UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 2
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 2007
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 000-25169
GENEREX BIOTECHNOLOGY
CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 98-0178636 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) | |
| 33 Harbour Square, Suite 202, Toronto, Canada | M5J 2G2 | |
| (Address of principal executive offices) | (Zip Code) |
(416) 364-2551
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Name of each exchange on which registered | |
| Common Stock, $.001 par value per share | The NASDAQ Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
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. (Check one):
| Large accelerated filer o | Accelerated filer þ | ||
| Non-accelerated filer o | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
As of January 31, 2007, the last business day of the registrant’s most recently completed second quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $166,240,654 based on the closing sale price as reported on the NASDAQ Capital Market. Generex Biotechnology Corporation has no non-voting common equity.
At March 6, 2008, there were 111,478,091 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 15, 2007 and Amendment No. 1 thereto filed with the Securities and Exchange Commission on November 28, 2007.
Generex Biotechnology Corporation
Form 10-K/A
Amendment No. 2
July 31, 2007
Table of Contents
Page | |||
Part I | |||
| Item 3. | Legal Proceedings. | 2 | |
Part II | |||
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 3 | |
| Item 8. | Financial Statements and Supplementary Data. | 11 | |
Part IV | |||
| Item 15. | Exhibits and Financial Statement Schedules. | 13 | |
| Signatures | 14 | ||
| Schedule II | 15 | ||
As used herein, the terms the “Company,” “Generex,” “we,” “us,” or “our” refer to Generex Biotechnology Corporation, a Delaware corporation.
i
Explanatory Note
This Amendment No. 2 (“Amendment”) to the Company’s Annual Report on Form 10-K for the year ended July 31, 2007 (the “Annual Report”) is being filed for the purpose of amending portions of the Annual Report pursuant to comments of the Securities and Exchange Commission staff as follows: (i) to add a brief description of the patents and their significance to the Company’s business to the disclosure relating to Subash Chandarana et al. v. Generex Biotechnology Corporation in Part I, Item 3 - Legal Proceedings, (ii) to include interest obligations in the table of Contractual Obligations in Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, (iii) to amend the report of the independent registered public accounting firm set forth in Part II, Item 8 - Financial Statements and Supplementary Data solely to include the firm’s opinion on the Company’s statements of income, cash flows, and stockholders’ equity for the period from November 2, 1995 (date of inception) to July 31, 2007. The financial statements of the Company and subsidiaries (a development stage enterprise) to which the report of the independent registered public accounting firm relates are not being amended or restated and appear in this Amendment solely to comply with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Part IV , Item 15 - Exhibits and Financial Statement Schedules is included to reflect that the consent of the Company’s independent registered public accounting firm, Danziger Hochman Partners LLP, and new certifications of the Company’s chief executive and chief financial officers pursuant to Rule 13a-14(a) or 15(d)-14(a) and Rule 13a-14(b) or 15(d)-14(b) of the Exchange Act are filed with this Amendment. The consent of the Company’s predecessor auditor, BDO Dunwoody, LLP, is not included herewith on the basis that no changes have been made to the Company’s consolidated financial statements included in this Amendment. BDO Dunwoody, LLP’s consent was included with the Annual Report when it was initially filed.
Except for the changes to the Annual Report described above, this Amendment does not amend or update the Annual Report in any respect and, accordingly, this Amendment should be read in conjunction with filings we have made with the Securities and Exchange Commission subsequent to October 15, 2007, the date of the original filing of the Annual Report.
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Subash Chandarana et al. v. Generex Biotechnology Corporation. In February 2001, a former business associate of Pankaj Modi ("Modi") (a former officer of the Company) and an entity called Centrum Technologies Inc. ("CTI") commenced an action in the Ontario Superior Court of Justice against us and Modi seeking, among other things, damages for alleged breaches of contract and tortious acts related to a business relationship between this former associate and Modi that ceased in July 1996. The plaintiffs’ statement of claim also seeks to enjoin the use, if any, by us of three patents allegedly owned by CTI. 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 our position that the buccal drug delivery technologies which are the subject matter of our 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, we filed a preliminary motion to dismiss the action of CTI as a nonexistent entity or, alternatively, to stay such action on the grounds of want of authority of such entity to commence the action. The plaintiffs brought a cross motion to amend the statement of claim to substitute Centrum Biotechnologies, Inc. ("CBI") for CTI. CBI is a corporation of which 50 percent of the shares are owned by the former business associate and the remaining 50 percent are owned by us. Consequently, the shareholders of CBI are in a deadlock. The court granted our motion to dismiss the action of CTI and denied the plaintiffs’ cross motion without prejudice to the former business associate to seek leave to bring a derivative action in the name of or on behalf of CBI. The former business associate subsequently filed an application with the Ontario Superior Court of Justice for an order granting him leave to file an action in the name of and on behalf of CBI against Modi and us. We opposed the application. In September 2003, the Ontario Superior Court of Justice granted the request and issued an order giving the former business associate leave to file an action in the name of and on behalf of CBI against Modi and us. A statement of claim was served in July 2004. Since that time, the plaintiffs have not taken any steps in furtherance of the proceeding. We are not able to predict the ultimate outcome of this legal proceeding at the present time or to estimate an amount or range of potential loss, if any, from this legal proceeding.
Michael Powell. In August, 2006, Michael Powell commenced an action against certain defendants, including us and certain of our officers, in the Ontario Superior Court of Justice, claiming compensatory damages, special and punitive damages and various forms of injunctive and declaratory relief for breach of contract and various business torts. We believe the claims against us are frivolous and completely without merit. We are not a party to any agreement with the plaintiff. Much of the requested relief relates to the plaintiff’s position and ownership interest in and accounting for the expenses of an entity in which Generex has no interest. We have not used any intellectual property or information owned by the other entity. All intellectual property, information and business claimed to be owned or conducted by the entity in which the plaintiff claims an interest are completely unrelated to any product or technology we are currently developing or intend to develop. Therefore, even if the court were to award some declaratory or injunctive relief, we would not be affected. We are defending this action vigorously. We have brought a motion seeking to have the action dismissed as against Generex which motion is presently scheduled for hearing on October 17, 2007. We are not able to predict the ultimate outcome of this legal proceeding at the present time or to estimate an amount or range of potential loss, if any, from this legal proceeding.
Shemano Group, Inc. On September 26, 2006, Shemano Group, Inc. initiated a National Association of Securities Dealers arbitration proceeding against us. Shemano claimed it was entitled to be paid fees pursuant to a finder’s agreement in connection with certain private placements effected by us. The arbitration hearing took place in June 2007 and in July 2007 the arbitration panel awarded Shemano an aggregate of $1,030,545 in cash in compensatory damages. A third party subsequently initiated an arbitration proceeding claiming an entitlement to 60% of the award. Consequently, we paid 40% of the award to Shemano in September 2007. We are currently seeking a ruling from the court to deposit the remaining portion of the award ($618,327) with the court in respect of the new arbitration proceeding.
We are involved in certain other legal proceedings in addition to those specifically described herein. Subject to the uncertainty inherent in all litigation, we do not believe at the present time that the resolution of any of these legal proceedings is likely to have a material adverse effect on our financial position, operations or cash flows.
With respect to all litigation matters, as additional information concerning the estimates used by us becomes known, we reassess each matter’s position both with respect to accrued liabilities and other potential exposures.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis by management provides information with respect to our financial condition and results of operations for the fiscal years ended July 31, 2005, 2006 and 2007. This discussion should be read in conjunction with the information in the consolidated financial statements and the notes pertaining thereto contained in Item 8 - Financial Statements and Supplementary Data of this Amendment No. 2 to the Annual Report on Form 10-K/A and the information discussed in Part I, Item 1A - Risk Factors of the Annual Report on Form 10-K for the year ended July 31, 2007.
Executive Summary
About the Company
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, we are expanding our focus to include immunomedicines. We operate in only one segment: the research, development and commercialization of drug delivery systems and technologies for metabolic and immunological diseases.
We have a limited number of products that are ready for commercial marketing and sale: our oral insulin formulation, Generex Oral-lyn™, has been approved for commercial marketing and sale in Ecuador; and our over-the-counter line glucose spray products utilizing our proprietary RapidMist™ buccal delivery technology have been launched in retail outlets in the United States and Canada.
We have begun the regulatory approval process for six pharmaceutical products: our oral insulin formulation (late-stage), our oral morphine formulation (pre-clinical), the Antigen HER-2/neu positive breast cancer vaccine (Phase II), the Antigen avian influenza vaccine (Phase I), the Antigen prostate cancer vaccine (Phase I), and the Antigen RNAi immunotherapeutic technology for myelogenous leukemia (pre-clinical).
Our organizational structure consists of Generex Biotechnology Corporation and five wholly-owned subsidiaries: Generex Pharmaceuticals Inc., which is incorporated in Ontario, Canada and which performs all of our Canadian operations; Generex (Bermuda), Inc., which is incorporated in Bermuda and which currently does not conduct any business activities; Antigen Express, Inc., which is incorporated in Delaware and which we acquired in 2003; Generex Pharmaceuticals (USA) LLC, which we organized in North Carolina in February 2006 and which has not yet commenced any business operations; and Generex Marketing & Distribution Inc., which we organized in Ontario, Canada in September 2006 and which has not yet commenced any business operations.
We are a development stage company. From inception through the end of the 2007 fiscal year, we have received only limited revenues from operations. Pursuant to a development and license agreement that we entered into with Eli Lilly and Company in September 2000 and terminated as of June 2003, we received a $1,000,000 upfront payment. In fiscal 2007, we received approximately $136,448 in revenues from sales of Glucose RapidSpray™.
Strategy
With the launch of commercial sales of our over-the-counter oral glucose and energy spray products in retail outlets in the United States and Canada, we expect to receive increased revenues from product sales in the fiscal year ending July 31, 2008. We plan to achieve this by increasing our over-the-counter product line to three products and expanding our existing distribution channels. In addition, we will increase our advertising and marketing efforts of our products and expand the availability of our products from North America to the rest of the world. This strategy has already been effected by the execution of agreements with Leosons General Trading Company for all products and Adcock Ingram LLP and Adcock Ingram Healthcare (Pty) Ltd. for Glucose RapidSpray ™.
We also expect to derive some revenue from product sales of our oral insulin formulation Generex Oral-lyn™. We project that revenues generated from sales of both our glucose and energy spray products in the U.S. and Canada and sales of Generex Oral-lyn™ in Ecuador will not be sufficient for all of our cash needs during fiscal year 2008. In the past we were able to fund Antigen expenses with some revenue from research grants for Antigen's immunomedicine products. During the fiscal year ended July 31, 2007, we received a total of $43,750 in such research grants, and we have received a total of $1,238,046 in such research grants. We do not expect to receive such grants on a going forward basis.
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We expect to satisfy the majority of our cash needs during the current year from previous capital raised through equity and debt financings with a limited group of investors. We believe that the terms of such financings were favorable to us. Through the financing transactions that we closed in our the fiscal years ending July 31, 2005 and 2006, we believe that we have secured the funds necessary to continue in the short term with the commercialization of Generex Oral-lyn™ in Ecuador, to seek regulatory approval for this product in certain other countries and to pursue late-stage clinical trials of this product in the United States, Canada and Europe. We also project that we will have the funds to support further research and development and limited clinical testing of technology created by Antigen.
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 Food and Drug Administration or other regulatory approvals are obtained. 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, preferred stock offerings and offerings of debt and convertible debt instruments. We have filed a shelf registration statement with the Securities and Exchange Commission (“SEC”) to register an indeterminate number of shares of common stock and preferred stock and an indeterminate number of warrants and units, the aggregate initial offering price of which is not to exceed $150,000,000. Management is actively pursuing industry collaboration activities, including product licensing and specific project financing.
In fiscal 2008, we plan to concentrate our activities on enrollment and dosing of late-stage clinical trials of Generex Oral-lynTM in the United States, Canada and Europe. In anticipation of undertaking late-stage clinical trials globally, we have engaged consultants to assist with the design and implementation of clinical trials and regulatory strategies. We also have secured a manufacturer to produce clinical trial batches of Generex Oral-lyn™. We have contracted with our third-party manufacturers for sufficient quantities of the RapidMist™ device components, the insulin, and the formulary excipients that will be required for the production of clinical trial batches of Generex Oral-lyn™. We also recently entered into licensing and distribution agreement with multinational distributors to initiate the regulatory approval and commercialization process for Generex Oral-lyn™ in 15 Middle Eastern countries and the Republic of Armenia, Georgia and the Republic of Kazakhstan. We also entered into a distribution agreement for Glucose RapidSpray™, GlucoBreak™ and BaBOOM!™ Energy Spray in 15 Middle Eastern countries. Additionally, we have also entered into a distribution agreement for Glucose RapidSpray ™ in South Africa and six neighboring countries. Under the terms of these agreements, we will not receive an upfront licensing fee, but the distributors will bear all the costs associated with procuring governmental approvals, including any clinical or regulatory costs.
In the next fiscal year, we also plan to continue with the commercialization of Generex Oral-lyn™ in Ecuador and efforts to obtain regulatory approval of this product in other countries using the approved Ecuadorian dossier. Our business partner for the commercialization of Generex Oral-lyn™ in Ecuador, PharmaBrand, expects additional commercial manufacturing runs of the product at its facilities in Quito, Ecuador in the second half of calendar year 2007. Currently, our relationship with PharmaBrand is governed by a letter of intent, and we are in the process of transitioning PharmaBrand’s role into one of a third-party manufacturer with distribution rights for Ecuador. PharmaBrand has generated some commercial sales of Generex Oral-lyn™ in Ecuador to date. We expect to receive revenues from such sales sometime in fiscal 2008, but we do not expect that such sales will be reflected in our financial statements until we have entered into a definitive licensing and distribution agreement with PharmaBrand.
We face competition from other providers of alternate forms of insulin, including Pfizer which has an inhalable form of insulin, marketed as Exubera®. Since May 2006, Pfizer has launched Exubera® in Germany, Ireland, the U.K. and the U.S. Although initial supplies of Exubera® were available across the U.S. beginning in September 2006, Pfizer has expressed disappointment with its slow acceptance. In the U.S., Pfizer began branded direct-to-consumer advertising of Exubera® in print ads in mid-June 2007 and television ads in July 2007. We believe that our buccal delivery technology offers several advantages over alternate forms of insulin.
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 stage II HER-2/neu positive breast cancer and patients with prostate cancer and against avian influenza. In May 2007, the first breast cancer patients received treatment in the Phase II clinical trial of the Antigen peptide vaccine. This trial is being conducted with the United States Military Cancer Institute Clinical Trials Group under the direction of Colonel George Peoples, M.D. The trial will measure the rate of relapse after two years in breast cancer patients who have completed standard therapy for node-positive or high-risk node-negative breast cancer expressing at least low levels of the HER-2/neu oncogene and who are at increased risk for recurrence. Euroclinic, a private center in Athens, Greece, has commenced clinical trials with the same compound as an immunotherapeutic vaccine for prostate cancer in fiscal 2007. The Lebanese-Canadian Hospital in Beirut, Lebanon commenced a Phase I clinical trial of the Antigen synthetic avian influenza vaccine in April 2007.
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In addition, Antigen recently entered into an agreement with Beijing Daopei Hospital in Beijing, China to conduct clinical trials using Antigen’s novel immunotherapeutic strategy involving RNA interference to modify a patient’s cancer cells to increase their immunogenicity to enable the immune system to fight cancer anywhere in the patient’s body.
We also expect to continue joint development activities with Fertin Pharma A/S with respect to a metformin medicinal chewing gum for the treatment of Type-2 diabetes mellitus and obesity.
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 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™. 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.
Generex Oral-lyn™ was approved for commercial sale by drug regulatory authorities in Ecuador in May 2005. PharmaBrand handled the commercial launch of Generex Oral-lyn™ in Ecuador in June 2006. During the last fiscal year, we and PharmaBrand have implemented education, marketing and training programs for physicians in Ecuador to support sales of Generex Oral-lyn™, which is available through physician referrals. While we anticipate generating revenue from sales of Generex Oral-lyn™ in Ecuador in fiscal 2008, we do not expect that such revenues will be sufficient to sustain our research and development and regulatory activities.
Although we initiated regulatory approval process for our morphine buccal product, we did not expend resources to further this product during our last fiscal year.
During the last fiscal year, we expended resources on research and development relating to Antigen’s peptide immunotherapeutic vaccines and related technologies. One Antigen vaccine is currently in Phase II clinical trials in the United States involving patients with HER-2/neu positive breast cancer, and an Antigen vaccine for H5N1 avian influenza is in Phase I clinical trials conducted at the Lebanese-Canadian Hospital in Beirut. Antigen’s prostate cancer vaccine based on AE37 is currently in Phase I clinical trials in Greece.
Because of various uncertainties, we cannot predict the timing of completion and commercialization of our buccal insulin 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 and morphine. Insubstantial amounts have been expended on projects with other drugs, 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 fiscal 2007, approximately 73% of our $11,983,626 in research expenses was attributable to insulin and platform technology development, and we did not have any research expenses related to morphine or other buccal projects. During fiscal 2006, approximately 82% of our $6,554,393 in research expenses was attributable to insulin and platform technology development, and we did not have any research expenses related to morphine or other buccal projects.
Approximately 27% or $3,181,927 of our research and development expenses for the fiscal year ended July 31, 2007 was related to Antigen's immunomedicine products compared to approximately 18% or $1,155,331 for the fiscal year ended July 31, 2006. Because these products are in initial phases of clinical trials or early, pre-clinical stage of development, all of the expenses were accounted for as basic research and no distinctions were made as to particular products. Because of the early stage of development, we cannot predict the timing of completion of any products arising from this technology, or when products from this technology might begin producing revenues.
5
Results of Operations
Year Ended July 31, 2007 Compared to Year Ended July 31, 2006
We had a net loss of $23,504,958 for the year ended July 31, 2007 (fiscal 2007) compared to a net loss of $67,967,204 for the year ended July 31, 2006 (fiscal 2006). The decrease in net loss for fiscal 2007 is attributable to the fact that in fiscal 2007 we did not have interest expense and loss on extinguishment of debt similar to that which we incurred during fiscal 2006 fiscal year in connection with the issuance of convertible debentures. Our operation loss for fiscal 2007 increased to $24,876,102 compared to $18,705,983 in operating loss for fiscal 2006. The increase in our fiscal 2007 operating loss resulted from a significant increase in research and development expenses (to $11,983,626 from $6,554,393), an increase in our selling and marketing expenses (to $693,309 from $56,028) and a slight increase in general and administrative expenses (to $12, 317,742 from $12,270,562). Our revenue, excluding the deferred revenue, increased slightly from $175,000 in fiscal 2006 to $180,198 in fiscal 2007 and is attributable to the sales of our over-the-counter products.
The increase in general and administrative expenses for fiscal 2007 is due primarily to the increase of non cash compensation to financial consultants in fiscal 2007 compared to compensation paid in 2006, an increase in legal, litigation and accounting expenses and an increase in travel. The increase was offset by the reduction in executive and director compensation and the decrease in office and general expenses.
The increase in research and development expenses for fiscal 2007 reflects increased levels of research and development activities in connection with commencement of Phase III clinical trials in Canada and higher level of clinical activities of Antigen.
Our interest expense in fiscal 2007 decreased to $849,548, compared to interest expense of $37,715,275 in fiscal 2006 relating to interest paid in connection with convertible debentures entered into during the last fiscal year. Our interest and miscellaneous income increased to $2,180,380 in fiscal 2007, compared to $768,098 in fiscal 2006, primarily due to substantially higher cash and short term investment balances during fiscal 2007. Our loss on extinguishment of debt, also incurred in connection with convertible debentures, was $237,162 in fiscal 2007, compared to $12,550,565 in fiscal 2006. We received a slightly higher income from rental operations (net of expense) of $277,474 in fiscal 2007, compared to $236,521 in fiscal 2006.
Results of Operations
Year Ended July 31, 2006 Compared to Year Ended July 31, 2005
We had a net loss of $67,967,204 for the year ended July 31, 2006 (fiscal 2006) compared to a net loss of $24,001,735 for the year ended July 31, 2005 (fiscal 2005). The increase in net loss for the 2006 fiscal year was attributable mainly to interest expense and loss on extinguishment of debt incurred in connection with convertible debentures entered during the 2006 fiscal year. Our operation loss for fiscal 2006 increased slightly to $18,705,983 compared to $18,558,421 in operating loss for fiscal 2005. The increase in our fiscal 2006 operating loss resulted from an increase in general and administrative expenses (to $12,270,562 from $11,199,802), and a decrease in research and development expenses (to $6,554,393 from $7,750,731). Our revenue had decreased from $392,112 in fiscal 2005 to $175,000 in fiscal 2006.
The increase in general and administrative expenses for fiscal 2006 was due primarily to the increase of non cash compensation to financial consultants in fiscal 2006 compared to compensation paid in 2005 and an increase in executive compensation. Our consulting services, travel and advertising expenses also contributed to an increase in general and administrative expenses despite the decrease in office and general expenses.
The decrease in research and development expenses for fiscal 2006 reflected decreased level of research and development activities and fewer clinical trials of our oral insulin formulation despite the increase in the activities of Antigen.
Our interest expense in fiscal 2006 increased to $37,715,275 compared to interest expense of $4,376,043 in fiscal 2005 due to interest paid in connection with convertible debentures entered into during fiscal 2006. Our interest and miscellaneous income increased to $768,098 in fiscal 2006 compared to $93,213 in fiscal 2005 primarily due to substantially higher cash and short term investment balances during the current fiscal year. Our loss on extinguishment of debt, also incurred in connection with convertible debentures, was $12,550,565 in fiscal 2006 compared to $1,346,341 in fiscal 2005. We received a slightly higher income from rental operations (net of expense) of $236,521 in fiscal 2006 compared to $185,857 in fiscal 2005.
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Developments in Fiscal Year 2007
In August 2006, we introduced our new Glucose RapidSpray™ product which became available in independent retail pharmacies in the United States and Canada in October, 2006.
In August 2006, we entered into an agreement with the Euroclinic in Athens, Greece to commence clinical trials on an immunotherapeutic vaccine for prostate cancer developed by Antigen. These studies are currently underway.
In September 2006, we executed a clinical supply agreement and a related quality agreement with Cardinal Health PTS, LLC, now known as Catalant Pharma Solutions. We have contracted with Catalant Pharma Solutions for the manufacture of clinical trial batches of our oral insulin product, Generex Oral-lyn™.
In November 2006, we entered into an agreement with the Lebanese-Canadian Hospital in Beirut, Lebanon to conduct a human clinical trial of a synthetic avian influenza vaccine developed by Antigen Express, representing the first studies to be conducted in humans. The study is being undertaken with the approval of the appropriate Lebanese governmental and regulatory bodies.
In November, 2006, we entered into an agreement with the Lebanese-Canadian Hospital in Beirut, Lebanon to conduct a human clinical trial of a synthetic avian influenza vaccine developed by Antigen Express, representing the first studies to be conducted in humans. This vaccine is based upon peptide-synthesis technology which we believe can be manufactured rapidly, easily and at inexpensive cost. In April 2007, the Lebanese-Canadian Hospital in Beirut, Lebanon commenced a Phase I clinical trial of the Antigen synthetic avian influenza vaccine. The study is being undertaken with the approval of the appropriate Lebanese governmental and regulatory bodies.
In February 2007, in conjunction with the United States Military Cancer Institute’s Clinical Trials Group, we entered into a Phase II clinical trial using the Antigen peptide vaccine in breast cancer patients who have completed standard therapy for node-positive or high-risk node-negative breast cancer expressing at least low levels of the HER-2/neu oncogene and who are at increased risk for recurrence.
In March 2007, Antigen entered into an agreement with Beijing Daopei Hospital in Beijing, China to conduct clinical trials using Antigen’s pioneering technology for RNA interference (RNAi) stimulation of the immune response against patients’ immune cells.
In April 2007, we entered into a licensing and distribution agreement with Leosons General Trading Company, a leading distributor of North American pharmaceutical and healthcare products in the Middle East, for the commercialization of Generex Oral-lyn™ in 15 Middle Eastern countries, including Saudi Arabia and the United Arab Emirates. Under this agreement, we will not receive an upfront license fee, but Leosons will bear all costs associated with the procurement of governmental approvals for the sale of the product, including any clinical and regulatory costs. Leosons is obligated to file all requisite applications for such approvals by the fall of 2007. In April 2007, we also entered into a licensing and distribution agreement with Leosons for the distribution of Glucose RapidSpray™ in the same 15 Middle Eastern countries.
In May 2007, we introduced two new products in our line of over-the-counter glucose sprays, BaBOOM!™ Energy Spray and GlucoBreak™ dietary aid spray.
In July 2007, we entered into a licensing and distribution agreement with the Armenian Development Agency and the Canada Armenia Trading House Ltd. for the commercialization of Generex Oral-lyn™ in the Republic of Armenia, Georgia and the Republic of Kazakhstan. While we will receive no upfront fee under this agreement, the distributors will bear any and all costs associated with the procurement of governmental approvals for the sale of Generex Oral-Lyn™, including any clinical and regulatory costs.
In September 2007, we entered into a licensing and distribution agreement with Adcock Ingram LLP and Adcock Ingram Healthcare (Pty) Ltd., a leading distributor of North American pharmaceutical and healthcare products in South Africa, for the marketing and distribution of Glucose RapidSpray ™ in South Africa and six neighboring countries. Under this agreement, we will not receive an upfront license fee, but Adcock Ingram will bear all costs associated with the procurement of governmental approvals for the sale of the product, including any clinical and regulatory costs.
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Financial Condition, Liquidity and Resources
To date we have financed our development stage activities primarily through private placements of our common stock and securities convertible into our common stock.
