2005)
|
|
4.24.2
|
Warrant
issued by Generex Biotechnology Corporation to Omicron
Master Trust on
June 7, 2005 in connection with Exhibit 4.24.1 (incorporated
by reference
to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on June 10, 2005)
|
|
4.25.1
|
Amendment
No. 1 to Securities Purchase Agreement and Registration
Rights Agreement
entered into by and between Generex Biotechnology Corporation
and the
Purchasers listed on the signature pages thereto (incorporated
by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on June 17, 2005)
|
|
4.25.2
|
Form
of AIR Debenture issued in connection with Exhibit
4.25.1
|
117
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
4.25.3
|
Form
of AIR Warrant issued in connection with Exhibit 4.25.1
|
|
4.25.4
|
Form
of Additional AIR issued in connection with Exhibit
4.25.1
|
|
4.26.1
|
Amendment
No. 2 to Securities Purchase Agreement and Registration
Rights Agreement
entered into by and between Generex Biotechnology Corporation
and the
Purchasers listed on the signature pages thereto (incorporated
by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on September 9, 2005)
|
|
4.26.2
|
Form
of Air Debenture issued in connection with Exhibit
4.26.1 (incorporated by
reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on September 9, 2005)
|
|
4.26.3
|
Form
of AIR Warrant issued in connection with Exhibit 4.26.1
(incorporated by
reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on September 9, 2005)
|
|
4.26.4
|
Form
of Additional AIR issued in connection with Exhibit
4.26.1 (incorporated
by reference to Exhibit 4.4 to Generex Biotechnology
Corporation’s Report
on Form 8-K filed on September 9, 2005)
|
|
4.27.1
|
July
22, 2005 Amendment to Promissory Note and Agreement,
entered into March
28, 2005 by and between Generex Biotechnology Corporation
and Cranshire
Capital, L.P.
|
|
4.27.2
|
Warrant
issued by Generex Biotechnology Corporation to Cranshire
Capital, L.P. on
July 22, 2005 in connection with Exhibit 4.27.1
|
|
4.28.1
|
June
22, 2005 Amendment to Promissory Note and Agreement,
entered into April 6,
2005 by and between Generex Biotechnology Corporation
and Omicron Master
Trust
|
|
4.28.2
|
Warrant
issued by Generex Biotechnology Corporation to Omicron
Master Trust on
July 22, 2005 in connection with Exhibit 4.28.1
|
|
4.29
|
Warrant
issued by Generex Biotechnology Corporation to Cranshire
Capital, L.P. on
October 20, 2005
|
|
4.30
|
Warrant
issued by Generex Biotechnology Corporation to Iroquois
Capital, L.P. on
October 20, 2005
|
|
4.31
|
Form
of Warrant issued by Generex Biotechnology Corporation
on October 27,
2005.
|
|
9
|
Form
of Voting Agreement entered into in connection with
Exhibit 4.18.1
(incorporated by reference to Exhibit 4.7 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on November 12,
2004)
|
|
10.1
|
Assistance
Agreement, dated March 30, 2005 by and between Generex
Biotechnology
Corporation and Eckert Seamans Cherin & Mellott, LLC (incorporated by
reference to Exhibit 10 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on April 1,
2005)
|
118
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
10.2
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and
Mindy J. Allport-Settle to purchase 100,000 shares
of Common Stock at the
exercise price of $0.56 per share (incorporated by
reference to Exhibit
10.2 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q
filed on June 14, 2005)*
|
|
10.3
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and
Peter G. Amanatides to purchase 100,000 shares of Common
Stock at the
exercise price of $0.56 per share (incorporated by
reference to Exhibit
10.3 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q
filed on June 14, 2005)*
|
|
10.4
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and John
P. Barratt to purchase 100,000 shares of Common Stock
at the exercise
price of $0.56 per share (incorporated by reference
to Exhibit 10.4 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
June 14, 2005)*
|
|
10.5
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and
Brian T. McGee to purchase 100,000 shares of Common
Stock at the exercise
price of $0.56 per share (incorporated by reference
to Exhibit 10.5 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
June 14, 2005)*
|
|
10.6
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and John
P. Barratt to purchase 35,714 shares of Common Stock
at the exercise price
of $0.001 per share (incorporated by reference to Exhibit
10.6 to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)*
|
|
10.7
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and
Brian T. McGee to purchase 35,714 shares of Common
Stock at the exercise
price of $0.001 per share (incorporated by reference
to Exhibit 10.7 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
June 14, 2005)*
|
|
10.8
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and
Gerald Bernstein, M.D. to purchase 100,000 shares of
Common Stock at the
exercise price of $0.61 per share (incorporated by
reference to Exhibit
10.8 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q
filed on June 14, 2005)*
