United States SECURITIES AND EXCHANGE COMMISSI

United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q [url=https://www.otcmarkets.com/filing/html?id=13499289&guid=evhxUa90cfxHS3h]< > [/url]
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended: 30 April 2019
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: ________________ to _______________



Commission File No. 0-25169



Generex Biotechnology Corporation

(Exact name of registrant as specified in its charter)


Delaware 98-0178636
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)



10102 USA Today Way, Miramar, Florida 33025

(Address of principal executive office)



Registrant's telephone number: (416) 364-2551



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 ☐ No



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

☒ YES ☐ No



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☒
Emerging Growth Company ☐



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ YES ☒ NO




Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock GNBT OTCQB



As of June 19, 2019,the registrant had 60,362,163 shares of common stock, $0.001 par value per share, outstanding.


1





GENEREX BIOTECHNOLOGY CORPORATION



INDEX


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets – April 30, 2019 (unaudited) and July 31, 2018 3
Consolidated Statements of Operations and Comprehensive Income (Loss) - For the three and nine month periods ended April 30, 2019 and 2018 (unaudited) 4
Consolidated Statements of Changes in Stockholders’ Deficiency - April 30 ,2019 (unaudited) 5
Consolidated Statements of Cash Flows - For the nine month periods ended April 30, 2019 and 2018 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 35
Item 3. Quantitative and Qualitative Disclosures About Market Risk 50
Item 4. Controls and Procedures 50
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 51
Item 1A. Risk Factors 52
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 53
Item 3. Defaults Upon Senior Securities 54
[Item 4. Removed and Reserved.] -
Item 5. Other Information 54
Item 6. Exhibits 54
Signatures 55


2





PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

April 30, 2019 July 31, 2018
ASSETS
Current Assets
Cash and cash equivalents $ 1,407,837 $ 1,046,365
Accounts receivable, net 1,803,192 33,555
Inventory, net 250,021 12,075
Other current assets 218,819 96,251
Total current assets 3,679,869 1,188,246
Property and equipment 556,276 31,536
Notes receivable - noncurrent (Note 9) 1,426,164 —
Call option (Note 9) — 2,168,211
Goodwill and intangible assets (Note 12) 48,323,164 3,187,757
Patents, net 21,362 23,280
Other assets, net 29,421 7,824
TOTAL ASSETS $ 54,036,256 $ 6,606,854

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current Liabilities
Accounts payable and accrued expenses $ 19,863,047 $ 11,044,774
Notes payable, current (Note 9 and 13) 7,029,049 320,000
Loans from related parties (Note 3) 13,200 13,864,241
Other current liabilities 4,702 —
Deferred tax liability (Note 9) 1,929,955 —
Total Current Liabilities 28,839,953 25,229,015
Other noncurrent liabilities 2,233 —
Derivative liability - convertible notes (Note 14) 3,937,513 —
Derivative liability - warrants (Note 14) 257,478 —
Derivative liability - downside protection (Note 9 and 14) 6,994,450 —
Common stock payable 201,294 —
Warrants to be issued (Note 9) — 24,962,507
Total Liabilities 40,232,921 50,191,522

Redeemable non-controlling interest (Note 7) 4,073,898 —
Commitments & Contingencies (Note 4)

Stockholders’ Equity (Deficiency) (Note 6)
Series H Convertible Preferred Stock, $.001 par value; authorized 109,000 shares, 0 and 63,000 issued shares at April 30, 2019 and July 31, 2018, respectively — 3
Series I Convertible Preferred Stock, $.001 par value; authorized 6,000 shares, 0 and 16,590 issued shares at April 30, 2019 and July 31, 2018, respectively — 1
Common stock, $.001 par value; authorized 750,000,000 shares at April 30, 2019 and July 31, 2018; 60,362,163 and 22,430,121 issued and outstanding at April 30, 2019 and July 31, 2018, respectively 60,362 22,430
Common stock payable — 2,168,951
Additional paid-in capital 400,844,512 368,388,265
Accumulated deficit (413,941,958 ) (409,386,468 )
Accumulated other comprehensive income 807,764 798,422

Non-controlling interest (Note 6) 21,958,757 (5,576,272 )

Total Stockholders’ Equity (Deficiency) 13,803,335 (43,584,668 )

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) $ 54,036,256 $ 6,606,854

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements


3





GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME


Three Months Ended April 30, Nine Months Ended April 30,
2019 2018 2019 2018
Revenue
Revenue, net $ 1,055,626 $ — $ 6,217,039 $ 2,218
Sales 37,300 — 37,300 —
Licensing income — — — 700,000
Total Revenue 1,092,926 — 6,254,339 702,218

Cost of Goods Sold 1,264,964 — 4,147,264 —

Gross (Loss) Profit (172,038 ) — 2,107,075 702,218

Operating expenses
Research and development 472,010 307,420 1,463,015 696,099
General and administrative 8,656,877 684,390 17,428,182 1,800,440
Total operating expenses 9,128,887 991,810 18,891,197 2,496,539

Operating Loss (9,300,925 ) (991,810 ) (16,784,122 ) (1,794,321 )

Other Income (Expense):
Interest expense (2,328,703 ) (149,590 ) (4,591,639 ) (426,780 )
Interest income 2,855 — 3,623 —
Changes in fair value of contingent purchase consideration (Note 9) — 4,573,493 15,147,591 23,350,122
Change in fair value of derivative liability (Note 14) 987,442 — 1,130,167 —
Change in fair value of downside protection (Note 14) (570,112 ) — (570,112 ) —
Impairment of long-lived assets (Note 9) — — (99,519 ) —
Other income, net 56,135 — 8,699 —

Net (Loss) Income (11,153,308 ) 3,432,093 (5,755,312 ) 21,129,021

Net loss attributable to non-controlling interests (Note 6) (839,419 ) (103,794 ) (1,199,822 ) (313,261 )

Net Income Available to Common Stockholders $ (10,313,889 ) $ 3,535,887 $ (4,555,490 ) $ 21,442,282

Net Income per Common Share
Basic $ (0.17 ) $ 0.16 $ (0.10 ) $ 0.96
Diluted $ (0.17 ) $ 0.06 $ (0.10 ) $ 0.39

Shares Used to Compute Income per Share (Note 5)
Basic 60,362,163 22,430,100 44,203,218 22,430,100
Diluted 60,362,163 54,447,036 44,203,218 54,447,036

Comprehensive Income:
Net Income $ (10,313,889 ) $ 3,535,887 $ (4,555,490 ) $ 21,442,282
Change in foreign currency translation adjustments 7,318 13,677 9,342 9,779
Comprehensive Income Available to Common Stockholders $ (10,306,571 ) $ 3,549,564 $ (4,546,148 ) $ 21,452,061

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements



4





GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


Preferred Stock Common Stock
Shares Amount Shares Amount Stock Payable Paid-in Capital Accumulated Deficit Other Comprehensive Income Sub Total Non-controlling Interest Redeemable Non-controlling Interest Stockholders' Equity (Deficiency)
Balance at July 31, 2018 79,590 4 22,430,121 $ 22,430 $ 2,168,951 $ 368,388,265 $ (409,386,468 ) $ 798,422 $ (38,008,396 ) $ (5,576,272 ) $ — $(43,584,668)
Net Income (Loss) — — — — — — (4,555,490 ) — (4,555,490 ) (1,199,822 ) — (5,755,312)
Investment in subsidiary by noncontrolling interest — — — — — — — — — 228,789 — 228,789
Conversion of preferred series H (63,000 ) (3 ) 25,200,000 25,200 — (25,197 ) — — — — — -
Conversion of preferred series I (16,590 ) (1 ) 6,630,644 6,631 — (6,630 ) — — — — — -
Elimination of non-controlling interest — — — — — (6,951,015 ) — — (6,951,015 ) — — (6,951,015)
Issuance of common stock payable — — 6,068,517 6,068 (1,967,657 ) 1,961,589 — — — — — -
Issuance of stock options — — — — — 1,530,312 — — 1,530,312 — — 1,530,312
Conversion of debt to equity — — 32,881 33 — 14,056,080 — — 14,056,113 — — 14,056,113
Conversion of debt to equity - Veneto — — — — — 13,929,129 — — 13,929,129 — — 13,929,129
Antigen dividend — — — — — (1,070,456 ) — — (1,070,456 ) 1,070,456 — -
Issuance of warrants — — — — — 9,032,435 — — 9,032,435 — — 9,032,435
Acquisition of NCI of Regentys — — — — — — — — — 9,870,762 — 9,870,762
Acquisition of NCI of Olaregen — — — — — — — — — 11,999,559 — 11,999,559
Acquisition of NCI of HDS — — — — — — — — — 5,565,285 — 5,565,285
Reclassification of equity to liability — — — — (201,294 ) — — — (201,294 ) — — (201,294)
Redeemable non-controlling interest — — — — — — — — — — 4,073,898 4,073,898
Currency translation adjustment — — — — — — — 9,342 9,342 — — 9,342
Balance at April 30, 2019 — — 60,362,163 $ 60,362 $ — $ 400,844,512 $ (413,941,958 ) $ 807,764 $ (12,229,320 ) $ 21,958,757 4,073,898 $13,803,335
Balance at January 31, 2019 — — 60,362,143 $ 60,362 $ 201,294 $ 387,380,368 $ (403,628,069 ) $ 800,446 $ (15,185,599 ) $ 21,683,698 4,073,898 $10,571,997
Net Income (Loss) — — — — — — (10,313,889 ) — (10,313,889 ) (839,419 ) — (11,153,308)
Investment in subsidiary by noncontrolling interest — — — — — — — — — 44,020 — 44,020
Issuance of stock options — — — — — 605,467 — — 605,467 — — 605,467
Extinguishment of debt - Veneto — — — — — 13,929,129 — — 13,929,129 — — 13,929,129
Antigen dividend — — — — — (1,070,456 ) — — (1,070,456 ) 1,070,456 — -
Acquisition of NCI of Olaregen — — — — — — — — — 2 — 2
Reclassification of equity to liability — — — — (201,294 ) — — — (201,294 ) — — (201,294)
Currency translation adjustment — — — — — — — 7,318 7,318 — — 7,318
Balance at April 30, 2019 — — 60,362,163 $ 60,362 $ — $ 400,844,512 $ (413,941,958 ) $ 807,764 $ (12,229,320 ) $ 21,958,757 4,073,898 $13,803,335
Balance at July 31, 2017 3,790 4 1,068,100 $ 1,068 $ 2,168,951 $ 368,409,627 $ (445,720,566 ) $ 783,150 $ (74,357,766 ) $ (5,518,465 ) $ — (79,876,231)
Net Income (loss) — — — — — — 21,442,282 — 21,442,282 (313,261 ) — 21,129,021
Investment in subsidiary by noncontrolling interest — — — — — — — — — 213,403 — 213,403
Currency translation adjustment — — — — — — — 9,779 9,779 — — 9,779
Balance at April 30, 2018 3,790 4 1,068,100 $ 1,068 $ 2,168,951 $ 368,409,627 $ (424,278,284 ) $ 792,929 $ (52,905,705 ) $ (5,618,323 ) $ (58,524,028)
Balance at April 30, 2018 3,790 4 1,068,100 $ 1,068 $ 2,168,951 $ 368,409,627 $ (424,278,284 ) $ 792,929 $ (52,905,705 ) $ (5,618,323 ) $ (58,524,028)
Balance at January 31, 2018 3,790 4 1,068,100 $ 1,068 $ 2,168,951 $ 368,409,627 $ (427,814,171 ) $ 779,252 $ (56,455,269 ) $ (5,602,556 ) $ — (62,057,825)
Net Income (loss) — — — — — — 3,535,887 — 3,535,887 (103,794 ) — 21,129,021
Investment in subsidiary by noncontrolling interest — — — — — — — — — 88,027 — 213,403
Currency translation adjustment — — — — — — — 13,677 13,677 — — 9,779
Balance at April 30, 2018 3,790 4 1,068,100 $ 1,068 $ 2,168,951 $ 368,409,627 $ (424,278,284 ) $ 792,929 $ (52,905,705 ) $ (5,618,323 ) $ (58,524,028)

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statement.



5





GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

April 30,
2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) Income $ (5,755,312 ) $ 21,129,021
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization 550,285 17,514
Impairment of long-lived assets 99,519 —
Impairment of goodwill — —
Stock compensation expense 1,530,312 —
Changes in fair value of contingent purchase consideration (15,147,591 ) (23,350,122 )
Amortization of debt discount 1,128,613 —
Non-cash interest expense from issuance on debt (derivative) 959,974 —
Change in fair value of derivative liabilities - convertible notes (1,034,180 ) —
Change in fair value of derivative liabilities - convertible warrants (95,986 ) —
Change in fair value of derivative liabilities - downside protection 570,112 —
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable 735,317 —
Inventory 1,239,411 (2,011 )
Accounts payable and accrued expenses 7,108,042 673,282
Accrued interest on notes receivable (38,401 ) —
Other current assets 106,160 (139,848 )
Other assets, net (21,597 ) —
Other current liabilities 4,702 —
Other noncurrent liabilities 2,233 —
Net cash used in operating activities (8,058,387 ) (1,672,164 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (285,670 ) (8,553 )
Purchase of intangible assets (26,487 ) —
Disposal of property and equipment 252,012 —
Disposal of intangible assets 62,091 —
Cash received in acquisition of a business, net of cash paid (Note 9) 2,280,425 —
Net cash provided by (used in) investing activities 2,282,371 (8,553 )

CASH FLOWS FROM FINANCING ACTIVITIES
Loan proceeds from related party (3,305 ) 145,803
Payment of notes payable (27,248 ) —
Proceeds from note payable 5,929,910 —
Investment in subsidiary by noncontrolling interest 228,789 213,403
Net cash provided by financing activities 6,128,146 359,206

Effects of currency translation on cash and cash equivalents 9,342 9,779

Net increase (decrease) in cash and cash equivalents 361,472 (1,311,732 )

Cash and cash equivalents, beginning of period 1,046,365 2,879,165

Cash and cash equivalents, end of period $ 1,407,837 $ 1,567,433

Supplemental Disclosure of Cash Flow Information
Antigen dividend $ — $ 320,000
Conversion of HDS debt and issuance of call option (Note 9) $ 14,056,113 $ —
Acquisition of Veneto through issuance of debt (Note 9) $ — $ —
Acquisition of Regentys through issuance of debt (Note 9) $ — $ —
Acquisition of Olaregen through issuance of debt (Note 9) $ — $ —

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements



6





Generex Biotechnology Corporation and Subsidiaries

Notes to the Unaudited Condensed Interim Consolidated Financial Statements



Note 1 – Organization of Business and Going Concern:



Generex Biotechnology Corporation (“Generex” or the “Company”), was formed in the State of Delaware on September 4, 1997 and its year-end is July 31. It is engaged primarily in the research and development of drug delivery systems and the use of the Company’s proprietary technology for the administration of formulations of large molecule drugs to the oral (buccal) cavity using a hand-held aerosol applicator; and through the Company’s wholly-owned subsidiary, Antigen Express, Inc. (“Antigen”), has undertaken work on immunomedicines incorporating proprietary vaccine formulations.



On January 18, 2017, the Company closed an Acquisition Agreement pursuant to which the Company acquired a 51% interest in NuGenerex Diagnostics LLC “NGDx,” formerly known as Hema Diagnostic Systems, LLC, a Florida limited liability company established in December 2000 to market and distribute rapid test devices including infectious diseases. Since 2002, NGDx has been developing an expanding line of rapid diagnostic tests (RDTs) including such diseases as Human Immunodeficiency Virus (HIV) – 1/2, tuberculosis, malaria, hepatitis, syphilis, typhoid and dengue as well as other infectious diseases. Subsequently, on December 1, 2018, the Company exercised its call option and closed the acquisition of the remaining 49% interest in NGDx to become a wholly owned subsidiary of the Company.



On October 3, 2018, the Company entered into an Asset Purchase Agreement with Veneto Holdings, L.L.C. (“Veneto”) to purchase certain assets of Veneto and its subsidiaries. The Agreement bifurcated the closing. On October 3, 2018 (the “First Closing”), the Company purchased substantially all the operating assets of Veneto including (a)system of dispensing pharmacies, (b) one central adjudicating pharmacy, (c) a wholesale pharmaceutical purchasing company, and (d) an in-network laboratory in exchange for a secured promissory note in the principal amount of $15,000,000. On November 1, 2018 the Company consummated the acquisition of the Second Closing Assets, consisting primarily of Veneto’s management services organization business and two additional ancillary services. The aggregate price for the First Closing Assets and the Second Closing Assets was $30,000,000. The Company issued a promissory note in the principal amount of $35,000,000 (the “ New Note ”) consisting of the $30,000,000 purchase price and a $5,000,000 original issue discount, as the sole consideration payable on the Second Closing Date. On January 15, 2019, the Company entered into an Amendment Agreement (the “ Amendment ”) with Veneto and the equity owners of Veneto entered into restructuring payment of the Note.



On March 28, 2019, the Company entered into an Amendment Agreement (the “ Amendment ”) with Veneto and the equity owners of Veneto (the “Veneto Members”) to restructure the payment of the obligation that in satisfaction of all obligations the Company would cause to be delivered 8,400,000 shares of the Company’s common stock (the “Generex Shares”) to be delivered on or before April 22, 2019; plus an aggregate 5,500,000 shares of the Company’s subsidiary, common stock of Antigen Express, Inc. The Company and the Veneto Members further agreed to certain downside protection between $2.50 per share and $1.50 per share subject to terms and conditions contained in the agreement.



As a result of the Amended Agreement entered into on March 28, 2019 (“the Amendment ”) with Veneto and the equity owners of Veneto (the “Veneto Members”) to restructure the Promissory Note referenced in Note 9, the Company was evaluated for downside protection associated with the 8,400,000 issued shares in lieu of cash payments against the Promissory Note. Based on the valuation as of the date of agreement on March 28, 2019, an allocation of $6,424,338 was allocated to derivative liability for downside protection. As of April 30, 2019, the downside protection had a market change of $570,112 and held a value of $6,994,450.



In March 2019, the Company changed its business model to no longer utilize their existing pharmacies. This shift resulted in breaking their existing lease agreements with their pharmacies which resulted in a liability of $606,296 as of April 30, 2019 and disposing the majority of applicable leasehold improvements, reduction of employees and no longer holding and selling inventory. Going forward Veneto will conduct business exclusively through their management services organization and by entering into more ancillary provider service agreements with third party pharmacies as an effort to reduce fixed costs and salaries. This was made practicable due to the decrease in overall script volume coupled with delays in the Company being able to receive operating licenses from various government agencies.


7





On January 7, 2019, the Company closed two separate Acquisition Agreements pursuant to which the Company acquired a 51% interest in both Regentys Corporation (“Regentys”) and Olaregen Therapeutix Inc. (“Olaregen”). Regentys is a regenerative medicine company focused on developing novel treatments for patients with gastrointestinal (GI) disorders. Olaregen is a New York based regenerative medicine company that is preparing to launch its proprietary, patented, wound conforming gel matrix, Excellagen, an FDA 510K cleared wound healing product. The terms of the Regentys acquisition included an upfront payment of $400,000, plus $14,600,000 to be paid according to a milestone-based schedule. The terms of the Olaregen acquisition included an upfront payment of $400,000, plus $11,600,000 to be paid according to a milestone-based schedule.



Going Concern



The accompanying unaudited condensed interim consolidated financial statements have been prepared in conformity with US GAAP, which contemplate continuation of the Company as a going concern. The Company has experienced recurring net losses and negative cash flows from operations since inception and has an accumulated deficit of approximately $413 million and a working capital deficiency of approximately $25 million at April 30, 2019. The Company has funded its activities to date almost exclusively from debt and equity financings.



The Company will continue to require substantial funds to implement its new investment acquisition plans. Management’s plans in order to meet its operating cash flow requirements include financing activities such as private placements of its common stock, preferred stock offerings, and issuances of debt and convertible debt instruments. Management is also actively pursuing financial and strategic alternatives, including strategic investments and divestitures, industry collaboration activities and strategic partners.



These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the balance sheet date. There are no assurances that such additional funding will be achieved and that the Company will succeed in its future operations. The unaudited condensed interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s inability to obtain required funding in the near future or its inability to obtain funding on favorable terms will have a material adverse effect on its operations and strategic development plan for future growth. If the Company cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition and business prospects will be materially and adversely affected, and the Company may have to cease operations.



Note 2 – Summary of Significant Accounting Policies:



Revenue Recognition — It is the Company’s policy that revenues from product sales is recognized in accordance with ASC 606 “Revenue Recognition.” Five basic steps must be followed before revenue can be recognized; (1) Identifying the contract(s) with a customer that creates enforceable rights and obligations; (2) Identifying the performance obligations in the contract, such as promising to transfer goods or services to a customer; (3) Determining the transaction price, meaning the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer; (4) Allocating the transaction price to the performance obligations in the contract, which requires the company to allocate the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or services promised in the contract; and (5) Recognizing revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer. The amount of revenue recognized is the amount allocated to the satisfied performance obligation.

Revenue from the pharmacy services is recognized when the prescription is dispensed (picked up by the patient or shipped to the patient using common carrier or delivered by the pharmacies own personnel). At the time of dispensing each pharmacy has a contract with the insurance payor (item (i)); the insurance payor has accepted the claim for reimbursement from the pharmacy (item ii) and informed the pharmacy how much will be paid for the prescription (item (iii)); the insurance payor is now legally obligated to make payment on the accepted claim within a given period proscribed by statute (item (iv)); and, the prescription has been taken from the pharmacy inventory, placed into an individually labeled container specific to the patient, and the patient is able to take possession of the prescription (item (v)). Shipment to or pick up by the patient is the first time that all criteria for revenue recognition have been met.
8



Revenue from the laboratory services is recognized upon the completion of accessions (the requested laboratory test has been performed and the report has been issued to the requesting physician). After the test has been performed and reported, the insurance company and/or patient has an obligation to pay for medically necessary laboratory tests (items (i) and (ii)). Unlike the pharmacy services model, laboratory services are provided prior to insurance company approval; as a result, the seller’s price to buyer is not known until payment is provided (items (iii) and (iv). Based on historical collections, the Company estimates the expected revenues associated with similar tests and recognizes the revenue when testing results have been provided (v).