During the fiscal year ended July 31, 2007, we did not engage in any capital-raising transactions. At July 31, 2007, we had cash and short-term investments of approximately $35.0 million, a decrease of $17.5 million from the balance as of the end of the prior fiscal year. As of July 31, 2007, we believed that our anticipated cash position was sufficient to meet our working capital needs for the next twelve months based on the pace of our planned activities. Beyond that, we may require additional funds to support our working capital requirements or for other purposes. Management plans to meet our operating cash flow requirements through financing activities, such as private placement of our common stock, preferred stock offerings and offerings of debt and convertible debt instruments. Management is also actively pursuing industry collaboration activities, including product licensing and specific project financing. While we have generally been able to raise equity capital as required, our cash balances were very low during portions of fiscal 2005 and unforeseen problems with our clinical program or materially negative developments in general economic conditions could interfere with our ability to raise additional equity capital as needed, or materially adversely affect the terms upon which such capital is available. If we are unable to raise additional capital as needed, we could be required to “scale back” or otherwise revise our business plan. Any significant scale back of operations or modification of our business plan due to a lack of funding could be expected to affect our prospects materially and adversely.
As of July 31, 2007, all outstanding 6% secured convertible debentures that we issued in connection with the Securities Purchase Agreement dated November 10, 2004 and amendments thereto have been either repaid or converted to shares of our common stock and the related debt discounts have been fully amortized. Since November 2004, we have issued an aggregate of 20,580,978 shares of common stock resulting from the conversion and repayment of an aggregate of $17,613,894 of debenture principal and accrued interest issued under the auspices of the Securities Purchase Agreement dated November 10, 2004 and amendments thereto.
At July 31, 2007, the following warrants issued under the auspices of the Securities Purchase Agreement dated November 10, 2004 and amendments thereto and the Securities Purchase Agreement dated June 1, 2006 were outstanding:
Date Issued | Aggregate No. of Shares Unexercised | Exercise Price* | Exercise Date | Expiration Date | |||||||||
| January 23, 2006 | 622,226 | $ | 1.60 | June 2, 2006 | July 22, 2011 | ||||||||
| February 27, 2006 | 4,770,617 | $ | 3.00 | August 27, 2006 | August 27, 2011 | ||||||||
| February 28, 2006 | 172,120 | $ | 1.25 | August 31, 2006 | August 31, 2011 | ||||||||
| March 1, 2006 | 800,000 | $ | 3.00 | September 6, 2006 | September 6, 2011 | ||||||||
| June 1, 2006 | 2,560,980 | $ | 2.45 | June 1, 2006 | June 1, 2011 | ||||||||
| June 2, 2006 | 3,273,144 | $ | 2.35 | June 2, 2006 | June 2, 2011 | ||||||||
*subject to anti-dilution adjustments upon issuance of securities at a price per share of common stock less than the then applicable exercise price or the market price of our common stock at that time, whichever is lower
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States of America. It requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
We consider certain accounting policies related to impairment of long-lived assets, intangible assets and accrued liabilities to be critical to our business operations and the understanding of our results of operations:
Revenue Recognition. Net sales of Glucose RapidSpray™, BaBOOM!™ Energy Spray and GlucoBreak™ are generally recognized in the period in which the products are delivered. Delivery of the products generally completes the criteria for revenue recognition for the Company. In the event where the customers have the right of return, sales are deferred until the right of return lapses or the product is resold.
8
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 Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." If it is determined that an impairment loss has occurred based upon expected future cash flows, the loss is recognized in the Statement of Operations.
Intangible Assets. We have intangible assets related to patents. The determination of the related estimated useful lives and whether or not these assets are impaired involves significant judgments. In assessing the recoverability of these intangible assets, we use an estimate of undiscounted operating income and related cash flows over the remaining useful life, market conditions and other factors to determine the recoverability of the asset. If these estimates or their related assumptions change in the future, we may be required to record impairment charges against these assets.
Estimating accrued liabilities, specifically litigation accruals. Management's current estimated range of liabilities related to pending litigation is based on management's best estimate of future costs. While the final resolution of the litigation could result in amounts different than current accruals, and therefore have an impact on our consolidated financial results in a future reporting period, management believes the ultimate outcome will not have a significant effect on our consolidated results of operations, financial position or cash flows.
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.
Contractual Obligations
The following table of contractual obligations as of July 31, 2007 includes interest obligations.
Payments Due by Period | ||||||||||||||||
Contractual Obligations | Total | Less than 1 Year | 1-3 years | 3-5 years | More than 5 years | |||||||||||
| Long-Term Debt Obligations | 3,628,837 | 302,888 | 2,640,216 | 685,733 | - | |||||||||||
| Capital Lease Obligations | - | - | - | - | - | |||||||||||
| Operating Lease Obligations | 589,211 | 148,823 | 256,079 | 183,812 | 497 | |||||||||||
| Purchase Obligations | - | - | - | - | - | |||||||||||
| Other Long-Term Liabilities Reflected on the Registrant's Balance Sheet under GAAP | - | - | - | - | - | |||||||||||
| Total | $ | 4,218,048 | $ | 451,711 | $ | 2,896,295 | $ | 869,545 | $ | 497 | ||||||
Certain Relationships and Related Transactions
Related Transactions
Prior to January 1, 1999, a portion of our general and administrative expenses resulted from transactions with affiliated persons, and a number of capital transactions also involved affiliated persons. Although these transactions were not the result of "arms-length" negotiations, we do not believe that this fact had a material impact on our results of operations or financial position. Prior to December 31, 1998, we classified certain payments to executive officers for compensation and expense reimbursements as "Research and Development - related party" and "General and Administrative - related party" because the executive officers received such payments through personal services corporations rather than directly. After December 31, 1998, these payments have been and will continue to be accounted for as though the payments were made directly to the officers, and not as a related party transaction. With the exception of our arrangement with our management company described below, we do not foresee a need for, and therefore do not anticipate, any related party transactions in the current fiscal year.
9
On May 3, 2001, we advanced $334,300 to each of three senior officers, who are also our stockholders, in exchange for promissory notes. These notes bore interest at 8.5% per annum and were payable in full on May 1, 2002. These notes were guaranteed by a related company owned by these officers and secured by a pledge of 2,500,000 shares of our common stock owned by this related company. On June 3, 2002, our Board of Directors extended the maturity date of the loans to October 1, 2002. The other terms and conditions of the loans and guaranty remained unchanged and in full force and effect. As of July 31, 2002, the balance outstanding on these notes, including accrued interest, was $1,114,084. Pursuant to a decision made by the Compensation Committee as of August 30, 2002, these loans were satisfied through the application of 592,716 shares of pledged stock, at a value of $1.90 per share, which represented the lowest closing price during the sixty days prior to August 30, 2002.
On December 9, 2005, our Board of Directors approved a one-time recompense payment in the aggregate amount of $1,000,000 for each of Ms. Gluskin, our Chairwoman, Chief Executive Officer and President, and Ms. Rose Perri, our Chief Operating Officer, Chief Financial Officer, Treasurer and Secretary, in recognition of the company’s failure to remunerate each of Ms. Gluskin and Ms. Perri in each of the fiscal years ended July 31, 1998, 1999, 2000 and 2001 in a fair and reasonable manner commensurate with comparable industry standards and Ms. Gluskin’s and Ms. Perri’s duties, responsibilities and performance during such years. The payment of such amount to each of Ms. Gluskin and Ms. Perri will be made (a) in cash at such time or times and in such amounts as determined solely by Ms. Gluskin or Ms. Perri, as applicable, and/or (b) in shares of our common stock at such time or times as determined by Ms. Gluskin or Ms. Perri, as applicable, provided that the conversion price for any such shares shall be equal to the average closing price of our common stock on the NASDAQ Capital Market for the 20 successive trading days immediately preceding, but not including, December 9, 2005. The amounts were not paid as of July 31, 2007 with the exception of $415,742.30 that was used by Ms. Perri to repay Note Receivable, Due from Related Party. The amount was due from EBI, Inc., a shareholder of the Company that is controlled by the estate of the Company’s former Chairman of the Board, Mark Perri. The note was not interest bearing, unsecured and did not have any fixed terms of repayment. The note was extended to EBI, Inc. in May 1997.
Real Estate Transactions: On August 7, 2002, we purchased real estate with an aggregate purchase price of approximately $1.6 million from an unaffiliated party. In connection with that transaction, Angara Enterprises, Inc., a licensed real estate broker that is an affiliate of Ms. Gluskin received a commission from the proceeds of the sale to the seller in the amount of 3% of the purchase price, or $45,714. We believe that this is less than the aggregate commission which would have been payable if a commission had been negotiated with an unaffiliated broker on an arm's length basis.
On December 9, 2005, our Board of Directors approved the grant to Ms. Perri of a right of first refusal in respect of any sale, transfer, assignment or other disposition of either or both real properties municipally known as 1740 Sismet Road, Mississauga, Ontario and 98 Stafford Drive, Brampton, Ontario (collectively, the “Properties”). We granted Ms. Perri this right in recognition of the fair market value transfer to us during the fiscal year ended July 31, 1998 by Ms. Perri (or parties related to her) of the Properties.
We utilize a management company to manage all of our real properties. The property management company is owned by Ms. Perri, Ms. Gluskin and the estate of Mark Perri, our former Chairman of the Board. In the fiscal years ended July 31, 2007 and 2006, we paid the management company approximately $47,832 and $46,133, respectively, in management fees.
Legal Fees. David Wires, a former director, is a partner of the firm Wires Jolley LLP. Wires Jolley represents us in various matters. During fiscal 2007, we paid approximately $95,000 in fees to Wires Jolley. We continue to use Wires Jolley and expect to pay legal fees in similar amounts to the firm in fiscal 2008. Mr. Wires elected not to stand for re-election at our annual meeting of stockholders which was held on May 29, 2007.
Consulting Fees. Peter Amanatides, one of our directors, is the Senior Vice-President and Chief Operating Officer of PharmaLogika, Inc., a private consulting firm in the pharmaceuticals regulatory field. During fiscal year 2007, Generex paid $100,000 in fees to PharmaLogika for services rendered, and we owe a balance of $50,000. We do not expect to pay any further fees to PharmaLogika going forward. Mr. Amanatides is neither a director nor a shareholder of PharmaLogika.
10
New Accounting Pronouncements
In July 2006, the FASB published FASB Interpretation No. 48 (FIN No. 48), “Accounting for Uncertainty in Income Taxes”, to address the noncomparability in reporting tax assets and liabilities resulting from a lack of specific guidance in SFAS No. 109, “Accounting for Income Taxes,” on the uncertainty in income taxes recognized in an enterprise’s financial statements. FIN No. 48 will apply to fiscal years beginning after December 15, 2006, with earlier adoption permitted. We do not expect that the adoption of FIN No. 48 will have a significant impact on our consolidated results of operations or financial position.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, with earlier application encouraged. Any amounts recognized upon adoption as a cumulative effect adjustment will be recorded to the opening balance of retained earnings in the year of adoption. We are currently evaluating the impact of this statement on our results of operations or financial position.
In February 2007, the FASB issued SFAS No. 159, “Establishing the Fair Value Option for Financial Assets and Liabilities” to permit all entities to choose to elect to measure eligible financial instruments at fair value. The decision whether to elect the fair value option may occur for each eligible item either on a specified election date or according to a preexisting policy for specified types of eligible items. However, that decision must also take place on a date on which criteria under SFAS 159 occurs. Finally, the decision to elect the fair value option shall be made on an instrument-by-instrument basis, except in certain circumstances. An entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 applies to fiscal years beginning after November 15, 2007, with early adoption permitted for an entity that has also elected to apply the provisions of SFAS No. 157, Fair Value Measurements. We are currently evaluating the impact of this statement on our results of operations or financial position.
Item 8. Financial Statements and Supplementary Data.
11
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | ||||
| Report of Independent Registered Public Accounting Firms | F-1-F-3 | |||
| Consolidated Balance Sheets July 31, 2007 and 2006 | F-4 | |||
| Consolidated Statements of Operations For the Years Ended July 31, 2007, 2006 and 2005 and Cumulative From Inception to July 31, 2007 | F-5 | |||
| Consolidated Statements of Changes in Stockholders’ Equity For the Period November 2, 1995 (Date of Inception) to July 31, 2007 | F-6-F-17 | |||
| Consolidated Statements of Cash Flows For the Years Ended July 31, 2007, 2006 and 2005 and Cumulative From Inception to July 31, 2007 | F-18 | |||
| Notes to Consolidated Financial Statements | F-19-F-46 | |||
12
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders of
Generex Biotechnology Corporation
(A Development Stage Company)
We have audited the accompanying consolidated balance sheets of Generex Biotechnology Corporation (a development stage company) as of July 31, 2007 and 2006 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended and for the period November 2, 1995 (date of inception) to July 31, 2007. We also have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that Generex Biotechnology Corporation maintained effective internal control over financial reporting as of July 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Generex Biotechnology Corporation’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on these financial statements, an opinion on management’s assessment, and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audits.
We conducted our audits, referred to above, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures we consider necessary in the circumstances. We believe that our audits provide reasonable bases for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
F-1
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Generex Biotechnology Corporation as of July 31, 2007 and 2006, and the results of its operations and its cash flows for the years then ended and for the period November 2, 1995 (date of inception) to July 31, 2007 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, management’s assessment that Generex Biotechnology Corporation maintained effective internal control over financial reporting as of July 31, 2007, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by COSO. Furthermore, in our opinion, Generex Biotechnology Corporation maintained, in all material respects, effective internal control over financial reporting as of July 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by COSO.
Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedule II is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied to the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.
/s/ Danziger Hochman Partners LLP
Toronto, Canada
October 3, 2007
F-2
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Generex Biotechnology Corporation
(A Development Stage Company)
We have audited the accompanying consolidated balance sheet of Generex Biotechnology Corporation (a development stage company) as of July 31, 2005 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended. We have also audited Schedule II. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and Schedule II are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and Schedule II, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement and schedule presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Generex Biotechnology Corporation (a development stage company) at July 31, 2005 and the results of its operations and its cash flows the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Also, in our opinion, Schedule II presents fairly, in all material respects, the information set forth therein.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring net losses and negative cash flows from operations and has a working capital deficiency. These matters raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BDO Dunwoody LLP
Toronto, Ontario
September 30, 2005
F-3
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
| July 31, | |||||||
| 2007 | 2006 | ||||||
| ASSETS | |||||||
| Current Assets: | |||||||
| Cash and cash equivalents | $ | 21,026,067 | $ | 38,208,493 | |||
| Short-term investments | 14,011,738 | 14,372,653 | |||||
| Accounts receivable | 58,264 | -- | |||||
| Inventory | 123,931 | -- | |||||
| Other current assets | 469,210 | 237,752 | |||||
| Total Current Assets | 35,689,210 | 52,818,898 | |||||
| Property and Equipment, Net | 2,137,027 | 2,585,744 | |||||
| Assets Held for Investment, Net | 3,693,183 | 3,602,773 | |||||
| Patents, Net | 4,884,984 | 5,097,827 | |||||
| TOTAL ASSETS | $ | 46,404,404 | $ | 64,105,242 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current Liabilities: | |||||||
| Accounts payable and accrued expenses | $ | 7,156,709 | $ | 5,444,790 | |||
| Deferred revenue | 33,314 | -- | |||||
| Current maturities of long-term debt | 84,503 | 428,059 | |||||
| Convertible debentures, net of debt discount of $-0- and $608,737 | |||||||
| at July 31, 2007 and 2006, respectively | -- | 160,494 | |||||
| Total Current Liabilities | 7,274,526 | 6,033,343 | |||||
| Long-Term Debt, Net | 3,059,286 | 2,608,105 | |||||
| Commitments and Contingencies | |||||||
| Stockholders’ Equity: | |||||||
| Special Voting Rights Preferred Stock, $.001 par value; | |||||||
| authorized 1,000 shares at July 31, 2007 and 2006; -0- and 1,000 shares | |||||||
| issued and outstanding at July 31, 2007 and 2006, respectively | -- | 1 | |||||
| Common stock, $.001 par value; authorized 500,000,000 shares at July 31, 2007 | |||||||
| and 2006; 109,616,518 and 107,398,360 shares issued and outstanding at | |||||||
| July 31, 2007 and 2006, respectively | 109,616 | 107,397 | |||||
| Additional paid-in capital | 247,079,439 | 243,097,627 | |||||
| Deficit accumulated during the development stage | (212,000,270 | ) | (188,495,312 | ) | |||
| Accumulated other comprehensive income | 881,807 | 754,081 | |||||
| Total Stockholders’ Equity | 36,070,592 | 55,463,794 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 46,404,404 | $ | 64,105,242 | |||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-4
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Years Ended July 31, | Cumulative From November 2, 1995 (Date of Inception) to July 31, | ||||||||||||
| 2007 | 2006 | 2005 | 2007 | ||||||||||
| Revenues | $ | 182,429 | $ | 175,000 | $ | 392,112 | $ | 2,376,725 | |||||
| Sales discounts | (2,231 | ) | -- | -- | (2,231 | ) | |||||||
| Net Revenue | 180,198 | 175,000 | 392,112 | 2,374,494 | |||||||||
| Cost of Goods Sold | 61,623 | -- | -- | 61,623 | |||||||||
| Operating Expenses: | |||||||||||||
| Research and development | 11,983,626 | 6,554,393 | 7,750,731 | 73,456,464 | |||||||||
| Research and development - | |||||||||||||
| related party | -- | -- | -- | 220,218 | |||||||||
| Selling and marketing | 693,309 | 56,028 | -- | 749,337 | |||||||||
| General and administrative | 12,317,742 | 12,270,562 | 11,199,802 | 90,039,418 | |||||||||
| General and administrative - | |||||||||||||
| related party | -- | -- | -- | 314,328 | |||||||||
| Total Operating Expenses | 24,994,677 | 18,880,983 | 18,950,533 | 164,779,765 | |||||||||
| Operating Loss | (24,876,102 | ) | (18,705,983 | ) | (18,558,421 | ) | (162,466,894 | ) | |||||
| Other Income (Expense): | |||||||||||||
| Miscellaneous income (expense) | -- | 500 | 70,345 | 196,193 | |||||||||
| Income from Rental Operations, net | 277,474 | 236,521 | 185,857 | 920,928 | |||||||||
| Interest income | 2,180,380 | 767,598 | 22,868 | 6,342,458 | |||||||||
| Interest expense | (849,548 | ) | (37,715,275 | ) | (4,376,043 | ) | (43,602,015 | ) | |||||
| Loss on extinguishment of debt | (237,162 | ) | (12,550,565 | ) | (1,346,341 | ) | (14,134,068 | ) | |||||
| Net Loss Before Undernoted | (23,504,958 | ) | (67,967,204 | ) | (24,001,735 | ) | (212,743,398 | ) | |||||
| Minority Interest Share of Loss | -- | -- | -- | 3,038,185 | |||||||||
| Net Loss | (23,504,958 | ) | (67,967,204 | ) | (24,001,735 | ) | (209,705,213 | ) | |||||
| Preferred Stock Dividend | -- | -- | -- | 2,295,057 | |||||||||
| Net Loss Available to Common | |||||||||||||
| Shareholders | $ | (23,504,958 | ) | $ | (67,967,204 | ) | $ | (24,001,735 | ) | $ | (212,000,270 | ) | |
| Basic and Diluted Net Loss Per | |||||||||||||
| Common Share | $ | (.22 | ) | $ | (.90 | ) | $ | (.66 | ) | ||||
| Weighted Average Number of Shares | |||||||||||||
| of Common Stock Outstanding | 108,416,023 | 75,416,234 | 36,537,318 | ||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-5
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2007
| SVR Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additonal Paid-In Capital | Notes Receivable - Common Stock | Deficit Accumulated During the Development Stage | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||
| Balance November 2, 1995 | ||||||||||||||||||||||||||||||||||
| (Inception) | - | $ | - | - | $ | - | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| February 1996, $.0254 | - | - | 321,429 | 321 | - | - | 7,838 | - | - | - | 8,159 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| February 1996, $.0510 | - | - | 35,142 | 35 | - | - | 1,757 | - | - | - | 1,792 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| February 1996, $.5099 | - | - | 216,428 | 216 | - | - | 110,142 | - | - | - | 110,358 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| March 1996, $10.2428 | - | - | 2,500 | 3 | - | - | 25,604 | - | - | - | 25,607 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| April 1996, $.0516 | - | - | 489,850 | 490 | - | - | 24,773 | - | - | - | 25,263 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| May 1996, $.0512 | - | - | 115,571 | 116 | - | - | 5,796 | - | - | - | 5,912 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| May 1996, $.5115 | - | - | 428,072 | 428 | - | - | 218,534 | - | - | - | 218,962 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| May 1996, $10.2302 | - | - | 129,818 | 130 | - | - | 1,327,934 | - | - | 1,328,064 | ||||||||||||||||||||||||
| Issuance of common stock for cash, | - | |||||||||||||||||||||||||||||||||
| July 1996, $.0051 | - | - | 2,606,528 | 2,606 | - | - | 10,777 | - | - | 13,383 | ||||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| July 1996, $.0255 | - | - | 142,857 | 143 | - | - | 3,494 | - | - | - | 3,637 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| July 1996, $.0513 | - | - | 35,714 | 36 | - | - | 1,797 | - | - | - | 1,833 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| July 1996, $10.1847 | - | - | 63,855 | 64 | - | - | 650,282 | - | - | - | 650,346 | |||||||||||||||||||||||
| Costs related to issuance of common | ||||||||||||||||||||||||||||||||||
| stock | - | - | - | - | - | - | (10,252 | ) | - | - | - | (10,252 | ) | |||||||||||||||||||||
| Founders Shares transferred for services rendered | - | - | - | - | - | - | 330,025 | - | - | - | 330,025 | |||||||||||||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | (693,448 | ) | - | (693,448 | ) | |||||||||||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | - | - | - | - | - | - | (4,017 | ) | (4,017 | ) | |||||||||||||||||||||
| Total Comprehensive Income (Loss) | (693,448 | ) | (4,017 | ) | (697,465 | ) | ||||||||||||||||||||||||||||
| Balance, July 31, 1996 | - | $ | - | 4,587,764 | $ | 4,588 | - | $ | - | $ | 2,708,501 | $ | - | $ | (693,448 | ) | $ | (4,017 | ) | $ | 2,015,624 | |||||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-6
