GENEREX BIOTECHNOLOGY CORP - Quarter Report: 2010 October (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the
quarterly period ended October 31, 2010
o TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the transition period from _________________ to ________________
COMMISSION
FILE NUMBER: 0-25169
GENEREX BIOTECHNOLOGY
CORPORATION
(Exact
name of registrant as specified in its charter)
|
Delaware
|
|
98-0178636
|
|
(State or other jurisdiction of
incorporation or
organization)
|
|
(IRS Employer Identification No.)
|
33 HARBOUR SQUARE, SUITE 202
TORONTO, ONTARIO
CANADA M5J
2G2
(Address
of principal executive offices)
(416)
364-2551
(Registrant's
telephone number, including area code)
Indicate
by check mark whether the registrant: (1) has filed all reports required 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 reports), and (2) has been subject to such filing requirements for the past
90 days. x Yes ¨ No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
¨
Yes ¨ No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ¨ Accelerated
filer x
Non-accelerated
filer ¨ Smaller
reporting company ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). o Yes x No
The
number of outstanding shares of the registrant's common stock, par value $.001,
was 274,748,993 as of December 8, 2010.
GENEREX
BIOTECHNOLOGY CORPORATION
INDEX
|
PART
I. FINANCIAL INFORMATION
|
|
|
Item
1. Financial Statements
(unaudited)
|
|
|
Consolidated
Balance Sheets -
|
|
|
October
31, 2010 (unaudited) and July 31, 2010
|
1
|
|
Consolidated
Statements of Operations — For the three-month
|
|
|
periods
ended October 31, 2010 and 2009, and cumulative from
|
|
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November
2, 1995 to October 31, 2010 (unaudited)
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2
|
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Consolidated
Statements of Cash Flows — For the three-month
|
|
|
periods
ended October 31, 2010 and 2009, and cumulative from
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|
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November
2, 1995 to October 31, 2010 (unaudited)
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3
|
|
Notes
to Consolidated Financial Statements (unaudited)
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4
|
|
Item
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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11
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
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20
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|
Item
4. Controls and Procedures
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21
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PART
II: OTHER INFORMATION
|
|
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Item
1. Legal Proceedings
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21
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Item
1A. Risk Factors
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21
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|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
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23
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Item
3. Defaults Upon Senior Securities
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24
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[Item
4. Removed and Reserved.]
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-
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Item
5. Other Information
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24
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Item
6. Exhibits
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24
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Signatures
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24
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i
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
BALANCE SHEETS
|
October 31, 2010
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July 31, 2010
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|||||||
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(Unaudited)
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||||||||
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ASSETS
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||||||||
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Current
Assets:
|
||||||||
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Cash
and cash equivalents
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$ | 7,596,871 | $ | 13,880,870 | ||||
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Accounts
receivable, net
|
95,161 | 70,585 | ||||||
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Inventory
(see Note 5)
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1,762,901 | 1,911,883 | ||||||
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Other
current assets
|
453,917 | 333,456 | ||||||
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Total
Current Assets
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9,908,850 | 16,196,794 | ||||||
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Property
and Equipment, Net
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1,360,588 | 1,341,408 | ||||||
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Assets
Held for Investment, Net
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3,513,759 | 3,503,110 | ||||||
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Patents,
Net
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3,477,228 | 3,533,688 | ||||||
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TOTAL
ASSETS
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$ | 18,260,425 | $ | 24,575,000 | ||||
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
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Current
Liabilities:
|
||||||||
|
Accounts
payable and accrued expenses (see Note 6)
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$ | 6,166,898 | $ | 6,554,714 | ||||
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Deferred
revenue
|
387,351 | 396,195 | ||||||
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Current
maturities of long-term debt
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1,158,065 | 1,141,861 | ||||||
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Current
maturities of obligations under capital lease
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— | 7,818 | ||||||
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Total
Current Liabilities
|
7,712,314 | 8,100,588 | ||||||
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Long-Term
Debt, Net
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1,818,163 | 1,824,071 | ||||||
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Derivative
Warrant Liability (see Note 11)
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4,810,189 | 5,679,721 | ||||||
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Total
Liabilities
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14,340,666 | 15,604,380 | ||||||
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Commitments
and Contingencies (see Notes 7 and 8)
|
||||||||
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Stockholders’
Equity (see Note 10):
|
||||||||
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Preferred
Stock, $.001 par value; authorized 1,000,000 shares at October 31, 2010
and July 31, 2010; -0- shares issued and outstanding at October 31, 2010
and July 31, 2010
|
— | — | ||||||
|
Common
stock, $.001 par value; authorized 750,000,000 shares at October 31, 2010
and July 31, 2010; 274,538,494 and 269,599,615 shares issued and
outstanding at October 31, 2010 and July 31, 2010,
respectively
|
274,538 | 269,600 | ||||||
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Additional
paid-in capital
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335,021,183 | 333,219,309 | ||||||
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Deficit
accumulated during the development stage
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(332,179,739 | ) | (325,302,472 | ) | ||||
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Accumulated
other comprehensive income
|
803,777 | 784,183 | ||||||
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Total
Stockholders’ Equity
|
3,919,759 | 8,970,620 | ||||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 18,260,425 | $ | 24,575,000 | ||||
The Notes
to Consolidated Financial Statements are an integral part of these
statements.
1
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
Cumulative From
|
||||||||||||
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November 2, 1995
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||||||||||||
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For the Three Months Ended October 31,
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(Date of Inception)
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|||||||||||
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2010
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2009
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to October 31, 2010
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||||||||||
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(Unaudited)
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(Unaudited)
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(Unaudited)
|
||||||||||
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Revenues,
net
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$ | 173,943 | $ | 97,542 | $ | 4,964,448 | ||||||
|
Cost
of Goods Sold
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64,112 | 79,237 | 1,517,759 | |||||||||
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Gross
Profit
|
109,831 | 18,305 | 3,446,689 | |||||||||
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Operating
Expenses:
|
||||||||||||
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Research
and development
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2,878,000 | 3,075,769 | 119,616,331 | |||||||||
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Research
and development - related party
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— | — | 220,218 | |||||||||
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Selling
and marketing
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404,487 | 1,298,704 | 8,546,752 | |||||||||
|
General
and administrative
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4,601,164 | 3,825,265 | 134,121,221 | |||||||||
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General
and administrative - related party
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— | — | 314,328 | |||||||||
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Total
Operating Expenses
|
7,883,651 | 8,199,738 | 262,818,850 | |||||||||
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Operating
Loss
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(7,773,820 | ) | (8,181,433 | ) | (259,372,161 | ) | ||||||
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Other
Income (Expense):
|
||||||||||||
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Miscellaneous
income
|
— | 500 | 197,011 | |||||||||
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Income
from rental operations, net
|
74,330 | 84,593 | 1,852,913 | |||||||||
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Interest
income
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3,231 | 10,085 | 7,777,150 | |||||||||
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Interest
expense
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(50,540 | ) | (52,401 | ) | (68,257,791 | ) | ||||||
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Change
in fair value of derivative warrant liability
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869,532 | 2,996,271 | (985,921 | )(1) | ||||||||
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Loss
on extinguishment of debt
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— | — | (14,134,068 | ) | ||||||||
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Net
Loss Before Undernoted
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(6,877,267 | ) | (5,142,385 | ) | (332,922,867 | ) | ||||||
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Minority
Interest Share of Loss
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— | — | 3,038,185 | |||||||||
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Net
Loss
|
(6,877,267 | ) | (5,142,385 | ) | (329,884,682 | ) | ||||||
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Preferred
Stock Dividend
|
— | — | 2,295,057 | |||||||||
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Net
Loss Available to Common Stockholders
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$ | (6,877,267 | ) | $ | (5,142,385 | ) | $ | (332,179,739 | ) | |||
|
Basic
and Diluted Net Loss Per Common Share (see Note 9)
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$ | (0.03 | ) | $ | (0.02 | ) | ||||||
|
Weighted
Average Number of Shares of Common Stock Outstanding - basic and diluted
(Note 9)
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270,553,982 | 233,991,319 | ||||||||||
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(1) -
|
includes
$5,981,403 as adjustment related to the adoption of FASB ASC Topic 815 in
"Cumulative from November 2, 1995 (Date of Inception) to October
31, 2010" column. See Note 11 - Derivative Warrant
Liability.
|
The Notes
to Consolidated Financial Statements are an integral part of these
statements.
2
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
Cumulative
From
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||||||||||||
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For
the Three Months
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November
2, 1995
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|||||||||||
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Ended
October 31,
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(Date
of Inception)
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|||||||||||
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2010
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2009
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to October 31, 2010
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||||||||||
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(Unaudited)
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(Unaudited)
|
(Unaudited)
|
||||||||||
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Cash
Flows From Operating Activities:
|
||||||||||||
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Net
loss
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$ | (6,877,267 | ) | $ | (5,142,385 | ) | $ | (329,884,682 | ) | |||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
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Depreciation
and amortization
|
186,492 | 199,702 | 8,739,413 | |||||||||
|
Minority
interest share of loss
|
-- | -- | (3,038,185 | ) | ||||||||
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Reduction
of notes receivable - common stock in exchange
|
||||||||||||
|
for services rendered
|
-- | -- | 423,882 | |||||||||
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Write-off
of uncollectible notes receivable - common stock
|
-- | -- | 391,103 | |||||||||
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Write-off
of deferred offering costs
|
-- | -- | 3,406,196 | |||||||||
|
Write-off
of abandoned patents
|
-- | -- | 913,196 | |||||||||
|
Loss
on disposal of property and equipment
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-- | -- | 911 | |||||||||
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Loss
on extinguishment of debt
|
-- | -- | 14,134,069 | |||||||||
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Common
stock issued as employee compensation
|
25,250 | 28,986 | 3,805,645 | |||||||||
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Amortization
of options and option modifications as stock compensation
|
72,438 | 884,653 | 1,944,815 | |||||||||
|
Common
stock issued for services rendered
|
1,486,704 | 639,224 | 13,304,533 | |||||||||
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Amortization
of prepaid services in conjunction with common stock
issuance
|
-- | -- | 138,375 | |||||||||
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Non-cash
compensation expense
|
-- | 45,390 | ||||||||||
|
Stock
options and warrants issued for services rendered
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-- | -- | 7,956,723 | |||||||||
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Issuance
of warrants as additional exercise right inducement
|
-- | -- | 21,437,909 | |||||||||
|
Preferred
stock issued for services rendered
|
-- | -- | 100 | |||||||||
|
Treasury
stock redeemed for non-performance of services
|
-- | -- | (138,000 | ) | ||||||||
|
Amortization
of deferred debt issuance costs and loan origination fees
|
-- | -- | 2,405,629 | |||||||||
|
Amortization
of discount on convertible debentures
|
-- | -- | 38,345,592 | |||||||||
|
Common
stock issued as interest payment on convertible debentures
|
-- | -- | 757,514 | |||||||||
|
Interest
on short-term advance
|
-- | -- | 22,190 | |||||||||
|
Founders’
shares transferred for services rendered
|
-- | -- | 353,506 | |||||||||
|
Fees
in connection with refinancing of debt
|
-- | -- | 113,274 | |||||||||
|
Warrant
repricing costs
|
-- | -- | 3,198,604 | |||||||||
|
Change
in fair value of derivative warrant liability
|
(869,532 | ) | (2,996,271 | ) | 985,921 | (1) | ||||||
|
Changes
in operating assets and liabilities (excluding the effects of
acquisition):
|
||||||||||||
|
Accounts
receivable
|
(24,469 | ) | (26,542 | ) | (110,186 | ) | ||||||
|
Miscellaneous
receivables
|
-- | -- | 43,812 | |||||||||
|
Inventory
|
150,442 | (145,862 | ) | (1,783,809 | ) | |||||||
|
Other
current assets
|
(117,692 | ) | (238,187 | ) | (437,757 | ) | ||||||
|
Accounts
payable and accrued expenses
|
(181,097 | ) | 1,168,647 | 14,250,339 | ||||||||
|
Deferred
revenue
|
(9,056 | ) | (33,702 | ) | 381,823 | |||||||
|
Other,
net
|
-- | -- | 110,317 | |||||||||
|
Net
Cash Used in Operating Activities
|
(6,157,787 | ) | (5,661,737 | ) | (197,781,838 | ) | ||||||
|
Cash
Flows From Investing Activities:
|
||||||||||||
|
Purchase
of property and equipment
|
(51,703 | ) | (132,646 | ) | (4,806,343 | ) | ||||||
|
Costs
incurred for patents
|
(47,032 | ) | (42,237 | ) | (2,478,319 | ) | ||||||
|
Change
in restricted cash
|
-- | -- | 512,539 | |||||||||
|
Proceeds
from maturity of short-term investments
|
-- | -- | 195,242,918 | |||||||||
|
Purchases
of short-term investments
|
-- | -- | (195,242,918 | ) | ||||||||
|
Cash
received in conjunction with merger
|
-- | -- | 82,232 | |||||||||
|
Advances
to Antigen Express, Inc.
