**UNITED
STATES**
 **SECURITIES
AND EXCHANGE COMMISSION**
 **WASHINGTON,
D.C. 2054**
 
 **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, 2005**
 
 **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 or other jurisdiction
      of**
    
    **(IRS Employer****incorporation or
      organization)**
    
    **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 an accelerated filer (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 39,790,346 as of June 14, 2005.
  
 
 **GENEREX
BIOTECHNOLOGY CORPORATION**
 
 **INDEX**
 **PART
I: FINANCIAL INFORMATION**
 
 Item
      1.
    Consolidated
      Financial Statements - unaudited
    3Consolidated
      Balance Sheets -
    3April
      30, 2005 and July 31, 2004Consolidated
      Statements of Operations -- for the three and nine month
    4periods
      ended April 30, 2005 and 2004, and cumulative fromNovember
      2, 1995 to April 30, 2005Consolidated
      Statements of Cash Flows -- For the nine month
    5periods
      ended April 30, 2005 and 2004, and cumulative fromNovember
      2, 1995 to April 30, 2005Notes
      to Consolidated Financial Statements
    6Item
      2.
    Management's
      Discussion and Analysis of Financial
    19Condition
      and Results of OperationsItem
      3.
    Quantitative
      and Qualitative Disclosures
    40About
      Market RiskItem
      4.
    Controls
      and Procedures
    40PART
      II: OTHER INFORMATIONItem
      1.
    Legal
      Proceedings
    41Item
      2.
    Unregistered
      Sales of Equity Securities and Use of Proceeds
    41Item
      3.
    Defaults
      Upon Senior Securities
    43Item
      4.
    Submission
      of Matters to a Vote of Security Holders
    44Item
      5.
    Other
      Information
    46Item
      6.
    Exhibits
    47Signatures
    
    54
    ****
 2
 **Item
1. Consolidated Financial Statements**
 **GENEREX
      BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES****(A
      DEVELOPMENT STAGE COMPANY)****CONSOLIDATED
      BALANCE SHEETS**April
      30,
    
    
    July
      31,2005
    
    
    2004ASSETSCurrent
      Assets:Cash
      and cash equivalents
    
    $
    435,874
    
    $
    4,950,419Restricted
      cash
    
    
    226,179
    
    
    206,421Other
      current assets
    
    
    154,089
    
    
    870,934Deferred
      debt issuance costs
    
    
    233,982
    
    
    --Total
      Current Assets
    
    
    1,050,124
    
    
    6,027,774Property
      and Equipment, Net
    
    
    4,049,701
    
    
    4,291,622Assets
      Held for Investment, Net
    
    
    2,323,618
    
    
    2,250,506Patents,
      Net
    
    
    5,580,725
    
    
    5,696,905Deposits
    
    
    --
    
    
    395,889Due
      From Related Party
    
    
    369,026
    
    
    349,294TOTAL
      ASSETS
    
    $
    13,373,194
    
    $
    19,011,990LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      Liabilities:Accounts
      payable and accrued expenses
    
    $
    2,725,969
    
    $
    1,947,399Short-term
      advance
    
    
    325,179
    
    
    --Current
      maturities of long-term debt
    
    
    1,870,811
    
    
    1,366,122Convertible
      Debentures, Net of Debt Discount of $1,993,735 and$-0-
      at April 30, 2005 and July 31, 2004, respectively
    
    
    1,539,688
    
    
    --Total
      Current Liabilities
    
    
    6,461,647
    
    
    3,313,521Long-Term
      Debt, Less Current Maturities
    
    
    948,982
    
    
    858,661Commitments
      and ContingenciesSeries
      A, Preferred stock, $.001 par value; authorized1,000,000
      shares, stated at redemption value, -0- and 1,191shares
      issued and outstanding at April 30, 2005 andJuly
      31, 2004
    
    
    --
    
    
    14,310,057Stockholders’
      Equity:Special
      Voting Rights Preferred stock, $.001 par value;authorized,
      issued and outstanding 1,000 shares atApril
      30, 2005 and July 31, 2004
    
    
    1
    
    
    1Common
      stock, $.001 par value; authorized 150,000,000 sharesat
      April 30, 2005 and July 31, 2004, 37,831,446 and34,262,448
      shares issued and outstanding atApril
      30, 2005 and July 31, 2004, respectively
    
    
    37,833
    
    
    34,264Additional
      paid-in capital
    
    
    119,598,392
    
    
    97,110,291Notes
      receivable - common stock
    
    
    --
    
    
    (384,803
    )Deficit
      accumulated during the development stage
    
    
    (114,179,253
    )
    
    (96,526,373
    )Accumulated
      other comprehensive income
    
    
    505,592
    
    
    296,371Total
      Stockholders’ Equity
    
    
    5,962,565
    
    
    529,751TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
    
    $
    13,373,194
    
    $
    19,011,990
 The Notes
to Consolidated Financial Statements are an integral part of these
statements.
   3
  **GENEREX
      BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES****(A
      DEVELOPMENT STAGE COMPANY)****CONSOLIDATED
      STATEMENTS OF OPERATIONS**Cumulative FromNovember 2, 1995For
      the Three Months Ended
    
