**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**





**x** **QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**


**EXCHANGE
      ACT OF 1934**





For
      the
      quarterly period ended April 30, 2006





**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)**




**Not
      applicable**





**(Former
      name, former address and former fiscal year**


**if
      changed since last report)**





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 o No







Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer  ̈ Accelerated
      filer  ̈ Non-accelerated
      filer 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





**APPLICABLE
      ONLY TO CORPORATE ISSUERS**


The
      number of outstanding shares of the registrant's common stock, par value $.001,
      was 98,495,931 as of June 2, 2006.









**GENEREX
      BIOTECHNOLOGY CORPORATION**





**INDEX**





PART
                I. FINANCIAL INFORMATIONItem
                1.Financial
                Statements.
            1(Unaudited)Consolidated
                Balance Sheets -April
                30, 2006 and July 31, 2005
            1Consolidated
                Statements of Operations -- for the three and nine monthperiods
                ended April 30, 2006 and 2005, and cumulative fromNovember
                2, 1995 to April 30, 2006
            2Consolidated
                Statements of Cash Flows -- For the nine monthperiods
                ended April 30, 2006 and 2005, and cumulative fromNovember
                2, 1995 to April 30, 2006
            3Notes
                to Consolidated Financial Statements
            4Item
                2.Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            26Item
                3.Quantitative
                and Qualitative Disclosures About Market Risk
            45Item
                4.Controls
                and Procedures
            45PART
                II: OTHER INFORMATIONItem
                1.Legal
                Proceedings
            46Item
                1A.Risk
                Factors
            46Item
                2.Unregistered
                Sales of Equity Securities and Use of Proceeds
            51Item
                3.Defaults
                Upon Senior Securities
            53Item
                4.Submission
                of Matters to a Vote of Security Holders
            53Item
                5.Other
                Information
            53Item
                6.Exhibits
            54Signatures
            61










**PART
      I. FINANCIAL INFORMATION**





**Item
      1. Financial Statements**





**GENEREX
                BIOTECHNOLOGY CORPORATION AND
                SUBSIDIARIES****(A
                DEVELOPMENT STAGE COMPANY)****CONSOLIDATED
                BALANCE SHEETS**April
                30,
            
            July
                31,2006
            
            2005ASSETSCurrent
                Assets:Cash
                and cash equivalents
            
            
            
            
            $
            31,183,186
            
            $
            586,530Restricted
                cash
            
            
            
            
            
            --
            
            
            204,734Short-term
                investments
            
            
            
            
            
            10,773,605
            
            
            --Other
                current assets
            
            
            
            
            
            174,840
            
            
            165,586Deferred
                debt issuance costs
            
            
            
            
            
            36,888
            
            
            337,798Total
                Current Assets
            
            
            
            
            
            42,168,519
            
            
            1,294,648Property
                and Equipment, Net
            
            
            
            
            
            2,700,051
            
            
            3,976,742Assets
                Held for Investment, Net
            
            
            
            
            
            3,680,815
            
            
            2,371,749Patents,
                Net
            
            
            
            
            
            5,198,612
            
            
            5,443,094Due
                From Related Party
            
            
            
            
            
            --
            
            
            379,612TOTAL
                ASSETS
            
            
            
            
            $
            53,747,997
            
            $
            13,465,845LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                Liabilities:Accounts
                payable and accrued expenses
            
            
            
            
            $
            2,846,411
            
            $
            2,410,846Short-term
                advance
            
            
            
            
            
            --
            
            
            325,179Current
                maturities of long-term debt
            
            
            
            
            
            2,022,840
            
            
            2,571,530Convertible
                Debentures, Net of Debt Discount of $1,119,923 and$2,108,459
                at April 30, 2006 and July 31, 2005, respectively
            
            
            
            
            
            253,154
            
            
            1,314,926Total
                Current Liabilities
            
            
            
            
            
            5,122,405
            
            
            6,622,481Long-Term
                Debt, Net
            
            
            
            
            
            1,331,182
            
            
            716,361Commitments
                and ContingenciesStockholders’
                Equity:Special
                Voting Rights Preferred stock, $.001 par value;authorized,
                issued and outstanding 1,000 shares atApril
                30, 2006 and July 31, 2005, respectively
            
            
            
            
            
            1
            
            
            1Common
                stock, $.001 par value; authorized 150,000,000 shares atApril
                30, 2006 and July 31, 2005; 98,242,854 and 41,933,898shares
                issued and outstanding, respectively
            
            
            
            
            
            98,242
            
            
            41,935Additional
                paid-in capital
            
            
            
            
            
            222,120,021
            
            
            126,044,326Deficit
                accumulated during the development stage
            
            
            
            
            
            (175,705,417
            )
            
            (120,528,108
            )Accumulated
                other comprehensive income
            
            
            
            
            
            781,563
            
            
            568,849Total
                Stockholders’ Equity
            
            
            
            
            
            47,294,410
            
            
            6,127,003TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            
            
            
            $
            53,747,997
            
            $
            13,465,845


1


**GENEREX
                  BIOTECHNOLOGY CORPORATION AND
                  SUBSIDIARIES****(A
                  DEVELOPMENT STAGE COMPANY)****CONSOLIDATED
                  STATEMENTS OF OPERATIONS**Cumulative
                  FromNovember
                  2, 1995For
                  the Three Months Ended
              
              For
                  the Nine Months Ended
              
              (Date
                  of Inception)April
                  30,
              
              April
                  30,
              
              to
                  April 30,2006
              
              2005
              
              2006
              
              2005
              
              2006Revenues
              
              $
              43,750
              
              $
              43,750
              
              $
              131,250
              
              $
              263,250
              
              $
              2,150,546Operating
                  Expenses:Research
                  and development
              
              
              1,635,238
              
              
              1,009,799
              
              
              3,628,732
              
              
              6,586,764
              
              
              58,547,177Research
                  and development -related
                  party
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              220,218General
                  and administrative
              
              
              2,299,011
              
              
              2,358,472
              
              
              7,684,754
              
              
              9,231,266
              
              
              73,135,868General
                  and administrative -related
                  party
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              314,328Total
                  Operating Expenses
              
              
              3,934,249
              
              
              3,368,271
              
              
              11,313,486
              
              
              15,818,030
              
              
              132,217,591Operating
                  Loss
              
              
              (3,890,499
              )
              
              (3,324,521
              )
              
              (11,182,236
              )
              
              (15,554,780
              )
              
              (130,067,045
              )Other
                  Income (Expense):Miscellaneous
                  income (expense)
              
              
              --
              
              
              --
              
              
              500
              
              
              --
              
              
              196,193Income
                  from Rental Operations, net
              
              
              42,506
              
              
              28,503
              
              
              78,346
              
              
              103,292
              
              
              283,022Interest
                  income
              
              
              241,053
              
              
              3,015
              
              
              257,149
              
              
              21,791
              
              
              3,651,629Interest
                  expense
              
              
              (17,227,595
              )
              
              (1,403,667
              )
              
              (32,458,126
              )
              
              (2,223,183
              )
              
              (37,293,061
              )Loss
                  on extinguishment of debt
              
              
              (10,938,959
              )
              
              --
              
              
              (11,872,942
              )
              
              --
              
              
              (13,219,283
              )Net
                  Loss Before Undernoted
              
              
              (31,773,494
              )
              
              (4,696,670
              )
              
              (55,177,309
              )
              
              (17,652,880
              )
              
              (176,448,545
              )Minority
                  Interest Share of Loss
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              3,038,185Net
                  Loss
              
              
              (31,773,494
              )
              
              (4,696,670
              )
              
              (55,177,309
              )
              
              (17,652,880
              )
              
              (173,410,360
              )Preferred
                  Stock Dividend
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              2,295,057Net
                  Loss Available to CommonShareholders
              
              $
              (31,773,494
              )
              $
              (4,696,670
              )
              $
              (55,177,309
              )
              $
              (17,652,880
              )
              $
              (175,705,417
              )Basic
                  and Diluted Net Loss PerCommon
                  Share
              
              $
              (.36
              )
              $
              (.13
              )
              $
              (.84
              )
              $
              (.49
              )Weighted
                  Average Number of Sharesof
                  Common Stock Outstanding
              
              
              88,683,352
              
              
              36,099,735
              
              
              65,719,702
              
              
              35,743,730






2


**GENEREX
                    BIOTECHNOLOGY CORPORATION AND
                    SUBSIDIARIES****(A
                    DEVELOPMENT STAGE COMPANY)****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS**Cumulative
                    FromNovember
                    2, 1995For
                    the Nine Months Ended
                
                (Date
                    of Inception)April
                    30,
                
                to
                    April 30,2006
                
                2005
                
                2006Cash
                    Flows From Operating Activities:Net
                    loss
                
                $
                (55,177,309
                )
                $
                (17,652,880
                )
                $
                (173,410,360
                )Adjustments
                    to reconcile net loss to net cash usedin
                    operating activities:Depreciation
                    and amortization
                
                
                846,239
                
                
                827,459
                
                
                4,427,419Minority
                    interest share of loss
                
                
                --
                
                
                --
                
                
                (3,038,185
                )Reduction
                    of notes receivable - common stock in exchangefor
                    services rendered
                
                
                --
                
                
                --
                
                
                423,882Write-off
                    of uncollectible notes receivable - common stock
                
                
                --
                
                
                391,103
                
                
                391,103Write-off
                    of deferred offering costs
                
                
                --
                
                
                --
                
                
                3,406,196Write-off
                    of abandoned patents
                
                
                1,278
                
                
                --
                
                
                77,364Loss
                    on extinguishment of debt
                
                
                11,872,942
                
                
                --
                
                
                13,219,283Common
                    stock issued as employee compensation
                
                
                126,104
                
                
                --
                
                
                126,104Common
                    stock issued for services rendered
                
                
                422,599
                
                
                1,093,528
                
                
                5,208,863Amortization
                    of prepaid services in conjunction with common stock
                    issuance
                
                
                138,375
                
                
                --
                
                
                138,375Non-cash
                    compensation expense
                
                
                --
                
                
                --
                
                
                45,390Stock
                    options and warrants issued for services rendered
                
                
                137,200
                
                
                530,600
                
                
                6,971,073Issuance
                    of warrants as additional exercise right inducement
                
                
                16,888,239
                
                
                --
                
                
                16,888,239Preferred
                    stock issued for services rendered
                
                
                --
                
                
                --
                
                
                100Treasury
                    stock redeemed for non-performance of services
                
                
                --
                
                
                (138,000
                )
                
                (138,000
                )Amortization
                    of deferred debt issuance costs and loan origination fees
                
                
                1,195,315
                
                
                155,988
                
                
                1,443,422Amortization
                    of discount on convertible debentures
                
                
                14,075,693
                
                
                1,849,976
                
                
                17,810,504Common
                    stock issued as interest payment on convertible debentures
                
                
                168,365
                
                
                --
                
                
                245,361Interest
                    on short-term advance
                
                
                13,524
                
                
                --
                
                
                22,190Founders’
                    shares transferred for services rendered
                
                
                --
                
                
                --
                
                
                353,506Fees
                    in connection with short-term refinancing of long-term
                    debt
                
                
                7,882
                
                
                105,293
                
                
                113,182Changes
                    in operating assets and liabilities (excluding the effects ofacquisition):Miscellaneous
                    receivables
                
                
                --
                
                
                --
                
                
                43,812Other
                    current assets
                
                
                45,275
                
                
                821,442
                
                
                (66,966
                )Accounts
                    payable and accrued expenses
                
                
                1,182,117
                
                
                2,843,052
                
                
                7,047,868Other,
                    net
                
                
                --
                
                
                --
                
                
                110,317Net
                    Cash Used in Operating Activities
                
                
                (8,056,162
                )
                
                (9,172,439
                )
                
                (98,139,958
                )Cash
                    Flows From Investing Activities:Purchase
                    of property and equipment
                
                
                (85,168
                )
                
                (62,099
                )
                
                (4,377,884
                )Costs
                    incurred for patents
                
                
                (37,253
                )
                
                (169,573
                )
                
                (1,532,239
                )Change
                    in restricted cash
                
                
                214,364
                
                
                (8,214
                )
                
                43,368Proceeds
                    from maturity of short term investments
                
                
                3,000,000
                
                
                --
                
                
                129,687,046Purchases
                    of short-term investments
                
                
                (13,773,605
                )
                
                --
                
                
                (140,460,651
                )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
                
                
                --
                
                
                395,889
                
                
                (477,194
                )Change
                    in notes receivable - common stock
                
                
                --
                
                
                (6,300
                )
                
                (91,103
                )Change
                    in due from related parties
                
                
                --
                
                
                --
                
                
                (2,222,390
                )Other,
                    net
                
                
                --
                
                
                --
                
                
                89,683Net
                    Cash Provided by (Used in) Investing Activities
                
                
                (10,681,662
                )
                
                149,703
                
                
                (20,417,289
                )Cash
                    Flows From Financing Activities:Proceeds
                    from short-term advance
                
                
                --
                
                
                325,179
                
                
                325,179Repayment
                    of short-term advance
                
                
                (347,369
                )
                
                --
                
                
                (347,369
                )Proceeds
                    from issuance of long-term debt
                
                
                35,051
                
                
                350,222
                
                
                2,005,199Repayment
                    of long-term debt
                
                
                (297,792
                )
                
                (60,068
                )
                
                (1,504,730
                )Change
                    in due to related parties
                
                
                --
                
                
                --
                
                
                154,541Proceeds
                    from exercise of warrants
                
                
                32,819,119
                
                
                --
                
                
                37,372,103Proceeds
                    from exercise of stock options
                
                
                3,174,555
                
                
                --
                
                
                4,184,995Proceeds
                    from minority interest investment
                
                
                --
                
                
                --
                
                
                3,038,185Proceeds
                    from issuance of preferred stock
                
                
                --
                
                
                --
                
                
                12,015,000Proceeds
                    from issuance of convertible debentures, net
                
                
                13,955,000
                
                
                4,299,930
                
                
                20,254,930Repayments
                    of convertible debentures
                
                
                --
                
                
                (416,513
                )
                
                (461,358
                )Purchase
                    of treasury stock
                
                
                --
                
                
                --
                
                
                (483,869
                )Proceeds
                    from issuance of common stock, net
                
                
                --
                
                
                --
                
                
                73,283,715Purchase
                    and retirement of common stock
                
                
                --
                
                
                --
                
                
                (119,066
                )Net
                    Cash Provided by (Used in) Financing Activities
                
                
                49,338,564
                
                
                4,498,750
                
                
                149,717,455Effect
                    of Exchange Rates on Cash
                
                
                (4,084
                )
                
                9,441
                
                
                22,978Net
                    Increase (Decrease) in Cash and Cash Equivalents
                
                
                30,596,656
                
                
                (4,514,545
                )
                
                31,183,186Cash
                    and Cash Equivalents, Beginning of Period
                
                
                586,530
                
                
                4,950,419
                
                
                --Cash
                    and Cash Equivalents, End of Period
                
                $
                31,183,186
                
                $
                435,874
                
                $
                31,183,186


3






**GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **1.**  **Basis
        of Presentation**
 The
        accompanying unaudited interim consolidated financial statements have been
        prepared pursuant to the rules and regulations for reporting on Form 10-Q.
        Accordingly, certain information and disclosures required by generally accepted
        accounting principles for complete financial statements are not included
        herein.
        The interim statements should be read in conjunction with the financial
        statements and notes thereto included in the Company’s latest Annual Report on
        Form 10-K. The results for the three and nine months 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 2006. 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
        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 April 30, 2006 of approximately $176 million. The Company has
        funded
        its activities to date almost exclusively from debt and equity financings.
 
 The
        Company is in the development stage and has realized minimal revenues to
        date.
        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 commence 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
        placement of its common stock, preferred stock offerings and offerings of
        debt
        and convertible debt instruments. Management is also actively pursuing industry
        collaboration activities including product licensing and specific project
        financing.
 
 While
        the
        Company believes that it will be successful in obtaining the necessary financing
        to fund its operations, 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.
 
 **2.**  **Effects
        of Recent Accounting Pronouncements**
 In
        December 2004, the FASB issued Statement of Financial Accounting Standards
        No.
        123(R), "Share-Based Payment" ("SFAS 123(R)"), which requires all companies
        to
        measure compensation cost for all share-based payments (including employee
        stock
        options) at fair value and to recognize cost over the vesting period. In
        March
        2005, the SEC released SEC Staff Accounting Bulletin No. 107, "Share-Based
        Payment" ("SAB 107"). SAB 107 provides the SEC staff position regarding the
        application of SFAS 123(R), including interpretive guidance related to the
        interaction between SFAS 123(R) and certain SEC rules and regulations, and
        provides the staff's views regarding the valuation of share-based payment
        arrangements for public companies. SAB 107 highlights the importance of
        disclosures made related to the accounting for share-based payment transactions.
        In April 2005, the SEC announced that companies may implement SFAS 123(R)
        at the
        beginning of their next fiscal year beginning after June 15, 2005, or December
        15, 2005 for small business issuers. The Company implemented the provisions
        of
        SFAS 123(R) and SAB 107 in the first quarter of fiscal 2006 using the
        modified-prospective method, and it did not have a material impact on our
        financial position or cash flows. See Note 3 - "Stock Based Compensation"
        for
        further information and the required disclosures under SFAS 123(R) and SAB
        107,
        including the impact of the implementation on our results of operations.
  4
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **2.**
              **Effects
                  of Recent Accounting Pronouncements
                  (Continued)**
 In
        December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
        Assets - an amendment of APB Opinion No. 29." The statement addresses
        the measurement of exchanges of nonmonetary assets and eliminates the exception
        from fair value measurement for nonmonetary exchanges of similar productive
        assets and replaces it with an exception for exchanges that do not have
        commercial substance. SFAS No. 153 is effective for nonmonetary asset
        exchanges occurring in fiscal periods beginning after June 15, 2005. This
        adoption of this statement did not have a significant impact on the consolidated
        results of operations or financial position of the Company.
 
 In
        May
        2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.”
This statement replaces APB No. 20 and SFAS No. 3 and changes the requirements
        for the accounting and reporting of a change in accounting principle. APB
        No. 20
        previously required that most voluntary changes in accounting principle be
        recognized by including in net income of the period of the change the cumulative
        effect of changing to the accounting principle. SFAS No. 154 requires
        retrospective application to prior periods’ financial statements of voluntary
        changes in accounting principle. SFAS No. 154 is effective for accounting
        changes and corrections of errors made in fiscal years beginning after December
        15, 2005. The Company does not expect that the adoption of SFAS No. 154 will
        have a significant impact on the consolidated results of operations or financial
        position of the Company.
 
 In
        February 2006, the FASB issued SFAS No. 155,”Accounting for Certain Hybrid
        Financial Instruments - an amendment of FASB Statements No. 133 and 140,” to
        simplify and make more consistent the accounting for certain financial
        instruments. Specifically, SFAS No. 155 amends SFAS No. 133, Accounting for
        Derivative Instruments and Hedging Activities, to permit fair value
        remeasurement for any hybrid financial instrument with an embedded derivative
        that otherwise would require bifurcation, provided that the whole instrument
        is
        accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140,
        Accounting for the Impairment or Disposal of Long-Lived Assets, to allow
        a
        qualifying special-purpose entity (SPE) to hold a derivative financial
        instrument that pertains to a beneficial interest other than another derivative
        financial instrument. SFAS No. 155 applies to all financial instruments acquired
        or issued after the beginning of an entity’s first fiscal year that begins after
        September 15, 2006, with earlier application allowed. The
        Company does not expect that the adoption of SFAS No. 155 will have a
        significant impact on the consolidated results of operations or financial
        position of the Company.
 
 In
        March
        2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
        Assets”, to simplify accounting for separately recognized servicing assets and
        servicing liabilities. SFAS No. 156 amends SFAS No. 140, “Accounting for
        Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
        Additionally, SFAS No. 156 permits, but does not require, an entity to choose
        either the amortization method or the fair value measurement method for
        measuring each class of separately recognized servicing assets and servicing
        liabilities. SFAS No. 156 applies to all separately recognized servicing
        assets
        and servicing liabilities acquired of issued after the beginning of an entity’s
        fiscal year that begins after September 15, 2006, although early adoption
        is
        permitted. The Company believes that this SFAS will have no effect on the
        Company’s financial condition or results of operations.
 
 
 
  5
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **3.**
              **Stock-Based
                  Compensation**
 As
        of
        April 30, 2006, the Company had two stockholder-approved stock incentive
        plans
        under which 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) and a total of 12,000,000 shares of common stock are
        reserved for issuance under the 2001 Stock Option Plan (the 2001 Plan). There
        were 1,900,000 and 427,331 shares of common stock reserved for future awards
        under the 2000 Plan and 2001 Plan, respectively, as of April 30,
        2006.
 
 The
        2000
        and 2001 Plans (the Plans) are administered by the Compensation Committee
        (the
        Committee). The Committee 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 Committee 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 Committee.
 
 The
        Plans
        provide that options may or may not be Incentive Stock Options (ISOs) within
        the
        meaning of Section 422 of the Internal Revenue Code. Only employees of the
        Company are eligible to receive ISOs, while employees and non-employee
        directors, advisors and consultants are eligible to receive options which
        are
        not ISOs, i.e. “Non-Qualified Options.” The options granted by the Board in
        connection with its adoption of the Plans are Non-Qualified
        Options.
 
 Prior
        to
        August 1, 2005, the Company accounted for the share-based compensation granted
        under its stock incentive plans under the recognition and measurement provisions
        of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
        to
        Employees," and related interpretations ("APB 25"). In accordance with APB
        25,
        the Company used the intrinsic-value method of accounting for stock option
        awards to employees and accordingly did not recognize compensation expense
        for
        its stock option awards to employees in its Consolidated Statement of Operations
        prior to August 1, 2005, as all option exercise prices were equal to the
        fair
        market value of the Company stock on the date the options were granted.
        Effective August 1, 2005, the Company implemented the fair value recognition
        provisions of Financial Accounting Standards Board (FASB) Statement No. 123
        (revised 2004) ("SFAS 123 (R)"), "Share Based Payment," which is a revision
        of
        SFAS No. 123, "Accounting for Stock Based Compensation," and SAB 107 for
        all
        share-based compensation that was not vested as of July 31, 2005.
 
 For
        the
        three and nine months ended April 30, 2006, no compensation expense was recorded
        for options outstanding as of August 1, 2005. There were no options granted
        during the three and nine months ended April 30, 2006.
 
 The
        following table illustrates the pro forma effect on net income and earnings
        per
        share for the three and nine months ended April 30, 2005, assuming the Company
        had applied the fair value recognition provisions of SFAS 123(R) to all
        previously granted share-based awards after giving consideration to potential
        forfeitures during such periods. The fair value of each option grant is
        estimated at the grant date using the Black-Scholes option-pricing model
        based
        on the assumptions listed below. The estimated fair value of options granted
        is
        expensed at the date of grant. Share-based employee compensation for the
        three
        and nine months ended April 30, 2006 in the amount of $-0- (net of related
        tax),
        is included in the net loss of $31,773,494 and $55,177,309, respectively.
        The
        following table represents the impact had the treatment been adopted at August
        1, 2004.
  6
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **3.**
              **Stock-Based
                  Compensation (Continued)**
   Nine
                    Months
              
              Three
                  MonthsEnded
              
              EndedApril
                    30,
              
              April
                  30,2005
              
              2005Net
                  Loss Available to Common Stockholders,as
                  Reported
              
              $
              (17,652,880
              )
              $
              (4,696,670
              )Add:
                  Total Stock-Based Employee CompensationIncluded
                  in Reported Net Loss
              
              
              --
              
              
              --Deduct:
                  Total Stock-Based Employee CompensationIncome
                  Determined Under Fair Value Based Method,Net
                  of Related Tax Effect
              
              
              1,998,140
              
              
              567,500Pro
                  Forma Net Loss Available to Common Stockholders
              
              $
              (19,651,020
              )
              $
              (5,264,170
              )Loss
                  Per Share:Basic
                  and diluted, as reported
              
              $
              (0.49
              )
              $
              (0.13
              )Basic
                  and diluted, pro forma
              
              $
              (0.55
              )
              $
              (0.15
              )
 
 The
        implementation of the provisions of SFAS 123(R) and SAB 107 during the three
        and
        nine months ended April 30, 2006 did not have a material impact on the Company’s
        cash flow from operations or cash flow from financing activities.
 
 The
        following information relates to stock options that have been granted under
        the
        Company’s stockholder-approved incentive plans. The stock option exercise price
        is typically granted at 100 percent of the fair market value on the date
        the
        options are granted. Options may be exercised for a period of five years
        commencing on the date of grant and typically vesting over two years from
        the
        date of grant.
 
 The
        fair
        value of each option award is estimated on the date of grant using the
        Black-Scholes option pricing model. No options were granted to employees
        during
        the three and nine months ended April 30, 2006.
 