Revenue from the provision of management services is recognized in accordance with the contractual terms of the relationship (item i); however, the current agreements in place typically specify that a percentage of the gross margin associated with the third-parties’ sales that the Company facilitates is to be remitted (iii), and as such, the revenue is considered earned upon completion of the third parties’ sales of such products (iv). Like pharmacy services described above, revenue is recognized when the prescription is dispensed (picked up by the patient or shipped to the patient using common carrier or delivered by the pharmacies own personnel) (v).

Provisions for estimated sales returns and uncollectible accounts are recorded in the period in which the related sales are recognized based on historical and anticipated rates.

The Company determines whether it is the principal or agent for its retail pharmacy contract services on a contract by contract basis. In the majority of its contracts, the Company has determined it is the principal due to it: (i) being the primary obligor in the arrangement, (ii) having latitude in changing the product or performing part of the service, (iii) having discretion in supplier selection, (iv) having involvement in the determination of product or service specifications, and (v) having credit risk. The Company’s obligations under its client contracts for which revenues are reported using the gross method are separate and distinct from its obligations to the third-party pharmacies included in its retail pharmacy network contracts. Pursuant to these contracts, the Company is contractually required to pay the third-party pharmacies in its retail pharmacy network for products sold, regardless of whether the Company is paid by its clients. The Company’s responsibilities under its client contracts typically include validating eligibility and coverage levels, communicating the prescription price and the co-payments due to the third-party retail pharmacy, identifying possible adverse drug interactions for the pharmacist to address with the prescriber prior to dispensing, suggesting generic alternatives where clinically appropriate, and approving the prescription for dispensing. Although the Company does not have credit risk with respect to Retail Co-Payments or inventory risk related to retail network claims, management believes that all of the other applicable indicators of gross revenue reporting are present. For contracts under which the Company acts as an agent, revenue is recognized using the net method.



In March 2019, the Company changed its business model to no longer utilize their existing pharmacies. This shift resulted in breaking their existing lease agreements with their pharmacies which resulted in a liability of $606,296 as of April 30, 2019 and disposing the majority of applicable leasehold improvements, reduction of employees and no longer holding and selling inventory. Going forward Veneto will conduct business exclusively through their management services organization and by entering into more ancillary provider service agreements with third party pharmacies as an effort to reduce fixed costs and salaries. This was made practicable due to the decrease in overall script volume coupled with delays in the Company being able to receive operating licenses from various government agencies.



Cost of Goods Sold —Costs and directly related expenses to sell the Company’s products and services are recorded as cost of goods sold when the related revenue is recognized. The Company records shipping and handling costs related to delivery of products to customers within cost of goods sold.



9





Income Taxes — Income taxes are accounted for under the asset and liability method prescribed by FASB ASC Topic 740. These standards require a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more likely than not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. 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. At April 30, 2019 and July 31, 2018, the Company had a full valuation allowance equal to the amount of the net deferred tax asset. As a result of the acquisition of Regentys and Olaregen, the purchase price allocation attributed to deferred tax liability in the amount of $889,782 and $1,040,173, respectfully. The Company did not offset the deferred tax liabilities since the Company acquired less than the 80% of both Regentys and Olaregen preventing the Company to consolidate its income tax returns with Regentys and Olaregen for tax purposes. Therefore, the deferred tax liabilities will be reported separately until such time that the Company determines otherwise.

Inventories —Inventories, which consist of both raw materials and finished goods, is valued at the lower of cost, determined by the first-in, first-out method, or market value. Inventory costs are comprised primarily of product, labor, freight and duty. The Company writes down inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. For the nine months ending April 30, 2019, the Company had a write down of inventory for $645,351 related to obsolescence which is classified as cost of goods sold.



Property and Equipment —Property, equipment and improvements to leased premises are depreciated using the straight-line method over the estimated useful lives of the assets, or when applicable, the term of the lease, whichever is shorter. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets, which are generally as follows:
Leasehold improvements The shorter of the expected useful life of the improvement or the lease term

Computers and technological assets 3-5 years
Machinery and equipment 3-5 years
Furniture and fixtures 3-7 years



Assets acquired through finance lease arrangements or long-term rental arrangements that transfer substantially all the risks and rewards associated with ownership of the asset to the Company (as lessee) are capitalized.

Reclassifications to Prior Period Financial Statements and Adjustments

Certain reclassifications have been made in the Company’s condensed interim consolidated financial statements of the prior year to conform to the current year presentation. These reclassifications have no impact on previously reported net income.



Redeemable Non-Controlling Interest



As a result of the acquisition of Regentys with redeemable convertible preferred stock classified as a mezzanine instrument outside of the its equity accounts, such amounts are reclassified as redeemable non-controlling interest as the carrying value determined by the purchase price allocation at the time of the acquisition of Regentys.



Derivative Financial Instruments



As a result of the early adoption of ASU 2017-11 in the second quarter of the fiscal year ended April 30, 2019, the Company has no derivative financials instruments with down round features classified as a liability at April 30, 2019.


10





Adoption of New Accounting Standards



We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effective dates during the periods reported and in future periods. The Company does not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.


• ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”
• ASC 815-40 (formerly SFAS No. 133 “Accounting for derivative instruments and hedging activities”), requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and in accordance with ASC 815-40-15 (formerly EITF-00-19 “Accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock”) to determine whether they should be considered a derivative liability and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula and present value pricing. At April 30, 2019, the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its condensed interim consolidated statement of operations and comprehensive loss.
• ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).”
• ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.”
• ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF (Emerging Issue Task Force) Meeting.”
• ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.”
• ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.”
• ASU 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.”
• ASU 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840) and Leases (Topic 842). Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments.”



The standards provide companies with a single model for use in accounting for revenue arising from contracts with customers that supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The guidance was adopted as of August 1, 2018. The Company found that the adoption did not have a material effect on the Company’s condensed interim consolidated financial statements and related disclosures.


11





In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This standard affects the accounting for equity instruments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. In February 2018, the FASB issued ASU 2018-03, “Technical Corrections and Improvements to Financial Instruments (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities”. This update was issued to clarify certain narrow aspects of guidance concerning the recognition of financial assets and liabilities established in ASU No. 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. This includes an amendment to clarify that an entity measuring an equity security using the measurement alternative may change its measurement approach to a fair valuation method in accordance with Topic 820, Fair Value Measurement, through an irrevocable election that would apply to that security and all identical or similar investments of the same issued. The update is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years beginning after June 15, 2018. The guidance was adopted as of August 1, 2018 and did not have a material effect on the Company’s condensed interim consolidated financial statements and related disclosures.



In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing diversity in practice regarding how certain cash receipts and cash payments are presented in the statement of cash flows. The standard provides guidance on the classification of the following items: (1) debt prepayment or debt extinguishment costs, (2) settlement of zero-coupon debt instruments, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, (6) distributions received from equity method investments, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows. The Company is required to adopt ASU 2016-15 for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017 on a retrospective basis. The guidance was adopted as of August 1, 2018 and did not have a material effect on the Company’s condensed interim consolidated financial statements and related disclosures.



In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that a statement of cash flows should include the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. The update is effective for fiscal years beginning after December 15, 2017. The guidance was adopted as of August 1, 2018 and did not have a material effect on the Company’s condensed interim consolidated financial statements and related disclosures.



In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The guidance was adopted as of August 1, 2018 and did not have a material effect on the Company’s condensed interim consolidated financial statements and related disclosures.



In May 2017, the FASB issued ASU 2017-09, “Compensation-Stock Compensation” (Topic 718): Scope of Modification Accounting. The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718 Compensation-Stock Compensation. An entity should account for the effects of a modification unless all the following are met: 1. The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification. 2. The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. 3. The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The ASU is effective for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. The guidance was adopted as of August 1, 2018 and did not have a material effect on the Company’s condensed interim consolidated financial statements and related disclosures.


12





Recently Issued Accounting Standards



In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). In January 2018, the FASB issued ASU 2018-01, which provides additional implementation guidance on the previously issued ASU 2016-02. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. The Company is required to adopt ASU 2016-02 for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018.



In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350), which eliminates Step 2 from the goodwill impairment test. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The Company will adopt the standard effective October 1, 2020. The Company is evaluating the effect that ASU 2017-04 will have on its condensed interim consolidated financial statements.



In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity , because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable non-controlling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company early adopted the ASU 2017-11 in the second quarter as of January 31, 2019.



In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , which was issued to address the income tax accounting treatment of the stranded tax effects within other comprehensive income due to the prohibition of backward tracing due to an income tax rate change that was initially recorded in other comprehensive income. This issue came about from the enactment of the TCJA on December 22, 2017 that changed the Company’s federal income tax rate from 35% to 21%. The ASU changed current accounting whereby an entity may elect to reclassify the stranded tax effect from accumulated other comprehensive income to retained earnings. The amendments in this ASU are effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. Adoption of this ASU is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the tax laws or rates were recognized. The Company is currently evaluating the impact, if any, ASU 2018-02 will have on its financial position, results of operations, and its consolidated financial statement disclosures. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is evaluating the effect that ASU 2018-02 will have on its condensed interim consolidated financial statements.



13





In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”, which adds disclosure requirements to Topic 820 for the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019. The Company is evaluating the effect that ASU 2018-13 will have on its condensed interim consolidated financial statements.



Note 3 - Loans from Related Parties



NGDx received substantially all of its funding from a shareholder, who owned 98.9% of NGDx prior to the acquisition of NGDx by the Company. The loan is unsecured, matures on December 31, 2019 and bears interest at 0.75% per annum through January 19, 2017, and bears no interest thereafter. Upon acquisition of NGDx by the Company (see Note 9), the outstanding principal balance was $13,239,837 and total accrued interest of $191,869. This loan was subject to a call option (Note 9) which, if exercised, the principal and accrued interest through January 18, 2017 would be eliminated.



Pursuant to the January 18, 2017 Acquisition, Mr. Berkman, previous owner of NGDx and debt holder, agreed, under certain conditions to transfer the remaining 49% of the NGDx equity to the Company for a consideration of $1.00. On December 1, 2018, the Company and Mr. Berkman entered into an Agreement, Assignment and Release, pursuant to which Mr. Berkman transferred the remaining NGDx equity interests to the Company, waiving and releasing any conditions to such transfer. NGDx is now a wholly owned subsidiary of the Company. In addition to the assignment of the NGDx interests, Mr. Berkman released these loans in exchange for shares of the Company’s common stock valued at the aggregate of such amount using the closing price for the common stock on November 30, 2018. The closing price was $18.99, resulting in 32,881 shares issuable to Mr. Berkman. This transaction resulted in Mr. Berkman’s advances of $624,404 plus the loan and call option which resulted in additional paid in capital of $13,431,705 which was reclassified to the Company’s stockholders’ equity as an extinguishment of debt for $14,056,109.



Pursuant to the January 7, 2019 acquisition of Regentys Corporation (“Regentys”), the Company assumed $16,505 of loans payable to Regentys shareholders which had a principal balance of $13,200 as of April 30, 2019.



Note 4 - Commitments and Contingencies:



Pending Litigation



The Company is a defendant in one legal proceeding relating to alleged breach of contract and claims against certain of the Company’s original buccal delivery patents. The Company is also a defendant in two legal proceedings brought by a former executive officer and her affiliate. These legal proceedings have been reported in the Company’s prior periodic reports. No activity has occurred in these cases in several years, and the Company now considers them dormant.



In December 2011, a vendor of the Company commenced an action against the Company and its subsidiary, Generex Pharmaceuticals, Inc., in the Ontario Superior Court of Justice claiming damages for unpaid invoices including interest in the amount of $429,000, in addition to costs and further interest. The Company responded to this statement of claim and also asserted a counterclaim in the proceeding for $200,000 arising from the vendor’s breach of contract and detinue, together with interest and costs. On November 16, 2012, the parties agreed to settle this action and the Company has agreed to pay the plaintiff $125,000, following the spinout of its subsidiary Antigen, from the proceeds of any public or private financing related to Antigen subsequent to such spinout. Each party agreed to execute mutual releases to the claim and counterclaim to be held in trust by each party’s counsel until payment of the settlement amount. Following payment to the plaintiff, the parties agree that a Consent Dismissal Order without costs will be filed with the court. If the Company fails to make the payment following completion of any post-spinout financing related to Antigen or any other subsidiaries, the Plaintiffs may take out a judgment in the amount of the claim plus interest of 3% per annum and costs fixed at $25,000. This has been accrued in the unaudited condensed interim consolidated financial statements.


14





On August 22, 2017, Generex received a letter from counsel for Three Brothers Trading LLC, d/b/a Alternative Execution Group (“AEXG”), claiming breach of a Memorandum of Understanding (“MOU”) between Generex and AEXG. The MOU related to AEXG referring potential financing candidate to Generex. The letter from AEXG counsel claimed that Generex’s acceptance of $3,000,000 in financing from Pharma Trials, LLC, in March 2017, violated the provisions of the MOU prohibiting Generex from seeking other financing, with certain exceptions, for a period of 60 days after execution of the MOU. AEXG has demanded at least $210,000 in cash and 84,000 warrants for Generex stock convertible at $2.50 per share, for attorney’s fees and costs. On December 2, 2018, an arbitrator awarded Three Brothers Trading LLC, d/b/a Alternative Execution Group (“AEXG”) an aggregate of $315,695 in damages, costs and fees as well as warrants exercisable for 84,000 shares of Generex Common Stock at an exercise price of $2.50 per share. The awards were made pursuant to claims under a Memorandum of Understanding (“MOU”) between Generex and AEXG related to AEXG referring potential financing candidate to Generex. AEXG filed a petition to confirm the arbitrator’s award in the United States District Court for the Southern District of New York. The petition includes a demand of $3,300,360 as the value of the Warrants. The arbitrator did not award the specific amount of $3.3 million, but only liquidated damages in the amount of $220,000 and the value of 84,000 warrants “as of today” (the date of the award) plus attorney’s fees, certain costs, prejudgment and post-judgment interest (which continues to run on a daily basis) and arbitration fees. As of April 30, 2019, the value of the warrants have a market value of $65,613. Between the warrants and the $220,000 of liquidated damages, the Company has accrued $285,613 related to this matter.



On June 28, 2018, the Company was named in respect of a claim by Burrard Pharmaceutical Enterprises Ltd. and Moa’yeri Kayhan for unspecified damages and other remedies issued by the Supreme Court of British Columbia. The claim is made in connection with one advanced against Burrard and Kayhan by Middle East Pharmaceutical Factory L.L.C., a foreign corporation, for fraudulent or negligent misrepresentation. Middle East alleges that it was misled by Burrard and Kayhan into believing that Burrard had rights to distribute Generex product in the Middle East. Burrard and Kayhan allege that they did have rights in that regard, which the Company denies. The matter remains at the pleadings stage and the Company is investigating the facts.



On October 26, 2018, Generex entered into a Securities Purchase Agreement with an investor pursuant to which the Company agreed to sell and sold its Note Due October 26, 2019 (“Note”) in the principal amount of $682,000 . On January 25, 2019, Generex received a letter from the purchaser’s counsel stating that the Note was in default because Generex’s common stock was not listed on NASDAQ within 90 days after the issuance of the Note. The letter demanded repayment in full. On February 12, 2019, the Purchaser filed a Motion for Summary Judgment in lieu of complaint in the Supreme Court of New York, demanding the aggregate principal amount, default interest and costs. Counsel for Generex and Alpha have engaged in settlement discussions.



On March 21, 2019 Compass Bank filed suit against NuGenerex Distributions Solutions 2, L.L.C. in the District Court of Dallas County, Texas requesting damages of $3,413,000. In connection with the closing of the Veneto acquisition, Compass Bank had a lien on certain assets that were supposed to be transferred into the ownership of NuGenerex, a subsidiary of Generex. Those assets were never transferred due to regulatory impositions. Generex had listed Compass Bank as an intended third party beneficiary to the transaction in relation to the assets liened and Veneto ceased payments upon the loan which the lien generated from. Compass bank filed suit against 6 parties involved in the transaction to collect on the loan, including NuGenerex. NuGenerex’s position is the contract was frustrated by the assets that were liened were never transferred, NuGenerex did not receive any benefit from the agreement, and thus NuGenerex is not responsible to Compass Bank for repayment of a loan on assets not transferred. Generex intends to implead Brooks Houghton for indemnification who was retained to perform due diligence on the transaction.



In May 2019 Brooks Houghton threatened litigation by way of a FINRA Dispute Resolution. Brooks Houghton, who the managing representative is Mr. Centonfanti a prior board member, was under contract to perform due diligence on the Veneto transaction, as well as other unrelated items. The Veneto transaction closed three times, each time with a reduction in price due to material negative circumstances. Brook Houghton, who was under contract to perform due diligence, claims their fee should be paid on the initial closing price not the ultimate resolution of the matter. The company offered to compensate Brooks Houghton pursuant to agreement, 3% on the most recent closing price for Veneto for which Brooks Houghton may have performed some level of work on, payable in kind, and Brooks Houghton declined the offer. Brooks Houghton is claiming $450,000 for the first closing of Veneto, $714,000 for the second closing of Veneto, $882,353 for the Regentys acquisition, and $705,882 for Olaregen. The company is awaiting service. As of April 30, 2019, the Company has accrued for the full $2,752,235 balance.


15





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.



Commitments



Lease Agreements



There are rental agreements in effect at Hema Diagnostics Systems, Empire State Pharmacy Inc., Regentys Corporation and Olaregen Therapeutix Inc. which have the following commitments as of April 30, 2019: $44,700 remaining in fiscal year 2019, $82,469 in fiscal year 2020 and $9,403 in fiscal year 2021.



Intellectual Property



In connection with the Company’s acquisition of Olaregen, intellectual property was acquired that had a valuation of $650,000 prior to being acquired and revalued. This initial $650,000 valuation represented the initial payment remitted by Olaregen in accordance with the $4 million signed commitment agreement entered into with Activation Therapeutics, Inc. The remaining $3.35 million balance is to be paid in quarterly installments equal to 10% of quarterly net sales generated by Activation Therapeutics assuming the Exellagen average selling price per unit exceeds $800. In the event that the average selling price per unit is less than $800 per unit, cost of goods sold shall be excluded from the computation of net sales.



Note 5 - Net Income Per Share (“EPS”):



Basic net income or loss per share is calculated using the weighted average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period and, when dilutive, potential shares from stock options and warrants to purchase common stock, using the treasury stock method. Common stock equivalents are included in the diluted income per share calculation only when option exercise prices are lower than the average market price of the common shares for the period presented.



The weighted average number of common stock equivalents not included in diluted income per share, because the effects are anti-dilutive, was 16,016,231 for the three and nine months ended April 30, 2019.




Three Months Ended

April 30,


Three Months Ended

April 30,
2019 2018
Weighted average number of common shares outstanding - Basic 60,362,163 22,430,100
Potentially dilutive common stock equivalents — 32,016,936
Weighted average number of common and equivalent shares outstanding-Diluted 60,362,163 54.447,036




Nine Months Ended

April 30,


Nine Months Ended

April 30,
2019 2018
Weighted average number of common shares outstanding - Basic 44,203,218 22,430,100
Potentially dilutive common stock equivalents — 32,016,936
Weighted average number of common and equivalent shares outstanding-Diluted 44,,203,218 54.447,036


16





Note 6 - Stockholders’ Equity:



Common Stock



On November 13, 2018, the Company declared a stock dividend on its outstanding Common Stock for stockholders of record date to be determined (the “Record Date”). As a result, all stockholders on the Record Date received twenty new shares of Common Stock for each share of Common Stock owned by them as of that date. Proportional adjustments for the reverse stock split were made to the Company’s outstanding stock options, and warrants including all share and per-share data, for all amounts and periods presented in the condensed interim consolidated financial statements.



On January 18, 2017, the Company issued 1,117,431 shares of common stock for the acquisition of 51% of NGDx and is obligated to issue 4,830,000 shares of common stock upon the conclusion of the Company’s reverse stock split. On October 26, 2018, 4,830,000 shares were issued.



On January 30, 2019, the Company declared a dividend to holders of Generex common shares of its subsidiary Antigen Express, Inc., d/b/a NuGenerex Immuno-Oncology. On February 25, 2019, Generex shareholders received a dividend of one share of Antigen Express, Inc. for every four shares of Generex common stock which amounted to an issuance of 15,076,849 shares, representing approximately 3.77% ownership of Antigen. The fair value of the shares issued amounted to $1,070,456 and was recorded as a dividend with a corresponding increases to noncontrolling interest.

During the nine months ended April 30, 2019, 1,238,517 shares of common stock payable were issued. As of April 30, 2019, 349,545 shares remain to be issued resulting in common stock payable $201,294.

Series H and Series I Convertible Preferred Stock



The Company has authorized 109,000 shares of designated non-voting Series H Convertible Preferred Stock with a stated value of $1,000 per share and authorized 6,000 shares of designated non-voting Series I Convertible Preferred Stock with a stated value of $47.61 per share pursuant to the Purchase Agreement dated March 27, 2017. The Series H Preferred Stock was scheduled to be sold in four tranches to the Purchaser. Under the Securities Purchase Agreement, in the event the Purchaser failed to purchase 100% of the shares of Preferred Stock at any given Closing, the Company can decline to sell any further securities to the Purchaser (the “Purchase Agreement”).

The Series H and Series I Convertible Preferred Stock are convertible at the option of the holder at any time into shares of the Company’s common stock at an effective conversion price of $.12 per share.

Neither Series H nor Series I Convertible Preferred Stock have special dividend rights. If the Company pays dividends on its common stock, the holders of the preferred stock will receive dividends in the amount they would have received had they converted the preferred stock to common stock.