    For
      the Nine Months Ended
    
    
    (Date
      of Inception)April
      30,
    
    April
      30,
    
    
    to
      April 30,2005
    
    2004
    
    2005
    
    2004
    
    2005Revenues
    
    $
    43,750
    
    $
    235,129
    
    $
    263,250
    
    $
    420,693
    
    $
    1,890,434Operating
      Expenses:Research
      and development
    
    
    1,009,799
    
    
    2,393,167
    
    
    6,586,764
    
    
    5,378,284
    
    
    53,754,478Research
      and development - related party
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    220,218General
      and administrative
    
    
    2,358,472
    
    
    2,750,055
    
    
    9,231,266
    
    
    8,487,814
    
    
    63,482,578General
      and administrative - related party
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    314,328Total
      Operating Expenses
    
    
    3,368,271
    
    
    5,143,222
    
    
    15,818,030
    
    
    13,866,098
    
    
    117,771,602Operating
      Loss
    
    
    (3,324,521
    )
    
    (4,908,093
    )
    
    (15,554,780
    )
    
    (13,445,405
    )
    
    (115,881,168
    )Other
      Income (Expense):Miscellaneous
      income (expense)
    
    
    --
    
    
    102
    
    
    --
    
    
    (3,760
    )
    
    125,348Income
      from Rental Operations, net
    
    
    28,503
    
    
    31,470
    
    
    103,292
    
    
    68,603
    
    
    197,642Interest
      income
    
    
    3,015
    
    
    13,906
    
    
    21,791
    
    
    190,519
    
    
    3,393,403Interest
      expense
    
    
    (1,403,667
    )
    
    (37,460
    )
    
    (2,223,183
    )
    
    (96,922
    )
    
    (2,757,606
    )Net
      Loss Before Undernoted
    
    
    (4,696,670
    )
    
    (4,900,075
    )
    
    (17,652,880
    )
    
    (13,286,965
    )
    
    (114,922,381
    )Minority
      Interest Share of Loss
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    3,038,185Net
      Loss
    
    
    (4,696,670
    )
    
    (4,900,075
    )
    
    (17,652,880
    )
    
    (13,286,965
    )
    
    (111,884,196
    )Preferred
      Stock Dividend
    
    
    --
    
    
    --
    
    
    --
    
    
    810,003
    
    
    2,295,057Net
      Loss Available to Common Shareholders
    
    $
    (4,696,670
    )
    $
    (4,900,075
    )
    $
    (17,652,880
    )
    $
    (14,096,968
    )
    $
    (114,179,253
    )Basic
      and Diluted Net Loss Per Common Share
    
    $
    (.13
    )
    $
    (.16
    )
    $
    (.49
    )
    $
    (.48
    )Weighted
      Average Number of Shares of CommonStock
      Outstanding
    
    
    36,099,735
    
    
    31,315,745
    
    
    35,743,730
    
    
    29,447,887
 The Notes to Consolidated Financial Statements are an integral part of these statements. 4
 **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,
    
    April
      30,2005
    
    2004
    
    2005Cash
      Flows From Operating Activities:Net
      loss
    
    $
    (17,652,880
    )
    $
    (13,286,965
    )
    $
    (111,884,196
    )Adjustments
      to reconcile net loss to net cash usedin
      operating activities:Depreciation
      and amortization
    
    
    827,459
    
    
    754,037
    
    
    3,304,691Minority
      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
    
    
    --
    
    
    --
    
    
    9,134Common
      stock issued for services rendered
    
    
    1,093,528
    
    
    1,356,599
    
    
    4,748,340Non-cash
      compensation expense
    
    
    --
    
    
    45,390
    
    
    45,390Stock
      options and warrants issued for services rendered
    
    
    530,600
    
    
    178,433
    
    
    6,816,718Preferred
      stock issued for services rendered
    
    
    --
    
    
    --
    
    
    100Treasury
      stock redeemed for non-performance of services
    
    
    (138,000
    )
    
    --
    
    
    (138,000
    )Amortization
      of deferred debt issuance costs
    
    
    155,988
    
    
    --
    
    
    155,988Amortization
      of discount on convertible debentures
    
    
    1,849,976
    
    
    --
    
    
    1,849,976Founders’
      shares transferred for services rendered
    
    
    --
    
    
    --
    
    
    353,506Fees
      in connection with short-term refinancing of long-term
debt
    
    
    105,293
    
    
    --
    
    
    105,293Changes
      in operating assets and liabilities (excluding the effects of
      acquisition):Miscellaneous
      receivables
    
    
    --
    
    
    --
    
    
    43,812Other
      current assets
    
    
    821,442
    
    
    (814,084
    )
    