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2007
SVR Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additonal Paid-In Capital | Notes Receivable - Common Stock | Deficit Accumulated During the Development Stage | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||
| Balance, August 1, 1996 | - | $ | - | 4,587,764 | $ | 4,588 | - | $ | - | $ | 2,708,501 | $ | - | $ | (693,448 | ) | $ | (4,017 | ) | $ | 2,015,624 | |||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| September 1996, $.0509 | - | - | 2,143 | 2 | - | - | 107 | - | - | - | 109 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| December 1996, $10.2421 | - | - | 1,429 | 1 | - | - | 14,635 | - | - | - | 14,636 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| January 1997, $.0518 | - | - | 1,466 | 1 | - | - | 75 | - | - | - | 76 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| March 1997, $10.0833 | - | - | 12 | - | - | - | 121 | - | - | - | 121 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| May 1997, $.0512 | - | - | 4,233 | 4 | - | - | 213 | - | - | - | 217 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| May 1997, $.5060 | - | - | 4,285,714 | 4,286 | - | - | 2,164,127 | - | - | - | 2,168,413 | |||||||||||||||||||||||
| Costs related to issuance of common | ||||||||||||||||||||||||||||||||||
| stock, May 1997 | - | - | - | - | - | - | (108,421 | ) | - | - | - | (108,421 | ) | |||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| May 1997, $10.1194 | - | - | 18,214 | 18 | - | - | 184,297 | - | - | - | 184,315 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| June 1997, $.0504 | - | - | 10,714 | 11 | - | - | 529 | - | - | - | 540 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| June 1997, $.5047 | - | - | 32,143 | 32 | - | - | 16,190 | - | - | - | 16,222 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| June 1997, $8.9810 | - | - | 29,579 | 30 | - | - | 265,618 | - | - | - | 265,648 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| June 1997, $10.0978 | - | - | 714 | 1 | - | - | 7,209 | - | - | - | 7,210 | |||||||||||||||||||||||
| Issuance of common stock for cash, | ||||||||||||||||||||||||||||||||||
| July 1997, $10.1214 | - | - | 25,993 | 26 | - | - | 263,060 | - | - | - | 263,086 | |||||||||||||||||||||||
| Costs related to issuance of common | ||||||||||||||||||||||||||||||||||
| stock | - | - | - | - | - | - | (26,960 | ) | - | - | - | (26,960 | ) | |||||||||||||||||||||
| Founders Shares transferred for services rendered | - | - | - | - | - | - | 23,481 | - | - | - | 23,481 | |||||||||||||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | (1,379,024 | ) | - | (1,379,024 | ) | |||||||||||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | - | - | - | - | - | - | 3,543 | 3,543 | |||||||||||||||||||||||
| Total Comprehensive Income (Loss) | (1,379,024 | ) | 3,543 | (1,375,481 | ) | |||||||||||||||||||||||||||||
| Balance, July 31, 1997 | - | $ | - | 9,000,118 | $ | 9,000 | - | $ | - | $ | 5,512,782 | $ | - | $ | (2,072,472 | ) | $ | (474 | ) | $ | 3,448,836 | |||||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-7
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2007
SVR Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additonal Paid-In Capital | Notes Receivable - Common Stock | Deficit Accumulated During the Development Stage | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||
| Balance, August 1, 1997 | - | $ | - | 9,000,118 | $ | 9,000 | - | $ | - | $ | 5,512,782 | $ | - | $ | (2,072,472 | ) | $ | (474 | ) | $ | 3,448,836 | |||||||||||||
Issuance of warrants in exchange for services rendered, October 1997, $.50 | - | - | - | - | - | - | 234,000 | - | - | - | 234,000 | |||||||||||||||||||||||
Issuance of common stock in exchange for services rendered, December 1997, $0.05 | - | - | 234,000 | 234 | - | - | 10,698 | - | - | - | 10,932 | |||||||||||||||||||||||
Issuance of SVR Preferred Stock in exchange for services rendered, January 1998, $.001 | 1,000 | 1 | - | - | - | - | 99 | - | - | - | 100 | |||||||||||||||||||||||
Shares issued pursuant to the January 9, 1998 reverse merger between GBC-Delaware, Inc. and Generex Biotechnology Corporation | - | - | 1,105,000 | 1,105 | - | - | (1,105 | ) | - | - | - | - | ||||||||||||||||||||||
Issuance of common stock for cash, March 1998, $2.50 | - | - | 70,753 | 71 | - | - | 176,812 | - | - | - | 176,883 | |||||||||||||||||||||||
Issuance of common stock for cash, April 1998, $2.50 | - | - | 60,000 | 60 | - | - | 149,940 | - | - | - | 150,000 | |||||||||||||||||||||||
Issuance of common stock in exchange for services rendered, April 1998, $2.50 | - | - | 38,172 | 38 | - | - | 95,392 | - | - | - | 95,430 | |||||||||||||||||||||||
Issuance of common stock for cash, May 1998, $2.50 | - | - | 756,500 | 757 | - | - | 1,890,493 | - | - | - | 1,891,250 | |||||||||||||||||||||||
Issuance of common stock in exchange for services rendered, May 1998, $2.50 | - | - | 162,000 | 162 | - | - | 404,838 | - | - | - | 405,000 | |||||||||||||||||||||||
Issuance of warrants in exchange for services rendered, May 1998, $.60 | - | - | - | - | - | - | 300,000 | - | - | - | 300,000 | |||||||||||||||||||||||
Issuance of common stock for cash, June 1998, $2.50 | - | - | 286,000 | 286 | - | - | 714,714 | - | - | - | 715,000 | |||||||||||||||||||||||
Exercise of warrants for cash, June 1998, $0.0667 | - | - | 234,000 | 234 | - | - | 15,374 | - | - | - | 15,608 | |||||||||||||||||||||||
Issuance of common stock in exchange for services rendered, June 1998, $2.50 | - | - | 24,729 | 24 | - | - | 61,799 | - | - | - | 61,823 | |||||||||||||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | (4,663,604 | ) | - | (4,663,604 | ) | |||||||||||||||||||||
| Other comprehensive income (loss) | �� | |||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | - | - | - | - | - | - | (198,959 | ) | (198,959 | ) | |||||||||||||||||||||
| Total Comprehensive Income (Loss) | (4,663,604 | ) | (198,959 | ) | 4,862,563 | |||||||||||||||||||||||||||||
| Balance, July 31, 1998 | 1,000 | $ | 1 | 11,971,272 | $ | 11,971 | - | $ | - | $ | 9,565,836 | $ | - | $ | (6,736,076 | ) | $ | (199,433 | ) | $ | 2,642,299 | |||||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-8
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2007
SVR Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additonal Paid-In Capital | Notes Receivable - Common Stock | Deficit Accumulated During the Development Stage | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||
| Balance, August 1, 1998 | 1,000 | $ | 1 | 11,971,272 | $ | 11,971 | - | $ | - | $ | 9,565,836 | $ | - | $ | (6,736,076 | ) | $ | (199,433 | ) | $ | 2,642,299 | |||||||||||||
| Issuance of common stock for cash, August 1998, $3.00 | - | - | 100,000 | 100 | - | - | 299,900 | - | - | - | 300,000 | |||||||||||||||||||||||
| Issuance of common stock for cash, August 1998, $3.50 | - | - | 19,482 | 19 | - | - | 68,168 | - | - | - | 68,187 | |||||||||||||||||||||||
Redemption of common stock for cash, September 1998, $7.75 | - | - | (15,357 | ) | (15 | ) | - | - | (119,051 | ) | - | - | - | (119,066 | ) | |||||||||||||||||||
Issuance of common stock for cash, September - October 1998, $3.00 | - | - | 220,297 | 220 | - | - | 660,671 | - | - | - | 660,891 | |||||||||||||||||||||||
Issuance of common stock for cash, August - October 1998, $4.10 | - | - | 210,818 | 211 | - | - | 864,142 | - | - | - | 864,353 | |||||||||||||||||||||||
Issuance of common stock in exchange for services rendered, August - October 1998, $2.50 | - | - | 21,439 | 21 | - | - | 53,577 | - | - | - | 53,598 | |||||||||||||||||||||||
Issuance of common stock in exchange for services rendered, August - October 1998, $4.10 | - | - | 18,065 | 18 | - | - | 74,048 | - | - | - | 74,066 | |||||||||||||||||||||||
Issuance of common stock in exchange for services rendered, September 1998, $4.10 | - | - | 180,000 | 180 | - | - | 737,820 | - | - | - | 738,000 | |||||||||||||||||||||||
Issuance of warrants in exchange for services rendered, October 1998, $.26 | - | - | - | - | - | - | 2,064 | - | - | - | 2,064 | |||||||||||||||||||||||
Issuance of stock options in exchange for services rendered, November 1998, $1.85 | - | - | - | - | - | - | 92,500 | - | - | - | 92,500 | |||||||||||||||||||||||
Issuance of warrants in exchange for services rendered, November 1998, $1.64 | - | - | - | - | - | - | 246,000 | - | - | - | 246,000 | |||||||||||||||||||||||
| Issuance of common stock for cash, November 1998 - January 1999, $3.50 | - | - | 180,000 | 180 | - | - | 629,820 | - | - | - | 630,000 | |||||||||||||||||||||||
Issuance of common stock for cash, November 1998 - January 1999, $4.00 | - | - | 275,000 | 275 | - | - | 1,099,725 | - | - | - | 1,100,000 | |||||||||||||||||||||||
Issuance of common stock for cash, November 1998 - January 1999, $4.10 | - | - | 96,852 | 97 | - | - | 397,003 | - | - | - | 397,100 | |||||||||||||||||||||||
Issuance of common stock in exchange for services rendered, November 1998 - January 1999, $4.10 | - | - | 28,718 | 29 | - | - | 117,715 | - | - | - | 117,744 | |||||||||||||||||||||||
| Issuance of common stock for cash, November 1998 - January 1999, $5.00 | - | - | 20,000 | 20 | - | - | 99,980 | - | - | - | 100,000 | |||||||||||||||||||||||
| Issuance of common stock for cash, November 1998 - January 1999, $5.50 | - | - | 15,000 | 15 | - | - | 82,485 | - | - | - | 82,500 | |||||||||||||||||||||||
| Issuance of common stock in exchange for services rendered, January 1999, $5.00 | - | - | 392 | - | - | - | 1,960 | - | - | - | 1,960 | |||||||||||||||||||||||
Issuance of common stock for cash, February 1999, $5.00 | - | - | 6,000 | 6 | - | - | 29,994 | - | - | - | 30,000 | |||||||||||||||||||||||
Issuance of common stock in exchange for services rendered, February 1999, $6.00 | - | - | 5,000 | 5 | - | - | 29,995 | - | - | - | 30,000 | |||||||||||||||||||||||
Issuance of common stock for cash, March 1999, $6.00 | - | - | 11,000 | 11 | - | - | 65,989 | - | - | - | 66,000 | |||||||||||||||||||||||
Issuance of common stock for cash, April 1999, $5.50 | - | - | 363,637 | 364 | - | - | 1,999,640 | - | - | - | 2,000,004 | |||||||||||||||||||||||
Issuance of warrants in exchange for services rendered, April 1999, $3.21 | - | - | - | - | - | - | 160,500 | - | - | - | 160,500 | |||||||||||||||||||||||
Issuance of warrants in exchange for services rendered, April 1999, $3.17 | - | - | - | - | - | - | 317,000 | - | - | - | 317,000 | |||||||||||||||||||||||
| Issuance of warrants in exchange for services rendered, April 1999, $2.89 | - | - | - | - | - | - | 144,500 | - | - | - | 144,500 | |||||||||||||||||||||||
Issuance of warrants in exchange for services rendered, April 1999, $3.27 | - | - | - | - | 184,310 | - | - | - | 184,310 | |||||||||||||||||||||||||
| Stock adjustment | - | - | 714 | 1 | - | - | (1 | ) | - | - | - | - | ||||||||||||||||||||||
Issuance of common stock for cash, May 1999, $5.50 | - | - | 272,728 | 273 | - | - | 1,499,731 | - | - | - | 1,500,004 | |||||||||||||||||||||||
| Issuance of common stock in exchange for services rendered, May - June 1999, $5.50 | - | - | 60,874 | 61 | - | - | 334,746 | - | 334,807 | |||||||||||||||||||||||||
| Exercise of warrants for cash, June 1999, $5.50 | - | - | 388,375 | 389 | - | 1,941,484 | - | - | - | 1,941,873 | ||||||||||||||||||||||||
Exercise of warrants in exchange for note receivable, June 1999, $5.00 | - | - | 94,776 | 95 | - | - | 473,787 | (473,882 | ) | - | - | - | ||||||||||||||||||||||
Exercise of warrants in exchange for services rendered, June 1999, $5.00 | - | - | 13,396 | 13 | - | - | 66,967 | - | - | - | 66,980 | |||||||||||||||||||||||
Reduction of note receivable in exchange for services rendered | - | - | - | - | - | - | - | 38,979 | - | - | 38,979 | |||||||||||||||||||||||
Shares tendered in conjunction with warrant exercise, June 1999, $7.8125 | - | - | (323,920 | ) | (324 | ) | - | - | (2,530,301 | ) | - | - | - | (2,530,625 | ) | |||||||||||||||||||
Exercise of warrants for shares tendered, June 1999, $5.00 | - | - | 506,125 | 506 | - | - | 2,530,119 | - | - | - | 2,530,625 | |||||||||||||||||||||||
| Cost of warrants redeemed for cash | - | - | - | - | - | (3,769 | ) | - | - | - | (3,769 | ) | ||||||||||||||||||||||
| Cost related to warrant redemption, June 1999 | - | - | - | - | - | - | (135,431 | ) | - | - | - | (135,431 | ) | |||||||||||||||||||||
| Costs related to issuance of common stock | - | - | - | - | - | - | (1,179,895 | ) | - | - | - | (1,179,895 | ) | |||||||||||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (6,239,602 | ) | - | (6,239,602 | ) | |||||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | - | - | - | - | - | - | 1,393 | 1,393 | |||||||||||||||||||||||
| Total Comprehensive Income (Loss) | (6,239,602 | ) | 1,393 | (6,238,209 | ) | |||||||||||||||||||||||||||||
| Balance, July 31, 1999 | 1,000 | $ | 1 | 14,740,683 | $ | 14,741 | - | $ | - | $ | 20,903,728 | $ | (434,903 | ) | $ | (12,975,678 | ) | $ | (198,040 | ) | $ | 7,309,849 | ||||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-9
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2007
SVR Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additonal Paid-In Capital | Notes Receivable - Common Stock | Deficit Accumulated During the Development Stage | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||
| Balance, August 1, 1999 | 1,000 | $ | 1 | 14,740,683 | $ | 14,741 | - | $ | - | $ | 20,903,728 | $ | (434,903 | ) | $ | (12,975,678 | ) | $ | (198,040 | ) | $ | 7,309,849 | ||||||||||||
Adjustment for exercise of warrants recorded June 1999, $5.00 | - | - | (2,300 | ) | (2 | ) | - | - | 2 | - | - | - | - | |||||||||||||||||||||
Issuance of common stock for cash, September 1999, $6.00 | - | - | 2,500 | 2 | - | - | 14,998 | - | - | - | 15,000 | |||||||||||||||||||||||
Issuance of common stock for cash pursuant to private placement, January 2000, $4.25 | - | - | 470,590 | 471 | - | - | 1,999,537 | - | - | - | 2,000,008 | |||||||||||||||||||||||
Financing costs associated with private placement, January, 2000 | - | - | - | - | - | - | (220,192 | ) | - | - | - | (220,192 | ) | |||||||||||||||||||||
Issuance of stock in exchange for services rendered, January 2000, $5.00 | - | - | 8,100 | 8 | - | - | 40,492 | - | - | - | 40,500 | |||||||||||||||||||||||
Granting of stock options for services rendered, January 2000 | - | - | - | - | - | - | 568,850 | - | - | - | 568,850 | |||||||||||||||||||||||
Granting of warrants for services rendered, January 2000 | - | - | - | - | - | - | 355,500 | - | - | - | 355,500 | |||||||||||||||||||||||
| Exercise of warrants for cash, February 2000, $5.50 | - | - | 2,000 | 2 | - | - | 10,998 | - | - | - | 11,000 | |||||||||||||||||||||||
| Exercise of warrants for cash, March 2000, $5.50 | - | - | 29,091 | 29 | - | - | 159,972 | - | - | - | 160,001 | |||||||||||||||||||||||
| Exercise of warrants for cash, March 2000, $6.00 | - | - | 2,000 | 2 | - | - | 11,998 | - | - | - | 12,000 | |||||||||||||||||||||||
| Exercise of warrants for cash, March 2000, $7.50 | - | - | 8,000 | 8 | - | - | 59,992 | - | - | - | 60,000 | |||||||||||||||||||||||
Issuance of common stock for cash pursuant to private placement, June 2000, $6.00 | - | - | 1,041,669 | 1,042 | - | - | 6,248,972 | - | - | - | 6,250,014 | |||||||||||||||||||||||
Financing costs associated with private placement, June 2000 | - | - | - | - | - | - | (385,607 | ) | - | - | - | (385,607 | ) | |||||||||||||||||||||
Issuance of common stock for services, June 2000, $6.00 | - | - | 4,300 | 4 | - | - | 25,796 | - | - | - | 25,800 | |||||||||||||||||||||||
| Exercise of warrants for cash, July 2000, $6.00 | - | - | 3,000 | 3 | - | - | 17,997 | - | - | - | 18,000 | |||||||||||||||||||||||
| Exercise of warrants for cash, July 2000, $7.50 | - | - | 16,700 | 17 | - | - | 125,233 | - | - | - | 125,250 | |||||||||||||||||||||||
Granting of stock options for services rendered, July 2000 | - | - | - | - | - | - | 496,800 | - | - | - | 496,800 | |||||||||||||||||||||||
Reduction of note receivable in exchange for services rendered | - | - | - | - | - | - | - | 384,903 | - | - | 384,903 | |||||||||||||||||||||||
| Accrued interest on note receivable | - | - | - | - | - | - | - | (4,118 | ) | - | - | (4,118 | ) | |||||||||||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (8,841,047 | ) | - | (8,841,047 | ) | |||||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | - | - | - | - | - | - | 32,514 | 32,514 | |||||||||||||||||||||||
| Total Comprehensive Income (Loss) | (8,841,047 | ) | 32,514 | (8,808,533 | ) | |||||||||||||||||||||||||||||
| Balance, July 31, 2000 | 1,000 | $ | 1 | 16,326,333 | $ | 16,327 | - | $ | - | $ | 30,435,066 | $ | (54,118 | ) | $ | (21,816,725 | ) | $ | (165,526 | ) | $ | 8,415,025 | ||||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-10
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2007
| SVR Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additonal Paid-In Capital | Notes Receivable - Common Stock | Deficit Accumulated During the Development Stage | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||
| Balance, August 1, 2000 | 1,000 | $ | 1 | 16,326,333 | $ | 16,327 | - | $ | - | $ | 30,435,066 | $ | (54,118 | ) | $ | (21,816,725 | ) | $ | (165,526 | ) | $ | 8,415,025 | ||||||||||||
| Exercise of warrants for cash, August 2000, $6.00 | - | - | 2,000 | 2 | - | - | 11,998 | - | - | - | 12,000 | |||||||||||||||||||||||
Issuance of common stock for services rendered August 2000 | - | - | 35,000 | 35 | - | - | 411,215 | - | - | - | 411,250 | |||||||||||||||||||||||
Issuance of warrants in exchange for equity line agreement, August 2000 | - | - | - | - | - | - | 3,406,196 | - | - | - | 3,406,196 | |||||||||||||||||||||||
| Exercise of warrants for cash, August 2000, $7.50 | - | - | 30,300 | 30 | - | - | 227,220 | - | - | - | 227,250 | |||||||||||||||||||||||
| Exercise of warrants for cash, August 2000, $8.6625 | - | - | 30,000 | 30 | - | - | 259,845 | - | - | - | 259,875 | |||||||||||||||||||||||
| Cashless exercise of warrants, August 2000 | - | - | 8,600 | 9 | - | - | (9 | ) | - | - | - | - | ||||||||||||||||||||||
| Exercise of warrants for cash, August 2000, $10.00 | - | - | 10,000 | 10 | - | - | 99,990 | - | - | - | 100,000 | |||||||||||||||||||||||
| Exercise of warrants for cash, September 2000, $8.6625 | - | - | 63,335 | 63 | - | - | 548,576 | - | - | - | 548,639 | |||||||||||||||||||||||
| Exercise of warrants for cash, September 2000, $5.50 | - | - | 16,182 | 16 | - | - | 88,986 | - | - | - | 89,002 | |||||||||||||||||||||||
| Exercise of warrants for cash, September 2000, $6.00 | - | - | 53,087 | 53 | - | - | 318,470 | - | - | - | 318,523 | |||||||||||||||||||||||
| Exercise of warrants for cash, September 2000, $10.00 | - | - | 9,584 | 10 | - | - | 95,830 | - | - | - | 95,840 | |||||||||||||||||||||||
| Exercise of warrants for cash, September 2000, $7.50 | - | - | 32,416 | 32 | - | - | 243,088 | - | - | - | 243,120 | |||||||||||||||||||||||
Issuance of common stock for cash pursuant to private placement, October 2000, $11.00 | - | - | 2,151,093 | 2,151 | - | - | 23,659,872 | - | - | - | 23,662,023 | |||||||||||||||||||||||
| Exercise of warrants for cash, Oct. 2000, $6.00 | - | - | 1,000 | 1 | - | - | 5,999 | - | - | - | 6,000 | |||||||||||||||||||||||
| Financing costs associated with private placement, October 2000 | - | - | - | - | - | - | (1,956,340 | ) | - | - | - | (1,956,340 | ) | |||||||||||||||||||||
| Exercise of warrants for cash, November - December 2000, $4.25 | - | - | 23,528 | 23 | - | - | 99,971 | - | - | - | 99,994 | |||||||||||||||||||||||
| Cashless exercise of warrants, December 2000 | - | - | 3,118 | 3 | - | - | (3 | ) | - | - | - | - | ||||||||||||||||||||||
| Exercise of warrants for cash, November - December 2000, $6.00 | - | - | 22,913 | 23 | - | - | 137,455 | - | - | - | 137,478 | |||||||||||||||||||||||
| Exercise of warrants for cash, December 2000, $7.00 | - | - | 8,823 | 9 | - | - | 61,752 | - | - | - | 61,761 | |||||||||||||||||||||||
| Issuance of common stock as employee compensation, December 2000 | - | - | 8,650 | 8 | - | - | 100,548 | - | - | - | 100,556 | |||||||||||||||||||||||
| Exercise of warrants for cash, January 2001, $6.00 | - | - | 3,000 | 3 | - | - | 17,997 | - | - | - | 18,000 | |||||||||||||||||||||||
| Issuance of common stock for cash pursuant to private placement, January 2001, $14.53 | - | - | 344,116 | 344 | - | - | 4,999,656 | - | - | - | 5,000,000 | |||||||||||||||||||||||
| Financing costs associated with private placement, January 2001 | - | - | - | - | - | - | (200,000 | ) | - | - | - | (200,000 | ) | |||||||||||||||||||||
| Issuance of common stock pursuant to litigation settlement, January 2001 | - | - | 2,832 | 2 | - | - | 21,096 | - | - | - | 21,098 | |||||||||||||||||||||||
| Granting of stock options in exchange for services rendered, January 2001 | - | - | - | - | - | - | 745,000 | - | - | - | 745,000 | |||||||||||||||||||||||
| Granting of stock options in exchange for services rendered, February 2001 | - | - | - | - | - | - | 129,600 | - | - | - | 129,600 | |||||||||||||||||||||||
| Exercise of stock options for cash, February 2001, $5.00 | - | - | 50,000 | 50 | - | - | 249,950 | - | - | - | 250,000 | |||||||||||||||||||||||
| Exercise of warrants for cash, March 2001, $6.00 | - | - | 500 | 1 | - | - | 2,999 | - | - | - | 3,000 | |||||||||||||||||||||||
| Exercise of stock options in exchange for note receivable, March 2001 | - | - | 50,000 | 50 | - | - | 249,950 | (250,000 | ) | - | - | - | ||||||||||||||||||||||
| Issuance of common stock in exchange for services rendered, March 2001, $5.50 | - | - | 8,000 | 8 | - | - | 43,992 | - | - | - | 44,000 | |||||||||||||||||||||||
| Granting of stock options in exchange for services rendered, May 2001 | - | - | - | - | - | - | 592,300 | - | - | - | 592,300 | |||||||||||||||||||||||
| Exercise of stock options for cash, June 2001, $5.00 | - | - | 75,000 | 75 | - | - | 374,925 | - | - | - | 375,000 | |||||||||||||||||||||||
| Exercise of stock options for cash, June 2001, $5.50 | - | - | 12,500 | 12 | - | - | 68,738 | - | - | - | 68,750 | |||||||||||||||||||||||
| Exercise of warrants for cash, June 2001, $6.00 | - | - | 4,000 | 4 | - | - | 23,996 | - | - | - | 24,000 | |||||||||||||||||||||||
| Exercise of stock options for cash, July 2001, $5.00 | - | - | 7,500 | 8 | - | - | 37,492 | - | - | - | 37,500 | |||||||||||||||||||||||
| Exercise of stock options for cash, July 2001, $5.50 | - | - | 2,500 | 3 | - | - | 13,747 | - | - | - | 13,750 | |||||||||||||||||||||||
| Exercise of warrants for cash, July 2001, $6.00 | - | - | 2,000 | 2 | - | - | 11,998 | - | - | - | 12,000 | |||||||||||||||||||||||
| Issuance of common stock for cash pursuant to private placement, July 2001, $9.25 | - | - | 1,254,053 | 1,254 | - | - | 11,598,736 | - | - | - | 11,599,990 | |||||||||||||||||||||||
| Financing costs associated with private placement, July 2001 | - | - | - | - | - | - | (768,599 | ) | - | - | - | (768,599 | ) | |||||||||||||||||||||
| Shares issued in exchange for services rendered, July 2001, $9.25 | - | - | 23,784 | 24 | - | - | 219,978 | - | - | - | 220,002 | |||||||||||||||||||||||
| Shares issued for Anti-Dilution Provisions, July 2001 | - | - | 5,779 | 6 | - | - | 53,450 | - | - | - | 53,456 | |||||||||||||||||||||||
| Issuance of warrants in exchange for services rendered, July 2001 | - | - | - | - | - | - | 19,134 | - | - | - | 19,134 | |||||||||||||||||||||||
| Accrued interest on note receivable | - | - | - | - | - | - | - | (10,182 | ) | - | - | (10,182 | ) | |||||||||||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (27,097,210 | ) | - | (27,097,210 | ) | |||||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | - | - | - | - | - | - | (81,341 | ) | (81,341 | ) | |||||||||||||||||||||
| Total Comprehensive Income (Loss) | (27,097,210 | ) | (81,341 | ) | (27,178,551 | ) | ||||||||||||||||||||||||||||
| Balance at July 31, 2001 | 1,000 | $ | 1 | 20,681,526 | $ | 20,681 | - | $ | - | $ | 76,761,860 | $ | (314,300 | ) | $ | (48,913,935 | ) | $ | (246,867 | ) | $ | 27,307,440 | ||||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-11
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2007
| SVR Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additonal Paid-In Capital | Notes Receivable - Common Stock | Deficit Accumulated During the Development Stage | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||
| Balance, August 1, 2001 | 1,000 | $ | 1 | 20,681,526 | $ | 20,681 | - | $ | - | $ | 76,761,860 | $ | (314,300 | ) | $ | (48,913,935 | ) | $ | (246,867 | ) | $ | 27,307,440 | ||||||||||||
| Exercise of stock options for cash, | ||||||||||||||||||||||||||||||||||
| August 2001, $5.50 | - | - | 5,000 | 5 | - | - | 27,495 | - | - | - | 27,500 | |||||||||||||||||||||||
| Purchase of Treasury Stock for cash | ||||||||||||||||||||||||||||||||||
| October 2001, $3.915 | - | - | - | - | (10,000 | ) | (39,150 | ) | - | - | - | - | (39,150 | ) | ||||||||||||||||||||
| Issuance of stock options in exchange for services rendered, December 2001 | - | - | - | - | - | - | 25,000 | - | - | - | 25,000 | |||||||||||||||||||||||
| Issuance of common stock as employee | ||||||||||||||||||||||||||||||||||
| compensation, January 2002 | - | - | 10,800 | 11 | - | - | 71,161 | - | - | - | 71,172 | |||||||||||||||||||||||
| Preferred stock dividend paid January 2002 | - | - | - | - | - | - | - | - | (720,900 | ) | - | (720,900 | ) | |||||||||||||||||||||
| Purchase of Treasury Stock for cash | ||||||||||||||||||||||||||||||||||
| February 2002, $4.693 | - | - | - | - | (31,400 | ) | (147,346 | ) | - | - | - | - | (147,346 | ) | ||||||||||||||||||||
| Issuance of warrants in exchange for services rendered, March 2002 | - | - | - | - | - | - | 202,328 | - | - | - | 202,328 | |||||||||||||||||||||||
