UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
10-Q/A
 (Amendment
No. 2)
 
 x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE
ACT OF 1934
 
 For the
quarterly period ended January 31, 2010
 
 o TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE
ACT OF 1934
 
 For
the transition period from _________________ to ________________
 
 COMMISSION
FILE NUMBER: 0-25169
 
 GENEREX BIOTECHNOLOGY
CORPORATION
 (Exact
name of registrant as specified in its charter)
  Delaware
                
                98-0178636(State of other jurisdiction of
                  incorporation or
      organization)
                
                (IRS Employer Identification No.)
 
 33 HARBOUR SQUARE, SUITE 202
 TORONTO, ONTARIO
 CANADA M5J
2G2
 (Address
of principal executive offices)
 
 (416)
364-2551
 (Registrant's
telephone number, including area code)
 
 Indicate
by check mark whether the registrant: (1) has filed all reports required by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. x Yes   ̈ No
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
  ̈Yes      ̈No
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large
accelerated filer   ̈    Accelerated
filer   ̈
 Non-accelerated
filer   ̈        Smaller
reporting company  x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  o Yes x No
 
 The
number of outstanding shares of the registrant's common stock, par value $.001,
was 253,584,341 as of March 9, 2010.
  
  GENEREX
BIOTECHNOLOGY CORPORATION
 FORM
10-Q/A
 
 EXPLANATORY
NOTE
 
 Generex
Biotechnology Corporation (the "Company") is filing this Amendment No. 2 (this
"Amendment No. 2") to its Quarterly Report on Form 10-Q for the quarterly period
ended January 31, 2010 (the "Original Report "), which was originally filed on
March 10, 2010 and which was amended by Amendment No. 1 on June 11, 2010
(“Amendment No. 1”), to address comments from the staff of the Securities and
Exchange Commission (the “Staff”).  The Company is filing this
Amendment No. 2 to restate Item 4. Controls and Procedures to indicate that the
Company’s Principal Executive Officer and Principal Financial Officer have
concluded that the Company’s disclosure controls and procedures were not
effective as of January 31, 2010.
 
 Except as
discussed above, the Company has not modified or updated disclosures presented
in Amendment No. 1.  Accordingly, this Amendment No. 2 does not
reflect events occurring after the filing of the Original Report or Amendment
No. 1, nor does it modify or update those disclosures affected by subsequent
events or discoveries.  It also does not affect information contained
in the Original Report which was not impacted by the restatements in Amendment
No. 1 or Amendment No. 2.  Events occurring after the filing of the
Original Report or other disclosures necessary to reflect subsequent events have
been or will be addressed in the Company's reports filed subsequent to the
Original Report.
 
 This
Amendment No. 2 should be read in conjunction with the Company's filings made
with the Securities and Exchange Commission subsequent to the filing of the
Original Report, including any amendments to those filings.
  i
  GENEREX
BIOTECHNOLOGY CORPORATION
 
 INDEX
  PART
      I. FINANCIAL INFORMATIONItem
      1.     Financial Statements
      (unaudited)Consolidated
      Balance Sheets -January
      31, 2010 (unaudited) and July 31, 2009
                          1Consolidated
      Statements of Operations — For the three and six-monthperiods
      ended January 31, 2010 and 2009, and cumulative fromNovember
      2, 1995 to January 31, 2010 (unaudited)
                          2Consolidated
      Statements of Cash Flows — For the six monthperiods
      ended January 31, 2010 and 2009, and cumulative fromNovember
      2, 1995 to January 31, 2010 (unaudited)
                          3Notes
      to Consolidated Financial Statements (unaudited)
                          5Item
      2. Management's Discussion and Analysis of Financial Condition and
      Results of Operations
                          14Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk
                          25Item
      4. Controls and Procedures (Restated)
                          25PART
      II: OTHER INFORMATIONItem
      1. Legal Proceedings
                          26Item
      1A. Risk Factors
                          26Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds
                          28Item
      3. Defaults Upon Senior Securities
                          29Item
      4. Reserved.
                          -Item
      5. Other Information
                          29Item
      6. Exhibits
                          29Signatures
                          29
  ii
  PART
I. FINANCIAL INFORMATION
 
 Item
1. Financial Statements
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED
BALANCE SHEETS
 
 January
      31,
                          
                          
                          July
      31,2010
                          
                          
                          2009(Unaudited)
                          
                          
                          (Audited)ASSETSCurrent
      Assets:Cash
      and cash equivalents
                          
                          $
                          22,624,666
                          
                          
                          $
                          14,197,048Accounts
      receivable
                          
                          
                          142,301
                          
                          
                          
                          57,792Inventory
      (see Note 5)
                          
                          
                          2,103,098
                          
                          
                          
                          1,271,456Other
      current assets
                          
                          
                          575,687
                          
                          
                          
                          766,741Total
      Current Assets
                          
                          
                          25,445,752
                          
                          
                          
                          16,293,037Property
      and Equipment, Net
                          
                          
                          1,381,778
                          
                          
                          
                          1,444,770Assets
      Held for Investment, Net
                          
                          
                          3,444,899
                          
                          
                          
                          3,373,564Patents,
      Net
                          
                          
                          3,586,784
                          
                          
                          
                          3,702,386TOTAL
      ASSETS
                          
                          $
                          33,859,213
                          
                          
                          $
                          24,813,757LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      Liabilities:Accounts
      payable and accrued expenses (see Note 6)
                          
                          $
                          9,485,196
                          
                          
                          $
                          7,486,155Deferred
      revenue and rebate liability
                          
                          
                          394,886
                          
                          
                          
                          140,883Current
      maturities of long-term debt
                          
                          
                          1,068,725
                          
                          
                          
                          1,060,788Current
      maturities of obligations under capital lease
                          
                          
                          26,600
                          
                          
                          
                          43,836Total
      Current Liabilities
                          
                          
                          10,975,407
                          
                          
                          
                          8,731,662Obligations
      Under Capital Lease, Net
                          
                          
                          —
                          
                          
                          
                          3,932Long-Term
      Debt, Net
                          
                          
                          1,842,500
                          
                          
                          
                          1,854,421Derivative
      Warranty Liability (see Note 11)
                          
                          
                          11,747,447
                          
                          
                          
                          —Total
      Liabilities
                          
                          
                          24,565,354
                          
                          
                          
                          10,590,015Commitments
      and Contingencies (see Note 8)Stockholders’
      Equity (see Note 10):Special
      Voting Rights Preferred Stock, $.001 par value; authorized 1,000 shares at
      January 31, 2010 and July 31, 2009; -0- shares issued and outstanding at
      January 31, 2010 and July 31, 2009
                          
                          
                          —
                          
                          
                          
                          —Common
      stock, $.001 par value; authorized 750,000,000 shares at January 31, 2010
      and July 31, 2009; 251,025,190 and 212,628,818 shares issued and
      outstanding at January 31, 2010 and July 31, 2009,
      respectively
                          
                          
                          251,024
                          
                          
                          
                          212,628Additional
      paid-in capital
                          
                          
                          316,812,595
                          
                          
                          
                          307,401,016Deficit
      accumulated during the development stage
                          
                          
                          (308,478,092
                          )
                          
                          
                          (294,041,489
                          )Accumulated
      other comprehensive income
                          
                          
                          708,332
                          
                          
                          
                          651,587Total
      Stockholders’ Equity
                          
                          
                          9,293,859
                          
                          
                          
                          14,223,742TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                          
                          $
                          33,859,213
                          
                          
                          $
                          24,813,757
 
 * - See
Note 12 - Restatement of Previously Reported Interim Period.
 
 The Notes
to Consolidated Financial Statements are an integral part of these
statements.
  1
 
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 Cumulative
      FromNovember
      2, 1995For
      the Six Months Ended
                      
                      
                      For
      the Three Months
                      
                      
                      (Date
      of Inception)January
      31,
                      
                      
                      Ended
      January 31,
                      
                      
                      to
      January 31,2010
      (restated)*
                      
                      
                      2009
                      
                      
                      2010
      (restated)*
                      
                      
                      2009
                      
                      
                      2010
      (restated)*(Unaudited)
                      
                      
                      (Unaudited)
                      
                      
                      (Unaudited)
                      
                      
                      (Unaudited)
                      
                      
                      (Unaudited)Revenues,
      net
                      
                      $
                      528,886
                      
                      
                      $
                      972,982
                      
                      
                      $
                      431,344
                      
                      
                      $
                      434,636
                      
                      
                      $
                      4,146,780Cost
      of Goods Sold
                      
                      
                      367,125
                      
                      
                      
                      349,390
                      
                      
                      
                      287,888
                      
                      
                      
                      327,198
                      
                      
                      
                      1,008,506Gross
      profit
                      
                      
                      161,761
                      
                      
                      
                      623,592
                      
                      
                      
                      143,456
                      
                      
                      
                      107,438
                      
                      
                      
                      3,138,274Operating
      Expenses:Research
      and development
                      
                      
                      6,476,290
                      
                      
                      
                      7,596,130
                      
                      
                      
                      3,400,521
                      
                      
                      
                      3,240,441
                      
                      
                      
                      109,853,465Research
      and development - related party
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      220,218Selling
      and marketing
                      
                      
                      2,646,772
                      
                      
                      
                      1,446,905
                      
                      
                      
                      1,348,068
                      
                      
                      
                      609,707
                      
                      
                      
                      7,079,270General
      and administrative
                      
                      
                      6,559,222
                      
                      
                      
                      4,912,435
                      
                      
                      
                      2,733,957
                      
                      
                      
                      2,064,522
                      
                      
                      
                      123,360,040General
      and administrative - related party
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      314,328Total
      Operating Expenses
                      
                      
                      15,682,284
                      
                      
                      
                      13,955,470
                      
                      
                      
                      7,482,546
                      
                      
                      
                      5,914,670
                      
                      
                      
                      240,827,321Operating
      Loss
                      
                      
                      (15,520,523
                      )
                      
                      
                      (13,331,878
                      )
                      
                      
                      (7,339,090
                      )
                      
                      
                      (5,807,232
                      )
                      
                      
                      (237,689,047
                      )Other
      Income (Expense):Miscellaneous
      income (expense)
                      
                      
                      750
                      
                      
                      
                      3
                      
                      
                      
                      250
                      
                      
                      
                      (2
                      )
                      
                      
                      197,011Income
      from rental operations, net
                      
                      
                      154,659
                      
                      
                      
                      167,739
                      
                      
                      
                      70,066
                      
                      
                      
                      79,359
                      
                      
                      
                      1,726,667Interest
      income
                      
                      
                      16,426
                      
                      
                      
                      221,097
                      
                      
                      
                      6,341
                      
                      
                      
                      52,632
                      
                      
                      
                      7,763,300Interest
      expense
                      
                      
                      (105,430
                      )
                      
                      
                      (10,792,585
                      )
                      
                      
                      (53,029
                      )
                      
                      
                      (6,363,197
                      )
                      
                      
                      (68,102,598
                      )Change
      in fair value of derivative warrant liability
                      
                      
                      1,017,515
                      
                      
                      
                      —
                      
                      
                      
                      (1,978,756
                      )
                      
                      
                      —
                      
                      
                      
                      1,017,515Loss
      on extinguishment of debt
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (14,134,068
                      )Net
      Loss Before Undernoted
                      
                      
                      (14,436,603
                      )
                      
                      
                      (23,735,624
                      )
                      
                      
                      (9,294,218
                      )
                      
                      
                      (12,038,440
                      )
                      
                      
                      (309,221,220
                      )Minority
      Interest Share of Loss
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      3,038,185Net
      Loss
                      
                      
                      (14,436,603
                      )
                      
                      
                      (23,735,624
                      )
                      
                      
                      (9,294,218
                      )
                      
                      
                      (12,038,440
                      )
                      
                      
                      (306,183,035
                      )Preferred
      Stock Dividend
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      2,295,057Net
      Loss Available to Common Stockholders
                      
                      $
                      (14,436,603
                      )
                      
                      $
                      (23,735,624
                      )
                      
                      $
                      (9,294,218
                      )
                      
                      $
                      (12,038,440
                      )
                      
                      $
                      (308,478,092
                      )Basic
      and Diluted Net Loss Per Common Share (see Note 9)
                      
                      $
                      (.06
                      )
                      
                      $
                      (.20
                      )
                      
                      $
                      (.04
                      )
                      
                      $
                      (.10
                      )Weighted
      Average Number of Shares of Common Stock Outstanding
                      
                      
                      241,522,176
                      
                      
                      
                      121,454,322
                      
                      
                      
                      249,053,034
                      
                      
                      
                      124,799,620
 
 * - See
Note 12 - Restatement of Previously Reported Interim Period.
 
 The Notes
to Consolidated Financial Statements are an integral part of these
statements.
  2
 
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 Cumulative
      FromNovember
      2, 1995For
      the Six Months
                      
                      
                      (Date
      of Inception)Ended January 31,
                      
                      
                      to
      January 31,2010 (restated)*
                      
                      
                      2009
                      
                      
                      2010 (restated)*(Unaudited)
                      
                      
                      (Unaudited)
                      
                      
                      (Unaudited)Cash
      Flows From Operating Activities:Net
      loss
                      
                      $
                      (14,436,603
                      )
                      
                      $
                      (23,735,624
                      )
                      
                      $
                      (306,183,035
                      )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                      
                      
                      393,958
                      
                      
                      
                      413,793
                      
                      
                      
                      8,166,629Minority
      interest share of loss
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (3,038,185
                      )Reduction
      of notes receivable - common stock in exchange for services
      rendered
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      423,882Write-off
      of uncollectible notes receivable - common stock
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      391,103Write-off
      of deferred offering costs
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      3,406,196Write-off
      of abandoned patents
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      913,196Loss
      on disposal of property and equipment
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      911Loss
      on extinguishment of debt
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      14,134,069Common
      stock issued as employee compensation
                      
                      
                      50,500
                      
                      
                      
                      102,800
                      
                      
                      
                      3,729,893Amortization
      of options and option modifications as employee
    compensation
                      
                      
                      916,381
                      
                      
                      
                      19,360
                      
                      
                      
                      1,023,377Common
      stock issued for services rendered
                      
                      
                      832,605
                      
                      
                      
                      124,166
                      
                      
                      
                      10,895,234Amortization
      of prepaid services in conjunction with common stock
    issuance
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      138,375Non-cash
      compensation expense
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      45,390Stock
      options and warrants issued for services rendered
                      
                      
                      505,000
                      
                      
                      
                      —
                      
                      
                      
                      7,870,723Issuance
      of warrants as additional exercise right inducement
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      21,437,909Preferred
      stock issued for services rendered
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      100Treasury
      stock redeemed for non-performance of services
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (138,000
                      )Amortization
      of deferred debt issuance costs and loan origination fees
                      
                      
                      —
                      
                      
                      
                      307,583
                      
                      
                      
                      2,405,629Amortization
      of discount on convertible debentures
                      
                      
                      —
                      
                      
                      
                      8,459,007
                      
                      
                      
                      38,345,592Common
      stock issued as interest payment on convertible debentures
                      
                      
                      —
                      
                      
                      
                      252,083
                      
                      
                      
                      757,514Interest
      on short-term advance
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      22,190Founders’
      shares transferred for services rendered
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      353,506Fees
      in connection with refinancing of debt
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      113,274Warrant
      repricing costs
                      
