United States securities and exchange commission logo
June 5, 2020
Joseph Moscato
President and Chief Executive Officer
GENEREX BIOTECHNOLOGY CORP
10102 USA Today Way
Miramar, FL 33025
Re: GENEREX
BIOTECHNOLOGY CORP
Form 10-K for the
Fiscal Year Ended July 31, 2019
Filed November 12,
2019
File No. 000-25169
Dear Mr. Moscato:
We have reviewed your April 30, 2020 response to our comment
letter and have the
following comments. In some of our comments, we may ask you to provide
us with information
so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your response to these comments, we may have
additional
comments. Unless we note otherwise, our references to prior comments are
to comments in our
March 25, 2020 letter.
Form 10-K for the Fiscal Year Ended July 31, 2019
Item 101. Business, page 4
1. Refer to your response
to comment 7. Please confirm that you will clarify in the filing all
significant research
and development milestone dates for each of your agreements,
including the
milestones noted in your response. In this respect, your response only
appears to address the
Merck/NSABP agreement. Please revise your response to include
the dates of any
significant milestone for any of your other agreements or confirm that
there are none.
Management's Discussion and Analysis
Results of Operations, page 70
2. With regards to your
response to comment 2, please address the following:
Joseph Moscato
FirstName LastNameJoseph Moscato
GENEREX BIOTECHNOLOGY CORP
Comapany NameGENEREX BIOTECHNOLOGY CORP
June 5, 2020
Page 2
June 5, 2020 Page 2
FirstName LastName
Confirm that you will include a table relating to the breakdown
of research and
development costs in future filings. In this respect, consider
revising the table
provided to separately present each significant product
candidate, to the extent that
the research and developments costs are known. For example, you
could present
AE37 in combination with Keytruda, ECMH Rectal solution for
Ulcerative Colitis,
and Express II Syphilis Treponemal Assay as separate line items.
Research and
development costs for insignificant product candidates could be
included in a
separate line item and any unallocated costs could be separately
presented as well.
Clarify to us your statements with respect to the Excellagen
product that "limited
funding is required to development the project further to create
a viable "room
temperature" product" and "Excellasome requires substantial
funding and will not
continue without such funding" as those two statements appear to
be contradictory.
You state that it is expected that the costs of development of a
vaccine of the SARS-
CoV-2 virus will be borne by the U.S. and foreign agencies. You
also state that you
will not pursue those projects. Please reconcile those statements
with your discussion
of your plan to make a targeted vaccine that produces a complete
immune response
that neutralizes the virus. Provide us proposed disclosure to be
provided in future
filings regarding your role in developing a vaccine or work
related to COVID-19.
Please clarify to us and in your proposed disclosure how you
intend to propose a
pivotal clinical trial in the fall of 2020 and begin delivery of
up to 100 million doses
of vaccine starting in the fall of 2020.
Consolidated Statements of Operations and Comprehensive (Loss) Income, page 82
3. Refer to your response to comment 3. Please note that ASC 805-30-35
requires you to
remeasure the fair value of your contingent consideration each period.
Please confirm that
the changes in the fair value have been immaterial for the periods
presented, including the
six months ended January 31, 2020, and revise your policy in future
filings.
Consolidated Statements of Changes in Stockholders' Equity, page 83
4. Refer to the company's response to comment 4 and address the
following:
Please clarify in future filings on page 96 and throughout as
applicable your
accounting treatment for the Olaregen acquisition. For example,
clarify that the
company did not issue the 4 million shares in connection with the
acquisition of the
preferred stock of Olaregen and your accounting treatment as a
capital contribution
for that issuance.
With respect to the 8,400,000 shares delivered in the Veneto
acquisition, please
clarify in future filings that the company did not issue the
shares and your accounting
treatment as a capital contribution for that issuance.
Refer to your disclosure on page 104 of the 10-K whereas you discuss
recording a
derivative liability for downside protection relating to the
8,400,000 shares issued.
Please provide us an analysis of how the downside protection was
structured, how
Joseph Moscato
FirstName LastNameJoseph Moscato
GENEREX BIOTECHNOLOGY CORP
Comapany NameGENEREX BIOTECHNOLOGY CORP
June 5, 2020
Page 3
June 5, 2020 Page 3
FirstName LastName
you determined the amount of the derivative, and the accounting
GAAP literature
supporting your accounting treatment. Specifically tell us if the
company or the Trust
is responsible for paying the downside protection.