    (22,455
    )Accounts
      payable and accrued expenses
    
    
    2,843,052
    
    
    403,794
    
    
    5,462,300Other,
      net
    
    
    --
    
    
    --
    
    
    110,317Net
      Cash Used in Operating Activities
    
    
    (9,172,439
    )
    
    (11,362,796
    )
    
    (87,856,090
    )Cash
      Flows From Investing Activities:Purchase
      of property and equipment
    
    
    (62,099
    )
    
    (395,468
    )
    
    (4,291,080
    )Costs
      incurred for patents
    
    
    (169,573
    )
    
    (251,820
    )
    
    (1,471,130
    )Change
      in restricted cash
    
    
    (8,214
    )
    
    (4,964
    )
    
    (198,543
    )Proceeds
      from maturity of short term investments
    
    
    --
    
    
    6,534,816
    
    
    126,687,046Purchases
      of short-term investments
    
    
    --
    
    
    (4,638,783
    )
    
    (126,687,046
    )Cash
      received in conjunction with merger
    
    
    --
    
    
    82,232
    
    
    82,232Advances
      to Antigen Express, Inc.
    
    
    --
    
    
    (32,000
    )
    
    (32,000
    )Increase
      in officers’ loans receivable
    
    
    --
    
    
    --
    
    
    (1,126,157
    )Change
      in deposits
    
    
    395,889
    
    
    (360,084
    )
    
    (477,194
    )Change
      in notes receivable - common stock
    
    
    (6,300
    )
    
    (18,587
    )
    
    (91,103
    )Change
      in due from related parties
    
    
    --
    
    
    --
    
    
    (2,222,390
    )Other,
      net
    
    
    --
    
    
    --
    
    
    89,683Net
      Cash Provided by (Used in) Investing Activities
    
    
    149,703
    
    
    915,342
    
    
    (9,737,682
    )Cash
      Flows From Financing Activities:Proceeds
      from short-term advance
    
    
    325,179
    
    
    --
    
    
    325,179Proceeds
      from issuance of long-term debt
    
    
    350,222
    
    
    --
    
    
    1,504,538Repayment
      of long-term debt
    
    
    (60,068
    )
    
    (54,937
    )
    
    (1,168,559
    )Change
      in due to related parties
    
    
    --
    
    
    --
    
    
    154,541Proceeds
      from exercise of warrants
    
    
    --
    
    
    --
    
    
    4,552,984Proceeds
      from exercise of stock options
    
    
    --
    
    
    126,640
    
    
    1,010,440Proceeds
      from minority interest investment
    
    
    --
    
    
    --
    
    
    3,038,185Proceeds
      from issuance of preferred stock
    
    
    --
    
    
    --
    
    
    12,015,000Proceeds
      from issuance of convertible debentures, net
    
    
    4,299,930
    
    
    --
    
    
    4,299,930Repayments
      of convertible debentures
    
    
    (416,513
    )
    
    --
    
    
    (416,513
    )Purchase
      of treasury stock
    
    
    --
    
    
    --
    
    
    (483,869
    )Proceeds
      from issuance of common stock, net
    
    
    --
    
    
    4,195,988
    
    
    73,283,715Purchase
      and retirement of common stock
    
    
    --
    
    
    --
    
    
    (119,066
    )Net
      Cash Provided by Financing Activities
    
    
    4,498,750
    
    
    4,267,691
    
    
    97,996,505Effect
      of Exchange Rates on Cash
    
    
    9,441
    
    
    18,724
    
    
    33,141Net
      Increase (Decrease) in Cash and Cash Equivalents
    
    
    (4,514,545
    )
    
    (6,161,039
    )
    
    435,874Cash
      and Cash Equivalents, Beginning of Period
    
    
    4,950,419
    
    
    12,356,578
    
    
    --Cash
      and Cash Equivalents, End of Period
    
    $
    435,874
    
    $
    6,195,539
    
    $
    435,874
 
 The Notes to Consolidated Financial Statements are an integral
part of these statements.
 