                      
                      —
                      
                      
                      
                      1,589,988
                      
                      
                      
                      3,198,604Change
      in fair value of derivative warrant liability
                      
                      
                      (1,017,515
                      )
                      
                      
                      —
                      
                      
                      
                      (1,017,515
                      )Changes
      in operating assets and liabilities (excluding the effects of
      acquisition):Accounts
      receivable
                      
                      
                      (84,392
                      )
                      
                      
                      (428,276
                      )
                      
                      
                      (157,627
                      )Miscellaneous
      receivables
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      43,812Inventory
                      
                      
                      (820,673
                      )
                      
                      
                      172,810
                      
                      
                      
                      (2,136,523
                      )Other
      current assets
                      
                      
                      350,775
                      
                      
                      
                      (1,291,294
                      )
                      
                      
                      (570,405
                      )Accounts
      payable and accrued expenses
                      
                      
                      3,822,306
                      
                      
                      
                      (1,204,834
                      )
                      
                      
                      16,375,446Deferred
      revenue
                      
                      
                      252,534
                      
                      
                      
                      27,446
                      
                      
                      
                      391,371Other,
      net
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      110,317Net
      Cash Used in Operating Activities
                      
                      
                      (9,235,124
                      )
                      
                      
                      (15,190,992
                      )
                      
                      
                      (178,547,048
                      )Cash
      Flows From Investing Activities:Purchase
      of property and equipment
                      
                      
                      (134,312
                      )
                      
                      
                      (1,385
                      )
                      
                      
                      (4,729,244
                      )Costs
      incurred for patents
                      
                      
                      (81,922
                      )
                      
                      
                      (66,503
                      )
                      
                      
                      (2,284,432
                      )Change
      in restricted cash
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      512,539Proceeds
      from maturity of short term investments
                      
                      
                      —
                      
                      
                      
                      8,852,214
                      
                      
                      
                      195,242,918Purchases
      of short-term investments
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (195,242,918
                      )Cash
      received in conjunction with merger
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      82,232Advances
      to Antigen Express, Inc.
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (32,000
                      )Increase
      in officers’ loans receivable
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (1,126,157
                      )Change
      in deposits
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (652,071
                      )Change
      in notes receivable - common stock
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (91,103
                      )Change
      in due from related parties
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (2,222,390
                      )Other,
      net
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      89,683Net
      Cash Provided By (Used in) Investing Activities
                      
                      
                      (216,234
                      )
                      
                      
                      8,784,326
                      
                      
                      
                      (10,452,943
                      )
 
 The Notes
to Consolidated Financial Statements are an integral part of these
statements.
  3
 
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 Cumulative
      FromNovember
      2, 1995For
      the Six Months
                        
                        
                        (Date
      of Inception)Ended January 31,
                        
                        
                        to
      January 31,2010 (restated)*
                        
                        
                        2009
                        
                        
                        2010 (restated)*Cash
      Flows From Financing Activities:Proceeds
      from short-term advance
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        325,179Repayment
      of short-term advance
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (347,369
                        )Proceeds
      from issuance of long-term debt
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        2,005,609Repayment
      of long-term debt
                        
                        
                        (47,950
                        )
                        
                        
                        (41,095
                        )
                        
                        
                        (2,072,476
                        )Repayment
      of obligations under capital lease
                        
                        
                        (21,168
                        )
                        
                        
                        (12,304
                        )
                        
                        
                        (56,402
                        )Change
      in due to related parties
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        154,541Proceeds
      from exercise of warrants
                        
                        
                        1,517,940
                        
                        
                        
                        —
                        
                        
                        
                        45,642,159Proceeds
      from exercise of stock options
                        
                        
                        —
                        
                        
                        
                        56,000
                        
                        
                        
                        5,001,916Proceeds
      from minority interest investment
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        3,038,185Proceeds
      from issuance of preferred stock
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        12,015,000Redemption
      of SVR preferred stock
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (100
                        )Proceeds
      from issuance of convertible debentures, net
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        40,704,930Payment
      of costs associated with convertible debentures
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (722,750
                        )Repayments
      of convertible debentures
                        
                        
                        —
                        
                        
                        
                        (3,130,000
                        )
                        
                        
                        (5,142,424
                        )Purchase
      of treasury stock
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (483,869
                        )Proceeds
      from issuance of common stock, net
                        
                        
                        16,400,671
                        
                        
                        
                        —
                        
                        
                        
                        112,137,624Purchase
      and retirement of common stock
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (497,522
                        )Net
      Cash Provided by (Used in) Financing Activities
                        
                        
                        17,849,493
                        
                        
                        
                        (3,127,399
                        )
                        
                        
                        211,702,231Effect
      of Exchange Rates on Cash
                        
                        
                        29,483
                        
                        
                        
                        (23,613
                        )
                        
                        
                        (77,574
                        )Net
      Increase (Decrease) in Cash and Cash Equivalents
                        
                        
                        8,427,618
                        
                        
                        
                        (9,557,678
                        )
                        
                        
                        22,624,666Cash
      and Cash Equivalents, Beginning of Period
                        
                        
                        14,197,048
                        
                        
                        
                        17,237,510
                        
                        
                        
                        —Cash
      and Cash Equivalents, End of Period
                        
                        $
                        22,624,666
                        
                        
                        $
                        7,679,832
                        
                        
                        $
                        22,624,666Supplemental
      Disclosure of Cash Flow Information:Cash
      paid during the period for:Interest
                        
                        $
                        105,430
                        
                        
                        $
                        976,706Income
      taxes
                        
                        $
                        —
                        
                        
                        $
                        —Disclosure
      of non-cash investing and financing activities:Issuance
      of common stock as satisfaction of accounts payable and accrued
      expenses
                        
                        $
                        1,991,838
                        
                        
                        $
                        —Par
      value of common stock issued in conjunction with cashless exercise of
      warrants
                        
                        $
                        5,245
                        
                        
                        $
                        —Issuance
      of common stock as repayment of convertible debentures and advance
      payments
                        
                        $
                        —
                        
                        
                        $
                        6,506,668Purchase
      of property and equipment through the issuance of obligations under
      capital lease
                        
                        $
                        —
                        
                        
                        $
                        83,002
 
 * - See
Note 12 - Restatement of Previously Reported Interim Period.
 
 The Notes
to Consolidated Financial Statements are an integral part of these
statements.
  4
  GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
                Basis
      of Presentation
 The
accompanying unaudited interim consolidated financial statements have been
prepared pursuant to the rules and regulations for reporting on Form 10-Q. 
Accordingly, certain information and disclosures required by generally accepted
accounting principles for complete financial statements are not included
herein.  The interim statements should be read in conjunction with the
financial statements and notes thereto included in the Company’s latest Annual
Report on Form 10-K.  The results for the six and three months ended may
not be indicative of the results for the entire year.
 
 Interim
statements are subject to possible adjustments in connection with the annual
audit of the Company’s accounts for the fiscal year 2010.  In the Company’s
opinion, all adjustments necessary for a fair presentation of these interim
statements have been included and are of a normal and recurring
nature.
 
 The
Company is a development stage company, which has a limited history of
operations and limited revenue to date.  The Company currently is
recognizing revenue from the sale of three of its four commercially available
products.  Additionally, the Company has several product candidates that
are in various research or early stages of pre-clinical and clinical
development.  There can be no assurance that the Company will be successful
in obtaining regulatory clearance for the sale of existing or any future
products or that any of the Company’s products will be commercially
viable.
 
 The
Company adopted Issue No. 07-5, “Determining Whether an Instrument (or Embedded
Feature) is Indexed to an Entity’s Own Stock” (now codified as Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 815,
Derivatives and Hedging) effective as of August 1, 2009.  The Company
reassessed certain outstanding warrants under ASC 815 and due to a price
adjustment clause included in these warrants, it has determined that such
warrants were no longer deemed to be indexed to the Company’s stock and,
therefore, no longer met the scope exception of ASC 815. These warrants have
been reclassified to a liability and will be adjusted to fair value on a
quarterly basis going forward.  The adoption of this guidance resulted in
the recognition of a loss of $1,978,756 within the Company’s consolidated
statements of operations for the three month period ended January 31, 2010 and a
gain of $1,017,515 for the six month period ended January 31, 2010.  There
was a net reclassification of $11,747,447 of previously reported stockholders’
equity to a liability under the caption “Derivative Warrant Liability” as of
January 31, 2010.  (See Notes 11 – Derivative Warrant Liability and 12
–Restatement of Previously Reported Interim Period.)
 
 Going
Concern
 The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. The Company has experienced
negative cash flows from operations since inception and had an accumulated
deficit at January 31, 2010 of approximately $308 million. The Company has
funded its activities to date almost exclusively from debt and equity
financings.
 
 The
Company will continue to require substantial funds to continue research and
development, including preclinical studies and clinical trials of its product
candidates, and to support sales and marketing efforts, if the FDA or other
regulatory approvals are obtained.  Management’s plans in order to meet its
operating cash flow requirements include financing activities such as private
placements of its common stock, preferred stock offerings and issuance of debt
and convertible debt instruments.  Management is also actively pursuing
industry collaboration activities including product licensing and specific
project financing.
 
 While the
Company believes that it will be successful in obtaining the necessary financing
to fund its operations, meet revenue projections and manage costs, there are no
assurances that such additional funding will be achieved and that it will
succeed in its future operations. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or amounts of liabilities that might be necessary should the Company be
unable to continue in existence.
  5
  GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 2.
                Effects
      of Recent Accounting Pronouncements
 
 Recently
Adopted Accounting Pronouncements
 In
November 2007, the FASB issued guidance related to accounting for collaborative
arrangements. This guidance defines a collaborative arrangement as a contractual
arrangement in which the parties are (i) active participants to the
arrangement; and (ii) exposed to significant risks and rewards that depend
upon the commercial success of the endeavor. It also addresses the appropriate
statement of operations presentation for activities and payments between the
participants in a collaborative arrangement as well as for costs incurred and
revenue generated from transactions with third parties. This guidance is
effective for the Company’s fiscal year beginning August 1, 2009. The
adoption of this guidance did not have a significant impact on the Company’s
consolidated financial statements.
 
 In
December 2007, the FASB issued an amendment to an existing accounting standard
which provides guidance related to business combinations. The amendment retains
the fundamental requirements that the acquisition method of accounting be used
for all business combinations and for an acquirer to be identified for each
business combination. This amendment also establishes principles and
requirements for how the acquirer: a) recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree; b) recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain purchase
and c) determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. This amendment applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. An entity may not
apply it before that date. This guidance is effective for the Company’s fiscal
year beginning August 1, 2009. The adoption of this guidance did not have a
significant impact on the Company’s consolidated financial
statements.
 
 In
December 2007, the FASB issued guidance related to non-controlling interests in
consolidated financial statements. This guidance amends previously issued
guidance to establish accounting and reporting standards for the non-controlling
(minority) interest in a subsidiary and for the deconsolidation of a subsidiary.
It clarifies that a non-controlling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. This guidance is effective for fiscal years,
and interim periods within those fiscal years, beginning on or after December
15, 2008.  This guidance is effective for the Company’s fiscal year
beginning August 1, 2009. The adoption of this guidance did not have a
significant impact on the Company’s consolidated financial
statements.
 
 In April
2008, the FASB issued guidance related to determining the useful life of
intangible assets. This guidance amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset. The objective of the guidance is to improve the
consistency between the useful life of a recognized intangible asset and the
period of expected cash flows used to measure the fair value of the asset. This
guidance is effective for fiscal years beginning after December 15, 2008. 
This guidance is effective for the Company’s fiscal year beginning
August 1, 2009. The adoption of this guidance did not have a significant
impact on the Company’s consolidated financial statements.
 
 In May
2008, the FASB issued guidance related to accounting for convertible debt
instruments that may be settled in cash upon conversion (including partial cash
settlements).  This guidance requires a portion of this type of convertible
debt to be recorded as equity and to record interest expense on the debt portion
at a rate that would have been charged on nonconvertible debt with the same
terms. The adoption of this guidance did not have a significant impact on the
Company’s consolidated financial statements.
 
 In June
2008, the FASB issued guidance related to determining whether instruments
granted in share-based payment transactions are participating securities. 
Securities participating in dividends with common stock according to a formula
are participating securities. This guidance determined that unvested shares of
restricted stock and stock units with nonforfeitable rights to dividends are
participating securities. Participating securities require the “two-class”
method to be used to calculate basic earnings per share. This method lowers
basic earnings per common share. This guidance is effective for the Company’s
fiscal year beginning August 1, 2009.  The adoption of this guidance
did not have a significant impact on the Company’s consolidated financial
statements.
  6
  GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 In
June 2008, the FASB reached a consensus regarding the determination of
whether an instrument (or an embedded feature) is indexed to an entity’s own
stock, which is the first part of the scope exception related to accounting for
derivative instruments and hedging activities.  This guidance is effective
for the Company’s fiscal year beginning August 1, 2009.  The Company
determined that certain of its warrants with price protection provisions are not
considered to be indexed to the Company’s own stock, therefore, they do not meet
the scope exception and thus should be accounted for as a liability.  The
adoption of this guidance resulted in the recognition of a loss of $1,978,756
within the Company’s consolidated statements of operations for the three month
period ended January 31, 2010 and a gain of $1,017,515 for the six month period
ended January 31, 2010.  There was a net reclassification of $11,747,447 of
previously reported stockholders’ equity to a liability under the caption
“Derivative Warrant Liability” as of January 31, 2010.  (See Notes 11 –
Derivative Warrant Liability and 12 –Restatement of Previously Reported Interim
Period.)
 
 In June
2009, the FASB issued guidance which stipulates the FASB Accounting Standards
Codification is the source of authoritative U.S. GAAP recognized by the FASB to
be applied by nongovernmental entities. This guidance is effective for the
Company’s fiscal year beginning August 1, 2009. The adoption of this
guidance did not have a significant impact on the Company’s consolidated
financial statements.
 
 Recently
Issued Accounting Pronouncements
 In
October 2009, the FASB issued guidance on multiple deliverable revenue
arrangements which eliminates the residual method of allocation and requires the
relative selling price method when allocating deliverables of a
multiple-deliverable revenue arrangement. The determination of the selling price
for each deliverable requires the use of a hierarchy designed to maximize the
use of available objective evidence including, vendor specific objective
evidence, third party evidence of selling price, or estimated selling
price.  This guidance is effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after
June 15, 2010, and must be adopted in the same period using the same
transition method. If adoption is elected in a period other than the beginning
of a fiscal year, the amendments in these standards must be applied
retrospectively to the beginning of the fiscal year. Full retrospective
application of these amendments to prior fiscal years is optional. Early
adoption of these standards may be elected. We are currently evaluating the
impact of this new accounting guidance on our consolidated financial
statements.
 
 In
January 2010, the FASB issued additional guidance on fair value measurements and
disclosures which requires reporting entities to provide information about
movements of assets among Level 1 and 2 of the three-tier fair value hierarchy
established by the existing guidance.  The guidance is effective for any
fiscal year that begins after December 15, 2010, and it should be used for
quarterly and annual filings.  We are currently evaluating the impact of
this new accounting guidance on our consolidated financial
statements.
 