At closing of the first tranche on March 28, 2017, the Company issued 63,000 shares of Series H Preferred Stock for a purchase price of $3,000,000. The proceeds of this sale were paid directly on the Company’s behalf to Emmaus as an additional deposit under the Company’s Emmaus LOI. The full amount of such proceeds was repaid to the Company in July 2017 upon termination of the Emmaus LOI. On December 1, 2018, after payment of the dividend, B-H Sanford, LLC, converted all of its holding of the Company’ Series H Convertible Preferred Stock owned by it into 25,200,000 shares of common stock.



Prior to payment of Generex’s 20 for 1 common stock dividend, on November 30, 2018, Joseph Moscato, the Company’s President and Chief Executive Officer, and Lawrence Salvo, a member of the Company’s Board of Directors, converted all shares of the Company’ Series I Convertible Preferred Stock owned by them. Mr. Moscato received 3,276,000 shares of the Company’s Common Stock upon conversion. Mr. Salvo received 3,354,645 shares of the Company’s Common Stock upon conversion.


17





Non-controlling Interest



Mr. Berkman agreed, under certain conditions to transfer the remaining 49% of the NGDx equity to the Company for a consideration of $1.00. On December 1, 2018, the Company and Mr. Berkman entered into an Agreement, Assignment and Release, pursuant to which Mr. Berkman transferred the remaining NGDx equity interests to the Company, waiving and releasing any conditions to such transfer. As of December 1, 2018, NGDx is a wholly owned subsidiary of the Company. During the nine months ended in April 30, 2019, there was a net loss attributable to the non-controlling interest (49%) in NGDx of $122,692 and contributions made of $133,679. As of April 30, 2019, and July 31, 2018, the non-controlling interest in NGDx was $0 and $5,576,272, respectively.



Pursuant to the Company’s acquisition of Regentys on January 7, 2019 to acquire a 51% interest, the Company was issued 12,048,161 shares of Regentys common stock. As of April 30, 2019, Regentys had a total of 18,623,278 shares of common stock and 2,793,192 Series A voting preferred stock for a total of 21,416,470 total voting shares outstanding. As such, there are 9,368,309 of shares that belong to non-controlling interest shareholders which represents a 43.74% non-controlling interest.



Pursuant to the Company’s acquisition of Olaregen on January 7, 2019 to acquire a 51% interest, the Company was issued 3,282,632 shares of Olaregen common stock. As of April 30, 2019, Olaregen had a total of 5,648,819 shares of common stock and 592,683 Series A voting preferred stock for a total of 6,241,502 total voting shares outstanding. As such, there are 2,958,870 of shares that belong to non-controlling interest shareholders which represents a 47.41% non-controlling interest.



On November 1, 2018, the Company completed its second closing of Veneto Holdings, L.L.C. (“Veneto”) which granted the Company Rapport Services, LLC (“Rapport”) through the ownership of the units of Class B membership interests providing control of Rapport as only the Class B Member is entitled to elect the nominees to the Board of Managers, which constitute a one percent (1%) ownership in Rapport. The remaining interests represent a 99% non-controlling interest.



Note 7 – Redeemable Non-Controlling Interest:



Pursuant to the Company’s acquisition of 51% of the outstanding capital stock of Regentys, Regentys had authorized 7,500,000 shares of redeemable Series A Convertible Preferred Stock (“Preferred Stock A”), with a par value of $0.0001 and redemption value of $0.65 per share of which 2,793,192 Preferred Stock A was outstanding as of the date of acquisition and as of April 30, 2019. Preferred Stock may be converted into common stock at the initial conversion ratio of 1:1 which ratio shall be adjusted in accordance with stock dividends, splits, combinations and other similar events, including the sale of additional shares of common or preferred stock and the holders of Preferred Stock A are entitled to vote, together with the holders of Regentys common stock, on all matters submitted to stockholders of Regentys for a vote. At any time after November 1, 2026, the holders of the Company’s Series A Preferred Stock will have the right to require the Company to redeem all or a portion of their shares for cash at a redemption price equal to its liquidation value. Accordingly, this Preferred Stock A was valued to be $4,073,898 at the time of acquisition of Regentys and reclassified as Redeemable Non-Controlling Interest outside of stockholders’ deficit on the condensed interim consolidated balance sheets.



Note 8 - Stock-Based Compensation :



Stock Option Plans

As of April 30, 2019, 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 2,835,000 shares of common stock are reserved for issuance under the 2006 Stock Plan as amended (the 2006 Plan) and 240,000,000 shares of common stock reserved for issuance under the 2017 Stock Option Plan (the 2017 Plan) and 1,200,000 shares of common stock reserved for issuance under the 2019 Stock Option Plan (the 2019 Plan). At April 30, 2019, there were 2,823,450, 234,492,875, 1,200,000 shares of common stock reserved for future awards under the 2006 Plan, 2017 Plan and 2019 Plan, respectively. The Company issues new shares of common stock from the shares reserved under the respective Plans upon conversion or exercise of options and issuance of restricted shares.
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The 2006, 2017 and 2019 Plans (the Plans) are administered by the Board of Directors (the Board). The Board is authorized to select from among eligible employees, directors, advisors and consultants those individuals to whom options are to be granted and to determine the number of shares to be subject to, and the terms and conditions of the options. The Board is also authorized to prescribe, amend and rescind terms relating to options granted under the Plans. Generally, the interpretation and construction of any provision of the Plans or any options granted hereunder is within the discretion of the Board.

The Plans provide that options may or may not be Incentive Stock Options (ISOs) within the meaning of Section 422 of the Internal Revenue Code. Only employees of the Company are eligible to receive ISOs, while employees and non-employee directors, advisors and consultants are eligible to receive options which are not ISOs, i.e. “Non-Qualified Options.” The options granted by the Board in connection with its adoption of the Plans were Non-Qualified Options. In addition, the 2006 Plan also provides for restricted stock grants.

The fair value of each option granted is estimated on the grant date using the Black-Scholes option pricing model or the value of the services provided, whichever is more readily determinable. The Black-Scholes option pricing model 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 a summary of the common stock options granted, forfeited or expired and exercised under the Plan:
Options Weighted Average Exercise Price per Share Weighted Average Remaining Life (Years) Aggregate Intrinsic Value
Outstanding - July 31, 2018 232,218 $ 1.46 0.22 380,247
Granted 6,650,625 0.56
Forfeited or expired (1,364,168 ) (0.37 )
Exercised — —
Outstanding - April 30, 2019 5,518,675 $ 0.68 9.15 3,157,178

The intrinsic value is calculated as the difference between the market value and the exercise price of the shares on April 30, 2019. The market values as of April 30, 2019 was $1.14 based on the closing bid price for April 30, 2019.

The 5,518,675 outstanding options at April 30, 2019 had a weighted average remaining contractual term of 9.15 years.

There were 2,345,175 vested common stock options under the Plan for the period ended April 30, 2019. The compensation expense was $1,526,609 for the nine months ended April 30, 2019. There was additional compensation expense pertaining to the Regentys acquisition of $3,703 for the nine months ended April 30, 2019 for total compensation expense of $1,530,312. The Company had $1,728,688 of unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan at April 30, 2019 to be recognized over an average of 2.22 years.

The Company granted 6,650,625 options during the nine months ended April 30, 2019 and none during the year ended July 31, 2018.

The Company estimated the fair value of each stock option on the grant date using a Black-Scholes option-pricing model. Black-Scholes option-pricing models requires the Company to make predictive assumptions regarding future stock price volatility, recipient exercise behavior, and dividend yield. The Company estimated the future stock price volatility using the historical volatility over the expected term of the option. The following assumptions were used in the Black-Scholes option-pricing model:
April 30,
2019
Exercise price $0.64 – 1.85
Expected term 5 to 10 years
Risk-free interest rate 2.56% - 3.15 %
Estimated volatility 135.2% - 222.2 %
Expected dividend —
Stock price at valuation date $0.64 – $1.85

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Note 9 – Acquisitions:

NuGenerex Diagnostics LLC:

On January 18, 2017, the Company acquired a 51% interest in NuGenerex Diagnostics LLC (“NGDx”), formerly Hema Diagnostic Systems, LLC, pursuant to the Acquisition Agreement. At closing, the Company acquired 4,950 of NGDx’s 10,000 previously outstanding limited liability company units in exchange for 1,117,011 shares of Generex common stock valued at $253,721, plus 420 shares of Generex common stock issued to NGDx in exchange for 300 new limited liability company units. The Acquisition Agreement also provides the Company with a call option to acquire the remaining 49% of NGDx and a retirement of NGDx shareholder loans in the amount of $13,431,706 (including interest) (the “Call Option”) for the aggregate purchase price of $1. On November 30, 2018, the call option was exercised, and the Company acquired the remaining 49% of NGDx.



Following the closing and the completion of Company’s reverse stock split, the Company was required to issue an additional 4,830,000 shares of common stock and issue a warrant to a former shareholder of NGDx to acquire 15,000,000 additional shares of Generex common stock for $2.50 per share. The issue of this warrant is contingent upon the Company obtaining approval from its shareholders for an increase in its authorized share capital. The total consideration was valued at $1,350,916 on the date of the acquisition. As of April 30, 2019, all warrants relating to this acquisition have been issued which resulted in additional paid in capital of $9,032,435.



Fair Value of the NGDx Assets



The intangibles assets acquired include In–Process Research & Development (“IPR&D”). The Fair Value of the IPR&D intangible asset using an Asset Cost Accumulation methodology as of January 18, 2017 (the “Valuation Date”) was determined to be $2,911,377. Intangible assets are generally amortized on a straight-line basis over the useful lives of the assets. The Company is currently not amortizing the in-process research and development until it becomes commercially viable and placed in service. At the time when the intangible assets are placed in service the Company will determine a useful life.



The net purchase price of NGDx was determined to be as follows:


Stock Price at Closing Shares

Fair

Value
Purchase price:
Common Stock at closing $ .23 1,117,011 $ 253,721
Common Stock after closing $ .23 420 95
Common Stock post reverse stock split $ .23 4,830,000 1,097,100
Total purchase price 5,947,431 $ 1,350,916



As of January 18, 2017, the issue of the warrant to acquire 15,000,000 additional common shares of Generex was contingent upon shareholder approval of an increase in the Company’s authorized capital stock. No warrant could be issued by the Company until such time that an increase in authorized capital has been approved. At the time of closing, management was not of the opinion that it is more likely than not that the warrant will be issued and the Call Option will be exercised, accordingly no values have been attributed to the warrant and Call Option at closing. During 2017, management made a redetermination and estimated that it was more likely than not that the shareholder approval to increase authorized share capital would be obtained and the Call Option would be exercised.


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On December 1, 2018, pursuant to the Acquisition Agreement the Company issued the warrant to 15,000,000 additional common shares of Generex to Stephen L. Berkman. The Warrant is exercisable until December 1, 2019 at an exercise price of $2.50 per share. The Warrant contains a provision prohibiting the exercise of the Warrant to the extent that, after exercise, Mr. Berkman would own more than 9.99% of the Company’s common stock. The Warrant was issued pursuant to the January 18, 2017 Acquisition Agreement among the Company, NuGenerex Diagnostics LLC (“NGDx”), formerly Hema Diagnostic Systems, LLC, Stephen L. Berkman and the other equity owners of NGDx.



Simultaneously, on December 1, 2018, Company exercised the Call Option and acquired the remaining 49% non-controlling interest in NGDx. Accordingly, the fair values of the warrants and call option was updated through the issuance and exercise date and the change in the fair value of the contingent purchase consideration of a loss of $4,397,507 and a gain of $15,147,591 was recorded and included in the condensed interim consolidated statements of operations and comprehensive income for the nine-months ending April 30, 2019. The Company adopted a sequencing policy and determined that the warrants with fixed exercise price were excluded from derivative consideration.



The remaining fair value of the call option and the warrant payable remaining at the time of exercise of the call option and issuance of the warrant was charged against additional paid-in capital as an elimination of non-controlling interest for a loss of $6,951,015.



Fair Value Assumptions Used in Accounting for the Warrant



The Company used the Black-Scholes option-pricing model to calculate the fair value of the warrant as of April 30, 2019. The Black-Scholes option-pricing model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. The key inputs used in the fair value calculations were as follows:


December 1,
2018 July 31,
2018
Exercise price 2.50 2.50
Time to expiration 3.14 years 3.47 years
Risk-free interest rate 3.01 % 2.77 %
Estimated volatility 138.61 % 143.97 %
Dividend — —
Stock price at valuation date $ 0.9 $ 0.1



Fair Value Assumptions Used in Accounting for Call Option



The Company used the Monte Carlo model to calculate the fair value of the call option as of nine months ended April 30, 2019. The valuations are based on assumptions as of the valuation date with regard to the value of the asset acquired net of impairment, the risk-free interest rate, the estimated volatility of the stock price in the future, the time to expiration and the stock price at the date of valuation.



The following assumptions were used in estimating the value of the Call Option:


December 1,
2018 July 31,
2018
Risk-free interest rate 2.52 % 2.44 %
Estimated volatility 164.43 % 129.95 %
Remaining Term 1.13 years 1.47 years
Stock price at valuation date $ 0.9043 $ 0.0976


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Grainland and Empire Pharmacies:

On December 28, 2017, the Company through its wholly owned subsidiary NuGenerex, completed the acquisition of the assets and 100% of the membership interests of two pre-operational pharmacies, Empire State Pharmacy Holdings, LLC and Grainland Pharmacy Holdings, LLC, pursuant to the bills of sale for a consideration of $320,000 Promissory Note due and payable in full on June 28, 2018 bearing an annual interest rate of 3%. The note was extended by six months and set to mature with the same terms on December 28, 2018. The note remains active and interest has continued to accrue while new terms of the note are in process of being negotiated.



We finalized our allocation of the purchase price as of January 31, 2019. The final allocation of the purchase price as of January 31, 2019, is as follows:


Preliminary Allocation as of December 28,
2017 Allocation Adjustments Final Allocation
Intangible assets (licenses) $ 276,380 $ — $ 276,380
Property and equipment 19,879 — 19,879
Computer software acquired 5,980 — 5,980
Leasehold Improvements 17,761 — 17,761
Total assets acquired 320,000 — 320,000
Consideration:
Note Payable 320,000 320,000
Goodwill $ — $ —



The entire value of the intangible assets represent the licenses obtained to operate a pharmacy in the respective state of each of the acquired pharmacies. Intangible assets are generally amortized on a straight-line basis over the useful lives of the assets. The Company is currently not amortizing the pharmacy license until the pharmacies becomes commercially viable and operations begin in the acquired pharmacies. At the time, when the licenses are placed in service, the Company will determine a useful life.



Since acquisition, Grainland Pharmacy Holdings, LLC ceased to operate. Accordingly, the value allocated to its tangible assets, leasehold improvements and licenses acquired for $99,519 was charged to impairment of long-lived assets.



Veneto:



On October 3, 2018, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Veneto Holdings, L.L.C. (“Veneto”) to purchase certain assets of Veneto.



Effective as at October 3, 2018, NuGenerex Distribution Solutions, LLC assigned the Veneto Asset Purchase Agreement to NuGenerex Distribution Solutions 2, LLC. The sole member of that LLC is NuGenerex Management Services, Inc., a wholly-owned subsidiary of Generex Biotechnology Corporation.



The aggregate purchase price for the Assets is $35,000,000 including the Promissory Note. At the Second Closing, the Company will pay the principal of the Promissory Note plus interest to Veneto, (i) $9,000,000 will be paid by the Company into a trust or other fiduciary account acceptable to Veneto to be used exclusively for satisfaction of certain contingent liabilities of Veneto and subsidiaries of Veneto not being acquired by the Company, (ii) $3,000,000 will be paid by the Company into an escrow account to secure potential obligations of Veneto in respect of the Second Closing date working capital and under the indemnification provisions of the Agreement and (iii) the balance will be payable directly to Veneto in cash.


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The Company had also entered into a temporary fee-for-service arrangement with Veneto and one of its subsidiaries for Veneto to provide management, personnel, operational, administrative and other services with respect to the First Closing Assets pending the Second Closing. At the Second Closing, all of Veneto personnel providing these services became employees or consultants of the Company, and, therefore, Veneto no longer provides these services.



At the First Closing, the Promissory Note issued to Veneto in the original principal amount of $15,000,000 with interest at an annual rate of 5.0% and guaranteed by Generex and Joseph Moscato, and secured by a first priority security interest in the Company’s assets other than the First Closing Assets was subsequently cancelled upon the issuance of the new promissory note on the Second Closing in the principal amount of $35,000,000 with an annual of 12.0% and guaranteed by Generex and Joseph Moscato.



On November 1, 2018 the Company consummated the acquisition of the Second Closing Assets, consisting primarily of Veneto’s management services organization business and two additional ancillary services. The aggregate price for the First Closing Assets and the Second Closing Assets was $30,000,000. The Company issued a promissory note in the principal amount of $35,000,000 (the “ New Note ”) consisting of the $30,000,000 purchase price and a $5,000,000 original issue discount, as the sole consideration payable on the Second Closing Date. In addition, we agreed to assume approximately $3.8 million in outstanding institutional debt of Veneto subsidiaries, but will have the use of Veneto cash which would otherwise have been applied to paying down the debt.



There was $62,500 of accrued interest on the first closing $15,000,000 note and an additional $1,716,129 of accrued interest on the second closing $35,000,000 promissory note for a total of $1,778,629 accrued interest through March 28, 2019 when the Company entered into an Amendment Agreement (the “ Amendment ”).



On March 28, 2019, the Company entered into an Amendment Agreement (the “ Amendment ”) with Veneto and the equity owners of Veneto (the “Veneto Members”) to restructure the payment of the obligation that in satisfaction of all obligations the Company would cause to be delivered 8,400,000 shares of the Company’s common stock (the “Generex Shares”) to be delivered on or before April 22, 2019; plus an aggregate 5,500,000 shares of the Company’s subsidiary, common stock of Antigen Express, Inc. The Company and the Veneto Members further agreed to certain downside protection between $2.50 per share and $1.50 per share subject to terms and conditions contained in the agreement.



As a result of the Amended Agreement entered into on March 28, 2019 (“the Amendment ”) with Veneto and the equity owners of Veneto (the “Veneto Members”) to restructure the Promissory Note, the Company was evaluated for downside protection associated with the 8,400,000 issued shares in lieu of cash payments against the Promissory Note. Based on the valuation as of the date of agreement on March 28, 2019, an allocation of $6,424,338 was allocated to derivative liability for downside protection. As of April 30, 2019, the downside protection had a market change of $570,112 and held a value of $6,994,450.



Fair Value of the Veneto Acquisition



The following table summarizes the allocation of the preliminary purchase price as of the Veneto acquisition as of the First Closing and the Second Closing:


“First Closing” completed on
October 3, 2018 “Second Closing” completed on
November 1, 2018 Total
Cash and cash equivalents $ 2,410,150 $ — $ 2,410,150
Accounts receivable, net 1,935,078 — 1,935,078
Inventory, net 1,068,856 — 1,068,856
Prepaid expenses 95,804 — 95,804
Property and equipment, net 652,590 — 652,590
Other receivables 1,014,316 — 1,014,316
Notes receivable - LT 1,387,763 — 1,387,763
Other assets, net 25,745 — 25,745
Intangible assets, net 35,603 7,110,000 7,145,603
Total assets acquired 8,625,905 7,110,000 15,735,905
Total current liabilities 2,509,887 — 2,509,887
Notes payable — 3,403,948 3,403,948
Total liabilities assumed 2,509,887 3,403,948 5,913,835
Net identifiable assets acquired 6,116,018 3,706,052 9,822,070
Goodwill 8,883,982 16,293,948 25,177,930
Total consideration transferred $ 15,000,000 $ 20,000,000 $ 35,000,000


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The following table summarizes the allocation of the revalued purchase price as of the Veneto acquisition as of the First Closing and the Second Closing during the quarter ending April 30, 2019:


“First Closing” completed on
October 3, 2018 “Second Closing” completed on
November 1, 2018 Total
Cash and cash equivalents $ 2,410,150 $ — $ 2,410,150
Accounts receivable, net 1,430,638 — 1,490,638
Inventory, net 1,068,856 — 1,068,856
Prepaid expenses 95,804 — 95,804
Property and equipment, net 652,590 — 652,590
Other receivables 1,014,316 — 1,014,316
Notes receivable - LT 1,387,763 — 1,387,763
Other assets, net 25,745 — 25,745
Intangible assets, net 35,603 2,277,000 2,312,603
Total assets acquired 8,181,465 2,277,000 10,458,465
Total current liabilities 2,065,448 — 2,065,448
Notes payable — 3,403,948 3,403,948
Total liabilities assumed 2,065,448 3,403,948 5,469,396
Net identifiable assets acquired 6,116,017 (1,126,948 ) 4,989,069
Goodwill 13,585,769
Total consideration tranferred $ — $ — $ 18,574,838



The note receivable for $1,387,763 acquired during the first closing of Veneto on October 3, 2018 has since accrued additional interest and holds a balance of $1,426,164 as of April 30, 2019.



The significant intangible assets identified in the purchase price allocation discussed above include developed software and technology, referral base (recurring revenue from the MSO investments and their use of Company owned pharmacies) and non-compete agreements with continued employment of key employees. Tradenames and trademarks were not valued as tradenames and trademarks will not be maintained going forward. To value the developed software and technology, the Company utilized the relief from royalty method, a form of the income approach to value the developed software and technology which assumes a limited technology life and market share adjusted by assumed obsolescence with a terminal value. The referral base was valued using a multi-period excess earnings method, a form of the income approach. The Company utilized the with and without method, a form of the income approach to value non-compete agreements with Generex.



The preliminary amounts assigned to the identifiable intangible assets, the estimated useful lives, and the estimated amortization expense related to these identifiable intangible assets are as follows:


Preliminary
Fair
Value Average
Estimated
Life
Developed Software/Technology $ 780,000 5
Referral Base 3,920,000 15
Non-compete agreements 2,410,000 3
$ 7,110,000


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Intangible assets are generally amortized on a straight-line basis over the useful lives of the assets.