|
-- | -- | (32,000 | ) | ||||||||
|
Increase
in officers’ loans receivable
|
-- | -- | (1,126,157 | ) | ||||||||
|
Change
in deposits
|
-- | -- | (652,071 | ) | ||||||||
|
Change
in notes receivable - common stock
|
-- | -- | (91,103 | ) | ||||||||
|
Change
in due from related parties
|
-- | -- | (2,222,390 | ) | ||||||||
|
Other,
net
|
-- | -- | 89,683 | |||||||||
|
Net
Cash Used in Investing Activities
|
(98,735 | ) | (174,883 | ) | (10,723,929 | ) | ||||||
|
Cash
Flows From Financing Activities:
|
||||||||||||
|
Proceeds
from short-term advance
|
-- | -- | 325,179 | |||||||||
|
Repayment
of short-term advance
|
-- | -- | (347,369 | ) | ||||||||
|
Proceeds
from issuance of long-term debt
|
-- | -- | 2,005,609 | |||||||||
|
Repayment
of long-term debt
|
(27,654 | ) | (23,492 | ) | (2,152,210 | ) | ||||||
|
Repayment
of obligations under capital lease
|
(7,818 | ) | (10,403 | ) | (83,002 | ) | ||||||
|
Change
in due to related parties
|
-- | -- | 154,541 | |||||||||
|
Proceeds
from exercise of warrants
|
-- | 1,517,940 | 45,698,281 | |||||||||
|
Proceeds
from exercise of stock options
|
-- | -- | 5,001,916 | |||||||||
|
Proceeds
from minority interest investment
|
-- | -- | 3,038,185 | |||||||||
|
Proceeds
from issuance of preferred stock
|
-- | -- | 12,015,000 | |||||||||
|
Redemption
of SVR preferred stock
|
-- | -- | (100 | ) | ||||||||
|
Proceeds
from issuance of convertible debentures, net
|
-- | -- | 40,704,930 | |||||||||
|
Payment
of costs associated with convertible debentures
|
-- | -- | (722,750 | ) | ||||||||
|
Repayments
of convertible debentures
|
-- | -- | (5,142,424 | ) | ||||||||
|
Purchase
of treasury stock
|
-- | -- | (483,869 | ) | ||||||||
|
Proceeds
from issuance of common stock, net
|
-- | 16,400,671 | 116,637,242 | |||||||||
|
Purchase
and retirement of common stock
|
-- | -- | (497,522 | ) | ||||||||
|
Net
Cash (Used in)/Provided by Financing Activities
|
(35,472 | ) | 17,884,716 | 216,151,637 | ||||||||
|
Effect
of Exchange Rates on Cash
|
7,995 | 16,996 | (48,999 | ) | ||||||||
|
Net
(Decrease)/Increase in Cash and Cash Equivalents
|
(6,283,999 | ) | 12,065,092 | 7,596,871 | ||||||||
|
Cash
and Cash Equivalents, Beginning of Period
|
13,880,870 | 14,197,048 | -- | |||||||||
|
Cash
and Cash Equivalents, End of Period
|
$ | 7,596,871 | $ | 26,262,140 | $ | 7,596,871 | ||||||
|
(1)
-
|
includes
$5,981,403 as adjustment related to the adoption of FASB ASC Topic 815 in
"Cumulative from November 2, 1995 (Date of Inception) to October 31, 2010"
column. See Note 11 - Derivative Warrant
Liability.
|
The Notes
to Consolidated Financial Statements are an integral part of these
statements.
3
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
1.
|
Basis
of Presentation
|
The
accompanying unaudited interim consolidated financial statements (“interim
statements”) have been prepared pursuant to the rules and regulations for
reporting on Form 10-Q. Accordingly, certain information and
disclosures required by generally accepted accounting principles for complete
financial statements are not included herein. The interim statements
should be read in conjunction with the financial statements and notes thereto
included in the Company’s latest Annual Report on Form 10-K. The
results for the three months ended October 31, 2010 may not be indicative of the
results for the entire year.
Interim
statements are subject to possible adjustments in connection with the annual
audit of the Company’s accounts for the fiscal year 2011. In the
Company’s opinion, all adjustments necessary for a fair presentation of these
interim statements have been included and are of a normal and recurring
nature.
The
Company is a development stage company, which has a limited history of
operations and limited revenue to date. The Company currently is
recognizing revenue from the sale of three of its four commercially available
products. Additionally, the Company has several product candidates
that are in various 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.
Going
Concern
The
accompanying unaudited interim consolidated 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 October 31, 2010 of approximately
$332 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 support sales and marketing efforts, if the U.S. Food and
Drug Administration (“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 placements of its common stock, preferred
stock offerings and issuance of 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, meet revenue projections and manage costs, there are no
assurances that such additional funding will be achieved and that it will
succeed in its future operations. The interim 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.
|
2.
|
Effects
of Recent Accounting
Pronouncements
|
Recently
Adopted Accounting Pronouncements
In
October 2009, the Financial Accounting Standards Board (“FASB”) issued guidance
on multiple deliverable revenue arrangements which eliminates the residual
method of allocation and requires the relative selling price method when
allocating deliverables of a multiple-deliverable revenue arrangement. The
determination of the selling price for each deliverable requires the use of a
hierarchy designed to maximize the use of available objective evidence
including, vendor specific objective evidence, third party evidence of selling
price, or estimated selling price. This guidance is effective
prospectively for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010, and must be adopted in
the same period using the same transition method. If adoption is elected in a
period other than the beginning of a fiscal year, the amendments in these
standards must be applied retrospectively to the beginning of the fiscal year.
This guidance was effective for the Company’s current fiscal year beginning
August 1, 2010. The adoption of this guidance did not have a
significant impact on the Company’s interim statements.
Recently
Issued Accounting Pronouncements
In
January 2010, the FASB issued additional guidance on fair value measurements and
disclosures which requires reporting entities to provide information about
movements of assets among Levels 1 and 2 of the three-tier fair value hierarchy
established by the existing guidance. The guidance is effective for
any fiscal year that begins after December 15, 2010, and it should be used for
quarterly and annual filings. We are currently evaluating the impact
of this new accounting guidance on our consolidated financial
statements.
4
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
3.
|
Stock-Based
Compensation
|
As of
October 31, 2010, the Company had three stockholder-approved stock incentive
plans under which shares and options exercisable for shares of common stock have
been or may be granted to employees, directors, consultants and advisors. A
total of 2,000,000 shares of common stock are reserved for issuance under the
2000 Stock Option Plan (the “2000 Plan”), a total of 12,000,000 shares of common
stock are reserved for issuance under the 2001 Stock Option Plan (the “2001
Plan”) and 30,000,000 shares of common stock are reserved for issuance under the
2006 Stock Plan (the “2006 Plan”). Restricted shares can only be
issued under the 2006 Plan. At October 31, 2010, there were
2,000,000, 4,048,490 and 18,302,523 shares of common stock reserved for future
awards under the 2000 Plan, 2001 Plan and 2006 Plan, respectively.
The 2000,
2001 and 2006 Plans (the “Plans”) are administered by the Board of Directors
(the “Board”). The Board 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 Board 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 Board.
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 were Non-Qualified Options. In
addition, the 2006 Plan also provides for restricted stock grants.
The fair
value of each option granted is estimated on the 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.
In the
case of restricted stock grants under the 2006 Plan, fair market value of the
shares is established as the market price on the date of the stock
grant.
The
following is a summary of the common stock options granted, forfeited or expired
and exercised under the Plans for the three months ended October 31,
2010:
|
Weighted
|
||||||||||
|
Average
|
||||||||||
|
Exercise
|
Aggregate
|
|||||||||
|
Price
|
Intrinsic
|
|||||||||
|
Options
|
Share
|
Value
|
||||||||
|
Outstanding,
August 1, 2010
|
7,465,638 | $ | 0.49 | |||||||
|
Granted
|
— | — | ||||||||
|
Forfeited
or expired
|
(166,667 | ) | 0.64 | |||||||
|
Exercised
|
— | — | ||||||||
|
Outstanding,
October 31, 2010
|
7,298,971 | $ | 0.48 | $ |
770,886
|
|||||
|
Exercisable,
October 31, 2010
|
6,241,051 | $ | 0.46 | $ |
770,886
|
|||||
The
7,298,971 outstanding options at October 31, 2010 had a weighted average
remaining contractual term of 5.12 years.
|
Grant
Date Fair Value of Options Granted
|
$ | n/a | ||
|
Grant
Date Fair Value of Options Forfeited or Expired
|
$ | 0.58 | ||
|
Total
Intrinsic Value of Options Exercised
|
$ | n/a |
5
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The
following is a summary of the non-vested common stock options granted, vested
and forfeited under the Plan:
|
Weighted Average
|
||||||||
|
Grant Date
|
||||||||
|
Options
|
Fair Value
|
|||||||
|
Outstanding,
August 1, 2010
|
2,021,669 | $ | 0.53 | |||||
|
Granted
|
— | — | ||||||
|
Vested
|
(797,082 | ) | 0.55 | |||||
|
Forfeited
|
(166,667 | ) | 0.58 | |||||
|
Outstanding,
October 31, 2010
|
1,057,920 | $ | 0.51 | |||||
As of
October 31, 2010, the Company had $419,919 of total unrecognized compensation
cost related to non-vested share-based compensation arrangements granted under
the Plans. That cost is expected to be recognized over a
weighted-average period of 2.3 years.
|
4.
|
Comprehensive
Loss
|
Comprehensive
loss, which includes net loss and the change in the foreign currency translation
account, for the three months ended October 31, 2010 and 2009, was $6,857,673
and $5,103,555, respectively.
|
5.
|
Inventory
|
Inventory
consists of the following:
|
October 31, 2010
|
July 31, 2010
|
|||||||
|
Raw
materials
|
$ | 960,143 | $ | 962,035 | ||||
|
Finished
goods
|
802,758 | 949,848 | ||||||
|
Total
|
$ | 1,762,901 | $ | 1,911,883 | ||||
|
|
At
October 31 and July 31, 2010, approximately 59% and 60%, respectively, of
the inventory related to the Company’s Oral-lyn™ product, while the
remainder in each period related to the Company’s over-the-counter
confectionary products.
|
|
6.
|
Accounts
Payable and Accrued Expenses
|
Accounts
payable and accrued expenses consist of the following:
|
October 31, 2010
|
July 31, 2010
|
|||||||
|
Accounts
Payable & Accruals – General and Administrative
|
$ | 4,107,628 | $ | 3,480,340 | ||||
|
Accounts
Payable & Accruals – Research and Development
|
1,579,410 | 2,621,514 | ||||||
|
Accounts
Payable & Accruals – Selling and Marketing
|
329,489 | 415,166 | ||||||
|
Executive
Compensation
|
150,371 | 37,694 | ||||||
|
Total
|
$ | 6,166,898 | $ | 6,554,714 | ||||
|
7.
|
Pending
Litigation
|
In
February 2001, a former business associate of the former Vice President of
Research and Development (“VP”) of the Company and an entity known as 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 CTI. The three patents are entitled
Liquid Formulations for
Proteinic Pharmaceuticals, Vaccine Delivery System for
Immunization, Using Biodegradable Polymer Microspheres, and Controlled Releases of Drugs or
Hormones in Biodegradable Polymer Microspheres. It is the
Company’s position that the buccal drug delivery technologies which are the
subject matter of the Company’s research, development, and commercialization
efforts, including Generex Oral-lyn™ and the RapidMist™ Diabetes Management
System, do not make use of, are not derivative of, do not infringe upon, and are
entirely different from the intellectual property identified in the plaintiffs’
statement of claim. 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 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 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.
6
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On April
6, 2010, the Company commenced legal proceedings against TheStreet.com, Inc. and
Adam Feuerstein in the Supreme Court of the State of New York (New York, NY)
seeking $250,000,000 in damages for business defamation, product disparagement,
and injurious falsehood. The claims arise out of articles authored by
Mr. Feuerstein and published on TheStreet.com website on March 19 and March 26,
2010. In the complaint, the Company contends that the articles
disseminate numerous defamatory statements about the Company, its management,
and its flagship product, Generex Oral-lyn™, and that the articles put forward
several ostensible statements of fact that are, in truth, misleading or outright
misstatements made with malicious intent or with a reckless disregard for the
truth. Defendants have filed an answer denying the claims in the
complaint and have served discovery requests on the Company. 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 damages
recovered, 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 consolidated 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.
|
8.
|
Commitments
|
On
December 7, 2009, the Company entered into a long-term agreement with
sanofi-aventis Deutschland GmbH (“sanofi-aventis”). Under this
agreement, sanofi-aventis will manufacture and supply recombinant human insulin
to the Company in the territories specified in the agreement. Through
this agreement, the Company will procure recombinant human insulin crystals for
use in the production of Generex Oral-lyn™. The terms of the supply
agreement require the Company to make certain minimum purchases of insulin from
sanofi-aventis through the period ending December 31, 2011.