 3.
                Stock-Based
      Compensation
 As of
January 31, 2010, the Company had three stockholder-approved stock incentive
plans under which shares and options exercisable for shares of common stock have
been or may be granted to employees, directors, consultants and advisors. A
total of 2,000,000 shares of common stock are reserved for issuance under the
2000 Stock Option Plan (the 2000 Plan), a total of 12,000,000 shares of common
stock are reserved for issuance under the 2001 Stock Option Plan (the 2001 Plan)
and 30,000,000 shares of common stock are reserved for issuance under the 2006
Stock Plan (the 2006 Plan).  Restricted shares can only be issued under the
2006 Plan.  At January 31, 2010, there were 2,000,000, 8,547,628 and
18,118,410 shares of common stock reserved for future awards under the 2000
Plan, 2001 Plan and 2006 Plan, respectively.
 
 The 2000,
2001 and 2006 Plans (the Plans) are administered by the Board of Directors (the
Board). The Board is authorized to select from among eligible employees,
directors, advisors and consultants those individuals to whom options are to be
granted and to determine the number of shares to be subject to, and the terms
and conditions of the options. The Board is also authorized to prescribe, amend
and rescind terms relating to options granted under the Plans. Generally, the
interpretation and construction of any provision of the Plans or any options
granted hereunder is within the discretion of the Board.
 
 The Plans
provide that options may or may not be Incentive Stock Options (ISOs) within the
meaning of Section 422 of the Internal Revenue Code. Only employees of the
Company are eligible to receive ISOs, while employees and non-employee
directors, advisors and consultants are eligible to receive options which are
not ISOs, i.e. “Non-Qualified Options.” The options granted by the Board in
connection with its adoption of the Plans were Non-Qualified Options. In
addition, the 2006 Plan also provides for restricted stock
grants.
  7
  GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 The fair
value of each option granted is estimated on the grant date using the
Black-Scholes option pricing model which takes into account as of the grant date
the exercise price and expected life of the option, the current price of the
underlying stock and its expected volatility, expected dividends on the stock
and the risk-free interest rate for the term of the option.
 
 In the
case of restricted stock grants under the 2006 Plan, fair market value of the
shares is the market price.
 
 The
following is a summary of the common stock options granted, forfeited or expired
and exercised under the Plan for the six months ended January 31,
2010:
  Weighted
                                    
                                    
                                    WeightedAverage
                                    
                                    
                                    AverageExercise
                                    
                                    
                                    Remaining
                                    
                                    
                                    AggregatePrice
                                    
                                    
                                    Contractual
                                    
                                    
                                    IntrinsicOptions
                                    
                                    
                                    Share
                                    
                                    
                                    Term (Years)
                                    
                                    
                                    ValueOutstanding,
      August 1, 2009
                                    
                                    
                                    5,067,138
                                    
                                    
                                    $
                                    0.44Granted
                                    
                                    
                                    855,000
                                    
                                    
                                    
                                    0.64Forfeited
      or expired
                                    
                                    
                                    (270,000
                                    )
                                    
                                    
                                    0.92Exercised
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —Outstanding,
      January 31, 2010
                                    
                                    
                                    5,652,138
                                    
                                    
                                    
                                    0.44
                                    
                                    
                                    
                                    4.65
                                    
                                    
                                    $
                                    1,456,715Exercisable,
      January 31, 2010
                                    
                                    
                                    4,753,388
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    1,456,715Grant
      Date Fair Value of Options Granted
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    $
                                    0.46Grant
      Date Fair Value of Options Forfeited or Expired
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    0.70Total
      Intrinsic Value of Options Exercised
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    n/a
 
 The
following is a summary of the non-vested common stock options granted, vested
and forfeited under the Plan:
 Weighted AverageGrant DateOptions
                              
                              
                              Fair ValueOutstanding,
      August 1, 2009
                              
                              
                              43,750
                              
                              
                              $
                              0.59Granted
                              
                              
                              855,000
                              
                              
                              
                              0.46Vested
                              
                              
                              —
                              
                              
                              
                              n/aForfeited
                              
                              
                              —
                              
                              
                              
                              n/aOutstanding,
      January 31, 2010
                              
                              
                              898,750
                              
                              
                              
                              0.47
 
 As of
January 31, 2010, the Company had $367,183 of total unrecognized compensation
cost related to non-vested share-based compensation arrangements granted under
the Plan.  That cost is expected to be recognized over a weighted-average
period of 3.66 years.
 
 During
the six months ended January 31, 2010, the Company modified the terms of
4,535,638 outstanding options which resulted in a charge to operations in the
amount of $875,773.  The fair value of modification cost is estimated as
the difference of options’ fair value before and after modification date. 
The estimates employ Black-Scholes option pricing model, which takes into
account the exercise price ($0.001 – $0.94), expected life of the option (5
years), the current price of the underlying stock ($0.59) and its expected
volatility (109.05%), expected dividends on the stock($0) and the risk-free
interest rate for the term of the option (0.11%).
 
 In August
2007, the Company issued 550,000 shares of common stock under the 2006 Plan in
the form of restricted stock awards to officers.  The fair value of these
shares was based on the quoted market price of the Company’s common stock on the
dates of the issuance is $830,500. These shares were issued as an incentive to
retain key employees and officers.  A portion of these shares vested
immediately while the remaining portion vested over two years from the date of
the grant.  The following table summarizes the Company’s non-vested
restricted stock activity for the six months ended January 31,
2010.
  8
  GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 WeightedAverageGrant DateNumber of
                      
                      
                      FairShares
                      
                      
                      ValueNon-vested
      restricted stock, August 1, 2009
                      
                      
                      14,844
                      
                      
                      $
                      1.51Granted
                      
                      
                      —
                      
                      
                      
                      n/aVested
                      
                      
                      (14,844
                      )
                      
                      
                      1.51Forfeited
                      
                      
                      —
                      
                      
                      
                      n/aNon-vested
      restricted stock, January 31, 2010
                      
                      
                      —
                      
                      
                      
                      n/a
 
 4.
                Comprehensive
      Loss
 Comprehensive
loss, which includes net loss and the change in the foreign currency translation
account, for the three months ended January 31, 2010 and 2009, was $9,276,303and
$12,080,656, respectively.  Comprehensive loss for the six months ended
January 31, 2010 and 2009 was $14,379,858 and $24,144,454,
respectively.
 
 5.
                Inventory
 Inventory
consists of the following:
 
 January
      31,
                      
                      
                      July
      31,2010
                      
                      
                      2009Raw
      materials
                      
                      $
                      1,255,436
                      
                      
                      $
                      728,919Finished
      goods
                      
                      
                      847,662
                      
                      
                      
                      542,537Total
                      
                      $
                      2,103,098
                      
                      
                      $
                      1,271,456
 
 6.
                Accounts
      Payable and Accrued Expenses
 Accounts
payable and accrued expenses consist of the following:
 
 January
      31,
                      
                      
                      July
      31,2010
                      
                      
                      2009Accounts
      Payable
                      
                      $
                      3,765,183
                      
                      
                      $
                      2,983,037Research
      and Development
                      
                      
                      3,065,806
                      
                      
                      
                      1,629,293Executive
      Compensation
                      
                      
                      2,654,207
                      
                      
                      
                      2,873,825Total
                      
                      $
                      9,485,196
                      
                      
                      $
                      7,486,155
 
 7.
                Pending
      Litigation
 In
February 2001, a former business associate of the former Vice President of
Research and Development (“VP”) of the Company and an entity known as Centrum
Technologies Inc. (“CTI”) commenced an action in the Ontario Superior Court of
Justice against the Company and the VP seeking, among other things, damages for
alleged breaches of contract and tortious acts related to a business
relationship between this former associate and the VP that ceased in July 1996.
The plaintiffs’ statement of claim also seeks to enjoin the use, if any, by the
Company of three patents allegedly owned by CTI. The three patents are entitled
Liquid Formulations for
Proteinic Pharmaceuticals, Vaccine Delivery System for
Immunization, Using Biodegradable Polymer Microspheres, and Controlled Releases of Drugs or
Hormones in Biodegradable Polymer Microspheres.  It is the Company’s
position that the buccal drug delivery technologies which are the subject matter
of the Company’s research, development, and commercialization efforts, including
Generex Oral-lynTM and the RapidMistTM Diabetes Management System, do not make use
of, are not derivative of, do not infringe upon, and are entirely different from
the intellectual property identified in the plaintiffs’ statement of claim. On
July 20, 2001, the Company filed a preliminary motion to dismiss the action of
CTI as a nonexistent entity or, alternatively, to stay such action on the
grounds of want of authority of such entity to commence the action. The
plaintiffs brought a cross motion to amend the statement of claim to substitute
Centrum Biotechnologies, Inc. (“CBI”) for CTI. CBI is a corporation of which 50
percent of the shares are owned by the former business associate and the
remaining 50 percent are owned by the Company. Consequently, the shareholders of
CBI are in a deadlock. The court granted the Company’s motion to dismiss the
action of CTI and denied the plaintiffs’ cross motion without prejudice to the
former business associate to seek leave to bring a derivative action in the name
of or on behalf of CBI. The former business associate subsequently filed an
application with the Ontario Superior Court of Justice for an order granting him
leave to file an action in the name of and on behalf of CBI against the VP and
the Company. The Company opposed the application. In September 2003, the Ontario
Superior Court of Justice granted the request and issued an order giving the
former business associate leave to file an action in the name of and on behalf
of CBI against the VP and the Company. A statement of claim was served in July
2004. The Company is not able to predict the ultimate outcome of this legal
proceeding at the present time or to estimate an amount or range of potential
loss, if any, from this legal proceeding.
  9
  GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 The
Company is involved in certain other legal proceedings in addition to those
specifically described herein. Subject to the uncertainty inherent in all
litigation, the Company does not believe at the present time that the resolution
of any of these legal proceedings is likely to have a material adverse effect on
the Company’s financial position, operations or cash flows.
 
 With
respect to all litigation, as additional information concerning the estimates
used by the Company becomes known, the Company reassesses its position both with
respect to accrued liabilities and other potential exposures.
 
 8.
                Commitments
 On
December 7, 2009, the Company entered into a long-term agreement with
sanofi-aventis Deutschland GmbH (“sanofi-aventis”).  Under this agreement,
sanofi-aventis will manufacture and supply recombinant human insulin to the
Company in the territories specified in the agreement.  Through this
agreement, the Company will procure recombinant human insulin crystals for use
in the production of Generex Oral-lynTM.  The terms of the supply agreement
require the Company to make certain minimum purchases of insulin from
sanofi-aventis through the period ending December 31, 2011.
 
 9.
                Net
      Loss Per Share
 Basic
earnings per shares (EPS) and Diluted EPS for the six and three months ended
January 31, 2010 and 2009 have been computed by dividing the net loss available
to common stockholders for each respective period by the weighted average shares
outstanding during that period.  All outstanding options and warrants,
representing approximately 48,281,423 incremental shares, have been excluded
from the January 31, 2010 computation of Diluted EPS as they are anti-dilutive,
due to the losses generated during the respective period.   All
outstanding options, warrants, non-vested restricted stock and shares to be
issued upon conversion of the outstanding convertible debentures, representing
approximately 70,990,472 incremental shares, have been excluded from the January
31, 2009 computation of Diluted EPS as they are anti-dilutive, due to the losses
generated during the respective period.
 
 10.
                Stockholders’
      Equity
 At our
Annual Meeting of Stockholders on July 30, 2009, our stockholders approved an
amendment to our Restated Certificate of Incorporation, as amended, to increase
the number of authorized shares of our common stock from 500,000,000 to
750,000,000.
 
 During
the six months ended January 31, 2010, the Company issued 23,870,513 shares of
common stock and 9,595,622 warrants to acquire the shares of common stock at
exercise prices of $0.79 to $1.00 pursuant to registered direct offerings and
private placements, in exchange for net cash proceeds after expenses of
$16,400,671.  The shares were priced at $0.66 to $0.80 per share based on
the quoted market price of the Company’s common stock on the dates of the
issuances.
 
 During
the six months ended January 31, 2010, the Company issued 1,300,659 shares of
common stock to various consultants for services rendered in the amount of
$832,605.  The shares were valued at $0.45 to $0.76 per share based on the
quoted market price of the Company’s common stock on the dates of the
issuances.
 
 During
the six months ended January 31, 2010, the Company issued 3,295,670 shares of
common stock to various vendors as satisfaction of accounts payable and accrued
expenses in the amount of $1,991,838.  The shares were valued at $0.48 to
$0.77 per share based on the quoted market price of the Company’s common stock
on the dates of the issuances.
 
 During
the six months ended January 31, 2010, the Company issued 84,258 shares of
common stock valued at $50,500 as employee compensation.  The shares were
valued at $0.50 to $0.73 per share based on the quoted market price of the
Company’s common stock on the dates of the issuances.
  10
  GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 During
the six months ended January 31, 2010, the Company granted 855,000 options to
employees as compensation.  The total fair value of the options amounted to
$393,300 which is being amortized over the vesting period of 4 years, resulting
in a charge to operations during the six month period ended January 31, 2010 of
$30,419.  The fair value of each option granted was estimated on the grant
date using the Black-Scholes option pricing model, taking into account the grant
date exercise price and current price of the underlying stock of $0.64, an
expected life of the option of 3.75 years, an expected volatility of 108.9%,
expected dividends on the stock of $0 and the risk-free interest rate for the
term of the option of 0.12%.
 
 During
the six months ended January 31, 2010, the Company modified the terms of
4,535,638 outstanding options resulting in a charge to operations in the amount
of $875,773.  This charge was entirely incurred in the quarter ended
October 31, 2009.
 
 During
the six months ended January 31, 2010, the Company issued 5,245,459 shares of
common stock in conjunction with cashless exercises of 9,344,795
warrants.
 
 During
the six months ended January 31, 2010, the Company received aggregate cash
proceeds of $1,517,940 from exercises of warrants.  The Company issued
4,599,817 shares of common stock as a result of these exercises.  All such
exercises occurred in the quarter ended October 31, 2009.
 
 During
the six months ended January 31, 2010, the Company recorded a charge to
operations in the amount of $10,189 as amortization of stock-based
compensation.
 
 During
the six months ended January 31, 2010, the Company issued 1,000,000 warrants to
purchase the shares of common stock for $0.001 valued at $505,000 to a
consultant.  The warrants were valued at $0.505 based on the quoted market
price of the Company’s common stock on the date of the issuance.  An
additional 1,000,000 warrants will be issued to the consultant at the same
exercise price if certain milestones are met prior to the contract expiration
date of May 31, 2010.
 
 The
following is a summary of the warrants issued, forfeited or expired and
exercised for the six months ended January 31, 2010:
 WarrantsOutstanding,
      August 1, 2009
                      
                      
                      46,478,276Issued
                      
                      
                      10,595,622Forfeited
      or expired
                      
                      
                      (500,001
                      )Exercised
                      
                      
                      (13,944,612
                      )Outstanding,
      January 31, 2010
                      
                      
                      42,629,285
 
 The
outstanding warrants at January 31, 2010 have a weighted average exercise price
of $0.57 per share.
 