| Purchase of Treasury Stock for cash | ||||||||||||||||||||||||||||||||||
| March 2002, $4.911 | - | - | - | - | (7,700 | ) | (37,816 | ) | - | - | - | - | (37,816 | ) | ||||||||||||||||||||
| Purchase of Treasury Stock for cash | ||||||||||||||||||||||||||||||||||
| April 2002, $4.025 | - | - | - | - | (12,800 | ) | (54,516 | ) | - | - | - | - | (54,516 | ) | ||||||||||||||||||||
| Issuance of stock options in exchange for services rendered, June 2002 | - | - | - | - | - | - | 132,387 | - | - | - | 132,387 | |||||||||||||||||||||||
| Purchase of Treasury Stock for cash | - | |||||||||||||||||||||||||||||||||
| July 2002, $4.025 | - | - | - | - | (34,600 | ) | (116,703 | ) | - | - | - | - | (116,703 | ) | ||||||||||||||||||||
| Accrued interest on note receivable | - | - | - | - | - | - | - | (22,585 | ) | - | - | (22,585 | ) | |||||||||||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (13,693,034 | ) | - | (13,693,034 | ) | |||||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | - | - | - | - | - | - | (71,185 | ) | (71,185 | ) | |||||||||||||||||||||
| Total Comprehensive Income (Loss) | (13,693,034 | ) | (71,185 | ) | (13,764,219 | ) | ||||||||||||||||||||||||||||
| Balance at July 31, 2002 | 1,000 | $ | 1 | 20,697,326 | $ | 20,697 | (96,500 | ) | $ | (395,531 | ) | $ | 77,220,231 | $ | (336,885 | ) | $ | (63,327,869 | ) | $ | (318,052 | ) | $ | 12,862,592 | ||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-12
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2007
| SVR Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additonal Paid-In Capital | Notes Receivable - Common Stock | Deficit Accumulated During the Development Stage | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||
| Balance, August 1, 2002 | 1,000 | $ | 1 | 20,697,326 | $ | 20,697 | (96,500 | ) | $ | (395,531 | ) | $ | 77,220,231 | $ | (336,885 | ) | $ | (63,327,869 | ) | $ | (318,052 | ) | $ | 12,862,592 | ||||||||||
Receipt of restricted shares of common stock as settlement for executive loan, September 2002, $1.90 | - | - | - | - | (592,716 | ) | (1,126,157 | ) | - | - | - | - | (1,126,157 | ) | ||||||||||||||||||||
Purchase of Treasury Stock for cash October 2002, $1.5574 | - | - | - | - | (40,000 | ) | (62,294 | ) | - | - | - | - | (62,294 | ) | ||||||||||||||||||||
Issuance of warrants in exchange for the services rendered, November 2002, $2.50 | - | - | - | - | - | - | 988,550 | - | - | - | 988,550 | |||||||||||||||||||||||
Issuance of stock options in exchange for services receivable, November 2002, $2.10 | - | - | - | - | - | - | 171,360 | - | - | - | 171,360 | |||||||||||||||||||||||
Issuance of common stock in exchange for services rendered, November 2002, $2.10 | - | - | 30,000 | 30 | - | - | 62,970 | - | - | - | 63,000 | |||||||||||||||||||||||
Issuance of common stock as employee compensation, January 2003, $2.10 | - | - | 9,750 | 10 | - | - | 20,465 | - | - | - | 20,475 | |||||||||||||||||||||||
Purchase of Treasury Stock for cash December 2002, $2.0034 | - | - | - | - | (13,000 | ) | (26,044 | ) | - | - | - | - | (26,044 | ) | ||||||||||||||||||||
| Preferred stock dividend paid January 2003 | - | - | - | - | - | - | - | - | (764,154 | ) | - | (764,154 | ) | |||||||||||||||||||||
| Issuance of common stock in exchange for services rendered, March 2003, $1.00 | - | - | 70,000 | 70 | - | - | 69,930 | - | - | - | 70,000 | |||||||||||||||||||||||
| Issuance of common stock for cash pursuant to private placement, May 2003, $1.15 | - | - | 2,926,301 | 2,926 | - | - | 3,362,324 | - | - | - | 3,365,250 | |||||||||||||||||||||||
| Financing costs associated with private placement, May 2003 | - | - | - | - | - | - | (235,568 | ) | - | - | - | (235,568 | ) | |||||||||||||||||||||
| Exercise of warrants for cash, May 2003, $1.50 | - | - | 35,000 | 35 | - | - | 52,465 | - | - | - | 52,500 | |||||||||||||||||||||||
| Issuance of common stock for cash pursuant to private placement, June 2003, $1.50 | - | - | 666,667 | 667 | - | - | 999,333 | - | - | - | 1,000,000 | |||||||||||||||||||||||
| Issuance of common stock as employee compensation, June 2003, $2.00 | - | - | 100 | - | - | - | 200 | - | - | - | 200 | |||||||||||||||||||||||
| Exercise of warrants for cash, June 2003, $1.50 | - | - | 1,496,001 | 1,496 | - | - | 2,242,506 | - | - | - | 2,244,002 | |||||||||||||||||||||||
| Cashless exercise of warrants, June 2003 | - | - | 16,379 | 16 | - | - | (16 | ) | - | - | - | - | ||||||||||||||||||||||
| Exercise of stock options for cash, June 2003, $1.59 | - | - | 70,000 | 70 | - | - | 111,230 | - | - | - | 111,300 | |||||||||||||||||||||||
| Accrued interest on note receivable | - | - | - | - | - | - | - | (23,113 | ) | - | - | (23,113 | ) | |||||||||||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (13,261,764 | ) | - | (13,261,764 | ) | |||||||||||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | - | - | - | - | - | - | 406,830 | 406,830 | |||||||||||||||||||||||
| Total Comprehensive Income (Loss) | (13,261,764 | ) | 406,830 | (12,854,934 | ) | |||||||||||||||||||||||||||||
| Balance at July 31, 2003 | 1,000 | $ | 1 | 26,017,524 | $ | 26,017 | (742,216 | ) | $ | (1,610,026 | ) | $ | 85,065,980 | $ | (359,998 | ) | $ | (77,353,787 | ) | $ | 88,778 | $ | 5,856,965 | |||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-13
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2007
| SVR Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additonal Paid-In Capital | Notes Receivable - Common Stock | Deficit Accumulated During the Development Stage | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||
| Balance, August 1, 2003 | 1,000 | $ | 1 | 26,017,524 | $ | 26,017 | (742,216 | ) | $ | (1,610,026 | ) | $ | 85,065,980 | $ | (359,998 | ) | $ | (77,353,787 | ) | $ | 88,778 | $ | 5,856,965 | |||||||||||
| Shares issued pursuant to acquisition of Antigen Express Inc., August 2003 | - | - | 2,779,974 | 2,780 | - | - | 4,639,777 | - | - | - | 4,642,557 | |||||||||||||||||||||||
| Cost of stock options to be assumed in conjunction with merger | - | - | - | - | - | - | 154,852 | - | - | - | 154,852 | |||||||||||||||||||||||
Exercise of stock options for cash, September 2003, $1.59 | - | - | 10,000 | 10 | - | - | 15,890 | - | - | - | 15,900 | |||||||||||||||||||||||
| Exercise of stock options for cash, October 2003, $2.10 | - | - | 14,900 | 15 | - | - | 31,275 | - | - | - | 31,290 | |||||||||||||||||||||||
| Exercise of stock options for cash, October 2003, $1.59 | - | - | 10,000 | 10 | - | - | 15,890 | - | - | - | 15,900 | |||||||||||||||||||||||
| Exercise of stock options for cash, October 2003, $0.30 | - | - | 65,000 | 65 | - | - | 19,435 | - | - | - | 19,500 | |||||||||||||||||||||||
| Exercise of stock options for cash, October 2003, $0.55 | - | - | 40,000 | 40 | - | - | 21,960 | - | - | - | 22,000 | |||||||||||||||||||||||
| Issuance of common stock In exchange for services rendered, October 2003, $1.98 | - | - | 150,000 | 150 | - | - | 296,850 | - | - | - | 297,000 | |||||||||||||||||||||||
| Issuance of common stock In exchange for services rendered, October 2003, $1.84 | - | - | 337,500 | 338 | - | - | 620,662 | - | - | - | 621,000 | |||||||||||||||||||||||
| Issuance of warrants in exchange for the services rendered October 2003 (at $1.35) | - | - | - | - | - | - | 27,000 | - | - | - | 27,000 | |||||||||||||||||||||||
Exercise of stock options for cash, November 2003, $2.10 | - | - | 10,500 | 10 | - | - | 22,040 | - | - | - | 22,050 | |||||||||||||||||||||||
| Redemption of Treasury Stock, November 2003, $2.17 | - | - | (742,216 | ) | (742 | ) | 742,216 | 1,610,026 | (1,609,284 | ) | - | - | - | - | ||||||||||||||||||||
| Granting of stock options in exchange for services, November 2003 (at $1.71) | - | - | - | - | - | - | 151,433 | - | - | - | 151,433 | |||||||||||||||||||||||
| Issuance of common stock for cash pursuant to private placement, Jan 2004, $1.47 | - | - | 1,700,680 | 1,701 | - | - | 2,498,299 | - | - | - | 2,500,000 | |||||||||||||||||||||||
| Issuance of common stock for cash pursuant to private placement, Jan 2004, $1.80 | - | - | 55,556 | 56 | - | - | 99,944 | - | - | - | 100,000 | |||||||||||||||||||||||
| Issuance of common stock for cash pursuant to private placement, Jan 2004, $1.75 | - | - | 228,572 | 229 | - | - | 399,771 | - | - | - | 400,000 | |||||||||||||||||||||||
| Financing costs associated with private placement, January 2004 | - | - | - | - | - | - | (68,012 | ) | - | - | - | (68,012 | ) | |||||||||||||||||||||
| Preferred Stock Dividend paid in January | - | - | - | - | - | - | - | - | (810,003 | ) | - | (810,003 | ) | |||||||||||||||||||||
| Issuance of common stock for cash pursuant to private placement, Feb 2004, $1.60 | - | - | 93,750 | 94 | - | - | 149,906 | - | - | - | 150,000 | |||||||||||||||||||||||
| Issuance of common stock for cash pursuant to private placement, Feb 2004, $1.66 | - | - | 68,675 | 69 | - | - | 113,932 | - | - | - | 114,001 | |||||||||||||||||||||||
| Issuance of common stock for cash pursuant to private placement, Feb 2004, $1.50 | - | - | 666,667 | 667 | - | - | 999,334 | - | - | - | 1,000,001 | |||||||||||||||||||||||
| Issuance of common stock as employee compensation, Feb 2004, $1.48 | - | - | 8,850 | 8 | - | - | 13,089 | - | - | - | 13,097 | |||||||||||||||||||||||
| Issuance of common stock In exchange for services rendered, Feb 2004, $1.48 | - | - | 175,000 | 175 | - | - | 258,825 | - | - | - | 259,000 | |||||||||||||||||||||||
| Issuance of common stock In exchange for services rendered, Feb 2004, $1.51 | - | - | 112,500 | 113 | - | - | 169,762 | - | - | - | 169,875 | |||||||||||||||||||||||
| Issuance of common stock for cash pursuant to private placement, July 2004, $1.22 | - | - | 2,459,016 | 2,459 | - | - | 2,997,541 | - | - | - | 3,000,000 | |||||||||||||||||||||||
| Financing costs associated with private placement, July 2004 | - | - | - | - | - | - | (41,250 | ) | - | - | - | (41,250 | ) | |||||||||||||||||||||
| Variable accounting non-cash compensation expense | - | - | - | - | - | - | 45,390 | - | - | - | 45,390 | |||||||||||||||||||||||
| Accrued interest on note receivable | - | - | - | - | - | - | - | (24,805 | ) | - | - | (24,805 | ) | |||||||||||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (18,362,583 | ) | - | (18,362,583 | ) | |||||||||||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | - | - | - | - | - | - | 207,593 | 207,593 | |||||||||||||||||||||||
| Total Comprehensive Income (Loss) | (18,362,583 | ) | 207,593 | (18,154,990 | ) | |||||||||||||||||||||||||||||
| Balance at July 31, 2004 | 1,000 | $ | 1 | 34,262,448 | $ | 34,264 | - | $ | - | $ | 97,110,291 | $ | (384,803 | ) | $ | (96,526,373 | ) | $ | 296,371 | $ | 529,751 | |||||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-14
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2007
SVR Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additonal Paid-In Capital | Notes Receivable - Common Stock | Deficit Accumulated During the Development Stage | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||
| Balance, August 1, 2004 | 1,000 | $ | 1 | 34,262,448 | $ | 34,264 | - | $ | - | $ | 97,110,291 | $ | (384,803 | ) | $ | (96,526,373 | ) | $ | 296,371 | $ | 529,751 | |||||||||||||
| Issuance of common stock In exchange for services rendered, Aug 2004, $1.09 | - | - | 620,000 | 620 | - | - | 675,180 | - | - | - | 675,800 | |||||||||||||||||||||||
| Issuance of warrants in exchange for services rendered Aug 2004, $1.08 | - | - | - | - | - | - | 415,000 | - | - | - | 415,000 | |||||||||||||||||||||||
| Granting of stock options in exchange for services, Oct 2004, $0.94 | - | - | - | - | - | - | 75,600 | - | - | - | 75,600 | |||||||||||||||||||||||
| Cancellation of common stock for non-performance of services, Oct 2004, $0.94 | - | - | (75,000 | ) | (75 | ) | - | - | (137,925 | ) | - | - | - | (138,000 | ) | |||||||||||||||||||
| Issuance of warrants in conjunction with financing, Nov 2004, $0.91 | - | - | - | - | - | - | 89,900 | - | - | - | 89,900 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with convertible debentures, $4,000,000, Nov 2004 $0.91 | - | - | - | - | - | - | 1,722,222 | - | - | - | 1,722,222 | |||||||||||||||||||||||
| Value of beneficial conversion feature on convertible debentures, $4,000,000, Nov 2004 $0.91 | - | - | - | - | - | - | 1,722,222 | - | - | - | 1,722,222 | |||||||||||||||||||||||
| Issuance of common stock In exchange for services rendered, Dec 2004, $0.71 | - | - | 48,000 | 48 | - | - | 34,032 | - | - | - | 34,080 | |||||||||||||||||||||||
| Conversion of Series A Preferred Stock, Dec 2004 $25.77 | - | - | 534,085 | 534 | - | - | 14,309,523 | - | - | - | 14,310,057 | |||||||||||||||||||||||
| Issuance of common stock In exchange for services rendered, Jan 2005, $0.85 | - | - | 18,000 | 18 | - | - | 15,282 | - | - | - | 15,300 | |||||||||||||||||||||||
| Issuance of common stock In exchange for services rendered, Jan 2005, $0.75 | - | - | 40,000 | 40 | - | - | 29,960 | - | - | - | 30,000 | |||||||||||||||||||||||
| Issuance of common stock In exchange for services rendered, Feb 2005, $0.69 | - | - | 18,000 | 18 | - | - | 12,402 | - | - | - | 12,420 | |||||||||||||||||||||||
| Issuance of common stock as repayment of principal and interest due, $4,000,000, Feb 2005 | - | - | 250,910 | 251 | - | - | 181,262 | - | - | - | 181,513 | |||||||||||||||||||||||
| Issuance of common stock In exchange for services rendered, Feb 2005, $0.68 | - | - | 50,000 | 50 | - | - | 33,950 | - | - | - | 34,000 | |||||||||||||||||||||||
| Issuance of common stock as repayment of principal and interest due, $4,000,000, Mar 2005 | - | - | 265,228 | 265 | - | - | 162,197 | - | - | - | 162,462 | |||||||||||||||||||||||
| Issuance of common stock as repayment of principal and interest due, $4,000,000, Apr 2005 | - | - | 314,732 | 315 | - | - | 162,275 | - | - | - | 162,590 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $143,500 of $4,000,000 debenture, Apr 2005 | - | - | 175,316 | 175 | - | - | 143,584 | - | - | - | 143,759 | |||||||||||||||||||||||
| Issuance of common stock as employee compensation, Apr 2005, $0.56 | - | - | 8,800 | 9 | - | - | 4,919 | - | - | - | 4,928 | |||||||||||||||||||||||
Issuance of warrants in conjunction with convertible debentures, $500,000, Apr 2005, $0.82 | - | - | - | - | - | - | 245,521 | - | - | - | 245,521 | |||||||||||||||||||||||
Value of beneficial conversion feature on convertible debentures, $500,000, Apr 2005, $0.82 | - | - | - | - | - | - | 86,984 | - | - | - | 86,984 | |||||||||||||||||||||||
Issuance of warrants in conjunction with convertible debentures, $100,000, Apr 2005, $0.82 | - | - | - | - | - | - | 49,104 | - | - | - | 49,104 | |||||||||||||||||||||||
| Value of beneficial conversion feature on convertible debentures, $100,000, Apr 2005, $0.82 | - | - | - | - | - | - | 17,397 | - | - | - | 17,397 | |||||||||||||||||||||||
| Issuance of warrants in exchange for services rendered Apr 2005, $0.82 | - | - | - | - | - | - | 40,000 | - | - | - | 40,000 | |||||||||||||||||||||||
Issuance of common stock In exchange for services rendered, Apr 2005, $0.82 | - | - | 350,000 | 350 | - | - | 286,650 | - | - | - | 287,000 | |||||||||||||||||||||||
Issuance of common stock in satisfaction of accounts payable, Apr 2005, $0.82 | - | - | 950,927 | 951 | - | - | 778,809 | - | - | - | 779,760 | |||||||||||||||||||||||
Granting of stock options in exchange for outstanding liabilities, Apr 2005, $0.001 | - | - | - | - | - | - | 1,332,052 | - | - | - | 1,332,052 | |||||||||||||||||||||||
Issuance of common stock as repayment of principal and interest due, $4,000,000, May 2005 | - | - | 482,071 | 482 | - | - | 321,877 | - | - | - | 322,359 | |||||||||||||||||||||||
Issuance of common stock in connection with conversion of $300,000 of $4,000,000 debenture, May 2005 | - | - | 365,914 | 366 | - | - | 299,683 | - | - | - | 300,049 | |||||||||||||||||||||||
Issuance of common stock in connection with conversion of $244,000 of $4,000,000 debenture, May 2005 | - | - | 297,659 | 298 | - | - | 243,783 | - | - | - | 244,081 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of | ||||||||||||||||||||||||||||||||||
| $410,000 of $4,000,000 debenture, May 2005 | - | - | 500,000 | 500 | - | - | 409,500 | - | - | - | 410,000 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with 1st extension of due date of $600,000 convertible debentures, May 2005, $0.82 | - | - | - | - | - | - | 717,073 | - | - | - | 717,073 | |||||||||||||||||||||||
| Issuance of common stock as repayment of principal and interest due, $4,000,000, June 2005 | - | - | 311,307 | 311 | - | - | 244,644 | - | - | - | 244,955 | |||||||||||||||||||||||
Issuance of common stock in conjunction with financing, $2,000,000, June 2005, $0.82 | - | - | 170,732 | 171 | - | - | 139,829 | - | - | - | 140,000 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with financing, $2,000,000, June 2005, $0.82 | - | - | - | - | - | - | 20,300 | - | - | - | 20,300 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with convertible debentures, $2,000,000, June 2005, $0.82 | - | - | - | - | - | - | 828,571 | - | - | - | 828,571 | |||||||||||||||||||||||
| Value of beneficial conversion feature on convertible debentures, $2,000,000, June 2005, $0.82 | - | - | - | - | - | - | 1,171,429 | - | - | - | 1,171,429 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $100,000 of $2,000,000 debenture, June 2005 | - | - | 166,667 | 167 | - | - | 99,833 | - | - | - | 100,000 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $190,000 of $2,000,000 debenture, June 2005 | - | - | 316,927 | 317 | - | - | 189,839 | - | - | - | 190,156 | |||||||||||||||||||||||
| Issuance of common stock In exchange for services rendered, June 2005, $0.60 | - | - | 63,207 | 63 | - | - | 37,861 | - | - | - | 37,924 | |||||||||||||||||||||||
| Issuance of common stock in satisfaction of accounts payable, June 2005, $0.82 | - | - | 90,319 | 90 | - | - | 73,971 | - | - | - | 74,061 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $17,000 of $2,000,000 debenture, July 2005 | - | - | 28,398 | 28 | - | - | 17,011 | - | - | - | 17,039 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $75,000 of $2,000,000 debenture, July 2005 | - | - | 125,000 | 125 | - | - | 75,035 | - | - | - | 75,160 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with 2nd extension of due date of $600,000 convertible debentures, July 2005, $0.82 | - | - | - | - | - | - | 629,268 | - | - | - | 629,268 | |||||||||||||||||||||||
| Issuance of common stock as repayment of principal and interest due, $4,000,000, July 2005 | - | - | 364,123 | 364 | - | - | 237,586 | - | - | - | 237,950 | |||||||||||||||||||||||
| Issuance of common stock in satisfaction of accounts payable, July 2005, $0.82 | - | - | 820,128 | 820 | - | - | 671,685 | - | - | - | 672,505 | |||||||||||||||||||||||
| Granting of stock options in exchange for services, July 2004, $0.63 | - | - | - | - | - | - | 17,155 | - | - | - | 17,155 | |||||||||||||||||||||||
| Accrued interest on note receivable | - | - | - | - | - | - | - | (6,300 | ) | - | - | (6,300 | ) | |||||||||||||||||||||
| Write-off of uncollectible notes receivable - common stock | - | - | - | - | - | - | - | 391,103 | - | - | 391,103 | |||||||||||||||||||||||
| Variable accounting non-cash compensation expense | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (24,001,735 | ) | - | (24,001,735 | ) | |||||||||||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | - | - | - | - | - | - | 272,478 | 272,478 | |||||||||||||||||||||||
| Total Comprehensive Income (Loss) | (24,001,735 | ) | 272,478 | (23,729,257 | ) | |||||||||||||||||||||||||||||
| Balance at July 31, 2005 | 1,000 | $ | 1 | 41,933,898 | $ | 41,935 | - | $ | - | $ | 126,044,326 | $ | - | $ | (120,528,108 | ) | $ | 568,849 | $ | 6,127,003 | ||||||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-15
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2007
| SVR Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additonal Paid-In Capital | Notes Receivable - Common Stock | Deficit Accumulated During the Development Stage | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||
| Balance, August 1, 2005 | 1,000 | $ | 1 | 41,933,898 | $ | 41,935 | - | $ | - | $ | 126,044,326 | $ | - | $ | (120,528,108 | ) | $ | 568,849 | $ | 6,127,003 | ||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $4,000,000, August 2005 | - | - | 429,041 | 429 | - | - | 282,738 | - | - | - | 283,167 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered August 2005 (at $0.61) | - | - | 19,500 | 19 | - | - | 11,877 | - | - | - | 11,896 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered August 2005 (at $0.59) | - | - | 246,429 | 246 | - | - | 145,147 | - | - | - | 145,393 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $4,000,000, September 2005 | - | - | 388,730 | 389 | - | - | 267,835 | - | - | - | 268,224 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, September 2005 | - | - | 322,373 | 322 | - | - | 222,115 | - | - | - | 222,437 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $504,538 of $2,000,000 debenture, September 2005 | - | - | 841,309 | 841 | - | - | 503,945 | - | - | - | 504,786 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $286,538 of $2,000,000 debenture, September 2005 | - | - | 477,962 | 478 | - | - | 286,299 | - | - | - | 286,777 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $457,200 of 2nd $2,000,000 debenture, September 2005 | - | - | 762,000 | 762 | - | - | 456,739 | - | - | - | 457,501 | |||||||||||||||||||||||
| Issuance of common stock in satisfaction of accounts payable, September 2005, $0.81 | - | - | 162,933 | 163 | - | - | 113,442 | - | - | - | 113,605 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $211,538 of $2,000,000 debenture, September 2005 | - | - | 353,665 | 354 | - | - | 211,845 | - | - | - | 212,199 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $150,000 of 2nd $2,000,000 debenture, September 2005 | - | - | 250,000 | 250 | - | - | 149,750 | - | - | - | 150,000 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $457,317 of 2nd $2,000,000 debenture, September 2005 | - | - | 762,195 | 762 | - | - | 458,209 | - | - | - | 458,971 | |||||||||||||||||||||||
| Issuance of common stock in conjunction with financing, 2nd $2,000,000, September 2005, $0.82 | - | - | 170,732 | 171 | - | - | 139,829 | - | - | - | 140,000 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with financing, 2nd $2,000,000, September 2005, $0.82 | - | - | - | - | - | - | 30,600 | - | - | - | 30,600 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with convertible debentures, 2nd $2,000,000, September 2005 (at $0.82) | - | - | - | - | - | - | 785,185 | - | - | - | 785,185 | |||||||||||||||||||||||
| Value of Beneficial Conversion Feature on Convertible Debentures, 2nd $2,000,000, September 2005 (at $0.82) | - | - | - | - | - | - | 1,185,185 | - | - | - | 1,185,185 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $4,000,000, October 2005 | - | - | 243,836 | 244 | - | - | 163,126 | - | - | - | 163,370 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, October 2005 | - | - | 67,949 | 68 | - | - | 45,458 | - | - | - | 45,526 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $307,317 of 2nd $2,000,000 debenture, October 2005 | - | - | 512,195 | 512 | - | - | 306,805 | - | - | - | 307,317 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $300,000 of $2,000,000 debenture, October 2005 | - | - | 501,397 | 501 | - | - | 300,337 | - | - | - | 300,838 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $500,000 of $500,000 debenture, October 2005 | - | - | 644,003 | 644 | - | - | 527,438 | - | - | - | 528,082 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $113,077 of $2,000,000 debenture, October 2005 | - | - | 189,019 | 189 | - | - | 113,222 | - | - | - | 113,411 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $297,692 of $4,000,000 debenture, October 2005 | - | - | 364,113 | 364 | - | - | 298,209 | - | - | - | 298,573 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, October 2005, $0.82 | - | - | 8,404,876 | 8,405 | - | - | 6,883,593 | - | - | - | 6,891,998 | |||||||||||||||||||||||
| Exercise of stock options for cash, October 2005, $0.63 | - | - | 101,500 | 101 | - | - | 63,844 | - | - | - | 63,945 | |||||||||||||||||||||||
| Exercise of stock options for cash, October 2005, $0.94 | - | - | 40,000 | 40 | - | - | 37,560 | - | - | - | 37,600 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $100,000 of $100,000 debenture, October 2005 | - | - | 128,834 | 129 | - | - | 105,515 | - | - | - | 105,644 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with financing, $500,000, October 2005, $0.82 | - | - | - | - | - | - | 14,250 | - | - | - | 14,250 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with convertible debentures, $500,000, October 2005, $0.82 | - | - | - | - | - | - | 270,950 | - | - | - | 270,950 | |||||||||||||||||||||||
| Issuance of warrants as exercise inducement Oct 2005, $1.20 | - | - | - | - | - | - | 573,146 | - | - | - | 573,146 | |||||||||||||||||||||||
| Issuance of warrants as exercise inducement Oct 2005, $1.25 | - | - | - | - | - | - | 2,501,390 | - | - | - | 2,501,390 | |||||||||||||||||||||||
| Value of Beneficial Conversion Feature on Convertible Debentures, $500,000, October 2005 (at $0.82) | - | - | - | - | - | - | 229,050 | - | - | - | 229,050 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $4,000,000, Nov 2005, $1.17 | - | - | 108,006 | 108 | - | - | 126,259 | - | - | - | 126,367 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, Nov 2005, $1.17 | - | - | 16,753 | 17 | - | - | 19,584 | - | - | - | 19,601 | |||||||||||||||||||||||
| Exercise of stock options for cash, November 2005, $0.94 | - | - | 100,000 | 100 | - | - | 93,900 | - | - | - | 94,000 | |||||||||||||||||||||||