 5
  **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 2005, 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, 2005 of approximately $114 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, 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 Financial Accounting Standards Board (“FASB”) issued SFAS
No. 123R “Share Based Payment.” This statement is a revision to SFAS 123
and supersedes Accounting Principles Board (APB) Opinion No. 25,
“Accounting for Stock Issued to Employees,” and amends FASB Statement
No. 95, “Statement of Cash Flows”. This statement requires a public entity
to expense the cost of employee services received in exchange for an award of
equity instruments using the fair-value-based method. This statement also
provides guidance on valuing and expensing these awards, as well as disclosure
requirements of these equity arrangements. This statement is effective for the
first interim reporting period that begins after June 15, 2005.
  6
  **GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
DEVELOPMENT STAGE COMPANY)**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **2.**
    **Effects
      of Recent Accounting Pronouncements
(Continued)**
  SFAS 123R
permits public companies to choose between the following two adoption methods:
  1.
    A
      “modified prospective” method in which compensation cost is recognized
      beginning with the effective date (a) based on the requirements of
      SFAS 123R for all share-based payments granted after the effective date
      and (b) based on the requirements of Statement 123 for all awards
      granted to employees prior to the effective date of SFAS 123R that remain
      unvested on the effective date, or2.
    A
      “modified retrospective” method which includes the requirements of the
      modified prospective method described above, but also permits entities to
      restate based on the amounts previously recognized under SFAS 123 for
      purposes of pro forma disclosures either (a) all prior periods
      presented or (b) prior interim periods of the year of adoption.
  As
permitted by SFAS 123, the Company currently accounts for share-based payments
to employees using APB Opinion 25’s intrinsic value method and, as such, the
Company generally recognizes no compensation cost for employee stock options.
The impact of the adoption of SFAS 123R cannot be predicted at this time because
it will be depend on levels of share-based payments granted in the future.
However, valuation of employee stock options under SFAS 123R is similar to SFAS
123, with minor exceptions. The impact on the results of operations and earnings
per share had the Company adopted SFAS 123, is described in stock based
compensation section of Note 4 below. Accordingly, the adoption of SFAS 123R’s
fair value method will have a significant impact on the Company’s results of
operations, although it will have no impact on the Company’s overall financial
position. SFAS 123R also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash flow, rather
than as an operating cash flow as required under current literature. This
requirement will reduce net operating cash flows and increase net financing cash
flows in periods after adoption. Due to timing of the release of SFAS 123R, the
Company has not yet completed the analysis of the ultimate impact that this new
pronouncement will have on the results of operations, nor the method of adoption
for this new standard.
   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. The
Company is currently evaluating the impact of adopting this
statement.
   7
  **GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
DEVELOPMENT STAGE COMPANY)**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **3.**
    **Employee
      Stock Plans**
 The
Company has elected to continue to account for its stock compensation plans
under the recognition and measurement principles of Accounting Principles Board
Opinion No. 25 (“APB 25”), "Accounting for Stock Issued to Employees" and
related interpretations. Under APB 25, no compensation cost is generally
recognized for fixed stock options in which the exercise price is greater than
or equal to the market price on the grant date. In connection with the
termination of certain employees, the company repriced 1,240,000 options. The
repriced options are accounted for under variable accounting and compensation
cost is recognized for the difference between the exercise price and the market
price of the common shares until such options are exercised, expired or
forfeited. During the three months ended April 30, 2005 and 2004, the Company
(recaptured)/recognized $-0- and $(30,000) of compensation expense in connection
with these options. During the nine months ended April 30, 2005 and 2004, the
Company recaptured/recognized $-0- and $45,390, of compensation expense in
connection with these options, respectively.
 
 The
following table illustrates the effect on net loss and loss per share as if the
Company had applied the fair value recognition provisions of SFAS
123.
  Three Months Ended
    
    Nine Months EndedApril 31,
    
    April 30,2005
    
    2004
    
    2005
    
    2004Net
      Loss Available to CommonStockholders,
      as Reported
    
    $
    (4,696,670
    )
    $
    (4,900,075
    )
    $
    (17,652,880
    )
    $
    (14,096,968
    )Add:
      Total Stock-Based EmployeeCompensation
      Included in ReportedNet
      Loss
    
    
    --
    
    
    30,000
    
    
    --
    
    
    (45,390
    )Deduct:
      Total Stock-Based EmployeeCompensation
      Income DeterminedUnder
      Fair Value Based Method,Net
      of Related Tax Effect
    
    
    567,500
    
    
    508,500
    
    
    1,998,140
    
    
    1,867,720Pro
      Forma Net Loss Availableto
      Common Stockholders
    
    $
    (5,264,170
    )
    $
    (5,438,575
    )
    $
    (19,651,020
    )
    $
    (15,919,298
    )Loss
      Per Share:Basic
      and diluted, as reported
    
    $
    (0.13
    )
    $
    (0.16
    )
    $
    (0.49
    )
    $
    (0.48
    )Basic
      and diluted, pro forma
    
    $
    (0.15
    )
    $
    (0.17
    )
    $
    (0.55
    )
    $
    (0.54
    )
 **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, 2005 and 2004,
was $4,740,742 and $5,036,597, respectively, and for the nine months ended April
30, 2005 and 2004, was $17,443,659 and $13,179,362, respectively.
  8
  **GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
DEVELOPMENT STAGE COMPANY)**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **5.**
    **Accounts
      Payable and Accrued Expenses**
 Accounts
payable and accrued expenses consist of the following:
 April 30,
    
    July 31,2005
    
    2004Accounts
      Payable
    
    $
    1,684,676
    
    $
    1,122,928Accounting
      and Auditing
    
    
    352,077
    
    
    44,775Accrued
      Legal Fees and Settlement
    
    
    430,906
    
    
    368,244Termination
      Agreements and Severance Pay
    
    
    258,310
    
    
    411,452Total
    
    $
    2,725,969
    
    $
    1,947,399
 
 **6.**
    **Convertible
      Debentures**
 On
November 8, 2004, the Company entered into definitive agreements with four
accredited investors, pursuant to which the Company would issue convertible
promissory notes 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 notes are convertible into
registered common stock of the Company at a per share price equal to the 10-day
Volume Weighted Average Price (VWAP) on the closing date ($0.82). The coupon and
amortization payments are payable in cash or, at the Company's option, in
registered stock valued at a 10% discount to the 20-day VWAP at as the payment
date, 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.
 