 The
stockholders’ equity transactions as described above are summarized
below:
 
 Additional
                      
                      
                      TotalCommon Stock
                      
                      
                      Paid-In
                      
                      
                      Stockholders’Shares
                      
                      
                      Amount
                      
                      
                      Capital
                      
                      
                      EquityIssuance
      of common stock in private placement
                      
                      
                      23,870,513
                      
                      
                      $
                      23,870
                      
                      
                      $
                      16,376,801
                      
                      
                      $
                      16,400,671Issuance
      of common stock for services
                      
                      
                      1,300,659
                      
                      
                      
                      1,301
                      
                      
                      
                      831,304
                      
                      
                      
                      832,605Issuance
      of common stock as employee compensation
                      
                      
                      84,258
                      
                      
                      
                      84
                      
                      
                      
                      50,416
                      
                      
                      
                      50,500Stock-based
      executive compensation
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      10,189
                      
                      
                      
                      10,189Warrants
      exercised for cash
                      
                      
                      4,599,817
                      
                      
                      
                      4,600
                      
                      
                      
                      1,513,340
                      
                      
                      
                      1,517,940Issuance
      of common stock as satisfaction of accounts payable and accrued
      expenses
                      
                      
                      3,295,670
                      
                      
                      
                      3,296
                      
                      
                      
                      1,988,543
                      
                      
                      
                      1,991,839Issuance
      of warrants for services
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      505,000
                      
                      
                      
                      505,000Issuance
      of common stock in conjunction with cashless exercise of
      warrants
                      
                      
                      5,245,459
                      
                      
                      
                      5,245
                      
                      
                      
                      (5,245
                      )
                      
                      
                      —Amortization
      of stock options as employee compensation
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      30,419
                      
                      
                      
                      30,419Option
      re-pricing costs
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      875,773
                      
                      
                      
                      875,773Total
                      
                      
                      38,396,376
                      
                      
                      $
                      38,396
                      
                      
                      $
                      22,176,540
                      
                      
                      $
                      22,214,936
  11
  GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 11.
                Derivative
      Warrant Liability
 
 The
Company has warrants outstanding with price protection provisions that allow for
the reduction in the exercise price of the warrants in the event the Company
subsequently issues stock at a price lower than the exercise price of the
warrants.  The Company has historically issued warrants with price
protection provisions in connection with financing to support its ongoing
operational and development activities.  The Company accounts for its
warrants with price protection in accordance with FASB ASC 815.
 
 Accounting
for Derivative Warrant Liability
 The
Company’s derivative warrant instruments are measured at fair value using the
Black-Scholes option pricing model which takes into account, as of the grant
date, the exercise price and expected life of the warrant, the current price of
the underlying stock and its expected volatility, expected dividends on the
stock and the risk-free interest rate for the term of the warrant.  The
Company recognizes all of its warrants with price protection in its consolidated
balance sheet as liabilities depending on the rights or obligations under the
contracts.  The liability is revalued at each reporting period and changes
in fair value are recognized currently in the consolidated statements of
operations under the caption “Change in fair value of derivative warrant
liability.”  The initial recognition and change in fair value of the
derivative warrant liability have no effect on the Company’s cash
flows.
 
 The
derivative warrants outstanding at January 31, 2010 are all currently
exercisable with a weighted-average remaining life of 6.2 years.
 
 The
various financial statement line items and totals affected by the adoption of
FASB ASC 815 for the previously reported interim periods ended October 31, 2009
and January 31, 2010 are disclosed in Note 12 - Restatement of Previously
Reported Interim Periods.
 
 Fair
Value Assumptions Used in Accounting for Derivative Warrant
Liability
 Fair
value is defined under FASB ASC 820 as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or
the most advantageous market for an asset or liability in an orderly transaction
between participants on the measurement date. Valuation techniques used to
measure fair value must maximize the use of observable inputs and minimize the
use of unobservable inputs. The standard describes a fair value hierarchy based
on the levels of inputs, of which the first two are considered observable and
the last unobservable, that may be used to measure fair value which are the
following:
 
 ·
                Level
      1 - Quoted prices in active markets for identical assets or
      liabilities
 ·
                Level
      2 - Inputs other than Level 1 that are observable, either directly or
      indirectly, such as quoted prices for similar assets or liabilities;
      quoted prices in markets that are not active; or other inputs that are
      observable or corroborated by observable market data or substantially the
      full term of the assets or
liabilities
 ·
                Level
      3 - Unobservable inputs that are supported by little or no market activity
      and that are significant to the value of the assets or
      liabilities
 
 The
Company has determined its derivative warrant liability to be a Level 2 fair
value measurement and has used the Black-Scholes pricing model to calculate the
fair value.  This model was used because of its wide acceptance by the
investment community, relative simplicity and its emphasis on observable
inputs.   Key assumptions used in the fair value calculation are as
follows:
 January
      31,
                      
                      
                      October
      31,
                      
                      
                      August
      1,2010
                      
                      
                      2009
                      
                      
                      2009Expected
      term
                      
                      
                      6.17
                      
                      
                      
                      6.42
                      
                      
                      
                      6.67Volatility
                      
                      
                      98.5
                      %
                      
                      
                      98.0
                      %
                      
                      
                      96.9
                      %Risk-free
      interest rate
                      
                      
                      0.16
                      %
                      
                      
                      0.16
                      %
                      
                      
                      0.16
                      %Dividend
      yield
                      
                      
                      0
                      
                      
                      
                      0
                      
                      
                      
                      0
  12
 
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 12.
                Restatement
      of Previously Reported Interim
Periods
 
 The
Company adopted Issue No. 07-5, “Determining Whether an Instrument (or Embedded
Feature) is Indexed to an Entity’s Own Stock” (now codified as FASB ASC 815)
effective as of August 1, 2009.  The Company reassessed certain outstanding
warrants under FASB ASC 815 and, due to a price adjustment clause included in
these warrants, determined that such warrants are no longer deemed to be indexed
to the Company’s stock and, therefore, no longer meet the scope exception of
FASB ASC 815. These warrants should have been reclassified to a liability in the
two quarters of fiscal 2010 ended October 31, 2009 and January 31, 2010 and will
be adjusted to fair value on a quarterly basis going forward.
 
 The
Company’s adoption of FASB ASC 815 on August 1, 2009 relating to the warrants
carried as a derivative liability had the following effect on the consolidated
statement of operations for the previously reported interim periods ended
January 31, 2010 and October 31, 2009:
 Six MonthsThree Months Ended
                      
                      
                      EndedOctober 31,
                      
                      
                      January 31,
                      
                      
                      January 31,2009
                      
                      
                      2010
                      
                      
                      2010Net
      loss as previously reported
                      
                      $
                      (8,138,656
                      )
                      
                      $
                      (7,315,462
                      )
                      
                      $
                      (15,454,118
                      )Change
      in fair value of derivative warrant liability
                      
                      
                      2,996,271
                      
                      
                      
                      (1,978,756
                      )
                      
                      
                      1,017,515Net
      loss as restated
                      
                      $
                      (5,142,385
                      )
                      
                      $
                      (9,294,218
                      )
                      
                      $
                      (14,436,603
                      )Previously
      reported loss per share – basic & diluted
                      
                      $
                      (0.03
                      )
                      
                      $
                      (0.03
                      )
                      
                      $
                      (0.06
                      )Restated
      loss per share – basic & diluted
                      
                      $
                      (0.02
                      )
                      
                      $
                      (0.04
                      )
                      
                      $
                      (0.06
                      )
 
 The
Company’s adoption of FASB ASC 815 relating to the warrants carried as a
derivative liability had the following effect on the consolidated balance sheets
as of the previously reported interim period October 31, 2009:
 
 PreviouslyReported
                      
                      
                      Correction
                      
                      
                      RestatedDerivative
      Warrant Liability
                      
                      $
                      —
                      
                      
                      $
                      10,131,138
                      
                      
                      $
                      10,131,138Total
      Liabilities
                      
                      $
                      10,684,117
                      
                      
                      $
                      10,131,138
                      
                      
                      $
                      20,815,255Additional
      paid in capital
                      
                      
                      327,892,433
                      
                      
                      
                      (13,127,409
                      )
                      
                      
                      314,765,024Deficit
      accumulated during the development stage
                      
                      
                      (302,180,145
                      )
                      
                      
                      2,996,271
                      
                      
                      
                      (299,183,874
                      )Total
      Stockholders’ Equity
                      
                      $
                      26,650,849
                      
                      
                      $
                      (10,131,138
                      )
                      
                      $
                      16,519,711
 
 The
Company’s adoption of FASB ASC 815 relating to the warrants carried as a
derivative liability had the following effect on the consolidated balance sheets
as of the previously reported interim period January 31, 2010:
 
 PreviouslyReported
                      
                      
                      Correction
                      
                      
                      RestatedDerivative
      Warrant Liability
                      
                      $
                      —
                      
                      
                      $
                      11,747,447
                      
                      
                      $
                      11,747,447Total
      Liabilities
                      
                      $
                      12,817,907
                      
                      
                      $
                      11,747,447
                      
                      
                      $
                      24,565,354Additional
      paid in capital
                      
                      
                      329,577,557
                      
                      
                      
                      (12,764,962
                      )
                      
                      
                      316,812,595Deficit
      accumulated during the development stage
                      
                      
                      (309,495,607
                      )
                      
                      
                      1,017,515
                      
                      
                      
                      (308,478,092
                      )Total
      Stockholders’ Equity
                      
                      $
                      21,041,306
                      
                      
                      $
                      (11,747,447
                      )
                      
                      $
                      9,293,859
 
 13.
                Subsequent
      Events
 
 The
Company has evaluated subsequent events occurring after the balance sheet date
through the date the consolidated financial statements were
issued.
  13
  Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
 
 As used
herein, the terms the “Company,” “Generex,” “we,” “us,” or “our” refer to
Generex Biotechnology Corporation, a Delaware corporation. The following
discussion and analysis by management provides information with respect to our
financial condition and results of operations for the three- and six-month
periods ended January 31, 2010 and 2009. This discussion should be read in
conjunction with the information contained in Part I, Item 1A - Risk
Factors and Part II,
Item 8 - Financial Statements and Supplementary Data in our Annual Report
on Form 10-K for the year ended July 31, 2009 and the information contained in
Part I, Item 1 - Financial
Statements and Part II,
Item 1A- Risk Factorsin this Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 2010.
 
 Forward-Looking
Statements
 
 We have
made statements in this Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere in this Quarterly Report on Form 10-Q of Generex
Biotechnology Corporation for the fiscal quarter ended January 31, 2010 that may
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Act"). The Act limits our
liability in any lawsuit based on forward-looking statements that we have made.
All statements, other than statements of historical facts, included in this
Quarterly Report that address activities, events or developments that we expect
or anticipate will or may occur in the future, including such matters as our
projections, future capital expenditures, business strategy, competitive
strengths, goals, expansion, market and industry developments and the growth of
our businesses and operations, are forward-looking statements. These statements
can be identified by introductory words such as "expects," “anticipates,”
"plans," "intends," "believes," "will," "estimates," "projects" or words of
similar meaning, and by the fact that they do not relate strictly to historical
or current facts. Our forward-looking statements address, among other
things:
 
 ·
              our expectations concerning
      product candidates for our
technologies;
 
 ·
              our expectations concerning
      existing or potential development and license agreements for third-party
      collaborations and joint
ventures;
 
 ·
              our expectations of when
      different phases of clinical activity may commence and
      conclude;
 
 ·
              our expectations of when
      regulatory submissions may be filed or when regulatory approvals may be
      received; and
 
 ·
              our expectations of when
      commercial sales of our products may commence and when actual revenue from
      the product sales may be
received.
 
 Any or
all of our forward-looking statements may turn out to be wrong. They may be
affected by inaccurate assumptions that we might make or by known or unknown
risks and uncertainties. Actual outcomes and results may differ materially from
what is expressed or implied in our forward-looking statements. Among the
factors that could affect future results are:
 
 ·
              the inherent uncertainties of
      product development based on our new and as yet not fully proven
      technologies;
 
 ·
              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 volatility of, and recent
      decline in, our stock price and the impact on our ability to pay
      installments due on our outstanding senior secured notes in stock rather
      than cash; and
 
 ·
              our ability to obtain the
      necessary financing to fund our
  operations.
  14
  Additional
factors that could affect future results are set forth in Part I, Item 1A Risk Factors
of our Annual Report on Form 10-K for the year ended July 31, 2009 and in Part II, Item 1A. Risk
Factors of this Quarterly Report on Form 10-Q. We caution investors that
the forward-looking statements contained in this Quarterly Report must be
interpreted and understood in light of conditions and circumstances that exist
as of the date of this Quarterly Report. We expressly disclaim any obligation or
undertaking to update or revise forward-looking statements to reflect any
changes in management's expectations resulting from future events or changes in
the conditions or circumstances upon which such expectations are
based.
  Compliance
with Smaller Reporting Company Disclosure Requirements
  Generex
has determined that it qualified as a “smaller reporting company” as defined in
Rule 12-b2 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and that it will take advantage of the Securities and Exchange
Commission’s recently adopted rules permitting a smaller reporting company to
comply with scaled disclosure requirements for smaller reporting companies on an
item-by-item basis. The Company has elected to comply with the scaled disclosure
requirements for smaller reporting companies with respect to Part I, Item 3 – Quantitative
and Qualitative Disclosures About Market Risk, which is not applicable to
smaller reporting companies.
 
 Executive
Summary
 
 Overview
of Business
 
 We are
engaged primarily in the research, development and commercialization of drug
delivery systems and technologies. Our primary focus at the present time is our
proprietary technology for the administration of formulations of large molecule
drugs to the oral (buccal) cavity using a hand-held aerosol applicator. Through
our wholly-owned subsidiary, Antigen, we have expanded our focus to include
immunomedicines incorporating proprietary vaccine formulations.
 
 We
believe that our buccal delivery technology is a platform technology that has
application to many large molecule drugs and provides a convenient,
non-invasive, accurate and cost-effective way to administer such drugs. We have
identified several large molecule drugs as possible candidates for development,
including estrogen, heparin, monoclonal antibodies, human growth hormone and
fertility hormone, but to date have focused our development efforts primarily on
one pharmaceutical product, Generex Oral-lynTM, an insulin formulation
administered as a fine spray into the oral cavity using our proprietary
hand-held aerosol spray applicator known as RapidMistTM.
 
 Generex
Oral-lynTM
 
 Regulatory
Approvals and Clinical Trials
 
 To date,
we have received regulatory approval in Ecuador, India, Lebanon and Algeria for
the commercial marketing and sale of Generex Oral-lynTM.
 
 In March
2008, we initiated Phase III clinical trials for this product in the U.S. with
the first patient screening for such trials at a clinical study site in Texas.
The patient screening at other participating clinical sites in the U.S. and
Canada is ongoing. Currently over 389 patients have been enrolled in 70 clinical
sites around the world, including sites in the United States, Canada, Bulgaria,
Poland, Romania, Russia and Ukraine.
 
 In
November 2008, we submitted our product dossier to the Ministry of Health in
Damascus, Syria through Generex MENA, our branch office in Dubai. The dossier
includes Generex Oral-lynTM. We also submitted a file to register our proprietary
over-the-counter products, including Glucose RapidSprayTM, 7-Day Diet Aid SprayTM
(marketed as Crave-NxTM in the United States and Canada) and BaBOOM!TM Energy
Spray. The Syrian Ministry of Health will review the dossier and inform us of
any additional requests for information that it may have. There have been no
immediate queries, and we anticipate registration in the 2010 calendar
year.
 