 The
        summary of the stock option activity for the nine months ended April 30,
        2006 is
        as follows:
 
 Weighted
              
              WeightedAverage
              
              AverageExercise
              
              RemainingPrice
              
              ContractualShares
              
              Share
              
              Term
                  (Years)Outstanding,
                  August 1, 2005
              
              
              11,607,269
              
              $
              1.51
              
              
              3.65Granted
              
              
              --
              
              $
              --
              
              
              --Cancelled
              
              
              (140,000
              )
              $
              9.41
              
              
              --Exercised
              
              
              (2,317,672
              )
              $
              1.19
              
              
              --Outstanding,
                  April 30, 2006
              
              
              9,149,597
              
              $
              1.42
              
              
              3.04
 
 
 
  7
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **3.**
              **Stock-Based
                  Compensation (Continued)**
 The
        summary of the status of the Company’s non-vested as of April 30, 2006, as
        changed during the nine months then ended is as follows:
 WeightedAverageGrant
                  DateShares
              
              Fair
                  ValueNon-vested
                  Stock Options, August 1, 2005
              
              
              628,000
              
              $
              0.72Granted
              
              
              --
              
              $
              --Cancelled
              
              
              --
              
              $
              --Vested
              
              
              (628,000
              )
              $
              0.72Non-vested
                  Stock Options, April 30, 2006
              
              
              --
              
              $
              --
 
 As
        of
        April 30, 2006, there was no unrecognized compensation related to non-vested
        stock options granted under the Company’s stock option plans.
 
 **4.**
              **Comprehensive
                  Income/(Loss)**
 Comprehensive
        loss, which includes net loss and the change in the foreign currency translation
        account during the period, for the three months ended April 30, 2006 and
        2005,
        was $31,708,769 and $4,740,742, respectively and for the nine months ended
        April
        30, 2006 and 2005 was $54,964,595 and $17,443,659, respectively.
 
 **5.**
              **Accounts
                  Payable and Accrued
                  Expenses**
 Accounts
        payable and accrued expenses consist of the following:
 
 April
                  30,
              
              July
                  31,2006
              
              2005Accounts
                  Payable
              
              $
              786,024
              
              $
              999,726Accounting
                  and Auditing
              
              
              122,430
              
              
              274,627Accrued
                  Legal Fees and Settlement
              
              
              134,665
              
              
              599,461Termination
                  Agreements and Severance Pay
              
              
              179,120
              
              
              265,720Executive
                  Compensation and Directors Fees
              
              
              1,624,172
              
              
              271,312Total
              
              $
              2,846,411
              
              $
              2,410,846
 
 **6.**
              **Convertible
                  Debentures**
 
 **$4
        Million Convertible Debenture**
 On
        November 8, 2004, the Company entered into four definitive agreements with
        four
        accredited investors, pursuant to which the Company would issue four $1,000,000
        convertible promissory notes (“convertible debentures”) for aggregate gross
        proceeds of $4,000,000. The notes carry a 6% coupon and a 15-month term and
        amortize in 13 equal monthly installments commencing in the third month of
        the
        term. The convertible debentures are convertible into registered common stock
        of
        the Company at $0.82 per share. The principal and interest payments are payable
        in cash or, at the Company's option, the lesser of registered stock valued
        at a
        10% discount to the average of the 20-day VWAP as of the payment date or
        $0.82,
        subject to certain restrictions. The transaction terms include 100% five-year
        warrant coverage at a per share exercise price equal to a 10% premium to
        the
        10-day VWAP on the closing date and a 100% additional investment right
        exercisable for up to twelve months following the effective date of the
        registration statement in respect of the transaction.
 
  8
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **6.**
              **Convertible
                  Debentures (Continued)**
 
 **$4
        Million Convertible Debenture (Continued)**
 During
        December 2004, the Company issued the aforementioned convertible debentures.
        Proceeds related to the issuance, net of issuance costs of $389,970, amounted
        to
        $3,699,930. Included in the issuance costs were warrants issued to a third
        party
        to purchase 145,000 shares of common stock at $0.91 per share. The fair value
        of
        the warrant was determined to be $89,900 using the Black Scholes pricing
        model
        assuming a risk-free rate of 1.79 percent, an expected volatility of 1.0463
        and
        a five year life. The fair value of the warrant, which has been allocated
        to
        additional paid in capital, and together with the $300,070 of issuance costs
        is
        being amortized over the life of the debt as a deferred debt issuance cost.
        During the nine months ended April 30, 2006, $155,988 has been amortized
        as
        interest expense and the remaining unamortized balance of $-0- is included
        in
        deferred debt issuance costs.
 
 The
        holders of the convertible debentures also received warrants to purchase
        4,878,048 of common stock at $0.91 per share. In accordance with Emerging
        Issues
        Task Force Issue 00-27, Application of Issue No. 98-5 to Certain Convertible
        Instruments ("EITF 00-27"), the Company recognized the value attributable
        to the
        warrants in the amount of $1,722,222 to additional paid-in capital and a
        discount against the convertible debenture. The Company valued the warrants
        in
        accordance with EITF 00-27 using the Black-Scholes pricing model assuming
        a
        risk-free rate of 1.79 percent, an expected volatility of 1.0463 and a five
        year
        life. The debt discount attributed to the value of the warrants issued is
        amortized over the convertible debenture’s maturity period as interest expense
        using the effective yield method.
 
 In
        accordance with Emerging Issues Task Force Issue 98-5, Accounting for
        Convertible Securities with a Beneficial Conversion Features or Contingently
        Adjustable Conversion Ratios ("EITF 98-5"), the Company recognized the value
        attributable to the beneficial conversion feature, valued at $1,722,222,
        to
        additional paid-in capital and a discount against the convertible debenture.
        The
        debt discount attributed to the beneficial conversion feature is amortized
        over
        the convertible debenture's maturity period as interest expense using the
        effective yield method.
 
 The
        Company amortized the convertible debenture debt discount attributed to the
        beneficial conversion feature and the value of the warrants and recorded
        non-cash interest expense of $630,452 during the nine months ended April
        30,
        2006. During the nine months ended April 30, 2006, the Company has issued
        646,834 shares of common stock to the holders of the convertible debentures
        upon
        receipt of the holders’ notice of conversion of principal and interest totaling
        $530,403. This conversion resulted in a charge of $42,409 to loss on
        extinguishment of debt that represents the difference between quoted market
        price of the Company’s common stock and 10 percent discount to the average of
        the 20-day VWAP.
 
 The
        Company has repaid the note holders $693,671 of the principal and interest
        in
        1,169,613 shares of common stock during the nine months ended April 30, 2006.
        This repayment resulted in a charge of $147,457 to loss on extinguishment
        of
        debt that represents the difference between quoted market price of the Company’s
        common stock and 10 percent discount to the average of the 20-day VWAP. The
        note
        holders have converted the balance of the debenture prior to the period
        end.
 
 **$500,000
        Convertible Debenture**
 On
        March
        28, 2005, the Company entered into a definitive agreement pursuant to which
        the
        Company would issue a convertible promissory note for aggregate gross proceeds
        of $500,000. The note bore interest at 10 percent per annum payable in common
        stock at the holders option and was due on May 15, 2005. The note was
        convertible into registered common stock of the Company at a per share price
        equal $0.82.
  9
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **6.**
              **Convertible
                  Debentures (Continued)**
 
 **$500,000
        Convertible Debenture (Continued)**
 The
        holder of the convertible debenture also received warrants to purchase 1,219,512
        of common stock at $0.82 per share. In accordance with EITF 00-27 the Company
        recognized the value attributable to the warrants, in the amount of $245,521,
        to
        additional paid-in capital and a discount against the convertible debenture.
        The
        Company valued the warrants in accordance with EITF 00-27 using the
        Black-Scholes pricing model assuming a risk-free rate of 2.78 percent, an
        expected volatility of 1.0054 and a five year life. The debt discount attributed
        to the value of the warrants issued is amortized over the convertible note’s
        maturity period as interest expense using the effective yield
        method.
 
 In
        accordance with EITF 98-5, the Company recognized the value attributable
        to the
        beneficial conversion feature valued at $86,984, to additional paid-in capital
        and a discount against the convertible note. The debt discount attributed
        to the
        beneficial conversion feature is amortized over the convertible note's maturity
        period as interest expense using the effective yield method.
 
 The
        Company fully amortized the convertible note debt discount attributed to
        the
        beneficial conversion feature and the value of the warrants and recorded
        non-cash interest expense of $332,505 during the year ended July 31, 2005.
 
 On
        June
        7, 2005 the Company entered into an agreement with the note holder to extend
        the
        maturity date of the convertible note to July 22, 2005. In consideration
        for the
        holder’s agreement to amend the original convertible note the Company granted a
        warrant to purchase 1,219,512 shares of common stock at $0.82 per share with
        an
        expiration of June 10, 2010. In accordance with EITF 98-5 the fair value
        of the
        warrants, $597,561, was determined to be the reacquisition price on the debt
        on
        the extinguishment date and was recorded as a loss on extinguishment of the
        debt. It was then determined that the new debt did not have a beneficial
        conversion feature.
 
 On
        July
        22, 2005 the Company entered into an agreement with the note holder to extend
        the maturity date of the convertible note to September 20, 2005. In
        consideration for the holder’s agreement to amend the original convertible note
        the Company granted a warrant to purchase 1,219,512 shares of common stock
        at
        $0.82 per share with an expiration of July 22, 2010. In accordance with EITF
        98-5 the fair value of the warrants, $524,390, was determined to be the
        reacquisition price on the debt on the extinguishment date and was recorded
        as a
        loss on extinguishment of the debt. It was then determined that the new debt
        did
        not have a beneficial conversion feature.
 
 During
        the nine months ended April 30, 2006, the Company issued 644,003 shares of
        common stock to the holder of the convertible note upon receipt of the holder’s
        notice of conversion of principal and interest totaling $528,082. The note
        holders have converted the balance of the debenture prior to the period
        end.
 
 **$100,000
        Convertible Debenture**
 On
        April
        4, 2005, the Company entered into a definitive agreement pursuant to which
        the
        Company would issue a convertible promissory note for aggregate gross proceeds
        of $100,000. The note bore interest at 10 percent per annum payable in common
        stock at the holders option and was due on May 15, 2005. The note was
        convertible into registered common stock of the Company at a per share price
        equal $0.82.
 
 
 
  10
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **6.**
              **Convertible
                  Debentures (Continued)**
 
 **$100,000
        Convertible Debenture (Continued)**
 The
        holder of the convertible note also received warrants to purchase 243,902
        of
        common stock at $0.82 per share. In accordance with EITF 00-27, the Company
        recognized the value attributable to the warrants in the amount of $49,104
        to
        additional paid-in capital and a discount against the convertible note. The
        Company valued the warrants in accordance with EITF 00-27 using the
        Black-Scholes pricing model assuming a risk-free rate of 2.78 percent, an
        expected volatility of 1.0054 and a five year life. The debt discount attributed
        to the value of the warrants issued is amortized over the convertible note’s
        maturity period as interest expense using the effective yield
        method.
 
 In
        accordance with EITF 98-5, the Company recognized the value attributable
        to the
        beneficial conversion feature valued at $17,397, to additional paid-in capital
        and a discount against the convertible note. The debt discount attributed
        to the
        beneficial conversion feature is amortized over the convertible note's maturity
        period as interest expense using the effective yield method.
 
 The
        Company fully amortized the convertible note debt discount attributed to
        the
        beneficial conversion feature and the value of the warrants and recorded
        non-cash interest expense of $66,501 during the year ended July 31, 2005.
 
 On
        June
        7, 2005 the Company entered into an agreement with the note holder to extend
        the
        maturity date of the convertible note to July 22, 2005. In consideration
        for the
        holder’s agreement to amend the original convertible note the Company granted a
        warrant to purchase 243,902 shares of common stock at $0.82 per share with
        an
        expiration of June 10, 2010. In accordance with EITF 98-5 the fair value
        of the
        warrants, $119,512 was determined to be the reacquisition price on the debt
        on
        the extinguishment date and was recorded as a loss on extinguishment of the
        debt. It was then determined that the new debt did not have a beneficial
        conversion feature.
 
 On
        July
        22, 2005 the Company entered into an agreement with the note holder to extend
        the maturity date of the convertible note to September 20, 2005. In
        consideration for the holder’s agreement to amend the original convertible note
        the Company granted a warrant to purchase 243,902 shares of common stock
        at
        $0.82 per share with an expiration of July 22, 2010. In accordance with EITF
        98-5 the fair value of the warrants, $104,878 was determined to be the
        reacquisition price on the debt on the extinguishment date and was recorded
        as a
        loss on extinguishment of the debt. It was then determined that the new debt
        did
        not have a beneficial conversion feature.
 
 During
        the nine months ended April 30, 2006, the Company issued 128,834 shares of
        common stock to the holders of the convertible note upon receipt of the holder’s
        notice of conversion of principal and interest totaling $105,644. The note
        holders have converted the balance of the debenture prior to the period
        end.
 
 
 
 
  11
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **6.**
              **Convertible
                  Debentures (Continued)**
 
 **$2
        Million Convertible Debenture**
 On
        June
        17, 2005, the holders of the $4 million convertible debenture exercised 50
        percent of their additional investment right “AIR Exercise” resulting in four
        $500,000 convertible promissory notes (“convertible debentures’) for an
        aggregate proceeds of $2,000,000. The notes carry a 6% coupon and a 15-month
        term and amortize in 13 equal monthly installments commencing in the third
        month
        of the term. The convertible debentures are convertible into registered common
        stock of the Company at $0.82 per share. The principal and interest payments
        are
        payable in cash or, at the Company's option, the lesser of registered stock
        valued at a 10% discount to the average of the 20-day VWAP as of the payment
        date or $0.82, subject to certain restrictions. The transaction terms include
        100% five-year warrant coverage at a per share exercise price equal to a
        10%
        premium to the 10-day VWAP on the closing date and a 100% additional investment
        right exercisable for up to twelve months following the effective date of
        the
        registration statement in respect of the transaction. In consideration of
        the
        AIR Exercise the Company reduced the conversion price of the convertible
        debentures issuable upon the AIR Exercise from $0.82 to $0.60 per share.
 
 Proceeds
        related to the AIR Exercise, net of issuance costs of $160,300, amounted
        to
        $1,839,700. Included in the issuance costs were warrants to purchase 35,000
        shares of common stock at $0.82 per share and 170,732 shares of common stock
        valued at $0.82 per share issued to a third party. The fair value of the
        warrant
        was determined to be $20,300 using the Black Scholes pricing model assuming
        a
        risk-free rate of 3.02 percent, an expected volatility of 0.9775 and a five
        year
        life. The fair value of the warrant, which has been allocated to additional
        paid
        in capital, together with the $140,000 of issuance costs is being amortized
        over
        the life of the debt as a deferred debt issuance cost. During the nine months
        ended April 30, 2006, the Company has amortized the remaining balance of
        deferred debt issuance costs in the amount of $155,129 as non-cash interest
        expense resulting from the convertible debenture being fully repaid and the
        remaining unamortized balance of $-0- is included in deferred debt issuance
        costs.
  The
        holders of the convertible debentures also received warrants to purchase
        2,439,024 shares of common stock at $0.82 per share. In accordance with EITF
        00-27, the Company recognized the value attributable to the warrants in the
        amount of $828,571 to additional paid-in capital and a discount against the
        convertible debenture. The Company valued the warrants in accordance with
        EITF
        00-27 using the Black-Scholes pricing model assuming a risk-free rate of
        3.02
        percent, an expected volatility of 0.9775 and a five year life. The debt
        discount attributed to the value of the warrants issued is amortized over
        the
        convertible debenture’s maturity period as interest expense using the effective
        yield method.
 
 In
        accordance with EITF 98-5 the Company recognized the value attributable to
        the
        beneficial conversion feature valued at $1,171,429, to additional paid-in
        capital and a discount against the convertible debenture. The debt discount
        attributed to the beneficial conversion feature is amortized over the
        convertible debenture's maturity period as interest expense using the effective
        yield method.
 
 The
        Company amortized the convertible debenture debt discount attributed to the
        beneficial conversion feature and the value of the warrants and recorded
        non-cash interest expense of $62,316 for the nine months ended April 30,
        2006.
        During the nine months ended April 30, 2006, the Company has issued 2,363,352
        shares of common stock to the holders of the convertible debentures upon
        receipt
        of the holders’ notice of conversions of principal and interest totaling
        $1,418,011.
 
 12
 **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **6.**
              **Convertible
                  Debentures (Continued)**
 
 **$2
        Million Convertible Debenture (Continued)**
 The
        Company has repaid the note holders $225,322 of the principal and interest
        in
        407,075 shares of common stock during the nine months ended April 30, 2006.
        This
        repayment resulted in a charge of $62,242 to loss on extinguishment of debt
        that
        represents the difference between quoted market price of the Company’s common
        stock and 10 percent discount to the average of the 20-day VWAP. The note
        holders have converted the balance of the debenture prior to the period
        end.
 
 **Second
        $2 Million Convertible Debenture**
 On
        September 8, 2005, the holders of the $2 million convertible debenture exercised
        their additional investment right “AIR Exercise” resulting in four $500,000
        convertible promissory notes (“convertible debentures’) for an aggregate
        proceeds of $2,000,000. The notes carry a 6% coupon and a 15-month term and
        amortize in 13 equal monthly installments commencing in the third month of
        the
        term. The convertible debentures are convertible into registered common stock
        of
        the Company at $0.82 per share. The principal and interest payments are payable
        in cash or, at the Company's option, the lesser of registered stock valued
        at a
        10% discount to the average of the 20-day VWAP as of the payment date or
        $0.82,
        subject to certain restrictions. The transaction terms include 100% five-year
        warrant coverage at a per share exercise price equal to a 10% premium to
        the
        10-day VWAP on the closing date and a 100% additional investment right
        exercisable for up to twelve months following the effective date of the
        registration statement in respect of the transaction. In consideration of
        the
        AIR Exercise the Company reduced the conversion price of the convertible
        debentures issuable upon the AIR Exercise from $0.82 to $0.60 per share.
 
 Proceeds
        related to the AIR Exercise, net of issuance costs of $185,600, amounted
        to
        $1,814,400. Included in the issuance costs were warrants to purchase 60,000
        shares of common stock at $0.82 per share and 170,732 shares of common stock
        valued at $0.82 per share issued to a third party. The fair value of the
        warrant
        was determined to be $30,600 using the Black Scholes pricing model assuming
        a
        risk-free rate of 3.76 percent, an expected volatility of 0.9232 and a five
        year
        life. The fair value of the warrant, which has been allocated to additional
        paid
        in capital, together with the $140,000 of issuance costs associated with
        the
        shares of common stock issued and $15,000 of legal costs are being amortized
        over the life of the debt as a deferred debt issuance cost. During the nine
        months ended April 30, 2006, $185,600 has been amortized as interest expense
        and
        the remaining unamortized balance of $-0- is included in deferred debt issuance
        costs.
 
 The
        holders of the convertible debentures also received warrants to purchase
        2,439,024 shares of common stock at $0.82 per share. In accordance with EITF
        00-27, the Company recognized the value attributable to the warrants in the
        amount of $785,185 to additional paid-in capital and a discount against the
        convertible debenture. The Company valued the warrants in accordance with
        EITF
        00-27 using the Black-Scholes pricing model assuming a risk-free rate of
        3.76
        percent, an expected volatility of 0.9232 and a five year life. The debt
        discount attributed to the value of the warrants issued is amortized over
        the
        convertible debenture’s maturity period as interest expense using the effective
        yield method.
 
 In
        accordance with EITF 98-5 the Company recognized the value attributable to
        the
        beneficial conversion feature valued at $1,185,185, to additional paid-in
        capital and a discount against the convertible debenture. The debt discount
        attributed to the beneficial conversion feature is amortized over the
        convertible debenture's maturity period as interest expense using the effective
        yield method.
 
  13
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **6.**
              **Convertible
                  Debentures (Continued)**
 
 **Second
        $2 Million Convertible Debenture (Continued)**
 The
        Company amortized the convertible debenture debt discount attributed to the
        beneficial conversion feature and the value of the warrants and recorded
        non-cash interest expense of $1,970,370 for the nine months ended April 30,
        2006. During the nine months ended April 30, 2006, the Company has issued
        2,878,648 shares of common stock to the holders of the convertible debentures
        upon receipt of the holders’ notice of conversions of principal and interest
        totaling $1,729,144. This conversion resulted in a charge of $1,088,868 to
        loss
        on extinguishment of debt that represents the difference between quoted market
        price of the Company’s common stock and 10 percent discount to the average of
        the 20-day VWAP.
 
 The
        Company has repaid the note holders $293,893 of the principal and interest
        in
        489,824 shares of common stock during the nine months ended April 30, 2006.
        This
        repayment resulted in a charge of $394,913 to loss on extinguishment of debt
        that represents the difference between quoted market price of the Company’s
        common stock and 10 percent discount to the average of the 20-day VWAP. The
        note
        holders have converted the balance of the debenture prior to the period
        end.
 
 **Second
        $500,000 Convertible Debenture**
 On
        October 27, 2005, one of the debenture holders exercised its additional
        investment right “AIR Exercise” resulting in a $500,000 convertible promissory
        note (“convertible debenture’) for an aggregate proceeds of $500,000. The
        convertible debenture carries a 6% coupon and a 15-month term and amortize
        in 13
        equal monthly installments commencing in the third month of the term. The
        convertible debenture is convertible into registered common stock of the
        Company
        at $0.82 per share. The principal and interest payments are payable in cash
        or,
        at the Company's option, the lesser of registered stock valued at a 10% discount
        to the average of the 20-day VWAP as of the payment date or $0.82, subject
        to
        certain restrictions. The transaction terms include 100% five-year warrant
        coverage at a per share exercise price equal to a 10% premium to the 10-day
        VWAP
        on the closing date and a 100% additional investment right exercisable for
        up to
        twelve months following the effective date of the registration statement
        in
        respect of the transaction.
 
 Proceeds
        related to the AIR Exercise, net of issuance costs of $49,250, amounted to
        $500,000. Included in the issuance costs were warrants to purchase 15,000
        shares
        of common stock at $0.95 per share and commissions of $35,000 issued to a
        third
        party. The fair value of the warrant was determined to be $14,250 using the
        Black Scholes pricing model assuming a risk-free rate of 3.76 percent, an
        expected volatility of 0.9322 and a five year life. The fair value of the
        warrant, which has been allocated to additional paid in capital, together
        with
        the $35,000 of issuance costs associated with the shares of common stock
        issued
        are being amortized over the life of the debt as a deferred debt issuance
        cost.
        During the nine months ended April 30, 2006, $49,250 has been amortized as
        interest expense and the remaining unamortized balance of $-0- is included
        in
        deferred debt issuance costs.
 
 The
        holder of the convertible debenture also received warrants to purchase 609,756
        shares of common stock at $0.82 per share. In accordance with EITF 00-27,
        the
        Company recognized the value attributable to the warrants in the amount of
        $270,950 to additional paid-in capital and a discount against the convertible
        debenture. The Company valued the warrants in accordance with EITF 00-27
        using
        the Black-Scholes pricing model assuming a risk-free rate of 3.76 percent,
        an
        expected volatility of 0.9232 and a five year life. The debt discount attributed
        to the value of the warrants issued is amortized over the convertible
        debenture’s maturity period as interest expense using the effective yield
        method.
 
 
  14
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **6.**
              **Convertible
                  Debentures (Continued)**
 
 **Second
        $500,000 Convertible Debenture (Continued)**
 In
        accordance with EITF 98-5 the Company recognized the value attributable to
        the
        beneficial conversion feature valued at $229,050, to additional paid-in capital
        and a discount against the convertible debenture. The debt discount attributed
        to the beneficial conversion feature is amortized over the convertible
        debenture's maturity period as interest expense using the effective yield
        method.
 
 The
        Company amortized the convertible debenture debt discount attributed to the
        beneficial conversion feature and the value of the warrants and recorded
        non-cash interest expense of $500,000 for the nine months ended April 30,
        2006.
        During the nine months ended April 30, 2006, the Company has issued 470,450
        shares of common stock to the holders of the convertible debentures upon
        receipt
        of the holders’ notice of conversions of principal and interest totaling
        $385,769. This conversion resulted in a charge of $1,180,830 to loss on
        extinguishment of debt that represents the difference between quoted market
        price of the Company’s common stock and 10 percent discount to the average of
        the 20-day VWAP.
 
 The
        Company has repaid the note holders $125,244 of the principal and interest
        in
        152,736 shares of common stock during the nine months ended April 30, 2006.
        This
        repayment resulted in a charge of $93,362 to loss on extinguishment of debt
        that
        represents the difference between quoted market price of the Company’s common
        stock and 10 percent discount to the average of the 20-day VWAP. The note
        holders have converted the balance of the debenture prior to the period
        end.
 
 **$3,500,000
        Convertible Debenture**
 On
        December 4, 2005, the Company and each of the holders of the $4 million
        convertible debenture entered into an Amendment No. 3 to Securities Purchase
        Agreement and Registration Rights Agreement pursuant to which (i) all but
        one of
        the Investors agreed to exercise an aggregate of $1,500,000 in principal
        amount
        (“$3.5 Million Convertible Debenture”) of the Additional AIRs granted to such
        Investors in connection with the Second AIR Exercise resulting in a $3,500,000
        convertible promissory note (“convertible debenture’) for an aggregate proceeds
        of $3,500,000. The convertible debenture carries a 6% coupon and a 15-month
        term
        and amortize in 13 equal monthly installments commencing in the third month
        of
        the term. The convertible debenture is convertible into registered common
        stock
        of the Company at $0.82 per share. The principal and interest payments are
        payable in cash or, at the Company's option, the lesser of registered stock
        valued at a 10% discount to the average of the 20-day VWAP as of the payment
        date or $0.82, subject to certain restrictions. The transaction terms include
        100% five-year warrant coverage at a per share exercise price equal to a
        10%
        premium to the 10-day VWAP on the closing date and a 100% additional investment
        right exercisable for up to twelve months following the effective date of
        the
        registration statement in respect of the transaction.
 