Goodwill initially represented the excess of the purchase price over the fair market value of net assets acquired. Goodwill for Veneto Acquisition was $8.9 million as of the date of the First Closing and $16.3 million as of the date of the Second Closing. Based on the Amended Agreement (the “ Amendment ”) entered into on March 28, 2019 referred to above which stipulated that in lieu any cash payments, the Company would deliver shares of the Company’s common stock (the “Generex Shares”). Additionally, in pursuant to ASC 805 and specifically, ASC 805-10-25-14, the Company recognized the change in assets and liabilities as a result of facts and circumstances that existed as of the acquisition date that would have resulted in the recognition of the assets and liabilities with the corresponding decrease of goodwill from $24.2 million to $13.6 million.



During the quarter ending April 30, 2019, the amounts assigned to the identifiable intangible assets, the estimated useful lives, and the estimated amortization expense related to these identifiable intangible assets were revalued as follows:


Preliminary
Fair
Value Average
Estimated
Life
Developed Software/Technology $ 397,000 5
Referral Base 10,000 15
Non-compete agreements 1,870,000 3
$ 2,277,000



Regentys and Olaregen:



On January 7, 2019, the Company closed two separate Acquisition Agreements pursuant to which the Company acquired a 51% interest in both Regentys Corporation (“Regentys”) and Olaregen Therapeutix Inc. (“Olaregen”).



The Company accounted for the acquisitions of both Regentys and Olaregen as business combinations using the purchase method of accounting as prescribed in Accounting Standards Codification 805, Business Combinations (“ASC 805”) and ASC 820 – Fair Value Measurements and Disclosures (“ASC 820”). In accordance with ASC 805 and ASC 820, the Company used its best estimates and assumptions to accurately assign fair value to the tangible assets acquired, identifiable intangible assets and liabilities assumed as of the acquisition dates. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed.



The fair values assigned to Regentys’ and Olaregen’s tangible and identifiable intangible assets acquired, and liabilities assumed are based on management’s estimates and assumptions. The estimated fair values of these assets acquired, and liabilities assumed are considered preliminary and are based on the information that was available as of the date of the acquisition. The preliminary estimated fair values of assets acquired, and liabilities assumed, and identifiable intangible assets may be subject to change as additional information is received. Thus, the provisional measurements of fair value are subject to change. The Company expects to finalize the valuations as soon as practicable, but not later than one year from the closing date.


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Regentys:



On November 28, 2018, Generex and Regentys closed the acquisition of 51% of the outstanding capital stock of Regentys for a total consideration of fifteen million dollars ($15,000,000). On January 7, 2019 the Company completed a definitive Stock Purchase Agreement and related documents effecting the transactions contemplated by the LOI.



Pursuant to a Stock Purchase Agreement between the Company and Regentys (the “Purchase Agreement”) the Company acquired 12,048,161 newly issued shares of the Regentys common stock representing 51% percent of the issued and outstanding capital stock of Regentys (“Regentys Shares”).



In addition to $400,000 paid to Regentys upon signing of the LOI, the purchase price for the Regentys Shares will consist of the following cash payments, with the proceeds intended to be used for specific purposes, as noted:


• $3,450,000 to initiate pre-clinical activities on or before January 15, 2018. As of the date this quarterly report was filed, the Company has paid $650,000 and the remaining balance of $2,800,000 is payable on or before June 30, 2019 per extension in amended agreement.


• $2,000,000 to initiate patient recruitment activities on or before May 1, 2019. As of the date this quarterly report was filed, the Company has not yet paid this installment and the full balance of $2,000,000 is payable on or before June 30, 2019 per extension in amended agreement.


• $3,000,000 to initiate a first-in-human pilot study on or before September 1, 2019.


• $5,000,000 to initiate a human pivotal study on or before February 1, 2020.


• $1,150,000 to submit a 510(k) de novo submission to the FDA on or about February 1, 2021.



The Company issued its Promissory Note in the amount of $14,600,000 (the “Note’) representing its obligation to pay the above amounts. The Note is secured by a pledge of the Regentys shares pursuant to a Pledge and Security Agreement. In the event that Generex does not make any of the first three payments listed above, at Regentys’ option either:


• Generex will forfeit all of the Regentys shares issued with no refund of amounts paid; or


• Generex will issue shares of its common stock to Regentys equivalent to 110% of the value of the missing payment, which shares will be registered for resale.



In the event Generex does not make either or both of the fourth and fifth payments, its share ownership of Regentys will be proportionately reduced.



On March 14, 2019, the Company and Regentys amended the Stock Purchase Agreement and Promissory Note to extend the due date of the remaining balance of the first tranche of Guaranteed Payments amounting to $2,800,000 on or before April 1, 2019. On May 22, 2019, the Company and Regentys signed a second extension to extend the due date on or before June 30, 2019. The extensions of the due date have no impact on the existing schedule of future payments or any additional terms within the Note. Regentys has not filed any notice of default as of the date of publication, and Generex continues to provide Regentys with business opportunities continuing the relationship.



26





Fair Value of the Regentys Acquisition



The following table summarizes the allocation of the preliminary purchase price as of the Regentys acquisition:



Preliminary Allocations as of
January 7,
2019
Cash and cash equivalents $ 61,857
Other current assets 13,138
Property and equipment, net 444
Accounts payable and accrued liabilities (1,181,375 )
Notes payable (639,009 )
Loans from related parties (16,506 )
In-process research & development 3,510,680
Deferred tax liability (889,782 )
Total Fair Value of Assets Acquired 859,447
Consideration:
Note receivable from Generex 14,345,205
Goodwill $ 13,485,758



The redeemable non-controlling interest of $4,073,898, representing the Series Stock A, was determined by deducting the total consideration paid of $14,745,205 from the total purchase value totaling $28,689,865 based on a convergence method in an Option Pricing Model using the Regentys capital structure with 12,048,161 newly issued shares of the Regentys common stock representing 51% percent of the issued and outstanding capital stock of Regentys. See Note 7 – Redeemable Non-Controlling Interest.



Olaregen:



On November 27, 2018, Generex and Olaregen entered into a binding letter of intent (“LOI”) contemplating the Company’s acquisition of 51% of the outstanding capital stock of Olaregen for a total consideration of twelve million dollars ($12,000,000). As of January 7, 2019, the Company completed a definitive Stock Purchase Agreement (“Purchase Agreement”) and related documents effecting the transactions contemplated by the LOI.



The Company acquired 3,282,632 newly issued shares of the Olaregen common stock representing 51% percent of the issued and outstanding capital stock of Olaregen (“Olaregen Shares”).



In addition to $400,000 paid to Olaregen upon signing of the LOI, the purchase price for the Olaregen Shares will consist of the following cash payments:


• $800,000 on or before January 15, 2019. The Company has paid this installment.


• $800,000 on or before January 31, 2019. As of the date this quarterly report was filed, the Company has paid $438,500 of this installment and remaining balance of $361,500 is payable on or before June 30, 2019 per extension in amended agreement.


• $3,000,000 on or before April 1, 2019. As of the date this quarterly report was filed, the Company has not yet paid this installment and the full balance of $3,000,000 is payable on or before June 30, 2019 per extension in amended agreement.


• $1,000,000. On or before May 31, 2019. As of the date this quarterly report was filed, the Company has not yet paid this installment and the full balance of $1,000,000 is payable on or before June 30, 2019 per extension in amended agreement.


• $6,000,000.00 on or before September 30, 2019.


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The Company issued its Promissory Note in the amount of $11,600,000 (the “Note’) representing its obligation to pay the above amounts. The Note is secured by a pledge of the Olaregen shares pursuant to a Pledge and Security Agreement. In the event that Generex fails to pay the installment due on September 30, 2019, Generex will forfeit the shares allocated to that installment (1,600,000 Olaregen shares) and Olaregen will be entitled to “claw back” fifty percent (50%) of any and all shares paid for by the prior payments.



On March 14, 2019, the Company and Olaregen amended the Stock Purchase Agreement and Promissory Note to extend the due date of the remaining balance of the second tranche of Guaranteed Payments amounting to $600,000 on or before April 1, 2019. The Company remitted additional payments of $200,000 on April 30, 2019 and $38,500 on May 17, 2019. On May 22, 2019, the Company and Olaregen amended the agreement to extend the due date of the remaining balance of the second tranche of Guaranteed Payments amounting to $361,500, the full balance of the third tranche amounting to $3,000,000 and the full balance of the fourth tranche amounting to $1,000,000 (total of $4,361,500) on or before June 30, 2019. The extensions of the due date have no impact on the existing schedule of future payments or any additional terms within the Note. Olaregen has not filed any notice of default as of the date of publication, and Generex continues to provide Olaregen with business opportunities continuing the relationship.



In the event Generex does not make any other payments, its share ownership of Olaregen will be proportionately reduced.



Based on the Note, in the event any incremental payment is not paid when due, Olaregen has the option to increase the per share purchase price for all remaining purchased shares to $4.00 per share. Based on $1,400,000 of remitted payments and a Promissory Note balance of $10,400,000 prior to the first extension agreement on March 14, 2019, Olaregen elected the option to proportionally increase the per share purchase price to $4.00 for the remaining 2,899,658 of the total 3,282,632 shares to be acquired. The resulting penalty amounts to an additional $998,633 which has been accrued for the Company to remit to Olaregen pursuant to the acquisition.



Generex has a limited anti-dilution right under the Purchase Agreement, to ensure that Generex will retain 51% ownership in Olaregen for a period of time.



Fair Value of the Olaregen Acquisition



The following table summarizes the allocation of the preliminary purchase price as of the Olaregen acquisition:



Preliminary Allocation as of
January 7,
2019
Cash and cash equivalents $ 608,419
Prepaid expenses 20,488
Inventory 408,501
Other current assets 37,950
Accounts payable (216,670 )
Accrued liabilities (216,694 )
In-process research & development 3,980,000
Non-compete agreement 790,000
Deferred tax liability (1,040,173 )
Total Fair Value of Assets Acquired $ 3,844,925
Consideration:
Cash paid prior to the time of closing 400,000
Note receivable from Generex 11,472,663
Goodwill $ 8,027,738



The components of the acquired intangible assets were as follows:


Preliminary
Fair
Value Average Estimated Life
In-process research and development $ 3,980,000 —
Non-compete agreement 790,000 3
$ 4,770,000


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Deferred Tax Liability

As a result of the acquisition of Regentys and Olaregen, the purchase price allocation attributed to deferred tax liability was $889,782 and $1,040,173, respectfully. The Company has deferred tax assets of over $64 million with a full allowance equally to the to the amount of the deferred tax asset. Although the Company deferred tax assets are in excess of deferred tax liabilities totaling $1,929,955, the Company cannot offset the deferred tax liabilities against its deferred tax assets since the Company acquired less than the 80% of both Regentys and Olaregen preventing the Company to consolidate its income tax returns with Regentys and Olaregen for tax purposes. Therefore, the deferred tax liabilities will be reported separately until such time that the Company determines otherwise. In addition, the Company acquired approximately 51% of each of Regentys and Olaregen, less than the 80% required to permit the Company to consolidate with Regentys and Olaregen for tax purposes. Therefore, the deferred tax liabilities will be reported separately until such time that the Company determines otherwise.



Unaudited Supplemental Pro Forma Data



Unaudited pro forma results of operations for the nine months ended April 30, 2019 and 2018 as though the Company acquired Veneto, Olaregen and Regentys (the “Acquired Companies”) on the first day of each fiscal year are set forth below.




Nine months Ended

April 30
2019 2018
Revenues $ 9,434,017 $ 30,045,595
Cost of revenues 4,151,810 12,011,144
Gross profit 5,282,207 18,034,451
Operating expenses 12,597,408 20,674,120
Operating loss (7,315,201 ) (2,639,669 )
Other income (expense) 245,096 (85,809 )
Net loss (7,070,105 ) (2,725,478 )
Net loss attributable to noncontrolling interests (1,712,060 ) (123,379 )
Net loss available to common stockholders (5,358,045 ) (2,602,099 )
Comprehensive net loss $ (5,358,045 ) $ (2,602,099 )
Basic and diluted net loss per common share (0.09 ) (0.12 )



Note 10 – Inventory



Inventory consists of the following components:
April 30, July 31,
2019 2018
Raw materials $ 108,060 $ —
Finished goods 141,961 12,075
Total Inventory $ 250,021 $ 12,075


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Note 11 – Property and Equipment



Property and equipment, net consisted of the following:
April 30, July 31,
2019 2018
Computers and technological assets $ 168,286 $ 11,365
Machinery and equipment 373,803 —
Furniture and fixtures 76,988 19,879
Leasehold Improvements 47,144 21,501
666,221 52,745
Less accumulated depreciation (109,945 ) (21,209 )
$ 556,276 $ 31,536



Depreciation expense related to property and equipment for the nine months ended April 30, 2019 and April 30, 2018 was $150,744 and $15,016, respectively.



For the nine months ended April 30, 2019, the Company had $252,012 of disposals and $11,208 of impairment of long-lived assets. The $252,012 of disposals pertains to Veneto and was mostly the result of their shift in business operations during March 2019 described in Notes 1 and 2. The $11,208 impairment of long-lived assets pertains to Grainland Pharmacies Holdings, LLC which ceased to operate – see Note 9.



Note 12 – Goodwill and Intangible Assets



Goodwill and Intangible Assets



The change in the carrying amount of goodwill and other intangible assets for the year ended July 31, 2018 and nine-month period ended April 30, 2019, is as follows:
Total Goodwill Other Intangibles, net
Balance as of July 31, 2018 $ 3,187,757 $ — $ 3,187,757
Acquisition of Veneto (revaluation) 15,898,371 13,585,769 2,312,602
Purchase of intangible assets 26,488 — 26,488
Disposal of intangible assets (62,091 ) — (62,091 )
Acquisition of Regentys 16,996,438 13,485,758 3,510,680
Acquisition of Olaregen 12,797,737 8,027,737 4,770,000
Close of Grainland Pharmacy (88,311 ) — (88,311 )
Amortization of Veneto developed software/technology (39,700 ) — (39,700 )
Amortization of Veneto referral base (initial valuation) (333 ) — (333 )
Amortization of Veneto non-compete agreement (initial valuation) (311,667 ) — (311,667 )
Amortization of Olaregen non-compete agreement (81,525 ) — (81,525 )
Balance as of April 30, 2019 $ 48,323,164 $ 35,099,264 $ 13,223,900




Intangible assets are generally amortized on a straight-line basis over the useful lives of the assets. The Company is currently not amortizing the in-process research and development until it becomes commercially viable and placed in service. At the time when the intangible assets are placed in service the Company will determine a useful life.



Goodwill represents the excess of the purchase price over the fair market value of net assets acquired. Goodwill for NGDx was $13.4 million as of the date of the acquisition. When the acquisition transaction closed in January 2017, NGDx was a development-stage entity and its liabilities exceeded the aggregate value of its assets. Utilizing discounted cash flow (DCF) valuation methodology, Generex determined that NGDx has forecasted losses throughout the reasonably foreseeable future with a nominal terminal value. In addition, there was a high degree of uncertainty as to the future cash flows of NGDx. Therefore, the Company concluded that the implied goodwill arising out of the acquisition was zero and should be properly characterized as fully impaired as of July 31, 2018.


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Goodwill for Veneto was $8,883,982 during first closing and $16,293,948 during the second closing for total goodwill of $25,177,930 pertaining to the acquisition. Based on the Amended Agreement (the “ Amendment ”) entered into on March 28, 2019 which stipulated that in lieu any cash payments, the Company would deliver shares of the Company’s common stock (the “Generex Shares”), the goodwill was revalued. Refer to Note 9 for additional details of the Amendment. Based on the updated analysis valuation, Veneto goodwill was deemed to have been $13,538,629 as of April 30, 2019.



Note 13 – Notes Payable



On October 26, 2018, Generex entered into a Securities Purchase Agreement with an investor pursuant to which the Company agreed to sell and sold its Note Due October 26, 2019 (“Note”) in the principal amount of $682,000 . The purchase price of the Note was $550,000 from which Generex was required to pay the $15,000 fee of the investor’s counsel. The remaining $147,000 of principal amount represents original issue discount. The Note does not bear any stated interest in addition to the original issue discount. The effective interest is 27.5%.



On November 25, 2018, Generex entered into a Securities Purchase Agreement with an investor pursuant to which the Company agreed to sell and sold its Note Due November 26, 2019 (“Note”) in the principal amount of $1,060,000. The purchase price of the Note was $1,000,000. The remaining $60,000 of principal amount represents original issue discount. The Note does not bear any stated interest in addition to the original issue discount.



On January 24, 2019, Generex entered into Securities Purchase Agreements with three investors pursuant to which the Company agreed to sell and sold convertible notes bearing interest at 10% per annum (the “Notes”) in the aggregate principal amount of $2,110,000. The purchase price of the Notes was $2,010,000 and the remaining $100,000 of principal amount represents original issue discount. Pursuant to the Securities Purchase Agreements, Generex also sold warrants to the investors to purchase up to an aggregate 120,570 shares of common stock with the fair value of the warrants as of the date of issuance in excess of the Notes (Note 14) resulting in full discount of the Notes.

On February 4, 2019, Generex entered into a Securities Purchase Agreement with an investor pursuant to which the Company agreed to sell and sold a convertible note bearing interest at 10% per annum (the “Note”) in the principal amount of $750,000. The purchase price of the Note was $712,500 and the remaining $37,500 of principal amount represents original issue discount. Pursuant to the Securities Purchase Agreements, the Company also sold to the Investor warrants to purchase up to an aggregate 45,000 shares of common stock with the fair value of the warrants as of the date of issuance in excess of the Notes (Note 14) resulting in full discount of the Notes.

On February 15, 2019, Generex entered into a Securities Purchase Agreement with an investor pursuant to which the Company agreed to sell and sold a convertible note bearing interest at 10% per annum (the “Note”) in the principal amount of $750,000 . The purchase price of the Note was $712,500 and the remaining $37,500 of principal amount represents original issue discount. Pursuant to the Securities Purchase Agreements, the Company also sold to the Investor warrants to purchase up to an aggregate 57,143 shares of common stock with the fair value of the warrants as of the date of issuance in excess of the Notes (Note 14) resulting in full discount of the Notes.

On April 8, 2019, Generex entered into a Securities Purchase Agreement with an investor pursuant to which the Company agreed to sell and sold a convertible note bearing interest at 10% per annum (the “Note”) in the principal amount of $530,000 . The purchase price of the Note was $505,500 and the remaining $25,000 of principal amount represents original issue discount. Pursuant to the Securities Purchase Agreements, the Company also sold to the Investor warrants to purchase up to an aggregate 92,842 shares of common stock with the fair value of the warrants as of the date of issuance in excess of the Notes (Note 14) resulting in full discount of the Notes.
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On April 23, 2019, Generex entered into a Securities Purchase Agreement with an investor pursuant to which the Company agreed to sell and sold a convertible note bearing interest at 10% per annum (the “Note”) in the principal amount of $530,000 . The purchase price of the Note was $505,500 and the remaining $25,000 of principal amount represents original issue discount. Pursuant to the Securities Purchase Agreements, the Company also sold to the Investor warrants to purchase up to an aggregate 84,126 shares of common stock with the fair value of the warrants as of the date of issuance in excess of the Notes (Note 14) resulting in full discount of the Notes.

For the three months ended April 30, 2019, the Company issued 279,111 warrants to investors of convertible notes disclosed above. For the nine months ended April 30, 2019, the Company issued 15,483,681 warrants which consisted of 399,681 issued to investors of convertible notes disclosed above, 15,000,000 issued to a former shareholder of NGDx upon acquisition of the remaining 49% interest of the entity (Note 9) and 84,000 issued to AEXG in connection with an arbitrator’s award (Note 4). With the exception of the 84,000 warrants issued to AEXG, all other granted warrants vested immediately upon issuance.

Pursuant to its wholly owned subsidiary NuGenerex, the Company completed the acquisition of the assets and 100% of the membership interests of two pre-operational pharmacies, Empire State Pharmacy Holdings, LLC and Grainland Pharmacy Holdings, LLC, pursuant to the bills of sale for a consideration of $320,000 Promissory Note. Refer to Note 9 for details.



Pursuant to the second closing of the acquisition of certain operating assets of Veneto Holdings, L.L.C. and its affiliates, Generex’s wholly owned subsidiary agreed to assume outstanding debt of Veneto subsidiaries to Compass Bank, including obligations under a term loan and a revolving line of credit. Claiming three separate types of default, Compass Bank has demanded payment in full of amounts due under the term loan and revolving line of credit, in an aggregate amount of approximately $3,404,000. Generex believes it has defenses to such demand, including that the bank was not an intended beneficiary of the subsidiary’s agreement to assume the debt.



Pursuant to its acquisition of Regentys, the Company inherited convertible notes with several investors which collectively holds a principal plus discount balance of $611,761 and has accrued interest of $12,899 as of April 30, 2019.



Note 14 – Derivative Liability



The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted and all additional convertible debentures and warrants are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities on the issuance date.



Based on the various convertible notes described in Note 13, the fair value of applicable derivative liabilities on notes, warrants and change in fair value of derivative liability are as follows as of April 30, 2019:



Note Date of Issuance Convertible Note Balance Derivative Liability on Convertible Notes Derivative Liability on Warrants Change in FV of Derivative Liability
A January 24, 2019 $ 2,110,000 $ 1,757,644 $ 56,707 $ 874,184
B February 4, 2019 750,000 618,349 3,660 192,037
C February 15, 2019 750,000 571,659 48,586 52,437
D April 8, 2019 530,000 496,701 77,992 4,001
E April 23, 2019 530,000 493,160 70,533 7,508
Totals $ 4,670,000 $ 3,937,513 $ 257,478 $ 1,130,167



Note A



Subject to certain ownership limitations, the Notes will be convertible at the option of the holder at any time into shares of the Company’s common stock at an effective conversion price determined as follows: the lesser of


• A price determined as of the date of closing; and


• 70% of the lowest volume weighted average trading price of the common stock on the ten days prior to conversion.



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Note B



Subject to certain ownership limitations, the Note will be convertible at the option of the holder at any time into shares of the Company’s common stock at an effective conversion price determined as follows: the lesser of


• Average price for the ten days prior to closing; and


• 70% of the lowest volume weighted average trading price of the common stock on the ten days prior to conversion.