 In
December 2008, we submitted Generex Oral-lynTM dossier to the Ministry of Health
in Iraq (North) through Generex MENA, our branch office in Dubai and expect to
receive an approval to market the product in the 2010 calendar
year.
 
 Special
Access Programs
 
 In
October 2009, we received approval from the U.S. Food and Drug Administration
(the “FDA”) to charge to recover costs for the treatment use of Generex
Oral-lynTM in patients with Type 1 or Type 2 diabetes mellitus in the FDA’s
Treatment Investigational New Drug program that provides for early access to
investigational treatments for life-threatening or otherwise serious
conditions.
  15
  We
received a Special Access Program (SAP) authorization from Health Canada for a
patient-specific, physician-supervised treatment of Type-1 diabetes with Generex
Oral-lynTM in April 2008. SAP provides access to non-marketed drugs for
practitioners treating patients with serious or life-threatening conditions when
conventional therapies have failed, are not available or unsuitable. We received
a similar authorization from health authorities in Netherlands in September
2008.  We will continue to expand our SAP participation in additional
countries around the world.
 
 Marketing
 
 In
November 2008 we, together with our marketing partner Shreya Life Sciences Pvt.
Ltd., officially launched Generex Oral-lynTM in India under marketing name of
Oral Recosulin. Each package of Oral Recosulin contains two canisters of our
product along with one actuator. The product was approved in India in January
2009, but per the requirements of the approval, a study in India with Oral
Recosulin is still ongoing and we have not recognized any revenue from the
Indian market to this point.
 
 In
December 2008, we, together with our marketing partner Benta SA., received an
approval to market Generex Oral-lynTM in Lebanon. Benta SA. is currently working
on reimbursement policy for Generex Oral-lynTM. The official product launch in
Lebanon took place in May 2009.
 
 In May
2009, the Algerian health authorities granted us permission to import and sell
Generex Oral-lynTM for the treatment of diabetes in Algeria.  Through
the efforts of our business development team, in association with our Generex
MENA office, we have entered into a marketing sub-distribution relationship with
Algerian company Continental Pharm Laboratoire. The official product launch in
Algeria took place in October 2009.  To date we have not recognized
any revenue from the sales of Generex Oral-lynTM in Algeria.
 
 Over-The-Counter
Glucose Product Line
 
 Using our
buccal delivery technology, we have also launched a line of over-the-counter
glucose and energy sprays , including Glucose RapidSprayTM, Crave-NXTM 7-day Diet
Aid Spray, and BaBOOM!TM Energy Spray. We believe these products will complement
Generex Oral-lynTM and may provide us with an additional revenue stream prior to
the commercialization of Generex Oral-lynTM in other major jurisdictions. In the
first two quarters of fiscal 2010, we received modest revenues from sales of our
commercially available products, our confectionary Glucose RapidSprayTM, a
flavored glucose “energy” spray supplemented with vitamins, BaBOOM!TM Energy
Spray, and a fat-free glucose spray to aid in dieting, Crave-NXTM.  All
three products are available in retail stores and independent pharmacies in the
United States and Canada.  In addition, the products are being
distributed in the Middle East through our Generex MENA office in Dubai. We
expect other distribution territories for these products to include South
Africa, India, South America and other jurisdictions worldwide. We are currently
pursuing European registrations for these products.
 
 Other
Product Candidates
 
 In
October 2008, we announced the enrollment of subjects in our bioequivalence
clinical trial of MetControlTM, our proprietary Metformin medicinal chewing gum
product. The protocol for the study is an open-label, two-treatment, two-period,
randomized, crossover study comparing MetControlTM and immediate release
MetforminTM tablets in healthy volunteers. The study results, that we received
and analyzed in December 2008 demonstrated bioequivalence and will allow us to
proceed with additional research and development initiatives and consider
regulatory agency registration applications.  We are compiling the
data from this study and expect to file with the regulatory agency in the 2010
calendar year.
 
 Our
subsidiary, Antigen Express, concentrates on developing proprietary vaccine
formulations that work by stimulating the immune system to either attack
offending agents (i.e., cancer cells, bacteria, and viruses) or to stop
attacking benign elements (i.e., self proteins and allergens). Our
immunomedicine products are based on two platform technologies and are in the
early stages of development. We continue clinical development of Antigen’s
synthetic peptide vaccines designed to stimulate a potent and specific immune
response against tumors expressing the HER-2/neu oncogene for patients with
HER-2/neu positive breast cancer in a Phase II clinical trial and patients with
prostate cancer and against avian influenza in two Phase I trials. An additional
Phase I trial has been initiated recently in patients with either breast or
ovarian cancer.  The synthetic vaccine technology has particularly
advantages for pandemic or potentially pandemic viruses, such as the H5N1 avian
and H1N1 swine flu.  In addition to pandemic influenza viruses,
development efforts also are underway for seasonal influenza virus, HIV, HPV,
melanoma, ovarian cancer, allergy and Type I diabetes mellitus. We have
established collaborations with clinical investigators at academic centers to
advance these technologies.
 
 Competition
 
 We face
competition from other providers of alternate forms of insulin. Some of our most
significant competitors, Pfizer, Eli Lilly, and Novo Nordisk, have announced
that they will discontinue development and/or sale of their inhalable forms of
insulin. Generex Oral-lynTM is not an inhaled insulin; rather, it is a buccally
absorbed formulation with no residual pulmonary deposition. We believe that our
buccal delivery technology offers several advantages over inhaled insulin,
including the avoidance of pulmonary inhalation, which requires frequent
physician monitoring, ease of use and portability.
  16
  Brief
Company Background
 
 We are a
development stage company. From inception through the end of the fiscal quarter
ended January 31, 2010, we have received only limited revenues from
operations. In the first two quarters of fiscal 2010 and in the fiscal year
ended July 31, 2009, we received approximately $528,886 and $1,118,509,
respectively in revenue. The revenue in fiscal 2009 included $550,000 relating
to an upfront license fee for the signing of a license and distribution
agreement for Generex Oral-lynTM, while the remainder of the revenue in both
fiscal periods pertained to the sale of our confectionary products. These
numbers do not reflect deferred sales to customers during the respective periods
with the right of return.
 
 We
operate in only one segment: the research, development and commercialization of
drug delivery systems and technologies for metabolic and immunological
diseases.
 
 We were
incorporated in the State of Delaware in 1997. Our principal executive offices
are located at 33 Harbour Square, Suite 202, Toronto, Canada, and our telephone
number at that address is (416) 364-2551. We maintain an Internet website at
www.generex.com.  We
make available free of charge on or through our website our filings with the
SEC.
 
 Accounting
for Research and Development Projects
 
 Our major
research and development projects are the refinement of our platform buccal
delivery technology, our buccal insulin project (Generex Oral-lynTM), our buccal
morphine product and Antigen’s peptide immunotherapeutic vaccines.
 
 During
the first two quarters of the current fiscal year and during the last fiscal
year, we expended resources on the clinical testing and commercialization, of
our buccal insulin product, Generex Oral-lynTM. In July 2007, we received no
objection from the FDA to proceed with our long-term multi-center Phase III
study protocol for Generex Oral-lynTM. Late-stage trials involve testing our
product with a large number of patients over a significant period of time. The
completion of late-stage trials in Canada and eventually the United States may
require significantly greater funds than we currently have on hand.
 
 Generex
Oral-lynTM was approved for commercial sale by drug regulatory authorities in
Ecuador in May 2005. PharmaBrand handled the commercial launch of Generex
Oral-lynTM in Ecuador in June 2006. While we anticipate generating revenue from
sales of Generex Oral-lynTM in Ecuador, we do not expect that such revenues will
be sufficient to sustain our research and development and regulatory
activities.
 
 Generex
Oral-lynTM was approved for importation and commercial sale in India in November
2007. We have entered into a licensing and distribution agreement with Shreya
Life Sciences Pvt. Ltd., and since January 2009 Generex Oral-lynTM has been
available in India under the marketing name of Oral Recosulin.
 
 Generex
Oral-lynTM was approved for importation and commercial sale in Lebanon in
December 2008. We have entered into a subdistribution agreement with Benta SA.
and officially launched the product in May 2009.
 
 Generex
Oral-lynTM was approved for importation and commercial sale in Algeria in May
2009. We have entered into a subdistribution agreement with Continental Pharm
Laboratoire and officially launched the product in October 2009.
 
 We have
not yet recognized any revenue from the sale of our oral insulin product in any
of the four countries where it is currently approved for commercial
sale.
 
 Although
we initiated regulatory approval process for our morphine and fentanyl buccal
products, we did not expend resources to further this product during our last
fiscal year or during the first two quarters of this fiscal year.
 
 During
the first two quarters of the current fiscal year and during the last fiscal
year, we expended resources on research and development relating to Antigen’s
peptide immunotherapeutic vaccines and related technologies. One Antigen vaccine
is currently in Phase II clinical trials in the United States involving patients
with HER-2/neu positive breast cancer, and an Antigen vaccine for H5N1 avian
influenza is in Phase I clinical trials conducted at the Lebanese-Canadian
Hospital in Beirut. Antigen’s prostate cancer vaccine based on AE37 is currently
in Phase I clinical trials in Greece. Preliminary pre-clinical work has
commenced with respect to the experimental vaccine for patients with acute
myeloid leukemia at Beijing Daopei Hospital in China.
 
 Because
of various uncertainties, we cannot predict the timing of completion and
commercialization of our buccal insulin in all jurisdictions or buccal morphine
products or Antigen’s peptide immunotherapeutic vaccines or related
technologies. These uncertainties include the success of current studies, our
ability to obtain the required financing and the time required to obtain
regulatory approval even if our research and development efforts are completed
and successful, our ability to enter into collaborative marketing and
distribution agreements with third-parties, and the success of such marketing
and distribution arrangements. For the same reasons, we cannot predict when any
products may begin to produce net cash inflows.
  17
  Most of
our buccal delivery research and development activities to date have involved
developing our platform technology for use with insulin. Insubstantial amounts
have been expended on projects with other drugs, including morphine and
fentanyl, and those projects involved a substantial amount of platform
technology development. As a result, we have not made significant distinctions
in the accounting for research and development expenses among products, as a
significant portion of all research has involved improvements to the platform
technology in connection with insulin, which may benefit all of our potential
buccal products. During the six months ended January 31, 2010, approximately 85%
of our total $6,476,290 in research expenses was attributable to insulin and
platform technology development, and we did not have any research expenses
related to morphine, fentanyl or other buccal projects.  During the
six months ended January 31, 2009, approximately 85% of our $7,596,130 in
research expenses was attributable to insulin and platform technology
development, and we did not have any research expenses related to morphine,
fentanyl or other buccal projects.
 
 Approximately
15%, or $968,490, of our research and development expenses for the six months
ended January 31, 2010 was related to Antigen's immunomedicine
products compared to approximately 15%, or $1,153,536, of our research and
development expenses for the six months ended January 31,
2009.  Because these products are in initial phases of clinical trials
or early, pre-clinical stage of development (with the exception of the Phase II
clinical trials of Antigen HER-2/neu positive breast cancer vaccine that are
underway), all of the expenses were accounted for as basic research and no
distinctions were made as to particular products. Due to the early stage of
development, we cannot predict the timing of completion of any products arising
from this technology, or when products from this technology might begin
producing revenues.
 
 Critical
Accounting Policies
 
 Our
discussion and analysis of our financial condition and results of operations is
based on our consolidated financial statements which have been prepared in
conformity with accounting principles generally accepted in the United States of
America. It requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
 
 We
consider certain accounting policies related to impairment of long-lived assets,
intangible assets and accrued liabilities to be critical to our business
operations and the understanding of our results of operations:
 
 Going
Concern.  As shown in the accompanying financial statements, we
have not been profitable and have reported recurring losses from
operations.  These factors raise substantial doubt about our ability
to continue to operate in the normal course of business.  The
accompanying financial statements do not include any adjustments that might be
necessary should we be unable to continue as a going concern.
 
 Revenue Recognition.
Net sales of Glucose RapidSprayTM, BaBOOM!TM Energy Spray and Crave-NXTM are
generally recognized in the period in which the products are delivered. Delivery
of the products generally completes the criteria for revenue recognition for the
Company. In the event where the customers have the right of return, sales are
deferred until the right of return lapses or the product is resold.
 
 Inventory.Inventories are stated at the lower of cost or market with cost
determined using the first-in first-out method. Management considers such
factors as the amount of inventory on hand and in the distribution channel,
estimated time to sell such inventory, inventories shelf life and current market
conditions when determining whether the lower cost or market is used. As
appropriate, a provision is recorded to reduce inventories to their net
realizable value.  Inventory also includes the cost of products sold
to the customers with the rights of return.
 
 Impairment of Long-Lived
Assets. Management reviews for impairment whenever events or changes in
circumstances indicate that the carrying amount of property and equipment may
not be recoverable under the provisions of Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." If it is determined that an impairment loss has occurred based upon
expected future cash flows, the loss is recognized in the Statement of
Operations.
 
 Intangible Assets. We
have intangible assets related to patents. The determination of the related
estimated useful lives and whether or not these assets are impaired involves
significant judgments. In assessing the recoverability of these intangible
assets, we use an estimate of undiscounted operating income and related cash
flows over the remaining useful life, market conditions and other factors to
determine the recoverability of the asset. If these estimates or their related
assumptions change in the future, we may be required to record impairment
charges against these assets.
 
 Estimating accrued
liabilities, specifically litigation accruals. Management's current
estimated range of liabilities related to pending litigation is based on
management's best estimate of future costs. While the final resolution of the
litigation could result in amounts different than current accruals, and
therefore have an impact on our consolidated financial results in a future
reporting period, management believes the ultimate outcome will not have a
significant effect on our consolidated results of operations, financial position
or cash flows.
  18
  Share-based
compensation. Management determines value of stock-based compensation in
accordance with Statement of Financial Accounting Standards No. 123(R)
“Share-Based Payment” which revises SFAS No. 123 “Accounting for Stock-Based
Compensation” for stock and options grants to employees.  We also
follow the guidance of Emerging Issues Task Force 96-18 “Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services” for equity instruments issued to
consultants.
 
 Derivative warrant
liability.  FASB ASC 815, Derivatives and Hedging, requires all
derivatives to be recorded on the balance sheet at fair value for fiscal years
beginning after December 15, 2008.  As a result, certain derivative
warrant liabilities 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.  The Company uses the Black-Scholes option-pricing model to
estimate fair value because of its relative simplicity and because it embodies
all of the requisite assumptions necessary to fair value these
instruments.  Key assumptions of the Black-Scholes option-pricing
model include the market price of the Company’s stock, applicable volatility
rates, risk-free interest rates 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.
 
 Results
of Operations
 Three
Months Ended January 31, 2010 Compared to Three Months Ended January 31,
2009
 
 As
described in Note 12 to the financial statements, we reassessed certain
outstanding warrants under Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 815, Derivatives and Hedging for the
quarter ended January 31, 2010.  Due to a price adjustment clause
included in these warrants, such warrants were no longer deemed to be indexed to
our stock and therefore, no longer met the scope exception of ASC 815. These
warrants should have been reclassified to a liability in the two previous
quarters of fiscal 2010 and adjusted to fair value at the end of each reporting
period.  The cumulative impact to the consolidated statement of
operations for the three months ended January 31, 2010 was a loss of
$1,978,756.
 