|
|
10.9
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and Mark
Fletcher to purchase 250,000 shares of Common Stock
at the exercise price
of $0.61 per share (incorporated by reference to Exhibit
10.9 to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)*
|
|
10.10
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and Anna
E. Gluskin to purchase 250,000 shares of Common Stock
at the exercise
price of $0.61 per share (incorporated by reference
to Exhibit 10.10 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
June 14, 2005)*
|
|
10.11
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and Rose
C. Perri to purchase 250,000 shares of Common Stock
at the exercise price
of $0.61 per share (incorporated by reference to Exhibit
10.11 to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)*
|
119
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
10.12
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and Mark
A. Fletcher to purchase 470,726 shares of Common Stock
at the exercise
price of $0.001 per share (incorporated by reference
to Exhibit 10.12 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
June 14, 2005)*
|
|
10.13
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and Anna
E. Gluskin to purchase 1,120,704 shares of Common Stock
at the exercise
price of $0.001 per share (incorporated by reference
to Exhibit 10.13 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
June 14, 2005)*
|
|
10.14
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and Rose
C. Perri to purchase 576,752 shares of Common Stock
at the exercise price
of $0.001 per share (incorporated by reference to Exhibit
10.14 to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)*
|
|
10.15
|
Annual
Base Salaries for Certain Executive Officers Effective
August 1, 2004
(incorporated by reference to Exhibit 10.15 to Generex
Biotechnology
Corporation’s Quarterly Report on Form 10-Q filed on June 14,
2005)*
|
|
10.16
|
Employment
Agreement by and between Generex Biotechnology Corporation
and Gerald
Bernstein M.D. (incorporated by reference to Exhibit
10.16 to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)*
|
|
10.17
|
Promissory
Note and Agreement, dated March 28, 2005 by and between
Generex
Biotechnology Corporation and Cranshire Capital, L.P.
(incorporated by
reference to Exhibit 4 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on April 1, 2005)
|
|
10.18
|
1998
Stock Option Plan (incorporated by reference to Exhibit
4.3 to Generex
Biotechnology Corporation’s Registration Statement on Form S-1 (File No.
333-82667) filed on July 12, 1999)*
|
|
10.19
|
2000
Stock Option Plan (incorporated by reference to Exhibit
4.3.2 to Generex
Biotechnology Corporation’s Annual Report on Form 10-K filed on October
30, 2000)*
|
|
10.20
|
2001
Stock Option Plan (incorporated by reference to Exhibit
4.2.3 to Generex
Biotechnology Corporation’s Annual Report on Form 10-K filed on October
29, 2001)*
|
|
10.21
|
Amended
2001 Stock Option Plan (incorporated by reference to
Exhibit 4.1 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
December 15, 2003)*
|
|
10.22
|
Memorandum
of Agreement dated January 7, 1998 between Generex
Pharmaceuticals, Inc.,
GHI Inc., Generex Biotechnology Corporation, Dr. Pankaj
Modi and Galaxy
Technology, Canada and Consulting Agreement between
Generex
Pharmaceuticals, Inc. and Pankaj Modi dated October
1, 1996 (incorporated
by reference to Exhibit 10.1.1 to Generex Biotechnology
Corporation’s
Registration Statement on Form 10 filed on December
14, 1998, as amended
February 24, 1999)*
|
|
10.23
|
Assignment
and Assumption Agreement between Generex Pharmaceuticals,
Inc. and Pankaj
Modi dated October 1, 1996 (incorporated by reference
to Exhibit 10.12 to
Generex Biotechnology Corporation’s Registration Statement on Form 10/A
filed on February 24, 1999)*
|
120
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
10.24
|
Supplemental
Agreement dated December 31, 2000 between Generex Pharmaceuticals,
Inc.,
Generex Biotechnology Corporation and Dr. Pankaj Modi
(incorporated by
reference to Exhibit 10.1.4 to Generex Biotechnology
Corporation’s Annual
Report on Form 10-K filed on October 29, 2001)*
|
|
10.25
|
Amended
and Restated License Agreement dated January 15, 2002
between Generex
Biotechnology Corporation and Generex (Bermuda) Ltd.
(incorporated by
reference to Exhibit 10.3 to Generex Biotechnology
Corporation’s Current
Report on Form 8-K/A filed on September 9, 2003)
|
|
10.26
|
Stockholders
Agreement among Generex Biotechnology Corporation and
the former holders
of capital stock of Antigen Express, Inc. (incorporated
by reference to
Exhibit 10.4 to Generex Biotechnology Corporation’s Annual Report on Form
10-K filed on October 29, 2003)
|
|
21
|
Subsidiaries
of the Registrant
|
|
23.1
|
Consent
of BDO Dunwoody, LLP, independent registered public
accounting
firm
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley
Act of 2002
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer
pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|
* Management contract or management compensatory
plan or
arrangement.