On
October 8, 2010, the Company entered into a purchase agreement with Global
Medical Direct, LLC, a Kansas limited liability company (“GMD”), and all of the
members of GMD, pursuant to which Generex will acquire fifty-one percent (51%)
of the issued and outstanding equity interests of GMD. Pursuant to the
terms of the purchase agreement, Generex has agreed to pay to the members of GMD
an aggregate amount of (i) $20,000,000 in cash and (ii) $5,000,000 payable in
shares of restricted common stock of Generex, subject to the terms and
conditions of the purchase agreement. The closing is subject to the
satisfaction or waiver of certain conditions, including Generex having secured
the acquisition financing, the parties agreeing upon the amended terms of an
operating agreement for GMD, the parties entering into a registration rights
agreement with respect to the registration of the shares of Generex common stock
issued as consideration and other customary closing
conditions. The purchase agreement contains certain termination
rights of the parties, including the right of any party to terminate the
purchase agreement if the parties cannot reach agreement on employment and
consulting agreements and the amendment of the operating agreement of GMD and if
the closing has not occurred by January 31, 2011 or such later date as the
parties may agree upon.
|
9.
|
Net
Loss Per Share
|
Basic
earnings per share (“EPS”) and Diluted EPS for the three-month periods ended
October 31, 2010 and 2009 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 stock options,
non-vested restricted stock and warrants, representing approximately 43,725,716
and 49,049,654 incremental shares, have been excluded from the October 31, 2010
and 2009 computations of Diluted EPS as they are anti-dilutive, due to the
losses generated during the respective periods.
7
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
10.
|
Stockholders’
Equity
|
During
the three months ended October 31, 2010, the Company issued 3,348,144 shares of
common stock to various consultants for services rendered in the amount of
$1,486,704. The shares were valued at $0.36 to $0.45 per share based
on the quoted market price of the Company’s common stock on the dates of the
issuances.
During
the three months ended October 31, 2010, the Company issued 532,389 shares of
common stock to various vendors as satisfaction of accounts payable and accrued
expenses in the amount of $222,421. The shares were valued at $0.36
to $0.49 per share based on the quoted market price of the Company’s common
stock on the dates of the issuances.
During
the three months ended October 31, 2010, the Company issued 60,228 shares of
common stock valued at $25,250 as employee compensation. The shares
were valued at $0.36 to $0.50 per share based on the quoted market price of the
Company’s common stock on the dates of the issuances.
Stock
option expense related to employee options granted in October 2009, resulting in
a charge to operations during the three month period ended October 31, 2010 of
$24,766. Stock option expense related to executive options granted in
March 2010 resulted in a charge to operations during the three-month period
ended October 31, 2010 of $47,672.
During
the three months ended October 31, 2010, the Company issued 998,118 shares of
common stock in conjunction with cashless exercises of 1,000,000
warrants.
The
following is a summary of warrants issued, forfeited or expired and exercised
for the three months ended October 31, 2010:
|
Warrants
|
||||
|
Outstanding,
August 1, 2010
|
37,426,745 | |||
|
Issued
|
— | |||
|
Forfeited
or expired
|
— | |||
|
Exercised
|
(1,000,000 | ) | ||
|
Outstanding,
October 31, 2010
|
36,426,745 | |||
The
outstanding warrants at October 31, 2010 have a weighted average exercise price
of $0.62 per share.
Certain
of the warrants above have been reclassified from equity to liability in
accordance with FASB Accounting Standards Codification (“ASC”) 815 and are not
included in stockholders’ equity. The Company has 13,931,027 warrants
with a current exercise price of $0.33 and an expiry date of March 31, 2016 and
2,572,313 warrants with a current exercise price of $0.33 and an expiry date of
September 30, 2016 (16,503,340 warrants in total) which have price protection
provisions that allow for the reduction in the current exercise price upon the
occurrence of certain events, including the Company’s issuance of common stock
or securities convertible into or exercisable for common stock, such as options
and warrants, at a price per share less than the exercise price then in
effect. For instance, if the Company issues shares of its common
stock or options exercisable for or securities convertible into common stock at
an effective price per share of common stock less than the exercise price then
in effect, the exercise price will be reduced to the effective price of the new
issuance. Simultaneously with any reduction to the exercise price,
the number of shares of common stock that may be purchased upon exercise of each
of these warrants shall be increased proportionately, so that after such
adjustment the aggregate exercise price payable for the adjusted number of
warrants shall be the same as the aggregate exercise price in effect immediately
prior to such adjustment.
The
Company’s issuance of certain securities will not trigger the price protection
provisions of these warrants described above. These “excluded”
issuances include the Company’s issuance of: (a) shares of common
stock or standard options to the Company’s directors, officers, employees or
consultants pursuant to a board-approved equity compensation program or other
contract or arrangement (up to an aggregate amount of 5,608,926, representing 5%
of the common stock issued and outstanding immediately prior to March 31, 2008);
(b) shares of common stock issued upon the conversion or exercise of any
security, right or other instrument convertible or exchangeable into common
stock (or securities exchangeable into common stock) issued prior to March 31,
2008; (c) the Warrant Shares; and (d) shares of common stock and warrants in
connection with strategic alliances, acquisitions, mergers, and strategic
partnerships, the primary purpose of which is not to raise capital, and which
are approved in good faith by the Company’s board of directors (up to an
aggregate number of 11,217,852, representing 10% of the shares of common stock
issued and outstanding immediately prior to March 31, 2008).
8
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The
Company accounts for the warrants with price protection provisions in accordance
with FASB ASC Topic 815 as described in Note 11 - Derivative Warrant Liability
below. As of October 31, 2010, there were a total of 16,503,340 warrants with an
estimated fair value of $4,810,189 which are identified on the balance sheet
under the caption “Derivative Warrant Liability”.
The
stockholders’ equity transactions as described above are summarized
below:
|
Additional
|
Total
|
|||||||||||||||
|
Common Stock
|
Paid-In
|
Stockholders’
|
||||||||||||||
|
Shares
|
Amount
|
Capital
|
Equity
|
|||||||||||||
|
Issuance
of common stock for services
|
3,348,144 | $ | 3,348 | $ | 1,483,355 | $ | 1,486,703 | |||||||||
|
Issuance
of common stock as employee compensation
|
60,228 | 60 | 25,190 | 25,250 | ||||||||||||
|
Stock-based
executive compensation
|
— | — | 47,672 | 47,672 | ||||||||||||
|
Issuance
of common stock as satisfaction of accounts payable and accrued
expenses
|
532,389 | 533 | 221,889 | 222,422 | ||||||||||||
|
Issuance
of common stock in conjunction with cashless exercise of
warrants
|
998,118 | 998 | (998 | ) | — | |||||||||||
|
Amortization
of stock options as employee compensation
|
— | — | 24,766 | 24,766 | ||||||||||||
|
Total
|
4,938,879 | $ | 4,939 | $ | 1,801,874 | $ | 1,806,813 | |||||||||
|
11.
|
Derivative
Warrant Liability
|
The
Company has warrants outstanding with price protection provisions that allow for
the reduction in the exercise price of the warrants in the event the Company
subsequently issues stock or securities convertible into stock at a price lower
than the exercise price of the warrants. Simultaneously with any
reduction to the exercise price, the number of shares of common stock that may
be purchased upon exercise of each of these warrants shall be increased or
decreased proportionately, so that after such adjustment the aggregate exercise
price payable for the adjusted number of warrants shall be the same as the
aggregate exercise price in effect immediately prior to such
adjustment. As of August 1, 2009, the Company accounted for its
warrants with price protection in accordance with FASB ASC Topic
815.
Accounting
for Derivative Warrant Liability
The
Company’s derivative warrant instruments have been measured at fair value at
October 31 and July 31, 2010 using the binomial lattice model. The
Company recognizes all of its warrants with price protection in its consolidated
balance sheets as liabilities. The liability is revalued at each
reporting period and changes in fair value are recognized currently in the
consolidated statements of operations. The initial recognition and
subsequent changes in fair value of the derivative warrant liability have no
effect on the Company’s consolidated cash flows.
The
derivative warrants outstanding at October 31, 2010 are all currently
exercisable with a weighted-average remaining life of 5.50 years.
The
revaluation of the warrants at each reporting period resulted in the recognition
of income of $869,532 and $2,996,271 within the Company’s consolidated
statements of operations for the quarters ended October 31, 2010 and 2009,
respectively, under the caption “Change in fair value of derivative warrant
liability”. The fair values of the warrants at October 31, 2010 and
July 31, 2010 were $4,810,189 and $5,679,721, respectively which are reported on
the consolidated balance sheet under the caption “Derivative Warrant
Liability”. The following summarizes the changes in the value of the
derivative warrant liability from the date of the Company’s adoption of the
provisions of FASB ASC Topic 815 on August 1, 2009 until October 31,
2010:
|
Balance
at August 1, 2009– Derivative warrant liability
|
$ | 19,825,865 | ||
|
Exercise
of warrants classified as derivative warrant liabilities
|
(10,020,554 | ) | ||
|
Decrease
in fair value of derivative warrant liability
|
(4,125,590 | ) | ||
|
Balance
at July 31, 2010 – Derivative warrant liability
|
5,679,721 | |||
|
Exercise
of warrants classified as derivative warrant liabilities
|
-0- | |||
|
Decrease
in fair value of derivative warrant liability
|
(869,532 | ) | ||
|
Balance
at October 31, 2010 – Derivative warrant liability
|
$ | 4,810,189 |
9
GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Fair
Value Assumptions Used in Accounting for Derivative Warrant
Liability
The
Company has determined its derivative warrant liability to be a Level 2 fair
value measurement and used the Black-Scholes pricing model to calculate the fair
value at the date of adoption and for the first, second and third quarters of
the fiscal year ended July 31, 2010. This model was used because of
its wide acceptance by the investment community, relative simplicity and its
emphasis on observable inputs. Key assumptions used in the
Black-Scholes fair value calculation were as follows:
|
April
30,
|
January
31,
|
October
31,
|
August
1,
|
|||||||||||||
|
2010
|
2010
|
2009
|
2009
|
|||||||||||||
|
Expected
term (years)
|
5.92 | 6.17 | 6.42 | 6.67 | ||||||||||||
|
Volatility
|
99.5 | % | 98.5 | % | 98.0 | % | 96.9 | % | ||||||||
|
Risk-free
interest rate
|
0.21 | % | 0.16 | % | 0.16 | % | 0.16 | % | ||||||||
|
Dividend
yield
|
-0- | -0- | -0- | -0- | ||||||||||||
In the
fourth quarter ended July 31, 2010, the Company determined that due to the
existence of the price protection provisions, the binomial lattice model
valuation method would likely provide a better estimate of the fair value of
these warrants. We engaged a valuation firm to estimate the fair
value of these warrants using the binomial lattice model.
The
binomial lattice model requires six basic data inputs: the exercise or strike
price, time to expiration, the risk-free interest rate, the current stock price,
the estimated volatility of the stock price in the future, and the dividend
rate. Because the warrants contain the price protection feature, the
probability that the exercise price of the warrants would decrease as the stock
price decreased was incorporated into the valuation calculations. The
key inputs used in the July 31 and October 31, 2010 fair value calculations were
as follows:
|
October
31,
|
July
31,
|
|||||||
|
2010
|
2010
|
|||||||
|
Current
exercise price
|
$ | 0.33 | $ | 0.33 | ||||
|
Time
to expiration (years)
|
5.49 | 5.75 | ||||||
|
Risk-free
interest rate
|
1.35 | % | 1.87 | % | ||||
|
Estimated
volatility
|
105 | % | 104 | % | ||||
|
Dividend
yield
|
-0- | -0- | ||||||
|
Current
stock price
|
$ | 0.344 | $ | 0.40 | ||||
In
accordance with the provisions of FASB ASC Topic 250 (Accounting Changes and
Error Corrections) as they pertain to a change in accounting estimate due to a
change in valuation technique, the binomial lattice valuation method has been
applied on a prospective basis beginning in the fourth quarter of our fiscal
year ended July 31, 2010.
|
12.
|
Subsequent
Events
|
The
Company has evaluated subsequent events occurring after the balance sheet date
through the date the consolidated financial statements were issued.
10
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
As used
herein, the terms the “Company,” “Generex,” “we,” “us,” or “our” refer to
Generex Biotechnology Corporation, a Delaware corporation. The following
discussion and analysis by management provides information with respect to our
financial condition and results of operations for the three-month periods ended
October 31, 2010 and 2009. This discussion should be read in conjunction with
the information contained in Part I, Item 1A - Risk
Factors and Part II,
Item 8 - Financial Statements and Supplementary Data in our Annual Report
on Form 10-K for the year ended July 31, 2010, as amended, and the information
contained in Part I, Item 1 -
Financial Statements and Part II, Item 1A- Risk Factors
in this Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 2010.
Forward-Looking
Statements
We have
made statements in this Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere in this Quarterly Report on Form 10-Q of Generex
Biotechnology Corporation for the fiscal quarter ended October 31, 2010 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 that we have made.