| Exercise of stock options for cash, November 2005, $0.63 | - | - | 1,500 | 2 | - | - | 944 | - | - | - | 946 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, November 2005, $0.82 | - | - | 3,058,536 | 3,058 | - | - | 2,504,942 | - | - | - | 2,508,000 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered November 2005, $0.97 | - | - | 64,287 | 64 | - | - | 62,294 | - | - | - | 62,358 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $42,800 of 2nd $2,000,000 debenture, Nov 2005, $1.23 | - | - | 72,058 | 72 | - | - | 88,559 | - | - | - | 88,631 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered August 2005, $0.97 | - | - | 19,500 | 19 | - | - | 18,897 | - | - | - | 18,916 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $230,769 of $4,000,000 debenture, November 2005,$0.97 | - | - | 282,721 | 283 | - | - | 273,957 | - | - | - | 274,240 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, Dec 2005, $0.98 | - | - | 212,750 | 213 | - | - | 208,282 | - | - | - | 208,495 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $1,451,000 of $3,500,000 debenture, Dec 2005, $0.93 | - | - | 1,770,223 | 1,770 | - | - | 1,644,537 | - | - | - | 1,646,307 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $4,221 of 2nd $2,000,000 debenture, Dec 2005, $0.85 | - | - | 7,042 | 7 | - | - | 5,979 | - | - | - | 5,986 | |||||||||||||||||||||||
| Issuance of common stock in conjunction with financing, $3,500,000, December 2005, $0.95 | - | - | 224,000 | 224 | - | - | 212,576 | - | - | - | 212,800 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with financing, $3,500,000, December 2005, $0.82 | - | - | - | - | - | - | 76,650 | - | - | - | 76,650 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with convertible debentures, $3,500,000, December 2005, $0.82 | - | - | - | - | - | - | 1,648,387 | - | - | - | 1,648,387 | |||||||||||||||||||||||
| Value of Beneficial Conversion Feature on Convertible Debentures, $3,500,000, December 2005,$0.82 | - | - | - | - | - | - | 1,851,613 | - | - | - | 1,851,613 | |||||||||||||||||||||||
| Issuance of warrants as exercise inducement Dec 2005, $1.25 | - | - | - | - | - | - | 1,115,853 | - | - | - | 1,115,853 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $82,000 of $3,500,000 debenture, December 2005, $0.84 | - | - | 100,000 | 100 | - | - | 83,900 | - | - | - | 84,000 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, 2nd $2,000,000, Jan 2006, $0.81 | - | - | 75,149 | 75 | - | - | 60,796 | - | - | - | 60,871 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $500,000, Jan 2006, $0.81 | - | - | 53,612 | 54 | - | - | 43,372 | - | - | - | 43,426 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $617,000 of $3,500,000 debenture, January 2005, $0.94 | - | - | 757,630 | 758 | - | - | 711,415 | - | - | - | 712,173 | |||||||||||||||||||||||
| Issuance of common stock in conjunction with financing, $4,000,000, January 2006, $1.00 | - | - | 266,667 | 267 | - | - | 266,400 | - | - | - | 266,667 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with financing, $4,000,000, January 2006, $1.05 | - | - | - | - | - | - | 88,800 | - | - | - | 88,800 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with convertible debentures, 4,000,000, January 2006, $1.05 | - | - | - | - | - | - | 1,653,631 | - | - | - | 1,653,631 | |||||||||||||||||||||||
| Value of Beneficial Conversion Feature on Convertible Debentures, 4,000,000, January 2006, $1.05 | - | - | - | - | - | - | 1,463,155 | - | - | - | 1,463,155 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, January 2006, $0.82 | - | - | 7,317,072 | 7,317 | - | - | 5,992,682 | - | - | - | 5,999,999 | |||||||||||||||||||||||
| Issuance of warrants as exercise inducement Jan 2006, $1.60 | - | - | - | - | - | - | 3,109,756 | - | - | - | 3,109,756 | |||||||||||||||||||||||
| Exercise of stock options for cash, January 2006, $0.63 | - | - | 10,000 | 10 | - | - | 6,290 | - | - | - | 6,300 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $850,000 of $3,500,000 debenture, January 2006, $1.06 | - | - | 1,045,779 | 1,046 | - | - | 1,107,480 | - | - | - | 1,108,526 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $500,000, Feb 2006, $1.23 | - | - | 49,812 | 50 | - | - | 61,219 | - | - | - | 61,269 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, Feb 2006, $1.23 | - | - | 67,746 | 68 | - | - | 83,260 | - | - | - | 83,328 | |||||||||||||||||||||||
| Issuance of common stock as employee compensation, December 2005, $0.90 | - | - | 140,115 | 140 | - | - | 125,964 | - | - | - | 126,104 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, February 2006, $0.82 | - | - | 303,902 | 304 | - | - | 248,896 | - | - | - | 249,200 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered February 2006, $1.53 | - | - | 50,000 | 50 | - | - | 76,450 | - | - | - | 76,500 | |||||||||||||||||||||||
| Exercise of stock options for cash, February 2006, $0.94 | - | - | 80,000 | 80 | - | - | 75,120 | - | - | - | 75,200 | |||||||||||||||||||||||
| Exercise of stock options for cash, February 2006, $1.59 | - | - | 80,000 | 80 | - | - | 127,120 | - | - | - | 127,200 | |||||||||||||||||||||||
| Exercise of stock options for cash, February 2006, $1.38 | - | - | 20,000 | 20 | - | - | 27,580 | - | - | - | 27,600 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, February 2006, $1.05 | - | - | 3,809,524 | 3,810 | - | - | 3,996,191 | - | - | - | 4,000,001 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, February 2006, $1.20 | - | - | 909,756 | 910 | - | - | 1,090,797 | - | - | - | 1,091,707 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, February 2006, $1.25 | - | - | 4,578,048 | 4,578 | - | - | 5,717,982 | - | - | - | 5,722,560 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, February 2006, $1.72 | - | - | 34,782 | 35 | - | - | 59,790 | - | - | - | 59,825 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $950,000 of Jan $4,000,000 debenture, Feb 2006, $2.38 | - | - | 904,762 | 905 | - | - | 2,152,429 | - | - | - | 2,153,334 | |||||||||||||||||||||||
| Issuance of warrants in conjunction with convertible debentures, 4,000,000, February 2006, $1.05 | - | - | - | - | - | - | 2,374,507 | - | - | - | 2,374,507 | |||||||||||||||||||||||
| Value of Beneficial Conversion Feature on Convertible Debentures, 4,000,000, February 2006, $1.05 | - | - | - | - | - | - | 1,625,493 | - | - | - | 1,625,493 | |||||||||||||||||||||||
| Issuance of warrants as exercise inducement Feb 2006, $3.00 | - | - | - | - | - | - | 8,294,141 | - | - | - | 8,294,141 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $1,550,000 of Jan $4,000,000 debenture, Mar 2006, $2.21 | - | - | 1,485,349 | 1,485 | - | - | 3,281,136 | - | - | - | 3,282,621 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, March 2006, $1.72 | - | - | 347,913 | 348 | - | - | 598,062 | - | - | - | 598,410 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, Mar 2006, $2.31 | - | - | 67,094 | 67 | - | - | 154,920 | - | - | - | 154,987 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $500,000, March 2006, $2.31 | - | - | 49,312 | 49 | - | - | 113,861 | - | - | - | 113,910 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $3,500,000, Mar 2006, $2.31 | - | - | 55,644 | 56 | - | - | 128,482 | - | - | - | 128,538 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered March 2006, $2.31 | - | - | 50,000 | 50 | - | - | 115,450 | - | - | - | 115,500 | |||||||||||||||||||||||
| Exercise of stock options for cash, March 2006, $0.94 | - | - | 300,222 | 300 | - | - | 281,909 | - | - | - | 282,209 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $2,350,000 of Feb $4,000,000 debenture, Mar 2006, $2.31 | - | - | 1,880,000 | 1,880 | - | - | 4,340,920 | - | - | - | 4,342,800 | |||||||||||||||||||||||
| Exercise of stock options for cash, March 2006, $1.47 | - | - | 274,500 | 274 | - | - | 403,241 | - | - | - | 403,515 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, March 2006, $1.25 | - | - | 1,600,000 | 1,600 | - | - | 1,998,400 | - | - | - | 2,000,000 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, March 2006, $0.91 | - | - | 60,000 | 60 | - | - | 54,540 | - | - | - | 54,600 | |||||||||||||||||||||||
| Exercise of stock options for cash, March 2006, $1.59 | - | - | 263,700 | 264 | - | - | 419,019 | - | - | - | 419,283 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $500,000 of Feb $4,000,000 debenture, Mar 2006, $2.20 | - | - | 400,592 | 401 | - | - | 880,902 | - | - | - | 881,303 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, March 2006, $0.82 | - | - | 48,000 | 48 | - | - | 39,312 | - | - | - | 39,360 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, March 2006, $1.05 | - | - | 46,000 | 46 | - | - | 48,254 | - | - | - | 48,300 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $200,000 of Jan $4,000,000 debenture, March 2006, $2.31 | - | - | 192,136 | 192 | - | - | 443,642 | - | - | - | 443,834 | |||||||||||||||||||||||
| Exercise of stock options for cash, March 2006, $1.71 | - | - | 180,000 | 180 | - | - | 307,620 | - | - | - | 307,800 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $384,615 of $500,000 debenture, March 2006, $3.33 | - | - | 470,450 | 470 | - | - | 1,566,129 | - | - | - | 1,566,599 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, March 2006, $1.68 | - | - | 1,639,344 | 1,639 | - | - | 2,752,459 | - | - | - | 2,754,098 | |||||||||||||||||||||||
| Cashless exercise of stock warrants, March 2006, $2.50 | - | - | 8,179 | 8 | - | - | (8 | ) | - | - | - | - | ||||||||||||||||||||||
| Exercise of stock warrants for cash, March 2006, $1.25 | - | - | 68,000 | 68 | - | - | 84,932 | - | - | - | 85,000 | |||||||||||||||||||||||
| Exercise of stock options for cash, March 2006, $2.10 | - | - | 175,000 | 175 | - | - | 367,325 | - | - | - | 367,500 | |||||||||||||||||||||||
| Exercise of stock options for cash, March 2006, $1.10 | - | - | 150,000 | 150 | - | - | 164,850 | - | - | - | 165,000 | |||||||||||||||||||||||
| Exercise of stock options for cash, March 2006, $1.52 | - | - | 150,000 | 150 | - | - | 227,850 | - | - | - | 228,000 | |||||||||||||||||||||||
| Exercise of stock options for cash, March 2006, $2.19 | - | - | 150,000 | 150 | - | - | 328,350 | - | - | - | 328,500 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, March 2006, $2.15 | - | - | 2,000 | 2 | - | - | 4,298 | - | - | - | 4,300 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, March 2006, $1.88 | - | - | 31,000 | 31 | - | - | 58,249 | - | - | - | 58,280 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, March 2006, $2.02 | - | - | 23,438 | 23 | - | - | 47,322 | - | - | - | 47,345 | |||||||||||||||||||||||
| Exercise of stock options for cash, March 2006, $0.63 | - | - | 120,750 | 121 | - | - | 75,952 | - | - | - | 76,073 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, March 2006, $1.86 | - | - | 170,068 | 170 | - | - | 316,156 | - | - | - | 316,326 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered March 2006, $2.96 | - | - | 25,000 | 25 | - | - | 73,975 | - | - | - | 74,000 | |||||||||||||||||||||||
| Issuance of common stock in satisfaction of accounts payable March 2006, $3.20 | - | - | 2,390 | 2 | - | - | 7,646 | - | - | - | 7,648 | |||||||||||||||||||||||
| Issuance of warrants as exercise inducement Mar 2006, $3.00 | - | - | - | - | - | - | 1,293,953 | - | - | - | 1,293,953 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, April 2006, $2.70 | - | - | 67,083 | 67 | - | - | 181,057 | - | - | - | 181,124 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, $3,500,000, April 2006, $2.70 | - | - | 49,812 | 50 | - | - | 134,443 | - | - | - | 134,493 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, Jan $4,000,000, Apr 2006, $2.70 | - | - | 167,144 | 167 | - | - | 451,122 | - | - | - | 451,289 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, April 2006, $1.88 | - | - | 29,000 | 29 | - | - | 54,491 | - | - | - | 54,520 | |||||||||||||||||||||||
| Exercise of stock options for cash, April 2006, $1.47 | - | - | 95,500 | 95 | - | - | 140,290 | - | - | - | 140,385 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $307,692 of 2nd $2,000,000 debenture, April 2006, $2.63 | - | - | 513,158 | 513 | - | - | 1,349,092 | - | - | - | 1,349,605 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $423,077 of $3,500,000 debenture, April 2005, $2.63 | - | - | 516,291 | 516 | - | - | 1,357,329 | - | - | - | 1,357,845 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $923,077 of Jan $4,000,000 debenture, April 2006, $2.63 | - | - | 879,699 | 880 | - | - | 2,312,729 | - | - | - | 2,313,609 | |||||||||||||||||||||||
| Exercise of stock options for cash, April 2006, $0.94 | - | - | 25,000 | 25 | - | - | 23,475 | - | - | - | 23,500 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, April 2006, $0.82 | - | - | 132,000 | 132 | - | - | 108,108 | - | - | - | 108,240 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, April 2006, $0.91 | - | - | 60,000 | 60 | - | - | 54,540 | - | - | - | 54,600 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, April 2006, $1.05 | - | - | 69,000 | 69 | - | - | 72,381 | - | - | - | 72,450 | |||||||||||||||||||||||
| Issuance of common stock in satisfaction of deposit April 2006, $1.25 | - | - | 204,465 | 204 | - | - | 255,377 | - | - | - | 255,581 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered April 2006, $2.67 | - | - | 38,400 | 38 | - | - | 102,490 | - | - | - | 102,528 | |||||||||||||||||||||||
| Issuance of warrants in exchange for the services rendered April 2006, $2.66 | - | - | - | - | - | - | 137,200 | - | - | - | 137,200 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, Jan $4,000,000, May 2006, $3.10 | - | - | 74,322 | 74 | - | - | 230,324 | - | - | - | 230,398 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, Feb $4,000,000, May 2006, $3.10 | - | - | 172,713 | 173 | - | - | 535,238 | - | - | - | 535,411 | |||||||||||||||||||||||
| Exercise of stock options for cash, May 2006, $2.10 | - | - | 25,000 | 25 | - | - | 52,475 | - | - | - | 52,500 | |||||||||||||||||||||||
| Exercise of stock options for cash, May 2006, $1.47 | - | - | 10,000 | 10 | - | - | 14,690 | - | - | - | 14,700 | |||||||||||||||||||||||
| Issuance of warrants in exchange for the services rendered May 2006, $1.91 | - | - | - | - | - | - | 35,250 | - | - | - | 35,250 | |||||||||||||||||||||||
| Issuance of common stock as employee compensation May 2006, $1.88 | - | - | 755,000 | 755 | - | - | 1,418,645 | - | - | - | 1,419,400 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered May 2006, $1.85 | - | - | 3,784 | 4 | - | - | 6,997 | - | - | - | 7,001 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered May 2006, $1.88 | - | - | 38,000 | 38 | - | - | 71,402 | - | - | - | 71,440 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, Jan $4,000,000, Jun 2006, $1.96 | - | - | 73,979 | 74 | - | - | 144,925 | - | - | - | 144,999 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, Feb $4,000,000, Jun 2006, $1.96 | - | - | 83,911 | 84 | - | - | 164,382 | - | - | - | 164,466 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, June 2006, $1.25 | - | - | 1,327,880 | 1,328 | - | - | 1,658,522 | - | - | - | 1,659,850 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, June 2006, $1.60 | - | - | 3,036,310 | 3,036 | - | - | 4,855,060 | - | - | - | 4,858,096 | |||||||||||||||||||||||
| Issuance of warrants as exercise inducement June 2006, $2.35 | - | - | - | - | - | - | 4,549,670 | - | - | - | 4,549,670 | |||||||||||||||||||||||
| Issuance of common stock for cash pursuant to private placement, June 2006, $2.05 | - | - | 3,414,636 | 3,415 | - | - | 6,996,589 | - | - | - | 7,000,004 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered June 2006, $1.85 | - | - | 3,784 | 4 | - | - | 6,997 | - | - | - | 7,001 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, Jan $4,000,000, July 2006, $1.75 | - | - | 66,264 | 66 | - | - | 115,896 | - | - | - | 115,962 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, Feb $4,000,000, July 2006, $1.75 | - | - | 64,923 | 65 | - | - | 113,550 | - | - | - | 113,615 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered July 2006, $1.40 | - | - | 5,000 | 5 | - | - | 6,995 | - | - | - | 7,000 | |||||||||||||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (67,967,204 | ) | - | (67,967,204 | ) | |||||||||||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | - | - | - | - | - | - | 185,232 | 185,232 | |||||||||||||||||||||||
| Total Comprehensive Income (Loss) | (67,967,204 | ) | 185,232 | (67,781,972 | ) | |||||||||||||||||||||||||||||
| Balance at July 31, 2006 | 1,000 | $ | 1 | 107,398,360 | $ | 107,397 | $ | - | $ | - | $ | 243,097,627 | $ | - | $ | (188,495,312 | ) | $ | 754,081 | $ | 55,463,794 | |||||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-16
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2007
| SVR Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Additonal Paid-In Capital | Notes Receivable - Common Stock | Deficit Accumulated During the Development Stage | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||
| Balance, August 1, 2006 | 1,000 | $ | 1 | 107,398,360 | $ | 107,397 | $ | - | $ | - | $ | 243,097,627 | $ | - | $ | (188,495,312 | ) | $ | 754,081 | $ | 55,463,794 | |||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, Feb $4,000,000, Aug 2006, $1.48 | - | - | 64,718 | 65 | - | - | 95,718 | - | - | - | 95,783 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Aug 2006, $1.43 | - | - | 25,000 | 25 | - | - | 35,725 | - | - | - | 35,750 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due Feb $4,000,000, Sep 2006 $1.53 | - | - | 64,400 | 64 | - | - | 98,468 | - | - | - | 98,532 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Oct 2006, $1.50 | - | - | 25,000 | 25 | - | - | 37,475 | - | - | - | 37,500 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due Feb $4,000,000, Oct 2006, $1.65 | - | - | 64,000 | 64 | - | - | 105,536 | - | - | - | 105,600 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Oct 2006, $1.83 | - | - | 27,262 | 27 | - | - | 49,862 | - | - | - | 49,889 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Oct 2006, $1.50 | - | - | 25,000 | 25 | - | - | 37,475 | - | - | - | 37,500 | |||||||||||||||||||||||
| Issuance of common stock as employee compensation Oct 2006, $1.83 | - | - | 100,000 | 100 | - | - | 182,900 | - | - | - | 183,000 | |||||||||||||||||||||||
| Exercise of stock warrants for cash, Oct 2006, $1.25 | - | - | 100,000 | 100 | - | - | 124,900 | - | - | - | 125,000 | |||||||||||||||||||||||
| Exercise of stock options for cash, Oct 2006, $1.59 | - | - | 90,300 | 90 | - | - | 143,487 | - | - | - | 143,577 | |||||||||||||||||||||||
| Exercise of stock options for cash, Oct 2006, $1.47 | - | - | 6,500 | 6 | - | - | 9,549 | - | - | - | 9,555 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due Feb $4,000,000, Nov 2006, $2.02 | - | - | 63,764 | 64 | - | - | 128,740 | - | - | - | 128,804 | |||||||||||||||||||||||
| Exercise of stock options for cash, Nov 2006, $1.59 | - | - | 15,000 | 15 | - | - | 23,835 | - | - | - | 23,850 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Nov 2006, $2.15 | - | - | 50,000 | 50 | - | - | 107,450 | - | - | - | 107,500 | |||||||||||||||||||||||
| Issuance of common stock as repayment of monthly amortization payments due, Feb $4,000,000, Dec 2006, $2.08 | - | - | 63,384 | 63 | - | - | 131,775 | - | - | - | 131,838 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Dec 2006, $1.68 | - | - | 25,000 | 25 | - | - | 41,975 | - | - | - | 42,000 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Jan 2007, $1.77 | - | - | 25,000 | 25 | - | - | 44,225 | - | - | - | 44,250 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $52,554 of Feb $4,000,000 debenture, Jan, $1.74 | - | - | 42,043 | 42 | - | - | 73,113 | - | - | - | 73,155 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of 52,554 of Feb $4,000,000 debenture, Jan, $1.77 | - | - | 42,043 | 42 | - | - | 74,374 | - | - | - | 74,416 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Feb 2007, $1.90 | - | - | 25,000 | 25 | - | - | 47,475 | - | - | - | 47,500 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Mar 2007, $1.71 | - | - | 100,000 | 100 | - | - | 170,900 | - | - | - | 171,000 | |||||||||||||||||||||||
Issuance of common stock as employee compensation Mar 2007, $1.71 | - | - | 9,844 | 10 | - | - | 16,823 | - | - | - | 16,833 | |||||||||||||||||||||||
Issuance of warrants in exchange for the services rendered Mar 2007, $1.71 | - | - | - | - | 125,000 | - | - | - | 125,000 | |||||||||||||||||||||||||
| Issuance of common stock as employee compensation Mar 2007, $1.71 | - | - | 296,000 | 296 | - | - | 505,864 | - | - | - | 506,160 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Mar 2007, $1.65 | - | - | 13,637 | 13 | - | - | 22,487 | - | - | - | 22,500 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Mar 2007, $1.69 | - | - | 25,000 | 25 | - | - | 42,225 | - | - | - | 42,250 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $52,554 of Feb $4,000,000 debenture, Mar 2007, $1.71 | - | - | 42,043 | 42 | - | - | 71,851 | - | - | - | 71,893 | |||||||||||||||||||||||
| Issuance of common stock as employee compensation Mar 2007, $1.70 | - | - | 4,951 | 5 | - | - | 8,412 | - | - | - | 8,417 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Apr 2007, $1.71 | - | - | 22,728 | 23 | - | - | 38,842 | - | - | - | 38,865 | |||||||||||||||||||||||
| Preferred Shares Redemption, April 2007 | (1,000 | ) | (1 | ) | - | - | - | - | (99 | ) | - | - | - | (100 | ) | |||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Apr 2007, $1.65 | - | - | 13,637 | 14 | - | - | 22,486 | - | - | - | 22,500 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Apr 2007, $1.69 | - | - | 25,000 | 25 | - | - | 42,225 | - | - | - | 42,250 | |||||||||||||||||||||||
| Issuance of common stock as employee compensation Apr 2007, $1.64 | - | - | 5,132 | 5 | - | - | 8,411 | - | - | - | 8,416 | |||||||||||||||||||||||
| Issuance of common stock in connection with conversion of $52,554 of Feb $4,000,000 debenture, Apr 2007, $1.61 | - | - | 42,043 | 42 | - | - | 67,647 | - | - | - | 67,689 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered May 2007, $1.60 | - | - | 22,728 | 23 | - | - | 36,342 | - | - | - | 36,365 | |||||||||||||||||||||||
| Exercise of stock options for cash, May 2007, $0.63 | - | - | 5,000 | 5 | - | - | 3,145 | - | - | - | 3,150 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered May 2007, $1.47 | - | - | 25,000 | 25 | - | - | 36,725 | - | - | - | 36,750 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered May 2007, $1.47 | - | - | 13,637 | 14 | - | - | 20,033 | - | - | - | 20,047 | |||||||||||||||||||||||
| Issuance of common stock as employee compensation May 2007, $1.45 | - | - | 5,805 | 6 | - | - | 8,411 | - | - | - | 8,417 | |||||||||||||||||||||||
| Issuance of common stock as employee compensation May 2007, $1.45 | - | - | 450,000 | 450 | - | - | 652,050 | - | - | - | 652,500 | |||||||||||||||||||||||
| Issuance of warrants in exchange for the services rendered May 2007, $1.45 | - | - | - | - | 141,400 | - | - | - | 141,400 | |||||||||||||||||||||||||
| Cancellation of common stock, May 2007, $1.45 | - | - | (150,000 | ) | (150 | ) | - | - | 150 | - | - | - | - | |||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Jun 2007, $1.40 | - | - | 22,728 | 23 | - | - | 31,796 | - | - | - | 31,819 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Jun 2007, $1.83 | - | - | 13,637 | 14 | - | - | 24,942 | - | - | - | 24,956 | |||||||||||||||||||||||
| Issuance of common stock in exchange for services rendered Jun 2007, $1.80 | - | - | 25,000 | 25 | - | - | 44,975 | - | - | - | 45,000 | |||||||||||||||||||||||
| Issuance of common stock as employee compensation, Jul 2007, $1.78 | - | - | 4,728 | 5 | - | - | 8,411 | - | - | - | 8,416 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Jul 2007, $1.78 | - | - | 22,728 | 23 | - | - | 40,433 | - | - | - | 40,456 | |||||||||||||||||||||||
| Exercise of stock options for cash, Jul 2007, $0.94 | - | - | 70,000 | 70 | - | - | 65,730 | - | - | - | 65,800 | |||||||||||||||||||||||
| Exercise of stock options for cash, Jul 2007, $0.56 | - | - | 100,000 | 100 | - | - | 55,900 | - | - | - | 56,000 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Jul 2007, $1.75 | - | - | 13,637 | 14 | - | - | 23,851 | - | - | - | 23,865 | |||||||||||||||||||||||
| Issuance of common stock in exchange for the services rendered Jul 2007, $1.68 | - | - | 25,000 | 25 | - | - | 41,975 | - | - | - | 42,000 | |||||||||||||||||||||||
| Issuance of common stock as employee compensation April 2007, $1.65 | - | - | 5,101 | 5 | - | - | 8,412 | - | - | - | 8,417 | |||||||||||||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | - | (23,504,958 | ) | - | (23,504,958 | ) | |||||||||||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | - | - | - | - | - | - | 127,726 | 127,726 | |||||||||||||||||||||||
| Total Comprehensive Income (Loss) | (23,504,958 | ) | 127,726 | (23,377,232 | ) | |||||||||||||||||||||||||||||
| Balance at July 31, 2007 | - | - | 109,616,518 | 109,616 | - | - | 247,079,439 | - | (212,000,270 | ) | 881,807 | 36,070,592 | ||||||||||||||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-17
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Year Ended July 31, | Cumulative From November 2, 1995 | ||||||||||||
| 2007 | 2006 | 2005 | 2007 | ||||||||||
| Cash Flows From Operating Activities: | |||||||||||||
| Net loss | $ | (23,504,958 | ) | $ | (67,967,204 | ) | $ | (24,001,735 | ) | $ | (209,705,213 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||||
| Depreciation and amortization | 1,166,090 | 1,134,676 | 1,103,948 | 5,881,946 | |||||||||
| Minority interest share of loss | -- | -- | -- | (3,038,185 | ) | ||||||||
Reduction of notes receivable - common stock in exchange for services rendered | -- | -- | -- | 423,882 | |||||||||
| Write-off of uncollectible notes receivable - common stock | -- | -- | 391,103 | 391,103 | |||||||||
| Write-off of deferred offering costs | -- | -- | -- | 3,406,196 | |||||||||
| Write-off of abandoned patents | 21,721 | 73,699 | 66,952 | 171,506 | |||||||||