 Proceeds
        related to the AIR Exercise, net of issuance costs of $15,000, amounted to
        $3,485,000. Included in the issuance costs were warrants to purchase 105,000
        shares of common stock at $0.82 per share and 224,000 shares of common stock
        valued at $0.95 per share issued to a third party. The fair value of the
        warrant
        was determined to be $76,650 using the Black Scholes pricing model assuming
        a
        risk-free rate of 4.02 percent, an expected volatility of 0.9288 and a five
        year
        life. The fair value of the warrant, which has been allocated to additional
        paid
        in capital, together with the $212,800 of issuance costs associated with
        the
        shares of common stock issued and $15,000 of legal costs are being amortized
        over the life of the debt as a deferred debt issuance cost. During the nine
        months ended April 30, 2006, $304,450 has been amortized as interest expense
        and
        the remaining unamortized balance of $-0- is included in deferred debt issuance
        costs.
  15
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **6.**
              **Convertible
                  Debentures (Continued)**
 
 **$3,500,000
        Convertible Debenture (Continued)**
 The
        holder of the convertible debenture also received warrants to purchase 4,268,292
        shares of common stock at $0.82 per share. In accordance with EITF 00-27,
        the
        Company recognized the value attributable to the warrants in the amount of
        $1,648,387 to additional paid-in capital and a discount against the convertible
        debenture. The Company valued the warrants in accordance with EITF 00-27
        using
        the Black-Scholes pricing model assuming a risk-free rate of 4.02 percent,
        an
        expected volatility of 0.9288 and a five year life. The debt discount attributed
        to the value of the warrants issued is amortized over the convertible
        debenture’s maturity period as interest expense using the effective yield
        method.
 
 In
        accordance with EITF 98-5 the Company recognized the value attributable to
        the
        beneficial conversion feature valued at $1,851,613, to additional paid-in
        capital and a discount against the convertible debenture. The debt discount
        attributed to the beneficial conversion feature is amortized over the
        convertible debenture's maturity period as interest expense using the effective
        yield method.
 
 The
        Company amortized the convertible debenture debt discount attributed to the
        beneficial conversion feature and the value of the warrants and recorded
        non-cash interest expense of $3,500,000 for the nine months ended April 30,
        2006. During the nine months ended April 30, 2006, the Company has issued
        4,189,923 shares of common stock to the holders of the convertible debentures
        upon receipt of the holders’ notice of conversions of principal and interest
        totaling $3,435,735. This conversion resulted in a charge of $1,473,115 to
        loss
        on extinguishment of debt that represents the difference between quoted market
        price of the Company’s common stock and 10 percent discount to the average of
        the 20-day VWAP.
 
 The
        Company has repaid the note holders $86,475 of the principal and interest
        in
        105,456 shares of common stock during the nine months ended April 30, 2006.
        This
        repayment resulted in a charge of $176,556 to loss on extinguishment of debt
        that represents the difference between quoted market price of the Company’s
        common stock and 10 percent discount to the average of the 20-day VWAP. The
        note
        holders have converted the balance of the debenture prior to the period
        end.
 
 **Second
        $4,000,000 Convertible Debenture**
 On
        January 20, 2006, the Company and each of the holders of the $4 million
        convertible debenture entered into an Amendment No. 4 to Securities Purchase
        Agreement and Registration Rights Agreement pursuant to which the investors
        agreed to exercise an additional $4,000,000 in principal amount of Additional
        Investment Rights (AIR) (“Second $4 Million Convertible Debenture”) of the
        Additional AIRs granted to such Investors in connection with the Third AIR
        Exercise resulting in a $4,000,000 convertible promissory note (“convertible
        debenture’) for an aggregate proceeds of $4,000,000. The convertible debenture
        carries a 6% coupon and a 15-month term and amortize in 13 equal monthly
        installments commencing in the third month of the term. The convertible
        debenture is convertible into registered common stock of the Company at $1.05
        per share. The principal and interest payments are payable in cash or, at
        the
        Company's option, the lesser of registered stock valued at a 10% discount
        to the
        average of the 20-day VWAP as of the payment date or $0.82, subject to certain
        restrictions. The transaction terms include 100% five-year warrant coverage
        at a
        per share exercise price equal to a 10% premium to the 10-day VWAP on the
        closing date and a 100% additional investment right exercisable for up to
        twelve
        months following the effective date of the registration statement in respect
        of
        the transaction.
 
 
 
  16
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **6.**
              **Convertible
                  Debentures (Continued)**
 
 **Second
        $4,000,000 Convertible Debenture (Continued)**
 Proceeds
        related to the AIR Exercise, net of issuance costs of $15,000, amounted to
        $3,985,000. Included in the issuance costs were warrants to purchase 120,000
        shares of common stock at $1.05 per share and 266,667 shares of common stock
        valued at $1.00 per share issued to a third party. The fair value of the
        warrant
        was determined to be $88,800 using the Black Scholes pricing model assuming
        a
        risk-free rate of 4.23 percent, an expected volatility of 0.9210 and a five
        year
        life. The fair value of the warrant, which has been allocated to additional
        paid
        in capital, together with the $266,667 of issuance costs associated with
        the
        shares of common stock issued and $15,000 of legal costs are being amortized
        over the life of the debt as a deferred debt issuance cost. During the nine
        months ended April 30, 2006, $338,396 has been amortized as interest expense
        and
        the remaining unamortized balance of $32,071 is included in deferred debt
        issuance costs.
 
 The
        holder of the convertible debenture also received warrants to purchase 3,809,524
        shares of common stock at $1.05 per share. In accordance with EITF 00-27,
        the
        Company recognized the value attributable to the warrants in the amount of
        $1,653,631 to additional paid-in capital and a discount against the convertible
        debenture. The Company valued the warrants in accordance with EITF 00-27
        using
        the Black-Scholes pricing model assuming a risk-free rate of 4.23 percent,
        an
        expected volatility of 0.9210 and a five year life. The debt discount attributed
        to the value of the warrants issued is amortized over the convertible
        debenture’s maturity period as interest expense using the effective yield
        method.
 
 In
        accordance with EITF 98-5 the Company recognized the value attributable to
        the
        beneficial conversion feature valued at $1,463,155, to additional paid-in
        capital and a discount against the convertible debenture. The debt discount
        attributed to the beneficial conversion feature is amortized over the
        convertible debenture's maturity period as interest expense using the effective
        yield method.
 
 The
        Company amortized the convertible debenture debt discount attributed to the
        beneficial conversion feature and the value of the warrants and recorded
        non-cash interest expense of $2,957,773 for the nine months ended April 30,
        2006. During the nine months ended April 30, 2006, the Company has issued
        3,461,946 shares of common stock to the holders of the convertible debentures
        upon receipt of the holders’ notice of conversions of principal and interest
        totaling $3,635,041. This conversion resulted in a charge of $4,558,356 to
        loss
        on extinguishment of debt that represents the difference between quoted market
        price of the Company’s common stock and 10 percent discount to the average of
        the 20-day VWAP.
 
 The
        Company has repaid the note holders $175,501 of the principal and interest
        in
        167,144 shares of common stock during the nine months ended April 30, 2006.
        This
        repayment resulted in a charge of $275,788 to loss on extinguishment of debt
        that represents the difference between quoted market price of the Company’s
        common stock and 10 percent discount to the average of the 20-day
        VWAP.
 
 
 
  17
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **6.**
              **Convertible
                  Debentures (Continued)**
 
 **Third
        $4,000,000 Convertible Debenture**
 On
        February 28, 2006, the holders of the Second $4 million convertible debenture
        exercised their additional investment right “AIR Exercise” resulting in four
        $1,000,000 convertible promissory notes (“convertible debentures’) for an
        aggregate proceeds of $4,000,000. The convertible debentures carry a 6% coupon
        and a 15-month term and amortize in 13 equal monthly installments commencing
        in
        the third month of the term. The convertible debentures are convertible into
        registered common stock of the Company at $1.25 per share. The principal
        and
        interest payments are payable in cash or, at the Company's option, the lesser
        of
        registered stock valued at a 10% discount to the average of the 20-day VWAP
        as
        of the payment date or $1.25, subject to certain restrictions. The Company
        did
        not incur issuance costs associated with the proceeds.
 
 The
        holder of the convertible debenture also received warrants to purchase 3,200,000
        shares of common stock at $1.25 per share. In accordance with EITF 00-27,
        the
        Company recognized the value attributable to the warrants in the amount of
        $2,374,507 to additional paid-in capital and a discount against the convertible
        debenture. The Company valued the warrants in accordance with EITF 00-27
        using
        the Black-Scholes pricing model assuming a risk-free rate of 4.49 percent,
        an
        expected volatility of 0.9380 and a 5.5 year life. The debt discount attributed
        to the value of the warrants issued is amortized over the convertible
        debenture’s maturity period as interest expense using the effective yield
        method.
 
 In
        accordance with EITF 98-5 the Company recognized the value attributable to
        the
        beneficial conversion feature valued at $1,625,493, to additional paid-in
        capital and a discount against the convertible debenture. The debt discount
        attributed to the beneficial conversion feature is amortized over the
        convertible debenture's maturity period as interest expense using the effective
        yield method.
 
 The
        Company amortized the convertible debenture debt discount attributed to the
        beneficial conversion feature and the value of the warrants and recorded
        non-cash interest expense of $3,039,090 for the nine months ended April 30,
        2006. During the nine months ended April 30, 2006, the Company has issued
        2,280,592 shares of common stock to the holders of the convertible debentures
        upon receipt of the holders’ notice of conversions of principal and interest
        totaling $2,850,739. This conversion resulted in a charge of $2,373,363 to
        loss
        on extinguishment of debt that represents the difference between quoted market
        price of the Company’s common stock and 10 percent discount to the average of
        the 20-day VWAP.
 
 During
        the nine months ended April 30, 2006, the Company has not repaid monthly
        principal and interest through the issuance of shares of common
        stock.
  18
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **7.**
              **Short-term
                  Advance**
 On
        March
        30, 2005, the Company entered into an agreement with an affiliated party
        to
        provide the Company with approximately $325,200 in funding. The funds were
        designated to assist the Company in satisfying its obligations under the
        terms
        of the first $4,000,000 convertible debenture agreements. The Company is
        obligated to repay the advance, without interest, in three equal installments
        on
        October 1, 2005, November 1, 2005 and December 1, 2005. Upon failure to repay
        any installment when due, all amounts become payable on demand and interest
        on
        such unpaid amounts will accrue interest at the rate of 8 percent per annum.
        The
        Company did not make the required installments, therefore, has accrued interest
        in the amount of $22,190. During the three months ended April 30, 2006, the
        Company has repaid the short-term advance together with accrued interest
        in the
        amount of $347,369.
 
 8.  **Pending
        Litigation**
 
 On
        October 2, 1998, Sands Brothers & Co. Ltd. (“Sands”), a New York City-based
        investment banking and brokerage firm, initiated an arbitration proceeding
        against the Company under the rules of the New York Stock Exchange in respect
        of
        an alleged contractual relationship between Sands and the Company.
 
 On
        August
        17, 2004, following various arbitration and court proceedings in the case,
        the
        Arbitration Panel of the New York Stock Exchange issued a final award in
        the
        case, awarding Sands $150,000 in damages.  A motion to confirm this award
        was granted on February 1, 2005.  In September 2005 Sands filed a motion
        seeking leave from the New York Court of Appeals to appeal certain prior
        orders
        of the Appellate Division in the case. On January 10, 2006 the New York Court
        of
        Appeals denied the motion. In March, 2006 the Company paid $150,000 plus
        $10,541
        in interest to Sands in satisfaction of the judgment.
 
 In
        February 2001, a former business associate of the former Vice President of
        Research and Development (VP), and an entity called Centrum Technologies
        Inc.
        (“CTI”) commenced an action in the Ontario Superior Court of Justice against the
        Company and the VP seeking, among other things, damages for alleged breaches
        of
        contract and tortious acts related to a business relationship between this
        former associate and the VP that ceased in July 1996. The plaintiffs’ statement
        of claim also seeks to enjoin the use, if any, by the Company of three patents
        allegedly owned by the company called CTI. On July 20, 2001, the Company
        filed a
        preliminary motion to dismiss the action of CTI as a nonexistent entity or,
        alternatively, to stay such action on the grounds of want of authority of
        such
        entity to commence the action. The plaintiffs brought a cross motion to amend
        the statement of claim to substitute Centrum Biotechnologies, Inc. (“CBI”) for
        CTI. CBI is a corporation of which 50 percent of the shares are owned by
        the
        former business associate and the remaining 50 percent are owned by the Company.
        Consequently, the shareholders of CBI are in a deadlock. The court granted
        the
        Company’s motion to dismiss the action of CTI and denied the plaintiffs’ cross
        motion without prejudice to the former business associate to seek leave to
        bring
        a derivative action in the name of or on behalf of CBI. The former business
        associate subsequently filed an application with the Ontario Superior Court
        of
        Justice for an order granting him leave to file an action in the name of
        and on
        behalf of CBI against the VP and the Company. The Company opposed the
        application. In September 2003, the Ontario Superior Court of Justice granted
        the request and issued an order giving the former business associate leave
        to
        file an action in the name of and on behalf of CBI against the VP and the
        Company. A statement of claim was served in July 2004. The Company is not
        able
        to predict the ultimate outcome of this legal proceeding at the present time
        or
        to estimate an amount or range of potential loss, if any, from this legal
        proceeding.
 
  19
  
 **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **8.**
              **Pending
                  Litigation (Continued)**
 
 In
        February 2005, a consultant commenced an action in the Ontario Superior Court
        of
        Justice against the Company seeking approximately $600,000 in damages for
        alleged contract breaches in respect of unpaid remuneration and other
        compensation allegedly owed to him. In March 2006 the litigation was settled,
        without any economic payment by the Company, and the action was dismissed,
        on
        consent, without costs.
 
 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.
 
 **9.**
              **Net
                  Loss Per Share**
 Basic
        EPS
        and Diluted EPS for the three months and nine months ended April 30, 2006
        and
        2005 have been computed by dividing the net loss for each respective period
        by
        the weighted average number of shares outstanding during that period. All
        outstanding warrants and options, approximately 25,246,229 and 26,485,026
        incremental shares at April 30, 2006 and 2005, respectively, have been excluded
        from the computation of Diluted EPS as they are anti-dilutive.
 
  20
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **10.**
              **Supplemental
                  Disclosure of Cash Flow
                  Information**
  For
                    the Nine Months EndedApril
                    30,Cash
                    paid during the period for:
                
                2006
                
                2005Interest
                
                $
                49,864
                
                $
                260,973Income
                    taxes
                
                $
                --
                
                $
                --Disclosure
                    of non-cash investing and financing activities:Value
                    of common stock issued in conjunction with capitalizedservices
                    upon issuance of convertible debentures
                
                $
                619,467
                
                $
                --Value
                    of warrants issued in conjunction with capitalizedservices
                    upon issuance of convertible debentures
                
                $
                210,300
                
                $
                89,900Costs
                    paid from proceeds in conjunction with capitalizedservices
                    upon issuance of convertible debentures
                
                $
                45,000
                
                $
                --Value
                    of warrants issued in conjunction with issuance ofconvertible
                    debentures and related beneficial conversionfeature
                
                $
                13,087,156
                
                $
                3,843,450Satisfaction
                    of accounts payable through the issuance ofcommon
                    stock
                
                $
                391,147
                
                $
                779,760Principal
                    repayment of convertible debentures through theissuance
                    of common stock
                
                $
                1,498,843
                
                $
                506,824Issuance
                    of common stock in conjunction with convertibledebenture
                    conversion
                
                $
                14,551,466
                
                $
                143,500Sale
                    of Series A Preferred Stock and mandatorily convertedto
                    common shares
                
                $
                --
                
                $
                14,310,057Issuance
                    of below market stock options in satisfaction ofaccounts
                    payable and accrued expenses
                
                $
                --
                
                $
                1,332,052Increase
                    in receivable included in other current assets inconnection
                    with short-term refinancing of long-term debt
                
                $
                --
                
                $
                79,480Increase
                    in other current assets for the prepayment of servicesthrough
                    the issuance of common stock
                
                $
                184,500
                
                $
                --Satisfaction
                    of due from related party through reduction ofaccrued
                    executive compensation
                
                $
                415,828
                
                $
                --
  
 **11.**
              **Transactions
                  with Related Party**
 At
        April
        30, 2006, the Company has agreed to accept a reduction in amounts due as
        executive compensation in satisfaction of amounts due from related party
        in the
        amount of $415,828. Prior to this agreement, the Company’s change in “Due from
        Related Party” for the nine months ended April 30, 2006 represented only the
        effect of change in exchange rate for the nine months ended versus that in
        effect at July 31, 2005.
 
 **12.**
              **Stockholders’
                  Equity**
 In
        August
        2005, the Company issued 265,929 shares of common stock to various consultants
        for services rendered in the amount of $157,289. The shares were valued at
        $0.59
        to $0.61 per share based on the quoted market price of the Company’s common
        stock on the dates of the issuances.
 
 In
        September 2005, the Company issued 162,933 shares of common stock to various
        vendors for the satisfaction of $113,605 of accounts payable and accrued
        liabilities. The shares were valued at $0.81 per share based on the quoted
        market price of the Company’s common stock on the dates of the
        issuances.
 
 
 21
 **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **12.**
              **Stockholders’
                  Equity (Continued)**
 In
        September 2005, the Company and each of the holders of the $4 million
        convertible debenture entered into an Amendment No. 2 to Securities Purchase
        Agreement and Registration Rights Agreement pursuant to which the investors
        agreed to exercise an additional $2,000,000 in principal amount of Additional
        Investment Rights (AIR) (“Second $2 Million Convertible Debenture”). In
        connection with this investment, the Company agreed to issue warrants to
        purchase an aggregate of 2,439,024 shares of the Company’s common stock at the
        exercise price of $0.82 per share exercisable for five years commencing six
        months following the issuance thereof and to grant each investor further
        AIR. In
        addition, in connection with the transaction contemplated by Amendment No.
        2,
        the Company issued a placement agent (i) 170,732 shares of common stock in
        lieu
        of a cash fee equal to 7 percent of the gross proceeds received by the Company
        and (ii) warrants exercisable into approximately 60,000 shares of common
        stock
        at the same exercise price as the AIR warrants (see Note 6).
 
 In
        October 2005 one of the debenture holders exercised its additional investment
        right “AIR Exercise” resulting in a $500,000 convertible promissory note
        (“$500,000 Convertible Debenture’) for an aggregate proceeds of $500,000. In
        connection with this investment, the Company agreed to issue warrants to
        purchase an aggregate of 609,756 shares of the Company’s common stock at the
        exercise price of $0.82 per share exercisable for five years commencing six
        months following the issuance thereof. In addition, in connection with the
        transaction, the Company issued a placement agent warrants to purchase 15,000
        shares of common stock (see Note 6).
 
 In
        October 2005, the Company issued an aggregate of 909,756 warrants to certain
        debenture holders as an incentive to exercise their existing warrants. All
        warrants have a five year term, an exercise price of $1.20 per share and
        were
        valued at $0.63. The warrants, which were valued using the Black-Scholes
        pricing
        model with expected volatility of 93.22 percent and risk free interest of
        3.76
        percent, resulted in charges to the interest expense of $573,146.
 
 In
        October 2005, the Company issued an aggregate of 2,748,780 warrants to certain
        debenture holders as an incentive to exercise their existing warrants. All
        warrants have a five year term, an exercise price of $1.25 per share and
        were
        valued at $0.91. The warrants, which were valued using the Black-Scholes
        pricing
        model with expected volatility of 93.22 percent and risk free interest of
        3.76
        percent, resulted in charges to the interest expense of $2,501,390.
 
 In
        October 2005, the Company received aggregate cash proceeds of approximately
        $6,891,998. The Company issued 8,404,876 shares of common stock as a result
        of
        these transactions.
 
 In
        November 2005, the Company issued 83,787 shares of common stock to consultants
        for services rendered in the amount of $81,274. The shares were valued at
        $0.97
        per share based on the quoted market price of the Company’s common stock on the
        dates of the issuances.
  22
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **12.**
              **Stockholders’
                  Equity (Continued)**
 In
        December 2005, the Company and each of the holders of the $4 million convertible
        debenture entered into an Amendment No. 2 to Securities Purchase Agreement
        and
        Registration Rights Agreement pursuant to which (i) all but one of the Investors
        agreed to exercise an aggregate of $1,500,000 in principal amount of the
        Additional AIRs granted to such Investors in connection with the First AIR
        Exercise and (ii) all of the Investors agreed to exercise an aggregate of
        $2,000,000 in principal amount of the Additional AIRs granted to the Investors
        in connection with the Second AIR Exercise (“$3.5 Million Convertible
        Debenture”). In connection with the $3.5 Million Convertible Debenture, the
        Company agreed to issue warrants to purchase an aggregate of 4,268,292 shares
        of
        the Company’s common stock at the exercise price of $0.82 per share exercisable
        for five years commencing six months following the issuance thereof and to
        grant
        each investor further AIR. In addition, in connection with the transaction
        contemplated by Amendment No. 2, the Company issued a placement agent (i)
        224,000 shares of common stock in lieu of a cash commission and (ii) warrants
        exercisable into approximately 105,000 shares of common stock at the same
        exercise price as the AIR warrants (see Note 6).
 
 In
        December 2005, the Company issued an aggregate of 1,829,268 warrants to certain
        debenture holders as an incentive to exercise their existing warrants. All
        warrants have a five year term, an exercise price of $1.25 per share and
        were
        valued at $0.61. The warrants, which were valued using the Black-Scholes
        pricing
        model with expected volatility of 0.9254 percent and risk free interest of
        4.02
        percent, resulted in charges to the interest expense of $1,115,853.
 
 In
        January 2006, the Company and each of the holders of the $4 million convertible
        debenture entered into an Amendment No. 4 to Securities Purchase Agreement
        and
        Registration Rights Agreement pursuant to which the investors agreed to exercise
        an additional $4,000,000 in principal amount of Additional Investment Rights
        (AIR) (“Second $4 Million Convertible Debenture”). In connection with this
        investment, the Company agreed to issue warrants to purchase an aggregate
        of
        3,809,524 shares of the Company’s common stock at the exercise price of $1.05
        per share exercisable for five years commencing six months following the
        issuance thereof and to grant each investor further AIR. In addition, in
        connection with the transaction contemplated by Amendment No. 2, the Company
        issued a placement agent (i) 266,667 shares of common stock in lieu of a
        cash
        fee equal to 7 percent of the gross proceeds received by the Company and
        (ii)
        warrants exercisable into approximately 120,000 shares of common stock at
        the
        same exercise price as the AIR warrants (see Note 6).
 
 In
        January 2006, the Company issued an aggregate of 3,658,536 warrants to certain
        debenture holders as an incentive to exercise their existing warrants. All
        warrants have a five year term, an exercise price of $1.60 per share and
        were
        valued at $0.85. The warrants, which were valued using the Black-Scholes
        pricing
        model with expected volatility of 0.9210 percent and risk free interest of
        4.23
        percent, resulted in charges to the interest expense of $3,109,756.
 
 In
        February 2006, the Company issued 140,115 shares of common stock valued at
        $126,104 as employee compensation.
 
 In
        February 2006, the Company issued 50,000 shares of common stock to a consultant
        for services rendered in the amount of $76,500. The shares were valued at
        $1.53
        per share based on the quoted market price of the Company’s common stock on the
        dates of the issuances.
 
  23
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **12.**
              **Stockholders’
                  Equity (Continued)**
 In
        February 2006, the holders of the Second $4 million convertible debenture
        exercised their additional investment right “AIR Exercise” resulting in
        $4,000,000 in principal amount of convertible debentures (“Third $4 Million
        Convertible Debenture”). In connection with this investment, the Company agreed
        to issue warrants to purchase an aggregate of 3,200,000 shares of the Company’s
        common stock at the exercise price of $1.25 per share exercisable for five
        years
        commencing six months following the issuance thereof and to grant each investor
        further AIR (see Note 6).
 
 In
        February 2006, the Company issued an aggregate of 4,770,617 warrants to certain
        debenture holders as an incentive to exercise their existing warrants.  All
        warrants have a five year term, an exercise price of $3.00 per share and
        were
        valued at $1.74.  The warrants, which were valued using the Black-Scholes
        pricing model with expected volatility of 0.9380 percent and risk free interest
        of 4.49 percent, resulted in charges to the interest expense of
        $8,307,606.
 
 In
        March
        2006, the Company issued 75,000 shares of common stock to various consultants
        for services rendered in the amount of $189,500. The shares were valued at
        $2.31
        to $2.96 per share based on the quoted market price of the Company’s common
        stock on the dates of the issuances.
 
 In
        March
        2006, the Company issued 2,390 shares of common stock to a vendor for the
        satisfaction of $1,959 of accounts payable. The shares were valued at $3.20
        per
        share based on the quoted market price of the Company’s common stock on the
        dates of the issuances. This conversion resulted in a charge of $5,689 to
        loss
        on extinguishment of debt that represents the difference between quoted market
        price of the Company’s common stock and accounts payable balance.
 
 In
        March
        2006, the Company issued an aggregate of 800,000 warrants to certain debenture
        holders as an incentive to exercise their existing warrants.  All warrants
        have a five year term, an exercise price of $3.00 per share and were valued
        at
        $1.62.  The warrants, which were valued using the Black-Scholes pricing
        model with expected volatility of .9377percent and risk free interest of
        4.49
        percent, resulted in charges to the interest expense of $1,293,953.
 