 Our net
loss for the quarter ended January 31, 2010 was $9,294,218 versus $12,038,440 in
the corresponding quarter of the prior fiscal year. The decrease in net loss in
this fiscal quarter versus the corresponding quarter of the prior fiscal year is
primarily due to the prior year’s quarter interest expense of $6,363,197, which
consisted mainly of non-cash interest charges recorded in connection with our
secured convertible debentures.  Interest expense for the current year
quarter was $53,029.  The reduction in interest from the prior year
comparative quarter was offset by a loss on revaluation of the derivative
warrant liability of $1,978,756.  The decrease in net loss was
partially offset by the increase in our general and administrative expenses,
selling and marketing expenses and research and development
expenses.  Our operating loss for the quarter ended January 31, 2010
increased to $7,339,090 compared to $5,807,232 in the second fiscal quarter of
2009.  The increase in operating loss resulted from an increase in
general and administrative expenses (to $2,733,957 from $2,064,522), an increase
in selling expense (to $1,348,068 from $609,707) and an increase in research and
development expenses (to $3,400,521 from $3,240,441). Our revenues in the
quarter ended January 31, 2010 decreased slightly to $431,344 from $434,636 for
the quarter ended January 31, 2009 reflecting only the sales of our
over-the-counter products.
 
 The
increase in research and development expenses in the last fiscal quarter versus
the comparative quarter in the previous fiscal year, is primarily due to timing
differences related to the clinical costs associated with the global Phase III
clinical trials of our oral insulin product and platform technology, as well as
the timing of earlier stage (pre-clinical, Phase I and Phase II) clinical trials
related to the Antigen immunotherapy products versus the previous fiscal year’s
quarter.  The increase in general and administrative expenses is
primarily related to an increase in professional expenses, including the
issuance of warrants in exchange for financial services resulting in a non-cash
expense of $505,000, as well as smaller increases in legal, accounting and
consulting expenses in the quarter ended January 31, 2010 versus the comparative
previous year quarter.  The increase in selling expenses for the
quarter ended January 31, 2010 versus the prior year comparative quarter is
associated with increased advertising and promotion of our over-the-counter
products, as well as the costs associated with our MENA sales office in
Dubai.
 
 Our
interest expense in the second quarter of fiscal 2010 decreased to $53,209,
compared to interest expense of $6,363,197 in the second quarter of fiscal 2009,
due to interest expense and costs of the repriced warrants recognized on the
convertible notes issued in March 2008 recognized in the prior year quarter, but
not in the current year.   Our interest income decreased to $6,341 in
the second quarter of fiscal 2010, compared to $52,632 in the same quarter for
the last year, primarily due to lower market interest rates.  We
received a slightly lower income from rental operations (net of expense) of
$70,066 in the second quarter of fiscal 2010 compared to $79,359 in the same
quarter for the last year.  The change in fair value of the warrants
carried as a derivative liability contributed a loss of $1,978,756 in the
current quarter.  As the related accounting policy was adopted at the
beginning of the current fiscal year, there was no similar adjustment in the
comparative previous fiscal year quarter.
  19
  Six
Months Ended January 31, 2010 Compared to Six Months Ended January 31,
2009
 
 As
described in Note 12 to the financial statements, we reassessed certain
outstanding warrants under Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 815, Derivatives and Hedging for the six
months ended January 31, 2010.  Due to a price adjustment clause
included in these warrants, such warrants were no longer deemed to be indexed to
our stock and therefore, no longer met the scope exception of ASC 815. These
warrants should have been reclassified to a liability and adjusted to fair value
at the end of each reporting period.  The cumulative impact to the
consolidated statement of operations for the six months ended January 31, 2010
was a gain of $1,017,515.
 
 Our net
loss for the six months ended January 31, 2010 was $15,454,118 versus
$23,735,624 in the corresponding six-month period of the prior fiscal
year.  The decrease in net loss in this fiscal year’s six month period
versus the corresponding quarter of the prior fiscal year is primarily due to
the prior year’s six-month period interest expense of $10,792,585, which
consisted mainly of non-cash interest charges recorded in connection with our
secured convertible debentures, as well as a gain of $1,017,515 related to the
change in fair value of the warrants carried as a derivative liability in the
current year’s quarter.  Interest expense for the current year period
was $105,430.  The decrease in net loss was partially offset by the
increase in our general and administrative expenses and selling and marketing
expenses, offset by a decrease in our research and development
expenses.  Our operating loss for the six-month period ended January
31, 2010 increased to $15,520,523 compared to $13,331,878 in the same fiscal
period in 2009.  The increase in operating loss resulted from an
increase in general and administrative expenses (to $6,559,222 from $4,912,435),
an increase in selling expense (to $2,646,772 from $1,446,905), offset by a
decrease in research and development expenses (to $6,476,290 from $7,596,130).
Our revenues in the six-month period ended January 31, 2010 decreased to
$528,886 from $972,982 for the six-month period ended January 31, 2009
reflecting only the sales of our over-the-counter products in the current fiscal
year period, while the comparative prior year period included an upfront,
non-refundable $500,000 license fee related to our Oral-lynTM
product
 
 The
decrease in research and development expenses in the last fiscal quarter versus
the comparative quarter in the previous fiscal year, is primarily due to timing
differences related to the clinical costs associated with the global Phase III
clinical trials of our oral insulin product and platform technology, as well as
the timing of earlier stage (pre-clinical, Phase I and Phase II) clinical trials
related to the Antigen immunotherapy products versus the comparative previous
fiscal year period.  The increase in general and administrative
expenses is primarily related to the non-cash, one time stock option
modification charge of $875,773 in the six-month period ended January 31, 2010,
as well as an increase in professional expenses, including the issuance of
warrants in exchange for financial services resulting in a non-cash expense of
$505,000 versus the comparative previous year period.  The increase in
selling expenses for the six-month period ended January 31, 2010 versus the
prior year comparative period is associated with increased advertising and
promotion of our over-the-counter products, as well as the costs associated with
our MENA sales office in Dubai.
 
 Our
interest expense in the six-month period ended January 31, 2010 decreased to
$105,430, compared to interest expense of $10,792,585 in the six-month period
ended January 31, 2009, due to interest expense and costs of the repriced
warrant recognized on the secured convertible notes issued in March 2008 in
connection with a private placement recognized in the prior year period, but not
in the current year.   Our interest income decreased to $16,426 in
fiscal 2010, compared to $221,097 in fiscal 2009.  We received a
slightly lower income from rental operations (net of expense) of $154,659 in the
six-month period ended January 31, 2010 compared to $167,739 in the comparative
period of the prior fiscal year.  The change in fair value of the
warrants carried as a derivative liability contributed a gain of $1,017,515 in
the current quarter.  As the related accounting policy was adopted at
the beginning of the current fiscal year, there was no similar adjustment in the
comparative previous fiscal year six-month period.
 
 Financial
Condition, Liquidity and Resources
 
 Sources
of Liquidity
 
 To date
we have financed our development stage activities primarily through private
placements of our common stock and securities convertible into our common
stock.
 
 As of
January 31, 2010, we believed that our anticipated cash position was sufficient
to meet our working capital needs for the next twelve months based on the pace
of our planned activities.  Beyond that, we anticipate that we will
require additional funds to support our working capital requirements or for
other purposes.
 
 While we
have generally been able to raise equity capital as required, our cash balances
were very low during portions of fiscal 2009, although we successfully raised
over $31 million (net of issuance costs and expenses) during the period from May
2009 to September 2009.  Unforeseen problems with our clinical
program, manufacturing and commercialization plans in Ecuador and India or
further negative developments in general economic conditions could interfere
with our ability to raise additional equity capital as needed, or materially
adversely affect the terms upon which such capital is available.  Our
inability to obtain required funding will have a material adverse effect on one
or more of our research or development programs and curtail some of our
commercialization efforts.
  20
  Management
may seek to meet all or some of our operating cash flow requirements through
financing activities, such as private placement of our common stock, at-market
stock issuance programs, preferred stock offerings and offerings of debt and
convertible debt instruments, as well as through merger or acquisition
opportunities.
 
 We have
undertaken certain steps in preparation for future financing
transactions.  For instance, in October 2009, we entered into an At
Market Issuance Sales Agreement with Wm Smith& Co., which is described in
more detail below under the subheading At Market Issuance Sales
Agreement and which is currently on hold, until further notice, because
of the general market conditions.
 
 In
addition, on January 29, 2010, we filed a new shelf registration statement (File
No. 333-164591) with the Securities and Exchange Commission (“SEC”) to renew and
replace the prior shelf registration statement filed in December 2006, pursuant
to which we registered an indeterminate number of shares of common stock and
preferred stock and an indeterminate number of warrants and units with an
aggregate initial offering price of up to $150,000,000.  We conducted
the offerings in the period May through September 2009 with takedowns from the
prior shelf registration statement, selling an aggregate of $33,889,080 of
securities.  The new shelf registration statement is intended to renew
and replace the prior registration statement.  The new registration
statement was declared effective on February 9, 2010 and covers offerings of
shares of our common stock, preferred stock, warrants and/or units with a
maximum aggregate offering price of $150,000,000, which includes the
$116,110,920 of securities remaining unsold under the prior registration
statement.
 
 Management
is actively pursuing industry collaboration activities, including product
licensing and specific project financing.  To secure a reliable
long-term insulin supply for our future commercial needs, we entered into a
long-term agreement with Sanofi-Aventis Deutschland GmbH (“sanofi-aventis”), on
December 7, 2009.  The material terms of this agreement are
described below under the heading Financial Condition, Liquidity and
Resources - Funding Requirements and Commitments.
 
 We
believe that our current progress in the Phase III clinical trial trials for
Oral-lynTM in the United States and Canada represents a significant milestone
event. We also anticipate that the commercial launch of Oral-lynTM in India,
Lebanon and Algeria, may provide us with revenue in 2010.  We believe that
the successful commercial launch of Oral-lynTM in India and other countries where
we have approval would enhance our ability to access additional sources of
funding.  We will continue to require substantial funds to continue
research and development, including preclinical studies and clinical trials of
our product candidates, and to commence sales and marketing efforts if the FDA
or other regulatory approvals are obtained.
 
 Proceeds
from Warrant Exercises
 
 We may
receive additional proceeds from the exercise of warrants issued in the private
placements conducted in June, August and September 2009, although some of the
warrants include a cashless exercise feature.  In the private
placement that closed on June 15, 2009, we sold an aggregate of 17,200,000
shares of our common stock and warrants exercisable for up to 8,600,000 shares
of our common stock to investors and issued Midtown Partners & Co., LLC
(“Midtown”), our exclusive placement agent for the transaction, a warrant to
purchase up to 244,926 shares of our common stock.   In the
August 6, 2009 private placement, we sold an aggregate of 8,558,013 shares of
our common stock and warrants exercisable for up to 2,995,305 shares of our
common stock to investors and issued a warrant to purchase 577,666 shares of our
common stock to Midtown, which acted as our exclusive placement agent for the
August 2009 transaction.  In the private placement that closed on
September 14, 2009, we sold an aggregate of 15,312,500 shares of our common
stock and warrants exercisable for up to 5,053,125 shares of our common stock to
investors and issued a warrant to purchase up to 969,526 shares of our common
stock to the two placement agents and a consultant for the
transaction.
 
 As of
March 10, 2010, all of the warrants issued in the June, August and September
2009 private placements were exercisable.  At March 10, 2010,
outstanding warrants issued in connection with the June, August and September
2009 private placements were as follows:
  Date Issued
                  
                  Aggregate No. of
                    Shares Unexercised
                  
                  
                  Exercise
                    Price
                  
                  Expiration DateJune
      15, 2009
                  
                  
                  8,844,926
                  
                  
                  
                  0.76
                  
                  December
      15, 2014August
      6, 2009
                  
                  
                  3,572,971
                  
                  
                  
                  0.79
                  
                  February
      4, 2015September
      14, 2009
                  
                  
                  6,022,651
                  
                  
                  
                  1.00
                  
                  March
      15, 2015
 
 In
addition, we may receive additional proceeds from the exercise of warrants
issued in connection with the securities purchase agreement and related
documents that we entered into on March 31, 2008 with existing institutional
investors relating to a private placement of 8% secured convertible notes (the
“Notes”) and warrants (the “Series Warrants”) for aggregate gross proceeds to us
of $20,650,000.  As of June 1, 2009, the outstanding principal balance
and accrued interest on the Notes were satisfied in full.
  21
  The
Series Warrants issued in connection with the March 2008 securities purchase
agreement included:
 
 (i)           Series
A and A-1 Warrants, which are exercisable for a period of 7 years into an
aggregate of 75% of the number of shares of our common stock initially issuable
upon conversion of the Notes, with the Series A Warrants being exercisable into
5,257,729 shares immediately upon issuance and the Series A-1 warrants being
exercisable into 7,541,857 shares as of October 1, 2008;
 
 (ii)          Series
B Warrants, which became exercisable on October 1, 2008 into 100% of the shares
of our common stock initially issuable upon conversion of the Notes (initially
17,066,166 shares) and remain exercisable for a period of 18 months after the
registration statement covering the shares of common stock issuable upon
conversion or exercise of the Notes and Warrants was declared effective by the
SEC; and
 
 (iii)         Series
C Warrants, which are exercisable for a period of 7 years as of October 1, 2008,
but only to the extent that the Series B Warrant are exercised and only in the
same percentage that the Series B Warrants are exercised, up to a maximum
percentage of 75% of the number of shares of our common stock initially issuable
upon conversion of the Notes (initially a maximum of 12,799,580
shares).
 
 The
initial exercise price of each Series Warrant was $1.21.  The exercise
price of the Series Warrants was subsequently reduced initially to $0.50 and
then to $0.33 as a result of an anti-dilution provision triggered by the May
2009 private placement.  The Series Warrants include a cashless
exercise feature.  At March 10, 2010, outstanding Series Warrants
were as follows:
 
 Date Issued
                  
                  Aggregate No. of
                    Shares Unexercised
                  
                  
                  Exercise
                    Price*
                  
                  Expiration DateMarch
      31, 2008
                  
                  
                  14,330,603
                  
                  
                  $
                  0.33
                  
                  March
      31, 2016March
      31, 2008
                  
                  
                  4,591,735
                  
                  
                  $
                  0.33
                  
                  September
      30, 2016
 *Subject
to anti-dilution adjustments upon issuance of securities at a price per share of
common stock less than the then applicable exercise price or the market price of
our common stock at that time, whichever is lower.  Due to the
anti-dilution adjustment provision of these warrants, they have been
reclassified on the Company’s balance sheet as a liability under the caption
“Derivative Warrant Liability” with any changes in fair value at each reporting
period recorded in earnings in accordance with ASC 815.
 