| Loss on disposal of property and equipment | -- | 911 | -- | 911 | |||||||||
| Loss on extinguishment of debt | 237,163 | 12,550,565 | 1,346,341 | 14,134,069 | |||||||||
| Common stock issued as employee compensation | 748,076 | 1,545,504 | -- | 2,293,580 | |||||||||
| Common stock issued for services rendered | 1,695,013 | 515,039 | 1,131,452 | 6,996,316 | |||||||||
Amortization of prepaid services in conjunction with common stock issuance | -- | 138,375 | -- | 138,375 | |||||||||
| Non-cash compensation expense | -- | -- | -- | 45,390 | |||||||||
| Stock options and warrants issued for services rendered | 266,400 | 172,450 | 547,755 | 7,272,723 | |||||||||
| Issuance of warrants as additional exercise right inducement | -- | 21,437,909 | -- | 21,437,909 | |||||||||
| Preferred stock issued for services rendered | -- | -- | -- | 100 | |||||||||
| Treasury stock redeemed for non-performance of services | -- | -- | (138,000 | ) | (138,000 | ) | |||||||
Amortization of deferred debt issuance costs and loan origination fees | -- | 1,234,772 | 248,107 | 1,482,879 | |||||||||
| Amortization of discount on convertible debentures | 608,737 | 14,586,879 | 3,734,811 | 18,930,427 | |||||||||
Common stock issued as interest payment on convertible debentures | 15,716 | 191,747 | 76,996 | 284,459 | |||||||||
| Interest on short-term advance | -- | 13,524 | -- | 22,190 | |||||||||
| Founders’ shares transferred for services rendered | -- | -- | -- | 353,506 | |||||||||
Fees in connection with short-term refinancing of long-term debt | -- | 7,974 | 105,300 | 113,274 | |||||||||
Changes in operating assets and liabilities (excluding the effects of acquisition): | |||||||||||||
| Accounts receivable | (56,680 | ) | -- | -- | (56,680 | ) | |||||||
| Miscellaneous receivables | -- | -- | -- | 43,812 | |||||||||
| Inventory | (117,502 | ) | -- | -- | (117,502 | ) | |||||||
| Other current assets | (26,068 | ) | 9,596 | 731,656 | (128,713 | ) | |||||||
| Accounts payable and accrued expenses | 1,682,196 | 3,780,168 | 3,255,169 | 11,328,115 | |||||||||
| Deferred revenue | 33,031 | -- | -- | 33,031 | |||||||||
| Other, net | -- | -- | -- | 110,317 | |||||||||
| Net Cash Used in Operating Activities | (17,231,065 | ) | (10,573,416 | ) | (11,400,145 | ) | (117,888,277 | ) | |||||
| Cash Flows From Investing Activities: | |||||||||||||
| Purchase of property and equipment | (93,704 | ) | (149,991 | ) | (63,735 | ) | (4,536,411 | ) | |||||
| Costs incurred for patents | (208,606 | ) | (114,010 | ) | (193,429 | ) | (1,817,602 | ) | |||||
| Change in restricted cash | -- | 216,868 | 19,333 | 45,872 | |||||||||
| Proceeds from maturity of short term investments | 22,795,763 | 8,600,000 | -- | 158,082,809 | |||||||||
| Purchases of short-term investments | (22,434,848 | ) | (22,972,653 | ) | -- | (172,094,547 | ) | ||||||
| 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 | (196,457 | ) | (29,639 | ) | 395,889 | (703,290 | ) | ||||||
| Change in notes receivable - common stock | -- | -- | (6,300 | ) | (91,103 | ) | |||||||
| Change in due from related parties | -- | -- | -- | (2,222,390 | ) | ||||||||
| Other, net | -- | -- | -- | 89,683 | |||||||||
| Net Cash Provided by (Used in) Investing Activities | (137,852 | ) | (14,449,425 | ) | 151,758 | (24,322,904 | ) | ||||||
| Cash Flows From Financing Activities: | |||||||||||||
| Proceeds from short-term advance | -- | -- | 325,179 | 325,179 | |||||||||
| Repayment of short-term advance | -- | (347,369 | ) | -- | (347,369 | ) | |||||||
| Proceeds from issuance of long-term debt | -- | 35,461 | 815,832 | 2,005,609 | |||||||||
| Repayment of long-term debt | (73,151 | ) | (572,280 | ) | (98,447 | ) | (1,852,369 | ) | |||||
| Change in due to related parties | -- | -- | -- | 154,541 | |||||||||
| Proceeds from exercise of warrants | 125,000 | 39,337,065 | -- | 44,015,049 | |||||||||
| Proceeds from exercise of stock options | 301,931 | 3,241,755 | -- | 4,554,126 | |||||||||
| Proceeds from minority interest investment | -- | -- | -- | 3,038,185 | |||||||||
| Proceeds from issuance of preferred stock | -- | -- | -- | 12,015,000 | |||||||||
| Redemption of SVR preferred stock | (100 | ) | -- | -- | (100 | ) | |||||||
| Proceeds from issuance of convertible debentures, net | -- | 13,955,000 | 6,299,930 | 20,254,930 | |||||||||
| Repayments of convertible debentures | (174,399 | ) | -- | (461,358 | ) | (635,757 | ) | ||||||
| Purchase of treasury stock | -- | -- | -- | (483,869 | ) | ||||||||
| Proceeds from issuance of common stock, net | -- | 7,000,004 | -- | 80,283,719 | |||||||||
| Purchase and retirement of common stock | -- | -- | -- | (119,066 | ) | ||||||||
| Net Cash Provided by Financing Activities | 179,281 | 62,649,636 | 6,881,136 | 163,207,808 | |||||||||
| Effect of Exchange Rates on Cash | 7,210 | (4,832 | ) | 3,362 | 29,440 | ||||||||
| Net Increase (Decrease) in Cash and Cash Equivalents | (17,182,426 | ) | 37,621,963 | (4,363,889 | ) | 21,026,067 | |||||||
| Cash and Cash Equivalents, Beginning of Period | 38,208,493 | 586,530 | 4,950,419 | -- | |||||||||
| Cash and Cash Equivalents, End of Period | $ | 21,026,067 | $ | 38,208,493 | $ | 586,530 | $ | 21,026,067 | |||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
F-18
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Business:
Generex Biotechnology Corporation (the Company) and its wholly-owned subsidiary Generex Pharmaceuticals, Inc. are engaged in the research and development of drug delivery systems and technology. Since its inception, the Company has devoted its efforts and resources to the development of a platform technology for the oral administration of large molecule drugs, including proteins, peptides, monoclonal antibodies, hormones and vaccines, which historically have been administered by injection, either subcutaneously or intravenously. Oral -lynTM the first product based on this platform technology, is in the various stages of regulatory approval in different jurisdictions around the world.
The Company’s subsidiary, Antigen Express, Inc. (Antigen), is engaged in research and development of technologies and immunomedicines for the treatment of malignant, infectious, autoimmune and allergic diseases. The Company’s immunomedicine products work by stimulating the immune system to either attack offending agents (i.e., cancer cells, bacteria, and viruses) or to stop attacking benign elements (i.e., self proteins and allergens). The immunomedicine products are based on two platform technologies that were discovered by an executive officer of Antigen, the Ii-Key hybrid peptides and Ii-Suppression. These technologies are expected to greatly boost immune cell responses which diagnose and treat the ailments and conditions.
The Company is a development stage company, which has a limited history of operations and whose revenues is primarily comprised of $1 million received in conjunction with the execution of a development agreement, grant revenue from government agencies related to Antigen’s operations and $50,000 in conjunction with the execution of a licensing agreement (see Note 8). The Company has realized minimal revenues to date from the sale of its commercial products, which currently consists of four commercially available products, Glucose RapidSprayTM. 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.
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained. For those consolidated subsidiaries where the Company ownership is less than 100 percent, the outside stockholders’ interests are shown as minority interests. Effective December 17, 2004, the Company’s ownership in all consolidated subsidiaries is 100 percent (see Note 12). All significant intercompany transactions and balances have been eliminated.
Development Stage Corporation
The accompanying consolidated financial statements have been prepared in accordance with the provisions of Statement of Financial Accounting Standard (SFAS) No. 7, “Accounting and Reporting by Development Stage Enterprises.”
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.
F-19
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Short-Term Investments
Short-term investments consist primarily of short-term U.S. term deposits with original maturities of between three to twelve months. These short-term notes are classified as held to maturity and are valued at amortized cost. At July 31, 2007, the cost of the investments approximated market value.
Accounts Receivable
Accounts receivable are customer obligations due under normal trade terms. The Company sells its product to various distributors and retailers. The Company performs ongoing credit evaluations of customers’ financial condition and does not require collateral.
Management reviews accounts receivable on a monthly basis to determine collectibility. Balances that are determined to be uncollectible are written off to the allowance for doubtful accounts. The allowance for doubtful accounts contains a general accrual for estimated bad debts and had a balance of zero at July 31, 2007 and 2006, however, actual write-offs may exceed the allowance.
Inventory
Inventories consist primarily of Glucose RapidSprayTM product and components. Inventories are stated at the lower of cost or market with cost determined using the first-in first-out (“FIFO”) method. In evaluating whether inventory is stated at the lower of cost or market, management considers such factors as the amount of inventory on hand and in the distribution channel, estimated time required to sell such inventory, remaining shelf life and current and expected market conditions, including levels of competition. As appropriate, a provision is recorded to reduce inventories to their net realizable value.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of the assets, which range from three to thirty years. Gains and losses on depreciable assets retired or sold are recognized in the statement of operations in the year of disposal. Repairs and maintenance expenditures are expensed as incurred.
Property Held for Investment
Property held for investment is recorded at cost less accumulated depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of the assets of thirty years. Gains and losses on depreciable assets retired or sold are recognized in the statement of operations in the year of disposal. Repairs and maintenance expenditures are expensed as incurred.
Patents
Capitalized patent costs represent legal costs incurred to establish patents and a portion of the acquisition price paid attributed to patents upon the acquisition of Antigen in August 2003. When patents reach a mature stage any associated legal costs are comprised mostly of maintenance fees and costs of national applications and are expensed as incurred. Capitalized patent costs are amortized on a straight line method over the related patent term. As patents are abandoned, the net book value of the patent is written off.
F-20
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Impairment or Disposal of Long-Lived Assets
The Company assesses the impairment of patents under SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” whenever events or changes in circumstances indicate that the carrying value may not be recoverable. For long-lived assets to be held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable and exceeds its fair value. The carrying amount of the long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result form the use and eventual disposal of the asset.
Convertible Debentures
In accordance with Emerging Issues Task Force Issue 98-5, Accounting for Convertible Securities with a Beneficial Conversion Features or Contingently Adjustable Conversion Ratios ("EITF 98-5"), the Company recognized an imbedded beneficial conversion feature present in the Convertible Notes. The Company allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The debt discount attributed to the beneficial conversion feature is amortized over the convertible debenture's maturity period as interest expense using the effective yield method.
In accordance with Emerging Issues Task Force Issue 00-27, Application of Issue No. 98-5 to Certain Convertible ("EITF 00-27") Instruments, the Company recognized the value attributable to the warrants to additional paid-in capital and a discount against the convertible debentures. The Company valued the warrants in accordance with EITF 00-27 using the Black-Scholes pricing model. The debt discount attributed to the value of the warrants issued is amortized over the convertible debenture’s maturity period as interest expense using the effective yield method.
Revenue Recognition
Revenues from the sale of commercial products are recognized at the time title of goods passes to the buyer and the buyer assumes the risks and rewards of ownership. Certain product sales are made to retailers under agreements allowing for a right to return unsold products. In accordance with SFAS No. 48, “Revenue Recognition When Right of Return Exists (as amended)” recognition of revenue on all sales to these retailers is deferred until the right of return expires, the product is sold to a third party or a provision for returns can be reasonably estimated based on historical experience. The cost of inventory under these sales is considered to be a consigned inventory until the revenue is recognized.
Grant revenue recognized as the Company provides the services stipulated in the underlying grant based on the time and expenditures incurred. Amounts received in advance of services provided are recorded as deferred revenue and amortized as revenue when the services are provided.
Included in miscellaneous income are fees received under licensing agreements. Nonrefundable fees received under licensing agreements are recognized as revenue when received if the Company has no continuing obligations to the other party.
Rental income is recognized as revenue in the period lease payments are due.
Research and Development Costs
Expenditures for research and development are expensed as incurred and include, among other costs, those related to the production of experimental drugs, including payroll costs, and amounts incurred for conducting clinical trials. Amounts expected to be received from governments under research and development tax credit arrangements are offset against current income tax expense.
F-21
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
Income taxes are accounted for under the asset and liability method prescribed by SFAS No. 109, “Accounting for Income Taxes.” Deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax asset will not be realized.
Stock-Based Compensation
Effective August 1, 2005, the Company adopted SFAS No. 123(R) which revises SFAS No. 123 “Accounting for Stock-Based Compensation” (“SFAS 123”) and supersedes Accounting Principles Board Opinion 25 “Accounting for Stock Issued to Employees.” Under APB 25, the Company used the “intrinsic value” method for employee stock options and did not record any expense because option exercise prices equaled the market value at the date of grant. SFAS 123(R) required that new, modified and unvested share-based payment transactions with employees, such as grants of stock options and restricted stock, be recognized in the financial statements based on their fair value at the grant date and recognized as compensation expense over their vesting periods. The Company estimates the fair value of stock options as of the date of grant using the Black-Scholes pricing model and restricted stock based on the quoted market price. The Company adopted SFAS 123(R) using the modified prospective method and, accordingly, prior period financial statements were not revised. The Company also follows the guidance in EITF 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” for equity instruments issued to consultants.
Net Loss Per Common Share
Basic EPS is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. The computation of Diluted EPS does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings. Refer to Note 15 for methodology for determining net loss per share.
Comprehensive Loss
Other comprehensive income (loss), which includes only foreign currency translation adjustments, is shown in the Statement of Changes in Stockholders’ Equity.
Concentration of Credit Risk
The Company maintains cash balances, at times, with financial institutions in excess of amounts insured by the Canada Deposit Insurance Corporation and the Federal Deposit Insurance Corporation. Management monitors the soundness of these institutions and considers the Company’s risk negligible.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
F-22
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Foreign Currency Translation
Foreign denominated assets and liabilities of the Company are translated into U.S. dollars at the prevailing exchange rates in effect at the end of the reporting period. Income statement accounts are translated at a weighted average of exchange rates which were in effect during the period. Translation adjustments that arise from translating the foreign subsidiary’s financial statements from local currency to U.S. currency are recorded in the other comprehensive loss component of stockholders’ equity.
Financial Instruments
The carrying values of cash and cash equivalents, short-term investments, other current assets, accounts payable and accrued expenses approximate their fair values due to their short-term nature. Due from related party approximated its fair value as it was due on demand. Long-term debt and convertible debentures approximates their fair value based upon the borrowing rates available for the nature of the underlying debt.
Effects of Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, with earlier application encouraged. Any amounts recognized upon adoption as a cumulative effect adjustment will be recorded to the opening balance of retained earnings in the year of adoption. The Company is currently evaluating the impact of this statement on its results of operations or financial position of the Company.
In February 2007, the FASB issued SFAS No. 159, “Establishing the Fair Value Option for Financial Assets and Liabilities” to permit all entities to choose to elect to measure eligible financial instruments and certain other items at fair value. The decision whether to elect the fair value option may occur for each eligible items either on a specified election date or according to a preexisting policy for specified types of eligible items. However, that decision must also take place on a date on which criteria under SFAS 159 occurs. Finally, the decision to elect the fair value option shall be made on an instrument-by-instrument basis, except in certain circumstances. An entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 applies to fiscal years beginning after November 15, 2007, with early adoption permitted for an entity that has also elected to apply the provisions of SFAS No. 157, Fair Value Measurements. The Company is currently evaluating this pronouncement in connection with SFAS No. 157.
F-23
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Property and Equipment:
The costs and accumulated depreciation of property and equipment are summarized as follows:
| July 31, | |||||||
| 2007 | 2006 | ||||||
| Land | $ | 213,312 | $ | 201,075 | |||
| Buildings and Improvements | 1,352,010 | 1,274,448 | |||||
| Furniture and Fixtures | 101,705 | 91,151 | |||||
| Office Equipment | 181,273 | 151,684 | |||||
| Lab Equipment | 4,221,152 | 4,046,520 | |||||
| Total Property and Equipment | 6,069,452 | 5,764,878 | |||||
| Less Accumulated Depreciation | 3,932,425 | 3,179,134 | |||||
| Property and Equipment, Net | $ | 2,137,027 | $ | 2,585,744 | |||
Depreciation expense amounted to $631,597, $605,657 and $631,134 for the years ended July 31, 2007, 2006 and 2005, respectively.
On August 1, 2005, the Company reclassified certain land and building and building improvements classified as property and equipment to property held for investment. At July 31, 2005, the aggregate cost and related accumulated depreciation reclassified was as follows:
| Land | $ | 181,507 | ||
| Buildings and Improvements | 1,147,093 | |||
| Total Property and Equipment Reclassified | 1,328,600 | |||
| Less Accumulated Depreciation | 255,851 | |||
| Property and Equipment, Net Reclassified | $ | 1,072,749 |
Such reclassification had no effect on the consolidated statements of activities as previously reported.
Note 4 - Property Held for Investment, Net:
The costs and accumulated depreciation of assets held for investment are summarized as follows:
| July 31, | |||||||
| 2007 | 2006 | ||||||
| Assets Held For Investment | $ | 4,485,179 | $ | 4,227,871 | |||
| Less: Accumulated Depreciation | 791,996 | 625,098 | |||||
| Assets Held For Investment, Net | $ | 3,693,183 | $ | 3,602,773 | |||
Depreciation expense amounted to $122,171, $125,366 and $73,077 for the years ended July 31, 2007, 2006 and 2005, respectively.
The Company’s intent is to hold this property for investment purposes and collect rental income. Included in income from rental operations, net is $457,458, $464,150 and $315,514 of rental income and $179,984, $227,629 and $129,657 of rental expenses for the years ended July 31, 2007, 2006 and 2005, respectively.
On August 1, 2005, the Company reclassified certain land and building and building improvements classified as property and equipment to property held for investment (see Note 3).
F-24
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Patents:
The costs and accumulated amortization of patents are summarized as follows:
| July 31, | |||||||
| 2007 | 2006 | ||||||
| Patents | $ | 6,580,005 | $ | 6,380,006 | |||
| Less: Accumulated Amortization | 1,695,021 | 1,282,179 | |||||
| Patents, Net | $ | 4,884,984 | $ | 5,097,827 | |||
| Weighted Average Life | 13.1 years | 13.7 years | |||||
Amortization expense amounted to $412,322, $403,654 and $399,737 for the years ended July 31, 2007, 2006 and 2005, respectively. Amortization expense is expected to be approximately $419,000 per year for the years ended July 31, 2008 through 2012. During the years ended July 31, 2007, 2006 and 2005, the Company wrote off approximately $22,000, $74,000 and $67,000 of net book value of patents to general and administrative expenses, respectively.
Note 6 - Income Taxes:
The Company has incurred losses since inception, which have generated net operating loss carryforwards. The net operating loss carryforwards arise from both United States and Canadian sources. Pretax losses arising from domestic operations (United States) were $19,012,466, $64,252,188 and $20,937,976 for the years ended July 31, 2007, 2006 and 2005, respectively. Pretax losses arising from foreign operations (Canada and Bermuda) were $4,492,492, $3,715,016 and $3,063,759 for the years ended July 31, 2007, 2006 and 2005, respectively. As of July 31, 2007, the Company has net operating loss carryforwards in Generex Biotechnology Corporation of approximately $123,200,000, which expire in 2014 through 2027, in Generex Pharmaceuticals Inc. of approximately $31,000,000, which expire in 2008 through 2013 and in Antigen Express, Inc. of approximately $13,300,000, which expire in 2015 through 2027. These loss carryforwards are subject to limitation due to the acquisition of Antigen and may be limited in future years should certain ownership changes occur.
For the years ended July 31, 2007, and 2006, the Company’s effective tax rate differs from the federal statutory rate principally due to net operating losses and other temporary differences for which no benefit was recorded.
Deferred income taxes consist of the following:
| July 31, | |||||||
| 2007 | 2006 | ||||||
| Deferred Tax Assets: | |||||||
| Net operating loss carryforwards | $ | 57,628,338 | $ | 47,811,943 | |||
| Other timing difference | 2,579,377 | 2,660,938 | |||||
| Total Deferred Tax Assets | 60,207,715 | 50,472,881 | |||||
| Valuation Allowance | (58,873,007 | ) | (48,991,563 | ) | |||
| Deferred Tax Liabilities | |||||||
| Intangible assets | (1,236,432 | ) | (1,347,468 | ) | |||
| Other timing difference | (98,276 | ) | (133,850 | ) | |||
| Total Deferred Tax Liabilities | (1,334,708 | ) | (1,481,318 | ) | |||
| Net Deferred Income Taxes | $ | -- | $ | -- | |||
F-25
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the United States Federal Statutory rate to the Company’s effective tax rate for the years ended July 31, 2007, 2006 and 2005 is as follows:
| 2007 | 2006 | 2005 | ||||||||
| Federal statutory rate | (34.0 | )% | (34.0 | )% | (34.0 | )% | ||||
| Increase (decrease) in income taxes resulting from: | ||||||||||
| Imputed interest income on intercompany receivables from foreign subsidiaries | 2.0 | -- | -- | |||||||
| Nondeductible items | -- | 7.0 | 3.0 | |||||||
| Other timing differences | (10.0 | ) | 6.0 | -- | ||||||
| Change in valuation allowance | 42.0 | 21.0 | 31.0 | |||||||
| Effective tax rate | -- | % | -- | % | -- | % | ||||
Note 7 - Accounts Payable and Accrued Expenses:
Accounts payable and accrued expenses consist of the following:
| July 31, | |||||||
| 2007 | 2006 | ||||||
| Accounts Payable | $ | 1,791,080 | $ | 1,214,694 | |||
| Research and Development | 1,956,049 | 696,769 | |||||
| Executive Compensation | 2,252,978 | 2,121,389 | |||||
| Financial Services | 1,156,602 | 1,411,938 | |||||
| Total | $ | 7,156,709 | $ | 5,444,790 | |||
Note 8 - Commitments and Contingent Liabilities:
Consulting Agreements
The Company has entered into a three year non-exclusive consulting agreement expiring in 2010 with a service provider whereby the service provider will solicit and evaluate prospective third party wholesale and retail distribution channels for the Company’s Oral-lynTM. In exchange for these services, the Company is required to pay $150,000 per annum and an aggregate of 450,000 shares of common stock to be issued quarterly over the term of the agreement.