 In
        April
        2006, the Company issued 38,400 shares of common stock to various consultants
        for services rendered in the amount of $102,528. The shares were valued at
        $2.67
        per share based on the quoted market price of the Company’s common stock on the
        date of the issue.
 
 In
        April
        2006, the Company issued 204,465 shares of common stock to an investor in
        a
        private placement for the proceeds of $255,581. The amount was included in
        accounts payable and accrued liabilities prior to the finalization of the
        terms
        of the private placement.
 
 In
        April
        2006, the Company issued an aggregate of 70,000 warrants to employees of
        the
        Company. All warrants have a five year term, an exercise price of $2.66 per
        share and were valued at $1.96. The warrants, which were valued using the
        Black-Scholes pricing model with expected volatility of 92.89 percent and
        risk
        free interest of 4.77 percent, resulted in charges to operations of
        $137,200.
 
 During
        the nine months ended April 30, 2006, the Company issued an aggregate of
        2,491,846 shares of common stock as monthly principal and interest payments
        totaling $1,600,106 of convertible debentures (see Note 6).
 
  24
  **GENEREX
        BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **12.**
              **Stockholders’
                  Equity (Continued)**
 During
        the nine months ended April 30, 2006, the Company issued an aggregate of
        17,064,582 shares of common stock resulting from the conversion of $11,767,829
        of principal and accrued interest of convertible debentures (see Note
        6).
 
 During
        the nine months ended April 30, 2006, the Company received aggregate cash
        proceeds of $3,174,554 from exercises of stock options. The Company issued
        2,317,672 shares of common stock as a result of these transactions.
 
 During
        the nine months ended April 30, 2006, the Company received aggregate cash
        proceeds of $32,819,118 from exercises of stock warrants. The Company issued
        32,750,438 shares of common stock as a result of these
        transactions.
 
 
 The
        issuances of common stock as described above are summarized as
        follow:
 
 Additional
              
              TotalCommon
                  Stock
              
              Paid-In
              
              Stockholders’Shares
              
              Amount
              
              Capital
              
              EquityConvertible
                  Debenture Conversions
              
              
              17,064,582
              
              $
              17,065
              
              $
              25,318,446
              
              $
              25,335,511Convertible
                  Debenture MonthlyRepayments
              
              
              2,491,846
              
              
              2,492
              
              
              2,747,929
              
              
              2,750,421Warrants
                  and Stock Options Exercisedfor
                  Cash
              
              
              35,059,931
              
              
              35,060
              
              
              35,958,613
              
              
              35,993,673Cashless
                  Exercise of Warrants
              
              
              8,179
              
              
              8
              
              
              (8
              )
              
              --Issuance
                  for Services and AccountsPayable
              
              
              1,544,303
              
              
              1,544
              
              
              1,601,848
              
              
              1,603,392Issuance
                  as Compensation
              
              
              140,115
              
              
              140
              
              
              125,964
              
              
              126,104Total
              
              
              56,308,956
              
              $
              $56,309
              
              $
              $65,752,792
              
              $
              $65,809,101
 
 **13.**
              **Subsequent
                  Events**
 During
        May 2006, the Company refinanced certain long-term debt with a balance at
        April
        30, 2006 in the amount of $658,557. The significant terms of refinancing
        include
        interest at 7.6 percent per annum and maturing May 2010.
 
 In
        June
        2006, the Company issued an aggregate of 3,414,636 shares and 2,560,980 warrants
        to purchase its common stock at $2.45 per share to four investors for aggregate
        gross proceeds of 7 million.
 
 In
        June
        2006, the Company issued an aggregate of 3,273,144 warrants to certain debenture
        holders as an incentive to exercise their existing warrants. All warrants
        have a
        five year term, an exercise price of $2.35 per share and were valued at $1.39.
        The warrants, which were valued using the Black-Scholes pricing model with
        expected volatility of 0.9302 percent and risk free interest of 4.98 percent,
        resulted in charges to the interest expense of $4,549,670.


25


**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.





**Forward-Looking
      Statements**





We
      have
      made statements in this *Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations* and
      elsewhere in this Quarterly Report on Form 10-Q of Generex Biotechnology
      Corporation for the fiscal quarter ended April 30, 2006 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," "plans," "intends," "believes," "will,"
      "estimates," "forecasts," "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:





Ÿ
            our
                expectations concerning product candidates for our
                technologies;Ÿ
            our
                expectations concerning existing or potential development and license
                agreements for third-party collaborations and joint
                ventures;Ÿ
            our
                expectations of when different phases of clinical activity may commence
                or
                be completed;Ÿ
            our
                expectations of when regulatory submissions may be filed or when
                regulatory approvals may be received; andŸ
            our
                expectations in respect of the timing and results of commercialization
                activities.





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:





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





Additional
      factors that could affect future results are set forth in *Part
      I, Item 1. Business - Certain Additional Risk Factors* of our
      Annual Report on Form 10-K for the year ended July 31, 2005 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.




26





**Corporate
      History**





We
      were
      incorporated in Delaware in September 1997 for the purpose of acquiring Generex
      Pharmaceuticals, Inc., a Canadian corporation formed in November 1995 to engage
      in pharmaceutical and biotechnological research and other activities. Our
      acquisition of Generex Pharmaceuticals was completed in October 1997 in a
      transaction in which the holders of all outstanding shares of Generex
      Pharmaceuticals exchanged their shares for shares of our common stock.





In
      January 1998, we participated in a "reverse acquisition" with Green Mt. P.
      S.,
      Inc., a previously inactive Idaho corporation formed in 1983. As a result of
      this transaction, our shareholders (the former shareholders of Generex
      Pharmaceuticals) acquired a majority (approximately 90%) of the outstanding
      capital stock of Green Mt., we became a wholly-owned subsidiary of Green Mt.,
      Green Mt. changed its corporate name to Generex Biotechnology Corporation
      ("Generex Idaho"), and we changed our corporate name to GB Delaware, Inc.
      Because the reverse acquisition resulted in our shareholders becoming the
      majority holders of Generex Idaho, we were treated as the acquiring corporation
      in the transaction for accounting purposes. Thus, our historical financial
      statements, which essentially represented the historical financial statements
      of
      Generex Pharmaceuticals, were deemed to be the historical financial statements
      of Generex Idaho.





In
      April
      1999, we completed a reorganization in which we merged with Generex Idaho.
      In
      this transaction, all outstanding shares of Generex Idaho were converted into
      our shares, Generex Idaho ceased to exist as a separate entity, and we changed
      our corporate name back to "Generex Biotechnology Corporation." This
      reorganization did not result in any material change in our historical financial
      statements or current financial reporting.





In
      August
      2003, we acquired Antigen Express, Inc. Antigen is engaged in the research
      and
      development of technologies and immunomedicines for the treatment of malignant,
      infectious, autoimmune and allergic diseases.





**Business
      History**





We
      are
      engaged primarily in the research and development of drug delivery 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.





Our
      first
      product is an insulin formulation that is administered as a fine spray into
      the
      oral cavity using a hand-held aerosol spray applicator. Between January 1999
      and
      September 2000, we conducted limited clinical trials on this product in the
      United States, Canada and Europe. In September 2000, we entered into an
      agreement (the "Development and License Agreement") to develop this product
      with
      Eli Lilly and Company ("Lilly"). To date, over 1,100 patients with diabetes
      have
      been dosed with our oral insulin product at approved facilities in seven
      countries. We conducted several clinical trials with insulin supplied by Lilly
      under our Development and License Agreement. Lilly did not, however, authorize
      or conduct any clinical trials or provide financial support for those trials.
      We
      did receive a $1,000,000 upfront payment from Lilly. On May 23, 2003, we
      announced that we had agreed with Lilly to end the Development and License
      Agreement for the development and commercialization of buccal delivery of
      insulin. On November 5, 2003, we entered into a termination agreement with
      Lilly
      terminating the Development and License Agreement, effective as of June 2,
      2003.
      In accordance with the termination agreement, we retained all of the
      intellectual property and commercialization rights with respect to buccal spray
      drug delivery technology, and we have the continuing right to develop and
      commercialize the product. We also entered into a Bulk Supply Agreement (the
      "Bulk Supply Agreement") for the sale of human insulin crystals by Lilly to
      us
      over a three-year period.





In
      January 2001, we established a joint venture with Elan International Services,
      Ltd. ("EIS"), a wholly-owned subsidiary of Elan Corporation, plc (EIS and Elan
      Corporation, plc being collectively referred to as "Elan"), to pursue the
      application of certain of our and Elan's drug delivery technologies, including
      our platform technology for the buccal delivery of pharmaceutical products,
      for
      the treatment of prostate cancer, endometriosis and/or the suppression of
      testosterone and estrogen. In January 2002, we and Elan agreed to expand the
      joint venture to encompass the buccal delivery of morphine for the treatment
      of
      pain and agreed to pursue buccal morphine as the initial pharmaceutical product
      for development under Generex (Bermuda) Ltd., the entity through which the
      joint
      venture was being conducted. This expansion of the joint venture occurred after
      we successfully completed a proof of concept clinical study of morphine delivery
      using our proprietary buccal delivery technology.




27





On
      December 27, 2004, we entered into an agreement (the "Termination Agreement")
      with Elan, whereby we and Elan agreed to terminate the joint venture through
      Generex (Bermuda) Ltd. Under the Termination Agreement, all rights granted
      by
      each party to the other terminated, and each party retained its intellectual
      property rights. We obtained full ownership of Generex (Bermuda).





In
      August
      2003, we acquired Antigen Express, Inc. Antigen is engaged in the research
      and
      development of technologies and immunomedicines for the treatment of malignant,
      infectious, autoimmune and allergic diseases.





Our
      immunomedicine products work by stimulating the immune system to either attack
      offending agents (i.e., cancer cells, bacteria, and viruses) or to stop
      attacking benign elements (i.e., self proteins and allergens). Our
      immunomedicine products are based on two platform technologies that were
      discovered by a former executive officer of Antigen, the Ii-Key hybrid peptides
      and Ii-Suppression. Phase 1 clinical testing in humans has commenced at The
      Walter Reed Army Medical Center in respect of a vaccine designed to stimulate
      an
      immune response against the tumor-causing gene HER-2/ *neu* ,
      which
      occurs in a significant percentage of patients with breast cancer as well as
      other cancers. The other immunomedicine products, including a vaccine for avian
      influenza, are in the pre-clinical stage of development, and trials in human
      patients are not expected for at least six months. Development efforts are
      underway in melanoma, breast cancer, prostate cancer, HIV, the avian influenza
      virus, smallpox, SARS and Type I diabetes mellitus. We are establishing
      collaborations with clinical investigators at academic centers to advance the
      technology, with the ultimate goal of conducting human clinical testing.





With
      the
      commencement of commercial sales of our oral insulin product, Generex Oral-lynTM,
      in Ecuador in the fourth quarter of our fiscal 2006, we expect to receive
      revenues from product sales in the current calendar year. We do not expect
      this
      revenue to be sufficient for all of our cash needs during the year. In the
      past
      we were able to fund Antigen expenses with some revenue from research grants
      for
      Antigen's immunomedicine products. During the fiscal quarter ended April 30,
      2006, we received a total of $43,750 in such research grants, and we have
      received a total of $131,250 in such grants in fiscal 2006. We do not expect
      to
      receive such grants on a going forward basis. We expect to satisfy the majority
      of our cash needs during the current year from capital raised through debt
      and
      equity financings.





**Disclosure
      Regarding Research and Development Projects**





Our
      major
      research and development projects (in addition to the Antigen Express projects
      referenced above) are the refinement of our platform buccal delivery technology,
      our buccal insulin project (Generex Oral-lynTM),our buccal morphine product, our
      buccal glucose project (Glucose RapidSprayTM, an over-the-counter confectionary),
      and our buccal metoformin project (metformin gum).





Our
      insulin product is in clinical trials. During the last fiscal year, we did
      not
      expend resources to further our buccal morphine product. In Canada, we are
      in
      the process of finalizing work for a New Drug Submission (NDS) to the Biologics
      and Genetic Therapeutics Directorate of Health Canada for approval for the
      marketing and sale of Generex Oral-lynTM in Canada. We expect that the NDS will
      be a blueprint for similar applications to the United States Food and Drug
      Administration (FDA) and the European Agency for the Evaluation of Medicinal
      Products (EMEA) however we cannot predict at this time when such applications
      will be made, what additional work will be required by us before such
      applications are granted, how long such work will take, or how much funding
      will
      be required to complete such work.





Our
      insulin product, Generex Oral-lynTM, was approved for commercial sale by drug
      regulatory authorities in Ecuador in early May 2005 for the treatment of
      patients with either Type-1 or Type-2 diabetes mellitus.. It is our intention
      that our South American joint venture partner, PharmaBrand S.A., will handle
      the
      commercial production and sale of Generex Oral-lynTM in Ecuador. Commercial sales
      of Generex Oral-lynTM began in Ecuador in the forth quarter of our current fiscal
      year.




28





Because
      of various uncertainties, we cannot predict the timing of completion and
      commercialization of our buccal insulin product or the other products presently
      under development. These uncertainties include the success of current studies,
      our ability to obtain the required financing, the time required to obtain
      regulatory approval even if our research and development efforts are completed
      and successful, and the availability of and our access to production facilities
      and distribution channels. For the same reasons, we cannot predict when any
      products may begin to produce net cash inflows.





Most
      of
      our buccal delivery research and development activities to date have involved
      developing our platform technology for use with insulin and morphine.
      Insubstantial amounts have been expended on projects with other drugs, and
      those
      projects involved a substantial amount of platform technology development.
      Therefore, in the past, 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 is expected to benefit all of
      our
      potential products. During the nine months ended April 30, 2006, approximately
      80% of our $3,628,732 in research expenses was attributable to insulin and
      platform technology development, and did not spend any money on morphine and
      fentanyl projects. In the comparable period ended April 30, 2005, approximately
      85% of our $6,586,764 of research and development was expended for insulin
      and
      platform technology, and approximately 1% for morphine and fentanyl.





Approximately
      20% or $736,972 of our research and development expenses for the nine months
      ended April 30, 2006 were related to Antigen's immunomedicine products compared
      to approximately 14% or $936,223 for the same period last year. Because these
      products are in a very early, pre-clinical stage of development (other than
      the
      breast cancer vaccine which is in Phase 1 trials), all of the expenses were
      accounted for as basic research and no distinctions were made as to particular
      products. Because of the early stage of development, we cannot predict the
      timing of completion of any products arising from the Antigen Express is
      technology, or when products from this technology might begin producing
      revenues.





Developments
      in Fiscal Quarter Ended April 30, 2006





*Amendments
      of Outstanding Warrants*





On
      February 27, 2006, we and the four accredited investors under the November
      10,
      2004 Securities Purchase Agreement (the “Securities Purchase Agreement”) amended
      the terms of certain outstanding warrants to purchase common stock issued in
      connection with the Securities Purchase Agreement, as amended, (the “February
      Exercised Warrants”) to accelerate the exercise date to February 27, 2006 in
      consideration of the full and immediate exercise thereof. The February Exercised
      Warrants consisted of warrants issued: (i) to Omicron Master Trust (“Omicron”)
      on July 22, 2005 for 243,902 shares of our common stock at $0.82 per share
      and
      then currently exercisable; (ii) to Cranshire Capital, L.P. (“Cranshire”) on
      October 20, 2005 for 300,000 shares of our common stock at $1.20 per share
      (originally exercisable on April 20, 2006); (iii) to Iroquois Capital, L.P.
      (“Iroquois”) on October 20, 2005 for 609,756 shares of our common stock at $1.20
      per share (originally exercisable on April 20, 2006); (iv) to Cranshire on
      October 27, 2005 for 309,756 shares of our common stock at $1.25 per share
      (originally exercisable on April 27, 2006); (v) to Omicron and Smithfield
      Fiduciary LLC (“Smithfield”) on October 27, 2006 for 609,756 shares each of our
      common stock at $1.25 per share (originally exercisable on April 27, 2006);
      (vi)
      to each of the investors on October 27, 2005 for 304,878 shares each of our
      common stock at $1.25 per share (originally exercisable on April 27, 2006);
      (vii) to Cranshire on December 9, 2005 for 1,829,268 shares of our common stock
      at $1.25 per share (originally exercisable on June 9, 2006); and (viii) to
      each
      of the investors on January 20, 2006 for 952,381 shares each of our common
      stock
      at $1.05 per share (originally exercisable on July 20, 2006).





The
      investors agreed to immediately exercise 100% of the February Exercised Warrants
      (for aggregate gross proceeds to us of $11,014,267) in exchange for (a) the
      acceleration of the exercise periods and (b) the issuance of additional warrants
      equal to 50% of the February Exercised Warrants (an aggregate of 4,770,617
      shares) (the “February Inducement Warrants”). The February Inducement Warrants
      have an exercise price of $3.00 per share and will be exercisable for five
      years
      commencing on August 27, 2006.




29





*Exercise
      of A4 Additional AIRs*





On
      February 28, 2006, we amended the terms of the Additional Investment Rights
      (the
“A4 Additional AIRs”) previously granted to the investors in connection with
      Amendment No. 4 to the Securities Purchase Agreement entered into on January
      19,
      2006 (“Amendment No. 4”) to accelerate the initial exercise date thereof to
      February 28, 2006 in consideration of the full and immediate exercise thereof
      by
      the investors.





In
      connection with the exercise of each A4 Additional AIR, each investor purchased
      a $1,000,000 principal amount debenture with a conversion price of $1.25
      (collectively, the “A4 Additional AIR Debentures”) and warrants (collectively,
      the “A4 Additional AIR Warrants”) entitling the investor to purchase a number of
      shares of our common stock equal to 100% of the shares of common stock issuable
      upon the conversion in full of the A4 AIR Debenture at a conversion price of
      $1.25 (subject to adjustment as set forth therein) (without regard to any
      restrictions on conversion therein contained) at an exercise price of $1.25.
      Accordingly, we issued to the investors A4 Additional AIR Debentures in the
      aggregate amount of $4,000,000 and A4 Additional AIR Warrants to purchase an
      aggregate of 3,200,000 shares of our common stock, exercisable for five years
      commencing six months following the issuance thereof. We received proceeds
      of
      approximately $4,000,000 in connection with the investors’ exercise of their A4
      Additional AIRs.





The
      A4
      Additional AIR Debentures have a term of fifteen months and amortize over
      thirteen months in thirteen equal monthly installments beginning on the first
      day of the third month following their issuance. Interest on the principal
      amount outstanding accrues at a rate of 6% per annum. We may pay principal
      and
      accrued interest in cash or, at our option, in shares of our common stock.
      If
      the we elect to pay principal and interest in shares of our common stock, the
      value of each share of common stock will be equal to the lesser of (i) $1.25
      and
      (ii) ninety percent (90%) of the average of the daily volume weighted average
      price for the common stock over the twenty trading day period immediately
      preceding the date of payment. At the option of the holder of each A4 Additional
      AIR Debenture, the principal amount outstanding under each A4 Additional AIR
      Debenture is initially convertible at any time after the closing of Amendment
      No
      4 into shares of our common stock at a conversion price of $1.25.





Upon
      the
      occurrence of an “Event of Default” with respect to the A4 Additional AIR
      Debentures, the full principal amount of each such Debenture, together with
      interest and other amounts owing in respect thereof, may be accelerated at
      the
      holder’s option and payable in cash. The aggregate amount payable upon an Event
      of Default will be equal to the “Mandatory Prepayment Amount,” which shall be
      calculated for the A4 Additional AIR Debentures in the same manner as described
      below with respect to the A2 AIR Debenture under *Financial
      Condition, Liquidity and Resources* *-
      Second AIR Exercise Pursuant to Amendment No.*  *2* .





The
      A4
      Additional AIR Warrants issued to the investors on February 28, 2006 are
      initially exercisable into an aggregate of 3,200,000 shares of our common stock,
      and the initial exercise price of each A4 Additional AIR Warrant is equal to
      $1.25. The conversion price of the A4 Additional AIR Debentures and the exercise
      price of the A4 Additional AIR Warrants are each subject to an anti-dilution
      adjustment upon the issuance by us of securities at a price per share less
      than
      the then conversion price or exercise price, as applicable.





On
      March
      6, 2006, we agreed with the investors to amend the terms of A4 Additional AIR
      Warrants to accelerate the exercise dates thereunder in respect of fifty percent
      (50%) of the shares of our common stock issuable thereunder (an aggregate of
      1,600,000 shares) to March 6, 2006. The A4 Additional AIR Warrants were
      initially exercisable on August 31, 2006. The investors agreed to immediately
      exercise fifty percent (50%) of the A4 Additional AIR Warrants (for aggregate
      gross proceeds to the Company of $2,000,000) in exchange for (a) the
      acceleration of the exercise period (insofar as it applied to fifty percent
      (50%) of the stock issuable thereunder, and (b) the issuance of additional
      warrants equal to 50% of the exercised A4 Additional AIR Warrants (an aggregate
      of 800,000 shares). The new warrants have an exercise price of $3.00 per share
      and will be exercisable for five years from September 6, 2006.




30





Developments
      Subsequent to Fiscal Quarter Ended April 30, 2006




On
      June
      1, 2006, we entered into a Securities Purchase Agreement with four accredited
      investors for the sale of shares of our common stock and warrants in a private
      placement for an aggregate purchase price of $7.0 million. These transactions
      closed on June 2, 2006.




Pursuant
      to the Securities Purchase Agreement, each of Cranshire, Iroquois, Smithfield
      and Rockmore Investment Master Fund Ltd. ("Rockmore") purchased 853,659
      restricted shares of the our common stock (the "Shares") and warrants to
      purchase 640,245 shares of common stock at an exercise price of $2.45 per share
      (the "Related Warrants"). The purchase price for each Unit consisting of one
      share and .75 warrants was $2.05. Consequently, each investor paid an aggregate
      of $1,750,000.95.




Pursuant
      to the Securities Purchase Agreement, we agreed to file a registration statement
      under the Securities Act of 1933, as amended (the "Securities Act"), to register
      the re-sale by the investors of the Shares and the shares of common stock
      issuable upon exercise of the Related Warrants. In the Securities Purchase
      Agreement, we also granted the investors certain participation rights pursuant
      to which, upon any financing at any time within the next twelve months, the
      investors will have the right to purchase up to 100% of such financing.




The
      exercise price of the Related Warrants is subject to certain 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.




On
      June
      1, 2006, we agreed with the investors to amend the terms of outstanding warrants
      to purchase an aggregate of 4,364,190 shares of common stock (the "Outstanding
      Warrants") to accelerate their exercise periods to June 1, 2006. The Outstanding
      Warrants included warrants to purchase an aggregate of 4,364,190 shares of
      our
      common stock with strike prices of $1.25 and $1.60 per share and exercise dates
      of August 28, 2006 and July 23, 2006. These Outstanding Warrants included
      warrants for 292,408 shares exercisable at $1.60 per share and warrants for
      127,880 shares exercisable at $1.25 per share originally issued to Omicron
      which
      had been assigned to Rockmore. Each of the investors agreed to immediately
      exercise the full amount of its Outstanding Warrants. In consideration of the
      investors' exercise of the Outstanding Warrants, we issued to each investor
      additional warrants exercisable for a period of five years entitling the holder
      thereof to purchase a number of shares of common stock equal to 75% of the
      shares of common stock issuable upon the conversion in full (without regard
      to
      any restrictions on conversion therein contained) of the Outstanding Warrants
      (an aggregate of 3,273,144 shares of common stock) at an exercise price of
      $2.35
      per share.




**Results
      of Operations**


**Three
      and Nine Months Ended April 30, 2006 Compared to Three and Nine Months Ended
      April 30, 2005**





Our
      net
      loss for the quarter ended April 30, 2006 was $31,773,494 versus $4,696,670
      in
      the corresponding quarter of the prior fiscal year. The increase in net loss
      in
      this fiscal quarter versus the corresponding quarter of the prior fiscal year
      is
      primarily due to an increase in interest expense and loss on extinguishment
      of
      debt incurred in connection with convertible debentures. Our operating loss
      for
      the quarter increased to $3,890,499 compared to $3,324,521 in the third fiscal
      quarter of 2005. The increase is a result of the higher research and development
      expenses ($1,635,238 versus $1,009,799 last year) despite a moderate decrease
      in
      our general and administrative expenses (to $2,299,011 from
      $2,358,472).





The
      increase in research and development expenses for the fiscal quarter ending
      April 30, 2006 reflects an increased level of research and development
      activities in respect of our buccal delivery technologies including
      pre-commercialization activities of our buccal insulin product in Ecuador.
      Expenses associated with clinical and regulatory consultants also contributed
      to
      higher research and development costs this quarter. The increase in expenses
      was
      slightly offset by a small reduction in research and development activities
      of
      Antigen Express.





The
      small
      decrease in general and administrative expenses for the third fiscal quarter
      of
      2006 is result of the decrease in financial services and audit and accounting
      expenses despite the increase in legal, consulting advertising and travel
      expenses and higher executive compensation.





Our
      interest expense in the third fiscal quarter of 2006 increased to $17,227,595
      compared to interest expense of $1,403,667 in the third fiscal quarter of 2005
      due to interest paid in connection with convertible debentures entered during
      last fiscal year and current quarter and interest expense associated with the
      value of warrants issued to convertible debenture holders as an incentive to
      exercise their existing warrants. Our interest and income from rental operations
      increased to $283,559 in the third fiscal quarter of 2006 compared to $31,518
      in
      the same quarter last year due to the reallocation of certain properties to
      rental operations and larger balances and higher interest earned on short term
      investments. In addition, this fiscal quarter we incurred $10,938,959 in losses
      on extinguishment of debt in connection with monthly amortization payments
      due
      on convertible debentures which amount represents the difference between the
      quoted market price of our stock and a 10% discount to the average of the 20-day
      VWAP that was used to determine the number of shares issued.