 At
Market Issuance Sales Agreement
 
 On
October 14, 2009, we entered into an At Market Issuance Sales Agreement
(the “Agreement”), with Wm Smith & Co. (“Wm Smith”), under which we may sell
an aggregate of $20,000,000 in gross proceeds of our common stock from time to
time through Wm Smith, as the agent for the offer and sale of the common stock.
Wm Smith may sell the common stock by any method permitted by law, including
sales deemed to be an “at the market” offering as defined in Rule 415 of
the Securities Act of 1933, as amended, including without limitation sales made
directly on NASDAQ Capital Market, on any other existing trading market for the
common stock or to or through a market maker. Wm Smith may also sell the common
stock in privately negotiated transactions, subject to Generex’s prior
approval.  We will pay Wm Smith a commission not to exceed 3% of the
gross proceeds of the sales price of all common stock sold through it as sales
agent under the agreement.
 
 The sales
agreement will terminate on the earliest of (1) the sale of all of the
common stock subject to the agreement, or (2) termination of the agreement
by Generex or Wm Smith. Wm Smith may terminate the sales agreement at any time
in certain circumstances, including the occurrence of a material adverse change
that, in Wm Smith’s reasonable judgment, may impair its ability to sell the
common stock, Generex’s failure to satisfy any condition under of the agreement
or a suspension or limitation of trading of our common stock on NASDAQ. We may
terminate the sales agreement at any time upon 10 days prior notice, and Wm
Smith may terminate the Agreement at any time upon 10 days prior
notice.
 
 We
announced on October 29, 2009, that, in light of general market conditions, we
will not exercise our right to issue and sell shares of our common stock under
the sales agreement until further notice.
 
 Cash
Flows for the Six Months Ended January 31, 2010
 
 For the
six months ended January 31, 2010, we used $9,235,124 in cash to fund our
operating activities. The use for operating activities included a net loss of
$14,436,603, a net increase in accounts receivable of $84,392 and an increase of
$820,673 in inventory, offset by an increase of $3,822,306 related to accounts
payable and accrued expenses, a decrease in other current assets of $350,775 and
an increase in deferred revenue of $252,534.
  22
  The use
of cash was offset by non-cash expenses of $393,958 related to depreciation and
amortization, $916,381 in stock-based compensation to employees and $1,388,105
in stock and warrant-based compensation issued in exchange for services rendered
by consultants.  There was also a non-cash year to date gain of
$2,996,271 related to the change of fair valuation of the derivative warrant
liability at the January 31, 2010 and October 31, 2009 reporting
dates.
 
 We had
net cash outflows from investing activities of $216,234 in the six months ended
January 31, 2010, representing payments for property and equipment of $134,312
and costs incurred for patents of $81,922.
 
 We had
net cash flows provided by financing activities of $17,849,493 in the six months
ended January 31, 2010.  We received $16,400,671 from issuances of
common stock in our August and September registered direct
offerings.  We received $1,517,940 in cash proceeds from exercises of
warrants.  We made payments related to our capital leases in the
amount of $21,168 and long-term debt in the amount of $47,950.
 
 Our net
working capital at January 31, 2010 increased to $14,470,345 from $7,561,375 at
July 31, 2009, which was attributed largely to the net proceeds raised from the
issuance of common stock and exercises of warrants, offset by our net loss for
the six-month period ended January 31, 2010.
 
 Funding
Requirements and Commitments
 
 We expect
to devote substantial resources to obtaining regulatory approval of Generex
Oral-lynTM in the U.S., Canada and Europe and to commercializing Generex
Oral-lynTM in India, Lebanon, Ecuador and Algeria.  We also will devote
resources to obtaining approval for the importation, marketing and
commercialization of Generex Oral-lynTM in other countries where we have licensed
distributors.
 
 Under the
long-term agreement that we signed with sanofi-aventis in December 2009,
sanofi-aventis will manufacture and supply recombinant human insulin to us in
the territories specified in the agreement.  Through this agreement,
we will procure recombinant human insulin crystals for use in the production of
Generex Oral-lynTM.  The terms of the supply agreement require us to
make certain minimum purchases of insulin from sanofi-aventis through the period
ended December 31, 2011.  Sanofi-aventis will be our exclusive
supplier in certain countries and a non-exclusive supplier in some other
countries.  Sanofi-aventis may delete any territory from the agreement
in which Generex Oral-lynTM has not been approved for commercial sale by December
31, 2011.  The prices under the supply agreement are subject to
adjustment beginning after December 31, 2012.
 
 In
addition to the resources that we will dedicate to regulatory approval and
commercialization of Generex Oral-lynTM, we will expend resources on further
clinical development of our immunotherapeutic vaccines.
 
 Our
future funding requirements and commitments and our ability to raise additional
capital will depend on factors that include:
 
 ·
                the timing and amount of expense
      incurred to complete our clinical
trials;
 
 ·
                the costs and timing of the
      regulatory process as we seek approval of our products in
      development;
 
 ·
                the advancement of our products
      in development;
 
 ·
                Our ability to generate new
      relationships with industry partners throughout the world that will
      provide us with regulatory assistance and long-term commercialization
      opportunities;
 
 ·
                the timing, receipt and amount of
      sales, if any, from Generex Oral-lynTM in India, Lebanon, Algeria and
      Ecuador;
 
 ·
                the timing, receipt and amount of
      sales, if any, from our over-the-counter
  products;
 
 ·
                the cost of manufacturing (paid
      to third parties) of our licensed products, and the cost of marketing and
      sales activities of those
products;
 
 ·
                the costs of prosecuting,
      maintaining, and enforcing patent claims, if any claims are
      made;
 
 ·
                Our ability to maintain existing
      collaborative relationships and establish new relationships as we advance
      our products in development;
and
 
 ·
                the receptivity of the financial
      market to biopharmaceutical
companies.
  23
  Off-Balance
Sheet Arrangements
 
 We have
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on the Company’s financial condition, changes in
financial condition, revenue or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors, and we
do not have any non-consolidated special purpose entities.
 
 Certain
Related Party Transactions
 
 We
utilize a management company to manage all of our real properties. The property
management company is owned by Ms. Perri, Ms. Gluskin and the estate of Mark
Perri, our former Chairman of the Board. In the six month period ended January
31, 2010 and the fiscal year ended July 31, 2009, we paid the management company
approximately $27,282 and $47,981, respectively, in management fees. We believe
that the amounts paid to the management company approximate the rates that would
be charged by a non-affiliated property management company.
  See Part III, Item 13 – Certain
Relationships and Related Transactions, and Directors Independence in our
Annual Report on Form 10-K for the year ended July 31, 2009 for further
descriptions of our transactions with related parties during the last fiscal
year.
 
 Recently
Adopted Accounting Pronouncements
 
 In
November 2007, the Financial Accounting Standards Board (FASB) issued guidance
related to accounting for collaborative arrangements. This guidance defines a
collaborative arrangement as a contractual arrangement in which the parties are
(i) active participants to the arrangement; and (ii) exposed to
significant risks and rewards that depend upon the commercial success of the
endeavor. It also addresses the appropriate statement of operations presentation
for activities and payments between the participants in a collaborative
arrangement as well as for costs incurred and revenue generated from
transactions with third parties. This guidance is effective for our fiscal year
beginning August 1, 2009. The adoption of this guidance did not have a
significant impact on our consolidated financial statements.
 
 In
December 2007, the FASB issued an amendment to an existing accounting standard
which provides guidance related to business combinations. The amendment retains
the fundamental requirements that the acquisition method of accounting be used
for all business combinations and for an acquirer to be identified for each
business combination. This amendment also establishes principles and
requirements for how the acquirer: a) recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree; b) recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain purchase
and c) determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. This amendment applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. An entity may not
apply it before that date. This guidance is effective for our fiscal year
beginning August 1, 2009. The adoption of this guidance did not have a
significant impact on our consolidated financial statements.
 
 In
December 2007, the FASB issued guidance related to non-controlling interests in
consolidated financial statements. This guidance amends previously issued
guidance to establish accounting and reporting standards for the non-controlling
(minority) interest in a subsidiary and for the deconsolidation of a subsidiary.
It clarifies that a non-controlling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. This guidance is effective for our fiscal
year beginning August 1, 2009. The adoption of this guidance did not have a
significant impact on our consolidated financial statements.
 
 In April
2008, the FASB issued guidance related to determining the useful life of
intangible assets. This guidance amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset. The objective of the guidance is to improve the
consistency between the useful life of a recognized intangible asset and the
period of expected cash flows used to measure the fair value of the asset. The
adoption of this guidance did not have a significant impact on our consolidated
financial statements.
 
 In May
2008, the FASB issued guidance related to accounting for convertible debt
instruments that may be settled in cash upon conversion (including partial cash
settlements).”  This guidance requires a portion of this type of
convertible debt to be recorded as equity and to record interest expense on the
debt portion at a rate that would have been charged on nonconvertible debt with
the same terms. The adoption of this guidance did not have a significant impact
on our consolidated financial statements.
  24
  In June
2008, the FASB issued guidance related to determining whether instruments
granted in share-based payment transactions are participating
securities.  Securities participating in dividends with common stock
according to a formula are participating securities. This guidance determined
that unvested shares of restricted stock and stock units with nonforfeitable
rights to dividends are participating securities. Participating securities
require the “two-class” method to be used to calculate basic earnings per share.
This method lowers basic earnings per common share. This guidance is effective
for our fiscal year beginning August 1, 2009. The adoption of this guidance
did not have a significant impact on our consolidated financial
statements.
 
 In
June 2008, the FASB reached a consensus regarding the determination of
whether an instrument (or an embedded feature) is indexed to an entity’s own
stock, which is the first part of the scope exception related to accounting for
derivative instruments and hedging activities.   This guidance is
effective for our fiscal year beginning August 1, 2009. The Company
determined that certain of its warrants with price protection provisions are not
considered to be indexed to the Company’s own stock, do not meet the scope
exception and, thus, should be accounted for as a liability.  The
adoption of this guidance resulted in the recognition of income of $1,017,515
within the Company’s consolidated statements of operations for the six months
ended January 31, 2010 and a net reclassification of $11,747,447 of previously
reported stockholders’ equity to a liability under the caption “Derivative
Warrant Liability” as of January 31, 2010.
 
 In June
2009, the FASB issued guidance which stipulates the FASB Accounting Standards
Codification is the source of authoritative U.S. GAAP recognized by the FASB to
be applied by nongovernmental entities. This guidance is effective for our
fiscal year beginning August 1, 2009. The adoption of this guidance did not
have a significant impact on our consolidated financial statements.
 
 Recently
Issued Accounting Pronouncements
 
 In
October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic
605)—Multiple Deliverable Revenue Arrangements (“ASU 2009-13”). ASU 2009-13
eliminates the residual method of allocation and requires the relative selling
price method when allocating deliverables of a multiple-deliverable revenue
arrangement. The determination of the selling price for each deliverable
requires the use of a hierarchy designed to maximize the use of available
objective evidence including, vendor specific objective evidence, third party
evidence of selling price, or estimated selling price.  ASU 2009-13 is
effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010, and must be
adopted in the same period using the same transition method. If adoption is
elected in a period other than the beginning of a fiscal year, the amendments in
these standards must be applied retrospectively to the beginning of the fiscal
year. Full retrospective application of these amendments to prior fiscal years
is optional. Early adoption of these standards may be elected. We are currently
evaluating the impact of these new accounting standards on our consolidated
financial statements.
 
 In
January 2010, the FASB issued additional guidance on fair value measurements and
disclosures which requires reporting entities to provide information about
movements of assets among Level 1 and 2 of the three-tier fair value hierarchy
established by the existing guidance.  The guidance is effective for
any fiscal year that begins after December 15, 2010, and it should be used for
quarterly and annual filings.  We are currently evaluating the impact
of this new accounting guidance on our consolidated financial
statements
 
 Item
3. Quantitative and Qualitative Disclosures About Market Risk.
  As a
smaller reporting company, we have elected scaled disclosure reporting
obligations and therefore are not required to provide the information in this
Item 3.
  Item 4.
Controls and Procedures (Restated)
  Evaluation
of Disclosure Controls and Procedures
 
 Prior to
the filing of this Quarterly Report on Form 10-Q, an evaluation was performed
under the supervision of and with the participation of Generex’s management,
including the Chief Executive Officer (“CEO”) and Chief Financial Officer
(“CFO”), of the effectiveness of Generex’s disclosure controls and procedures.
Based on the evaluation, the CEO and CFO have concluded that, as of January 31,
2010, Generex’s disclosure controls and procedures were effective to ensure that
information required to be disclosed by Generex in reports that it files or
submits under the Exchange Act, is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms, and is accumulated and
communicated to Generex’s management, as appropriate, to allow timely decisions
regarding required disclosure.
 
 Subsequent
to the date of that evaluation, management, including Generex’s interim
President and Chief Executive Officer and our CFO, have re-evaluated the
effectiveness of the design and operation of the disclosure controls and
procedures as of the end of the period covered by this report and have concluded
that Generex’s disclosure controls and procedures were not effective to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements.
 
 Our
disclosure controls and procedures were not effective because of the material
weakness arising from accounting errors following the application of FASB ASC
815-40-15 to the Company on August 1, 2009 that resulted in the reclassification
of certain warrants to a liability in the three-month period ended
January 31, 2010 and adjustments to fair value at the end of such
period.  Based on the impact of the aforementioned accounting errors,
the Company determined to restate our consolidated financial statements as of
January 31, 2010.
  25
  The
Company has taken the following steps that we believe will remediate the
deficiencies in disclosure controls and procedures that are identified
above:
 
 ·
              In
      June 2009, we added a new member to our internal accounting staff at the
      level of Vice President, Finance, who has extensive experience in
      financial reporting of SEC reporting companies and who is active in the
      review and preparation of our financial reporting
    documents.
  ·
              In
      conjunction with the quarterly and annual technical review of our
      consolidated financial statements by our outside accounting firm (other
      than our independent auditors), we review all recent Accounting Standard
      Updates (“ASU’s”) to determine if there are any ASU’s which need to be
      applied to the Company’s financial statements.  We also have our
      outside accounting firm review and prepare updates to the “Effects of
      Recent Accounting Pronouncements” note to the financial statements and
      have asked that accounting literature related to ASU’s be diligently
      reviewed in the future.
  ·
              On
      a quarterly and annual basis, we review and complete a current version of
      a GAAP disclosure checklist and verify that we have addressed all
      applicable items on the checklist.  We ask our independent
      registered public accounting firm to provide the checklist to us to ensure
      that we have the most current version
available.
  We
believe that the foregoing steps will remediate the significant deficiencies
identified above, and we will continue to monitor the effectiveness of these
steps and make any changes that our management deems appropriate.
 
 Changes
in Internal Control over Financial Reporting
 
 During
the fiscal quarter ended January 31, 2010, there were no changes in Generex’s
internal controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, Generex’s internal control over
financial reporting.
 
 PART
II - OTHER INFORMATION
 
 Item
1. Legal Proceedings.
 
 None.
 
 Item
1A. Risk Factors.
 
 In
addition to the other information included in this Quarterly Report on Form
10-Q, you should carefully review and consider the factors discussed in Part I, Item 1A - Risk
Factors of our Annual Report on Form 10-K for the year ended July 31,
2009, certain of which have been updated below. These factors materially affect
our business, financial condition or future results of operations. The risks,
uncertainties and other factors described in our Annual Report on Form 10-K and
below are not the only ones facing our company. Additional risks, uncertainties
and other factors not presently known to us or that we currently deem immaterial
may also impair our business operations, financial condition or operating
results. Any of the risks, uncertainties and other factors could cause the
trading price of our common stock to decline substantially.
 