The Company has entered into a consulting agreement expiring in December 2007 whereby the consultant will provide various services including sourcing and evaluating prospective joint ventures, strategic alliances and licensing arrangements for the Company in respect of the manufacturing, importation, marketing, distribution and sale of the Company’s products. In exchange for these services, the Company is required to pay $15,000 per month. The agreement also requires the payment of bonuses up to $500,000 upon meeting prescribed milestones. At July 31, 2007, no such milestones have been met. Accordingly, no amount has been paid or accrued in the consolidated financial statements.
F-26
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Leases
The Company has entered into various operating lease agreements for the use of operating space, vehicles and office equipment.
Aggregate minimum annual lease commitments of the Company under non-cancelable operating leases as of July 31, 2007 are as follows:
Year | Amount | |||
| 2008 | $ | 148,823 | ||
| 2009 | 147,355 | |||
| 2010 | 108,723 | |||
| 2011 | 95,772 | |||
| 2012 | 88,040 | |||
| Thereafter | 497 | |||
| Total Minimum Lease Payments | $ | 589,210 | ||
Lease expense amounted to approximately $41,000, $39,000 and $37,000 for the years ended July 31, 2007, 2006 and 2005, respectively.
The preceding data reflects existing leases and does not include replacements upon their expiration. In the normal course of business, operating leases are generally renewed or replaced by other leases.
Rental Operations
The Company sub-leases a portion of the floor that it owns in an office building located in Toronto, Canada. The following represents the approximate minimum amount of sublease income under current lease agreements to be received in years ending after July 31, 2007:
Year | Amount | |||
| 2008 | $ | 41,309 | ||
| 2009 | 36,670 | |||
| 2010 | 13,481 | |||
| 2011 and thereafter | -- | |||
| Total | $ | 91,460 | ||
Property Held for Investment
The Company leases two commercial buildings located in Brampton and Mississauga, Canada, and units of property that it owns located in Toronto, Canada. The following represents the approximate minimum amount in lease income under current lease agreements to be received in years ending after July 31, 2007:
Year | Amount | |||
| 2008 | $ | 284,686 | ||
| 2009 | 194,876 | |||
| 2010 | 114,212 | |||
| 2011 | 109,459 | |||
| 2012 | 94,017 | |||
| Thereafter | 61,549 | |||
| Total | $ | 858,799 | ||
F-27
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Supply Agreements
The Company has a supply agreement with Presspart Manufacturing Limited, whereby the Company will purchase its entire requirements for products to use in the administration of insulin through the buccal mucosa and shall not purchase the products or any metal containers competitive to the products from any other person in exchange for an exclusive non-transferable royalty-free irrevocable license to use the products. The contract shall continue for a minimum period of four contract years from the end of the first contract year in which the total quantity of products purchased by the Company from Presspart exceeds 10,000,000 units, and thereafter, shall continue until terminated by either party by giving twelve months written notice.
The Company has a supply agreement with Catalant Pharma Solutions whereby the Company will perform a technical transfer for the production of Oral-lyn™ drug product for use in the Company’s Phase III clinical trials and/or studies. The anticipated project timeline is seven months and billed over the term of the project. Either party may terminate the agreement, or any portion thereof, by providing forty-five days written notice.
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 called Centrum Technologies Inc. (“CTI”) commenced an action in the Ontario Superior Court of Justice against the Company and the VP seeking, among other things, damages for alleged breaches of contract and tortious acts related to a business relationship between this former associate and the VP that ceased in July 1996. The plaintiffs’ statement of claim also seeks to enjoin the use, if any, by the Company of three patents allegedly owned by CTI. On July 20, 2001, the Company filed a preliminary motion to dismiss the action of CTI as a nonexistent entity or, alternatively, to stay such action on the grounds of want of authority of such entity to commence the action. The plaintiffs brought a cross motion to amend the statement of claim to substitute Centrum Biotechnologies, Inc. (“CBI”) for CTI. CBI is a corporation of which 50 percent of the shares are owned by the former business associate and the remaining 50 percent are owned by the Company. Consequently, the shareholders of CBI are in a deadlock. The court granted the Company’s motion to dismiss the action of CTI and denied the plaintiffs’ cross motion without prejudice to the former business associate to seek leave to bring a derivative action in the name of or on behalf of CBI. The former business associate subsequently filed an application with the Ontario Superior Court of Justice for an order granting him leave to file an action in the name of and on behalf of CBI against the VP and the Company. The Company 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.
F-28
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company is involved in certain other legal proceedings in addition to those specifically described herein. Subject to the uncertainty inherent in all litigation, the Company does not believe at the present time that the resolution of any of these legal proceedings is likely to have a material adverse effect on the Company’s financial position, operations or cash flows.
With respect to all litigation, as additional information concerning the estimates used by the Company becomes known, the Company reassesses its position both with respect to accrued liabilities and other potential exposures.
Employment Agreements
As of July 31, 2007, the Company has an employment agreement with an executive expiring March 2008, whereby the Company is required to pay an annual base salary of $300,000. In the event the agreement is terminated, by reason other than cause, death, voluntary retirement or disability, the Company is required to pay the employee in one lump sum twelve months base salary and the average annual bonus.
As of July 31, 2007, the Company has an employment agreement with an executive expiring March 2008, whereby the Company is required to pay an annual base salary of $200,000. In the event the agreement is terminated, by reason other than cause, death, voluntary retirement or disability, the Company is required to pay the employee in one lump sum twelve months base salary and the average annual bonus.
As of July 31, 2007, the Company has employment agreements with its President and Chief Executive Officer and its Chief Financial Officer and Chief Operating Officer expiring December 2010, whereby the Company is required to pay an annual base salary of $500,000 and $400,000, respectively, and bonuses at the discretion of the Compensation Committee of the Board of Directors. The agreements require six months notice of non-renewal/ termination. In the event either agreement is terminated, by reason other than cause, death or disability or voluntary termination, the Company may be required to pay the executive the greater of five times base salary at the date of termination or $5,000,000 in a combination of cash and common stock of the Company and provide benefits for a period of twelve months following the date of termination.
As of July 31, 2007, the Company has three at will employment agreements with Antigen employees requiring the Company to pay an annual aggregate salary of $424,000 to the three employees. In the event any agreement is terminated by reason other than death, disability, a voluntary termination not for good reason (as defined in the agreement) or a termination for cause, the Company is required to pay the employee severance in accordance with the terms of the individual employment agreement.
Termination Agreements
On December 17, 2004, the Company and Elan International Services, Ltd. (EIS) agreed to terminate their joint venture through Generex (Bermuda) Ltd. EIS has agreed to transfer all shares of capital stock or Generex (Bermuda) owned by it to the Company (see Note 18).
F-29
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Collaboration Agreements
The Company has a research and development agreement with Fertin Pharma A/S (Fertin) whereby the Parties have established collaboration for the development of a metformin medicinal chewing gum for the treatment of Type-2 diabetes mellitus and obesity. The agreement includes certain milestone payments required of the Company upon Fertin’s completion of various development phases. The Company is required to pay all development costs related to the development of the product together with royalty payments amounting to five percent of the sale or licensing of the products. In lieu of receiving reimbursement for development costs, Fertin, at its discretion and upon written notice, may elect to receive royalty payments amounting to twenty-five percent of the sale or licensing of the products. The agreement shall remain in effect ten years from the date of market introduction and commercial sale. Either party may terminate the agreement by providing sixty days written notice.
Note 9 - Related Party Transactions:
The amounts due from a related party at July 31, 2007, 2006 and 2005 were 0, 0 and 379,612, respectively. The amount, which was due from EBI, Inc., is a shareholder of the Company and is controlled by the estate of the Company’s former Chairman of the Board. During April 2006, the Company and EBI, Inc. have agreed to offset the amount due to the Company in exchange for executive compensation due to the sole beneficiary of the estate of the Company’s former Chairman of the Board.
The Company estimates the following additional amounts would have been recorded if such transaction was consummated under arms-length agreements:
| For the Years Ended July 31, | ||||||||||
| 2007 | 2006 | 2005 | ||||||||
| Interest Income | $ | -- | $ | 14,288 | $ | 15,854 | ||||
The interest income amounts were computed at estimated prevailing rates based on the average receivable balance outstanding during the periods reflected.
The Company utilizes a management company to manage all of its real estate properties. The property management company is owned by two of the Company’s senior officers and the estate of the Company’s former Chairman of the Board. For the years ended July 31, 2007, 2006 and 2005, the Company has paid the management company $47,832, $46,113 and $44,024, respectively, in management fees.
F-30
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Long-Term Debt:
Long-term debt consists of the following:
| July 31, | |||||||
| 2007 | 2006 | ||||||
| Mortgage payable - interest at 6.822 percent per | |||||||
| annum, monthly principal and interest payments of | |||||||
| $2,194, due June 2011, secured by real property | |||||||
| located at 98 Stafford Drive, Brampton, ON | $ | 273,666 | $ | 264,579 | |||
| Mortgage payable - interest at 6.822 percent per | |||||||
| annum, monthly principal and interest payments of | |||||||
| $3,538, due June 2011, secured by real property | |||||||
| located at 1740 Sismet Road, Mississauga, ON | 441,380 | 426,725 | |||||
| Mortgage payable - interest at 7.6 percent per annum, | |||||||
| monthly payments of principal and interest of $5,662, | |||||||
| due May 2010, secured by first mortgage over real | |||||||
| property located at 17 Carlaw Avenue and 33 Harbour | |||||||
| Square, Toronto, Canada | 667,943 | 645,898 | |||||
| Mortgage payable - interest at 10 percent per annum, | |||||||
| monthly payments of principal and interest of $2,453, | |||||||
| due November 2008, secured by real property located | |||||||
| at 13-14, 11 Carlaw Avenue, Toronto, Canada | 210,371 | 206,209 | |||||
| Mortgage payable - interest at 8.5 percent per annum, | |||||||
| monthly payments of interest only of $3,126, principal | |||||||
| payment due August 2008, secured by real property | |||||||
| located at 10-11, 11 Carlaw Avenue, Toronto, Canada | 375,120 | 353,600 | |||||
| Mortgage payable - interest at 6.07 percent per annum, | |||||||
| monthly interest payments of $8,829, principal due | |||||||
| March 2009, secured by secondary rights to real | |||||||
| property located at 1-8, 11 Carlaw Avenue, Toronto, | |||||||
| Canada | 1,175,309 | 1,139,153 | |||||
| Total Debt | 3,143,789 | 3,036,164 | |||||
| Less Current Maturities of Long-Term Debt | 84,503 | 428,059 | |||||
| Total Long-Term Debt | $ | 3,059,286 | $ | 2,608,105 | |||
Aggregate maturities of long-term debt of the Company due within the next five years are as follows:
Year | Amount | |||
| 2008 | $ | 84,503 | ||
| 2009 | 1,759,069 | |||
| 2010 | 653,691 | |||
| 2011 | 646,526 | |||
| 2012 and thereafter | -- | |||
| Total | $ | 3,143,789 | ||
F-31
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Convertible Debentures:
As of July 31, 2007 and 2006, the Company was contractually obligated under various convertible promissory notes (“convertible debentures”) with accredited investors. The convertible debentures were convertible into shares of the Company's common stock at a price as stipulated in each agreement, required the issuance of warrants to the investor in conjunction with the transaction in accordance with the warrant terms in the individual debenture agreement and provided a 100% additional investment right (with the exception of the 1st $500,000, $100,000 and 3rd $4,000,000 debentures) exercisable for up to twelve months following the effective date of the registration statement with respect to the transaction.
The convertible debentures are accounted for in accordance with EITF 98-5 and 00-27 (see Note 2). The following summarizes the significant terms and accounting for each convertible debenture entered into by the Company.
F-32
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| Debenture | ||||||||||
1st $4,000,000 | 1st $500,000 | $100,000 | ||||||||
| Date Issued | 12/2004 | 3/2005 | 4/2005 | |||||||
| Promissory Note Amount | $ | 1,000,000 | $ | 500,000 | $ | 100,000 | ||||
| # of Promissory Notes | 4 | 1 | 1 | |||||||
| Terms | (A | ) | (E | ) | (E | ) | ||||
| Conversion Price | $ | 0.82 | $ | 0.82 | $ | 0.82 | ||||
| Gross Proceeds | $ | 4,000,000 | $ | 500,000 | $ | 100,000 | ||||
| Issuance Costs Paid in Cash | $ | 300,070 | $ | -- | $ | -- | ||||
| Issuance Costs Paid in Common Stock | $ | -- | $ | -- | $ | -- | ||||
| Shares of Common Stock | -- | -- | -- | |||||||
| Issuance Costs Paid in Warrants | 145,000 | -- | -- | |||||||
| Warrant Exercise Price | $ | 0.91 | n/a | n/a | ||||||
| Warrant Fair Value (WFV) | $ | 89,900 | n/a | n/a | ||||||
| Black Scholes Model Assumptions | (B1) | n/a | n/a | |||||||
| Total Issuance Costs (C) | $ | 389,970 | $ | -- | $ | -- | ||||
| Amortization of Issuance Costs as | ||||||||||
| Non-cash Interest Expense | $ | 389,970 | $ | -- | $ | -- | ||||
| Net Cash Proceeds | $ | 3,699,930 | $ | 500,000 | $ | 100,000 | ||||
| Warrants Issued to Investor | 4,878,048 | 1,219,512 | 243,902 | |||||||
| Warrant Exercise Price | $ | 0.91 | $ | 0.82 | $ | 0.82 | ||||
| Warrant Fair Value (WFV) | $ | 1,722,222 | $ | 245,521 | $ | 49,104 | ||||
| Black Scholes Model Assumptions | (B1) | (B2) | (B2) | |||||||
| Beneficial Conversion Feature (BCF) | $ | 1,722,222 | $ | 86,984 | $ | 17,397 | ||||
| Amortization of WFV and BCF as | ||||||||||
| Non-cash Interest Expense | $ | 3,444,444 | $ | 332,505 | $ | 66,501 | ||||
| Principal and Interest Converted | $ | 1,628,292 | $ | 528,082 | $ | 105,644 | ||||
| Loss on Extinguishment (D) | $ | 42,409 | $ | -- | $ | -- | ||||
| Shares Issued Upon Conversion | 1,985,249 | 644,003 | 128,834 | |||||||
| Principal and Interest Repayments | ||||||||||
| in Shares of Common Stock | $ | 2,005,500 | $ | -- | $ | -- | ||||
| Loss on Extinguishment (D) | $ | 147,457 | $ | -- | $ | -- | ||||
| Shares Issued for Principal and | ||||||||||
| Interest Repayments | 3,158,344 | -- | -- | |||||||
| Principal and Interest Repayments | ||||||||||
| in Cash | $ | 506,564 | $ | -- | $ | -- | ||||
Warrant Issued to Investor for 1st | ||||||||||
| Extension of Maturity Date (F) | n/a | 1,219,512 | 243,902 | |||||||
| Warrant Exercise Price | n/a | $ | 0.82 | $ | 0.82 | |||||
| Warrant Fair Value (WFV) | n/a | $ | 597,561 | $ | 119,512 | |||||
| Black Scholes Model Assumptions | n/a | (B2) | (B2) | |||||||
Warrant Issued to Investor for 2nd | ||||||||||
| Extension of Maturity Date (F) | n/a | 1,219,512 | 243,902 | |||||||
| Warrant Exercise Price | n/a | $ | 0.82 | $ | 0.82 | |||||
| Warrant Fair Value (WFV) | n/a | $ | 524,390 | $ | 104,878 | |||||
| Black Scholes Model Assumptions | n/a | (B7) | (B7) | |||||||
F-33
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| Debenture | ||||||||||
1st 2,000,000 | 2nd 2,000,000 | 2nd $500,000 | ||||||||
| Date Issued | 6/2005 | 9/2005 | 10/2005 | |||||||
| Promissory Note Amount | $ | 500,000 | $ | 500,000 | $ | 500,000 | ||||
| # of Promissory Notes | 4 | 4 | 1 | |||||||
| Terms | (A | ) | (A | ) | (A | ) | ||||
| Conversion Price | $ | 0.60 | $ | 0.60 | 0.82 | |||||
| Gross Proceeds | $ | 2,000,000 | $ | 2,000,000 | $ | 500,000 | ||||
| Issuance Costs Paid in Cash | $ | -- | $ | 15,000 | $ | -- | ||||
| Issuance Costs Paid in Common Stock | $ | 140,000 | $ | 140,000 | $ | 33,250 | ||||
| Shares of Common Stock | 170,732 | 170,732 | 35,000 | |||||||
| Issuance Costs Paid in Warrants | 35,000 | 60,000 | 15,000 | |||||||
| Warrant Exercise Price | $ | 0.82 | $ | 0.82 | $ | 0.95 | ||||
| Warrant Fair Value (WFV) | $ | 20,300 | $ | 30,600 | $ | 14,250 | ||||
| Black Scholes Model Assumptions | (B3) | (B4) | (B4) | |||||||
| Total Issuance Costs (C) | $ | 160,300 | $ | 185,600 | $ | 47,500 | ||||
| Amortization of Issuance Costs as | ||||||||||
| Non-cash Interest Expense | $ | 160,300 | $ | 185,600 | $ | 47,500 | ||||
| Net Cash Proceeds | $ | 2,000,000 | $ | 1,985,000 | $ | 500,000 | ||||
| Warrants Issued to Investor | 2,439,024 | 2,439,024 | 609,756 | |||||||
| Warrant Exercise Price | $ | 0.82 | $ | 0.82 | $ | 0.82 | ||||
| Warrant Fair Value (WFV) | $ | 828,571 | $ | 785,185 | $ | 270,950 | ||||
| Black Scholes Model Assumptions | (B3) | (B4) | (B4) | |||||||
| Beneficial Conversion Feature (BCF) | $ | 1,171,429 | $ | 1,185,185 | $ | 229,050 | ||||
| Amortization of WFV and BCF as | ||||||||||
| Non-cash Interest Expense | $ | 2,000,000 | $ | 1,970,370 | $ | 500,000 | ||||
| Principal and Interest Converted | $ | 1,800,206 | $ | 1,729,144 | $ | 385,769 | ||||
| Loss on Extinguishment (D) | $ | -- | $ | 1,088,868 | $ | 1,180,830 | ||||
| Shares Issued Upon Conversion | 3,000,344 | 2,878,648 | 470,450 | |||||||
| Principal and Interest Repayments | ||||||||||
| in Shares of Common Stock | $ | 225,322 | $ | 293,893 | $ | 125,244 | ||||
| Loss on Extinguishment (D) | $ | 62,242 | $ | 394,912 | $ | 93,361 | ||||
| Shares Issued for Principal and | ||||||||||
| Interest Repayments | 407,075 | 489,822 | 152,736 | |||||||
| Principal and Interest Repayments | ||||||||||
| in Cash | $ | -- | $ | -- | $ | -- | ||||
F-34
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| Debenture | ||||||||||
| $3,500,000 | 2nd $4,000,000 | 3rd $4,000,000 | ||||||||
| Date Issued | 12/2005 | 1/2006 | 2/2006 | |||||||
| Promissory Note Amount | $ | 1,000,000 | $ | 1,000,000 | $ | 1,000,000 | ||||
| # of Promissory Notes | 3.5 | 4 | 4 | |||||||
| Terms | (A | ) | (A | ) | (A | ) | ||||
| Conversion Price | $ | 0.82 | $ | 1.05 | $ | 1.25 | ||||
| Gross Proceeds | $ | 3,500,000 | $ | 4,000,000 | $ | 4,000,000 | ||||
| Issuance Costs Paid in Cash | $ | 15,000 | $ | 15,000 | $ | -- | ||||
| Issuance Costs Paid in Common | ||||||||||
| Stock | $ | 179,550 | $ | 266,400 | $ | -- | ||||
| Shares of Common Stock | 189,000 | 266,667 | -- | |||||||
| Issuance Costs Paid in Warrants | 105,000 | 120,000 | -- | |||||||
| Warrant Exercise Price | $ | 0.82 | $ | 1.05 | n/a | |||||
| Warrant Fair Value (WFV) | $ | 76,650 | $ | 88,800 | n/a | |||||
| Black Scholes Model Assumptions | (B5) | (B6) | n/a | |||||||
| Total Issuance Costs (C) | $ | 271,200 | $ | 370,200 | $ | -- | ||||
| Amortization of Issuance Costs as | ||||||||||
| Non-cash Interest Expense | $ | 271,200 | $ | 370,200 | $ | -- | ||||
| Net Cash Proceeds | $ | 3,485,000 | $ | 3,985,000 | $ | 4,000,000 | ||||
| Warrants Issued to Investor | 4,268,292 | 3,809,524 | 3,200,000 | |||||||
| Warrant Exercise Price | $ | 0.82 | $ | 1.05 | $ | 1.25 | ||||
| Warrant Fair Value (WFV) | $ | 1,648,387 | $ | 1,653,631 | $ | 2,374,507 | ||||
| Black Scholes Model Assumptions | (B5) | (B6) | (B7) | |||||||
| Beneficial Conversion Feature (BCF) | $ | 1,851,613 | $ | 1,463,155 | $ | 1,625,493 | ||||
| Amortization of WFV and BCF as | ||||||||||
| Non-cash Interest Expense | $ | 3,500,000 | $ | 3,116,786 | $ | 4,000,000 | ||||
| Principal and Interest Converted | $ | 3,435,735 | $ | 3,635,041 | $ | 3,081,556 | ||||
| Loss on Extinguishment (D) | $ | 1,473,115 | $ | 4,558,356 | $ | 2,450,301 | ||||
| Shares Issued Upon Conversion | 4,189,923 | 3,461,946 | 2,448,764 | |||||||
| Principal and Interest Repayments | ||||||||||
| in Shares of Common Stock | $ | 86,475 | $ | 398,578 | $ | 941,326 | ||||
| Loss on Extinguishment (D) | $ | 176,556 | $ | 541,854 | $ | 571,782 | ||||
| Shares Issued for Principal and | ||||||||||
| Interest Repayments | 105,456 | 381,709 | 641,813 | |||||||
| Principal and Interest Repayments | ||||||||||
| in Cash | $ | -- | $ | -- | $ | 174,399 | ||||
As of July 31, 2007, all convertible debentures have either been repaid or converted to shares of common stock and the related debt discounts have been fully amortized.
As of July 31, 2006, the $160,494 net outstanding balance of convertible debentures was comprised of $769,231 of debt net of unamortized debt discount of $608,737 related to the 3rd $4,000,000 convertible debentures. All other convertible debentures had either been repaid or converted to shares of common stock and the related debt discounts had been fully amortized.
F-35
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| (A) | The notes carry a 6% coupon and a 15-month term and amortization in 13 equal assignments commencing in the third month of the term. The principal and interest payments are payable in cash or, at the Company's option, the lesser of registered stock valued at a 10% discount to the average of the 20-day VWAP as of the payment date or predetermined conversion price, subject to certain conditions. |
Black Scholes pricing model assumptions:
Risk Free Interest Rate | Expected Volatility | Life (Years) | ||||||||
| (B1) | 1.79 | % | 1.0463 | 5.50 | ||||||
| (B2) | 2.78 | % | 1.0054 | 5.50 | ||||||
| (B3) | 3.02 | % | 0.9775 | 5.50 | ||||||
| (B4) | 3.76 | % | 0.9232 | 5.50 | ||||||
| (B5) | 4.02 | % | 0.9288 | 5.50 | ||||||
| (B6) | 4.23 | % | 0.9210 | 5.50 | ||||||
| (B7) | 4.49 | % | 0.9380 | 5.50 | ||||||
| (C) | The issuance cost is amortized over the life of the debt as a deferred debt issuance cost. |
| (D) | Loss on extinguishment represents the difference between the quoted market price of the Company's common stock and lower of predetermined conversion price or the 10% discount to the average of the 20-day VWAP. |
| (E) | The notes carry a 10% coupon and a 1 ½ month term. The principal and interest payments are payable in cash or, at the Holder's option, in common stock at a per share price equal to $0.82. |
| (F) | The Company extended the maturity date of the convertible debenture from May to July and later to September 2005. In consideration for the holder’s agreement to extend the maturity date, the Company issued the holder additional warrants. In accordance with EITF 98-5, the fair value of the warrants was determined to be the reacquisition price on the debt extinguishment date and was recorded as a loss on extinguishment. |
Note 12 - Series A Preferred Stock:
During 2001, the Company issued 1,000 shares of Series A Preferred Stock (Series A) with a par value of $.001 per share. The holder had the right at any time after January 16, 2004 to convert Series A shares into shares of common stock of the Company as well as the option to exchange the shares of the Company’s Series A Preferred stock for shares of the Company’s convertible preferred shares of Generex (Bermuda), Ltd. Holders of Series A shares were not entitled to vote. In addition, the holders of Series A shares were entitled to receive a dividend per share equal to the dividend declared and paid on shares of the Company’s common stock as and when dividends are declared and paid on the Company’s common stock, and were also entitled to receive a mandatory annual dividend equal to 6 percent per year on the original issue price of $12,015 per share.
In December 2004, the holder of the Series A Preferred Stock sold its holdings to a third party. In conjunction with sale, all of the Company’s outstanding Series A Preferred Stock was automatically converted to common stock. As a result, the buyer received 534,085 shares of common stock and the Company no longer has any outstanding shares of Series A Preferred Stock (see Note 18).