31





**Financial
      Condition, Liquidity and Resources**





To
      date
      we have financed our development stage activities primarily through private
      placements of our common stock and securities convertible into our common stock.





During
      the nine months ended April 30, 2006, we engaged in several capital-raising
      transactions with certain of our stockholders as described above and below
      under
      the caption *Developments
      in Fiscal Quarter Ended April 30, 2006* in this *Part
      I -*  *Item 2.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations,* and as
      described in our Quarterly Report on Form 10-Q for the fiscal quarter ended
      January 31, 2006. At April 30, 2006, we had cash and short-term investments
      of
      approximately $42 million, an increase of approximately $41 million from the
      balance as of the end of the prior fiscal year. The increase is attributable
      to
      the proceeds received in connection with warrant and additional investment
      right
      exercises during nine month of our fiscal 2006. At April 30, 2006, we believed
      that our anticipated cash position was sufficient to meet our working capital
      needs for the next 12 months based on the pace of our planned activities. Beyond
      that, we will likely require additional funds to support our working capital
      requirements or for other purposes. From time to time as deemed appropriate
      by
      management, we may seek to raise funds through private or public equity
      financing or from other sources. If we are unable to raise additional capital
      as
      needed, we could be required to "scale back" or otherwise revise our business
      plan. Any significant scale back of operations or modification of our business
      plan due to a lack of funding could be expected to affect our prospects
      materially and adversely.





At
      April
      30, 2006, we had 6% Secured Convertible Debentures (the “Debentures”)
      outstanding in the aggregate principal amount of $1,373,077, which were issued
      in connection with the Securities Purchase Agreement and the amendments thereto.
      At such date, we had issued an aggregate of 19,556,428 shares of common stock
      resulting from the conversion of an aggregate of $13,367,935 of Debenture
      principal and accrued interest issued under the auspices of the Securities
      Purchase Agreement, as amended.





At
      April
      30, 2006, we had 14,896,230 outstanding warrants and 9,149,597 options to
      purchase our common stock.





*November
      2004 Securities Purchase Agreement*





We
      entered into the Securities Purchase Agreement on November 10, 2004 and closed
      the transaction on November 12, 2004. Pursuant to the Securities Purchase
      Agreement, we issued Debentures and related warrants and for an aggregate
      purchase price of $4,000,000, which Debentures have since been fully repaid
      in
      cash or by conversion into shares of our common stock. The warrants issued
      in
      connection with the Securities Purchase Agreement were initially exercisable
      into the same number of shares of the common stock initially issuable upon
      conversion of the Debentures. The initial exercise price of each warrant was
      equal to 110% of the conversion price of the Debentures, or $0.91. The
      conversion price of the Debentures and the exercise price of the warrants were
      each subject to an anti-dilution adjustment upon the issuance by us of
      securities at a price per share less than the then conversion price or exercise
      price, as applicable. The warrants issued in connection with the Securities
      Purchase Agreement were fully exercised in late October 2005 as described below
      under the caption *Exercise
      of Outstanding Warrants Issued Pursuant to Securities Purchase
      Agreement* at a
      reduced exercise price $0.82 per share as a consequence of an anti-dilution
      adjustment.





In
      connection with the Securities Purchase Agreement, we granted an Additional
      Investment Right to holders of the Debentures. Pursuant to the terms of each
      Additional Investment Right, each holder had the right at any time prior to
      January 24, 2006 to purchase on the same terms and conditions as the private
      placement up to the same number of Debentures and warrants purchased by such
      holder at the closing of the private placement.




32





In
      connection with the Securities Purchase Agreement, we also issued to a placement
      agent a warrant exercisable into approximately 145,000 shares of common stock
      at
      the same exercise price as the warrants issued to the holders of the Debentures.





The
      aggregate number of shares of common stock issuable upon conversion or exercise
      of the Debentures and related warrants issuable pursuant to the Securities
      Purchase Agreement exceeded 19.99% of the outstanding shares of our common
      stock
      prior to such issuance. Because the rules and regulations of The NASDAQ Stock
      Market prohibit, under certain circumstances, the issuance, without prior
      stockholder approval, of shares of common stock in excess of 19.99% of an
      issuer's outstanding common stock prior to such issuance, certain insiders
      entered into a voting agreement with the holders of the Debentures whereby
      such
      insiders agreed to vote at the next meeting of our stockholders all shares
      of
      common stock held by them in favor of authorizing the issuance of an amount
      of
      shares of common stock in excess of 19.99% of the outstanding common stock
      prior
      to consummating the private placement. The issuance of such shares was approved
      by our stockholders at the Annual Meeting of Stockholders held on April 5,
      2005.





*AIR
      Exercise Pursuant to Amendment No. 1*





On
      June
      16, 2005, we and each of the four accredited investor parties to the Securities
      Purchase Agreement entered into Amendment No. 1 to the Securities Purchase
      Agreement and the Registration Rights Agreement (“Amendment No. 1”), pursuant to
      which the investors agreed to exercise of 50% of their additional investment
      rights in the aggregate amount of $2,000,000. This transaction closed on June
      17, 2005. In consideration for the investors’ exercise of their additional
      investment rights (the “A1 Air Exercise”), we issued the investors:





Ÿ
            Debentures
                in the aggregate amount of $2,000,000, with a reduced conversion
                price
                ($0.60) (which reduced conversion price did not trigger any anti-dilution
                adjustments to the outstanding Debentures and related warrants) (the
“A1
                AIR Debentures”);





Ÿ
            warrants
                to purchase an aggregate of 2,439,024 shares of our common stock
                at an
                exercise price of $0.82 per share, which were exercisable for five
                years
                commencing six months following the issuance thereof (the “A1 AIR
                Warrants”); and





Ÿ
            further
                additional investment rights (“A1 Additional AIRs”), pursuant to which
                each investor had the right to purchase detachable units consisting
                of (i)
                Debentures in principal amount equal to the principal amount of A1
                AIR
                Debentures issuable to each investor upon the A1 AIR Exercise with
                a
                conversion price of $0.82 (the “A1 Additional AIR Debentures”) and (ii)
                additional warrants entitling the holder thereof to purchase a number
                of
                shares of our common stock equal to 100% of the shares of common
                stock
                issuable upon the conversion in full of the A1 Additional AIR Debentures
                at an $0.82 conversion price (subject to adjustment as set forth
                therein)
                (without regard to any restrictions on conversion therein contained)
                at an
                exercise price of $0.82 (the “A1 Additional AIR
                Warrants”).





The
      A1
      AIR Debentures have since been fully converted into shares of our common stock.
      The A1 AIR Warrants were amended (to abridge the exercise periods) and exercised
      in full in late October 2005 as described below under the caption *Exercise
      of Outstanding AIR Warrants* .
      The A1
      Additional AIRs were amended (to abridge the exercise periods) and exercised
      in
      full in December 2005 as described below under *Omicron’s
      Exercise of Additional AIR* and *Third AIR Exercise Pursuant to Amendment No. 3.*





In
      addition, in connection with the transactions contemplated by Amendment No.
      1,
      we issued to a placement agent (i) 170,732 shares of common stock in lieu of
      a
      cash fee equal to 7% of the gross proceeds received by us and (ii) warrants
      exercisable into approximately 60,000 shares of our common stock at the same
      exercise price as the A1 AIR Warrants.




33





As
      we
      obtained shareholder approval at our April 5, 2005 Annual Meeting of
      Stockholders for the issuance of up to an aggregate of 10,000,000 shares of
      common stock or securities convertible into common stock for a price of not
      less
      than 70% of the market price at the time of issuance and for aggregate
      consideration not to exceed $50,000,000, in excess of the number of shares
      that
      NASDAQ’s Marketplace Rules 4350(i)(1)(c) and (D) permit us to issue without
      prior stockholder approval, no further stockholder approval was necessary in
      connection with the transactions contemplated by
      Amendment No. 1.





*Second
      AIR Exercise Pursuant to Amendment No. 2*





On
      September 8, 2005, we and the investor parties to the Securities Purchase
      Agreement entered into Amendment No. 2 pursuant to which the investors agreed
      to
      exercise the remaining $2,000,000 in principal amount of their original
      additional investment rights acquired pursuant to the Securities Purchase
      Agreement on November 12, 2004 (the “A2 AIR Exercise”). In connection with the
      A2 AIR Exercise, we issued the investors:





Ÿ
            Debentures
                in the aggregate amount of $2,000,000, with a reduced conversion
                price
                ($0.60) (which reduced conversion price did not trigger any anti-dilution
                adjustments to the outstanding Debentures and related warrants) (the
“A2
                AIR Debentures”);





Ÿ
            warrants
                to purchase an aggregate of 2,439,024 shares of our common stock
                at the
                exercise price of $0.82 per share, which were exercisable for five
                years
                commencing six months following the issuance thereof (the “A2 AIR
                Warrants”); and





Ÿ
            additional
                investment rights (the “A2 Additional AIRs”), pursuant to which each
                investor had the right to purchase detachable units consisting of
                (i)
                Debentures in principal amount equal to the principal amount of A2
                AIR
                Debentures issuable to each investor upon the A2 AIR Exercise with
                a
                conversion price of $0.82 (the “A2 Additional AIR Debentures”) and (ii)
                additional warrants entitling the holder thereof to purchase a number
                of
                shares of our common stock equal to 100% of the shares of common
                stock
                issuable upon the conversion in full of the A2 Additional AIR Debentures
                at an $0.82 conversion price (subject to adjustment as set forth
                therein)
                (without regard to any restrictions on conversion therein contained)
                at an
                exercise price of $0.82 (the “A2 Additional AIR
                Warrants”).





The
      A2
      AIR Debentures have since been fully converted into shares of our common stock.
      The A2 AIR Debentures have a term of fifteen months and amortize over thirteen
      months in thirteen equal monthly installments beginning on the first day of
      the
      third month following their issuance. Interest on the principal amount
      outstanding accrues at a rate of 6% per annum. We may pay principal and accrued
      interest in cash or, at our option, in shares of our common stock. If we elect
      to pay principal and interest in shares of our common stock, the value of each
      share of common stock will be equal to the lesser of (i) the conversion price
      ($0.60) and (ii) ninety percent (90%) of the average of the daily volume
      weighted average price for the common stock for the twenty trading day period
      immediately preceding the date of payment. At the option of the holder of each
      A2 AIR Debenture, the principal amount outstanding under each A2 AIR Debenture
      is convertible at any time into shares of our common stock at a conversion
      price
      of $0.60.





Upon
      the
      occurrence of an “Event of Default,” including a default in payment of principal
      or interest (including late fees) which is not cured within three trading days,
      the full principal amount of each A2 AIR Debenture, together with interest
      and
      other amounts owing in respect thereof, to the date of acceleration will become,
      at the holder’s election, due and payable in cash. The aggregate amount payable
      upon an Event of Default shall be equal to the “Mandatory Prepayment Amount.”
The Mandatory Prepayment Amount for any A2 AIR Debentures shall equal the sum
      of
      (i) the greater of: (A) 130% of the principal amount of A2 AIR Debentures to
      be
      prepaid, plus all accrued and unpaid interest thereon, or (B) the principal
      amount of A2 AIR Debentures to be prepaid, plus all other accrued and unpaid
      interest thereof, divided by the conversion price on (x) the date the Mandatory
      Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory
      Prepayment Amount is paid in full, whichever is less, multiplied by the daily
      volume weighted average price of the common stock on (x) the date the Mandatory
      Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory
      Prepayment Amount is paid in full, whichever is greater, and (ii) all other
      amounts, costs, expenses and liquidated damages due in respect of such Second
      AIR Debentures. The interest rate on the A2 AIR Debentures will accrue at the
      rate of 18% per annum, or such lower maximum amount of interest permitted to
      be
      charged under applicable law, beginning five days after the occurrence of any
      Event of Default that results in the acceleration of the A2 AIR Debentures.
      A
      late fee of 18% per annum, or such lower maximum amount of interest permitted
      to
      be charged under applicable law, will accrue on a daily basis on all overdue
      accrued and unpaid interest under the A2 AIR Debentures from the due date to
      the
      date of payment.




34





The
      A2
      AIR Warrants were amended (to abridge the exercise periods) and exercised in
      full in late October 2005 as described below under the caption *Exercise
      of Outstanding AIR Warrants* .
      The A2
      Additional AIRs were amended (to abridge the exercise periods) and exercised
      in
      full in December 2005 as described below under *Omicron’s
      Exercise of Additional AIR* and *Third AIR Exercise Pursuant to Amendment No. 3.*





In
      addition, in connection with the transactions contemplated Amendment No. 2,
      we
      issued to a placement agent (i) 170,732 shares of our common stock in lieu
      of a
      cash fee equal to 7% of the gross proceeds received by us and (ii) warrants
      exercisable into approximately 60,000 shares of our common stock at the same
      exercise price as the Second AIR Warrants.





*Cranshire
      and Omicron Notes and Related Warrants*





We
      entered into a Promissory Note and Agreement with Cranshire on March 28, 2005
      and entered into a Promissory Note and Agreement with Omicron on April 6, 2005
      pursuant to which Cranshire and Omicron loaned us the principal amounts of
      $500,000 and $100,000, respectively (the "Notes"). The outstanding principal
      balances under the Notes and any accrued but unpaid interest thereon was due
      and
      payable on May 15, 2005 to the extent that Cranshire and Omicron had not
      exercised their respective conversion rights under the Notes. On April 28,
      2005,
      as additional consideration for the loans from Cranshire and Omicron, we issued
      Cranshire a warrant to purchase an aggregate of 1,219,512 shares of our common
      stock at a per share price of $0.82 and issued Omicron a warrant to purchase
      an
      aggregate of 243,902 shares of our common stock at a per share price of $0.82.





We
      did
      not pay the outstanding principal balances originally due on May 15, 2005 under
      the Notes. Interest on the outstanding principal balances under the Notes began
      accruing before the maturity date at the rate of 10% per annum. On June 7 and
      July 22, 2005, Cranshire and Omicron agreed to extend the interest payment
      date
      and the maturity date of each of the Notes, with the last extension to September
      20, 2005. In consideration of each such extension, we issued Cranshire a warrant
      to purchase an aggregate of 1,219,512 shares of our common stock at a per share
      price of $0.82 and issued Omicron a warrant to purchase an aggregate of 243,902
      shares of our common stock at a per share price of $0.82





On
      September 20, 2005, we did not pay the outstanding principal balances under
      the
      Notes. On October 19, 2005 Cranshire converted outstanding principal and accrued
      interest on its Note ($528,082 in total) into 644,003 shares of our common
      stock. On October 27, 2005 Omicron converted outstanding principal and accrued
      interest on its Note ($105,644 in total) into 128,834 shares of common stock.





In
      October and November 2005, Cranshire exercised the outstanding warrants
      previously issued to it in connection with its Note, and, on December 9, 2005,
      in consideration thereof, we issued to Cranshire a five-year warrant to purchase
      an aggregate of 1,829,268 shares of our common stock at $1.25 per share. On
      February 28, 2006, Omicron exercised one of its warrants previously issued
      to it
      in connection with its Note pursuant to which it purchased an aggregate of
      243,902 shares of our common stock for $200,000. In consideration of such
      exercise, we issued to Omicron a five-year warrant to purchase an aggregate
      of
      121,951 shares of our common stock at $3 per share. Prior thereto, Omicron
      has
      voluntarily exercised all of its other warrants previously issued to it in
      connection with its Note for no additional consideration.




35





*Exercise
      of Outstanding Warrants Issued Pursuant to Securities Purchase
      Agreement*





On
      October 20, 2005, in consideration for the exercise of certain outstanding
      warrants previously issued to each of Cranshire and Iroquois in connection
      with
      their purchase of our Debentures pursuant to the Securities Purchase Agreement,
      we issued a five-year warrant to purchase 300,000 shares of our common stock
      to
      Cranshire and a five-year warrant to purchase 609,756 shares of our common
      stock
      to Iroquois, in each case with an exercise price of $1.20 per share. We received
      aggregate proceeds of $1,492,000 in connection with Cranshire’s partial exercise
      of its outstanding warrant to purchase 1,219,512 shares of our common stock
      and
      Iroquois’ full exercise of its outstanding warrant to purchase 1,219,512 shares
      of our common stock.





On
      October 27, 2005, in consideration for the exercise of certain outstanding
      warrants previously issued pursuant to the Securities Purchase Agreement, we
      issued to Cranshire, Omicron and Smithfield five-year warrants to purchase
      an
      aggregate of 1,529,268 shares of our common stock at $1.25 per share. We
      received aggregate proceeds of approximately $2,508,000 in connection with
      their
      exercise of outstanding warrants to purchase shares of our common stock.





*Exercise
      of Outstanding AIR Warrants*





On
      October 26, 2005, we and the holders of the A1 AIR Warrants amended the A1
      AIR
      Warrants pursuant to which we agreed to accelerate the initial exercise dates
      thereof (the 181st day following the date of issuance) in consideration of
      the
      full and immediate exercise by each of the investors of its A1 AIR Warrant
      and
      the delivery to us of a Notice of Exercise in respect thereof on or before
      the
      close of business on October 27, 2005. Each of the investors timely delivered
      the aforementioned Notice of Exercise, satisfying the conditions specified
      in
      each of the A1 AIR Warrant amendments. We received aggregate proceeds of
      approximately $2,000,000 in connection with the investors’ exercise of the A1
      AIR Warrants. In consideration of the investors’ exercise of the A1 AIR
      Warrants, we issued each of the investors a five-year warrant to purchase
      304,878 shares of our common stock at $1.25 per share.





*Omicron’s
      Exercise of Additional AIR*





On
      October 27, 2005, we and Omicron amended the A1 Additional AIR granted to
      Omicron to accelerate the initial exercise date (defined as the 181st day
      following the date of issuance) in consideration of the full and immediate
      exercise by Omicron of its A1 Additional AIR and the delivery to us of a Notice
      of Exercise in respect thereof on or before the close of business on October
      27,
      2005. Omicron timely delivered its Notice of Exercise, satisfying the conditions
      specified in the A1 AIR amendment. In connection with Omicron’s exercise of the
      A1 Additional AIR, we received aggregate proceeds of $500,000. Through its
      exercise of its A1 Additional AIR, Omicron purchased (i) a $500,000 principal
      amount A1 Additional AIR Debenture with a conversion price of $0.82 and (ii)
      A1
      Additional AIR Warrants entitling Omicron to purchase a number of shares of
      our
      common stock equal to 100% of the shares of common stock issuable upon the
      conversion in full of the A1 Additional AIR Debenture at a $0.82 conversion
      price (subject to adjustment as set forth therein) (without regard to any
      restrictions on conversion therein contained) at an exercise price of
      $0.82





*Third
      AIR Exercise Pursuant to Amendment No. 3*





On
      December 4, 2005, we and the four accredited investor parties to the Securities
      Purchase Agreement entered into Amendment No. 3 pursuant to which (i) the all
      of
      the investors except Omicron agreed to exercise an aggregate of $1,500,000
      in
      principal amount of the A1 Additional AIRs (Omicron had previously exercised
      its
      A1 Additional AIR as described above), and (ii) all of the investors, including
      Omicron, agreed to exercise an aggregate of $2,000,000 in principal amount
      of
      the A2 Additional AIRs granted to them in connection with Amendment No.
      2.





In
      connection with Amendment No. 3, we and the investors, excluding Omicron, agreed
      to accelerate the initial exercise date of the A1 Additional AIRs (the 181st
      day
      following the date of issuance) in consideration of the full and immediate
      exercise by such investors of their A1 Additional AIRs and the delivery to
      us of
      Notices of Exercise in respect thereof on or before the close of business on
      December 5, 2005. In addition, we and all four of the investors agreed to
      accelerate the initial exercise dates of the A2 Additional AIRs (the 181st
      day
      following the date of issuance) in consideration of the full and immediate
      exercise by the investors of their A2 Additional AIRs and the delivery to us
      of
      Notices of Exercise in respect thereof on or before the close of business on
      December 5, 2005.




36





Each
      investor timely delivered its Notices of Exercise In connection with the
      exercise of each A1 Additional AIR and each A2 Additional AIR on December 5,
      2005, each investor purchased a $500,000 principal amount Debenture with a
      conversion price of $0.82 (the A1 Additional Debentures and the A2 Additional
      Debentures) and a Warrant entitling the investor to purchase a number of shares
      of our common stock equal to 100% of the shares of common stock issuable upon
      the conversion in full of the A1 Additional AIR Debenture and the A2 Additional
      AIR Debenture (together, the “A1/A2 Additional AIR Debentures”) at a $0.82
      conversion price (subject to adjustment as set forth therein) (without regard
      to
      any restrictions on conversion therein contained) at an exercise price of $0.82
      per share (the A1 Additional AIR Warrants and the A2 Additional AIR Warrants
      (together, the “A1/A2 Additional AIR Warrants”)). Accordingly, we issued to the
      investors A1/A2 Additional AIR Debentures in the aggregate principal amount
      of
      $3,500,000 and A1/A2 Additional AIR Warrants to purchase an aggregate of
      4,268,292 shares of our common stock, exercisable for five years commencing
      six
      months following the issuance thereof. We received proceeds of approximately
      $3,500,000 in connection with the investors’ exercise of their A1 Additional
      AIRs and their A2 Additional AIRS.





The
      A1/A2
      Additional AIR Debentures have since been fully converted into shares of our
      common stock. The A1/A2 Additional AIR Debentures had a term of fifteen months
      and amortized over thirteen months in thirteen equal monthly installments
      beginning on the first day of the third month following their issuance. Interest
      on the principal amount outstanding accrued at a rate of 6% per annum. The
      principal and accrued interest could be repaid in cash or, at our option, in
      shares of our common stock. If we elected to pay principal and interest in
      shares of our common stock, the value of each share of common stock would be
      equal to the lesser of (i) $0.82 and (ii) ninety percent (90%) of the average
      of
      the daily volume weighted average price for the common stock over the twenty
      trading day period immediately preceding the date of payment. At the option
      of
      the holder of each A1/A2 Additional AIR Debenture, the principal amount
      outstanding under each A1/A2 Additional AIR Debenture was convertible at any
      time into shares of our common stock at a conversion price of
      $0.82.





In
      addition, in consideration of each investor’s exercise of its A1 Additional AIRs
      and its A2 Additional AIRs, including Omicron’s October 2005 exercise of its A1
      Additional AIR, we granted to each investor an additional investment right
      (the
“A3 Additional AIRs”) pursuant to which each investor had the right to purchase
      detachable units consisting of (a) Debentures in principal amount of $1,000,000
      with a conversion price of $1.25 per share (the “A3 Additional AIR Debentures”)
      and (b) warrants entitling the holder thereof to purchase a number of shares
      of
      our common stock equal to 100% of the shares of common stock issuable upon
      the
      conversion in full of the A3 Additional AIR Debentures at a $1.25 conversion
      price (subject to adjustment as set forth therein) (without regard to any
      restrictions on conversion therein contained) at an exercise price of $1.25
      per
      share.





In
      addition, in connection with the transactions contemplated by Amendment No.
      3
      and Omicron’s October 2005 exercise of its A1 Additional AIR, we paid to a
      placement agent (i) 224,000 shares of our common stock in lieu of a $280,000
      cash fee (7% of the gross proceeds received by us) and (ii) warrants exercisable
      into 105,000 shares of common stock at the same exercise price as the A1/A2
      Additional AIR Warrants. These shares were also registered for
      resale.





The
      A1/A2
      Additional AIR Warrants were amended (to abridge the exercise periods) and
      exercised in full in late December 2005 as described below under the caption *January
      2006 Acceleration and Exercise of AIR Warrants* .
      The A3
      Additional AIRs were amended (to abridge the exercise periods) and exercised
      in
      full in December 2005 as described below under *Fourth
      AIR Exercise Pursuant to Amendment No. 4.*





*Exercise
      of Warrants in December 2005.*





On
      December 9, 2005, in consideration for the exercise of certain outstanding
      warrants previously issued in connection with its Note, we issued to Cranshire
      five-year warrants to purchase an aggregate of 1,829,268 shares of our common
      stock at $1.25 per share. We received aggregate proceeds of approximately
      $3,000,000 in connection with the warrant exercise.




37





*Fourth
      AIR Exercise Pursuant to Amendment No. 4*





In
      connection with Amendment No. 4 entered into on January 19, 2006, the investors
      agreed to exercise an aggregate of $4,000,000 in principal amount of the A3
      Additional AIRs (being the full amount thereof). Pursuant to each such A3
      Additional AIR, each Investor had the right to purchase detachable units
      consisting of (a) an A3 Additional AIR Debenture in principal amount of
      $1,000,000 with a conversion price of $1.25 and (b) an A3 Additional AIR Warrant
      entitling the holder thereof to purchase a number of shares of our common stock
      equal to 100% of the shares of common stock issuable upon the conversion in
      full
      of the A3 additional AIR Debenture at a $1.25 conversion price (subject to
      adjustment as set forth therein) (without regard to any restrictions on
      conversion therein contained) at an exercise price of $1.25 per
      share.