All statements, other than statements of historical facts, included in this
Quarterly 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 “may,” "expects," “anticipates,”
"plans," "intends," "believes," "will," "estimates" 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:
|
|
·
|
our expectations concerning
product candidates for our
technologies;
|
|
|
·
|
our expectations concerning
existing or potential development and license agreements for third-party
collaborations, acquisitions and joint
ventures;
|
|
|
·
|
our expectations of when
different phases of clinical activity may commence and
conclude;
|
|
|
·
|
our expectations of when
regulatory submissions may be filed or when regulatory approvals may be
received; and
|
|
|
·
|
our expectations of when
commercial sales of our products may commence and when actual revenue from
the product sales may be
received.
|
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:
|
|
·
|
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;
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the
inherent uncertainties associated with the process of obtaining regulatory
approval to market product
candidates;
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the inherent uncertainties
associated with commercialization of products that have received
regulatory approval;
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the volatility of, and recent
decline in, our stock price;
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our
recent delisting from NASDAQ for failure to satisfy the minimum bid price
requirement; and
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our ability to obtain the
necessary financing to fund our
operations.
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Additional
factors that could affect future results are set forth in Part I, Item 1A Risk Factors
of our Annual Report on Form 10-K for the year ended July 31, 2010, as amended,
and in Part II, Item 1A. Risk
Factors of this Quarterly Report on Form 10-Q. We caution investors that
the forward-looking statements contained in this Quarterly Report must be
interpreted and understood in light of conditions and circumstances that exist
as of the date of this Quarterly Report. We expressly disclaim any obligation or
undertaking to update or revise forward-looking statements 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.
11
Executive
Summary
Overview
of Business
We are
engaged primarily in the research, development and commercialization of drug
delivery systems and 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. Through
our wholly-owned subsidiary, Antigen Express, Inc., we have expanded our focus
to include immunomedicines incorporating proprietary vaccine
formulations.
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,
including estrogen, heparin, monoclonal antibodies, human growth hormone and
fertility hormone, but to date have focused our development efforts primarily on
one pharmaceutical product, Generex Oral-lyn™, an insulin formulation
administered as a fine spray into the oral cavity using our proprietary
hand-held aerosol spray applicator known as RapidMist™.
Generex
Oral-lyn™
Regulatory
Approvals and Clinical Trials
To date,
we have received regulatory approval in Ecuador, India, Lebanon and Algeria for
the commercial marketing and sale of Generex Oral-lyn™, although as per the
terms and conditions of the regulatory approval in India, a local clinical study
must be conducted before the product can be offered for commercial sale in that
country.
In March
2008, we initiated Phase III clinical trials for this product in the U.S. with
the first patient screening for such trials at a clinical study site in Texas.
The patient screening at other participating clinical sites in the U.S. and
Canada is ongoing. To date, over 450 patients have been enrolled in 70 clinical
sites around the world, including sites in the United States, Canada, Ecuador,
Bulgaria, Poland, Romania, Russia and Ukraine.
In
November 2008, we submitted our product dossier to the Ministry of Health in
Damascus, Syria through Generex MENA, our branch office in Dubai. The dossier
includes Generex Oral-lyn™. We also submitted a file to register our proprietary
over-the-counter products, including Glucose RapidSpray™, 7-Day Diet Aid Spray™
(marketed as Crave-Nx™ in the United States and Canada) and BaBOOM!™ Energy
Spray. The Syrian Ministry of Health has reviewed the dossier for Generex
Oral-lyn™ and has approved a four month in-country clinical trial, for which
patient recruitment has commenced and which trial is expected to begin early in
calendar year 2011. Upon successful completion of this trial, we
anticipate that regulatory approval will follow shortly
thereafter. We do not anticipate significant revenues to be
recognized from this approval in the 2011 fiscal year.
We have
also submitted regulatory dossiers for Generex Oral-lyn™ in a number of other
countries including Bangladesh, Kenya, Yemen, Iraq, Iran, Libya and
Sudan. While we believe these countries will ultimately approve our
product for commercial sale, it could be some time before these approvals are
received and as such we do not anticipate recognizing any revenues for these
jurisdictions until the latter part of the 2011 calendar year, at the
earliest.
Special
Access Programs
In
October 2009, we received approval from the U.S. Food and Drug Administration
(the “FDA”) to charge to recover costs for the treatment use of Generex
Oral-lyn™ in patients with Type 1 or Type 2 diabetes mellitus in the FDA’s
Treatment Investigational New Drug program that provides for early access to
investigational treatments for life-threatening or otherwise serious
conditions.
We
received a Special Access Program (“SAP”) authorization from Health Canada for a
patient-specific, physician-supervised treatment of Type-1 diabetes with Generex
Oral-lyn™ in April 2008. SAP provides access to non-marketed drugs for
practitioners treating patients with serious or life-threatening conditions when
conventional therapies have failed, are not available or unsuitable. We received
a similar authorization from health authorities in Netherlands in September
2008. We will continue to expand our SAP participation in additional
countries around the world.
Marketing
We have
entered into licensing and distribution agreements with a number of
multinational distributors to assist us with the process of gaining regulatory
approval for the registration, marketing, distribution, and sale of Generex
Oral-lyn™ in countries throughout the world, including:
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Shreya
Life Sciences Pvt. Ltd. for India, Pakistan, Bangladesh, Nepal, Bhutan,
Sri Lanka, and Myanmar;
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Adcock
Ingram Limited and Adcock Ingram Healthcare (Pty) Ltd. for South Africa,
Lesotho, Swaziland, Botswana, Namibia, Mozambique and
Zimbabwe;
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E&V
Alca Distribution Corp. for Albania, Montenegro, and
Kosovo;
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Medrey
S.A.L. (formerly MedGen Corp.) and Benta S.A.L. for
Lebanon;
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SciGen,
Ltd. for China, Hong Kong, Indonesia, Malaysia, the Philippines,
Singapore, Thailand and Vietnam;
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Pharmaris
Perus S.A.C. for Peru;
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MediPharma
SA for Argentina
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PMG
S.A. for Chile; and
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Dong
Sung Pharm. Co. Ltd. for South
Korea.
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In August
2008, we entered into a product licensing and distribution agreement with Dong
Sung Pharm Co. Ltd. for the importation, marketing, distribution and sale of
Generex Oral-lyn™ in South Korea. Under the seven-year agreement,
Dong-Sung will have an exclusive license. Per the terms of the
agreement, they paid us a USD $500,000 non-refundable license fee upon execution
and will pay us a USD $500,000 non-refundable license fee at such time as
governmental approval for the importation, marketing, distribution and sale of
the product in South Korea is obtained. Under this agreement, we are
responsible for procuring such governmental approval. In addition,
when it places its first purchase order, Dong-Sung will make a pre-payment to us
in the amount of USD $500,000, which will be applied against product purchase
orders.
Our
Generex MENA office, located in Dubai Healthcare City, has filed submissions of
the Generex Oral-Lyn™ dossier with regulatory agencies throughout the Middle
East and North Africa and has established a distribution network in over 20
countries. This distribution network is responsible for following up with
dossiers submitted in their specific regions and has also been actively
purchasing and distributing the company’s confectionary line of
products.
In India,
a marketing plan has already been submitted by Shreya Life Sciences Pvt. Ltd.,
to Generex on the marketing strategy for the distribution of Oral Recosulin™,
which is the trademark under which Shreya will market Generex Oral-lyn™ within
India. Per the requirements of the regulatory approval in India, an
in-country clinical study must be completed in India with Oral Recosulin™ before
commercial sales can commence.
Over-The-Counter
Glucose Product Line
Using our
buccal delivery technology, we have also launched a line of over-the-counter
glucose and energy sprays , including Glucose RapidSpray™, a fat-free,
low-calorie glucose formulation, Crave-NX™ 7-day Diet Aid Spray, a fat-free
glucose spray to aid in dieting, and BaBOOM!™ Energy Spray, a flavored glucose
“energy” spray supplemented with vitamins. We believe these products will
complement Generex Oral-lyn™ and may provide us with an additional revenue
stream prior to the commercialization of Generex Oral-lyn™ in other major
jurisdictions. To date, we have received modest revenues from sales of these
products. All three products are available in retail stores and
independent pharmacies in the United States and Canada. In addition,
the products are being distributed in the Middle East through our Generex MENA
office in Dubai. We expect other distribution territories for these products to
include South Africa, India, South America and other jurisdictions worldwide. We
are currently pursuing European registrations for these products.
Other
Product Candidates
In
October 2008, we announced the enrollment of subjects in our bioequivalence
clinical trial of MetControl™, our proprietary Metformin medicinal chewing gum
product, conducted in the United States. Fertin Pharma A/S, a leading
Danish manufacturer of medicinal chewing gum, produced clinical materials for
the trial. The protocol for the study is an open-label,
two-treatment, two-period, randomized, crossover study comparing MetControl™ and
immediate release Metformin™ tablets in healthy volunteers. The study results
that we received and analyzed in December 2008 demonstrated bioequivalence and
will allow us to proceed with additional research and developmental initiatives
and to consider regulatory agency registration applications. We are
compiling the data from this study and may run similar studies, which will allow
us to file a marketing application with various global regulatory agencies,
including the United States, in the latter part of the 2011 calendar
year.
Our
subsidiary, Antigen, concentrates on developing proprietary vaccine formulations
that 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 and are in the early stages of development. We
continue clinical development of Antigen’s synthetic peptide vaccines designed
to stimulate a potent and specific immune response against tumors expressing the
HER-2/neu oncogene for patients with HER-2/neu positive breast cancer in a Phase
II clinical trial and patients with prostate cancer and against avian influenza
in two completed Phase I trials. An additional Phase I trial has been initiated
recently in patients with either breast or ovarian cancer. The
synthetic vaccine technology has particularly advantages for pandemic or
potentially pandemic viruses, such as the H5N1 avian and H1N1 swine
flu. In addition to pandemic influenza viruses, development efforts
also are underway for seasonal influenza virus, HIV, HPV, melanoma, ovarian
cancer, allergy and Type I diabetes mellitus. We have established collaborations
with clinical investigators at academic centers to advance these
technologies.
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Competition
We face
competition from other providers of alternate forms of insulin. Some of our most
significant competitors, Pfizer, Eli Lilly, and Novo Nordisk, have announced
that they will discontinue development and/or sale of their inhalable forms of
insulin. Generex Oral-lyn™ is not an inhaled insulin; rather, it is a buccally
absorbed formulation with no residual pulmonary deposition. We believe that our
buccal delivery technology offers several advantages over inhaled insulin,
including the avoidance of pulmonary inhalation, which requires frequent
physician monitoring, ease of use and portability.
Brief
Company Background
We are a
development stage company. From inception through the end of the fiscal quarter
ended October 31, 2010, we have received only limited revenues from operations.
In the first quarter of fiscal 2011 and cumulatively since inception in November
1995, we have received $173,943 and $4,964,448, respectively in revenue. This
revenue has been comprised mainly of the sale of our confectionary products,
although we have recognized $600,000 relating to upfront license fees for the
signing of license and distribution agreements for Generex Oral-lyn™. These
numbers do not reflect deferred sales to customers during the respective periods
with the right of return.
We
operate in only one segment: the research, development and commercialization of
drug delivery systems and technologies for metabolic and immunological
diseases.
We were
incorporated in the State of Delaware in 1997. Our principal executive offices
are located at 33 Harbour Square, Suite 202, Toronto, Canada, and our telephone
number at that address is (416) 364-2551. We maintain an Internet website at
www.generex.com. We
make available free of charge on or through our website our filings with the
SEC.
Accounting
for Research and Development Projects
Our major
research and development projects are the refinement of our platform buccal
delivery technology, our buccal insulin project (Generex Oral-lyn™), our buccal
morphine product and Antigen’s peptide immunotherapeutic vaccines.
During
the first quarter of the current fiscal year and during the last fiscal year, we
expended resources on the clinical testing and commercialization, of our buccal
insulin product, Generex Oral-lyn™. In July 2007, we received no objection from
the FDA to proceed with our long-term multi-center Phase III study protocol for
Generex Oral-lyn™, which study is ongoing. Late-stage trials involve testing our
product with a large number of patients over a significant period of time. The
completion of late-stage trials in Canada and eventually the United States may
require significantly greater funds than we currently have on hand.
While
Generex Oral-lyn™ has received regulatory approval in Ecuador, India (subject to
the completion of an in-country study), Lebanon and Algeria, we have not
recognized any revenue from sales of Generex Oral-lyn™ in Ecuador, India or
Algeria to date and only modest revenues in Lebanon. We do
not expect that the near-term revenues from the sales of Generex Oral-lyn™ in
the countries where we currently have regulatory approval will be sufficient to
sustain our research and development and regulatory activities.
Although
we initiated regulatory approval process for our morphine and fentanyl buccal
products, we did not expend resources to further this product during our last
fiscal year or during the first two quarters of this fiscal year.