F-36
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13 - Stockholders’ Equity:
Warrants
As of July 31, 2007, the Company has the following warrants to purchase common stock outstanding:
Number of Shares To be Purchased | Warrant Exercise Price Per Share | Warrant Expiration Date | ||
| 5,000 | $2.50 | November 29, 2007 | ||
| 30,000 | $3.00 | November 29, 2007 | ||
| 500,000 | $2.50 | January 15, 2008 | ||
| 255,102 | $1.86 | January 9, 2009 | ||
| 57,143 | $2.20 | January 9, 2009 | ||
| 13,889 | $2.25 | January 9, 2009 | ||
| 166,667 | $1.89 | February 13, 2009 | ||
| 17,169 | $2.10 | February 13, 2009 | ||
| 327,869 | $1.68 | July 12, 2009 | ||
| 500,000 | $1.09 | August 10, 2009 | ||
| 100,000 | $0.82 | April 27, 2010 | ||
| 102,232 | $1.25 | April 17, 2011 | ||
| 70,000 | $2.66 | April 17, 2011 | ||
| 25,000 | $1.91 | May 29, 2011 | ||
| 3,273,144 | $2.35 | May 31, 2011 | ||
| 2,560,980 | $2.45 | May 31, 2011 | ||
| 5,000 | $1.05 | July 19, 2011 | ||
| 622,226 | $1.60 | July 22, 2011 | ||
| 4,770,617 | $3.00 | August 26, 2011 | ||
| 172,120 | $1.25 | August 27, 2011 | ||
| 800,000 | $3.00 | September 2, 2011 | ||
| 100,000 | $1.71 | March 3, 2012 | ||
| 140,000 | $1.45 | May 27, 2012 | ||
| 14,614,158 |
F-37
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes Receivable - Common Stock
Notes receivable - common stock consist of two separate promissory notes. The first promissory note was issued in conjunction with the redemption of Series A Redeemable Common Stock Purchase Warrants in June 1999, and was for $50,000. This note was originally due on December 1, 1999. After multiple extensions, the note together with accrued interest at 7 percent per annum, was due July 31, 2004. In January 2005, the Company deemed this note as uncollectible and, therefore, has taken a charge to general and administrative expenses for the outstanding principal and accrued interest in the amount of $72,107. This charge is included in operations for the year ended July 31, 2005.
The second promissory note was issued in conjunction with the exercise of 50,000 Common Stock Options in March 2001, and was for $250,000. This note was originally due on March 15, 2002. After multiple extensions, the note together with accrued interest at 7 percent per annum was due March 15, 2004. In January 2005, the Company deemed this note as uncollectible and, therefore, has taken a charge to general and administrative expenses for the outstanding principal and accrued interest in the amount of $318,996. This charge is included in operations for the year ended July 31, 2005.
Preferred Stock
The Company has authorized 1,000,000 shares of preferred stock with a par value of one-tenth of a cent ($.001) per share. The preferred stock may be issued in various series and shall have preference as to dividends and to liquidation of the Company. The Company’s Board of Directors is authorized to establish the specific rights, preferences, voting privileges and restrictions of such preferred stock, or any series thereof. At July 31, 2007 and 2006, no shares of preferred stock were issued or outstanding.
Special Voting Rights Preferred Stock
In 1997, the Company issued 1,000 shares of Special Voting Rights Preferred Stock (SVR Shares) with a par value of $.001. The Company had the right at any time after December 31, 2000, upon written notice to all holders of preferred shares, to redeem SVR Shares at $.10 per share. Holders of SVR Shares were not entitled to vote, except as specifically required by applicable law or in the event of change in control, as defined. In addition, holders of SVR Shares were entitled to receive a dividend per share equal to the dividend declared and paid on shares of the Company’s common stock as and when dividends are declared and paid on the Company’s common stock. During the year ended July 31, 2007, the Company redeemed and cancelled 1,000 shares of Special Voting Rights Preferred Stock for $100. This redemption represented all issued and outstanding shares.
Equity Instruments Issued for Services Rendered
During the years ended July 31, 2007, 2006 and 2005, the Company issued stock options, warrants and shares of common stock in exchange for services rendered to the Company. The fair value of each stock option and warrant was valued using the Black Scholes pricing model which takes into account as of the grant date the exercise price and expected life of the stock option or warrant, the current price of the underlying stock and its expected volatility, expected dividends on the stock and the risk free interest rate for the term of the stock option or warrant. Shares of common stock are valued at the quoted market price on the date of grant. The fair value of each grant was charged to the related expense in the statement of operations for the services received.
F-38
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 - Stock Based Compensation:
Stock Option Plans
As of July 31, 2007, 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 10,000,000 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 July 31, 2007, there were 1,940,000, 1,182,490 and 9,108,000 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 are Non-Qualified Options. In addition, the 2006 Plan also provides for restricted stock grants.
Effective August 1, 2005, the Company implemented the fair value recognition provisions of SFAS 123(R) and SAB 107 for all share-based compensation. Share-based employee compensation related to stock options for the years ended July 31, 2007 and 2006 amounted to $-0- (net of related tax) for each year and is included in the statements of operations. Share-based employee compensation related to common stock grants for the years ended July 31, 2007 and 2006 amounted to $748,076 and $1,545,504, respectively, and is included in the statements of operations.
The fair value of each option granted is estimated on grant date using the Black-Scholes option pricing model which takes into account as of the grant date the exercise price and expected life of the option, the current price of the underlying stock and its expected volatility, expected dividends on the stock and the risk-free interest rate for the term of the option. The following is the average of the data used to calculate the fair value:
| Risk-Free | Expected | Expected | Expected | ||||||||||
| Interest Rate | Life (Years) | Volatility | Dividends | ||||||||||
| July 31, 2007 and 2006 | n/a | n/a | n/a | n/a | |||||||||
| July 31, 2005 | 2.32 | % | 5.00 | 1.0215 | -- | ||||||||
F-39
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of the common stock options granted, forfeited or expired and exercised under the Plan:
| Options | Weighted Average Exercise Price Per Share | ||||||
| Outstanding - August 1, 2004 | 7,214,159 | $ | 3.49 | ||||
| Granted | 6,046,110 | $ | 0.50 | ||||
| Forfeited or expired | (1,653,000 | ) | $ | 6.49 | |||
| Exercised | -- | $ | -- | ||||
| Outstanding - July 31, 2005 | 11,607,269 | $ | 1.51 | ||||
| Granted | -- | $ | -- | ||||
| Forfeited or expired | (755,000 | ) | $ | 5.97 | |||
| Exercised | (2,352,672 | ) | $ | 1.37 | |||
| Outstanding - July 31, 2006 | 8,499,597 | $ | 1.15 | ||||
| Granted | -- | $ | -- | ||||
| Forfeited or expired | (250,159 | ) | $ | 7.86 | |||
| Exercised | (286,800 | ) | $ | 1.05 | |||
| Outstanding - July 31, 2007 | 7,962,638 | $ | 1.12 | ||||
| Exercisable - July 31, 2007 | 7,962,638 | $ | 1.12 | ||||
Options typically vest over a period of two years and have a contractual life of five years.
The Company had no non-vested stock options outstanding as of July 31, 2007. Accordingly, there was no unrecognized compensation related to non-vested stock options granted under the Company’s stock option plans.
F-40
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information on stock options outstanding at July 31, 2007:
| Options Outstanding | |||||||||||||
| Weighted | |||||||||||||
| Number | Weighted | Average | |||||||||||
| Outstanding | Average | Remaining | Aggregate | ||||||||||
| Range of | at | Exercise | Life | Intrinsic | |||||||||
| Exercise Price | July 31, 2007 | Price | (Years) | Value | |||||||||
| $0.001 | 2,239,610 | $ | 0.001 | 2.68 | |||||||||
| $0.56 - $0.94 | 2,702,528 | 0.77 | 2.39 | ||||||||||
| $1.00 - $2.19 | 3,020,500 | 1.80 | 0.73 | ||||||||||
| 7,962,638 | 1.84 | $ | 6,059,852 | ||||||||||
| Options Exercisable | ||||||||||
| Number | Weighted | |||||||||
| Outstanding | Average | Aggregate | ||||||||
| Range of | at | Exercise | Intrinsic | |||||||
| Exercise Price | July 31, 2007 | Price | Value | |||||||
| $0.001 | 2,239,610 | $ | 0.001 | |||||||
| $0.56 - $0.94 | 2,702,528 | 0.77 | ||||||||
| $1.00 - $2.19 | 3,020,500 | 1.80 | ||||||||
| 7,962,638 | $ | 6,059,852 | ||||||||
| For the Year Ended July 31, | ||||||||||
| 2007 | 2006 | 2005 | ||||||||
| Weighted Average Grant Date Fair Value | ||||||||||
| of Options Granted | $ | -- | $ | -- | $ | 0.59 | ||||
| Aggregate Intrinsic Value of Options | ||||||||||
| Exercised | $ | 238,179 | $ | 3,499,814 | $ | -- | ||||
| Cash Received for Exercise of Stock Options | $ | 301,932 | $ | 3,241,755 | $ | -- | ||||
During the year ended July 31, 2005 the Company issued 2,239,610 options at an exercise price of $0.001 as settlement for outstanding executive compensation. Accordingly, the Company has included a charge for the fair value of these options in the amount of $1,332,052 in the statement of operations. No gain or loss was recorded as a result of this transaction.
The intrinsic value is calculated as the difference between the market value as of July 31, 2007 and the exercise price of the shares. The market value as of July 31, 2007 was $1.60 as reported by the NASDAQ Stock Market.
F-41
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table illustrates the pro forma effect on net income and earnings per share for the year ended July 31, 2005, assuming the Company had applied the fair value recognition provisions of SFAS 123(R) to all previously granted share-based awards after giving consideration to potential forfeitures during such periods.
| Year Ended | ||||
| July 31, | ||||
| 2005 | ||||
| Net Loss Available to Common | ||||
| Stockholders, as Reported | $ | (24,001,735 | ) | |
| Add: Total Stock-Based Employee | ||||
| Compensation Expense Included | ||||
| In Reported Net Loss | -- | |||
| Deduct: Total Stock-Based Employee | ||||
| Compensation Expense Determined | ||||
| Under Fair Value Based Method | 2,199,300 | |||
| Pro Forma Net Loss Available | ||||
| to Common Stockholders | $ | (26,201,035 | ) | |
| Loss Per Share: | ||||
| Basic and diluted, as reported | $ | (0.66 | ) | |
| Basic and diluted, pro forma | $ | (0.72 | ) | |
Note 15 - Net Loss Per Share:
Basic earnings per shares (EPS) and Diluted EPS for the years ended July 31, 2007, 2006 and 2005 have been computed by dividing the net loss available to common stockholders for each respective period by the weighted average shares outstanding during that period. All outstanding warrants, options and shares to be issued upon conversion of the outstanding convertible debentures, representing approximately 22,576,796, 24,455,964 and 35,291,316 incremental shares, have been excluded from the 2007, 2006 and 2005 computation of Diluted EPS as they are antidilutive due to the losses generated.
Note 16 - Supplemental Disclosure of Cash Flow Information:
| For the Years Ended July 31, | ||||||||||
| 2007 | 2006 | 2005 | ||||||||
| Cash paid during the year for: | ||||||||||
| Interest | $ | 256,836 | $ | 273,097 | $ | 184,655 | ||||
| Income taxes | $ | -- | $ | -- | $ | -- | ||||
Disclosure of non-cash investing and financing activities:
Year Ended July 31, 2007 | ||||
| Principal repayment of convertible debentures through the issuance | ||||
| of common stock | $ | 384,616 | ||
| Issuance of common stock in conjunction with convertible debenture | ||||
| conversion | $ | 210,216 | ||
| Par value in connection with voluntary relinquishment and cancellation | ||||
| of 150,000 shares of common stock | $ | 150 | ||
F-42
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended July 31, 2006 | ||||
| Value of common stock issued in conjunction with capitalized | ||||
| services upon issuance of convertible debentures | $ | 619,467 | ||
| Value of warrants issued in conjunction with capitalized | ||||
| services upon issuance of convertible debentures | $ | 210,300 | ||
| Costs paid from proceeds in conjunction with capitalized services | ||||
| upon issuance of convertible debentures | $ | 45,000 | ||
| Value of warrants issued in conjunction with issuance of convertible | ||||
| debentures and related beneficial conversion feature | $ | 13,087,156 | ||
| Satisfaction of accounts payable through the issuance of common | ||||
| stock | $ | 391,147 | ||
| Principal repayment of convertible debentures through the issuance | ||||
| of common stock | $ | 2,102,689 | ||
| Issuance of common stock in conjunction with convertible debenture | ||||
| conversion | $ | 14,551,466 | ||
| Increase in other current assets for the prepayment of services | ||||
| through the issuance of common stock | $ | 184,500 | ||
| Satisfaction of due from related party through reduction of accrued | ||||
| executive compensation | $ | 415,828 | ||
| Repayment of long-term debt through the issuance of long-term debt | ||||
| upon refinancing | $ | 1,082,443 | ||
Year Ended July 31, 2005 | ||||
| Costs associated with convertible debentures paid from proceeds | $ | 300,070 | ||
| Value of common stock issued in conjunction with capitalized | ||||
| services upon issuance of convertible debentures | $ | 140,000 | ||
| Value of warrants issued in conjunction with capitalized | ||||
| services upon issuance of convertible debentures | $ | 110,200 | ||
| Sale of Series A Preferred Stock and mandatorily converted | ||||
| to common shares | $ | 14,310,057 | ||
| Value of warrants issued in conjunction with issuance of | ||||
| convertible debentures and related beneficial conversion feature | $ | 5,843,450 | ||
| Satisfaction of accounts payable through the issuance of | ||||
| common stock | $ | 1,526,326 | ||
| Principal repayment of convertible debentures through the | ||||
| issuance of common stock | $ | 1,235,577 | ||
| Issuance of common stock in conjunction with convertible | ||||
| debenture conversions | $ | 1,479,500 | ||
| Issuance of below market stock options in satisfaction of | ||||
| accounts payable and accrued expenses | $ | 1,332,052 | ||
| Costs paid from proceeds of issuance of long-term debt | $ | 54,466 | ||
| Repayment of long-term debt through the issuance of long-term debt | ||||
| upon refinancing | $ | 323,301 | ||
F-43
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17 - Segment Information:
The Company follows SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (SFAS No. 131). SFAS No. 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS No. 131 also establishes standards for related disclosures about products and services, geographic areas, and major customers.
SFAS No. 131 uses a management approach for determining segments. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company’s reportable segments. The Company’s management reporting structure provides for only one segment.
The regions in which the Company had identifiable assets and revenues are presented in the following table. Identifiable assets are those that can be directly associated with a geographic area.
| 2007 | 2006 | 2005 | ||||||||
| Identifiable Assets | ||||||||||
| Canada | $ | 41,899,734 | $ | 59,583,574 | $ | 8,722,630 | ||||
| United States | 4,504,670 | 4,521,668 | 4,743,215 | |||||||
| Total | $ | 46,404,404 | $ | 64,105,242 | $ | 13,465,845 | ||||
| Revenue | ||||||||||
| Canada | $ | 25,242 | $ | -- | $ | -- | ||||
| United States | 157,187 | 175,000 | 392,112 | |||||||
| Total | $ | 182,429 | $ | 175,000 | $ | 392,112 | ||||
Note 18 - Collaborative Agreements:
The Company has a research and development agreement with Fertin Pharma A/S (Fertin) whereby the Parties have established collaboration for the development of a metformin medicinal chewing gum for the treatment of Type-2 diabetes mellitus and obesity. (See Note 8)
The Company has a collaboration agreement with Stallergenes, S.A., a European firm in immunological treatments and asthma. Through the collaboration the parties agreed to pursue the design and test of li-key/allergen epitope hybid pepticles to create a novel approach for the control of both dangerous forms of asthma and functionally disabling allergic reactions.
The Company had a joint venture with Elan International Services, Ltd. (“EIS”), a wholly owned subsidiary of Elan Corporation, plc (EIS and Elan Corporation, plc being collectively referred to as “Elan”). The parties conducted the joint venture through Generex (Bermuda), Ltd. (Generex Bermuda), a Bermuda limited liability company.
F-44
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company applied the $12,015,000 that it received from Elan for the shares of the Company’s Series A Preferred Stock (see Note 12) to form Generex Bermuda. The Company’s interest in this company consisted of 6,000 shares of Generex Bermuda common stock and 3,612 shares of convertible preferred stock, representing an 80.1 percent equity ownership interest in Generex Bermuda. At the same time, Elan remitted $2,985,000 to purchase 2,388 shares of Generex Bermuda convertible preferred stock, representing a 19.9 percent equity ownership interest in Generex Bermuda. The Series A Preferred stock had an exchange feature which allowed Elan to acquire an additional 30.1 percent equity ownership interest in Generex Bermuda. As of July 31, 2007, 2006 and 2005, the minority interest has been reduced to $-0- due to their share of Generex Bermuda’s net loss.
On December 17, 2004, the Company entered into a Termination Agreement with Elan. In connection with negotiating the Termination Agreement, Elan approached the Company for consent to transfer the Series A Preferred Stock by way of an auction process. The Company responded to Elan request by delivering a proposal letter describing the terms and conditions pursuant to which the Company would consent to the transfer of the Series A Preferred Stock (the Proposal). The Proposal required that (i) the auction process conclude no later than December 15, 2004 and the Elan’s disposition of the shares conclude no later than December 31, 2004 (the Closing Date), (ii) the buyer immediately convert the preferred stock at the voluntary conversion price of $25.77 (calculated pursuant to the terms of the certificate of designation for the preferred stock resulting in the issuance of 534,085 shares of common stock), (iii) Elan’s registration rights may not be transferred, and (iv) for a period of two (2) years after the Closing Date, the purchaser of the Series A Preferred Stock may not transfer the shares of common stock issuable upon conversion thereof of the Company shall have the right to redeem the shares of common stock at a per share price of 150 percent of the average closing price of the common stock on the Nasdaq SmallCap Market for the twenty (20) days immediately preceding the Closing Date.
Subsequently, the purchaser of the Series A Preferred Stock converted all outstanding shares into 534,085 shares of common stock of the Company and, the Company no longer has any outstanding shares of Series A Preferred Stock. (See Note 12)
Note 19 - Quarterly Information (Unaudited):
The following schedule sets forth certain unaudited financial data for the preceding eight quarters ending July 31, 2007. In our opinion, the unaudited information set forth below has been prepared on the same basis as the audited information and includes all adjustments necessary to present fairly the information set forth herein. The operating results for the quarter are not indicative of results for any future period.
| Q1 | Q2 | Q3 | Q4 | ||||||||||
Fiscal Year July 31, 2007: | |||||||||||||
| Revenues | $ | 139,005 | $ | 45,421 | $ | 10,960 | $ | (15,188 | ) | ||||
| Operating loss | $ | (3,980,182 | ) | $ | (5,478,477 | ) | $ | (8,006,072 | ) | $ | (7,411,371 | ) | |
| Net loss | $ | (3,658,045 | ) | $ | (5,195,634 | ) | $ | (7,718,355 | ) | $ | (6,932,924 | ) | |
| Net loss available to common | |||||||||||||
| stockholders | $ | (3,658,045 | ) | $ | (5,195,634 | ) | $ | (7,718,355 | ) | $ | (6,932,924 | ) | |
| Net loss per share | $ | (0.03 | ) | $ | (0.05 | ) | $ | (0.07 | ) | $ | (0.07 | ) | |
F-45
GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year July 31, 2006: | |||||||||||||
| Contract research revenue | $ | 43,750 | $ | 43,750 | $ | 43,750 | $ | 43,750 | |||||
| Operating loss | $ | (2,107,485 | ) | $ | (5,184,252 | ) | $ | (3,890,499 | ) | $ | (7,523,747 | ) | |
| Net loss | $ | (9,003,218 | ) | $ | (14,400,597 | ) | $ | (31,773,494 | ) | $ | (12,789,895 | ) | |
| Net loss available to common | |||||||||||||
| stockholders | $ | (9,003,218 | ) | $ | (14,400,597 | ) | $ | (31,773,494 | ) | $ | (12,789,895 | ) | |
| Net loss per share | $ | (.20 | ) | $ | (.22 | ) | $ | (.36 | ) | $ | (.12 | ) | |
Note 20 - Subsequent Events:
During August 2007, the Company issued an aggregate of 550,000 shares of common stock value at $1.51 to three executives of the Company under the 2006 Stock Plan, of which 312,500 shares were unrestricted and issued for past services to the Company. Accordingly, the Company has included the value of these shares in the consolidated financial statements for the year ended July 31, 2007. The remaining 237,500 shares are restricted for a period ranging from one to two years. Accordingly, the value of the restricted shares will be measured at the grant date at $1.51 and amortized over their respective restriction periods. In addition, the Company retroactively awarded the same executives salary increases amounting to approximately $179,000 in the aggregate. Accordingly, the Company has included this amount in the consolidated financial statements for the year ended July 31, 2007.
During August 2007, the Company issued an aggregate of 100,000 unrestricted shares of common stock valued at $1.51 to a director of the Company.
During September 2007, the Company issued an aggregate of 50,000 restricted shares of common stock valued at $1.53 to a financial consultant.
F-46
RIDER A:
(a) 1. Financial Statements - See Part II - Item 8. Financial Statements and Supplementary Data hereof on page 11.
The financial statements include the following:
Consolidated Balance Sheets as of July 31, 2007 and 2006
Consolidated Statements of Operations for the Year Ended July 31, 2007, 2006 and 2005 and Cumulative from Inception to July 31, 2007
Consolidated Statements of Changes in Stockholders’ Equity for the Period November 2, 1995 (Date of Inception) to July 31, 2007
Consolidated Statements of Cash Flows for the Years Ended July 31, 2007, 2006 and 2005 and Cumulative from Inception to July 31, 2007
2. Financial Statement Schedule and Auditor’s Report
Schedule I - Condensed financial information of registrant
This schedule is not applicable.
Schedule II - Valuation and qualifying accounts
See Schedule II on page 15.
3. Exhibits
Description of Exhibit | ||
| 23 | Consent of DanzigerHochman Partners LLP, Independent Registered Public Accounting Firm† | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002† | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002† | |
| 32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002† |
| † | Filed herewith. | ||
| Note: The Consent of BDO Dunwoody, LLP, the Company’s predecessor auditor, is not included herewith on the basis that no changes have been made to the Company’s consolidated financial statements included in this Amendment. BDO Dunwoody, LLP served as the Company’s auditors for fiscal years ending July 31, 2003 through 2005, and BDO Dunwoody, LLP’s consent was included with the Annual Report on Form 10-K when it was initially filed on October 15, 2007. | |||
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized this 12th day of March 2008.
GENEREX BIOTECHNOLOGY CORPORATION
By: /s/ Anna E. Gluskin
Name: Anna E. Gluskin
Title: President and Chief Executive Officer
Know all persons by these present, that each person whose signature appears below constitutes and appoints Anna E. Gluskin, his or her attorney-in-fact, with the full power of substitution, for him or her, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name | Capacity in Which Signed | Date | ||
| /s/ Anna E. Gluskin | President, Chief Executive Officer and Director | March 12, 2008 | ||
| Anna E. Gluskin | (Principal Executive Officer) | |||
| /s/ Rose C. Perri | Chief Operating Officer, Chief Financial Officer, | March 12, 2008 | ||
| Rose C. Perri | Treasurer, Secretary and Director | |||
| (Principal Financial and Accounting Officer) | ||||
| /s/ Gerald Bernstein, M.D. | Vice President Medical Affairs and Director | March 12, 2008 | ||
| Gerald Bernstein, M.D. | ||||
| /s/ Brian T. McGee | Director | March 12, 2008 | ||
| Brian T. McGee | ||||
| /s/ John P. Barratt | Director | March 12, 2008 | ||
| John P. Barratt | ||||
| /s/ Peter G. Amanatides | Director | March 12, 2008 | ||
| Peter G. Amanatides | ||||
| /s/ Nola E. Masterson | Director | March 12, 2008 | ||
| Nola E. Masterson | ||||
| /s/ Slava Jarnitskii | Controller | March 12, 2008 | ||
| Slava Jarnitskii |
14
Schedule II
SCHEDULE II
| Balance at | Additions | Balance | ||||||||||||||
| Beginning | Charged | Other | at End of | |||||||||||||
| Of Period | to Expenses | Additions | Deductions | Period | ||||||||||||
| Year Ended July 31, 2005 Valuation Allowance on Deferred Tax Asset | $ | 27,443,257 | -- | -- | 7,506,943 | $ | 34,950,200 | |||||||||
| Year Ended July 31, 2006 Valuation Allowance on Deferred Tax Asset | $ | 34,950,200 | -- | -- | 14,041,363 | $ | 48,991,563 | |||||||||
| Year Ended July 31, 2007 Valuation Allowance on Deferred Tax Asset | $ | 48,991,563 | -- | -- | 9,881,444 | $ | 58,873,007 | |||||||||
15
EXHIBIT INDEX
Description of Exhibit | ||
| 23 | Consent of DanzigerHochman Partners LLP, Independent Registered Public Accounting Firm† | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002† | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002† | |
| 32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002† |
| † | Filed herewith. | ||
| Note: The Consent of BDO Dunwoody, LLP, the Company’s predecessor auditor, is not included herewith on the basis that no changes have been made to the Company’s consolidated financial statements included in this Amendment. BDO Dunwoody, LLP served as the Company’s auditors for fiscal years ending July 31, 2003 through 2005, and BDO Dunwoody, LLP’s consent was included with the Annual Report on Form 10-K when it was initially filed on October 15, 2007. | |||
16