Note C



Subject to certain ownership limitations, the Note will be convertible at the option of the holder at any time into shares of the Company’s common stock at an effective conversion price determined as follows: the lesser of


• $2.50 per share; and


• 70% of the lowest volume weighted average trading price of the common stock on the ten days prior to the date a notice of conversion is received.



Note D



Subject to certain ownership limitations, the Note will be convertible at the option of the holder at any time into shares of the Company’s common stock at an effective conversion price determined as follows: the lesser of


• A price determined as of the date of closing; and


• 70% of the lowest volume weighted average trading price of the common stock on the ten days prior to (and including) the date a notice of conversion is received.



Note E



Subject to certain ownership limitations, the Note will be convertible at the option of the holder at any time into shares of the Company’s common stock at an effective conversion price determined as follows: the lesser of


• A price determined as of the date of closing; and


•

70% of the lowest volume weighted average trading price of the common stock on the ten days prior to (and including) the date a notice of conversion is received.



As a result of the Amended Agreement entered into on March 28, 2019 (“the Amendment ”) with Veneto and the equity owners of Veneto (the “Veneto Members”) to restructure the Promissory Note referenced in Note 9, the Company was evaluated for Veneto Downside Protection associated with the 8,400,000 issued shares in lieu of cash payments against the Promissory Note. Based on the valuation as of the date of agreement on March 28, 2019, an allocation of $6,424,338 was allocated to derivative liability for downside protection. As of April 30, 2019, the downside protection had a market change of $570,112 and held a value of $6,994,450.


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Note 15 – Income Taxes:



The Company has incurred losses since inception, which have generated net operating loss (“NOL”) carryforwards. The NOL carryforwards arise from both United States and Canadian sources. Pre-tax gain or (loss) arising from domestic operations (United States) were $(5,415,726) and $35,948,698 for the nine months ended April 30, 2019 and the year ended July 31, 2018, respectively. Pre-tax (losses) arising from foreign operations (Canada) were $(339,586) and $(150,394) for the nine months ended April 30, 2019 and the year ended July 31, 2018, respectively.



As of April 30, 2019, the Company has NOL carryforwards in Generex Biotechnology Corporation of approximately $215 million, of which $200 million will expire in 2019 through 2037, and $14.8 million will not expire. The non-expiring portion is limited to 80% of the current year taxable income of the respective entity. Generex Pharmaceuticals Inc. has NOL carryforwards of approximately $36.4 million, which expire in 2024 through 2039. Antigen Express, Inc. has NOL carryforwards of approximately $36.7 million, of which $35.1 will expire in 2019 through 2038. Regentys Corporation has NOL carryforwards of approximately $6.1 million, of which $3.5 million will expire in 2033 through 2038. Olaregen Therapeutics, Inc. has NOL carryforwards of $1.6 million which will not expired. Some of these loss carryforwards are subject to limitation due to the acquisition of Regentys, Olaregen and Antigen and may be limited in future years due to certain structural ownership changes which have occurred over the last several years related to the Company’s equity and convertible debenture financing transactions.



As of April 30, 2019, the Company had no tax benefits which have not been fully allowed for, and no adjustment to its financial position, results of operations or cash flows was required. The Company has deferred tax assets of over $67 million with a full allowance equally to the to the amount of the deferred tax asset. The Company does not expect that unrecognized tax benefits will increase within the next twelve months. As referenced in Note 9, the acquisition of Regentys and Olaregen resulted in the purchase price allocation attributed to deferred tax liability was $889,782 and $1,040,173, respectfully. Although the Company deferred tax assets are in excess of deferred tax liabilities totaling $1,929,955, the Company cannot offset the deferred tax liabilities against its deferred tax assets since the Company acquired less than the 80% of both Regentys and Olaregen preventing the Company to consolidate its income tax returns with Regentys and Olaregen for tax purposes. Therefore, the deferred tax liabilities will be reported separately until such time that the Company determines otherwise.



The Company records interest and penalties related to tax matters within other expense on the accompanying consolidated statement of operations. These amounts are not material to the consolidated financial statements for the years presented. Generally, tax years 2015 to 2018 remain open to examination by the Internal Revenue Agency or other tax jurisdictions to which the Company is subject. The Company’s Canadian tax returns are subject to examination by federal and provincial taxing authorities in Canada. Generally, tax years 2010 to 2018 remain open to examination by the Canada Revenue Agency or other tax jurisdictions to which the Company is subject.



Note 16 - Subsequent Events:



The Company has evaluated subsequent events occurring after the balance sheet date through the date the unaudited condensed interim consolidated financial statements were issued.

On May 10, 2019, 4,000,000 shares of Generex common stock was transferred out of the Friends of Generex Biotechnology Investment Trust (the “Trust”) in consideration of 592,683 Series A voting preferred of Olaregen held by an existing shareholder in Olaregen. A $2,000,000 promissory note from Genrex to the existing shareholder in Olaregen remains outstanding. The 592,683 represents approximately 10% voting control of Olaregen. The $2,000,000 was extended to have a maturity date of August 1, 2019. Subsequent to this transaction, there are 2,366,187 Olaregen shares that belong to non-controlling interest shareholders which represents a 37.9% non-controlling interest.



On May 10, 2019, the Trust transferred 400,000 shares of Generex common stock to an investor to to satisfy a $1,000,000 obligation.

On May 22, 2019, the Company and Olaregen amended the Stock Purchase Agreement and Promissory Note to extend the due date of the remaining balance of the second payment and the full balance of the third and fourth guaranteed payments amounting to $4,361,500 on or before June 30, 2019.

On May 22, 2019, the Company and Regentys amended the Stock Purchase Agreement and Promissory Note to extend the due date of the remaining balance of the first tranche of and the full balance of the second guaranteed payments amounting to $4,800,000 on or before June 30, 2019.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

As used herein, the terms the “Company,” “Generex,” “we,” “us,” or “our” refer to Generex Biotechnology Corporation, a Delaware corporation. The following discussion and analysis by management provides information with respect to our financial condition and results of operations for the nine-month periods ended April 30, 2019 and 2018. We engaged in certain acquisition transactions during the nine months ended April 30, 2019 as follows:


• Effective October 3, 2018, we purchased certain assets of Veneto Holdings, L.L.C. (“Veneto”), and its subsidiaries (the “First Closing Assets”). We acquired additional assets of Veneto effective November 1, 2018 (the “Second Closing Assets” and together with the First Closing Assets, the “Acquired Veneto Assets.”). Our balance sheet at April 30, 2019 includes our interest in the Acquired Veneto Assets, the obligations issued in connection with the purchase of the Acquired Veneto Assets. Our interest in the results of operations of the First Closing Assets since October 3, 2018 and the Second Closing Assets since November 1, 2018 is included in our Condensed Interim Consolidated Statement of Operations and Comprehensive Loss for the quarter ended April 30, 2019.
• Effective January 7, 2019, we purchased a majority interest in the capital stock of Regentys Corporation. (“Regentys”). Our balance sheet at April 30, 2019 includes our interest in Regentys and our interest in the results of operations of Regentys for the period January 7, 2019 through April 30, 2019 is included in our Condensed Interim Consolidated Statement of Operations and Comprehensive Loss for the nine months ended April 30, 2019.
• Effective January 7, 2019, we purchased a majority interest in the capital stock of Olaregen Therapeutix Inc. (“Olaregen”). Our balance sheet at January 31, 2019 includes our interest in Olaregen and our interest in the results of operations of Olaregen for the period January 7, 2019 through April 30, 2019 is included in our Condensed Interim Consolidated Statement of Operations and Comprehensive Loss for the nine months ended April 30, 2019.



This discussion should be read in conjunction with the information contained in Part I, Item 1A - Risk Factors and Part II, Item 8 - Financial Statements and Supplementary Data in our Annual Report on Form 10-K for the year ended July 31, 2018, as amended, and the information contained in Part I, Item 1 - Financial Statements in this Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2019.



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Forward-Looking Statements

We have made statements in this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q of Generex Biotechnology Corporation for the fiscal quarter ended April 30, 2019 that may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act" . The Act limits our liability in any lawsuit based on forward-looking statements that we have made. All statements, other than statements of historical facts, included in this Quarterly Report that address activities, events or developments that we expect or anticipate will or may occur in the future, including such matters as our projections, future capital expenditures, business strategy, competitive strengths, goals, expansion, market and industry developments and the growth of our businesses and operations, are forward-looking statements. These statements are based on currently available operating, financial and competitive information. These statements can be identified by introductory words such as “may,” "expects," “anticipates,” "plans," "intends," "believes," "will," "estimates" or words of similar meaning, and by the fact that they do not relate strictly to historical or current facts. Our forward-looking statements address, among other things:


• our expectations concerning product candidates for our technologies;
• our expectations concerning funding of obligations related to potential acquisitions and generally completing acquisitions;
• our expectations concerning existing or potential development and license agreements for third-party collaborations, acquisitions and joint ventures;
• our expectations concerning product candidates for our technologies;
• our expectations regarding the cost of raw materials and labor, consumer preferences, the effect of government regulations on the Company’s business, the Company’s ability to compete in its industry, as well as future economic and other conditions both generally and in the Company’s specific geographic markets;
• our expectations of when regulatory submissions may be filed or when regulatory approvals may be received; and
• our expectations of when commercial sales of our products in development may commence and when actual revenue from the product sales may be received.



Any or all of our forward-looking statements may turn out to be wrong. They may be affected by inaccurate assumptions that we might make or by known or unknown risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in our forward-looking statements. Among the factors that could affect future results are:


• the inherent uncertainties of product development based on our new and as yet not fully proven technologies;
• the risks and uncertainties regarding the actual effect on humans of seemingly safe and efficacious formulations and treatments when tested clinically;
• the inherent uncertainties associated with clinical trials of product candidates;
• the inherent uncertainties associated with the process of obtaining regulatory approval to market product candidates;
• the inherent uncertainties associated with commercialization of products that have received regulatory approval;
• the decline in our stock price; and
• our current lack of financing for operations and our ability to obtain the necessary financing to fund our operations and effect our strategic development plan.


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Additional factors that could affect future results of our historical business are set forth in Part I, Item 1A Risk Factors of our Annual Report on Form 10-K for the year ended July 31, 2018, as amended. We caution investors that the forward-looking statements contained in this Quarterly Report must be interpreted and understood in light of conditions and circumstances that exist as of the date of this Quarterly Report. We expressly disclaim any obligation or undertaking to update or revise forward-looking statements to reflect any changes in management's expectations resulting from future events or changes in the conditions or circumstances upon which such expectations are based.



Executive Summary



Preliminary Note



On January 17, 2017, we acquired a 51% interest in NuGenerex Diagnostics LLC (“NGDx”), formerly Hema Diagnostic Systems. On December 1, 2018, we acquired the remaining equity of NGDx, and NGDx became a wholly owned subsidiary. We intend to focus resources on NGDx’ business as well as other potential acquisition candidates going forward, but do not intend to discontinue our pre-Acquisition activities.



We intend to focus resources on NGDx’s business, and on the businesses of Regentys, Olaregen and the MSAO business acquired from Veneto, as well as additional acquisition targets, but do not intend to discontinue our historical activities. However, we will not pursue our historical business if we do not receive substantial financing for that purpose. Olaregen is launching an FDA 5 a wound healing product.



On October 3, 2018, we acquired the First Closing Assets from Veneto, primarily consisting of the operating assets of (a) system dispensing pharmacies, (b) a central adjudicating pharmacy, (c)a wholesale pharmaceutical purchasing company, and (d) an in-network laboratory.



On November 1, 2018 we consummated the acquisition of the Second Closing Assets, consisting primarily of Veneto’s management services organization business and two additional ancillary services. The aggregate price for the First Closing Assets and the Second Closing Assets was $30,000,000. We issued a promissory note in the principal amount of $35,000,000 (the “ New Note ”) consisting of the $30,000,000 purchase price and a $5,000,000 original issue discount, as the sole consideration payable on the Second Closing Date. In addition, we agreed to assume approximately $3.4 million in outstanding institutional debt of Veneto subsidiaries, but will have use of Veneto cash which would otherwise have been applied to paying down the debt.



On March 28, 2019, the Company entered into an Amendment Agreement (the “Amendment”) with Veneto and the equity owners of Veneto (the “Veneto Members”) entered into restructuring the payment of the New Note that provided in lieu of any cash payments, the Company would delivery 8,400,000 shares of the Company’s common stock (the “Generex Shares”) to be delivered on or before April 22, 2019; plus an aggregate 5,500,000 shares of the Company’s common stock of the Company’s subsidiary, Antigen Express, Inc.


• The Company and the Veneto Members established a value of the Company’s common stock related to this conversion of debt at $2.50/share, but upon a final pay date of June 14, 2020 (the “Pay Date”) the Veneto Members will receive additional compensatory shares if following results in a positive number: $2.50 (the “Strike Price" per Generex Shares times the shares issued (8,400,000) minus the Sale Price of the proceeds of sale of any Generex Shares by the Members in the interim (“Sale Price”) times the number of Generex Shares sold (“Shares Sold”) divided by the Spot Price of the price of the common voting shares of the Company’s common stock on the Pay Date (“Spot Price”). Any sale above the Strike Price shall be discarded.
• The Sale Price shall, for calculation under this agreement shall be no less than $1.50 per share. Any actual proceeds of sale that are less than $1.50 per shares shall be calculated at $1.50 regardless of the actual proceeds of sale. As such, the Veneto Members shall have downside protection from $2.50 to $1.50.
• The downside protection lapses if the volume weighted average price of the Generex Shares, in any period of 90 consecutive trading days, is over $5 per share.


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On January 7, 2019, we acquired a majority interest in Regentys Corporation for an aggregate of $15,000,000. $400,000 was paid in cash and the remainder was paid by the issuance of a promissory note. $650,000 principal was paid against the note as of April 30, 2019 in addition to the $400,000 initial payment. Regentys is developing a non-surgical treatment for inflammatory bowel diseases such as ulcerative colitis and Crohn’s disease.



On January 7, 2019, we acquired a majority interest in Olaregen Therapeutix Inc. (“Olaregen”) for an aggregate of $12,000,000. $400,000 was paid in cash and the remainder was paid by the issuance of a promissory note. $1,200,000 principal was paid against the note as of April 30, 2019 and an additional $38,500 was paid subsequently for a total aggregate of $1,238,500 of principal payments in addition to the $400,000 initial payment. Olaregen is launching an FDA-510(k) cleared wound care product.



Overview of Business



NGDx Diagnostic Products .



Our majority owned subsidiary, NuGenerex Diagnostics LLC (“NGDx”), formerly Hema Diagnostic Systems, is in the business of developing, manufacturing, and distributing of in-vitro medical diagnostics for infectious diseases administered at the point of care level with results as soon as 10-15 minutes. We manufacture and sell rapid diagnostic devices based upon our own proprietary EXPRESS platforms as well as cassette devices based on customary designs used generally in the industry.



Since its founding, NGDx has been developing and continues to develop an expanding line of Rapid Diagnostic Tests (RDTs) including those for the following infectious diseases such as Human Immunodeficiency Virus (HIV) – ½ w/p24Ab, tuberculosis-XT, malaria, hepatitis, syphilis, typhoid, dengue and other infectious diseases.



Today, we have developed a substantial line of RDT’s known as ready to “go-to-market.”



Due to the potential infectious character of the whole blood test sample, our Express series of RDTs are designed to perform and deliver test results while sealed within the Express housing, carefully controlling the potentially infectious test sample. This design helps to increase our ability to control the possibility of cross-contamination. Most of our competitors’ products, while inexpensive, are not as user-friendly allowing for increased user-error and requires substantially more training and have greater risk of cross-contamination.



We have been designing and engineering delivery systems that incorporate advanced technologies of rapid test strips for use in our Express series of devices and which yield a rapid response for point-of-care patient testing and treatment.



Each RDT incorporates an accurate test strip that has been striped with specific antigens or antibodies combined in a proprietary cocktail and then incorporated into an easy-to-use and user-friendly delivery system. The NGDx delivery systems include our standard “cassette” design, our patented “Express” housing device as well as our new “Express II”.



Each system delivers its own advantages which enhance the use, application and performance of each diagnostic. This ease of use in the Express delivery systems ensure that our RDTs perform efficiently and effectively providing the most accurate and repeatable test results available while, at the same time, minimizing the transference of a potentially infected blood sample.



The Company maintains a Federal Drug Administration (FDA) registered facility in Miramar, Florida and is certified under both ISO9001 and ISO13485 for the Design, Development, Production and Distribution of the in-vitro devices. Approval of our HIV rapid test has been issued by the United States Agency for International Development (USAID). Additionally, some of our products qualified for and carry the European Union “CE” Mark, which allow us to enter into CE Member countries subject to individual country requirements. Currently, we have two malaria rapid tests approved under World Health Organization (WHO) guidelines. Our NGDx products have also received registrations and approvals issued by other foreign governments. NGDx is currently in the planning phase for entering into the newly announced, WHO “Pre-Qualified Approval” process for other NGDx tests. This process allows expedited approval of rapid tests, reducing the current 24-30 month process down to approximately 6-9 months. WHO approval is necessary for our products to be used in those countries which rely upon the expertise of the WHO, as well as for NGO funding for the purchase of diagnostic products.


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Pharmacy and MSO Business



On October 3, 2018, we acquired from Veneto the operating assets of system dispensing pharmacies, (b) a central adjudicating pharmacy, (c) a wholesale pharmaceutical purchasing company, and (d) an in-network laboratory.



On November 1, 2018, we acquired Veneto’s management services organization (MSO) business and two additional ancillary services.



Regentys Business



Regentys is a development stage, regenerative medicine company focused on developing treatments for patients with gastrointestinal (GI) disorders. Their first product, ExtraCellular Matrix Hydrogel (ECMH), is a first-in-class, non-pharmacologic, non-surgical treatment option for patients suffering from Ulcerative Colitis.



Olaregen Business .



Olaregen’s primary product, Excellagen, is an FDA-510(k) cleared aseptically-manufactured, syringe-based, ready to use 3-dimensional wound conforming matrix that supports a favorable wound healing environment. Excellagen is indicated for the management of wounds including; partial and full-thickness wounds, pressure ulcers, venous ulcers, diabetic ulcers, chronic vascular ulcers, tunneled/undermined wounds, surgical wounds (donor sites/graft, post-Mohs surgery, post-laser surgery, podiatric, wound dehiscence), trauma wounds (abrasions, lacerations, second-degree burns and skin tears) and draining wounds.



Generex Historical Business



We have historically engaged primarily in the research and development 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 have expanded our focus to include immunomedicines incorporating proprietary vaccine formulations. On January 18, 2017, we acquired a majority of the equity interests in NuGenerex Diagnostics LLC (“NGDx”), formerly Hema Diagnostic Systems, LLC. On December 1, 2018, we acquired the remainder of the NGDx equity interests for nominal consideration provided that the Generex stock and warrants issued to the NGDx equity owners in connection with the initial acquisition have a specified value and we have registered for resale the Company’s shares issued to the NGDx equity owners. NGDx is in the business of developing, manufacturing, and distributing of in-vitro medical diagnostics for infectious diseases administered at the point of care level with results as soon as 10-15 minutes. NGDx manufactures and sells rapid diagnostic devices based upon our own proprietary EXPRESS technology as well as cassette devices based on customary designs used generally in the industry. We intend to focus on NGDx’s business and in identifying other areas for expansion, but do not intend to discontinue our pre-Acquisition activities.



We believe that our buccal delivery technology is a platform technology that has application to many large molecule drugs and provides a convenient, non-invasive, accurate and cost-effective way to administer such drugs. We have identified several large molecule drugs as possible candidates for development, including estrogen, heparin, monoclonal antibodies, human growth hormone and fertility hormones, but to date have focused our development efforts primarily on one pharmaceutical product, Generex Oral-lyn™, an insulin formulation administered as a fine spray into the oral cavity using our proprietary hand-held aerosol spray applicator known as RapidMist™.



Our subsidiary, Antigen, concentrates on developing proprietary vaccine formulations that work by stimulating the immune system to either attack offending agents (i.e., cancer cells, bacteria, and viruses) or to stop attacking benign elements (i.e., self-proteins and allergens). Our immunomedicine products are based on two platform technologies and are in the early stages of development. Prior to exhausting our funds, we continued clinical development of Antigen’s synthetic peptide vaccines designed to stimulate a potent and specific immune response against tumors expressing the HER-2/neu oncogene for patients with HER-2/neu positive breast cancer in a Phase II clinical trial and patients with prostate cancer and against avian influenza in two Phase I clinical trials. We also initiated an additional Phase I clinical trial in patients with either breast or ovarian cancer. The synthetic vaccine technology has certain advantages for pandemic or potentially pandemic viruses, such as the H5N1 avian and H1N1 swine flu. We have established collaborations with clinical investigators at academic centers to advance these technologies.


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We operate in three segments. Our historical business operates in the research and development of drug delivery systems and technologies for metabolic and immunological diseases. NGDx operates in the development, manufacture and distribution of in-vitro medical diagnostic devices (RDTs) administered at the point of care level. Our subsidiary, NuGenerex Distribution Solutions 2, LLC, which acquired the Veneto assets, operates in pharmaceutical services.



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™) and Antigen’s peptide immunotherapeutic vaccines.



We did not expend any material resources on our buccal insulin (Generex Oral-lyn™) or other oral delivery products in the fiscal quarters ended April 30, 2019 and 2018 due to lack of funds. The completion of further late-stage trials in Canada and the United States may require significantly greater funds than we currently have on hand.



During the nine months ended April 30, 2019 and 2018, we paid $342,000 to NSABP for clinical trials for additional research and development relating to Antigen’s peptide immune therapeutic vaccines and related technologies due to our lack of cash. One Antigen vaccine is currently in Phase II clinical trials in the United States involving patients with HER-2/neu positive breast cancer, and we have completed a Phase I clinical trial for an Antigen vaccine for H5N1 avian influenza which was conducted at the Lebanese-Canadian Hospital in Beirut. Antigen’s prostate cancer vaccine based on AE37 has been tested in a completed (August 2009) Phase I clinical trial in Greece.