(1)
In
the
case of incorporation by reference to documents filed by the
Registrant under
the Exchange Act, the Registrant’s file number under the Exchange Act is
000-25169.
121
Signatures
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of
1934, the registrant has duly caused this report to be signed on its behalf
by
the undersigned, thereunto duly authorized this 28th day of October
2005.
| GENEREX BIOTECHNOLOGY CORPORATION | ||
| |
|
|
| By: | /s/ Anna E. Gluskin | |
|
Name: Anna E. Gluskin |
||
| Title: President | ||
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
signed below by the following persons on behalf of the registrant and in
the
capacities and on the dates indicated.
|
Name
|
Capacity
in Which Signed
|
Date
|
||
|
/s/
Anna E. Gluskin
|
President,
Chief Executive Officer and Director (Principal
|
October
28, 2005
|
||
|
Anna
E. Gluskin
|
Executive Officer) | |||
|
/s/
Rose C. Perri
|
Chief
Operating Officer, Chief Financial Officer, Treasurer, Secretary
|
October
28, 2005
|
||
|
Rose
C. Perri
|
and Director (Principal Financial and Accounting Officer) | |||
|
/s/
Gerald Bernstein, M.D.
|
Vice
President Medical Affairs and Director
|
October
28, 2005
|
||
|
Gerald
Bernstein, M.D.
|
||||
|
/s/
Mindy J. Allport-Settle
|
Director
|
October
28, 2005
|
||
| Mindy J. Allport-Settle | ||||
|
/s/
Brian T. McGee
|
Director
|
October
28, 2005
|
||
|
Brian
T. McGee
|
||||
|
/s/
John P. Barratt
|
Director
|
October
28, 2005
|
||
|
John
P. Barratt
|
||||
|
/s/
Peter G. Amanatides
|
Director
|
October
28, 2005
|
||
|
Peter
G. Amanatides
|
||||
|
/s/
Slava Jarnitskii
|
Controller
|
October
28, 2005
|
||
|
Slava
Jarnitskii
|
122
SCHEDULE
II
|
Balance
at
|
|
Additions
|
|
|
|
|
|
Balance
|
|
|||||||
|
|
|
Beginning
|
|
Charged
|
|
Other
|
|
|
|
at
End of
|
|
|||||
|
|
|
Of
Period
|
to
Expenses
|
Additions
|
Deductions
|
Period
|
||||||||||
|
Year
Ended July 31, 2003 Valuation Allowance on Deferred Tax
Asset
|
$
|
15,558,091
|
--
|
$
|
4,197,557
|
|
--
|
$
|
19,755,648
|
|||||||
|
Year
Ended July 31, 2004 Valuation Allowance on Deferred Tax
Asset
|
$
|
19,755,648
|
--
|
$
|
7,687,609
|
|
--
|
$
|
27,443,257
|
|||||||
|
Year
Ended July 31, 2005 Valuation Allowance on Deferred Tax
Asset
|
$
|
27,443,257
|
--
|
$
|
7,506,943
|
--
|
$
|
34,950,200
|
||||||||
123
EXHIBIT
INDEX
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
2
|
Agreement
and Plan of Merger among Generex Biotechnology Corporation,
Antigen
Express, Inc. and AGEXP Acquisition Inc. (incorporated by reference
to
Exhibit 2.1 to Generex Biotechnology Corporation’s Current Report on Form
8-K filed on August 15, 2003)
|
|
3(I)
|
Restated
Certificate of Incorporation of Generex Biotechnology Corporation,
as
amended (incorporated by reference to Exhibit 3.1 to Generex
Biotechnology
Corporation’s Report on Form 10-Q filed on March 15,
2004)
|
|
3(II)
|
Bylaws
of Generex Biotechnology Corporation (incorporated by reference
to Exhibit
3.2 to Generex Biotechnology Corporation’s Registration Statement on Form
S-1 (File No. 333-82667) filed on July 12, 1999)
|
|
4.1
|
Form
of common stock certificate (incorporated by reference to Exhibit
4.1 to
Generex Biotechnology Corporation’s Registration Statement on Form S-1
(File No. 333-82667) filed on July 12, 1999)
|
|
4.2
|
Certificate
of Designations, Preferences and Rights of Series A Preferred
Stock
(incorporated by reference to Exhibit 4.4 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on January 23,
2001)
|
|
4.3
|
Form
of Warrant issued to Ladenburg Thalmann & Co., Inc. dated July 6, 2001