Pursuant
      to Amendment No. 4, we amended the terms of the A3 Additional AIRs to accelerate
      the initial exercise dates thereof to January 19, 2006 and to reduce the
      conversion price from $1.25 to $1.05 in consideration of their full and
      immediate exercise by the investors. We received proceeds of approximately
      $4,000,000 in connection with the investors’ exercise of their A3 Additional
      AIRs.





Accordingly,
      we issued to the investors A3 Additional AIR Debentures in the aggregate amount
      of $4,000,000 and A3 Additional AIR Warrants to purchase an aggregate of
      3,809,524 shares of our common stock, exercisable for five years commencing
      six
      months following the issuance thereof. Under the terms of Amendment No. 4,
      the
      reduction in the conversion price of the A3 Additional AIR Debentures and the
      exercise price of the A3 Additional AIR Warrants did not trigger any
      anti-dilution adjustments to any outstanding securities held by the investors.





With
      the
      exception of the A3 Additional AIR Debenture held by Cranshire, the A3
      Additional AIR Debentures have since been fully converted into shares of our
      common stock. The A3 Additional AIR Debentures have a term of fifteen months
      and
      amortize over thirteen months in thirteen equal monthly installments beginning
      on the first day of the third month following their issuance. Interest on the
      principal amount outstanding accrues at a rate of 6% per annum. We may pay
      principal and accrued interest in cash or, at our option, in shares of our
      common stock. If the we elect to pay principal and interest in shares of our
      common stock, the value of each share of common stock will be equal to the
      lesser of (i) $1.05 and (ii) ninety percent (90%) of the average of the daily
      volume weighted average price for the common stock over the twenty trading
      day
      period immediately preceding the date of payment. At the option of the holder
      of
      each A3 Additional AIR Debenture, the principal amount outstanding under each
      A3
      Additional AIR Debenture is convertible at any time into shares of the our
      common stock at a conversion price of $1.05.





Upon
      the
      occurrence of an “Event of Default” with respect to each A3 Additional AIR
      Debenture, the full principal amount of each such Debenture, together with
      interest and other amounts owing in respect thereof, may be accelerated at
      the
      holder’s option and payable in cash. The aggregate amount payable upon an Event
      of Default will be equal to the “Mandatory Prepayment Amount,” which shall be
      calculated for the A3 Additional AIR Debentures in the same manner as described
      above with respect to the A2 AIR Debentures under *Second
      AIR Exercise Pursuant to Amendment No. 2.*





In
      addition, in consideration of each investor’s exercise of its A3 Additional AIR,
      we granted to each investor a further additional investment right (the “A4
      Additional AIR”) pursuant to which each investor had the right to purchase
      detachable units consisting of (a) a Debenture in principal amount of $1,000,000
      with a conversion price of $1.25 (the “A4 Additional AIR Debenture”) and (b) a
      warrant entitling the holder thereof to purchase a number of shares of our
      common stock equal to 100% of the shares of common stock issuable upon the
      conversion in full of the A4 Additional AIR Debenture at a $1.25 conversion
      price (subject to adjustment as set forth therein) (without regard to any
      restrictions on conversion therein contained) at an exercise price of $1.25
      per
      share (the “A4 Additional AIR Warrants”). The A4 Additional AIRs were amended
      (to abridge the exercise periods) and exercised in full on February 28, 2006
      as
      described below under *Exercise
      of A4 Additional AIRs.*





Under
      the
      terms of Amendment No. 4, we also agreed to register for resale the securities
      issuable upon conversion/exercise of the A4 Additional AIR Debentures and the
      A4
      Additional AIR Warrants, consistent with the investors’ existing registration
      rights under the Registration Rights Agreement. We agreed to register such
      securities on the Registration Statement contemplated by Amendment No. 3. The
      Registration Statement became effective on February 24, 2006.




38





In
      addition, in connection with the transactions contemplated by Amendment No.
      4,
      we issued to a placement agent (i) 266,667 shares of common stock in lieu of
      a
      cash fee equal to 7% of the gross proceeds received by us and (ii) warrants
      exercisable into approximately 120,000 shares of common stock at the same
      exercise price as the AIR Warrants. These shares were registered for resale
      in
      the registration statement which became effective on February 24,
      2006.





*January
      2006 Acceleration and Exercise of AIR Warrants*





On
      January 23, 2006, we agreed with the investors to amend the terms of certain
      outstanding warrants to purchase common stock (the “January Exercised Warrants”)
      to accelerate their exercise dates to January 23, 2006. The January Exercised
      Warrants consisted of warrants for an aggregate of 2,439,024 **** shares
      issued in connection with Amendment No. 2 (initially exercisable on March 8,
      2006) and warrants for an aggregate of 4,878,048 shares issued in connection
      with Amendment No. 3 (initially exercisable beginning June 5, 2006). The
      investors agreed to immediately exercise 100% of these warrants (for aggregate
      gross proceeds to the Company of $6,000,000) in exchange for (a) the
      acceleration of the exercise period , and (b) the issuance of additional
      warrants equal to 50% of the shares issuable upon exercise of the January
      Exercised Warrants (an aggregate of 3,658,536 shares) (the “January Inducement
      Warrants”). The January Inducement Warrants have an exercise price of $1.60 per
      share and will be exercisable for a period of five years commencing six months
      from the date of issuance. The exercise price is subject to an anti-dilution
      adjustment upon the issuance by us of securities at a price per share less
      than
      the then exercise price. If, at any time after the first anniversary of the
      date
      of issuance of the January Inducement Warrants, there is no effective
      registration statement registering for resale the shares of common stock into
      which the warrants are exercisable, each holder may exercise its warrant through
      a cashless exercise. The January Inducement Warrants are included in a
      Registration Statement declared effective February 24, 2006. The number of
      shares to be issued upon a cashless exercise will be equal to the quotient
      resulting from the following calculation: [(the VWAP on the trading day
      immediately preceding the date of such election less the exercise price, as
      adjusted) multiplied by the number of shares issuable upon exercise of the
      warrant by means of a cash exercise] divided by the VWAP on the trading day
      immediately preceding the date of such election. Each holder has agreed that
      it
      will not exercise its warrant if such exercise would cause the holder, together
      with its respective affiliates, to beneficially own more than 4.99% of our
      common stock then outstanding.





*Amendments
      of Outstanding Warrants*





On
      February 27, 2006, we and the investors agreed to amend the terms of certain
      outstanding warrants to purchase common stock issued in connection with the
      Securities Purchase Agreement, as amended, (the “February Exercised Warrants”)
      to accelerate the exercise date to February 27, 2006 in consideration of the
      full and immediate exercise thereof. The February Exercised Warrants consisted
      of warrants issued: (i) to Omicron on July 22, 2005 for 243,902 shares of our
      common stock at $0.82 per share and then currently exercisable; (ii) to
      Cranshire on October 20, 2005 for 300,000 shares of our common stock at $1.20
      per share (originally exercisable on April 20, 2006); (iii) to Iroquois on
      October 20, 2005 for 609,756 shares of our common stock at $1.20 per share
      (originally exercisable on April 20, 2006); (iv) to Cranshire on October 27,
      2005 for 309,756 shares of our common stock at $1.25 per share (originally
      exercisable on April 27, 2006); (v) to Omicron and Smithfield on October 27,
      2006 for 609,756 shares each of our common stock at $1.25 per share (originally
      exercisable on April 27, 2006); (vi) to each of the investors on October 27,
      2005 for 304,878 shares each of our common stock at $1.25 per share (originally
      exercisable on April 27, 2006); (vii) to Cranshire on December 9, 2005 for
      1,829,268 shares of our common stock at $1.25 per share (originally exercisable
      on June 9, 2006); and (viii) to each of the investors on January 20, 2006 for
      952,381 shares each of our common stock at $1.05 per share (originally
      exercisable on July 20, 2006).





The
      investors agreed to immediately exercise 100% of the February Exercised Warrants
      (for aggregate gross proceeds to us of $11,014,267) in exchange for (a) the
      acceleration of the exercise periods and (b) the issuance of additional warrants
      equal to 50% of the February Exercised Warrants (an aggregate of 4,770,617
      shares) (the “February Inducement Warrants”). The February Inducement Warrants
      have an exercise price of $3.00 per share and will be exercisable for five
      years
      commencing on August 27, 2006.




39





*Exercise
      of A4 Additional AIRs*





On
      February 28, 2006, we amended the terms of the A4 Additional AIRs previously
      granted to the investors in connection with Amendment No. 4 to accelerate the
      initial exercise date of the A4 Additional AIRs to February 28, 2006 in
      consideration of the full and immediate exercise thereof by the
      investors.





In
      connection with the exercise of each A4 Additional AIR, each investor purchased
      a $1,000,000 principal amount debenture with a conversion price of $1.25
      (collectively, the “A4 Additional AIR Debentures”) and warrants (collectively,
      the “A4 Additional AIR Warrants”) entitling the investor to purchase a number of
      shares of our common stock equal to 100% of the shares of common stock issuable
      upon the conversion in full of the A4 Additional AIR Debenture at a conversion
      price of $1.25 (subject to adjustment as set forth therein) (without regard
      to
      any restrictions on conversion therein contained) at an exercise price of $1.25.
      Accordingly, we issued to the investors A4 Additional AIR Debentures in the
      aggregate amount of $4,000,000 and A4 Additional AIR Warrants to purchase an
      aggregate of 3,200,000 shares of our common stock, exercisable for five years
      commencing six months following the issuance thereof. We received proceeds
      of
      approximately $4,000,000 in connection with the investors’ exercise of their A4
      Additional AIRs.





The
      A4
      Additional AIR Debentures have a term of fifteen months and amortize over
      thirteen months in thirteen equal monthly installments beginning on the first
      day of the third month following their issuance. Interest on the principal
      amount outstanding accrues at a rate of 6% per annum. We may pay principal
      and
      accrued interest in cash or, at our option, in shares of our common stock.
      If
      the we elect to pay principal and interest in shares of our common stock, the
      value of each share of common stock will be equal to the lesser of (i) $1.25
      and
      (ii) ninety percent (90%) of the average of the daily volume weighted average
      price for the common stock over the twenty trading day period immediately
      preceding the date of payment. At the option of the holder of each A4 Additional
      AIR Debenture, the principal amount outstanding under each such Debenture is
      initially convertible at any time after the closing of Amendment No 4 into
      shares of our common stock at a conversion price of $1.25.





Upon
      the
      occurrence of an “Event of Default” with respect to each A4 Additional AIR
      Debenture, the full principal amount of each such Debenture, together with
      interest and other amounts owing in respect thereof, may be accelerated at
      the
      holder’s option and payable in cash. The aggregate amount payable upon an Event
      of Default will be equal to the “Mandatory Prepayment Amount,” which shall be
      calculated for the A4 Additional AIR Debentures in the same manner as described
      above with respect to the A2 AIR Debentures under *Second
      AIR Exercise Pursuant to Amendment No. 2.*





The
      A4
      Additional AIR Warrants issued to the investors on February 28, 2006 are
      initially exercisable into an aggregate of 3,200,000 shares of our common stock,
      and the initial exercise price of each A4 Additional AIR Warrant is equal to
      $1.25. The conversion price of the A4 Additional AIR Debentures and the exercise
      price of the A4 Additional AIR Warrants are each subject to an anti-dilution
      adjustment upon the issuance by us of securities at a price per share less
      than
      the then conversion price or exercise price, as applicable.





On
      March
      6, 2006, we agreed with the investors to amend the terms of A4 Additional AIR
      Warrants to accelerate the exercise dates thereunder in respect of fifty percent
      (50%) of the shares of our common stock issuable thereunder (an aggregate of
      1,600,000 shares) to March 6, 2006. The A4 Additional AIR Warrants were
      initially exercisable on August 31, 2006. The investors agreed to immediately
      exercise fifty percent (50%) of the A4 Additional AIR Warrants (for aggregate
      gross proceeds to the Company of $2,000,000) in exchange for (a) the
      acceleration of the exercise period (insofar as it applied to fifty percent
      (50%) of the stock issuable thereunder, and (b) the issuance of additional
      warrants equal to 50% of the exercised A4 Additional AIR Warrants (an aggregate
      of 800,000 shares). The new warrants have an exercise price of $3.00 per share
      and will be exercisable for five years from September 6, 2006.




40





*Assistance
      Agreement with Eckert Seamans*





On
      March
      30, 2005, we entered into an Assistance Agreement with Eckert Seamans, pursuant
      to which Eckert Seamans advanced us funds in the amount of $325,179 for the
      sole
      purpose of making the interest payment and the monthly redemption payment due
      on
      March 31, 2005 and April 1, 2005, respectively, under the Debentures. Under
      the
      terms of the Assistance Agreement, we agreed to repay such advance without
      interest in three equal installments due on October 1, 2005, November 1, 2005
      and December 1, 2005. Because we did not make the first installment payment
      on
      October 1, 2005 as of that date, all amounts owed to Eckert Seamans became
      payable on demand, and interest on such unpaid amounts began accruing at the
      rate of 8% per annum. On March 28, 2006, we paid the outstanding balance
      ($337,937) due under the Assistance Agreement in full.





In
      the
      past, we have funded most of our development and other costs with equity
      financing. While we have been able to raise equity capital as required,
      unforeseen problems with our clinical program or materially negative
      developments in general economic conditions could interfere with our ability
      to
      raise additional equity capital as needed, or materially adversely affect the
      terms upon which such capital is available.





*Issuance
      of Other Warrants*





On
      April
      17, 2006, our Board of Directors ratified the issuance to Zapfe Holdings Inc.
      of
      an aggregate of 204,465 shares of common stock and a warrant to purchase 102,232
      shares of our common stock at an exercise price of $1.25 per share. We issued
      the stock and warrant in consideration of an investment of CAD$300,000. The
      warrant is exercisable until January 13, 2011. The holder has agreed that it
      will not exercise this warrant if such exercise would cause the holder, together
      with its respective affiliates, to beneficially own more than 9.99% of our
      common stock then outstanding. The holder may exercise the warrant by tendering
      cash or through a cashless exercise after the first year anniversary or prior
      to
      the first year anniversary if there is no effective registration statement
      registering for resale the shares of common stock into which the warrants are
      exercisable. The number of shares to be issued upon cashless exercise of the
      warrants is determined as follows: the number of shares with respect to which
      the warrant is being exercised multiplied by [(the average of the closing prices
      for the five trading days immediately prior to (but not including) the exercise
      date minus the exercise price) divided by the average of the closing prices
      for
      the five trading days immediately prior to (but not including) the exercise
      date]. The shares of common stock and the shares of common stock issuable upon
      exercise of the warrant were included on our registration statement filed on
      February 1, 2006 and declared effective by the SEC on February 27, 2006.





On
      April
      17, 2006, our Board of Directors approved the issuance to one of our directors,
      Dr. Gerald Bernstein, of a five-year warrant to purchase 50,000 shares of our
      common stock pursuant to the terms of Dr. Bernstein’s employment agreement and
      granted a bonus to an employee of our subsidiary Antigen Express, Inc. in the
      form of a five-year warrant to purchase up to an aggregate of 20,000 shares
      of
      our common stock. Each such warrant has an exercise price of $2.66 per share,
      which represented the average of the closing prices of our common stock for
      the
      five trading days ended April 17, 2006.




Pursuant
      to the Securities Purchase Agreement dated as of June 1, 2006, each of
      Cranshire, Iroquois, Smithfield and Rockmore purchased 853,659 restricted shares
      of the our common stock and warrants to purchase 640,245 shares of common stock
      at an exercise price of $2.45 per share. The purchase price for each Unit
      consisting of one share and .75 warrants was $2.05. Consequently, each investor
      paid an aggregate of $1,750,000.95 ($7.0 million in total). We also granted
      the
      investors certain participation rights pursuant to which, upon any financing
      at
      any time within the next twelve months, the investors will have the right to
      purchase up to 100% of such financing. The exercise price of the Related
      Warrants is subject to certain 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. This
      transaction closed on June 2, 2006.




On
      June
      1, 2006, we agreed with the investors to amend the terms of outstanding warrants
      to purchase an aggregate of 4,364,190 shares of common stock (the "Outstanding
      Warrants") to accelerate their exercise periods to June 1, 2006. The Outstanding
      Warrants included warrants to purchase an aggregate of 4,364,190 shares of
      our
      common stock with strike prices of $1.25 and $1.60 per share and exercise dates
      of August 28, 2006 and July 23, 2006. These Outstanding Warrants included
      warrants for 292,408 shares exercisable at $1.60 per share and warrants for
      127,880 shares exercisable at $1.25 per share originally issued to Omicron
      which
      had been assigned to Rockmore. Each of the investors agreed to immediately
      exercise the full amount of its Outstanding Warrants. On June 2, 2006, in
      consideration of the investors' exercise of the Outstanding Warrants, we issued
      to each investor additional warrants exercisable for a period of five years
      entitling the holder thereof to purchase a number of shares of common stock
      equal to 75% of the shares of common stock issuable upon the conversion in
      full
      (without regard to any restrictions on conversion therein contained) of the
      Outstanding Warrants (an aggregate of 3,273,144 shares of common stock) at
      an
      exercise price of $2.35 per share.




41




**Going
      Concern Uncertainty**





In
      their
      audit opinion issued in connection with our consolidated balance sheet as of
      July 31, 2005 and our consolidated statements of operation, stockholders’ equity
      and cash flows for the year then ended and for the period from November 2,
      1995
      (date of inception) to July 31, 2005, our auditors expressed substantial doubt
      about our ability to continue as a going concern given our recurring net losses,
      negative cash flows from operations and working capital deficiency.





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. We have experienced negative
      cash flows from operations since inception and had an accumulated deficit at
      April 30, 2006 of approximately $175,705,417. We have funded our activities
      to
      date almost exclusively from debt and equity financings.





We
      are in
      the development stage and have realized minimal revenues to date. 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. Management’s plans in order to meet our operating cash
      flow requirements include financing activities such as private placements of
      our
      common stock, preferred stock offerings, debt and convertible debt instruments.
      Management is also actively pursuing industry collaboration activities,
      including product licensing and specific project financing.





While
      we
      believe that we will be successful in obtaining the necessary financing to
      fund
      our operations, there are no assurances that such additional funding will be
      achieved and that we will succeed in our 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 we be unable to continue in existence.





**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:





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.




42





Estimating
      accrued liabilities, specifically litigation accruals .
      Management's current estimated range of liabilities related to pending
      litigation is based on management's best estimate of future costs. While the
      final resolution of the litigation could result in amounts different than
      current accruals, and therefore have an impact on our consolidated financial
      results in a future reporting period, management believes the ultimate outcome
      will not have a significant effect on our consolidated results of operations,
      financial position or cash flows.





**Off-Balance
      Sheet Arrangements**





We
      have
      no off-balance sheet arrangements that have or are reasonably likely to have
      a
      current or future effect on the Company’s financial condition, changes in
      financial condition, revenue or expenses, results of operations, liquidity
      capital expenditures or capital resources that is material to investors, and
      the
      Company does not have any non-consolidated special purpose
      entities.





**Contractual
      Obligations**





**Payments
                Due by Period****Contractual
                Obligations**
            **Total**
            **Less
                than 1**
              **year**
            **1-3
                years**
            **3-5
                years**
            **More
                than**
              **5
                years**Long-Term
                Debt Obligations
            4,729,336
            3,307,455
            1,421,881
            0
            0Capital
                Lease Obligations
            0
            0
            0
            0
            0Operating
                Lease Obligations
            52,362
            32,092
            16,903
            3,367
            0Purchase
                Obligations
            0
            0
            0
            0
            0Other
                Long-Term Liabilities Reflected on the
              Registrant's
                Balance Sheet under GAAP
            0
            0
            0
            0
            0Total
            $4,781,698
            $3,339,547
            $1,438,784
            $3,367
            $0





**Related
      Party Transactions**





Prior
      to
      January 1, 1999, a portion of our general and administrative expenses resulted
      from transactions with affiliated persons, and a number of capital transactions
      also involved affiliated persons. Although these transactions were not the
      result of "arms-length" negotiations, we do not believe that this fact had
      a
      material impact on our results of operations or financial position. Prior to
      December 31, 1998, we classified certain payments to executive officers for
      compensation and expense reimbursements as "Research and Development - related
      party" and "General and Administrative - related party" because the executive
      officers received such payments through personal services corporations rather
      than directly. After December 31, 1998, these payments have been and will
      continue to be accounted for as though the payments were made directly to the
      officers, and not as a related party transaction. With the exception of our
      arrangement with our management company described below, we do not foresee
      a
      need for, and therefore do not anticipate, any related party transactions in
      the
      current fiscal year.





We
      utilize a management company to manage all of our real properties. The property
      management company is owned by Anna Gluskin, our Chairman, Chief Executive
      Officer and President, Rose Perri, our Chief Operating Officer, Chief Financial
      Officer, Treasurer and Secretary, and the estate of Mark Perri, our former
      Chairman of the Board. In the fiscal quarters ended April 30, 2006 and 2005,
      we
      paid the management company approximately $11,864 and $11,000, respectively,
      in
      management fees.





At
      April
      30, 2006, EBI, Inc., a company controlled by Ms. Rose Perri, was indebted to
      the
      Company in the amount of $415,828 for obligations incurred in 1997 and 1998.
      The
      U.S. dollar amount of this obligation has been shown on our balance sheets
      as
“Due From Related Party” and the circumstances of the incurrence of this
      obligation have been reported in our forms 10-K/A and Proxy Statements including
      those for fiscal year 2005 and our most recent annual meeting of stockholders.
      On April 30, 2006, the Company, Ms. Perri and EBI agreed to satisfy the amounts
      due from EBI by an offsetting reduction in the amount of compensation owed
      by
      the Company to Ms. Perri.




43





**New
      Accounting Pronouncements**





In
      December 2004, the FASB issued Statement of Financial Accounting Standards
      No.
      123(R), "Share-Based Payment" ("SFAS 123(R)"), which requires all companies
      to
      measure compensation cost for all share-based payments (including employee
      stock
      options) at fair value and to recognize cost over the vesting period. In March
      2005, the SEC released SEC Staff Accounting Bulletin No. 107, "Share-Based
      Payment" ("SAB 107"). SAB 107 provides the SEC staff position regarding the
      application of SFAS 123(R), including interpretive guidance related to the
      interaction between SFAS 123(R) and certain SEC rules and regulations, and
      provides the staff's views regarding the valuation of share-based payment
      arrangements for public companies. SAB 107 highlights the importance of
      disclosures made related to the accounting for share-based payment transactions.
      In April 2005, the SEC announced that companies may implement SFAS 123(R) at
      the
      beginning of their next fiscal year beginning after June 15, 2005, or December
      15, 2005 for small business issuers. The Company implemented the provisions
      of
      SFAS 123(R) and SAB 107 in the first quarter of fiscal 2006 using the
      modified-prospective method, and it did not have a material impact on our
      financial position or cash flows. See Note 3 - "Stock Based Compensation" for
      further information and the required disclosures under SFAS 123(R) and SAB
      107,
      including the impact of the implementation on our results of
      operations.





In
      December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
      -
      an amendment of APB Opinion No. 29." The statement addresses the measurement
      of
      exchanges of nonmonetary assets and eliminates the exception from fair value
      measurement for nonmonetary exchanges of similar productive assets and replaces
      it with an exception for exchanges that do not have commercial substance. SFAS
      No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods
      beginning after June 15, 2005. This adoption of this statement did not have
      a
      significant impact on our consolidated results of operations or our financial
      position.





In
      May
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.”
This statement replaces APB No. 20 and SFAS No. 3 and changes the requirements
      for the accounting for and reporting of a change in accounting principle. APB
      No. 20 previously required that most voluntary changes in accounting principle
      be recognized by including in net income of the period of the change the
      cumulative effect of changing to the accounting principle. SFAS No. 154 requires
      retrospective application to prior periods’ financial statements of voluntary
      changes in accounting principle. SFAS No. 154 is effective for accounting
      changes and corrections of errors made in fiscal years beginning after December
      15, 2005. We are currently evaluating the impact of adopting this
      statement.





In
      February 2006, the FASB issued SFAS No. 155,”Accounting for Certain Hybrid
      Financial Instruments - an amendment of FASB Statements No. 133 and 140,” to
      simplify and make more consistent the accounting for certain financial
      instruments. Specifically, SFAS No. 155 amends SFAS No. 133, Accounting for
      Derivative Instruments and Hedging Activities, to permit fair value
      remeasurement for any hybrid financial instrument with an embedded derivative
      that otherwise would require bifurcation, provided that the whole instrument
      is
      accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140,
      Accounting for the Impairment or Disposal of Long-Lived Assets, to allow a
      qualifying special-purpose entity (SPE) to hold a derivative financial
      instrument that pertains to a beneficial interest other than another derivative
      financial instrument. SFAS No. 155 applies to all financial instruments acquired
      or issued after the beginning of an entity’s first fiscal year that begins after
      September 15, 2006, with earlier application allowed. The
      Company does not expect that the adoption of SFAS No. 155 will have a
      significant impact on the consolidated results of operations or financial
      position of the Company.





In
      March
      2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets”, to simplify accounting for separately recognized servicing assets and
      servicing liabilities. SFAS No. 156 amends SFAS No. 140, “Accounting for
      Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
      Additionally, SFAS No. 156 permits, but does not require, an entity to choose
      either the amortization method or the fair value measurement method for
      measuring each class of separately recognized servicing assets and servicing
      liabilities. SFAS No. 156 applies to all separately recognized servicing assets
      and servicing liabilities acquired of issued after the beginning of an entity’s
      fiscal year that begins after September 15, 2006, although early adoption is
      permitted. The Company believes that this SFAS will have no effect on the
      Company’s financial condition or results of operations.