During the nine months April 30, 2019 and 2018, NGDx expended $443,504 and $380,781 on research and development relating to its rapid diagnostic tests. NGDx expects to expend resources on its rapid diagnostic test during the remainder fiscal year ending July 31, 2019.



Because of various uncertainties, we cannot predict the timing of completion and commercialization of our buccal insulin or Antigen’s peptide immunotherapeutic vaccines or related technologies. These uncertainties include the success of current studies net operating losses attributed to NGDx, 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.



Critical Accounting Policies



There are no material changes from the critical accounting policies set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended July 31, 2018 filed with the SEC on October 26, 2018, except as follows:



We have adopted a sequencing policy whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to our inability to demonstrate we have sufficient authorized shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of authorized but unissued shares, and all future instruments being classified as a derivative liability, with the exception of instruments related to share-based compensation issued to employees or directors.



Our discussion and analysis of our financial condition and results of operations is based on our condensed interim 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.


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We consider certain accounting policies related to impairment of long-lived assets, intangible assets and accrued liabilities to be critical to our business operations and the understanding of our results of operations:



Going Concern. As shown in the accompanying condensed interim consolidated financial statements, we have not been profitable and have reported recurring losses from operations. These factors raise substantial doubt about our ability to continue to operate in the normal course of business. The accompanying consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.



Impairment of Long-Lived Assets . Management reviews for impairment whenever events or changes in circumstances indicate that the carrying amount of property and equipment may not be recoverable under the provisions of accounting for the impairment of long-lived assets. If it is determined that an impairment loss has occurred based upon expected future cash flows, the loss is recognized in the Condensed Interim Consolidated 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



Inventory . Inventories, which consist of both raw materials and finished goods, is valued at the lower of cost, determined by the first-in, first-out method, or market value. Inventory costs are comprised primarily of product, labor, freight and duty. The Company writes down inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. For the nine months ending April 30, 2019, the Company had a write down of inventory for $645,351 related to obsolescence which is classified as cost of goods sold.



Share-based compensation. Management determines value of stock-based compensation to employees in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 718, Compensation – Stock Compensation. Management determines value of stock-based compensation to non-employees and consultants in accordance with and ASC 505, Equity-Based Payments to Non-Employees.



Derivative warrant liability . FASB ASC 815, Derivatives and Hedging, requires all derivatives to be recorded on the condensed interim consolidated balance sheet at fair value for fiscal years beginning after December 15, 2008. As a result, certain derivative warrant liabilities (namely those with a price protection feature) are now separately valued as of August 1, 2009 and accounted for on our balance sheet, with any changes in fair value recorded in earnings. On our condensed interim consolidated balance sheets as of April 30, 2019 and July 31, 2018, we used the binomial lattice model to estimate the fair value of these warrants. Key assumptions of the binomial lattice option-pricing model include the market price of our stock, the exercise price of the warrants, applicable volatility rates, risk-free interest rates, expected dividends and the instrument’s remaining term. These assumptions require significant management judgment. In addition, changes in any of these variables during a period can result in material changes in the fair value (and resultant gains or losses) of this derivative instrument.



As reported above, the Company has a sequencing policy regarding share settlement wherein instruments with the earliest issuance date would be settled first. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares.



On January 24, 2019, the company entered into a note payable with an unrelated party at a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. Accordingly, all convertible instruments issued after January 24, 2019 are considered derivatives according to the Company’s sequencing policy.


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Results of Operations



Three months ended April 30, 2019 compared to three months ended April 30, 2018



We had a net loss for the three months ended April 30, 2019 of $11,153,308 and income of $3,432,093 in the corresponding three months of the prior fiscal year. The net loss for the three months ended April 30, 2019 was caused primarily by general and administrative expenses which was $8,656,877 which represented a $7,972,487 increase compared to the three months of the prior fiscal year which had a balance of $684,390. The income for the three months of the prior fiscal year was caused primarily by the change in fair value of contingent purchase consideration which was $4,573,493 compared to the three months ended April 30, 2019 which had a balance of $0.



Of the $7,972,487 increase in general and administrative expenses in the quarter ended April 30, 2019 versus the comparative previous fiscal quarter, $3,006,813 was due to the acquisitions of Veneto, Regentys and Olaregen which had not yet been acquired in the previous fiscal year. The increase in general and administrative expenses is also attributed to an increase of $3,103,120 in professional services which is mostly comprised of legal fees due to the newly acquired entities. Due diligence fees alone accounted for $2,752,235 of these fees.



The change in fair value of contingent purchase consideration in the three months ended April 30, 2019 was $0 compared to the previous year’s fiscal three months of $4,573,493 due to the change in fair value of the warrant and Call Option related to purchasing the remaining interest of NuGenerex Diagnostics LLC (“NGDx”), formerly Hema Diagnostic Systems, LLC. The Call Option was exercised November 30, 2018.



Our interest expense in the three months ended April 30, 2019 was $2,328,703 compared to the previous year’s fiscal three months of $149,590 which is due to the increase of debt during the current fiscal year as the Company has entered into various new promissory notes during the current fiscal year.



Nine months ended April 30, 2019 compared to nine months ended April 30, 2018



We had a net loss for the nine months ended April 30, 2019 of $5,755,312 and income of $21,129,021 in the corresponding nine months of the prior fiscal year. The net loss for the nine months ended April 30, 2019 was caused primairy by general and administrative expenses which was $17,428,182 which represented a $15,627,742 increase compared to the nine months of the prior fiscal year which had a balance of $1,800,440. The income for the nine months of the prior fiscal year was caused primarily by the change in fair value of contingent purchase consideration which was $23,350,122 which represented an $8,202,531 increase compared to the nine months ended April 30, 2019 which had a balance of $15,147,591.



Of the $15,627,742 increase in general and administrative expenses in the nine months ended April 30, 2019 versus the comparative previous fiscal quarter, $8,211,184 was due to the acquisitions of Veneto, Regentys and Olaregen which had not yet been acquired in the previous fiscal year. The increase in general and administrative expenses is also attributed to an increase of $3,701,982 in professional services which is mostly comprised of legal fees due to the newly acquired entities. Due diligence fees alone accounted for $2,752,235 of these fees.



The change in fair value of contingent purchase consideration in the nine months ended April 30, 2019 was $15,147,591 compared to the previous year’s fiscal three months of $23,350,122 due to the change in fair value of the warrant and Call Option related to purchasing the remaining interest of NuGenerex Diagnostics LLC (“NGDx”), formerly Hema Diagnostic Systems, LLC. The Call Option was exercised November 30, 2018.



Our interest expense in the nine months ended April 30, 2019 was $4,591,639 compared to the previous year’s fiscal nine months of $426,780 which is due to the increase of debt during the current fiscal year as the Company has entered into various new promissory notes.



Financial Condition, Liquidity and Resources



Sources of Liquidity



To date we have financed our development stage activities primarily through private placements of our common stock, securities convertible into our common stock, and investor loans. We will require additional funds to support our working capital requirements and any development or other activities. NGDx will require additional funds to support its working capital requirements and any development or other activities or will need to curtail its research and development and other planned activities or suspend operations. NGDx will no longer be able to rely on its former primary owner for necessary financing. Going forward, NGDx will rely on Generex financing activities to fund NGDx operations, development and other activities.



Our April 30, 2019 cash position was not sufficient for 12 months of operations. Anticipated revenues associated with the Veneto acquisition are expected to alter the cash flow landscape.



While we have financed our development stage activities to date primarily through private placements of our common stock and securities convertible into our common stock, as well as investor notes, and raised approximately $4,000,000 during fiscal 2017 (including proceeds from warrant exercises, short term loans and the issuance of preferred stock), our cash balances have been low throughout fiscal 2018. We did not raise any cash from the sale of our securities in fiscal 2018.


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Management may seek to meet all or some of our operating cash flow requirements through financing activities, such as private placement of our common stock, preferred stock offerings and offerings of debt and convertible debt instruments as well as through merger or acquisition opportunities.



In addition, management is actively pursuing financial and strategic alternatives, including strategic investments and divestitures, industry collaboration activities, and potential strategic partners. Management has sold non-essential real estate assets which are classified as Assets Held for Investment to augment the company’s cash position and reduce its long-term debt.



We will continue to require substantial funds to continue research and development, including preclinical studies and clinical trials of our product candidates, further clinical trials for Oral-lyn™ and to commence sales and marketing efforts if the FDA or other regulatory approvals are obtained.



Financings



Following is a summary of the financing activities that we have completed since the end of fiscal 2018.



Financing – October 2018

Investor Note Secured by CEO’s Stock



On October 26, 2018, Generex entered into a Securities Purchase Agreement with an investor pursuant to which the Company agreed to sell and sold its Note Due October 26, 2019 (“Note”) in the principal amount of $682,000 . The purchase price of the Note was $550,000 from which Generex was required to pay the $15,000 fee of the investor’s counsel. The remaining $147,000 of principal amount represents original issue discount. The Note does not bear any stated interest in addition to the original issue discount.



Joseph Moscato, the Company’s President & Chief Executive Officer, has guaranteed the Company’s obligations under the Note. In addition, Mr. Moscato has pledged as collateral for the guaranty 156,400 shares of the Company’s common stock.



The Note provided it would become due and payable prior to maturity if the Company’s common stock is not listed for trading on a NASDAQ market on or before ninety (90) days after the date of the Note. The listing has not occurred. In January 2019, the Note holder demanded repayment on this basis and in March 2019, filed suit to recover the principal amount of the Note plus interest. The Company has filed its response.



Financing – November 2018

Investor Note Secured by CEO’s Stock



On November 25, 2018, Generex entered into a Securities Purchase Agreement with an investor pursuant to which the Company agreed to sell and sold its Note due November 26, 2019 (“Note”) in the principal amount of $1,060,000 . The purchase price of the Note was $1,000,000. The remaining $60,000 of principal amount represents original issue discount. The Note does not bear any stated interest in addition to the original issue discount.



Joseph Moscato, the Company’s President & Chief Executive Officer, has guaranteed the Company’s obligations under the Note. In addition, Mr. Moscato has pledged as collateral for the guaranty 400,000 shares of the Company’s post-stock dividend Common Stock owned by him. At the option of either the investor or Mr. Moscato, all or any part of the loan can be paid with shares of the pledged stock valued at $2.50 per share, without default.



The Company will become obligated to repay the Note prior to maturity upon the occurrence of certain other triggering events, including, breach of the covenants under the Note or Securities Purchase Agreement, breach of certain other contractual obligations, and the occurrence of a change in control of the Company.



If any of these events occur, or if the Company does not pay the principal amount when due, interest will accrue at the rate of 24% per annum on outstanding balance under the Note until paid in full. Late fees will apply on all amounts not paid within five trading days of the payment date.


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January – April 2019 Convertible Note Transactions



Between January 24, 2019 and January 31, 2019, the Company issues convertible notes bearing interest at 10% per annum (the “Notes”) in the aggregate principal amount of $2,110,000 . The purchase price of the Notes was $1,990,000 and the remaining $120,000 of principal amount represents original issue discount. Pursuant to the Securities Purchase Agreements, the Company also sold to the investors warrants to purchase up to an aggregate 120,570 shares of common stock.



Between February 4 and February 18, 2019, the Company issued two Notes with a combined aggregate principal amount of $1,500,000. Pursuant to the Securities Purchase Agreements, the Company also sold to the investors warrants to purchase up to an aggregate 102,143 shares of common stock.



Between April 8 and April 23, 2019, the Company issued two Notes with a combined aggregate principal amount of $1,060,000. Pursuant to the Securities Purchase Agreements, the Company also sold to the investors warrants to purchase up to an aggregate 176,968 shares of common stock



Subject to certain ownership limitations, the Notes will be convertible at the option of the holder at any time into shares of the Company’s common stock at an effective conversion price determined as the lesser of:


• A price determined as of the date of closing; and
• 70% of the lowest volume weighted average trading price of the common stock on the ten days prior to conversion.



Cash Flows for the Nine Months ended April 30, 2019



For the fiscal quarter ended April 30, 2019, we used $8,058,387 in cash to fund our operating activities. The use for operating activities included a net loss of $5,755,312, changes in fair value of contingent purchase consideration of $15,147,591, changes in fair value of derivative liabilities - convertible notes of $1,034,180 and change in derivative liabilities – warrants of $95,986. Changes to working capital included an increase of $6,663,603 related to accounts payable and accrued expenses.



The use of cash was offset by non-cash expenses of $550,285 related to depreciation and amortization, $1,530,312 related to the issuance of stock options as compensation, $99,519 impairment of long-lived assets, $1,128,613 amortization of debt discount, $959,974 non-cash interest expense from issuance on debt (derivative) and $570,112 change in fair value of downside protection.



In the nine months ended April 30, 2019, we had net cash used in investing activities of $2,282,371 primarily relating to cash received in the acquisition of Veneto.



We had cash provided by financing activities in the nine months ended April 30, 2019 of $6,128,146, most of which pertained to proceeds from investors of $5,929,910.



Our net working capital April 30, 2019 declined to negative $25,160,088 from negative $24,040,769 at July 31, 2018, which was attributed primarily to an increase in accounts payable and accrued expenses as well as notes payable.



Funding Requirements and Commitments



In addition to our commitments under the financings described above, we have the following obligations:



Veneto Acquisition Related Debt



On November 1, 2018, in connection with the completion of the acquisition of the pharmacy, management service organization and other assets of Veneto, the Company’s subsidiary, NuGenerex Distribution Solutions 2, LLC (“NuGenerex”), issued Veneto a promissory note in the principal amount of $35,000,000. The note calls for payment in full on or before January 15, 2019 with interest at an annual rate of 12% on the $30,000,000 portion of the new note representing the purchase price of the assets. The note is guaranteed by Generex and Joseph Moscato and secured by a first priority security interest in all of Generex’s assets. Mr. Moscato’s guaranty is limited to the principal amount of $15,000,000.


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On January 15, 2019, we entered into an Amendment Agreement (the “ Amendment ”) with Veneto and the equity owners of Veneto entered into restructuring payment of the note as follows:


• Payment of $15,750,000 by delivery of Generex common stock, initially valued at $2.50 per share.
• If, on the first to occur of (i) the ninetieth (90 th ) day after closing under the Amendment and (ii) the effective date of a registration statement filed with the SEC including the Generex shares pursuant to the Amendment, the average volume weighted average price (“VWAP”) of Generex common stock for the preceding five (5) trading days is less than $2.50 share, Generex will deliver additional Generex Shares such that the aggregate number of shares delivered under this Agreement equals $15,750,000 ÷ such average VWAP.
• The remainder of the principal and interest under the note shall be payable on April 15, 2019; provided that on that maturity date, Veneto shall have the option of (i) payment of principal and interest in cash and (ii) payment of principal and interest by Generex’s delivery of Generex Shares valued at $2.50 per share.
• All Generex shares issued pursuant to the Amendment will be delivered pro rata to the six equity owners of Veneto as distributions from Veneto.



On March 28, 2019, the Company entered into an Amendment Agreement (the “ Amendment ”) with Veneto and the equity owners of Veneto (the “Veneto Members”) to restructure the payment of the New Note that provided in lieu of any cash payments, the Company would deliver 8,400,000 shares of the Company’s common stock (the “Generex Shares”) to be delivered on or before April 22, 2019; plus an aggregate 5,500,000 shares of the Company’s subsidiary, common stock of Antigen Express, Inc. The Company and the Veneto Members established a value of the Company’s common stock related to this conversion of debt at $2.50/share, but upon a final pay date of June 14, 2020 (the “Pay Date”) the Veneto Members will receive additional compensatory shares if following results in a positive number: $2.50 (the “Strike Price" per Generex Shares times the shares issued (8,400,000) minus the Sale Price of the proceeds of sale of any Generex Shares by the Members in the interim (“Sale Price”) times the number of Generex Shares sold (“Shares Sold”) divided by the Spot Price of the price of the common voting shares of the Company’s common stock on the Pay Date (“Spot Price”). Any sale above the Strike Price shall be discarded. The Sale Price shall, for calculation under this agreement shall be no less than $1.50 per share. Any actual proceeds of sale that are less than $1.50 per shares shall be calculated at $1.50 regardless of the actual proceeds of sale. As such, the Veneto Members shall have downside protection from $2.50 to $1.50. The downside protection lapses if the volume weighted average price of the Generex Shares, in any period of 90 consecutive trading days, is over $5 per share.



As a result of the Amended Agreement entered into on March 28, 2019 (“the Amendment ”) with Veneto and the equity owners of Veneto (the “Veneto Members”) to restructure the Promissory Note referenced in Note 9, the Company was evaluated for Veneto Downside Protection associated with the 8,400,000 issued shares in lieu of cash payments against the Promissory Note. Based on the valuation as of the date of agreement on March 28, 2019, an allocation of $6,424,338 was allocated to derivative liability for Veneto Downside Protection. As of April 30, 2019, the downside protection had a market change of $570,112 and held a value of $6,994,450.



As of the date of filing this quarterly report, we had not yet delivered the shares of Generex Common Stock to the Veneto equity owners and the Amendment Agreement has not closed and subject to change.



In addition, pursuant to the Amendment, NuGenerex agreed to assume approximately $3.8 million in outstanding institutional debt of Veneto subsidiaries.


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Olaregen and Regentys Acquisitions



Olaregen



As of January 7, 2019, the Company completed a definitive Stock Purchase Agreement and related documents relating to the Company’s purchase of 3,282,632 newly issued shares of the Olaregen common stock representing 51% percent of the issued and outstanding capital stock of Olaregen for an aggregate $12,000,000.



In addition to $400,000 paid to Olaregen upon signing of the LOI, the purchase price for the Olaregen shares will consist of the following cash payments:


• $800,000 on or before January 15, 2019. The Company has paid this installment.
• $800,000 on or before January 31, 2019. As of the date this quarterly report was filed, the Company has paid $438,500 of this installment and remaining balance of $361,500 is payable on or before June 30, 2019 per extension in amended agreement.
• $3,000,000 on or before February 28, 2019. As of the date this quarterly report was filed, the Company has not paid this installment. As of the date is quarterly report was filed, the Company has not yet paid this installment and the full balance of $3,000,000 is payable on or before June 30, 2019 per extension in amended agreement.
• $1,000,000 on or before May 31, 2019. As of the date this quarterly report was filed, the Company has not paid this installment. As of the date is quarterly report was filed, the Company has not yet paid this installment and the full balance of $1,000,000 is payable on or before June 30, 2019 per extension in amended agreement.
• $6,000,000 on or before September 30, 2019.



Generex issued its promissory note in the amount of $11,600,000 (the “Note’) representing its obligation to pay the above amounts. The Note is secured by a pledge of the Olaregen Shares pursuant to a Pledge and Security Agreement.



On March 14, 2019, the Company and Olaregen amended the Stock Purchase Agreement and Promissory Note to extend the due date of the remaining balance of the first tranche of Guaranteed Payments amounting to $600,000 on or before April 1, 2019. The Company remitted additional payments of $200,000 on April 30, 2019 and $38,500 on May 17, 2019. On May 22, 2019, the Company and Olaregen amended the agreement to extend the due date of the remaining balance of the second tranche of Guaranteed Payments amounting to $361,500, the full balance of the third tranche amounting to $3,000,000 and the full balance of the fourth tranche amounting to $1,000,000 (total balance of $4,361,500) on or before June 30, 2019. The extension of this due date has no impact on the existing schedule of future payments or any additional terms within the Note. Olaregen has not filed any notice of default as of the date of publication, and Generex continues to provide Olaregen with business opportunities continuing the relationship.



In the event Generex does not make any other payments, its share ownership of Olaregen will be proportionately reduced.



Based on the Note, in the event any incremental payment is not paid when due, Olaregen has the option to increase the per share purchase price for all remaining purchased shares to $4.00 per share. Based on $1,400,000 of remitted payments and a Promissory Note balance of $10,400,000 prior to the first extension agreement on March 14, 2019, Olaregen elected the option to proportionally increase the per share purchase price to $4.00 for the remaining 2,899,658 of the total 3,282,632 shares to be acquired. This will result in an additional $998,633 which has been accrued for the Company to remit to Olaregen pursuant to the acquisition. This additional amount will be penalty amounts will be paid out proportionately with future payments. For example, the $361,500 balance of the second tranche, at the original purchase price of $3.65 per share, would have paid for 99,041 Olaregen shares. The Company will now be required to pay 99,041 x $4.00 = 396,164 to complete the second tranche.



Generex has a limited anti-dilution right under the Purchase Agreement, to ensure that Generex will retain 51% ownership in Olaregen for a period of time.


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Regentys



On January 7, 2019 the Company completed a definitive Stock Purchase Agreement and related documents relating to the Company’s purchase of 12,048,161 newly issued shares of the Regentys common stock representing 51% percent of the issued and outstanding capital stock of Regentys (“Regentys Shares”) for an aggregate of $15,000,000.



In addition to $400,000 paid to Regentys upon signing of the LOI, the purchase price for the Regentys shares consist of the following cash payments, with the proceeds intended to be used for specific purposes, as noted:


• $3,450,000 to initiate pre-clinical activities on or before January 15, 2018. As of the date this quarterly report was filed, the Company has paid $650,000 and the remaining balance of $2,800,000 is payable on or before June 30, 2019.
• $2,000,000 to initiate patient recruitment activities on or before May 1, 2019. As of the date this quarterly report was filed, the Company has not yet paid this installment and the full balance of $2,000,000 is payable on or before June 30, 2019 per extension in amended agreement.
• $3,000,000 to initiate a first-in-human pilot study on or before September 1, 2019.
• $5,000,000 to initiate a human pivotal study on or before February 1, 2020.
• $1,150,000 to submit a 510(k) de novo submission to the FDA on or about February 1, 2021.



The Company issued its promissory note in the amount of $14,600,000 (the “Note’) representing its obligation to pay the above amounts. The Note is secured by a pledge of the Regentys pursuant to a Pledge and Security Agreement.