During
the first quarter of the current fiscal year and during the last fiscal year, we
expended resources on research and development relating to Antigen’s peptide
immunotherapeutic vaccines and related technologies. Antigen has one vaccine
currently in Phase II clinical trials in the United States involving patients
with HER-2/neu positive breast cancer and has completed a Phase I clinical trial
for a vaccine for H5N1 avian influenza at the Lebanese-Canadian Hospital in
Beirut. Antigen’s prostate cancer vaccine based on AE37 has been tested in a
completed (August 2009) Phase I clinical trial in Greece. Preliminary
pre-clinical work has commenced with respect to the experimental vaccine for
patients with acute myeloid leukemia at Beijing Daopei Hospital in
China.
Because
of various uncertainties, we cannot predict the timing of completion and
commercialization of our buccal insulin in all jurisdictions or buccal morphine
products or Antigen’s peptide immunotherapeutic vaccines or related
technologies. 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, our ability to enter into collaborative marketing and
distribution agreements with third-parties, and the success of such marketing
and distribution arrangements. 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. Insubstantial amounts
have been expended on projects with other drugs, including morphine and
fentanyl, and those projects involved a substantial amount of platform
technology development. As a result, 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
buccal products. During the three months ended October 31, 2010, approximately
82% of our total $2,878,000 in research expenses was attributable to insulin and
platform technology development, and we did not have any research expenses
related to morphine, fentanyl or other buccal projects. During the
three months ended October 31, 2009, approximately 85% of our $3,075,769 in
research expenses was attributable to insulin and platform technology
development, and we did not have any research expenses related to morphine,
fentanyl or other buccal projects.
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Approximately
18%, or $505,696, of our research and development expenses for the three months
ended October 31, 2010 was related to Antigen's immunomedicine products
compared to approximately 15%, or $446,346, of our research and development
expenses for the three months ended October 31, 2009. Because these
products are in initial phases of clinical trials or early, pre-clinical stage
of development (with the exception of the Phase II clinical trials of Antigen
HER-2/neu positive breast cancer vaccine that are underway), all of the expenses
were accounted for as basic research and no distinctions were made as to
particular products. Due to 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.
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. These principles require 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:
Going
Concern. As shown in the accompanying financial statements, we
have not been profitable and have reported recurring losses from
operations. These factors raise substantial doubt about our ability
to continue to operate in the normal course of business. The
accompanying financial statements do not include any adjustments that might be
necessary should we be unable to continue as a going concern.
Revenue Recognition.
Net sales of Glucose RapidSpray™, BaBOOM!™ Energy Spray and Crave-NX™ are
generally recognized in the period in which the products are delivered. Delivery
of the products generally completes the criteria for revenue recognition for us.
In the event where the customers have the right of return, sales are deferred
until the right of return lapses, the product is sold to a third party or a
provision for returns can be reasonably estimated based on historical
experience.
Inventory.
Inventories are stated at the lower of cost or market with cost determined using
the first-in first-out method. Management considers such factors as the amount
of inventory on hand and in the distribution channel, estimated time to sell
such inventory, inventories shelf life and current market conditions when
determining whether the lower cost or market is used. As appropriate, a
provision is recorded to reduce inventories to their net realizable
value. Inventory also includes the cost of products sold to the
customers with the rights of return.
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 accounting for the impairment 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.
Share-based
compensation. Management determines value of stock-based compensation to
employees in accordance with Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 718, Compensation – Stock
Compensation. Management determines value of stock-based compensation
to non-employees and consultants in accordance with and ASC 505, Equity-Based
Payments to Non-Employees.
Derivative warrant
liability. FASB ASC 815, Derivatives and Hedging, requires all
derivatives to be recorded on the balance sheet at fair value for fiscal years
beginning after December 15, 2008. As a result, certain derivative
warrant liabilities (namely those with a price protection feature) are now
separately valued as of August 1, 2009 and accounted for on our balance sheet,
with any changes in fair value recorded in earnings. For our balance
sheet as of July 31, 2010 and October 31, 2010, we used the binomial lattice
model to estimate the fair value of these warrants. Key assumptions
of the binomial lattice option-pricing model include the market price of our
stock, the exercise price of the warrants, applicable volatility rates,
risk-free interest rates, expected dividends and the instrument’s remaining
term. These assumptions require significant management
judgment. In addition, changes in any of these variables during a
period can result in material changes in the fair value (and resultant gains or
losses) of this derivative instrument. Prior to the adoption of the
binomial lattice method, we used the Black-Scholes option-pricing model to
estimate the fair value of these warrants. The binomial lattice model
was adopted as management determined that it may provide a better estimate of
the fair value of these warrants. The binomial lattice model was
adopted for the July 31, 2010 valuation date and was applied on a prospective
basis.
15
Results
of Operations
Three
Months Ended October 31, 2010 Compared to Three Months Ended October 31,
2009
Our net
loss for the quarter ended October 31, 2010 was $6,877,267 versus $5,142,385 in
the corresponding quarter of the prior fiscal year. The increase in net loss in
this fiscal quarter versus the corresponding quarter of the prior fiscal year is
primarily due to the gain on revaluation of the derivative warrant liability in
the current year’s quarter of only $869,532 versus a gain of $2,996,271 in the
corresponding prior year quarter. The increase in net loss for the current
year’s quarter was offset by a decrease in operating loss due to decreases in
our selling and marketing expenses and research and development expenses versus
the comparative prior year quarter, which were partially offset by an increase
in general and administrative expenses. Our operating loss for the
quarter ended October 31, 2010 decreased to $7,773,820 compared to $8,181,433 in
the first fiscal quarter of 2010. The decrease in operating loss
resulted from a decrease in selling expense (to $404,487 from $1,298,704) and a
decrease in research and development expenses (to $2,878,000 from $3,075,769),
offset by an increase in general and administrative expenses (to $4,601,164 from
$3,825,265). Our revenues in the quarter ended October 31, 2010
increased to $173,943 from $97,542 for the quarter ended October 31, 2009
reflecting primarily the sales of our over-the-counter products.
The
decrease in research and development expenses in the current fiscal quarter
versus the comparative quarter in the previous fiscal year, is primarily due to
timing differences related to the clinical costs associated with the global
Phase III clinical trials of our oral insulin product and platform technology,
as well as the timing of earlier stage (pre-clinical, Phase I and Phase II)
clinical trials related to the Antigen immunotherapy products versus the
previous fiscal year’s quarter. Generally, costs relating to the
Phase III oral insulin clinical studies have been decreasing as we progress
closer to the conclusion of the study, while costs relating to the Antigen Phase
II breast cancer trials are increasing as we progress further in to the studies
and enroll more patients. The increase in general and
administrative expenses is primarily related to an increase in financial
services and consulting expenses in the quarter ended October 31, 2010, as
compared to the previous year quarter ended October
31, 2009. The decrease in selling expenses for the quarter
ended October 31, 2010 versus the prior year comparative quarter is associated
with decreased advertising and promotion relating to our over-the-counter
products.
Our
interest expense in the first quarter of fiscal 2011 decreased to $50,540,
compared to interest expense of $52,401 in the first quarter of fiscal
2010. Our interest income decreased slightly to $3,231 in the first
quarter of fiscal 2011, compared to $10,085 in the same quarter for the last
year, due to lower average cash balances. We received a slightly
lower income from rental operations (net of expense) of $74,330 in the first
quarter of fiscal 2011 compared to $84,593 in the same quarter of the previous
fiscal year. The change in fair value of the warrants carried as a
derivative liability contributed a gain of $869,532 in the current quarter,
compared to a gain of $2,996,271 in the comparable quarter last
year.
Financial
Condition, Liquidity and Resources
Sources
of Liquidity
To date
we have financed our development stage activities primarily through private
placements of our common stock and securities convertible into our common
stock.
As of
October 31, 2010, we expect that our current cash position will not be
sufficient to meet our working capital needs for the next twelve months based on
the pace of our planned activities. Therefore, we will require additional funds
to support our working capital requirements and any expansion or other
activities, or will need to significantly reduce our clinical trials and other
planned activities.
While we
have financed our development stage activities to date primarily through private
placements of our common stock and securities convertible into our common stock
and while we raised over $36 million during fiscal 2010 and the fourth quarter
of fiscal 2009 combined, our cash balances were very low during portions of
fiscal 2009. Unforeseen problems with our clinical program,
manufacturing and commercialization plans in Ecuador and India, volatility or a
significant decline in our stock price following our delisting from NASDAQ, or
further 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. Our
inability to obtain required funding will have a material adverse effect on one
or more of our research or development programs and curtail some of our
commercialization efforts.
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Management
may seek to meet all or some of our operating cash flow requirements through
financing activities, such as private placement of our common stock, at-market
stock issuance programs, preferred stock offerings and offerings of debt and
convertible debt instruments, as well as through merger or acquisition
opportunities. On January 29, 2010, we filed a new shelf registration
statement (File No. 333-164591) with the Securities and Exchange Commission
(“SEC”) to renew and replace the prior shelf registration statement (File
No. 333-139637), filed in December 2006, pursuant to which we registered an
indeterminate number of shares of common stock and preferred stock and an
indeterminate number of warrants and units with an aggregate initial offering
price of up to $150,000,000. The new shelf registration statement is
intended to renew and replace the prior registration statement. The
new registration statement was declared effective on February 9, 2010
and covers offerings of shares of our common stock, preferred stock, warrants
and/or units with a maximum aggregate offering price of $150,000,000, which
includes the $116,110,920 of securities remaining unsold under the prior
registration statement. In May, June, August and September 2009, we
conducted offerings pursuant to the prior registration statement and raised an
aggregate of $32,335,164 in net proceeds. In April, May and June
2010, we raised a further $4,499,618 in net proceeds pursuant to a common stock
purchase agreement with takedowns from the new shelf registration
statement.
In
addition, management is actively pursuing industry collaboration activities,
including product licensing, specific project financing, and potential strategic
partners in the consumer market for diabetes-related products.
We
believe that our current progress in the Phase III clinical trial trials for
Oral-lyn™ in the United States and Canada represents a significant milestone
event. We also anticipate that the commercial launch of Oral-lyn™ in countries
where it has been approved may provide us with revenue in 2011. We believe
that the successful commercial launch of Oral-lyn™ in countries where we have
approval would enhance our ability to access additional sources of
funding. We will continue to require substantial funds to continue
research and development, including preclinical studies and clinical trials of
our product candidates, and to commence sales and marketing efforts if the FDA
or other regulatory approvals are obtained.
Proceeds
from Warrant Exercises
We may
receive additional proceeds from the exercise of warrants issued in the
registered direct offerings conducted in June, August and September 2009 and the
sales to Seaside 88, LP in April, May and June 2010, although some of the
warrants include a cashless exercise feature.
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In
the transaction that closed on June 15, 2009, we sold shares of common
stock and warrants exercisable for up to 8,600,000 shares of our common
stock to investors and issued Midtown Partners & Co., LLC, our
exclusive placement agent for the transaction, a warrant to purchase up to
244,926 shares of our common stock.
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In
the August 6, 2009 registered direct offering, we sold shares of common
stock and warrants exercisable for up to 2,995,305 shares of our common
stock to investors and issued a warrant to purchase 577,666 shares of our
common stock to Midtown, which acted as our exclusive placement agent for
the August 2009 transaction.
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In
the transaction that closed on September 14, 2009, we sold an aggregate of
15,312,500 shares of our common stock and warrants exercisable for up to
5,053,125 shares of our common stock to investors and issued warrants to
purchase up to 969,526 shares of our common stock to the two placement
agents and a consultant in relation to the
transaction.
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In
the closings under the common stock purchase agreement that occurred in
April, May and June 2010, we sold Seaside 12,000,000 shares of our common
stock and issued to Midtown, as placement agent, warrants to purchase an
aggregate of 300,000 shares of our common stock.
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As of
December 10, 2010, all of the warrants issued in the June, August and September
2009 registered direct offerings were exercisable. At December 10,
2010, outstanding warrants issued in connection with the June, August and
September 2009 registered direct offerings and April, May and June 2010 sales to
Seaside were as follows:
|
Date Issued
|
Aggregate No. of
Shares
Unexercised
|
Exercise
Price
|
Expiration Date
|
||||||
|
June
15, 2009
|
8,844,926 | 0.76 |
December
15, 2014
|
||||||
|
August
6, 2009
|
3,572,971 | 0.79 |
February
4, 2015
|
||||||
|
September
14, 2009
|
6,022,651 | 1.00 |
March
15, 2015
|
||||||
|
April
8, 2010
|
50,000 | 0.47259 |
February
9, 2015
|
||||||
|
April
21, 2010
|
50,000 | 0.4258 |
February
9, 2015
|
||||||
|
April
30, 2010
|
50,000 | 0.415 |
February
9, 2015
|
||||||
|
May
14, 2010
|
50,000 | 0.3496 |
February
9, 2015
|
||||||
|
May
28, 2010
|
50,000 | 0.351 |
February
9, 2015
|
||||||
|
June
11, 2010
|
50,000 | 0.3543 |
February
9, 2015
|
||||||
17
In
addition, we may receive additional proceeds from the exercise of warrants
issued in connection with the securities purchase agreement and related
documents that we entered into on March 31, 2008 with existing institutional
investors relating to a private placement of 8% secured convertible notes (the
“Notes”) and warrants (the “Series Warrants”) for aggregate gross proceeds to us
of $20,650,000. As of June 1, 2009, the outstanding principal balance
and accrued interest on the Notes were satisfied in full.