(incorporated by reference to Exhibit 4.15 to Generex Biotechnology
Corporation’s Registration Statement on Form S-3 (File No. 333-67118)
filed on August 8, 2001)
|
|
4.4
|
Form
of Warrant granted to Cranshire Capital, L.P.; RAM Trading
Ltd.; Gryphon
Master Fund; Kodiak Opportunity, L.P.; Kodiak Opportunity 3C7,
L.P.;
Kodiak Opportunity Offshore, Ltd.; Novelly Exempt Trust; Langley
Partners,
L.P.; Montrose Investments, Ltd.; WEC Asset Management, LLC;
ZLP Master
Technology Fund, Ltd.; Alpha Capital Aktiengesellschaft; and
The dotCOM
Fund, LLC, dated July 6, 2001 (incorporated by reference to
Exhibit 3 to
Generex Biotechnology Corporation’s Report on Form 8-K filed on July 17,
2001)
|
|
4.5
|
Warrant
granted to Capital Ventures International, dated July 3, 2001
(incorporated by reference to Exhibit 6 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on July 17,
2001)
|
124
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
4.6
|
Warrant
issued to Elliott International, L.P. and Elliott Associates,
L.P., dated
July 5, 2001 (incorporated by reference to Exhibit 9 to Generex
Biotechnology Corporation’s Report on Form 8-K filed on July 17,
2001)
|
|
4.7
|
Form
of Warrant issued to certain parties to October 2000 Private
Placement
(incorporated by reference to Exhibit 4 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on October 16,
2000)
|
|
4.8
|
Form
of Warrant (GCR Series) held by Robert P. Carter, Harvey
Kaye, Fittube,
Inc., Edward Maskaly and Gulfstream Capital Group, L.C. (incorporated
by
reference to Exhibit 4.4.2 to Generex Biotechnology Corporation’s
Registration Statement on Form 10 filed on December 14, 1998,
as amended
February 24, 1999)
|
|
4.9
|
Letter
Agreement and Warrant with M. H. Meyerson & Co., Inc. dated November
17, 1998 (incorporated by reference to Exhibit 4.4.4 to Generex
Biotechnology Corporation’s Registration Statement on Form 10 filed on
December 14, 1998, as amended February 24, 1999)
|
|
4.10.1
|
Form
of Securities Purchase Agreement entered into with Cranshire
Capital,
L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore
Capital,
Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard
Todd
Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated
by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 10-Q/A for the quarter ended April 30, 2003 filed on
August 13,
2003)
|
|
4.10.2
|
Form
of Registration Rights Agreement entered into with Cranshire
Capital,
L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore
Capital,
Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard
Todd
Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated
by
reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
Form 10-Q/A for the quarter ended April 30, 2003 filed on
August 13,
2003)
|
|
4.10.3
|
Form
of Warrant granted to Cranshire Capital, L.P.; Gryphon Partners,
L.P.;
Langley Partners, L.P.; Lakeshore Capital, Ltd.; LH Financial;
Omicron
Capital; Photon Fund, Ltd.; Howard Todd Horberg and Vertical
Ventures, LLC
dated May 29, 2003 (incorporated by reference to Exhibit
4.3 to Generex
Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended
April 30, 2003 filed on August 13, 2003)
|
|
4.10.4
|
Form
of Securities Purchase Agreement entered into with Cranshire
Capital, L.P.
dated June 6, 2003 (incorporated by reference to Exhibit
4.4 to Generex
Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended
April 30, 2003 filed on August 13, 2003)
|
|
4.10.5
|
Form
of Registration Rights Agreement entered into with Cranshire
Capital, L.P.