With respect to the 1,953,257 issuances of common stock for
conversion of debt, tell
us how the $13,431,703 charge to APIC was determined.
Specifically tell us
how many shares were issued by the Generex Trust, the date of the
transaction, and
the share price on the date of the transaction. Reconcile for us
the per share ratio of
the conversion of debt for each share issued, including any
shares issued by the
Generex Trust with the trading price of the stock on the date of
issuance. Clarify in
future filings that $13,431,703 of the $18,4040,731 charge to
APIC was a result of
contributions by the Generex Trust. Clarify the nature of the
Trust and that the Trust
is not consolidated with your financial statements.
Please tell us if other shares were issued by other than the
company, in other
transactions not discussed herein, the circumstances and
accounting thereof
and revise to clarify throughout the filing.
Reference is made to the $13,929,129 conversion of debt to equity
and the disclosure
in your April 30, 2019 Form 10-Q. Tell us and address the
following in future filings
as applicable:
o if the $13,929,129 relates to the 8,400,000 Generex shares
issued by the Trust
and the 5,500,000 subsidiary shares and who contributed the
5,500,000
subsidiary shares and the accounting treatment thereof.
o why you classify the transaction as an extinguishment of
debt-Veneto in the
Statements of Stockholders' Equity in the Form 10-Q for the
period ended April
30, 2019 and a conversion of debt to equity in the
Statements of Stockholders'
Equity in the Form 10-K.
o if you recorded any gain or loss on the extinguishment of
debt and the basis for
your accounting and where that amount is disclosed
o why recording the conversion rate at $2.50 per share as
discussed on page 37 of
the Form 10-Q is appropriate when the trading value of the
common stock was
significantly below the $2.50 per share on the date of the
transaction
o the journal entries recorded in the transaction for the
extinguishment/conversion
of debt, which would include the derivative liability
recorded for the downside
protection noted. Also provide the accounting basis for the
entries recorded
o a recalculation of the change in the derivative liability
for the downside
protection. Please reconcile the change in the downside
protection to the
trading value of your stock at the end of the period.
Reference is made to the issuance of warrants and net amount
recorded in APIC of
$5,592,244 which based on your response represents the
accumulated value of
warrants issued in the Acquisition of NGIO and subsequent changes
in fair value
related to those warrants. You reference Note 13 in your response
relating to the
$5,592,244. Please address the following:
o Clarify if you meant the acquisition of NGDx instead of
NGIO.
o Reconcile for us the $5,592,244 net amount recorded to APIC
to the $9,032,435
Joseph Moscato
GENEREX BIOTECHNOLOGY CORP
June 5, 2020
Page 4
gross amount recorded to APIC upon issuance of the
warrants as disclosed on
page 101 of your 10-K.
o Tell us why changes in the fair value of the warrants were
being made and why
the changes were going through APIC.
Revenue, page 86
5. We acknowledge your response to comment 5. Please confirm that you
will provide the
disclosures required by ASC 606 in future filings for disaggregated
revenue, significant
judgments and changes in judgments, and contract balances as requested
in our
comment relating to your new revenue streams. In addition, please
confirm that you will
quantify in Management's Discussion and Analysis each significant
factor that resulted in
significant changes in revenue and the extent to which the changes
relate to price vs
volume.
Notes to the Consolidated Financial Statements
Note 2- Summary of Significant Accounting Policies Research and Development
Costs, page 88
6. We acknowledge your response to comment 6 and the proposed additional
disclosure. As
you appear to indicate that each agreement is a material agreement,
please refer to Rule
601(b)(10) of Regulation S-K and address the following:
We believe the significant terms of each material agreement are
required to be
presented in the filing such as the rights and obligations of each
party, including any
significant milestone payments paid/received to date and aggregate
potential
milestones and the triggering factors thereof, the royalty
percentages or a range,
profit sharing, and termination clauses. Disclosure in the 8-K and
exhibits thereof is
not sufficient. Please note that reference to royalties in the
double-digits, such as the
disclosure for the Shenzhen agreement, is not sufficient as it is
not within a 10
percentage point range. Please provide proposed disclosure to be
included in future
periodic reports, including the next Form 10-Q. To the extent that
any of the above
terms do not apply to any of your material agreements, please
specifically state that
fact in your response.