The
Series Warrants issued in connection with the March 2008 securities purchase
agreement included:
|
|
(i)
|
Series
A and A-1 Warrants, which are exercisable for a period of 7 years into an
aggregate of 75% of the number of shares of our common stock initially
issuable upon conversion of the Notes, with the Series A Warrants being
exercisable into 5,257,729 shares immediately upon issuance and the Series
A-1 warrants being exercisable into 7,541,857 shares as of October 1,
2008;
|
|
|
(ii)
|
Series
B Warrants, which became exercisable on October 1, 2008 into 100% of the
shares of our common stock initially issuable upon conversion of the Notes
(initially 17,066,166 shares) and remain exercisable for a period of 18
months after the registration statement covering the shares of common
stock issuable upon conversion or exercise of the Notes and Warrants was
declared effective by the SEC; and
|
|
|
(iii)
|
Series
C Warrants, which are exercisable for a period of 7 years as of October 1,
2008, but only to the extent that the Series B Warrant are exercised and
only in the same percentage that the Series B Warrants are exercised, up
to a maximum percentage of 75% of the number of shares of our common stock
initially issuable upon conversion of the Notes (initially a maximum of
12,799,580 shares).
|
The
initial exercise price of each Series Warrant was $1.21. The Series
Warrants include a cashless exercise feature. The exercise price of
the Series Warrants was subsequently reduced initially to $0.50 and then to
$0.33 as a result of a price protection provision triggered by our offering of
stock in a private placement in May 2009. This price protection
feature allows for the reduction in the exercise price of the Series Warrants in
the event we subsequently issue common stock or securities convertible into or
exercisable for common stock, such as options and warrants, at a price per share
less than the Series Warrant exercise price then in effect. In
addition, with any reduction to the Series Warrant exercise price, the number of
shares of common stock that may be purchased upon exercise of each Series
Warrant will be increased or decreased proportionately, so that after such
adjustment the aggregate Series Warrant exercise price payable for the adjusted
number of shares issuable upon exercise will be the same as the aggregate Series
Warrant exercise price in effect immediately prior to such
adjustment. We account for these warrants with price protection in
accordance with ASC 815 as described in Note 11 to the Notes to Consolidated Financial
Statements included elsewhere in this Quarterly Report.
As of
December 10, 2010, outstanding Series Warrants were as follows:
|
Date Issued
|
Aggregate No. of
Shares
Unexercised
|
Exercise
Price*
|
Expiration Date
|
||||||
|
March
31, 2008
|
13,931,027 | $ | 0.33 |
March
31, 2016
|
|||||
|
March
31, 2008
|
2,572,313 | $ | 0.33 |
September
30, 2016
|
|||||
*Upon
issuance of securities at a price per share of common stock less than the then
applicable exercise price, the warrants are subject to anti-dilution adjustment
of the exercise price and to the number of shares of common stock that may be
purchased upon exercise of each warrant such that the aggregate exercise price
payable upon exercise of the warrant will be the same as the aggregate exercise
price in effect immediately prior to such adjustment. Due to the anti-dilution
adjustment provision of these warrants, they have been reclassified on Generex’s
balance sheet as a liability under the caption “Derivative Warrant Liability”
with any changes in fair value at each reporting period recorded in earnings in
accordance with ASC 815.
Cash
Flows for the Three Months Ended October 31, 2010
For the
three months ended October 31, 2010, we used $6,157,787 in cash to fund our
operating activities. The use for operating activities included a net loss of
$6,877,267, an increase of $24,469 in accounts receivable, an increase in other
current assets of $117,692, a decrease of $9,056 in deferred revenue and a
decrease of $181,097 related to accounts payable and accrued expenses, offset by
a decrease of $150,442 in inventory.
The use
of cash was offset by non-cash expenses of $186,492 related to depreciation and
amortization, $72,438 in stock-based compensation to employees and $1,511,954 in
stock and warrant-based compensation issued in exchange for services rendered by
consultants. There was also a year-to-date non-cash gain of $869,532
related to the fair valuation of the derivative warrant liability at October 31,
2010.
We had
net cash outflows from investing activities of $98,735 in the three months ended
October 31, 2010, representing payments for property and equipment of $51,703
and costs incurred for patents of $47,032.
18
We had
cash outflows from financing activities in the three months ended October 31,
2010 of $35,472, which pertained to principal payments related to our capital
leases in the amount of $7,818 and long-term debt in the amount of
$27,654. There were no cash inflows related to issuances of common
stock or warrant exercises during the three months ended October 31,
2010.
Our net
working capital at October 31, 2010 decreased to $2,196,536 from $8,096,206 at
July 31, 2010, which was attributed largely to our net loss for the three-month
period ended October 31, 2010.
Funding
Requirements and Commitments
We expect
to devote substantial resources to obtaining regulatory approval of Generex
Oral-lyn™ in the U.S., Canada and Europe and to commercializing Generex
Oral-lyn™ in India, Lebanon, Ecuador and Algeria. We also will devote
resources to obtaining approval for the importation, marketing and
commercialization of Generex Oral-lyn™ in other countries where we have licensed
distributors.
Under the
long-term agreement that we signed with sanofi-aventis in December 2009,
sanofi-aventis will manufacture and supply recombinant human insulin to us in
the territories specified in the agreement. Through this agreement,
we will procure recombinant human insulin crystals for use in the production of
Generex Oral-lyn™. The terms of the supply agreement require us to
make certain minimum purchases of insulin from sanofi-aventis through the period
ended December 31, 2011. Sanofi-aventis will be our exclusive
supplier in certain countries and a non-exclusive supplier in some other
countries. Sanofi-aventis may delete any territory from the agreement
in which Generex Oral-lyn™ has not been approved for commercial sale by December
31, 2011. The prices under the supply agreement are subject to
adjustment beginning after December 31, 2012.
In
addition to the resources that we will dedicate to regulatory approval and
commercialization of Generex Oral-lyn™, we will expend resources on further
clinical development of our immunotherapeutic vaccines.
We also
will require funding to complete our acquisition of a majority interest in
Global Medical Direct, LLC (“GMD”), durable medical equipment and pharmaceutical
provider specializing in direct-to-consumer diabetes supplies and
medications. Pursuant to the Limited Liability Company Ownership
Interest Purchase Agreement dated as of October 8, 2010 (the “Purchase
Agreement”) that we entered into with GMD and all of the members of GMD, we
agreed to pay to the members of GMD an aggregate amount of (i) $20,000,000 in
cash and (ii) $5,000,000 payable in shares of restricted common stock,
calculated based on the value weighted average closing prices per share of our
common stock on the then principal trading market for each of the last 20
trading days prior to the closing date, subject to the terms and conditions of
the Purchase Agreement. The consummation of the transactions
contemplated by the Purchase Agreement is subject to the satisfaction or waiver
of closing conditions, including our having secured the acquisition financing,
the parties agreeing upon the amended terms of the operating agreement for GMD,
the parties entering into a registration rights agreement with respect to the
registration of the shares of our common stock issued as consideration, and
other customary closing conditions. The Purchase Agreement contains
certain termination rights of the parties, including the right of any party to
terminate the Purchase Agreement if the parties cannot reach agreement on
employment and consulting agreements and the amendment of the operating
agreement of GMD and if the closing has not occurred by January 31, 2011 or such
later date as the parties may agree upon.
Our
future funding requirements and commitments and our ability to raise additional
capital will depend on factors that include:
|
|
·
|
the timing and amount of expense
incurred to complete our clinical
trials;
|
|
|
·
|
the costs and timing of the
regulatory process as we seek approval of our products in
development;
|
|
|
·
|
the advancement of our products
in development;
|
|
|
·
|
our ability to generate new
relationships with industry partners throughout the world that will
provide us with regulatory assistance and long-term commercialization
opportunities;
|
|
|
·
|
the timing, receipt and amount of
sales, if any, from Generex Oral-lyn™ in India, Lebanon, Algeria and
Ecuador;
|
|
|
·
|
the timing, receipt and amount of
sales, if any, from our over-the-counter
products;
|
|
|
·
|
the cost of manufacturing (paid
to third parties) of our licensed products, and the cost of marketing and
sales activities of those
products;
|
|
|
·
|
the costs of prosecuting,
maintaining, and enforcing patent claims, if any claims are
made;
|
|
|
·
|
our ability to maintain existing
collaborative relationships and establish new relationships as we advance
our products in development;
and
|
|
|
·
|
the receptivity of the financial
market to biopharmaceutical
companies.
|
19
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 we
do not have any non-consolidated special purpose entities.
Certain
Related Party Transactions
We
utilize a management company to manage all of our real properties. The property
management company is owned by Ms. Perri, Ms. Gluskin, a director and former
Chief Executive Officer and President, and the estate of Mark Perri, a former
Chairman of the Board. In the three month period ended October 31, 2010 and the
fiscal year ended July 31, 2010, we paid the management company approximately
$14,407 and $55,691, respectively, in management fees. We believe that the
amounts paid to the management company approximate the rates that would be
charged by a non-affiliated property management company.
See Part III, Item 13 – Certain
Relationships and Related Transactions, and Directors Independence in our
Annual Report on Form 10-K for the year ended July 31, 2010, as amended, for
further descriptions of our transactions with related parties during the last
fiscal year.
Recently
Adopted Accounting Pronouncements
In
October 2009, the FASB issued guidance related to revenue recognition with
multiple deliverable revenue arrangements. This guidance eliminates
the residual method of allocation and requires the relative selling price method
when allocating deliverables of a multiple-deliverable revenue arrangement. The
determination of the selling price for each deliverable requires the use of a
hierarchy designed to maximize the use of available objective evidence
including, vendor specific objective evidence, third party evidence of selling
price, or estimated selling price. This guidance is effective on a
prospective basis for revenue arrangements entered into or materially modified
in our fiscal year beginning August 1, 2010. The adoption of this guidance did
not have a significant impact on our consolidated financial
statements.
Recently
Issued Accounting Pronouncements
In
January 2010, the FASB issued additional guidance on fair value measurements and
disclosures which requires reporting entities to provide information about
movements of assets among Levels 1 and 2 of the three-tier fair value hierarchy
established by the existing guidance. The guidance is effective for
any fiscal year that begins after December 15, 2010, and it should be used for
quarterly and annual filings. We are currently evaluating the impact
of this new accounting guidance on our consolidated financial
statements.
Item
3. 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, and 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. 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
October 31, 2010, we had fixed rate debt totaling $2,976,228. This amount
consists of the following:
|
Loan Amount
|
Interest Rate
per Annum
|
|||||
| $ | 1,100,796 | 5.91 | % | |||
| 627,896 | 6.75 | % | ||||
| 670,001 | 6.82 | % | ||||
| 392,600 | 8.50 | % | ||||
| 184,935 | 10.00 | % | ||||
| $ | 2,976,228 |
Total
|
||||
These
debt instruments mature from June 2011 through May 2015. 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.
20
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.
We have
warrants outstanding with price protection provisions that allow for the
reduction in the exercise price of the warrants in the event we subsequently
issue common stock or securities convertible into or exercisable for common
stock, such as options and warrants, at a price per share less than the warrant
exercise price then in effect. In addition, with any reduction to the
warrant exercise price, the number of shares of common stock that may be
purchased upon exercise of each warrant will be increased proportionately, so
that after such adjustment the aggregate warrant exercise price payable for the
adjusted number of shares issuable upon exercise will be the same as the
aggregate warrant exercise price in effect immediately prior to such
adjustment. We account for the warrants with price protection in
accordance with FASB ASC 815. We recognize the warrants with price
protection in our consolidated balance sheet as liabilities. The
warrant liability is revalued at each reporting period and changes in fair value
are recognized currently in the consolidated statements of operations under the
caption Change in fair value
of derivative warrant liability. While the change in fair
value of the derivative warrant liability has no effect on our cash flows, the
gains or losses can have a significant impact on non-operating income and
expenses and thus the net income or loss. As of October 31, 2010, there were
16,503,340 warrants outstanding subject to price protection provisions with an
estimated fair value of $4,810,189 or $0.291 per warrant. If the
estimated fair value of the warrants increases, there will be a corresponding
non-operating expense equal to the change in the value of the
liability. Likewise, if the estimated fair value of the warrants
decreases, there will be a corresponding non-operating gain equal to the change
in the value of the liability. There is a directly proportional relationship
between the fair value of the warrants and the market price of the stock;
therefore increases or decreases in the market price will lead to corresponding
increases or decreases in the value of the warrant liability and result in
losses or gains, respectively, on our consolidated statements of
operations.
Item 4.
Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
Prior to
the filing of this Quarterly Report on Form 10-Q, an evaluation was performed
under the supervision of and with the participation of Generex’s management,
including the Interim Chief Executive Officer (“CEO”) and Chief Financial
Officer (“CFO”), of the effectiveness of Generex’s disclosure controls and
procedures. Based on the evaluation, the CEO and CFO have concluded that, as of
October 31, 2010, Generex’s disclosure controls and procedures are effective to
ensure that information required to be disclosed by Generex in reports that it
files or submits under the Exchange Act, is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms, and is
accumulated and communicated to Generex’s management, as appropriate, to allow
timely decisions regarding required disclosure.
Changes
in Internal Control over Financial Reporting
During
the fiscal quarter ended October 31, 2010, there were no changes in Generex’s
internal controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, Generex’s internal control over
financial reporting.
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings.
See Note 7 – Pending Litigation
of the Notes to the Consolidated Financial Statements set forth under
Item 1 of Part I of this Quarterly Report for a description of legal proceedings
in which we are currently involved.
We are
involved in certain other legal proceedings in addition to those specifically
described in this Quarterly Report. 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.
Item
1A. Risk Factors.
In
addition to the other information included in this Quarterly Report on Form
10-Q, you should carefully review and consider the factors discussed in Part I, Item 1A - Risk
Factors of our Annual Report on Form 10-K for the year ended July 31,
2010, certain of which have been updated below. These factors materially affect
our business, financial condition or future results of operations. The risks,
uncertainties and other factors described in our Annual Report on Form 10-K and
below are not the only ones facing our company. Additional risks, uncertainties
and other factors not presently known to us or that we currently deem immaterial
may also impair our business operations, financial condition or operating
results. Any of the risks, uncertainties and other factors could cause the
trading price of our common stock to decline substantially.
21
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. In the three months ended October 31, 2010, we
received revenues of $173,943 which were primarily from sales of our
over-the-counter confectionary products. In the fiscal year ended
July 31, 2010, we received modest revenues of approximately $1,172,611 which
were also primarily from sales of our over-the-counter confectionary
products. We have not recognized any revenue from the sale of our
oral insulin product in Ecuador, Algeria or India to date, including during the
first three months of fiscal 2011, although we have recognized $600,000 in
licensing fee revenue relating to the signing of licensing and distribution
agreements for the sale of Generex Oral-lyn™. We do not expect to receive any
revenues in Ecuador until we enter into a definitive manufacturing and
distribution agreement with our business partner there. While we have entered
into a licensing and distribution agreement with a leading Indian-based
pharmaceutical company and insulin distributor, we do not anticipate recognizing
revenue from sales of Generex Oral-lyn™ in India until at least the latter part
of calendar year 2011, as we have to complete an in-country clinical study
before the product can be offered for commercial sale in India. We
have entered in to a subdistribution agreement in Lebanon, but do not expect any
significant revenue from the launch of the product in that country in fiscal
year 2011.
To date,
we have not been profitable and our accumulated net loss available to
shareholders was $332,179,739 at October 31, 2010. 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.
With the
exception of Generex Oral-lyn™, which has received regulatory approval in
Ecuador, India (subject to the completion of an in-country study), Lebanon and
Algeria, and our over-the-counter glucose and energy spray products, Glucose
RapidSpray™, BaBOOM!™ Energy Spray and Crave-NX™, 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 must also
complete further clinical trials and seek regulatory approvals for Generex
Oral-lyn™ in countries outside of Ecuador, India, Lebanon and Algeria. 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.
Risks
Related to the Market for Our Common Stock
If
our common stock becomes subject to the SEC’s penny stock rules, broker-dealers
may experience difficulty in completing customer transactions and trading
activity in our securities may be adversely affected.
Following
the delisting of our common stock by the NASDAQ Stock Market, if, at any time,
we have net tangible assets of $5,000,000 or less and our common stock has a
market price per share of less than $5.00, transactions in our common stock will
be subject to the SEC’s “penny stock” rules. If our common stock
becomes subject to the “penny stock” rules promulgated under the Securities
Exchange Act of 1934, broker-dealers may find it difficult to effectuate
customer transactions and trading activity in our securities may be adversely
affected.
Under
these rules, broker-dealers who recommend such securities to persons other than
institutional accredited investors must:
|
|
•
|
make
a special written suitability determination for the
purchaser;
|
|
|
•
|
receive
the purchaser’s written agreement to the transaction prior to
sale;
|
|
|
•
|
provide
the purchaser with risk disclosure documents which identify certain risks
associated with investing in “penny stocks” and which describe the market
for these “penny stocks” as well as a purchaser’s legal remedies;
and
|
|
|
•
|
obtain
a signed and dated acknowledgment from the purchaser demonstrating that
the purchaser has actually received the required risk disclosure document
before a transaction in a “penny stock” can be
completed.
|
As a
result, if our common stock becomes subject to the penny stock rules, the market
price of our securities may be depressed, and you may find it more difficult to
sell our securities.
The
price of our common stock may be affected by a limited trading volume, may
fluctuate significantly and may not reflect the actual value of our
business.
There may
be a limited public market for our common stock on the over the counter bulletin
board market, and there can be no assurance that an active trading market will
continue. An absence of an active trading market could adversely affect our
stockholders’ ability to sell our common stock in short time periods, or at
all. Our common stock has experienced, and is likely to experience in
the future, significant price and volume fluctuations that could adversely
affect the market price of our common stock without regard to our operating
performance. In addition, we believe that factors, such as possible quarterly
fluctuations in our financial results, changes in the overall economy and the
volatility of the financial markets, could cause the price of our common stock
to fluctuate substantially. Thus, the price at which shares of our
common stock may trade from time to time may not reflect the actual value of our
business or the actual value of our common stock.
22
Our
recent equity financing will dilute current stockholders and could prevent the
acquisition or sale of our business.
The
equity financing transactions into which we have recently entered have and will
dilute current stockholders. Currently approximately 35,609,513 shares of common
stock are issuable upon exercise of the warrants that we issued in a private
placement in March 2008, in the registered direct offerings conducted in June,
August and September 2009 and in connection with the sales to Seaside 88, LP in
April, May and June 2010, which represents approximately 13% of the shares of
common stock currently outstanding. Assuming
the holders of the warrants convert and exercise all of the warrants into shares
of common stock, the number of shares of issued and outstanding common stock
will increase significantly, and current stockholders will own a smaller
percentage of the outstanding common stock of Generex. The issuance of shares of
common stock pursuant to the warrants will also have a dilutive effect on
earnings per share and may adversely affect the market price of the common
stock.
In
addition, the issuance of shares of common stock upon exercise of the warrants
issued in the March 2008 private placement, the registered direct offerings in
June, August and September 2009 and in connection with the sales to Seaside in
April, May and June 2010 could have an anti-takeover effect because such
issuance will make it more difficult for, or discourage an attempt by, a party
to obtain control of Generex by tender offer or other means. The issuance of
common stock upon the exercise of the warrants will increase the number of
shares entitled to vote, increase the number of votes required to approve a
change of control of the company, and dilute the interest of a party attempting
to obtain control of the company.
If we
raise funds through one or more additional equity financings in the future, it
will have a further 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.
Item.
2. Unregistered Sales of Equity Securities and Use of Proceeds.
In the
fiscal quarter ended October 31, 2010, we sold common stock and other securities
in transactions in reliance upon exemptions from the registration requirements
of the Securities Act.
During
the three months ended October 31, 2010, we issued 12,000 shares of common stock
to American Capital Ventures, Inc. pursuant to an agreement with us for
financial services. The sale of such shares was exempt from registration under
the Securities Act in reliance upon Section 4(2) thereof. We believe
that American Capital Ventures, 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 include a legend 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.
During
the three months ended October 31, 2010, we issued 150,000 shares of our
restricted common stock as partial consideration for the provision of services
by Dr. Craig Eagle under a consulting agreement with us. The sale of
such shares was exempt from registration under the Securities Act in reliance
upon Section 4(2) thereof. We believe that Dr. Eagle 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 include a legend 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.
During
the three months ended October 31, 2010, we issued 300,000 shares of our
restricted common stock as partial consideration for the financial services
provided to us by Moscato Marsh & Partners, Inc. The sale of such
shares was exempt from registration under the Securities Act in reliance upon
Section 4(2) thereof. We believe that Moscato Marsh & Partners, 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 include a legend 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.
During
the three months ended October 31, 2010, we issued 73,000 shares of our
restricted common stock as partial consideration for the financial services
provided to us by Market Update Network Corp. The sale of such shares
was exempt from registration under the Securities Act in reliance upon Section
4(2) thereof. We believe that Market Update Network Corp. 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
include a legend 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.
We have
issued shares of our common stock to Seahawk Capital Partners, Inc, a
consultant, pursuant to an agreement to provide us with investor relation
services through October 11, 2010. During the three months ended
October 31, 2010, we issued 120,000 shares of common stock to Seahawk Capital
Partners pursuant to this agreement. We also have issued shares of
our common stock to Seahawk Capital Partners pursuant to a new agreement to
provide us with investor relation services through September 30,
2011. During the three months ended October 31, 2010, we issued
2,650,000 shares of common stock to Seahawk Capital Partners pursuant to this
agreement. The sale of such shares was exempt from registration under the
Securities Act in reliance upon Section 4(2) thereof. We believe that Seahawk
Capital Partners 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 included a legend 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.
23
We have
issued shares of our common stock to Beckerman Public Relations, a consultant,
pursuant to an agreement to provide us with investor relation
services. During the three months ended October 31, 2010, we issued
43,144 shares of common stock to Beckerman Public Relations. The sale of such
shares was exempt from registration under the Securities Act in reliance upon
Section 4(2) thereof. We believe that Beckerman Public Relations 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 include a legend 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.
Issuer
Purchases of Equity Securities
Neither
Generex nor any affiliated purchaser (as defined in Section 240.10 b-18(a)(3) of
the Exchange Act) purchased any of its equity securities during the fiscal
quarter ended October 31, 2010.
Item
3. Defaults Upon Senior Securities.
None.
Item
5. Other Information.
Reference
is made to the disclosure set forth under Part II, Item 2 - Unregistered Sales
of Equity Securities and Use of Proceeds under the caption Unregistered Sales of Equity
Securities in this Quarterly Report on Form 10-Q, which is incorporated
by reference herein.
Item
6. Exhibits.
Exhibits
are incorporated herein by reference or are filed with this quarterly report as
set forth in the Exhibit Index beginning on page 27 hereof.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
GENEREX BIOTECHNOLOGY CORPORATION
|
||
|
(Registrant)
|
||
|
Date: December
10, 2010
|
By:
|
/s/ Mark A.