dated June 6, 2003 (incorporated by reference to Exhibit
4.5 to Generex
Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended
April 30, 2003 filed on August 13, 2003)
|
| 4.10.6 |
Form
of Warrant granted to Cranshire Capital, L.P. dated June
6, 2003
(incorporated by reference to Exhibit 4.6 to Generex Biotechnology
Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003
filed on August 13, 2003)
|
125
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
4.10.7
|
Form
of replacement Warrant issued to warrant holders exercising
at reduced
exercise price in May and June 2003 (incorporated by reference
to Exhibit
4.13.7 to Generex Biotechnology Corporation’s Report on Form 10-K for the
period ended July 31, 2003 filed on October 29, 2003)
|
|
4.11.1
|
Securities
Purchase Agreement, dated December 19, 2003, by and among
Generex
Biotechnology Corporation and the investors named therein
(incorporated by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K/A filed on March 24, 2004)
|
|
4.11.2
|
Registration
Rights Agreement, dated December 19, 2003, by and among
Generex
Biotechnology Corporation and the investors named therein
(incorporated by
reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
Form 8-K/A filed on March 24, 2004)
|
|
4.11.3
|
Form
of Warrant issued in connection with Exhibit 4.11.1 (incorporated
by
reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
Form 8-K/A filed on March 24, 2004)
|
|
4.11.4
|
Form
of Additional Investment Right issued in connection with
Exhibit 4.11.1
(incorporated by reference to Exhibit 4.4 to Generex Biotechnology
Corporation’s Report on Form 8-K/A filed on March 24,
2004)
|
|
4.12.1
|
Securities
Purchase Agreement, dated January 7, 2004, by and between
Generex
Biotechnology Corporation and ICN Capital Limited (incorporated
by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.12.2
|
Registration
Rights Agreement, dated January 7, 2004, by and between
Generex
Biotechnology Corporation and ICN Capital Limited (incorporated
by
reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.12.3
|
Warrant
issued in connection with Exhibit 4.12.1 (incorporated
by reference to
Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
4.12.4
|
Additional
Investment Right issued in connection with Exhibit 4.12.1
(incorporated by
reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.13.1
|
Securities
Purchase Agreement, dated January 9, 2004, by and between
Generex
Biotechnology Corporation and Vertical Ventures, LLC (incorporated
by
reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.13.2
|
Registration
Rights Agreement, dated January 9, 2004, by and between
Generex
Biotechnology Corporation and Vertical Ventures, LLC (incorporated
by
reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.13.3
|
Warrant
issued in connection with Exhibit 4.13.1 (incorporated
by reference to
Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
4.13.4
|
Additional
Investment Right issued in connection with Exhibit 4.13.1
(incorporated by
reference to Exhibit 4.8 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
126
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
4.14.1
|
Securities
Purchase Agreement, dated February 6, 2004, by and
between Generex
Biotechnology Corporation and Alexandra Global Master
Fund, Ltd.
(incorporated by reference to Exhibit 4.9 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on March 1,
2004)
|
|
4.14.2
|
Registration
Rights Agreement, dated February 6, 2004, by and between
Generex
Biotechnology Corporation and Alexandra Global Master
Fund, Ltd.
(incorporated by reference to Exhibit 4.10 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on March 1,
2004)
|
|
4.14.3
|
Warrant
issued in connection with Exhibit 4.14.1 (incorporated
by reference to
Exhibit 4.11 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
4.14.4
|
Additional
Investment Right issued in connection with Exhibit
4.14.1 (incorporated by
reference to Exhibit 4.12 to Generex Biotechnology
Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.14.5
|
Escrow
Agreement, dated February 26, 2004, by and among Generex
Biotechnology
Corporation, Eckert Seamans Cherin & Mellott, LLC and Alexandra Global
Master Fund, Ltd. (incorporated by reference to Exhibit
4.13 to Generex
Biotechnology Corporation’s Report on Form 8-K filed on March 1,
2004)
|
|
4.15.1
|
Securities
Purchase Agreement, dated February 11, 2004, by and
between Generex
Biotechnology Corporation and Michael Sourlis (incorporated
by reference
to Exhibit 4.14 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
4.15.2
|
Registration
Rights Agreement, dated February 11, 2004, by and between
Generex
Biotechnology Corporation and Michael Sourlis (incorporated
by reference
to Exhibit 4.15 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
4.15.3
|
Warrant
issued in connection with Exhibit 4.15.1 (incorporated
by reference to
Exhibit 4.16 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
4.15.4
|
Additional
Investment Right issued in connection with Exhibit
4.15.1 (incorporated by
reference to Exhibit 4.17 to Generex Biotechnology
Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.16.1
|
Securities
Purchase Agreement, dated February 13, 2004, by and
between Generex
Biotechnology Corporation and Zapfe Holdings, Inc.
(incorporated by
reference to Exhibit 4.18 to Generex Biotechnology
Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.16.2
|
Registration
Rights Agreement, dated February 13, 2004, by and between
Generex
Biotechnology Corporation and Zapfe Holdings, Inc.