44





**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk.**





We
      are
      exposed to market risks associated with changes in the exchange rates between
      U.S. and Canadian currencies and with changes in the interest rates related
      to
      our fixed rate debt. We do not believe that any of these risks will have a
      material impact on our financial condition, results of operations and cash
      flows.





At
      the
      present time, we maintain our cash in short-term government or government
      guaranteed instruments, short-term commercial paper, interest bearing bank
      deposits or demand bank deposits which do not earn interest. A substantial
      majority of these instruments and deposits are denominated in U.S. dollars,
      with
      the exception of funds denominated in Canadian dollars on deposit in Canadian
      banks to meet short-term operating needs in Canada. At the present time, with
      the exception of professional fees and costs associated with the conduct of
      clinical trials in the United States and Europe, substantially all of our
      operating expense obligations are denominated in Canadian dollars. We do not
      presently employ any hedging or similar strategy intended to mitigate against
      losses that could be incurred as a result of fluctuations in the exchange rates
      between U.S. and Canadian currencies.





As
      of
      April 30, 2006, we have fixed rate debt totaling $3,356,260. This amount
      consists of the following:





Loan
                Amount
            
            Interest
                Rate per Annum$436,529
            
            4.913%$270,657
            
            4.924%$1,161,754
            
            6.07%$658,557
            
            6.85%$358,240
            
            8.5%$210,799
            
            10%$259,724
            
            16.5%$3,356,260
            
            *Total*





These
      debt instruments mature from June 2006 through March 2009. \As our fixed rate
      debt instruments mature, we will likely refinance such debt at the existing
      market interest rates which may be more or less than interest rates on the
      maturing debt. Since this debt is fixed rate debt, if interest rates were to
      increase 100 basis points prior to maturity, there would be no impact on
      earnings or cash flows.





We
      have
      neither issued nor own any long-term debt instruments, or any other financial
      instruments, for trading purposes and as to which we would be subject to
      material market risks.





**Item
      4. Controls and Procedures.**





*Evaluation
      of disclosure controls and procedures*





Based
      on
      our management's evaluation (with the participation of our principal executive
      officer and principal financial officer), as of the end of the period covered
      by
      this Quarterly Report on Form 10-Q, our chief executive officer and chief
      financial officer have concluded that our disclosure controls and procedures
      (as
      defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities
      Exchange Act of 1934, as amended (the "Exchange Act")) are effective to ensure
      that information required to be disclosed by us in the reports that we file
      or
      submit under the Exchange Act is recorded, processed, summarized and reported
      within the time periods specified in the SEC’s rules and forms.




45





*Changes
      in internal control over financial reporting*





There
      was
      no change in our internal control over financial reporting (as defined in Rules
      13a-15(f) and 15(d)-15(f) under the Exchange Act) during the period covered
      by
      this Quarterly Report on Form 10-Q that has materially affected, or is
      reasonably likely to materially affect, our 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 1. Business - Certain Additional Risk Factors* of our
      Annual Report on Form 10-K for the year ended July 31, 2005, 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. We do expect to receive some revenue from the sale of our
      oral insulin product in Ecuador in fiscal 2006. To date, we have not been
      profitable and our accumulated net loss was $175,705,417 at April 30, 2006.
      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 our oral insulin formulation which was approved for commercial
      sale
      in Ecuador in early May 2005, 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 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.





***We
      need additional capital.***





To
      progress in product development, production, marketing, and distribution we
      will
      need additional capital which may not be available to us. This may delay our
      progress in product development or market.





We
      will
      require funds in excess of our existing cash resources:




46





Ÿ
            to
                proceed with the development of our buccal insulin product;





Ÿ
            to
                develop other buccal and immunomedicine products;





Ÿ
            to
                develop new products based on our buccal delivery and immunomedicine
                technologies, including clinical testing relating to new products;





Ÿ
            to
                develop or acquire other technologies or other lines of business;





Ÿ
            to
                establish and expand our manufacturing capabilities;





Ÿ
            to
                finance general and administrative and research activities that are
                not
                related to specific products under development;





Ÿ
            to
                finance the research and development activities of our subsidiary
                Antigen;
                and





Ÿ
            to
                otherwise carry on business.





In
      the
      past, we have funded most of our development and other costs through equity
      financing. We anticipate that our existing capital resources will enable us
      to
      maintain currently planned operations through the next 12 months. However,
      this
      expectation is based on our current operating plan, which could change as a
      result of many factors, and we may need additional funding sooner than
      anticipated. Because our operating and capital resources are insufficient to
      meet future requirements, we will have to raise additional funds in the near
      future to continue the development and commercialization of our products.
      Unforeseen problems, including materially negative developments in our clinical
      trials or in general economic conditions, could interfere with our ability
      to
      raise additional equity capital or materially adversely affect the terms upon
      which such funding is available. Recent changes in the application of the rules
      of The NASDAQ Stock Market may also make it more difficult for us to raise
      private equity capital.





It
      is
      possible that we will be unable to obtain additional funding as and when we
      need
      it. If we were unable to obtain additional funding as and when needed, we could
      be forced to delay the progress of certain development efforts. Such a scenario
      poses risks. For example, our ability to bring a product to market and obtain
      revenues could be delayed, our competitors could develop products ahead of
      us,
      and/or we could be forced to relinquish rights to technologies, products or
      potential products.





***Our
      independent auditors have expressed substantial doubt about our ability to
      continue as a going concern.***





In
      their
      audit opinion issued in connection with our consolidated balance sheet as of
      July 31, 2005 and our consolidated statements of operations, stockholders’
equity and cash flows for the year then ended and for the period from November
      2, 1995 (date of inception) to July 31, 2005, our auditors have expressed a
      substantial doubt about our ability to continue as a going concern given our
      recurring net losses, negative cash flows from operations and working capital
      deficiency.





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 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
      we be unable to continue in existence.





Risks
      Related to Our Technologies





***With
      the exceptions of Generex Oral-lynTM and Glucose RapidSprayTM, our technologies
      and products are at an early stage of development and we cannot expect revenues
      in respect thereof in the foreseeable future.***




47





With
      the
      exception of Generex Oral-lynTM, our proprietary oral insulin spray formulation
      which has been approved for commercial marketing and sale in Ecuador for the
      treatment of Type-1 and Type-2 diabetes, and Glucose RapidSprayTM, an
      over-the-counter confectionary, we have no products approved for commercial
      sale
      at the present time. To be profitable, we must not only successfully research,
      develop and obtain regulatory approval for our products under development,
      but
      also manufacture, introduce, market and distribute them once development is
      completed. We may not be successful in one or more of these stages of the
      development or commercialization of our products, and/or any of the products
      we
      develop may not be commercially viable.





While
      over 1,100 patients with diabetes have been dosed with our oral insulin
      formulation at approved facilities in seven countries, our insulin product
      has
      only recently been approved for marketing in Ecuador. Until we can manufacture,
      market and distribute our oral insulin product in Ecuador and can establish
      that
      it is a commercially viable product, we will not receive revenues from ongoing
      operations.





***Until
      we receive regulatory approval to sell our products in one or more countries
      other than Ecuador, our ability to generate revenues from operations may be
      limited and those revenues may be insufficient to sustain operations. Many
      factors impact our ability to obtain approvals for commercially viable
      products.***





Only
      one
      of our products has been approved for commercial sale by drug regulatory
      authorities, and that approval was obtained in Ecuador. We have begun the
      regulatory approval process for our oral insulin formulation, buccal morphine
      product in other countries. Our immunomedicine products are in the pre-clinical
      stage of development, with the exception of our Phase 1 trial in human patients
      with stage II HER-2/neu positive breast cancer.





Pre-clinical
      and clinical trials of our products, and the manufacturing and marketing of
      our
      technologies, are subject to extensive, costly and rigorous regulation by
      governmental authorities in the United States, Canada and other countries.
      The
      process of obtaining required regulatory approvals from the FDA and other
      regulatory authorities often takes many years, is expensive and can vary
      significantly based on the type, complexity and novelty of the product
      candidates. For these reasons, it is possible we will never receive approval
      for
      one or more product candidates in any country other than Ecuador.





In
      addition, we cannot be sure when or if we will be permitted by regulatory
      agencies to undertake additional clinical trials or to commence any particular
      phase of clinical trials. Because of this, statements in this Quarterly Report
      on Form 10-Q regarding the expected timing of clinical trials cannot be regarded
      as actual predictions of when we will obtain regulatory approval for any "phase"
      of clinical trials.





Delays
      in
      obtaining United States or other foreign approvals for our products could result
      in substantial additional costs to us, and, therefore, could adversely affect
      our ability to compete with other companies. If regulatory approval is
      ultimately granted in any country other than Ecuador, the approval may place
      limitations on the intended use of the product we wish to commercialize, and
      may
      restrict the way in which we are permitted to market the product.





Risks
      Related to Marketing of Our Potential Products





***We
      may not become, or stay, profitable even if our products are approved for
      sale.***





Even
      if
      we obtain regulatory approval to market our oral insulin product or any other
      product candidate in another country other than Ecuador, many factors may
      prevent the product from ever being sold in commercial quantities. Some of
      these
      factors are beyond our control, such as:





Ÿ
            acceptance
                of the formulation or treatment by health care professionals and
                diabetic
                patients;





Ÿ
            the
                availability, effectiveness and relative cost of alternative diabetes
                or
                immunomedicine treatments that may be developed by competitors; and





Ÿ
            the
                availability of third-party (i.e., insurer and governmental agency)
                reimbursements.




48


We
      will
      not receive revenues from our oral insulin formulation in Ecuador or any of
      our
      other products that may receive regulatory approval until we can successfully
      manufacture, market and distribute them in the relevant market.





We
      will
      have to depend upon others for marketing and distribution of our products,
      including Generex Oral-lynTM in Ecuador, and we may be forced to enter into
      contracts limiting the benefits we may receive and the control we have over
      our
      products. We intend to rely on collaborative arrangements with one or more
      other
      companies that possess strong marketing and distribution resources to perform
      these functions for us. We may not be able to enter into beneficial contracts,
      and we may be forced to enter into contracts for the marketing and distribution
      of our products that substantially limit the potential benefits to us from
      commercializing these products. In addition, we will not have the same control
      over marketing and distribution that we would have if we conducted these
      functions ourselves.





***We
      may not be able to compete with treatments now being marketed and developed,
      or
      which may be developed and marketed in the future by other
      companies.***





Our
      products will compete with existing and new therapies and treatments. We are
      aware of a number of companies currently seeking to develop alternative means
      of
      delivering insulin, as well as new drugs intended to replace insulin therapy
      at
      least in part. We are also aware of a number of companies currently seeking
      to
      develop alternative means of enhancing and suppressing peptides. In the longer
      term, we also face competition from companies that seek to develop cures for
      diabetes and other malignant, infectious, autoimmune and allergic diseases
      through techniques for correcting the genetic deficiencies that underlie such
      diseases.





Numerous
      pharmaceutical, biotechnology and drug delivery companies, hospitals, research
      organizations, individual scientists and nonprofit organizations are engaged
      in
      the development of alternatives to our technologies. Some of these companies
      have greater research and development capabilities, experience, manufacturing,
      marketing, financial and managerial resources than we do. Accordingly, our
      competitors may succeed in developing competing technologies, obtaining FDA
      approval for products or gaining market acceptance more rapidly than we can.





In
      January, 2006, the FDA approved Pfizer, Inc.’s inhalable form of insulin, the
      first non-injected insulin to be approved by the FDA. Pfizer’s product in
      inhaled through the mouth and absorbed in the lungs. While we believe that
      absorption though the buccal cavity offers several advantages over absorption
      through the lungs, Pfizer’s early approval could allow it to capture a large
      portion of the market.





Risks
      Related to the Market for Our Common Stock





***Our
      common stock could be delisted from The NASDAQ Capital
      Market.***





On
      June
      5, 2003, our common stock was delisted from The NASDAQ National Market because
      of our failure to maintain a minimum of $10,000,000 in stockholders' equity.
      On
      June 5, 2003, our stock began trading on The NASDAQ Capital Market. The NASDAQ
      Capital Market has its own standards for continued listing, including a minimum
      of $2.5 million stockholders' equity. As of July 31, 2004, our stockholders'
      equity was $529,751. As a result, on November 19, 2004, we received notice
      from
      The NASDAQ Stock Market informing us that we do not comply with Marketplace
      Rule
      4310(c)(2)(B), which requires us to have a minimum of $2,500,000 in
      stockholders' equity or $35,000,000 market value of listed securities or
      $500,000 of net income from continuing operations for the most recently
      completed fiscal year or two of the three most recently completed fiscal years.
      On December 22, 2004, all outstanding shares of our Series A Convertible
      Preferred Stock were converted to common stock, resulting in the elimination
      of
      approximately $14,300,000 of mezzanine equity and an equal amount was added
      to
      additional paid-in capital attributable to the common stock, increasing
      stockholders' equity by that amount. Based on this, the delisting proceeding
      relating to failure to meet stockholders’ equity standards was terminated.
      Because we are still in the development stage, there is no guarantee that we
      will sustain compliance with this standard. In the event we cannot sustain
      compliance, our shares of common stock may be delisted from The NASDAQ Capital
      Market and begin trading on the over-the-counter bulletin board.




49





In
      addition, for continued listing on both The NASDAQ National Market and Capital
      Market, our stock price must be at least $1.00. From October of 2004 until
      October 2005, our stock price traded below this minimum per share requirement
      for thirty (30) or more consecutive business days. As a result, on November
      24,
      2004, we received notice from The NASDAQ Stock Market informing us that we
      did
      not comply with Market Rule 4310(c)(4), which requires us to have a minimum
      bid
      price per share of at least $1.00 for thirty (30) consecutive business days.
      We
      had 180 calendar days, or until May 23, 2005, subject to extension by The NASDAQ
      Stock Market under certain circumstances, to regain compliance with the
      Rule.





On
      May
      25, 2005, we received notice from the Staff of The NASDAQ Stock Market informing
      us that, during the 180 calendar day period ending May 23, 2005, we had not
      regained compliance with Marketplace Rule 4310(c)(4); however, the Staff noted
      that on May 23, 2005, we met all initial inclusion criteria for the Capital
      Market set forth in Marketplace Rule 4310(c), except for bid price. Therefore,
      in accordance with Marketplace Rule 4310(c)(8)(D), we had an additional 180
      calendar days to regain compliance with Rule 4310(c)(4).





On
      November 14, 2005, we received written confirmation from The NASDAQ Stock Market
      that we achieved compliance with the continued listing requirements in
      accordance with the minimum bid price requirement under NASDAQ Marketplace
      Rule
      4310(c)(4).





Although
      we have regained compliance with the minimum bid price requirement, there is
      no
      guarantee that the bid price of our common stock will remain at or above $1.00
      per share. In the event that the price of our common stock falls below $1.00
      per
      share for thirty (30) consecutive business days, we would likely receive a
      notice from The NASDAQ Stock Market informing us of our noncompliance with
      Market Rule 4310(c)(4) and giving us 180 calendar days, subject to extension,
      to
      regain compliance with the Rule. In the event that we could not demonstrate
      compliance with Marketplace Rule 4310(c)(4) by the specified deadline and were
      not eligible for an additional compliance period, the Staff would notify us
      that
      our stock would be delisted, at which time we could appeal the Staff’s
      determination to a Listing Qualifications Panel. Pending the decision of the
      Listing Qualification Panel, our common stock would continue to trade on the
      Capital Market. If we were not successful in such an appeal, our stock would
      likely trade on NASDAQ’s over-the-counter bulletin board, assuming we meet the
      requisite criteria.





***If
      we fail to maintain compliance with applicable NASDAQ Marketplace Rules and
      our
      stock is delisted from the NASDAQ Capital Market, it may become subject to
      Penny
      Stock Regulations and there will be less interest for our stock in the market.
      This may result in lower prices for our stock and make it more difficult for
      us
      to obtain financing.***





If
      our
      stock is not listed on NASDAQ and fails to maintain a price of $5.00 or more
      per
      share, our stock would become subject to the Securities and Exchange
      Commission's "Penny Stock" rules. These rules require a broker to deliver,
      prior
      to any transaction involving a Penny Stock, a disclosure schedule explaining
      the
      Penny Stock Market and its risks. Additionally, broker/dealers who recommend
      Penny Stocks to persons other than established customers and accredited
      investors must make a special written suitability determination and receive
      the
      purchaser's written agreement to a transaction prior to the sale. In the event
      our stock becomes subject to these rules, it will become more difficult for
      broker/dealers to sell our common stock. Therefore, it may be more difficult
      for
      us to obtain financing.





***The
      price of our common stock may be volatile.***





There
      may
      be wide fluctuations in the price of our common stock. These fluctuations may
      be
      caused by several factors including:





Ÿ
            announcements
                of research activities and technology innovations or new products
                by us or
                our competitors;




50




Ÿ
            changes
                in market valuation of companies in our industry generally;





Ÿ
            variations
                in operating results;





Ÿ
            changes
                in governmental regulations;





Ÿ
            developments
                in patent and other proprietary rights;





Ÿ
            public
                concern as to the safety of drugs or treatments developed by us or
                others;





Ÿ
            results
                of clinical trials of our products or our competitors' products;
                and





Ÿ
            regulatory
                action or inaction on our products or our competitors' products.





From
      time
      to time, we may hire companies to assist us in pursuing investor relations
      strategies to generate increased volumes of investment in our common stock.
      Such
      activities may result, among other things, in causing the price of our common
      stock to increase on a short-term basis.





Furthermore,
      the stock market generally and the market for stocks of companies with lower
      market capitalizations and small biopharmaceutical companies, like us, have
      from
      time to time experienced, and likely will again experience significant price
      and
      volume fluctuations that are unrelated to the operating performance of a
      particular company.





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





*Unregistered
      Sales of Equity Securities*





In
      the
      fiscal quarter ended April 30, 2006, we sold warrants to purchase shares of
      our
      common stock in the amounts and to the purchasers and on the terms as disclosed
      above in this Quarterly Report under the captions *Amendments
      of Outstanding Warrants* and *Exercise
      of A4 Additional AIRs* under *Part
      I -*  *Item 2.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations- Financial Condition, Liquidity and Resources* ,
      which
      disclosures are incorporated herein by reference. We undertook the offer and
      sale of these warrants, including shares of common stock into which such
      warrants are exercisable, by us to the purchasers in reliance upon the exemption
      from registration under Section 4(2) of the Securities Act of 1933, as amended
      (the “Securities Act”). Each of the purchasers has previously represented and
      warranted to us that it is an “accredited investor” as that term is defined in
      Rule 501(a) of Regulation D promulgated under the Securities Act. Any
      certificates issued representing such warrants and shares of common stock issued
      upon exercise thereof will be legended to indicate that they are restricted.
      No
      sale of these securities involved the use of underwriters.





On
      April
      17, 2006, we issued 204,465 shares of common stock and a warrant to purchase
      102,232 shares of our common stock to Zapfe Holdings Inc. We issued the stock
      and warrant in consideration of an investment of CAD$300,000. The exercise
      price
      of the warrant is $1.25 per share. The conversion features of the warrant are
      described in this Quarterly Report on Form 10-Q above under the caption *Financial
      Condition, Liquidity and Resources* of *Part
      I - Item 2. Management’s Discussion and Analysis of Financial Condition and
      Results of Operations* .
      The
      sale of the shares of common stock and warrant, including the shares of common
      stock to be issued upon exercise of the warrant, is exempt from the registration
      under Securities Act in reliance upon Section 4(2) thereof. Zapfe Holdings
      Inc.
      has represented to us that it is an “accredited investor” as that term is
      defined in Rule 501(a) of Regulation D. The shares of common stock and the
      shares of common stock issuable upon exercise of the warrant were included
      on
      our registration statement filed on February 1, 2006 and declared effective
      by
      the SEC on February 27, 2006. The sale did not involve the use of underwriters,
      and no commissions were paid in connection with the sale, if any,
      thereof.




51





On
      April
      17, 2006, we issued an aggregate of 72,000 shares of our restricted common
      stock
      to The Abajian Group, LLC (“Abajian”) as partial consideration for Abajian’s
      provision of services under an agreement with us relating to the solicitation,
      evaluation and design of third-party wholesale and retail distribution channels
      for certain of our products. All shares of our common stock issued to Abajian
      shall be restricted for 18 months from the date of issuance. Abajian has certain
      “piggyback” registration rights with respect to the shares of common stock. The
      sales of all such shares of restricted common stock were exempt from
      registration under the Securities Act, in reliance upon Section 4(2) thereof.
      Abajian has represented us that it is an “accredited investor” as that term is
      defined in Rule 501(a) of Regulation D. The certificate issued for the
      restricted shares of common stock was legended to indicate that the shares
      are
      restricted. The sale of such shares did not involve the use of underwriters,
      and
      no commissions were paid in connection with the issuance or sale, if any,
      thereof.





On
      April
      17, 2006, we issued 1,400 shares of our restricted common stock to a consultant
      pursuant to early termination of the consulting agreement between the consultant
      and us. All shares of our common stock issued to the consultant shall be
      restricted for 12 months from the date of issuance. The sales of all such shares
      of restricted common stock were exempt from registration under the Securities
      Act, in reliance upon Section 4(2) thereof. The consultant is a resident of
      Canada. The certificate issued for the restricted shares of common stock was
      legended to indicate that the shares are restricted. The sale of such shares
      did
      not involve the use of underwriters, and no commissions were paid in connection
      with the issuance or sale, if any, thereof.





On
      April
      17, 2006, we issued a five-year warrant to purchase 50,000 shares of our common
      stock to one of our directors, Dr. Gerald Bernstein. The warrant was issued
      pursuant to the terms of Dr. Bernstein’s employment agreement. The warrant has
      an exercise price of $2.66 per share, which represented the average of the
      closing prices of our common stock for the five trading days ended April 17,
      2006. In the event that the issuance of this warrant is deemed to be a “sale” as
      that term is defined under Section 2(a)(3) of the Securities Act, such “sale” is
      exempt from registration under the Securities Act in reliance upon Section
      4(2)
      thereof. Dr. Bernstein, as a director of Generex, is an “accredited investor” as
      that term is defined in Rule 501(a) of Regulation D. The warrant was, and the
      certificates representing the shares of common stock issuable upon exercise
      thereof will be, legended to indicate that they are restricted. The sale, if
      any, of such warrant did not involve the use of underwriters, and no commissions
      were paid in connection with the issuance or sale, if any, thereof.





In
      addition, on April 17, 2006, our Board of Directors granted a bonus to an
      employee of our subsidiary Antigen Express, Inc. of a five-year warrant to
      purchase up to an aggregate of 20,000 shares of our common stock at an exercise
      price of $2.66 per share, which represented the average of the closing prices
      of
      our common stock for the five trading days ended April 17, 2006. The issuance
      of
      this warrant is not deemed to be a “sale” as that term is defined under Section
      2(a)(3) of the Securities Act. The warrant was, and the certificates
      representing the shares of common stock issuable upon exercise of the warrant
      will be, legended to indicate that they are restricted.





On
      April
      17, 2006, the Board of Directors also approved the donation of 25,000 shares
      of
      our common stock to the University Campus Bio-Medico in Rome, Italy. The
      issuance of these shares is not deemed to be a “sale” as that term is defined
      under Section 2(a)(3) of the Securities Act. The shares of common stock were
      included on our registration statement filed on February 1, 2006 and declared
      effective by the SEC on February 27, 2006.




On
      June
      1, 2006, we entered into a Securities Purchase Agreement with four accredited
      investors for the sale of shares of its common stock and warrants in a private
      placement for an aggregate purchase price of $7.0 million. This transaction
      closed on June 2, 2006. Pursuant to the Securities Purchase Agreement, each
      of
      Cranshire, Rockmore, Iroquois and Smithfield purchased 853,659 restricted shares
      of the our common stock (the "Shares") and warrants to purchase 640,245 shares
      of common stock at an exercise price of $2.45 per share (the "Related
      Warrants"). The purchase price for each Unit consisting of one share and .75
      warrants was $2.05. Consequently, each investor paid an aggregate of
      $1,750,000.95. The terms and conditions applicable to the Shares and Related
      Warrants, including the conversion features of the Related Warrants, are
      described in this Quarterly Report on Form 10-Q above under the caption *Financial
      Condition, Liquidity and Resources* of *Part
      I - Item 2. Management’s Discussion and Analysis of Financial Condition and
      Results of Operations* .




On
      June
      1, 2006, we agreed with the investors to amend the terms of outstanding warrants
      to purchase an aggregate of 4,364,190 shares of common stock (the "Outstanding
      Warrants") to accelerate their exercise periods to June 1, 2006. The Outstanding
      Warrants included warrants to purchase an aggregate of 4,364,190 shares of
      our
      common stock with strike prices of $1.25 and $1.60 per share and exercise dates
      of August 28, 2006 and July 23, 2006. These Outstanding Warrants included
      warrants for 292,408 shares exercisable at $1.60 per share and warrants for
      127,880 shares exercisable at $1.25 per share originally issued to Omicron
      which
      had been assigned to Rockmore. Each of the investors agreed to immediately
      exercise the full amount of its Outstanding Warrants. On June 2, 2006, in
      consideration of the investors' exercise of the Outstanding Warrants, we issued
      to each investor additional warrants exercisable for a period of five years
      entitling the holder thereof to purchase a number of shares of common stock
      equal to 75% of the shares of common stock issuable upon the conversion in
      full
      (without regard to any restrictions on conversion therein contained) of the
      Outstanding Warrants (an aggregate of 3,273,144 shares of Common Stock) at
      an
      exercise price of $2.35 per share. We undertook the offer and sale of the Shares
      and Related Warrants, as well as the shares of common stock issuable upon
      exercise of the Related Warrants and the Outstanding Warrants, in reliance
      upon
      Rule 506 of Regulation D and Section 18(b)(4)(D) of the Securities Act. No
      underwriting commissions, placement fees or similar amounts were paid in
      connection with the issuance of the Shares and Related Warrants or the exercise
      of the Outstanding Warrants.