 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. As
of April 30, 2004, $155,988 has been amortized as expense and the remaining
$233,982 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. The relative fair value assignment
of the fair value of the warrants, as determined by the Black Scholes pricing
model (using the same assumptions as above), to the debt’s total proceeds
resulted in a debt discount of $1,722,222 and a beneficial conversion feature of
$1,722,222 which has been allocated to additional paid in capital. These
resulting debt discounts, totaling $3,444,444, are being amortized using the
effective yield method over the life of the debenture. As of April 30, 2005,
$1,646,435 has been recorded as interest expense and the remaining $1,798,011 is
included as a debt discount which is net with the balance of the convertible
debenture.
  9
  **GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
DEVELOPMENT STAGE COMPANY)**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **6.**
    **Convertible
      Debentures (Continued)**
 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 bears interest at 10 percent per annum and is due on May
15, 2005. The note is convertible into registered common stock of the Company at
a per share price equal $0.82.
 
 The
holder of the convertible debenture also received warrants to purchase 1,219,512
of common stock at $0.82 per share. The relative fair value assignment of the
fair value of the warrants, as determined by 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, to the debt’s total proceeds resulted in a debt discount of
$245,521 and a beneficial conversion feature of $86,984 which has been allocated
to additional paid in capital. These resulting debt discounts, totaling $332,505
is being amortized using the effective yield method over the life of the
debenture. As of April 30, 2005, $179,141 has been recorded as interest expense
and the remaining $153,363 is included as a debt discount which is net with the
balance of the 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 bears interest at 10 percent per annum and is due on May
15, 2005. The note is convertible into registered common stock of the Company at
a per share price equal $0.82.
 
 The
holder of the convertible debenture also received warrants to purchase 243,902
of common stock at $0.82 per share. The relative fair value assignment of the
fair value of the warrants, as determined by 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, to the debt’s total proceeds resulted in a debt discount of
$49,104 and a beneficial conversion feature of $17,397 which has been allocated
to additional paid in capital. These resulting debt discounts, totaling $66,501
is being amortized using the effective yield method over the life of the
debenture. As of April 30, 2005, $24,140 has been recorded as interest expense
and the remaining $42,361 is included as a debt discount which is net with the
balance of the convertible debenture.
 
 **7.**
    **Long-term
      Debt**
 On March
31, 2005, the Company, entered into a loan transaction pursuant to which the
Company borrowed approximately $183,000 ($230,000 CND). The net proceeds to GPI
after fees and disbursements were approximately $159,000 ($200,800 CND). 
The loan is secured by real property owned by the Company.  The loan bears
interest at 13.5 percent per annum, requires monthly payments of interest only
and is for a term of two years. The loan was refinanced in May 2005 (see Note
14).
 
 On April
27, 2005, the Company entered into a loan transaction pursuant to which the
Company borrowed approximately $346,000 ($435,000 CND).  The net proceeds
to the Company after fees and disbursements were approximately $265,000
($333,600 CND). The loan is secured by real property owned by the Company. The
loan bears interest at 16.5 percent, has a term of one year and requires
interest only payments for the first two months and interest plus $10,000
principal payments beginning the third month. The loan was refinanced in May
2005 (see Note 14).
 
 10
  **GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
DEVELOPMENT STAGE COMPANY)**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
  **8.**
    **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 November 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.
 
 **9.**
    **Pending
      Litigation**
 On
October 2, 1998, Sands Brothers & Co. Ltd., a New York City-based investment
banking and brokerage firm, initiated an arbitration against the Company under
New York Stock Exchange rules. Sands alleged that it had the right to receive,
for nominal consideration, approximately 1.5 million shares of the Company’s
common stock. Sands based its claim upon an October 1997 letter agreement that
was purported by Sands to confirm an agreement appointing Sands as the exclusive
financial advisor to Generex Pharmaceuticals, Inc., a subsidiary of the Company
that was acquired in late 1997. In exchange, the letter agreement purported to
grant Sands the right to acquire 17 percent of Generex Pharmaceuticals’ common
stock for nominal consideration. Sands claimed that its right to receive shares
of Generex Pharmaceuticals’ common stock applies to the Company’s common stock
since outstanding shares of Generex Pharmaceuticals’ common stock were converted
into shares of the Company’s common stock in the acquisition. Sands' claims also
included additional shares allegedly due as a fee related to that acquisition,
and $144,000 in monthly fees allegedly due under the terms of the purported
agreement.
 