(incorporated by
reference to Exhibit 4.19 to Generex Biotechnology
Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.16.3
|
Warrant
issued in connection with Exhibit 4.16.1 (incorporated
by reference to
Exhibit 4.20 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
127
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
4.16.4
|
Additional
Investment Right issued in connection with Exhibit
4.16.1 (incorporated by
reference to Exhibit 4.21 Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
4.17.1
|
Securities
Purchase Agreement, dated June 23, 2004, by and among
Generex
Biotechnology Corporation and the investors named therein
(incorporated by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on July 14, 2004)
|
|
4.17.2
|
Registration
Rights Agreement, dated June 23, 2004, by and among
Generex Biotechnology
Corporation and the investors (incorporated by reference
to Exhibit 4.2 to
Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14,
2004)
|
|
4.17.3
|
Form
of Warrant issued in connection with Exhibit 4.17.1
(incorporated by
reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on July 14, 2004)
|
|
4.17.4
|
Form
of Additional Investment Right issued in connection
Exhibit 4.17.1
(incorporated by reference to Exhibit 4.4 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on July 14,
2004)
|
|
4.18.1
|
Securities
Purchase Agreement, dated November 10, 2004, by and
among Generex
Biotechnology Corporation and the investors named therein
(incorporated by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on November 12, 2004)
|
|
4.18.2
|
Form
of 6% Secured Convertible Debenture issued in connection
with Exhibit
4.21.1 (incorporated by reference to Exhibit 4.2 to
Generex Biotechnology
Corporation’s Report on Form 8-K filed on November 12,
2004)
|
|
4.18.3
|
Registration
Rights Agreement, dated November 10, 2004, by and among
Generex
Biotechnology Corporation and the investors named therein
(incorporated by
reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on November 12, 2004)
|
|
4.18.4
|
Form
of Warrant issued in connection with Exhibit 4.18.1
(incorporated by
reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on November 12, 2004)
|
|
4.18.5
|
Form
of Additional Investment Right issued in connection
with Exhibit 4.18.1
(incorporated by reference to Exhibit 4.5 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on November 12,
2004)
|
|
4.18.6
|
Custodial
and Security Agreement, dated November 10, 2004, by
and among Generex
Biotechnology Corporation, Feldman Weinstein LLP, as
custodian, and the
investors named therein (incorporated by reference
to Exhibit 4.6 to
Generex Biotechnology Corporation’s Report on Form 8-K filed on November
12, 2004)
|
|
4.18.7
|
Form
of Voting Agreement entered into in connection with
Exhibit 4.18.1
(incorporated by reference to Exhibit 4.7 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on November 12,
2004)
|
128
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
4.19
|
Termination
Agreement, dated December 17, 2004, by and among Generex
Biotechnology
Corporation and Elan Corporation plc and Elan International
Services, Ltd.
(incorporated by reference to Exhibit 4.19 to Generex
Biotechnology
Corporation’s Quarterly Report on Form 10-Q filed on June 14,
2005)
|
|
4.20
|
Warrant
issued to The Aethena Group, LLC on April 28, 2005
(incorporated by
reference to Exhibit 4.20 to Generex Biotechnology
Corporation’s Quarterly
Report on Form 10-Q filed on June 14, 2005)
|
|
4.21.1
|
Promissory
Note and Agreement, dated March 28, 2005 by and between
Generex
Biotechnology Corporation and Cranshire Capital, L.P.
(incorporated by
reference to Exhibit 4 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on April 1, 2005)
|
|
4.21.2
|
Warrant
issued to Cranshire Capital, L.P. entered into in connection
with Exhibit
4.21.1 (incorporated by reference to Exhibit 4.21.2
to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)
|
|
4.22.1
|
Promissory
Note and Agreement,
entered into April
6, 2005 by and between Generex Biotechnology Corporation
and Omicron
Master Trust (incorporated by reference to Exhibit
4.22.1 to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)
|
|
4.22.2
|
Warrant
issued to Omicron Master Trust entered into in connection
with Exhibit
4.22.1 (incorporated by reference to Exhibit 4.22.2
to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)
|
|
4.23.1
|
June
7, 2005 Amendment to Promissory Note and Agreement,
dated March 28, 2005
by and between Generex Biotechnology Corporation and
Cranshire Capital,
L.P. (incorporated by reference to Exhibit 4.1 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on June 10,
2005)
|
|
4.23.2
|
Warrant
issued by Generex Biotechnology Corporation to Cranshire
Capital, L.P. on
June 7, 2005 in connection with Exhibit 4.23.1 (incorporated
by reference
to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on June 10, 2005)
|
|
4.24.1
|
June
7, 2005 Amendment to Promissory Note and Agreement,
entered into April 6,
2005 by and between Generex Biotechnology Corporation
and Omicron Master
Trust (incorporated
by reference to Exhibit 4.24.1 to Generex Biotechnology
Corporation’s
Quarterly Report on Form 10-Q filed on June 14, 2005)
|
|
4.24.2
|
Warrant
issued by Generex Biotechnology Corporation to Omicron
Master Trust on
June 7, 2005 in connection with Exhibit 4.24.1 (incorporated
by reference
to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on June 10, 2005)
|
|
4.25.1
|
Amendment
No. 1 to Securities Purchase Agreement and Registration
Rights Agreement
entered into by and between Generex Biotechnology Corporation
and the
Purchasers listed on the signature pages thereto (incorporated
by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on June 17, 2005)
|
|
4.25.2
|
Form
of AIR Debenture issued in connection with Exhibit
4.25.1
|
129
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
4.25.3
|
Form
of AIR Warrant issued in connection with Exhibit 4.25.1
|
|
4.25.4
|
Form
of Additional AIR issued in connection with Exhibit
4.25.1
|
|
4.26.1
|
Amendment
No. 2 to Securities Purchase Agreement and Registration
Rights Agreement
entered into by and between Generex Biotechnology Corporation
and the
Purchasers listed on the signature pages thereto (incorporated
by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on September 9, 2005)
|
|
4.26.2
|
Form
of Air Debenture issued in connection with Exhibit
4.26.1 (incorporated by
reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on September 9, 2005)
|
|
4.26.3
|
Form
of AIR Warrant issued in connection with Exhibit 4.26.1
(incorporated by
reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on September 9, 2005)
|
|
4.26.4
|
Form
of Additional AIR issued in connection with Exhibit
4.26.1 (incorporated
by reference to Exhibit 4.4 to Generex Biotechnology
Corporation’s Report
on Form 8-K filed on September 9, 2005)
|
|
4.27.1
|
July
22, 2005 Amendment to Promissory Note and Agreement,
entered into March
28, 2005 by and between Generex Biotechnology Corporation
and Cranshire
Capital, L.P.