 Risks
Related to Our Financial Condition
 
 We
have a history of losses and will incur additional losses.
 
 We are a
development stage company with a limited history of operations, and do not
expect sufficient revenues to support our operation in the immediately
foreseeable future.  In the six months ended January 31, 2010, we
received revenues of $528,886 from sales of our over-the-counter confectionary
products.  In the fiscal year ended July 31, 2009, we received modest
revenues of approximately $618,509 from sales of these products.  We
did not recognize any revenue from the sale of our oral insulin product in
Ecuador or India in fiscal 2009 or the first six months of fiscal 2010, although
we did recognize $500,000 in licensing fee revenue relating to the signing of a
licensing and distribution agreement for the sale of Generex Oral-lynTM in Korea
in fiscal 2009. We do not expect to receive any revenues in Ecuador until we
enter into a definitive manufacturing and distribution agreement with our
business partner there. While we have entered into a licensing and distribution
agreement with a leading Indian-based pharmaceutical company and insulin
distributor, we do not anticipate significant revenue from the initial
commercial launch of Generex Oral-lynTM in India until sometime this fiscal
year.  We also have entered in subdistribution agreements in Lebanon
and Algeria but do not expect any significant revenue from the launch of the
product in those countries in calendar year 2010.
  26
  To date,
we have not been profitable and our accumulated net loss available to
shareholders was $308,478,092 at January 31, 2010. Our losses have resulted
principally from costs incurred in research and development, including clinical
trials, and from general and administrative costs associated with our
operations. While we seek to attain profitability, we cannot be sure that we
will ever achieve product and other revenue sufficient for us to attain this
objective.
 
 With the
exception of Generex Oral-lynTM, which is currently approved for sale in Ecuador,
India, Lebanon and Algeria, and our over-the-counter glucose and energy spray
products, Glucose RapidSprayTM, BaBOOM!TM Energy Spray and Crave-NxTM, our product
candidates are in research or early stages of pre-clinical and clinical
development. We will need to conduct substantial additional research,
development and clinical trials. We will also need to receive necessary
regulatory clearances both in the United States and foreign countries and obtain
meaningful patent protection for and establish freedom to commercialize each of
our product candidates. We must also complete further clinical trials and seek
regulatory approvals for Generex Oral-lynTM in countries outside of Ecuador,
India, Lebanon and Algeria. We cannot be sure that we will obtain required
regulatory approvals, or successfully research, develop, commercialize,
manufacture and market any other product candidates. We expect that these
activities, together with future general and administrative activities, will
result in significant expenses for the foreseeable future.
 
 Risks
Related to the Market for Our Common Stock
 
 Our
common stock could be delisted from The NASDAQ Capital Market.
 
 On July
23, 2008, we received notice from The NASDAQ Stock Market that we were not
compliance with Marketplace Rule 4310(c)(4) (now known as Listing Rule
5550(a)(2)), which requires us to have a minimum bid price per share of at least
$1.00 for thirty (30) consecutive business days.  In accordance with
this Rule, we had 180 calendar days, or until January 20, 2009, subject to
extension, to regain compliance with this Rule.
 
 Our
initial compliance period of 180 calendar days ending on January 20, 2009 was
subsequently extended until November 9, 2009 due to NASDAQ’s temporary
suspension of the minimum bid price requirement from October 16, 2008 until
August 3, 2009.
 
 On
November 9, 2009, we received a letter from NASDAQ indicating that we had not
regained compliance with the $1.00 minimum bid price required for continued
listing under Listing Rule 5550(a)(2) within the grace period previously allowed
by NASDAQ following the initial notice of noncompliance on
July 23, 2008.
 
 Pursuant
to Listing Rule 5810(c)(3)(A), NASDAQ has given us an additional 180 calendar
day compliance period because we met all other initial inclusion criteria (other
than the minimum bid price requirement) as of January 6,
2009.  Therefore, we have 180 calendar days, or until
May 5, 2010, to regain compliance with the rule. To regain compliance
with the minimum bid price requirement, the closing bid price of our common
stock must close at $1.00 per share or more for a minimum of ten consecutive
business days.
 
 If, by
May 5, 2010, we do not regain compliance with Listing Rule 5550(a)(2), we will
receive written notification that our stock will be delisted.  At that
time, we may appeal the delisting determination to a NASDAQ Hearings
Panel.  An appeal to the Hearings Panel would stay the
delisting.  If we are not successful in such an appeal, our stock
would be delisted from the NASDAQ Capital Market and likely trade on NASDAQ’s
over-the-counter bulletin board, assuming we meet the requisite
criteria.
 
 Our
recent equity financing will dilute current stockholders and could prevent the
acquisition or sale of our business.
 
 The
equity financing transactions into which we have recently entered have and will
dilute current stockholders. Currently approximately 37,728,511 shares of common
stock are issuable upon exercise of the warrants that we issued on March 31,
2008, May 15, 2009, June 15, 2009, August 6, 2009 and September 14, 2009
(without regard to additional shares which may become issuable due to
anti-dilution adjustments or in connection with payments of interest), which
represents approximately 15% of the shares of common stock currently
outstanding.  Assuming the holders of the warrants convert and
exercise all of the warrants into shares of common stock, the number of shares
of issued and outstanding common stock will increase significantly, and current
stockholders will own a smaller percentage of the outstanding common stock of
Generex. The issuance of shares of common stock pursuant to the warrants will
also have a dilutive effect on earnings per share and may adversely affect the
market price of the common stock.
 
 In
addition, the issuance of shares of common stock upon exercise of the warrants
sold in the offerings that closed on June 15, 2009, August 6, 2009 and September
14, 2009 and sold in our March 31, 2008 private placement could have an
anti-takeover effect because such issuance will make it more difficult for, or
discourage an attempt by, a party to obtain control of Generex by tender offer
or other means. The issuance of common stock upon the exercise of the warrants
will increase the number of shares entitled to vote, increase the number of
votes required to approve a change of control of the company, and dilute the
interest of a party attempting to obtain control of the
company.
  27
  If we
raise funds through one or more additional equity financings in the future,
including if we exercise our right to issue and sell shares under the sales
agreement with Wm Smith, it will have a further dilutive effect on existing
holders of our shares by reducing their percentage ownership. The shares may be
sold at a time when the market price is low because we need the funds. This will
dilute existing holders more than if our stock price was higher. In addition,
equity financings normally involve shares sold at a discount to the current
market price.
 
 Item.
2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
 In the
fiscal quarter ended January 31, 2010, we sold common stock and other securities
in transactions in reliance upon exemptions from the registration requirements
of the Securities Act.
 
 During
the three months ended January 31, 2010, we issued 12,000 shares of common stock
to American Capital Ventures, Inc. pursuant to an agreement with us for
financial services. The sale of such shares was exempt from registration under
the Securities Act in reliance upon Section 4(2) thereof.  We believe
that American Capital Ventures, Inc. is an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D under the Securities Act. The
certificates issued for the shares of common stock will include a legend to
indicate that they are restricted. The sales of such securities did not involve
the use of underwriters, and no commissions were paid in connection
therewith.
 
 During
the three months ended January 31, 2010, we issued 37,500 shares of our
restricted common stock as partial consideration for the provision of services
by The Abajian Group, LLC under a consulting agreement with us. William Abajian,
a Business Development Consultant to Generex, is a principal of The Abajian
Group, LLC. The sale of such shares was exempt from registration under the
Securities Act in reliance upon Section 4(2) thereof. We believe that The
Abajian Group, LLC. is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D under the Securities Act. The certificates issued for the
shares of common stock will include a legend to indicate that they are
restricted. The sales of such securities did not involve the use of
underwriters, and no commissions were paid in connection therewith.
 
 We have
issued shares of our common stock to Luxury Air Jets, Inc. pursuant to an
agreement with a principal thereof, to provide us with investor relations
services.  During the three months ended January 31, 2010, we issued
39,000 shares of common stock to Luxury Air Jets, Inc. pursuant to this
agreement. The sale of such shares was exempt from registration under the
Securities Act in reliance upon Section 4(2) thereof. We believe that Luxury Air
Jets, Inc. is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D under the Securities Act. The certificates issued for the shares of
common stock will include a legend to indicate that they are restricted. The
sales of such securities did not involve the use of underwriters, and no
commissions were paid in connection therewith.
 
 We have
issued shares of our common stock to Seahawk Capital Partners, Inc, a
consultant, pursuant to an agreement to provide us with investor relation
services until October 11, 2010.  During the three months ended
January 31, 2010, we issued 180,000 shares of common stock to Seahawk Capital
Partners pursuant to this agreement. The sale of such shares was exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof. We
believe that Seahawk Capital Partners is an “accredited investor” as that term
is defined in Rule 501(a) of Regulation D under the Securities Act. The
certificates issued for the shares of common stock included a legend to indicate
that they are restricted. The sales of such securities did not involve the use
of underwriters, and no commissions were paid in connection
therewith.
 
 We have
issued shares of our common stock to Beckerman Public Relations, a consultant,
pursuant to an agreement to provide us with investor relation
services.  During the three months ended January 31, 2010, we issued
59,324 shares of common stock to Beckerman Public Relations. The sale of such
shares was exempt from registration under the Securities Act in reliance upon
Section 4(2) thereof. We believe that Beckerman Public Relations is an
“accredited investor” as that term is defined in Rule 501(a) of Regulation D
under the Securities Act. The certificates issued for the shares of common stock
will include a legend to indicate that they are restricted. The sales of such
securities did not involve the use of underwriters, and no commissions were paid
in connection therewith.
 
 We issued
a common stock purchase warrant to Advisor Associates, Inc. a consultant,
pursuant to an agreement to provide us with financial services.  In
accordance with the agreement, which extends until May 31, 2010, we issued
Advisor Associates a warrant to purchase 1,000,000 shares of common stock at an
exercise price of $0.001 per share.  The warrant was immediately
exercisable upon issuance.  Pursuant to the agreement, we will issue
Advisor Associates a second warrant to purchase an additional 1,000,000 shares
of common stock if certain milestones are attained prior to May 31,
2010.  The sale of the warrant was exempt from registration under the
Securities Act in reliance upon Section 4(2) thereof.  We believe that
Advisor Associates is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D under the Securities Act. The certificates issued for the
shares of common stock obtained upon exercise of the warrant will include a
legend to indicate that they are restricted. This transaction did not involve
the use of underwriters, and no commissions were paid in connection
therewith.
  28
  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 January 31, 2010.
 
 Item
3. Defaults Upon Senior Securities.
 
 None.
 
 Item
5. Other Information.
 
 Reference
is made to the disclosure set forth under Part II, Item 2 - Unregistered Sales
of Equity Securities and Use of Proceeds under the caption Unregistered Sales of Equity
Securities in this Quarterly Report on Form 10-Q, which is incorporated
by reference herein.
 
 Item
6. Exhibits.
 
 Exhibits
are incorporated herein by reference or are filed with this quarterly report as
set forth in the Exhibit Index beginning on page 29 hereof.
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 GENEREX BIOTECHNOLOGY CORPORATION(Registrant)Date: December
      10, 2010
              By:
              /s/  Mark A.
  FletcherMark
      A. FletcherInterim
      President and Chief Executive OfficerDate: December
      10, 2010
              By:
              /s/  Rose C. PerriRose C. PerriChief Financial Officer
  29
  EXHIBIT
INDEX
  Exhibit
                Number
              
              Description of Exhibit(1)2
              
              Agreement
      and Plan of Merger among Generex Biotechnology Corporation, Antigen
      Express, Inc. and AGEXP Acquisition Inc. (incorporated by reference to
      Exhibit 2.1 to Generex Biotechnology Corporation’s Current Report on Form
      8-K filed on August 15, 2003)3(i)
              
              Restated
      Certificate of Incorporation of Generex Biotechnology Corporation
      (incorporated by reference to Exhibit 4.1 to Generex Biotechnology
      Corporation’s Post-Effective Amendment No. 1 to the Registration Statement
      on Form S-8 filed on October 26, 2009)3(ii)
              
              Amended
      and Restated By-Laws of Generex Biotechnology Corporation (incorporated by
      reference to Exhibit 3.2(ii) to Generex Biotechnology Corporation’s Report
      on Form 8-K filed December 5, 2007)4.1
              
              Form
      of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to
      Generex Biotechnology Corporation’s Registration Statement on Form S-1
      (File No. 333-82667) filed on July 12, 1999)4.2.1
              
              Form
      of Securities Purchase Agreement entered into with Cranshire Capital,
      L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore Capital,
      Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard Todd
      Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated by
      reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
      Form 10-Q/A for the quarter ended October 31, 2003 filed on August 13,
      2003)4.2.2
              
              Form
      of Registration Rights Agreement entered into with Cranshire Capital,
      L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore Capital,
      Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard Todd
      Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated by
      reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
      Form 10-Q/A for the quarter ended October 31, 2003 filed on August 13,
      2003)4.2.3
              
              Form
      of Warrant granted to Cranshire Capital, L.P.; Gryphon Partners, L.P.;
      Langley Partners, L.P.; Lakeshore Capital, Ltd.; LH Financial; Omicron
      Capital; Photon Fund, Ltd.; Howard Todd Horberg and Vertical Ventures, LLC
      dated May 29, 2003 (incorporated by reference to Exhibit 4.3 to Generex
      Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended
      October 31, 2003 filed on August 13, 2003)4.3
              
              Form
      of replacement Warrant issued to warrant holders exercising at reduced
      exercise price in May and June 2003 (incorporated by reference to Exhibit
      4.13.7 to Generex Biotechnology Corporation’s Report on Form 10-K for the
      period ended July 31, 2003 filed on October 29, 2003)4.4.1
              
              Securities
      Purchase Agreement, dated December 19, 2003, by and among Generex
      Biotechnology Corporation and the investors named therein (incorporated by
      reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
      Form 8-K/A filed on March 24, 2004)4.4.2
              
              Registration
      Rights Agreement, dated December 19, 2003, by and among Generex
      Biotechnology Corporation and the investors named therein (incorporated by
      reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
      Form 8-K/A filed on March 24, 2004)4.4.3
              
              Form
      of Warrant issued in connection with Exhibit 4.4.1 (incorporated by
      reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
      Form 8-K/A filed on March 24, 2004)4.4.4
              
              Form
      of Additional Investment Right issued in connection with Exhibit 4.4.1
      (incorporated by reference to Exhibit 4.4 to Generex Biotechnology
      Corporation’s Report on Form 8-K/A filed on March 24,
  2004)
  30
 
 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)
  31
 
 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)
  32
 
 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)
  33
 
 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)
  34
  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)10.1
                
                Recombinant
      Human Insulin Active Ingredient Manufacturing and Supply Agreement entered
      into on December 7, 2009 by and  between Generex Biotechnology
      Corporation and Sanofi-Aventis Deutschland GmbH (incorporated by reference
      to Exhibit 10.2 to Generex Biotechnology Corporation’s Report on Form 10-Q
      filed on December 11, 2009) (subject to confidential
      treatment)31.1
                
                Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200231.2
                
                Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200232
                
                Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002
 
 (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.
  35