  11
  **GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
DEVELOPMENT STAGE COMPANY)**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **9.**
    **Pending
      Litigation (Continued)**
 Pursuant
to an arbitration award dated September 22, 1999, the arbitration panel that
heard this case awarded Sands $14,070 and issued a declaratory judgment
requiring the Company to issue to Sands a warrant to purchase 1,530,020 shares
of the Company’s common stock pursuant to and in accordance with the terms of
the purported October 1997 letter agreement. On October 13, 1999, Sands
commenced a special proceeding to confirm the arbitration award in the Supreme
Court of the State of New York, County of New York (the “New York Supreme
Court”). On November 10, 1999, the Company moved to vacate the arbitration
award. On March 20, 2000, the New York Supreme Court granted Sands’ petition to
confirm the award and denied the Company’s motion to vacate the award. The
Company appealed and on January 23, 2001, the New York State Appellate Division,
First Department (the “Appellate Division”), modified the judgment of the New
York Supreme Court that had confirmed the arbitration award against the Company.
The Appellate Division affirmed the portion of the New York Supreme Court
judgment that had confirmed the granting of monetary relief of $14,070 to Sands
but modified the judgment to vacate the portion of the arbitration award
directing the issuance to Sands of a warrant to purchase 1,530,020 shares of the
Company’s common stock. The Appellate Division held that the portion of the
award directing the Company to issue warrants to Sands is too indefinite to be
enforceable and remanded the matter to the arbitration panel for a final and
definite award with respect to such relief or its equivalent (including possibly
an award of monetary damages). The arbitration panel commenced hearings on the
matters remanded by the Appellate Division in June 2001. On November 7, 2001,
the arbitration panel issued an award again requiring the Company to issue to
Sands a warrant to purchase 1,530,020 shares of the Company’s common stock
purportedly pursuant to and in accordance with the terms of the October 1997
letter agreement. Thereafter, Sands submitted a motion to the New York Supreme
Court to modify and confirm the arbitration panel’s award while the Company
filed a motion with the court to vacate the arbitration award. On February 25,
2002, the New York Supreme Court vacated the arbitration panel’s award. The
Supreme Court concluded that the arbitration panel had “disregarded the plain
meaning” of the directive given by the Appellate Division in the Appellate
Division’s January 23, 2001 decision that remanded the matter of the warrant for
reconsideration by the panel. The Supreme Court found that the arbitration
panel’s award “lacks a rational basis”. The Supreme Court also remanded the
matter to the New York Stock Exchange on the issue of whether the arbitration
panel should be disqualified. Sands has appealed the February 25, 2002 order of
the Supreme Court to the Appellate Division. The Company filed **** a
cross-appeal on issues relating to the disqualification of the arbitration
panel.
 
 On
October 29, 2002, the Appellate Division issued a decision and order unanimously
modifying the lower court's order by remanding the issue of damages to a new
panel of arbitrators and otherwise affirming the lower court's order. The
Appellate Division's decision and order limits the issue of damages before the
new panel of arbitrators to reliance damages which is not to include an award of
lost profits. Reliance damages are out-of-pocket damages incurred by Sands. The
Appellate Division stated that the lower court properly determined that the
arbitration award, which had granted Sands warrants for 1,530,020 shares of the
registrant's stock, was incorrect.
 
 On March
18, 2003, the Appellate Division of the Supreme Court of New York denied a
motion by Sands for re-argument of the October 29, 2002 decision, or, in the
alternative, for leave to appeal to the Court of Appeals. A new arbitration took
place in early June 2004.
 
 12
  **GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
DEVELOPMENT STAGE COMPANY)**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **9.**
    **Pending
      Litigation (Continued)**
 On August
17, 2004, the Arbitration Panel of the New York Stock Exchange issued a final
award in the case of Sands vs. the Company, awarding Sands $150,000 in reliance
damages.  A motion to confirm this award has been filed by Sands and was
granted on February 1, 2005.  Sands has not sought leave to appeal the
vacaturs of the prior panel’s warrant award to the New York Court of Appeals but
advised the Company intentions of doing so.  As such, the award may be
subject to further legal proceedings. Accordingly, the Company has accrued
$150,000 and it is included in the balance sheet under the caption accounts
payable and accrued expenses.
 
 In
February 1997, an individual alleging to be a former employee of Generex
Pharmaceuticals, Inc., commenced an action in the Ontario Superior Court of
Justice for wrongful dismissal. The Ontario Superior Court of Justice rendered
judgment in favor of the plaintiff for approximately $127,000 plus interest in
November 1999 and further awarded costs to the plaintiff in March 2000. An
appeal of the judgment was filed with the Court of Appeal for Ontario in April
2000. The appeal was heard on February 26, 2003, and on February 28, 2003, the
Court of Appeals dismissed the appeal with costs. Generex Pharmaceuticals, Inc.,
has sought leave to appeal the Courts of Appeal’s decision to the Supreme Court
of Canada. The appeal was dismissed. The parties have signed Minutes of
Settlement in April 2004, pursuant to which the Company is required to pay the
plaintiff a total of $280,000 Canadian (approximately $230,000 US) in monthly
installments. The installments consist of $20,000 CND on May 1, 2004, $20,000
CND on June 1, 2004, $50,000 CND on July 1, 2004 and 7 monthly payments of
$27,142.86 CND each from August 1, 2004 to February 1, 2005.
 