|
|
4.27.2
|
Warrant
issued by Generex Biotechnology Corporation to Cranshire
Capital, L.P. on
July 22, 2005 in connection with Exhibit 4.27.1
|
|
4.28.1
|
June
22, 2005 Amendment to Promissory Note and Agreement,
entered into April 6,
2005 by and between Generex Biotechnology Corporation
and Omicron Master
Trust
|
|
4.28.2
|
Warrant
issued by Generex Biotechnology Corporation to Omicron
Master Trust on
July 22, 2005 in connection with Exhibit 4.28.1
|
|
4.29
|
Warrant
issued by Generex Biotechnology Corporation to Cranshire
Capital, L.P. on
October 20, 2005
|
|
4.30
|
Warrant
issued by Generex Biotechnology Corporation to Iroquois
Capital, L.P. on
October 20, 2005
|
|
4.31
|
Form
of Warrant issued by Generex Biotechnology Corporation
on October 27,
2005.
|
|
9
|
Form
of Voting Agreement entered into in connection with
Exhibit 4.18.1
(incorporated by reference to Exhibit 4.7 to Generex
Biotechnology
Corporation’s Report on Form 8-K filed on November 12,
2004)
|
|
10.1
|
Assistance
Agreement, dated March 30, 2005 by and between Generex
Biotechnology
Corporation and Eckert Seamans Cherin & Mellott, LLC (incorporated by
reference to Exhibit 10 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on April 1,
2005)
|
130
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
10.2
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and
Mindy J. Allport-Settle to purchase 100,000 shares
of Common Stock at the
exercise price of $0.56 per share (incorporated by
reference to Exhibit
10.2 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q
filed on June 14, 2005)*
|
|
10.3
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and
Peter G. Amanatides to purchase 100,000 shares of Common
Stock at the
exercise price of $0.56 per share (incorporated by
reference to Exhibit
10.3 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q
filed on June 14, 2005)*
|
|
10.4
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and John
P. Barratt to purchase 100,000 shares of Common Stock
at the exercise
price of $0.56 per share (incorporated by reference
to Exhibit 10.4 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
June 14, 2005)*
|
|
10.5
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and
Brian T. McGee to purchase 100,000 shares of Common
Stock at the exercise
price of $0.56 per share (incorporated by reference
to Exhibit 10.5 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
June 14, 2005)*
|
|
10.6
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and John
P. Barratt to purchase 35,714 shares of Common Stock
at the exercise price
of $0.001 per share (incorporated by reference to Exhibit
10.6 to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)*
|
|
10.7
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and
Brian T. McGee to purchase 35,714 shares of Common
Stock at the exercise
price of $0.001 per share (incorporated by reference
to Exhibit 10.7 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
June 14, 2005)*
|
|
10.8
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and
Gerald Bernstein, M.D. to purchase 100,000 shares of
Common Stock at the
exercise price of $0.61 per share (incorporated by
reference to Exhibit
10.8 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q
filed on June 14, 2005)*
|
|
10.9
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and Mark
Fletcher to purchase 250,000 shares of Common Stock
at the exercise price
of $0.61 per share (incorporated by reference to Exhibit
10.9 to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)*
|
|
10.10
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and Anna
E. Gluskin to purchase 250,000 shares of Common Stock
at the exercise
price of $0.61 per share (incorporated by reference
to Exhibit 10.10 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
June 14, 2005)*
|
|
10.11
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and Rose
C. Perri to purchase 250,000 shares of Common Stock
at the exercise price
of $0.61 per share (incorporated by reference to Exhibit
10.11 to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)*
|
131
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
10.12
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and Mark
A. Fletcher to purchase 470,726 shares of Common Stock
at the exercise