On March 14, 2019, the Company and Regentys amended the Stock Purchase Agreement and Promissory Note to extend the due date of the remaining balance of the first tranche of Guaranteed Payments amounting to $2,800,000 on or before April 1, 2019. On May 22, 2019, the Company and Regentys signed a second extension to extend the due date on or before June 30, 2019. The extension of this due date has no impact on the existing schedule of future payments or any additional terms within the Note. Regentys has not filed any notice of default as of the date of publication, and Generex continues to provide Regentys with business opportunities continuing the relationship.



If we obtain necessary financing, we expect to expend resources towards additional acquisitions and regulatory approval and commercialization of Generex Oral-lyn™ and further clinical development of our immunotherapeutic vaccines.



In addition to our future funding requirements, commitments and our ability to raise additional capital will depend on factors that include:


• the timing and amount of expenses incurred to complete our clinical trials;
• the costs and timing of the regulatory process as we seek approval of our products in development;
• the advancement of our products in development;
• our ability to generate new relationships with industry partners throughout the world that will provide us with regulatory assistance and long-term commercialization opportunities;
• the timing, receipt and amount of sales, if any, from Generex Oral-lyn™ in India, Lebanon, Algeria and Ecuador;
• the cost of manufacturing (paid to third parties) of our licensed products and the cost of marketing and sales activities of those products;
• the costs of prosecuting, maintaining, and enforcing patent claims, if any claims are made;
• our ability to maintain existing collaborative relationships and establish new relationships as we advance our products in development;
• our ability to obtain the necessary financing to fund our operations and effect our strategic development plan; and
• the receptivity of the financial market to biopharmaceutical companies.


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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 our 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.



Tabular Disclosure of Contractual Obligations



Generex is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.



Recently Issued Accounting Pronouncements



The FASB issued several updates on Topic 606 “Revenue from Contracts with Customers”, including:


• ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”
• ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).”
• ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.”
• ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF (Emerging Issue Task Force) Meeting.”
• ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.”
• ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.”
• ASU 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840) and Leases (Topic 842). Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments.”



The standards provide companies with a single model for use in accounting for revenue arising from contracts with customers that supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The guidance was adopted as of August 1, 2018 and did not have a material effect on the Company’s condensed interim consolidated financial statements and related disclosures.


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In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This standard affects the accounting for equity instruments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. In February 2018, the FASB issued ASU 2018-03, “Technical Corrections and Improvements to Financial Instruments (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities”. This update was issued to clarify certain narrow aspects of guidance concerning the recognition of financial assets and liabilities established in ASU No. 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. This includes an amendment to clarify that an entity measuring an equity security using the measurement alternative may change its measurement approach to a fair valuation method in accordance with Topic 820, Fair Value Measurement, through an irrevocable election that would apply to that security and all identical or similar investments of the same issued. The update is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years beginning after June 15, 2018. The guidance was adopted as of August 1, 2018 and did not have a material effect on the Company’s condensed interim consolidated financial statements and related disclosures.



In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing diversity in practice regarding how certain cash receipts and cash payments are presented in the statement of cash flows. The standard provides guidance on the classification of the following items: (1) debt prepayment or debt extinguishment costs, (2) settlement of zero-coupon debt instruments, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, (6) distributions received from equity method investments, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows. The Company is required to adopt ASU 2016-15 for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017 on a retrospective basis. Early adoption is permitted, including adoption in an interim period. The guidance was adopted as of August 1, 2018 and did not have a material effect on the Company’s condensed interim consolidated financial statements and related disclosures.



In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that a statement of cash flows should include the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. The Company is evaluating the effect that ASU 2016-18 will have on its consolidated financial statements and is considering early adoption of the standard. The update is effective for fiscal years beginning after December 15, 2017. The guidance was adopted as of August 1, 2018 and did not have a material effect on the Company’s condensed interim consolidated financial statements and related disclosures.



In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The guidance was adopted as of August 1, 2018 and did not have a material effect on the Company’s condensed interim consolidated financial statements and related disclosures.



In May 2017, the FASB issued ASU 2017-09, “Compensation-Stock Compensation” (Topic 718): Scope of Modification Accounting. The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718 Compensation-Stock Compensation. An entity should account for the effects of a modification unless all the following are met: 1. The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification. 2. The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. 3. The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The ASU is effective for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. The guidance was adopted as of August 1, 2018 and did not have a material effect on the Company’s condensed interim consolidated financial statements and related disclosures.


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Item 3. Quantitative and Qualitative Disclosures About Market Risk.



Generex is a smaller reporting company and not required to provide Quantative and Qualitative Disclosures about Market Risk pursuant to Regulation S-K 305 (e).



Item 4. Controls and Procedures



As of April 30, 2019, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) and concluded that, subject to the inherent limitations, our disclosure controls and procedures were not effective due to the existence of several significant deficiencies culminating in material weaknesses in our internal control over financial reporting because of inadequate segregation of duties over authorization, review and recording of transactions, as well as the financial reporting of such transactions.



We have been working and are currently working to remediate the material weaknesses described above, including assessing the need for additional remediation steps and implementing additional measures to remediate the underlying causes that gave rise to the material weaknesses. We believe we have taken appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies, however we cannot be certain that our remediation efforts will ensure that our management designs, implements and maintains adequate controls over our financial processes and reporting in the future or that the changes made will be sufficient to address and eliminate the material weaknesses previously identified. Our inability to remedy any additional deficiencies or material weaknesses that may be identified in the future could, among other things, have a material adverse effect on our business, results of operations and financial condition, as well as impair our ability to meet our quarterly, annual and other reporting requirements under the Securities Exchange Act of 1934 in a timely manner, and require us to incur additional costs or to divert management resources.


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PART II - OTHER INFORMATION



Item 1. Legal Proceedings.



The Company is a defendant in one legal proceeding relating to alleged breach of contract and claims against certain of the Company’s original buccal delivery patents. The Company is also a defendant in two legal proceedings brought by a former executive officer and her affiliate. These legal proceedings have been reported in the Company’s prior periodic reports. No activity has occurred in these cases in several years, and the Company now considers them dormant.



In December 2011, a vendor of the Company commenced an action against the Company and its subsidiary, Generex Pharmaceuticals, Inc., in the Ontario Superior Court of Justice claiming damages for unpaid invoices including interest in the amount of $429,000, in addition to costs and further interest. The Company responded to this statement of claim and also asserted a counterclaim in the proceeding for $200,000 arising from the vendor’s breach of contract and detinue, together with interest and costs. On November 16, 2012, the parties agreed to settle this action and the Company has agreed to pay the plaintiff $125,000, following the spinout of its subsidiary Antigen, from the proceeds of any public or private financing related to Antigen subsequent to such spinout. Each party agreed to execute mutual releases to the claim and counterclaim to be held in trust by each party’s counsel until payment of the settlement amount. Following payment to the plaintiff, the parties agree that a Consent Dismissal Order without costs will be filed with the court. If the Company fails to make the payment following completion of any post-spinout financing related to Antigen or any other subsidiaries, the Plaintiffs may take out a judgment in the amount of the claim plus interest of 3% per annum and costs fixed at $25,000. This has been accrued in the unaudited condensed interim consolidated financial statements.



On August 22, 2017, Generex received a letter from counsel for Three Brothers Trading LLC, d/b/a Alternative Execution Group (“AEXG”), claiming breach of a Memorandum of Understanding (“MOU”) between Generex and AEXG. The MOU related to AEXG referring potential financing candidate to Generex. The letter from AEXG counsel claimed that Generex’s acceptance of $3,000,000 in financing from Pharma Trials, LLC, in March 2017, violated the provisions of the MOU prohibiting Generex from seeking other financing, with certain exceptions, for a period of 60 days after execution of the MOU. AEXG has demanded at least $210,000 in cash and 84,000 warrants for Generex stock convertible at $2.50 per share, for attorney’s fees and costs. On December 2, 2018, an arbitrator awarded Three Brothers Trading LLC, d/b/a Alternative Execution Group (“AEXG”) an aggregate of $315,695 in damages, costs and fees as well as warrants exercisable for 84,000 shares of Generex Common Stock at an exercise price of $2.50 per share. The awards were made pursuant to claims under a Memorandum of Understanding (“MOU”) between Generex and AEXG related to AEXG referring potential financing candidate to Generex. AEXG filed a petition to confirm the arbitrator’s award in the United States District Court for the Southern District of New York. The petition includes a demand of $3,300,360 as the value of the Warrants. The arbitrator did not award the specific amount of $3.3 million, but only liquidated damages in the amount of $220,000 and the value of 84,000 warrants “as of today” (the date of the award) plus attorney’s fees, certain costs, prejudgment and post-judgment interest (which continues to run on a daily basis) and arbitration fees. As of April 30, 2019, the value of the warrants have a market value of $65,613. Between the warrants and the $220,000 of liquidated damages, the Company has accrued $285,613 related to this matter.



On June 28, 2018, the Company was named in respect of a claim by Burrard Pharmaceutical Enterprises Ltd. and Moa’yeri Kayhan for unspecified damages and other remedies issued by the Supreme Court of British Columbia. The claim is made in connection with one advanced against Burrard and Kayhan by Middle East Pharmaceutical Factory L.L.C., a foreign corporation, for fraudulent or negligent misrepresentation. Middle East alleges that it was misled by Burrard and Kayhan into believing that Burrard had rights to distribute Generex product in the Middle East. Burrard and Kayhan allege that they did have rights in that regard, which the Company denies. The matter remains at the pleadings stage and the Company is investigating the facts.



On October 26, 2018, Generex entered into a Securities Purchase Agreement with an investor pursuant to which the Company agreed to sell and sold its Note Due October 26, 2019 (“Note”) in the principal amount of $682,000 . On January 25, 2019, Generex received a letter from the purchaser’s counsel stating that the Note was in default because Generex’s common stock was not listed on NASDAQ within 90 days after the issuance of the Note. The letter demanded repayment in full. On February 12, 2019, the Purchaser filed a Motion for Summary Judgment in lieu of complaint in the Supreme Court of New York, demanding the aggregate principal amount, default interest and costs. Counsel for Generex and Alpha have engaged in settlement discussions.


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On March 21, 2019 Compass Bank filed suit against NuGenerex Distributions Solutions 2, L.L.C. in the District Court of Dallas County, Texas requesting damages of $3,413,000. In connection with the closing of the Veneto acquisition, Compass Bank had a lien on certain assets that were supposed to be transferred into the ownership of NuGenerex, a subsidiary of Generex. Those assets were never transferred due to regulatory impositions. Generex had listed Compass Bank as an intended third party beneficiary to the transaction in relation to the assets liened and Veneto ceased payments upon the loan which the lien generated from. Compass bank filed suit against 6 parties involved in the transaction to collect on the loan, including NuGenerex. NuGenerex’s position is the contract was frustrated by the assets that were liened were never transferred, NuGenerex did not receive any benefit from the agreement, and thus NuGenerex is not responsible to Compass Bank for repayment of a loan on assets not transferred. Generex intends to implead Brooks Houghton for indemnification who was retained to perform due diligence on the transaction.



In May 2019 Brooks Houghton threatened litigation by way of a FINRA Dispute Resolution. Brooks Houghton, who the managing representative is Mr. Centonfanti a prior board member, was under contract to perform due diligence on the Veneto transaction, as well as other unrelated items. The Veneto transaction closed three times, each time with a reduction in price due to material negative circumstances. Brook Houghton, who was under contract to perform due diligence, claims their fee should be paid on the initial closing price not the ultimate resolution of the matter. The company offered to compensate Brooks Houghton pursuant to agreement, 3% on the most recent closing price for Veneto for which Brooks Houghton may have performed some level of work on, payable in kind, and Brooks Houghton declined the offer. Brooks Houghton is claiming $450,000 for the first closing of Veneto, $714,000 for the second closing of Veneto, $882,353 for the Regentys acquisition, and $705,882 for Olaregen. The company is awaiting service. As of April 30, 2019, the Company has accrued for the full $2,752,235 balance.



Item 1A. Risk Factors.



Generex is a smaller reporting company defined by Rule 12b-2 of the Exchange Act and not required to provide Risk Factors.



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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.



Between January 24, 2019 and January 31, 2019, the Company issues convertible notes bearing interest at 10% per annum (the “Notes”) in the aggregate principal amount of $2,110,000 . The purchase price of the Notes was $1,990,000 and the remaining $120,000 of principal amount represents original issue discount. Pursuant to the Securities Purchase Agreements, the Company also sold to the investors warrants to purchase up to an aggregate 120,570 shares of common stock.



Between February 4 and February 18, 2019, the Company issued two Notes with a combined aggregate principal amount of $1,500,000. Pursuant to the Securities Purchase Agreements, the Company also sold to the investors warrants to purchase up to an aggregate 102,143 shares of common stock.



Between April 8 and April 23, 2019, the Company issued two Notes with a combined aggregate principal amount of $1,060,000. Pursuant to the Securities Purchase Agreements, the Company also sold to the investors warrants to purchase up to an aggregate 176,968 shares of common stock



Subject to certain ownership limitations, the Notes will be convertible at the option of the holder at any time into shares of the Company’s common stock at an effective conversion price determined as the lesser of:


• A price determined as of the date of closing; and
• 70% of the lowest volume weighted average trading price of the common stock on the ten days prior to conversion.



The warrants are exercisable for a The conversion price of the Note and the exercise of the warrants will be subject to adjustment in the case of stock splits, stock dividends, combinations of shares, similar recapitalization transactions and certain pro-rata distributions to common stockholders. The conversion price will also be adjusted if the Company sells or grants any shares of common stock or securities convertible into, or rights to acquire, common stock at an effective price per share that is lower than the then conversion price, except in the event of certain exempt issuances. In the event of a fundamental transaction, such as a merger, consolidation, sale of substantially all assets and similar reorganizations or recapitalizations, the holders of convertible preferred stock will be entitled to receive, upon conversion of their shares, any securities or other consideration received by the holders of the Company’s common stock pursuant to the fundamental transaction.

The Company is subject to significant cash penalties in the event that the Company fails to timely deliver certificates for shares of common stock issuable upon conversion of Note (“conversion shares”).



The conversion price of the Note will be reduced to a lower percentage of the volume weighted average trading price in the event the Company’s stock ceases to be DTC eligible, there is a DTC “chill,” or the Note cannot be converted into free trading stock within 181 days after issuance of a Note.



The Company has the right to prepay the Note at a premium within 180 days after issuance. If the Note is prepaid within 90 days, he Company will pay 120% of the principal amount; if the Note is prepaid after 90 days but prior to 180 days, the Company will pay 135% of the principal amount.



Each of the Notes was issued with a 5% original issue discount, so that the proceeds from the aggregate $4,670,000 principal amount was $4,436,500, prior to deducting the finders’ fees and the Company’s estimated offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued.



The Note, warrants, and the shares of common stock underlying the Note and warrants, were offered privately pursuant to Section 4(3) of, and Rule 506 of Regulation D under, the Securities Act of 1933. The Company and the investors have entered into a registration rights agreement pursuant to which the Company has agreed to file a registration statement with the Securities and Exchange Commission covering the public resale of the common stock issuable upon conversion of the Note and exercise of the warrants. The Company has agreed to file the registration statement within 360 days after closing and to use its best efforts to have the registration statement declared effective within 135 days after closing. If these deadlines are not met, the Company will be in default of the Note.


53





Issuer Purchases of Equity Securities



Neither Generex nor any affiliated purchaser (as defined in Section 240.10 b-18(a)(3) of the Exchange Act) purchased any of its equity securities during the fiscal quarter ended April 30, 2019.



Item 3. Defaults Upon Senior Securities.



Reference is made to Item 1 - Legal Proceedings, above for a description of claims relating to the Note held by Alpha capital Anstalt.



Item 5. Other Information.



None



Item 6. Exhibits.



Exhibits are incorporated herein by reference or are filed with this quarterly report as set forth in the Exhibit Index beginning on page 56 hereof.


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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


GENEREX BIOTECHNOLOGY CORPORATION
(Registrant)

Date: June 19, 2019 By: /s/ Joseph Moscato
Joseph Moscato
President and Chief Executive Officer

Date: June 19, 2019 By: /s/ Mark Corrao
Mark Corrao
Chief Financial Officer


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EXHIBIT INDEX



Exhibit

Number
Description of Exhibit (1)
1 Amendment dated as of April 7, 2010 to Placement Agent Agreement Placement Agency Agreement, dated June 8, 2009, by and between Generex Biotechnology Corporation and Midtown Partners & Co., LLC and amendments dated August 5, August 18, and September 11, 2009 (incorporated by reference to Exhibit 1.2 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on April 8, 2010)
2 Agreement and Plan of Merger among Generex Biotechnology Corporation, Antigen Express, Inc. and AGEXP Acquisition Inc. (incorporated by reference to Exhibit 2.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on August 15, 2003)
3(i)(a) Restated Certificate of Incorporation of Generex Biotechnology Corporation (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Post-Effective Amendment No. 1 to the Registration Statement on Form S-8 filed on October 26, 2009)
3(i)(b) Certificate of Designation of Preferences, Rights and Limitations of Series A 9% Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on July 11, 2011).

3(i)(c)




Certificate of Designation of Preferences, Rights and Limitations of Series B 9% Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to Generex Biotechnology Corporation’s Current Report on form 8-K filed on February 1, 2012)
3(i)(d) Certificate of Designation of Preferences, Rights and Limitations of Series C 9% Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on August 8, 2012).

3(i)(e)


Certificate of Designation of Preferences, Rights and Limitations of Series D 9% Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to Generex Biotechnology Corporation’s Current Report on form 8-K filed on December 11, 2012)

3(i)(f)


Certificate of Amendment to Restated Certificate of Incorporation of Generex Biotechnology Corporation (incorporated by reference to Exhibit 3(i)(f) to Generex Biotechnology Corporation’s Current Report on Registration Statement on Form S-1 (File No. 333-187656) filed on April 1, 2013)

3(i)(g)


Certificate of Designation of Preferences, Rights and Limitations of Series E 9% Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to Generex Biotechnology Corporation’s Current Report on form 8-K filed on June 17, 2013)
3(i)(h) Certificate of Designation of Preferences, Rights and Limitations of Series F 9% Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to Generex Biotechnology Corporation’s Current Report on form 8-K filed on March 28, 2014)
3(i)(i) Certificate of Designation of Preferences, Rights and Limitations of Series G 9% Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to Generex Biotechnology Corporation’s Current Report on form 8-K filed on June 25, 2015)
3(ii) Amended and Restated By-Laws of Generex Biotechnology Corporation (incorporated by reference to Exhibit 3.2(ii) to Generex Biotechnology Corporation’s Report on Form 8-K filed December 5, 2007)
4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 (File No. 333-82667) filed on July 12, 1999)
4.2.1 Form of Securities Purchase Agreement entered into with Cranshire Capital, L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore Capital, Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard Todd Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended October 31, 2003 filed on August 13, 2003)
4.2.2 Form of Registration Rights Agreement entered into with Cranshire Capital, L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore Capital, Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard Todd Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended October 31, 2003 filed on August 13, 2003)
4.2.3 Form of Warrant granted to Cranshire Capital, L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore Capital, Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard Todd Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended October 31, 2003 filed on August 13, 2003)
4.3 Form of replacement Warrant issued to warrant holders exercising at reduced exercise price in May and June 2003 (incorporated by reference to Exhibit 4.13.7 to Generex Biotechnology Corporation’s Report on Form 10-K for the period ended July 31, 2003 filed on October 29, 2003)
4.4.1 Securities Purchase Agreement, dated December 19, 2003, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K/A filed on March 24, 2004)
4.4.2 Registration Rights Agreement, dated December 19, 2003, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K/A filed on March 24, 2004)
4.4.3 Form of Warrant issued in connection with Exhibit 4.4.1 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K/A filed on March 24, 2004)
4.4.4 Form of Additional Investment Right issued in connection with Exhibit 4.4.1 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K/A filed on March 24, 2004)
4.5.1 Securities Purchase Agreement, dated January 7, 2004, by and between Generex Biotechnology Corporation and ICN Capital Limited (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.5.2 Registration Rights Agreement, dated January 7, 2004, by and between Generex Biotechnology Corporation and ICN Capital Limited (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.5.3 Warrant issued in connection with Exhibit 4.5.1 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.5.4 Additional Investment Right issued in connection with Exhibit 4.5.1 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.6.1 Securities Purchase Agreement, dated January 9, 2004, by and between Generex Biotechnology Corporation and Vertical Ventures, LLC (incorporated by reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.6.2 Registration Rights Agreement, dated January 9, 2004, by and between Generex Biotechnology Corporation and Vertical Ventures, LLC (incorporated by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.6.3 Warrant issued in connection with Exhibit 4.6.1 (incorporated by reference to Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.6.4 Additional Investment Right issued in connection with Exhibit 4.6.1 (incorporated by reference to Exhibit 4.8 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.7.1 Securities Purchase Agreement, dated February 6, 2004, by and between Generex Biotechnology Corporation and Alexandra Global Master Fund, Ltd. (incorporated by reference to Exhibit 4.9 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.7.2 Registration Rights Agreement, dated February 6, 2004, by and between Generex Biotechnology Corporation and Alexandra Global Master Fund, Ltd. (incorporated by reference to Exhibit 4.10 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.7.3 Warrant issued in connection with Exhibit 4.7.1 (incorporated by reference to Exhibit 4.11 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.7.4 Additional Investment Right issued in connection with Exhibit 4.7.1 (incorporated by reference to Exhibit 4.12 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.7.5 Escrow Agreement, dated February 26, 2004, by and among Generex Biotechnology Corporation, Eckert Seamans Cherin & Mellott, LLC and Alexandra Global Master Fund, Ltd. (incorporated by reference to Exhibit 4.13 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.8.1 Securities Purchase Agreement, dated February 11, 2004, by and between Generex Biotechnology Corporation and Michael Sourlis (incorporated by reference to Exhibit 4.14 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.8.2 Registration Rights Agreement, dated February 11, 2004, by and between Generex Biotechnology Corporation and Michael Sourlis (incorporated by reference to Exhibit 4.15 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.8.3 Additional Investment Right issued in connection with Exhibit 4.8.1 (incorporated by reference to Exhibit 4.17 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.9.1 Securities Purchase Agreement, dated February 13, 2004, by and between Generex Biotechnology Corporation and Zapfe Holdings, Inc. (incorporated by reference to Exhibit 4.18 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.9.2 Registration Rights Agreement, dated February 13, 2004, by and between Generex Biotechnology Corporation and Zapfe Holdings, Inc. (incorporated by reference to Exhibit 4.19 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.9.3 Warrant issued in connection with Exhibit 4.9.1 (incorporated by reference to Exhibit 4.20 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.9.4 Additional Investment Right issued in connection with Exhibit 4.9.1 (incorporated by reference to Exhibit 4.21 Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.10.1 Securities Purchase Agreement, dated June 23, 2004, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14, 2004)
4.10.2 Registration Rights Agreement, dated June 23, 2004, by and among Generex Biotechnology Corporation and the investors (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14, 2004)
4.10.3 Form of Warrant issued in connection with Exhibit 4.10.1 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14, 2004)
4.10.4 Form of Additional Investment Right issued in connection Exhibit 4.10.1 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14, 2004)
4.11.1 Securities Purchase Agreement, dated November 10, 2004, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.11.2 Form of 6% Secured Convertible Debenture issued in connection with Exhibit 4.11.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.11.3 Registration Rights Agreement, dated November 10, 2004, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.11.4 Form of Voting Agreement entered into in connection with Exhibit 4.11.1 (incorporated by reference to Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.12 Warrant issued to The Aethena Group, LLC on April 28, 2005 (incorporated by reference to Exhibit 4.20 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)
4.13.1 Amendment No. 4 to Securities Purchase Agreement and Registration Rights Agreement entered into by and between Generex Biotechnology Corporation and the Purchasers listed on the signature pages thereto on January 19, 2006 (incorporated by reference herein to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on January 20, 2006)
4.13.2 Form of Additional AIRs issued in connection with Exhibit 4.13.1 (incorporated by reference herein to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on January 20, 2006)
4.14 Form of Warrant issued by Generex Biotechnology Corporation on January 23, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on January 24, 2006)
4.15.1 Agreement to Amend Warrants between Generex Biotechnology Corporation and Cranshire Capital L.P. dated February 27, 2006 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 28, 2006).
4.15.2 Agreement to Amend Warrants between Generex Biotechnology Corporation and Omicron Master Trust dated February 27, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 28, 2006).
4.15.3 Agreement to Amend Warrants between Generex Biotechnology Corporation and Iroquois Capital L.P. dated February 27, 2006 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 28, 2006).
4.15.4 Agreement to Amend Warrants between Generex Biotechnology Corporation and Smithfield Fiduciary LLC dated February 27, 2006 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 28, 2006).
4.15.5 Form of Warrant issued by Generex Biotechnology Corporation on February 27, 2006 (incorporated by reference to Exhibit 4.26 to Generex Biotechnology Corporation’s Report on Form 10-K filed on October 16, 2006)