 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 has opposed the
application which is now pending before the Court. In September 2003, the
Ontario Superior Court of Justice granted the request and issued an order giving
the former business associate leave to file an action in the name of and on
behalf of CBI against Modi and 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.
 
 13
  
 **GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
DEVELOPMENT STAGE COMPANY)**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **9.**
    **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. The Company is of the view that the claims
are wholly without merit and intends to defend this action vigorously. The
Company is not able to predict the ultimate outcome of this legal proceeding at
the present time or estimate an amount or range of potential loss, if any, from
this legal proceeding.
 
 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.
 
 **10.**
    **Net
      Loss Per Share**
 Basic EPS
and Diluted EPS for the three and nine months ended April 30, 2005 and 2004 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 26,485,026 and 14,478,070
incremental shares at April 30, 2005 and 2004, respectively, have been excluded
from the computation of Diluted EPS as they are antidilutive.
 
 14
  **GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
DEVELOPMENT STAGE COMPANY)**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **11.**
    **Supplemental
      Disclosure of Cash Flow
Information**
 For the Nine Months EndedApril 30,2005
    
    2004Cash
      paid during the period for:Interest
    
    $
    260,973
    
    $
    97,701Income
      taxes
    
    $
    --
    
    $
    --Disclosure
      of non-cash investing and financing activities:Value
      of warrants issued in conjunction with capitalizedservices
      upon issuance of convertible debentures
    
    $
    89,900
    
    $
    --Sale
      of Series A Preferred Stock and mandatorily convertedto
      common shares
    
    $
    14,310,057
    
    $
    --Value
      of warrants and beneficial conversion feature issuedin
      conjunction with issuance of convertible debentures
    
    $
    3,843,450
    
    $
    --Satisfaction
      of accounts payable through the issuance ofcommon
      stock
    
    $
    779,760
    
    $
    --Principal
      repayment of convertible debentures through theissuance
      of common stock
    
    $
    506,824
    
    $
    --Issuance
      of common stock in conjunction with convertibledebenture
      conversion
    
    $
    143,500
    
    $
    --Issuance
      of below market stock options in satisfaction ofaccounts
      payable and accrued expenses
    
    $
    1,332,052
    
    $
    --Increase
      in receivable included in other current assets inconnection
      with short-term refinancing of long-term debt
    
    $
    79,480
    
    $
    --Issuance
      of Series A Preferred Stock as a preferred stockdividend
    
    $
    --
    
    $
    810,003Application
      of deposit to advances to Antigen Express, Inc.
    
    $
    --
    
    $
    25,000Acquisition
      of Antigen Express, Inc through the issuanceof
      common stock and the assumption of stock options
    
    $
    --
    
    $
    4,797,409Retirement
      of treasury stock
    
    $
    --
    
    $
    1,610,026
 **12.**
    **Transactions
      with Related Party**
 The
Company’s change in “Due from Related Party” for the nine months ended April 30,
2005 represents only the effect of change in exchange rate for the nine months
ended versus that in effect at July 31, 2004.
 
 **13.**
    **Stockholders’
      Equity**
 In August
2004, the Company issued 620,000 shares of common stock to consultants for
services rendered, which resulted in charges to the statement of operations of
$675,800 based on the quoted market price of the Company stock on the date of
issuance.
 
 In August
2004, the Company issued 500,000 warrants in exchange for services rendered. The
warrants were fully vested on date of issuance and exercisable at $1.09 each for
the purchase of one share of the Company’s common stock. The warrants, which
were valued using the Black Scholes pricing model, resulted in charges to the
statement of operations of $415,000.
 
 
 15
 **GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
DEVELOPMENT STAGE COMPANY)**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **13.**
    **Stockholders’
      Equity (Continued)**
 In
October, 2004, the Company granted a total of 1,942,000 options to purchase
shares of common stock with an exercise price of $0.94, which equaled the five
trading day closing average of the Company common stock on the date of issuance.
All of the options, except for 105,000, were issued to employees; accordingly no
charge to operations was incurred as the Company follows APB 25 (see Note 3).
Options issued to other than employees were valued using the Black Scholes
pricing model and resulted in a charge to operations of $75,600.
 
 In
October, 2004, the Company granted a total of 150,000 options to purchase shares
of common stock with an exercise price of $1.10, which equaled the five trading
day closing average of the Company common stock July 31, 2004. All of the
options were issued to an employee; accordingly no charge to operations was
incurred as the Company follows APB 25 (See Note 3).
 
 In
October, 2004, the Company redeemed 75,000 shares of common stock as a result of
non-performance of services. These shares were originally exchanged in October
2003 for services the Company believed to be rendered, which resulted in prior
charges to the statement of operations of $138,000. In conjunction with the
redemption of the shares, the Company reversed the prior charges to the
statement of operations in the amount of ($138,000).
 