52




*Issuer
      Purchases of Equity Securities*





Neither
      we nor any affiliated purchaser (as defined in Section 240.10 b-18(a)(3) of
      the
      Exchange Act) purchased any of our equity securities during the fiscal quarter
      ended April 30, 2006.





**Item
      3. Defaults Upon Senior Securities.**





Under
      the
      terms of an Assistance Agreement with Eckert Seamans Cherin & Mellott, LLC,
      , we agreed to repay an advance of $325,179 without interest in three equal
      installments due on October 1, 2005, November 1, 2005 and December 1, 2005.
      Because we did not make the first installment payment on October 1, 2005, all
      amounts owed to Eckert Seamans became payable on demand as of that date, and
      interest on such unpaid amounts began accruing at the rate of 8% per annum.
      On
      March 28, 2006, we paid the outstanding balance ($337,937) due under the
      Assistance Agreement in full. The terms and conditions of the Assistance
      Agreement with Eckert Seamans, are described in this Quarterly Report on Form
      10-Q above under the caption *Financial
      Condition, Liquidity and Resources* of *Part
      I - Item 2. Management’s Discussion and Analysis of Financial Condition and
      Results of Operations* .





**Item
      4. Submission of Matters to a Vote of Security Holders.**





None.





**Item
      5. Other Information.**





The
      disclosures set forth under *Part
      II - Item 2. Unregistered Sales of Equity Securities and Use of
      Proceeds* and *Part
      II - Item 3. Defaults Upon Senior Securities* are
      incorporated herein by reference.


53


**Item
      6. Exhibits.**





**Exhibit****Number**
            
            **Description
                of Exhibit**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
                Corporation3(II)
            
            Bylaws
                of Generex Biotechnology Corporation (incorporated by reference to
                Exhibit
                3.2 to Generex Biotechnology Corporation’s Registration Statement on Form
                S-1 (File No. 333-82667) filed on July 12, 1999)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
            
            Warrant
                issued to Elliott International, L.P. and Elliott Associates, L.P.,
                dated
                July 5, 2001 (incorporated by reference to Exhibit 9 to Generex
                Biotechnology Corporation’s Report on Form 8-K filed on July 17,
                2001)4.3.1
            
            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 April 30, 2003 filed on August
                13,
                2003)4.3.2
            
            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 April 30, 2003 filed on August
                13,
                2003)4.3.3
            
            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
                April 30, 2003 filed on August 13, 2003)4.4.1
            
            Form
                of Securities Purchase Agreement entered into with Cranshire Capital,
                L.P.
                dated June 6, 2003 (incorporated by reference to Exhibit 4.4 to Generex
                Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended
                April 30, 2003 filed on August 13, 2003)4.4.2
            
            Form
                of Registration Rights Agreement entered into with Cranshire Capital,
                L.P.
                dated June 6, 2003 (incorporated by reference to Exhibit 4.5 to Generex
                Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended
                April 30, 2003 filed on August 13, 2003)4.4.3
            
            Form
                of Warrant granted to Cranshire Capital, L.P. dated June 6, 2003
                (incorporated by reference to Exhibit 4.6 to Generex Biotechnology
                Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003
                filed on August 13, 2003)




54




**Exhibit****Number**
              
              **Description
                  of Exhibit**


4.4.4
            
            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)4.5.1
            
            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)4.5.2
            
            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)4.5.3
            
            Form
                of 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/A filed on March 24, 2004)4.5.4
            
            Form
                of 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/A filed on March 24,
                2004)4.6.1
            
            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)4.6.2
            
            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)4.6.3
            
            Warrant
                issued in connection with Exhibit 4.6.1 (incorporated by reference
                to
                Exhibit 4.3 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 4.4 to Generex Biotechnology Corporation’s Report on
                Form 8-K filed on March 1, 2004)4.7.1
            
            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)4.7.2
            
            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)4.7.3
            
            Warrant
                issued in connection with Exhibit 4.7.1 (incorporated by reference
                to
                Exhibit 4.7 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 4.8 to Generex Biotechnology Corporation’s Report on
                Form 8-K filed on March 1, 2004)4.8.1
            
            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)4.8.2
            
            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)




55




**Exhibit****Number**
              
              **Description
                  of Exhibit**


4.8.3
            
            Warrant
                issued in connection with Exhibit 4.8.1 (incorporated by reference
                to
                Exhibit 4.11 to Generex Biotechnology Corporation’s Report on Form 8-K
                filed on March 1, 2004)4.8.4
            
            Additional
                Investment Right issued in connection with Exhibit 4.8.1 (incorporated
                by
                reference to Exhibit 4.12 to Generex Biotechnology Corporation’s Report on
                Form 8-K filed on March 1, 2004)4.8.5
            
            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)4.9.1
            
            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)4.9.2
            
            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)4.9.3
            
            Additional
                Investment Right issued in connection with Exhibit 4.9.1 (incorporated
                by
                reference to Exhibit 4.17 to Generex Biotechnology Corporation’s Report on
                Form 8-K filed on March 1, 2004)4.10.1
            
            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)4.10.2
            
            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)4.10.3
            
            Warrant
                issued in connection with Exhibit 4.10.1 (incorporated by reference
                to
                Exhibit 4.20 to Generex Biotechnology Corporation’s Report on Form 8-K
                filed on March 1, 2004)4.10.4
            
            Additional
                Investment Right issued in connection with Exhibit 4.10.1 (incorporated
                by
                reference to Exhibit 4.21 Generex Biotechnology Corporation’s Report on
                Form 8-K filed on March 1, 2004)4.11.1
            
            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)4.11.2
            
            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)4.11.3
            
            Form
                of Warrant issued in connection with Exhibit 4.11.1 (incorporated
                by
                reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
                Form 8-K filed on July 14, 2004)4.11.4
            
            Form
                of Additional Investment Right issued in connection Exhibit 4.11.1
                (incorporated by reference to Exhibit 4.4 to Generex Biotechnology
                Corporation’s Report on Form 8-K filed on July 14,
                2004)




56




**Exhibit****Number**
              
              **Description
                  of Exhibit**


4.12.1
            
            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)4.12.2
            
            Form
                of 6% Secured Convertible Debenture issued in connection with Exhibit
                4.12.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology
                Corporation’s Report on Form 8-K filed on November 12,
                2004)4.12.3
            
            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)4.12.4
            
            Form
                of Additional Investment Right issued in connection with Exhibit
                4.12.1
                (incorporated by reference to Exhibit 4.5 to Generex Biotechnology
                Corporation’s Report on Form 8-K filed on November 12,
                2004)4.12.5
            
            Custodial
                and Security Agreement, dated November 10, 2004, by and among Generex
                Biotechnology Corporation, Feldman Weinstein LLP, as custodian, and
                the
                investors named therein (incorporated by reference to Exhibit 4.6
                to
                Generex Biotechnology Corporation’s Report on Form 8-K filed on November
                12, 2004)4.12.6
            
            Form
                of Voting Agreement entered into in connection with Exhibit 4.12.1
                (incorporated by reference to Exhibit 4.7 to Generex Biotechnology
                Corporation’s Report on Form 8-K filed on November 12,
                2004)4.13
            
            Termination
                Agreement, dated December 17, 2004, by and among Generex Biotechnology
                Corporation and Elan Corporation plc and Elan International Services,
                Ltd.
                (incorporated by reference to Exhibit 4.19 to Generex Biotechnology
                Corporation’s Quarterly Report on Form 10-Q filed on June 14,
                2005)4.14
            
            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)4.15.1
            
            Amendment
                No. 1 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 (incorporated by
                reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
                Form 8-K filed on June 17, 2005)4.15.2
            
            Form
                of AIR Debenture issued in connection with Exhibit 4.15.1 (incorporated
                by
                reference to Exhibit 4.25.2 to Generex Biotechnology Corporation’s Report
                on Form 10-K filed on October 31, 2005)4.15.3
            
            Form
                of AIR Warrant issued in connection with Exhibit 4.15.1(incorporated
                by
                reference to Exhibit 4.25.3 to Generex Biotechnology Corporation’s Report
                on Form 10-K filed on October 31, 2005)4.15.4
            
            Form
                of Additional AIR issued in connection with Exhibit 4.15.1 (incorporated
                by reference to Exhibit 4.25.4 to Generex Biotechnology Corporation’s
                Report on Form 10-K filed on October 31, 2005)4.16.1
            
            Amendment
                No. 2 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 (incorporated by
                reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
                Form 8-K filed on September 9,
                2005)




57




**Exhibit****Number**
              
              **Description
                  of Exhibit**


4.16.2
            
            Form
                of Air Debenture issued in connection with Exhibit 4.16.1 (incorporated
                by
                reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
                Form 8-K filed on September 9, 2005)4.16.3
            
            Form
                of AIR Warrant issued in connection with Exhibit 4.16.1 (incorporated
                by
                reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
                Form 8-K filed on September 9, 2005)4.16.4
            
            Form
                of Additional AIR issued in connection with Exhibit 4.16.1 (incorporated
                by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report
                on Form 8-K filed on September 9, 2005)4.17
            
            Form
                of Warrant issued by Generex Biotechnology Corporation on October
                27, 2005
                (incorporated by reference to Exhibit 4.31 to Generex Biotechnology
                Corporation’s Report on Form 10-K filed on October 31,
                2005)4.18.1
            
            Amendment
                to the Additional Investment Right issued by Generex Biotechnology
                Corporation to Omicron Master Trust on June 17, 2005 (incorporated
                by
                reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on
                Form 8-K filed on October 31, 2005)4.18.2
            
            Additional
                AIR Debenture issued by Generex Biotechnology Corporation to Omicron
                Master Trust on October 27, 2005 issued in connection with Exhibit
                4.18.1
                (incorporated by reference to Exhibit 4.37 to Generex Biotechnology
                Corporation’s Report on Form 10-Q filed on December 15,
                2005)4.18.3
            
            Additional
                AIR Warrant issued by Generex Biotechnology Corporation to Omicron
                Master
                Trust on October 27, 2005 issued in connection with Exhibit 4.18.1
                (incorporated by reference to Exhibit 4.38 to Generex Biotechnology
                Corporation’s Report on Form 10-Q filed on December 15,
                2005)4.19.1
            
            Amendment
                No. 3 to Securities Purchase Agreement and Registration Rights Agreement
                entered into by and among Generex Biotechnology Corporation and the
                Purchasers listed on the signature pages thereto (incorporated by
                reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
                Form 8-K filed on December 5, 2005)4.19.2
            
            Form
                of AIR Debentures issued in connection with Exhibit 4.19.1 (incorporated
                by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report
                on Form 8-K filed on December 5, 2005)4.19.3
            
            Form
                of AIR Warrants issued in connection with Exhibit 4.19.1 (incorporated
                by
                reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on
                Form 8-K filed on December 5, 2005)4.19.4
            
            Form
                of Additional AIRs issued in connection with Exhibit 4.19.1 (incorporated
                by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report
                on Form 8-K filed on December 5, 2005)4.20
            
            Form
                of Amendment to the Additional Investment Right issued by Generex
                Biotechnology Corporation on June 17, 2005 in connection with the
                First
                AIR Exercise (incorporated by reference to Exhibit 4.2 to Generex
                Biotechnology Corporation’s Report on Form 8-K filed on December 5,
                2005)4.21
            
            Form
                of Amendment to the Additional Investment Right issued by Generex
                Biotechnology Corporation on September 8, 2005 in connection with
                the
                Second AIR Exercise (incorporated by reference to Exhibit 4.3 to
                Generex
                Biotechnology Corporation’s Report on Form 8-K filed on December 5,
                2005)4.22
            
            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)




58




**Exhibit****Number**
              
              **Description
                  of Exhibit**


4.23
            
            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).4.24
            
            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).4.25
            
            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).4.26
            
            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).4.27
            
            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).4.28
            
            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).4.29
            
            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).4.30
            
            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).4.31
            
            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).4.32
            
            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)4.33
            
            Warrant
                issued by Generex Biotechnology Corporation on April 17, 2006 to
                Zapfe
                Holdings, Inc.4.34
            
            Form
                of Warrant issued by Generex Biotechnology Corporation on April 17,
                2006
                to certain employees.4.35
            
            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)




59




**Exhibit****Number**
              
              **Description
                  of Exhibit**


4.36
            
            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)4.37
            
            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)4.38
            
            Form
                of Warrant issued by Generex Biotechnology Corporation on June 1,
                2006 in
                connection with Exhibit 4.37 (incorporated by reference to Exhibit
                4.4 to
                Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2,
                2006)9
            
            Form
                of Voting Agreement entered into in connection with Exhibit 4.12.1
                (incorporated by reference to Exhibit 4.7 to Generex Biotechnology
                Corporation’s Report on Form 8-K filed on November 12,
                2004)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.








60





**SIGNATURES**





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




**GENEREX
                BIOTECHNOLOGY CORPORATION**
              (Registrant)Date:
                June 14, 2006
            By:
            /s/ Anna
                E.
                GluskinAnna
                E. Gluskin
              Chairman,
                President and Chief Executive OfficerDate:
                June 14, 2006
            By:
            /s/ Rose
                C.
                PerriRose
                C. Perri
              Chief
                Operating Officer, Chief Financial Officer, Treasurer and
                Secretary


61


**Generex
      Biotechnology Corporation**


Form
      10-Q


April
      30,
      2006


Exhibit
      Index


**Exhibit****Number**
              
              **Description
                  of Exhibit**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
                  Corporation3(II)
              
              Bylaws
                  of Generex Biotechnology Corporation (incorporated by reference
                  to Exhibit
                  3.2 to Generex Biotechnology Corporation’s Registration Statement on Form
                  S-1 (File No. 333-82667) filed on July 12, 1999)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
              
              Warrant
                  issued to Elliott International, L.P. and Elliott Associates, L.P.,
                  dated
                  July 5, 2001 (incorporated by reference to Exhibit 9 to Generex
                  Biotechnology Corporation’s Report on Form 8-K filed on July 17,
                  2001)4.3.1
              
              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 April 30, 2003 filed on August
                  13,
                  2003)4.3.2
              
              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 April 30, 2003 filed on August
                  13,
                  2003)4.3.3
              
              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
                  April 30, 2003 filed on August 13, 2003)4.4.1
              
              Form
                  of Securities Purchase Agreement entered into with Cranshire Capital,
                  L.P.
                  dated June 6, 2003 (incorporated by reference to Exhibit 4.4 to
                  Generex
                  Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended
                  April 30, 2003 filed on August 13, 2003)4.4.2
              
              Form
                  of Registration Rights Agreement entered into with Cranshire Capital,
                  L.P.
                  dated June 6, 2003 (incorporated by reference to Exhibit 4.5 to
                  Generex
                  Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended
                  April 30, 2003 filed on August 13, 2003)4.4.3
              
              Form
                  of Warrant granted to Cranshire Capital, L.P. dated June 6, 2003
                  (incorporated by reference to Exhibit 4.6 to Generex Biotechnology
                  Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003
                  filed on August 13, 2003)
  62
  **Exhibit****Number**
                
                **Description
                    of Exhibit**
 4.4.4
              
              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)4.5.1
              
              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)4.5.2
              
              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)4.5.3
              
              Form
                  of 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/A filed on March 24, 2004)4.5.4
              
              Form
                  of 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/A filed on March 24,
                  2004)4.6.1
              
              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)4.6.2
              
              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)4.6.3
              
              Warrant
                  issued in connection with Exhibit 4.6.1 (incorporated by reference
                  to
                  Exhibit 4.3 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 4.4 to Generex Biotechnology Corporation’s Report on
                  Form 8-K filed on March 1, 2004)4.7.1
              
              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)4.7.2
              
              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)4.7.3
              
              Warrant
                  issued in connection with Exhibit 4.7.1 (incorporated by reference
                  to
                  Exhibit 4.7 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 4.8 to Generex Biotechnology Corporation’s Report on
                  Form 8-K filed on March 1, 2004)4.8.1
              
              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)4.8.2
              
              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)
  63
  **Exhibit****Number**
                
                **Description
                    of Exhibit**
 4.8.3
              
              Warrant
                  issued in connection with Exhibit 4.8.1 (incorporated by reference
                  to
                  Exhibit 4.11 to Generex Biotechnology Corporation’s Report on Form 8-K
                  filed on March 1, 2004)4.8.4
              
              Additional
                  Investment Right issued in connection with Exhibit 4.8.1 (incorporated
                  by
                  reference to Exhibit 4.12 to Generex Biotechnology Corporation’s Report on
                  Form 8-K filed on March 1, 2004)4.8.5
              
              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)4.9.1
              
              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)4.9.2
              
              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)4.9.3
              
              Additional
                  Investment Right issued in connection with Exhibit 4.9.1 (incorporated
                  by
                  reference to Exhibit 4.17 to Generex Biotechnology Corporation’s Report on
                  Form 8-K filed on March 1, 2004)4.10.1
              
              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)4.10.2
              
              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)4.10.3
              
              Warrant
                  issued in connection with Exhibit 4.10.1 (incorporated by reference
                  to
                  Exhibit 4.20 to Generex Biotechnology Corporation’s Report on Form 8-K
                  filed on March 1, 2004)4.10.4
              
              Additional
                  Investment Right issued in connection with Exhibit 4.10.1 (incorporated
                  by
                  reference to Exhibit 4.21 Generex Biotechnology Corporation’s Report on
                  Form 8-K filed on March 1, 2004)4.11.1
              
              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)4.11.2
              
              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)4.11.3
              
              Form
                  of Warrant issued in connection with Exhibit 4.11.1 (incorporated
                  by
                  reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
                  Form 8-K filed on July 14, 2004)4.11.4
              
              Form
                  of Additional Investment Right issued in connection Exhibit 4.11.1
                  (incorporated by reference to Exhibit 4.4 to Generex Biotechnology
                  Corporation’s Report on Form 8-K filed on July 14,
                  2004)
  64
  **Exhibit****Number**
                
                **Description
                    of Exhibit**
 4.12.1
              
              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)4.12.2
              
              Form
                  of 6% Secured Convertible Debenture issued in connection with Exhibit
                  4.12.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology
                  Corporation’s Report on Form 8-K filed on November 12,
                  2004)4.12.3
              
              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)4.12.4
              
              Form
                  of Additional Investment Right issued in connection with Exhibit
                  4.12.1
                  (incorporated by reference to Exhibit 4.5 to Generex Biotechnology
                  Corporation’s Report on Form 8-K filed on November 12,
                  2004)4.12.5
              
              Custodial
                  and Security Agreement, dated November 10, 2004, by and among Generex
                  Biotechnology Corporation, Feldman Weinstein LLP, as custodian,
                  and the
                  investors named therein (incorporated by reference to Exhibit 4.6
                  to
                  Generex Biotechnology Corporation’s Report on Form 8-K filed on November
                  12, 2004)4.12.6
              
              Form
                  of Voting Agreement entered into in connection with Exhibit 4.12.1
                  (incorporated by reference to Exhibit 4.7 to Generex Biotechnology
                  Corporation’s Report on Form 8-K filed on November 12,
                  2004)4.13
              
              Termination
                  Agreement, dated December 17, 2004, by and among Generex Biotechnology
                  Corporation and Elan Corporation plc and Elan International Services,
                  Ltd.
                  (incorporated by reference to Exhibit 4.19 to Generex Biotechnology
                  Corporation’s Quarterly Report on Form 10-Q filed on June 14,
                  2005)4.14
              
              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)4.15.1
              
              Amendment
                  No. 1 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 (incorporated
                  by
                  reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
                  Form 8-K filed on June 17, 2005)4.15.2
              
              Form
                  of AIR Debenture issued in connection with Exhibit 4.15.1 (incorporated
                  by
                  reference to Exhibit 4.25.2 to Generex Biotechnology Corporation’s Report
                  on Form 10-K filed on October 31, 2005)4.15.3
              
              Form
                  of AIR Warrant issued in connection with Exhibit 4.15.1(incorporated
                  by
                  reference to Exhibit 4.25.3 to Generex Biotechnology Corporation’s Report
                  on Form 10-K filed on October 31, 2005)4.15.4
              
              Form
                  of Additional AIR issued in connection with Exhibit 4.15.1 (incorporated
                  by reference to Exhibit 4.25.4 to Generex Biotechnology Corporation’s
                  Report on Form 10-K filed on October 31, 2005)4.16.1
              
              Amendment
                  No. 2 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 (incorporated
                  by
                  reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
                  Form 8-K filed on September 9,
                  2005)
  65
  **Exhibit****Number**
                
                **Description
                    of Exhibit**
 4.16.2
              
              Form
                  of Air Debenture issued in connection with Exhibit 4.16.1 (incorporated
                  by
                  reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
                  Form 8-K filed on September 9, 2005)4.16.3
              
              Form
                  of AIR Warrant issued in connection with Exhibit 4.16.1 (incorporated
                  by
                  reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
                  Form 8-K filed on September 9, 2005)4.16.4
              
              Form
                  of Additional AIR issued in connection with Exhibit 4.16.1 (incorporated
                  by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report
                  on Form 8-K filed on September 9, 2005)4.17
              
              Form
                  of Warrant issued by Generex Biotechnology Corporation on October
                  27, 2005
                  (incorporated by reference to Exhibit 4.31 to Generex Biotechnology
                  Corporation’s Report on Form 10-K filed on October 31,
                  2005)4.18.1
              
              Amendment
                  to the Additional Investment Right issued by Generex Biotechnology
                  Corporation to Omicron Master Trust on June 17, 2005 (incorporated
                  by
                  reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on
                  Form 8-K filed on October 31, 2005)4.18.2
              
              Additional
                  AIR Debenture issued by Generex Biotechnology Corporation to Omicron
                  Master Trust on October 27, 2005 issued in connection with Exhibit
                  4.18.1
                  (incorporated by reference to Exhibit 4.37 to Generex Biotechnology
                  Corporation’s Report on Form 10-Q filed on December 15,
                  2005)4.18.3
              
              Additional
                  AIR Warrant issued by Generex Biotechnology Corporation to Omicron
                  Master
                  Trust on October 27, 2005 issued in connection with Exhibit 4.18.1
                  (incorporated by reference to Exhibit 4.38 to Generex Biotechnology
                  Corporation’s Report on Form 10-Q filed on December 15,
                  2005)4.19.1
              
              Amendment
                  No. 3 to Securities Purchase Agreement and Registration Rights
                  Agreement
                  entered into by and among Generex Biotechnology Corporation and
                  the
                  Purchasers listed on the signature pages thereto (incorporated
                  by
                  reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
                  Form 8-K filed on December 5, 2005)4.19.2
              
              Form
                  of AIR Debentures issued in connection with Exhibit 4.19.1 (incorporated
                  by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report
                  on Form 8-K filed on December 5, 2005)4.19.3
              
              Form
                  of AIR Warrants issued in connection with Exhibit 4.19.1 (incorporated
                  by
                  reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on
                  Form 8-K filed on December 5, 2005)4.19.4
              
              Form
                  of Additional AIRs issued in connection with Exhibit 4.19.1 (incorporated
                  by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report
                  on Form 8-K filed on December 5, 2005)4.20
              
              Form
                  of Amendment to the Additional Investment Right issued by Generex
                  Biotechnology Corporation on June 17, 2005 in connection with the
                  First
                  AIR Exercise (incorporated by reference to Exhibit 4.2 to Generex
                  Biotechnology Corporation’s Report on Form 8-K filed on December 5,
                  2005)4.21
              
              Form
                  of Amendment to the Additional Investment Right issued by Generex
                  Biotechnology Corporation on September 8, 2005 in connection with
                  the
                  Second AIR Exercise (incorporated by reference to Exhibit 4.3 to
                  Generex
                  Biotechnology Corporation’s Report on Form 8-K filed on December 5,
                  2005)4.22
              
              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)
  66
  **Exhibit****Number**
                
                **Description
                    of Exhibit**
 4.23
              
              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).4.24
              
              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).4.25
              
              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).4.26
              
              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).4.27
              
              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).4.28
              
              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).4.29
              
              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).4.30
              
              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).4.31
              
              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).4.32
              
              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)4.33
              
              Warrant
                  issued by Generex Biotechnology Corporation on April 17, 2006 to
                  Zapfe
                  Holdings, Inc.4.34
              
              Form
                  of Warrant issued by Generex Biotechnology Corporation on April
                  17, 2006
                  to certain employees.4.35
              
              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)
  67
  **Exhibit****Number**
                
                **Description
                    of Exhibit**
 4.36
              
              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)4.37
              
              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)4.38
              
              Form
                  of Warrant issued by Generex Biotechnology Corporation on June
                  1, 2006 in
                  connection with Exhibit 4.37 (incorporated by reference to Exhibit
                  4.4 to
                  Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2,
                  2006)9
              
              Form
                  of Voting Agreement entered into in connection with Exhibit 4.12.1
                  (incorporated by reference to Exhibit 4.7 to Generex Biotechnology
                  Corporation’s Report on Form 8-K filed on November 12,
                  2004)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.






68