The Exhibit Index on page 132 does not appear to comply with Item 15
to the Form
10-K and Item 601 of Regulation S-K. Please confirm that you will
revise your
periodic reports in future filings to include the Exhibit list as
required.
Note 12 - Goodwill and Intangible Assets, page 100
7. Refer to your response to comment 8. The goodwill remaining on the
balance
FirstName LastNameJoseph Moscato
sheet represents 60% of the original goodwill recorded, which appears to
be attributed to
ComapanyMSO business. AsBIOTECHNOLOGY CORP changed substantially since the
the NameGENEREX the MSO business model has
June 5,acquisition, 4 us why the goodwill is not impaired at each of the
balance sheet dates.
2020 Page tell
FirstName LastName
Joseph Moscato
FirstName LastNameJoseph Moscato
GENEREX BIOTECHNOLOGY CORP
Comapany NameGENEREX BIOTECHNOLOGY CORP
June 5, 2020
June 5, 2020 Page 5
Page 5
FirstName LastName
Note 13 - Acquisitions
Regentys and Olaregen, page 106
8. Refer to your response to comment 10 and address the following:
You state that the primary value for the IPR&D for Olaregen was
attributed to
Excellagen which based on page 40 of your January 31, 2020 Form
10-Q obtained
FDA 510K clearance on October 3, 2013 for 17 indications. Tell us
why you believe
Excellagen was not commercially viable upon acquisition.
You state in response to comment 2 that no additional resources are
currently needed
for Excellagen as the project has FDA 510K approval with active
sales. In addition,
we note that you recently launched Excellagen and based on page 46
of the 10-Q
appear to have begun recording sales in the three months ended
October 31, 2019.
o Tell us why the assets acquired relating to Excellagen were
not recorded as an
amortizable intangible product right asset.
o If you continue to believe that the assets should be
accounted for as IPR&D,
please tell us what assets were acquired that are used in
R&D activities in light
of your discussion in response to comment two which appears
to indicate that
you are not currently undergoing R&D activities relating to
Excellagen and your
statement in comment 10 that Excellagen requires no future
research and
development.
o If you are not currently undergoing R&D activities, clarify
why you believe a
write-off of the IPR&D was not required.
You state that you used the cost accumulation method to determine
the value
of the Regentys IPR&D.
o Please tell us how the cost accumulation method is
appropriate to determine the
fair value.
o Please help us understand the nature of the non-competes,
including the term of
the agreement.
o Clarify why the non-competes are considered IPR&D.
o Tell us why amortization of any non-compete agreements did
not begin
immediately.
Tell us why the relief from royalty method is an appropriate
methodology to value
the IPR&D acquired in the Olaregen acquisition.
Clarify your reference to the use of the income approach and
multiple methods for
Olaregen and in what circumstances each method was used. If you
combined
methodologies in your valuation, clarify how that was done and why
you believe it
was appropriate.
At a minimum, please disclose in future filings the efforts to
complete all of your
significant in-process research and development projects and the
impact of any delays
on your expected investment return, results of operations and
financial condition. In
this respect, please enhance the response to the last bullet of
comment 10 to
encompass more specific information relating to your efforts to
complete the in-
process research and development.
Joseph Moscato
GENEREX BIOTECHNOLOGY CORP
June 5, 2020
Page 6
Item 9A. Controls and Procedures, page 114
9. Please amend the 10-K to include the revised disclosures included in
your response to
comment 13 for your disclosure controls and procedures and internal
controls. In this
respect, please revise your proposed disclosure for risk factors
regarding your internal
controls to delete reference to disclosure controls and procedures in
the second paragraph
of the proposed disclosure. Include updated management certifications
as required.
You may contact Mary Mast at (202) 551-3613 or Dan Gordon at (202)
551-3486 with
any questions.
FirstName LastNameJoseph Moscato Sincerely,
Comapany NameGENEREX BIOTECHNOLOGY CORP
Division of Corporation Finance
June 5, 2020 Page 6 Office of Life Sciences
FirstName LastName