4.16.1 Agreement to Amend Additional Investment Right between Generex Biotechnology Corporation and Cranshire Capital, L.P. dated February 28, 2006 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2006).
4.16.2 Agreement to Amend Additional Investment Right between Generex Biotechnology Corporation and Omicron Master Trust dated February 28, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2006).
4.16.3 Agreement to Amend Additional Investment Right between Generex Biotechnology Corporation and Iroquois Capital LP dated February 28, 2006 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2006).
4.16.4 Agreement to Amend Additional Investment Right between Generex Biotechnology Corporation and Smithfield Fiduciary LLC dated February 28, 2006 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2006).
4.16.5 Form of Additional AIR Debenture issued by Generex Biotechnology Corporation on February 28, 2006 (incorporated by reference to Exhibit 4.31 to Generex Biotechnology Corporation’s Report on Form 10-K filed on October 16, 2006)
4.16.6 Form of Additional AIR Warrant issued by Generex Biotechnology Corporation on February 28, 2006 (incorporated by reference to Exhibit 4.32 to Generex Biotechnology Corporation’s Report on Form 10-K filed on October 16, 2006)
4.17.1 Form of Agreement to Amend Warrants between Generex Biotechnology Corporation and the Investors dated March 6, 2006 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 7, 2006).
4.17.2 Form of Warrant issued by Generex Biotechnology Corporation on March 6, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 7, 2006)
4.18 Warrant issued by Generex Biotechnology Corporation on April 17, 2006 to Zapfe Holdings, Inc. (incorporated by reference to Exhibit 4.33 to Generex Biotechnology Corporation’s Report on Form 10-Q filed on June 14, 2006)
4.19 Form of Warrant issued by Generex Biotechnology Corporation on April 17, 2006 to certain employees (incorporated by reference to Exhibit 4.34 to Generex Biotechnology Corporation’s Report on Form 10-Q filed on June 14, 2006).
4.20.1 Securities Purchase Agreement entered into by and between Generex Biotechnology Corporation and four Investors on June 1, 2006 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2, 2006)
4.20.2 Form of Warrant issued by Generex Biotechnology Corporation on June 1, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2, 2006)
4.21.1 Form of Amendment to Outstanding Warrants (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2, 2006)
4.21.2 Form of Warrant issued by Generex Biotechnology Corporation on June 1, 2006 in connection with Exhibit 4.39 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2, 2006)
4.22.1 Securities Purchase Agreement, dated as of March 31, 2008 among the Registrant and each of the purchasers named therein (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on April 2, 2008)
4.22.2 Form of 8% Secured Convertible Note, as amended (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Registration Statement (333-150562) on Form S-3 filed on October 31, 2008)
4.22.3 Form of Series A Warrant, as amended (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Registration Statement on Form S-3 (333-150562) filed on October 31, 2008)
4.22.4 Form of Series A-1 Warrant, as amended (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Registration Statement on Form S-3 (333-150562) filed on October 31, 2008)
4.22.5 Form of Series B Warrant, as amended (incorporated by reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Registration Statement on Form S-3 (333-150562) filed on October 31, 2008)
4.22.6 Form of Series C Warrant, as amended (incorporated by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Registration Statement on Form S-3 (333-150562) filed on October 31, 2008)
4.22.7 Registration Rights Agreement, dated March 31, 2008, among Registrant and each of the purchasers under Securities Purchase Agreement (incorporated by reference to Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K filed on April 2, 2008)
4.22.8 Security Agreement (incorporated by reference to Exhibit 4.8 to Generex Biotechnology Corporation’s Report on Form 8-K filed on April 2, 2008)
4.22.9 Form of Guaranty (incorporated by reference to Exhibit 4.9 to Generex Biotechnology Corporation’s Report on Form 8-K filed on April 2, 2008)
4.23.1 Form of Securities Purchase Agreement, dated May 15, 2009, entered into between Generex Biotechnology Corporation and each investor in the offering (incorporated by reference to Exhibit 1.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on May 18, 2009)
4.24.1 Form of Securities Purchase Agreement, dated June 15, 2009, entered into between Generex Biotechnology Corporation and each investor in the offering (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 16, 2009)
4.24.2 Form of Warrant issued in connection with Exhibit 4.24.1 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 16, 2009)
4.24.3 Form of Warrant issued to Midtown Partners & Co., LLC in connection with Exhibit 4.24.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 16, 2009)
4.25.1 Form of Securities Purchase Agreement, dated August 6, 2009, entered into between Generex Biotechnology Corporation and each investor in the offering (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on August 6, 2009)
4.25.2 Form of Warrant issued in connection with Exhibit 4.25.1 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on August 6, 2009)
4.25.3 Form of Warrant issued to Midtown Partners & Co., LLC in connection with Exhibit 4.25.1 (incorporated by reference to Exhibit 4.28 to Generex Biotechnology Corporation’s Report on Form 8-K filed on August 6, 2009)
4.26.1 Form of Securities Purchase Agreement, dated September 11, 2009, entered into between Generex Biotechnology Corporation and each investor in the offering (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on September 15, 2009)
4.26.2 Form of Warrant issued in connection with Exhibit 4.26.1 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on September 15, 2009)
4.26.3 Form of Warrant issued to Midtown Partners & Co., LLC in connection with Exhibit 4.26.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on September 15, 2009)
4.27.1 Common Stock Purchase Agreement dated April 7, 2010 by and between Generex Biotechnology Corporation and Seaside 88, LP. (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on April 8, 2010)
4.27.2 First Amendment to Common Stock Purchase Agreement dated April 28, 2010 by and between Generex Biotechnology Corporation and Seaside 88, LP. (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on April 29, 2010)
4.27.3 Form of Warrant issued to Midtown Partners & Co., LLC in connection with the Placement Agency Agreement and in connection with Exhibit 4.27.1 hereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on April 8, 2010)
4.28.1 Form of Securities Purchase Agreement, dated January 24, 2011, entered into between Generex Biotechnology Corporation and each investor in the offering (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on January 25, 2011)
4.28.2 Form of Warrant issued in connection with Exhibit 4.28.1 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on January 25, 2011.
4.28.3 Amendment to Purchase Agreement dated March 25, 2011 (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on March 30, 2011).
4.28.4 Second Amendment to Purchase Agreement dated April 13, 2011 (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on April 14, 2011).
4.29.1 Form of Securities Purchase Agreement, dated July 8, 2011, by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on July 11, 2011).
4.29.2 Form of Common Stock Warrant issued in connection with Exhibit 4.29.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on July 11, 2011).
4.30.1 Form of Securities Purchase Agreement, dated January 31, 2012, by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on February 1, 2012).
4.30.2 Form of Common Stock Warrant issued in connection with Exhibit 4.30.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 1, 2012).
4.30.3 Form of Registration Rights Agreement by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 1, 2012)
4.31.1 Form of Securities Purchase Agreement, dated August 8, 2012, by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on August 8, 2012).
4.31.2 Form of Common Stock Warrant issued in connection with Exhibit 4.30.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on August 8, 2012).
4.31.3 Form of Registration Rights Agreement by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on August 8, 2012)
4.32.1 Form of Securities Purchase Agreement, dated December 10, 2012, by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on December 11, 2012).
4.32.2 Form of Common Stock Warrant issued in connection with Exhibit 4.30.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 11, 2012).
4.32.3 Form of Registration Rights Agreement by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 10, 2012)
4.33.1 Form of Securities Purchase Agreement, dated June 17, 2013, by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on June 17, 2013).
4.33.2 Form of Common Stock Warrant issued in connection with Exhibit 4.33.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 17, 2013).
4.33.3 Form of Registration Rights Agreement by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 17, 2013)
4.34.1 Form of Securities Purchase Agreement, dated January 14, 2014, by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on January 14, 2014).
4.34.2 Form of Common Stock Warrant issued in connection with Exhibit 4.34.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on January 14, 2014).
4.35.1 Form of Securities Purchase Agreement, dated March 27, 2014, by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on March 28, 2014).
4.35.2 Form of Common Stock Warrant issued in connection with Exhibit 4.35.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 28, 2014).
4.35.3 Form of Registration Rights Agreement by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 28, 2014)
4.36.1 Form of Securities Purchase Agreement, dated June 24, 2015, by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on June 25, 2015).
4.36.2 Form of Common Stock Warrant issued in connection with Exhibit 4.36.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 25, 2015).
4.36.3 Form of Registration Rights Agreement by and among Generex Biotechnology Corporation and the purchaser(s) listed on the signature pages thereto (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 25, 2015)
10.37.1 Form of Acquisition Agreement by and among Generex Biotechnology Corporation and Hema Diagnostic Systems, LLC and other parties listed on the signature pages thereto (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on January 20, 2017)
10.38.1 Form of Letter of Intent Acquisition Agreement by and among Generex Biotechnology Corporation and Emmaus Life Sciences, Inc., the acquire thereto (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on January 20, 2017.
10.39 Nonqualified Stock Option Grant Agreement dated June 20, 2012 by and between Generex Biotechnology Corporation and David Brusegard (incorporated by reference to Exhibit 10.55 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 filed on September 12, 2012).*
10.4056 Nonqualified Stock Option Grant Agreement dated April 1, 2013 by and between Generex Biotechnology Corporation and Mark A. Fletcher (incorporated by reference to Exhibit 10.56 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 filed on July 2, 2013).*
10.41 Nonqualified Stock Option Grant Agreement dated April 1, 2013 by and between Generex Biotechnology Corporation and Brian T. McGee (incorporated by reference to Exhibit 10.58 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 filed on July 2, 2013).*
10.42 Nonqualified Stock Option Grant Agreement dated April 1, 2013 by and between Generex Biotechnology Corporation and James Anderson (incorporated by reference to Exhibit 10.59 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 filed on July 2, 2013).*
10.43 Nonqualified Stock Option Grant Agreement dated April 1, 2013 by and between Generex Biotechnology Corporation and Eric von Hofe (incorporated by reference to Exhibit 10.60 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 filed on July 2, 2013).*
10.44 Nonqualified Stock Option Grant Agreement dated April 1, 2013 by and between Generex Biotechnology Corporation and Stephen Fellows (incorporated by reference to Exhibit 10.61 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 filed on July 2, 2013).*
10.45 Nonqualified Stock Option Grant Agreement dated April 1, 2013 by and between Generex Biotechnology Corporation and David Brusegard (incorporated by reference to Exhibit 10.62 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 filed on July 2, 2013).*
10.46 Nonqualified Stock Option Grant Agreement dated June 6, 2013 by and between Generex Biotechnology Corporation and Mark A. Fletcher (incorporated by reference to Exhibit 10.63 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 filed on July 2, 2013).*
10.47 Nonqualified Stock Option Grant Agreement dated June 6, 2013 by and between Generex Biotechnology Corporation and Brian T. McGee (incorporated by reference to Exhibit 10.65 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 filed on July 2, 2013).*
10.48 Nonqualified Stock Option Grant Agreement dated June 6, 2013 by and between Generex Biotechnology Corporation and James Anderson (incorporated by reference to Exhibit 10.66 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 filed on July 2, 2013).*
10.49 Nonqualified Stock Option Grant Agreement dated June 6, 2013 by and between Generex Biotechnology Corporation and Eric von Hofe (incorporated by reference to Exhibit 10.67 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 filed on July 2, 2013).*
10.50 Nonqualified Stock Option Grant Agreement dated June 6, 2013 by and between Generex Biotechnology Corporation and Stephen Fellows (incorporated by reference to Exhibit 10.68 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 filed on July 2, 2013).*
10.51 Nonqualified Stock Option Grant Agreement dated June 6, 2013 by and between Generex Biotechnology Corporation and David Brusegard (incorporated by reference to Exhibit 10.69 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 filed on July 2, 2013).*
10.52 Nonqualified Stock Option Grant Agreement dated October 31, 2013 by and between Generex Biotechnology Corporation and James Anderson (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 9, 2013).*
10.53 Nonqualified Stock Option Grant Agreement dated October 31, 2013 by and between Generex Biotechnology Corporation and David Brusegard (incorporated by reference to Exhibit 10.3 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 9, 2013).*
10.54 Nonqualified Stock Option Grant Agreement dated October 31, 2013 by and between Generex Biotechnology Corporation and Stephen Fellows (incorporated by reference to Exhibit 10.4 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 9, 2013).*
10.55 Nonqualified Stock Option Grant Agreement dated October 31, 2013 by and between Generex Biotechnology Corporation and Mark Fletcher (incorporated by reference to Exhibit 10.5 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 9, 2013).*
10.56 Nonqualified Stock Option Grant Agreement dated October 31, 2013 by and between Generex Biotechnology Corporation and Brian McGee (incorporated by reference to Exhibit 10.6 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 9, 2013).*
10.57 Nonqualified Stock Option Grant Agreement dated October 31, 2013 by and between Generex Biotechnology Corporation and Eric von Hofe (incorporated by reference to Exhibit 10.7 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 9, 2013).*
10.58 Nonqualified Stock Option Grant Agreement dated October 31, 2013 by and between Generex Biotechnology Corporation and James Anderson (incorporated by reference to Exhibit 10.8 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 9, 2013).*
10.59 Nonqualified Stock Option Grant Agreement dated October 31, 2013 by and between Generex Biotechnology Corporation and David Brusegard (incorporated by reference to Exhibit 10.10 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 9, 2013).*
10.60 Nonqualified Stock Option Grant Agreement dated October 31, 2013 by and between Generex Biotechnology Corporation and Stephen Fellows (incorporated by reference to Exhibit 10.11 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 9, 2013).*
10.61 Nonqualified Stock Option Grant Agreement dated October 31, 2013 by and between Generex Biotechnology Corporation and Mark Fletcher (incorporated by reference to Exhibit 10.12 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 9, 2013).*
10.62 Nonqualified Stock Option Grant Agreement dated October 31, 2013 by and between Generex Biotechnology Corporation and Brian McGee (incorporated by reference to Exhibit 10.13 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 9, 2013).*
10.63 Nonqualified Stock Option Grant Agreement dated October 31, 2013 by and between Generex Biotechnology Corporation and Eric von Hofe (incorporated by reference to Exhibit 10.14 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 9, 2013).*
10.64 Asset Purchase Agreement by and between Veneto Holdings, L.L.C. and NuGenerex Distribution Solutions, LLC effective October 3, 2018 (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on October 9, 2018).
10.65 Promissory Note in the amount of $15,000,000 from NuGenerex Distribution Solutions, LLC to Veneto Holdings, LLC (incorporated by reference to Exhibit 10.2 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on October 9, 2018).
10.66 Amendment to Asset Purchase Agreement by and between Veneto Holdings, L.L.C. and NuGenerex Distribution Solutions 2, LLC effective November 1, 2018 (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Current Report on Form 8-k filed on November 5, 2018).
10.67 Promissory Note in the amount of $35,000,000 from NuGenerex Distribution Solutions 2, LLC to Veneto Holdings, L.L.C. (incorporated by reference to Exhibit 10.2 to Generex Biotechnology Corporation’s Current Report on Form 8-k filed on November 5, 2018).
10.68 Amendment Agreement by and between Veneto Holdings, L.L.C., Generex Biotechnology Corporation, NuGenerex Distribution Solutions 2, LLC and the members of Veneto Holdings, L.L.C. effective January 15, 2019 (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Current Report on Form 8-k filed on January 22, 2019).
10.69 Restructuring Agreement by and between Veneto Holdings, L.L.C., Generex Biotechnology Corporation, NuGenerex Distribution Solutions 2, LLC and the members of Veneto Holdings, L.L.C. dated March 28, 2019 (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Current Report on Form 8-k filed on April 4, 2019).
10.70 Stock Purchase Agreement between Regentys Corporation and Generex Biotechnology Corporation as of January 7, 2019 (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Current Report on Form 8-k filed on January 11, 2019).
10.71 Promissory Note issued by Generex Biotechnology Corporation to Regentys Corporation (incorporated by reference to Exhibit 10.2 to Generex Biotechnology Corporation’s Current Report on Form 8-k filed on January 11, 2019).
10.72 Pledge and Security Agreement between Generex Biotechnology Corporation and Regentys Corporation (incorporated by reference to Exhibit 10.3 to Generex Biotechnology Corporation’s Current Report on Form 8-k filed on January 11, 2019).
10.73 Amended and Restated Shareholders Agreement of Regentys Corporation (incorporated by reference to Exhibit 10.4 to Generex Biotechnology Corporation’s Current Report on Form 8-k filed on January 11, 2019).
10.74 Management Services Agreement among Regentys Corporation and its officers (incorporated by reference to Exhibit 10.5 to Generex Biotechnology Corporation’s Current Report on Form 8-k filed on January 11, 2019).
10.75 Stock Purchase Agreement between Olaregen Therapeutix, Inc. and Generex Biotechnology Corporation as of January 7, 2019 (incorporated by reference to Exhibit 10.1 to Generex Biotechnology Corporation’s Current Report on Form 8-k filed on January 11, 2019).
10.76 Promissory Note issued by Generex Biotechnology Corporation to Olaregen incorporated by reference to Exhibit 10.2 to Generex Biotechnology Corporation’s Current Report on Form 8-k filed on January 11, 2019).
10.77 Pledge and Security Agreement between Generex Biotechnology Corporation and Olaregen incorporated by reference to Exhibit 10.3 to Generex Biotechnology Corporation’s Current Report on Form 8-k filed on January 11, 2019).
10.78 Amended and Restated Investor Rights Agreement of Olaregen incorporated by reference to Exhibit 10.4 to Generex Biotechnology Corporation’s Current Report on Form 8-k filed on January 11, 2019).
10.79 Restructuring Agreement by and between Veneto Holdings, L.L.C., Generex Biotechnology Corporation, NuGenerex Distribution Solutions 2, LLC and the members of Veneto Holdings, L.L.C. dated March 28, 2019
31.1 Certification of President and 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 President and Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



* Management contract or management compensatory plan or arrangement.



(1) In the case of incorporation by reference to documents filed by the Registrant under the Exchange Act, the Registrant’s file number under the Exchange Act is 000-25169.


56



Exhibit 31.1

CERTIFICATION



I, Joseph Moscato, certify that:



1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2019 of Generex Biotechnology Corporation;



2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:



a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, 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;



c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and



5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):



a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and



b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.




DATE: June 19, 2019 By: /s/ Joseph Moscato
Joseph Moscato
President & Chief Executive Officer



Exhibit 31.2

CERTIFICATION



I, Mark A. Corrao, certify that:



1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2019 of Generex Biotechnology Corporation;



2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:



a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, 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;



c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and



5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):



a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and



b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.




DATE: June 19, 2019 By: /s/ Mark Corrao
Mark Corrao
Chief Financial Officer



Exhibit 32



CERTIFICATIONS



Pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. ss. 1350, as adopted), Joseph Moscato, Chief Executive Officer and President of Generex Biotechnology Corporation (the "Company" , hereby certifies that, to the best of their knowledge:



1. The Company's Quarterly Report on Form 10-Q for the period ended April 30, 2019 to which this Certification is attached as Exhibit 32 (the "Report" fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and



2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the end of the period covered by the Report.




DATE: June 19, 2019 By: /s/ Joseph Moscato
Joseph Moscato
President & Chief Executive Officer

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