Fletcher
|
|
Mark
A. Fletcher
|
||
|
Interim
President and Chief Executive Officer
|
||
|
Date: December
10, 2010
|
By:
|
/s/ Rose C. Perri
|
|
Rose C. Perri
|
||
|
Chief Financial Officer
|
||
24
EXHIBIT
INDEX
|
Exhibit
Number
|
|
Description of Exhibit(1)
|
|
1
|
Amendment
dated as of April 7, 2010 to Placement Agent Agreement Placement Agency
Agreement, dated June 8, 2009, by and between Generex Biotechnology
Corporation and Midtown Partners & Co., LLC and amendments dated
August 5, August 18, and September 11, 2009 (incorporated by reference to
Exhibit 1.2 to Generex Biotechnology Corporation’s Current Report on Form
8-K filed on April 8, 2010)
|
|
|
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
(incorporated by reference to Exhibit 4.1 to Generex Biotechnology
Corporation’s Post-Effective Amendment No. 1 to the Registration Statement
on Form S-8 filed on October 26, 2009)
|
|
|
3(ii)
|
Amended
and Restated By-Laws of Generex Biotechnology Corporation (incorporated by
reference to Exhibit 3.2(ii) to Generex Biotechnology Corporation’s Report
on Form 8-K filed December 5, 2007)
|
|
|
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)
|
|
|
4.2.1
|
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 October 31, 2003 filed on August 13,
2003)
|
|
|
4.2.2
|
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 October 31, 2003 filed on August 13,
2003)
|
|
|
4.2.3
|
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
October 31, 2003 filed on August 13, 2003)
|
|
|
4.3
|
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)
|
|
|
4.4.1
|
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)
|
|
|
4.4.2
|
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)
|
|
|
4.4.3
|
Form
of Warrant issued in connection with Exhibit 4.4.1 (incorporated by
reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
Form 8-K/A filed on March 24, 2004)
|
|
|
4.4.4
|
Form
of Additional Investment Right issued in connection with Exhibit 4.4.1
(incorporated by reference to Exhibit 4.4 to Generex Biotechnology
Corporation’s Report on Form 8-K/A filed on March 24,
2004)
|
|
|
4.5.1
|
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)
|
25
|
4.5.2
|
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)
|
|
|
4.5.3
|
Warrant
issued in connection with Exhibit 4.5.1 (incorporated by reference to
Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
|
4.5.4
|
Additional
Investment Right issued in connection with Exhibit 4.5.1 (incorporated by
reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
|
4.6.1
|
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)
|
|
|
4.6.2
|
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)
|
|
|
4.6.3
|
Warrant
issued in connection with Exhibit 4.6.1 (incorporated by reference to
Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
|
4.6.4
|
Additional
Investment Right issued in connection with Exhibit 4.6.1 (incorporated by
reference to Exhibit 4.8 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
|
4.7.1
|
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)
|
|
|
4.7.2
|
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)
|
|
|
4.7.3
|
Warrant
issued in connection with Exhibit 4.7.1 (incorporated by reference to
Exhibit 4.11 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
|
4.7.4
|
Additional
Investment Right issued in connection with Exhibit 4.7.1 (incorporated by
reference to Exhibit 4.12 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
|
|
||
|
4.7.5
|
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)
|
|
|
4.8.1
|
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)
|
|
|
4.8.2
|
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)
|
|
|
4.8.3
|
Additional
Investment Right issued in connection with Exhibit 4.8.1 (incorporated by
reference to Exhibit 4.17 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
|
4.9.1
|
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)
|
|
|
4.9.2
|
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)
|
26
|
4.9.3
|
Warrant
issued in connection with Exhibit 4.9.1 (incorporated by reference to
Exhibit 4.20 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 1, 2004)
|
|
|
4.9.4
|
Additional
Investment Right issued in connection with Exhibit 4.9.1 (incorporated by
reference to Exhibit 4.21 Generex Biotechnology Corporation’s Report on
Form 8-K filed on March 1, 2004)
|
|
|
4.10.1
|
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)
|
|
|
4.10.2
|
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)
|
|
|
4.10.3
|
Form
of Warrant issued in connection with Exhibit 4.10.1 (incorporated by
reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on July 14, 2004)
|
|
|
4.10.4
|
Form
of Additional Investment Right issued in connection Exhibit 4.10.1
(incorporated by reference to Exhibit 4.4 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on July 14,
2004)
|
|
|
4.11.1
|
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)
|
|
|
4.11.2
|
Form
of 6% Secured Convertible Debenture issued in connection with Exhibit
4.11.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on November 12,
2004)
|
|
|
4.11.3
|
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)
|
|
|
4.11.4
|
Form
of Voting Agreement entered into in connection with Exhibit 4.11.1
(incorporated by reference to Exhibit 4.7 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on November 12,
2004)
|
|
|
4.12
|
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)
|
|
|
4.13.1
|
Amendment
No. 4 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 on January 19, 2006
(incorporated by reference herein to Exhibit 4.1 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on January 20,
2006)
|
|
|
4.13.2
|
Form
of Additional AIRs issued in connection with Exhibit 4.13.1 (incorporated
by reference herein to Exhibit 4.4 to Generex Biotechnology Corporation’s
Report on Form 8-K filed on January 20, 2006)
|
|
|
4.14
|
Form
of Warrant issued by Generex Biotechnology Corporation on January 23, 2006
(incorporated by reference to Exhibit 4.2 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on January 24,
2006)
|
|
|
4.15.1
|
Agreement
to Amend Warrants between Generex Biotechnology Corporation and Cranshire
Capital L.P. dated February 27, 2006 (incorporated by reference to Exhibit
4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on
February 28, 2006).
|
|
|
4.15.2
|
Agreement
to Amend Warrants between Generex Biotechnology Corporation and Omicron
Master Trust dated February 27, 2006 (incorporated by reference to Exhibit
4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on
February 28, 2006).
|
|
|
4.15.3
|
Agreement
to Amend Warrants between Generex Biotechnology Corporation and Iroquois
Capital L.P. dated February 27, 2006 (incorporated by reference to Exhibit
4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on
February 28, 2006).
|
|
|
4.15.4
|
Agreement
to Amend Warrants between Generex Biotechnology Corporation and Smithfield
Fiduciary LLC dated February 27, 2006 (incorporated by reference to
Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on February 28, 2006).
|
27
|
4.15.5
|
Form
of Warrant issued by Generex Biotechnology Corporation on February 27,
2006 (incorporated by reference to Exhibit 4.26 to Generex Biotechnology
Corporation’s Report on Form 10-K filed on October 16,
2006)
|
|
|
4.16.1
|
Agreement
to Amend Additional Investment Right between Generex Biotechnology
Corporation and Cranshire Capital, L.P. dated February 28, 2006
(incorporated by reference to Exhibit 4.1 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on March 1,
2006).
|
|
|
4.16.2
|
Agreement
to Amend Additional Investment Right between Generex Biotechnology
Corporation and Omicron Master Trust dated February 28, 2006 (incorporated
by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report
on Form 8-K filed on March 1, 2006).
|
|
|
4.16.3
|
Agreement
to Amend Additional Investment Right between Generex Biotechnology
Corporation and Iroquois Capital LP dated February 28, 2006 (incorporated
by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report
on Form 8-K filed on March 1, 2006).
|
|
|
4.16.4
|
Agreement
to Amend Additional Investment Right between Generex Biotechnology
Corporation and Smithfield Fiduciary LLC dated February 28, 2006
(incorporated by reference to Exhibit 4.4 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on March 1,
2006).
|
|
|
4.16.5
|
Form
of Additional AIR Debenture issued by Generex Biotechnology Corporation on
February 28, 2006 (incorporated by reference to Exhibit 4.31 to Generex
Biotechnology Corporation’s Report on Form 10-K filed on October 16,
2006)
|
|
|
4.16.6
|
Form
of Additional AIR Warrant issued by Generex Biotechnology Corporation on
February 28, 2006 (incorporated by reference to Exhibit 4.32 to Generex
Biotechnology Corporation’s Report on Form 10-K filed on October 16,
2006)
|
|
|
4.17.1
|
Form
of Agreement to Amend Warrants between Generex Biotechnology Corporation
and the Investors dated March 6, 2006 (incorporated by reference to
Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on March 7, 2006).
|
|
|
4.17.2
|
Form
of Warrant issued by Generex Biotechnology Corporation on March 6, 2006
(incorporated by reference to Exhibit 4.2 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on March 7,
2006)
|
|
|
4.18
|
Warrant
issued by Generex Biotechnology Corporation on April 17, 2006 to Zapfe
Holdings, Inc. (incorporated by reference to Exhibit 4.33 to Generex
Biotechnology Corporation’s Report on Form 10-Q filed on June 14,
2006)
|
|
|
4.19
|
Form
of Warrant issued by Generex Biotechnology Corporation on April 17, 2006
to certain employees (incorporated by reference to Exhibit 4.34 to Generex
Biotechnology Corporation’s Report on Form 10-Q filed on June 14,
2006).
|
|
|
4.20.1
|
Securities
Purchase Agreement entered into by and between Generex Biotechnology
Corporation and four Investors on June 1, 2006 (incorporated by reference
to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on June 2, 2006)
|
|
|
4.20.2
|
Form
of Warrant issued by Generex Biotechnology Corporation on June 1, 2006
(incorporated by reference to Exhibit 4.2 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on June 2, 2006)
|
|
|
4.21.1
|
Form
of Amendment to Outstanding Warrants (incorporated by reference to Exhibit
4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on
June 2, 2006)
|
|
|
4.21.2
|
Form
of Warrant issued by Generex Biotechnology Corporation on June 1, 2006 in
connection with Exhibit 4.39 (incorporated by reference to Exhibit 4.4 to
Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2,
2006)
|
|
|
4.22.1
|
Securities
Purchase Agreement, dated as of March 31, 2008 among the Registrant and
each of the purchasers named therein (incorporated by reference to Exhibit
4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on
April 2, 2008)
|
|
|
4.22.2
|
Form
of 8% Secured Convertible Note, as amended (incorporated by reference to
Exhibit 4.2 to Generex Biotechnology Corporation’s Registration Statement
(333-150562) on Form S-3 filed on October 31, 2008)
|
|
|
4.22.3
|
Form
of Series A Warrant, as amended (incorporated by reference to Exhibit 4.3
to Generex Biotechnology Corporation’s Registration Statement on Form S-3
(333-150562) filed on October 31,
2008)
|
28
|
4.22.4
|
Form
of Series A-1 Warrant, as amended (incorporated by reference to Exhibit
4.4 to Generex Biotechnology Corporation’s Registration Statement on Form
S-3 (333-150562) filed on October 31, 2008)
|
|
|
4.22.5
|
Form
of Series B Warrant, as amended (incorporated by reference to Exhibit 4.5
to Generex Biotechnology Corporation’s Registration Statement on Form S-3
(333-150562) filed on October 31, 2008)
|
|
|
4.22.6
|
Form
of Series C Warrant, as amended (incorporated by reference to Exhibit 4.6
to Generex Biotechnology Corporation’s Registration Statement on Form S-3
(333-150562) filed on October 31, 2008)
|
|
|
4.22.7
|
Registration
Rights Agreement, dated March 31, 2008, among Registrant and each of the
purchasers under Securities Purchase Agreement (incorporated by reference
to Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on April 2, 2008)
|
|
|
4.22.8
|
Security
Agreement (incorporated by reference to Exhibit 4.8 to Generex
Biotechnology Corporation’s Report on Form 8-K filed on April 2,
2008)
|
|
|
4.22.9
|
Form
of Guaranty (incorporated by reference to Exhibit 4.9 to Generex
Biotechnology Corporation’s Report on Form 8-K filed on April 2,
2008)
|
|
|
4.23.1
|
Form
of Securities Purchase Agreement, dated May 15, 2009, entered into between
Generex Biotechnology Corporation and each investor in the offering
(incorporated by reference to Exhibit 1.2 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on May 18, 2009)
|
|
|
4.24.1
|
Form
of Securities Purchase Agreement, dated June 15, 2009, entered into
between Generex Biotechnology Corporation and each investor in the
offering (incorporated by reference to Exhibit 10.1 to Generex
Biotechnology Corporation’s Report on Form 8-K filed on June 16,
2009)
|
|
|
4.24.2
|
Form
of Warrant issued in connection with Exhibit 4.24.1 (incorporated by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on June 16, 2009)
|
|
|
4.24.3
|
Form
of Warrant issued to Midtown Partners & Co., LLC in connection with
Exhibit 4.24.1 (incorporated by reference to Exhibit 4.2 to Generex
Biotechnology Corporation’s Report on Form 8-K filed on June 16,
2009)
|
|
|
4.25.1
|
Form
of Securities Purchase Agreement, dated August 6, 2009, entered into
between Generex Biotechnology Corporation and each investor in the
offering (incorporated by reference to Exhibit 10.1 to Generex
Biotechnology Corporation’s Report on Form 8-K filed on August 6,
2009)
|
|
|
4.25.2
|
Form
of Warrant issued in connection with Exhibit 4.25.1 (incorporated by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on August 6, 2009)
|
|
|
4.25.3
|
Form
of Warrant issued to Midtown Partners & Co., LLC in connection with
Exhibit 4.25.1 (incorporated by reference to Exhibit 4.28 to Generex
Biotechnology Corporation’s Report on Form 8-K filed on August 6,
2009)
|
|
|
4.26.1
|
Form
of Securities Purchase Agreement, dated September 11, 2009, entered into
between Generex Biotechnology Corporation and each investor in the
offering (incorporated by reference to Exhibit 10.1 to Generex
Biotechnology Corporation’s Report on Form 8-K filed on September 15,
2009)
|
|
|
4.26.2
|
Form
of Warrant issued in connection with Exhibit 4.26.1 (incorporated by
reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on September 15, 2009)
|
|
|
4.26.3
|
Form
of Warrant issued to Midtown Partners & Co., LLC 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 15,
2009)
|
|
|
4.27.1
|
Common
Stock Purchase Agreement dated April 7, 2010 by and between Generex
Biotechnology Corporation and Seaside 88, LP. (incorporated by reference
to Exhibit 10.1 to Generex Biotechnology Corporation’s Report on
Form 8-K filed on April 8, 2010)
|
|
|
4.27.2
|
First
Amendment to Common Stock Purchase Agreement dated April 28, 2010 by and
between Generex Biotechnology Corporation and Seaside 88, LP.
(incorporated by reference to Exhibit 10.1 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on April 29,
2010)
|
29
|
4.27.3
|
Form
of Warrant issued to Midtown Partners & Co., LLC in connection with
the Placement Agency Agreement and in connection with Exhibit 4.27.1
hereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology
Corporation’s Report on Form 8-K filed on April 8,
2010)
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10.1
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Summary
of Compensation Arrangements with Executive Officers
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|
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10.2
|
Amendment
to the Employment Terms for Mark A. Fletcher, dated September 29, 2010
(incorporated by reference to Exhibit 10.46 to Generex Biotechnology
Corporation’s Report on Form 10-K filed on October 14,
2010)
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|
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10.3
|
Limited
Liability Company Ownership Interest Purchase Agreement by and among
Generex Biotechnology Corporation, Global Medical Direct, LLC and Joseph
Corso, Jr., Robert S. Shea and Mark Franz (incorporated by reference to
Exhibit 10.1 to Generex Biotechnology Corporation’s Report on Form 8-K
filed on October 12, 2010)
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31.1
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Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
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|
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31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
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|
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32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|
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(1)
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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.
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30