price of $0.001 per share (incorporated by reference
to Exhibit 10.12 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
June 14, 2005)*
|
|
10.13
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and Anna
E. Gluskin to purchase 1,120,704 shares of Common Stock
at the exercise
price of $0.001 per share (incorporated by reference
to Exhibit 10.13 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
June 14, 2005)*
|
|
10.14
|
Stock
Option Agreement by and between Generex Biotechnology
Corporation and Rose
C. Perri to purchase 576,752 shares of Common Stock
at the exercise price
of $0.001 per share (incorporated by reference to Exhibit
10.14 to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)*
|
|
10.15
|
Annual
Base Salaries for Certain Executive Officers Effective
August 1, 2004
(incorporated by reference to Exhibit 10.15 to Generex
Biotechnology
Corporation’s Quarterly Report on Form 10-Q filed on June 14,
2005)*
|
|
10.16
|
Employment
Agreement by and between Generex Biotechnology Corporation
and Gerald
Bernstein M.D. (incorporated by reference to Exhibit
10.16 to Generex
Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June
14, 2005)*
|
|
10.17
|
Promissory
Note and Agreement, dated March 28, 2005 by and between
Generex
Biotechnology Corporation and Cranshire Capital, L.P.
(incorporated by
reference to Exhibit 4 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on April 1, 2005)
|
|
10.18
|
1998
Stock Option Plan (incorporated by reference to Exhibit
4.3 to Generex
Biotechnology Corporation’s Registration Statement on Form S-1 (File No.
333-82667) filed on July 12, 1999)*
|
|
10.19
|
2000
Stock Option Plan (incorporated by reference to Exhibit
4.3.2 to Generex
Biotechnology Corporation’s Annual Report on Form 10-K filed on October
30, 2000)*
|
|
10.20
|
2001
Stock Option Plan (incorporated by reference to Exhibit
4.2.3 to Generex
Biotechnology Corporation’s Annual Report on Form 10-K filed on October
29, 2001)*
|
|
10.21
|
Amended
2001 Stock Option Plan (incorporated by reference to
Exhibit 4.1 to
Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on
December 15, 2003)*
|
|
10.22
|
Memorandum
of Agreement dated January 7, 1998 between Generex
Pharmaceuticals, Inc.,
GHI Inc., Generex Biotechnology Corporation, Dr. Pankaj
Modi and Galaxy
Technology, Canada and Consulting Agreement between
Generex
Pharmaceuticals, Inc. and Pankaj Modi dated October
1, 1996 (incorporated
by reference to Exhibit 10.1.1 to Generex Biotechnology
Corporation’s
Registration Statement on Form 10 filed on December
14, 1998, as amended
February 24, 1999)*
|
|
10.23
|
Assignment
and Assumption Agreement between Generex Pharmaceuticals,
Inc. and Pankaj
Modi dated October 1, 1996 (incorporated by reference
to Exhibit 10.12 to
Generex Biotechnology Corporation’s Registration Statement on Form 10/A
filed on February 24, 1999)*
|
132
|
Exhibit
Number
|
Description
of Exhibit(1)
|
|
10.24
|
Supplemental
Agreement dated December 31, 2000 between Generex Pharmaceuticals,
Inc.,
Generex Biotechnology Corporation and Dr. Pankaj Modi
(incorporated by
reference to Exhibit 10.1.4 to Generex Biotechnology
Corporation’s Annual
Report on Form 10-K filed on October 29, 2001)*
|
|
10.25
|
Amended
and Restated License Agreement dated January 15, 2002
between Generex
Biotechnology Corporation and Generex (Bermuda) Ltd.
(incorporated by
reference to Exhibit 10.3 to Generex Biotechnology
Corporation’s Current
Report on Form 8-K/A filed on September 9, 2003)
|
|
10.26
|
Stockholders
Agreement among Generex Biotechnology Corporation and
the former holders
of capital stock of Antigen Express, Inc. (incorporated
by reference to
Exhibit 10.4 to Generex Biotechnology Corporation’s Annual Report on Form
10-K filed on October 29, 2003)
|
|
21
|
Subsidiaries
of the Registrant
|
|
23.1
|
Consent
of BDO Dunwoody, LLP, independent registered public
accounting
firm
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley
Act of 2002
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer
pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|
* Management contract or management compensatory
plan or
arrangement.
(1)
In
the
case of incorporation by reference to documents filed by the
Registrant under
the Exchange Act, the Registrant’s file number under the Exchange Act is
000-25169.
133