 In
December 2004, the holder of the Series A Preferred Stock sold its holdings to a
third party. In conjunction with sale, all of the Company’s outstanding Series A
Preferred Stock was automatically converted to common stock. As a result, the
buyer received 534,085 shares of common stock and the Company no longer has any
outstanding shares of Series A Preferred Stock.
 
 In
December 2004, the Company issued convertible debentures. In conjunction with
the issuance of the debentures, the Company issued 4,878,048 warrants with the
debentures and 145,000 warrants for financial services rendered. The warrants
were fully vested on date of issuance and exercisable at $0.91 each for the
purchase of one share of the Company’s common stock (see Note 6).
 
 In
December 2004, the Company issued 48,000 shares of common stock to consultants
for services rendered, which resulted in charges to the statement of operations
of $34,080 based on the quoted market price of the Company stock on the date of
issuance.
 
 In
January 2005, the Company issued 58,000 shares of common stock to consultants
for services rendered, which resulted in charges to the statement of operations
of $45,300 based on the quoted market price of the Company stock on the date of
issuance.
 
 In
January 2005, the Company deemed its notes receivable - common stock in the
amount of $391,103 to be uncollectible and, therefore, has taken a charge to
operations for the said amount.
 
 In
February 2005, the Company issued 250,910 shares of common stock in satisfaction
of its required monthly repayment of convertible debentures valued at
$181,513.
 
 In
February 2005, the Company issued 68,000 shares of common stock to consultants
for services rendered, which resulted in charges to the statement of operations
of $46,420 based on the quoted market price of the Company stock on the date of
issuance.
 
 In March
2005, the Company issued 265,228 shares of common stock in satisfaction of its
required monthly repayment of convertible debentures valued at
$162,462.
 
 16
 **GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
DEVELOPMENT STAGE COMPANY)**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **13.**
    **Stockholders’
      Equity (Continued)**
 In March
and April 2005, the Company issued convertible debentures. In conjunction with
the issuance of the debentures, the Company issued 1,463,414 warrants with the
debentures. The warrants were fully vested on date of issuance and exercisable
at $0.82 each for the purchase of one share of the Company’s common stock (see
Note 6).
 
 In April
2005, the Company issued 314,732 shares of common stock in satisfaction of its
required monthly repayment of convertible debentures valued at
$162,849.
 
 In April
2005, the Company issued 8,800 shares of common stock to employees as
compensation, which resulted in charges to the statement of operations of $4,928
based on the quoted market price of the Company stock on the date of
issuance.
 
 In April
2005, the Company issued 100,000 warrants in exchange for services rendered. The
warrants were fully vested on date of issuance and exercisable at $0.82 each for
the purchase of one share of the Company’s common stock. The warrants, which
were valued using the Black Scholes pricing model, resulted in charges to the
statement of operations of $40,000.
 
 In April
2005, the Company issued 175,316 shares of common stock resulting from the
conversion of $143,500 of convertible debenture principal.
 
 In April
2005, the Company issued 350,000 shares of common stock to consultants for
services rendered, which resulted in charges to the statement of operations of
$287,000 based on the quoted market price of the Company stock on the date of
issuance.
 
 In April
2005, the Company issued 950,927 shares of common stock to various vendors for
the satisfaction of $779,760 of accounts payable and accrued liabilities. The
shares were valued at $0.82 per share.
 
 In April
2005, the Company granted a total of 2,239,610 options to executives and
directors of the Company to purchase shares of common stock with an exercise
price of $0.001 in satisfaction of accrued wages, bonuses and fees in the amount
of $1,332,052. The options were issued below the quoted market price on the date
of issuance of $0.56 and $0.61.
 
 **14.**
    **Subsequent
      Events**
 On May
19, 2005, the March and April loans were consolidated and restructured. Pursuant
to the revised arrangement, the Company repaid an aggregate of approximately
$211,000 ($265,000 CND) leaving a principal of approximately $318,000 ($400,000
CND).  In conjunction with this transaction, the Company paid an aggregate
of approximately $28,600 ($35,978 CND) in fees and disbursements.  The loan
is secured by real property owned by the Company.  The loan bears interest
at 16.5 percent per annum, requires payments of approximately $7,900 ($10,000
CND) in principal plus monthly interest, and has a term of 1 year.
 
 On May
19, 2005, GPI entered into two additional mortgage loan transactions pursuant to
which the Company borrowed an aggregate of approximately $644,000 ($810,000
CND). The net proceeds to the Company were approximately $377,000 ($474,369
CND).  The loan is secured by real property owned by the Company. 
Both loans are for a term of 1 year with an annual interest rate of 4.924% as to
$246,388 loan and 4.913% as to $397,400 loan calculated semi-annually. The loan
requires monthly payments of principal and interest.
  17
  **GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES**
 **(A
DEVELOPMENT STAGE COMPANY)**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 **14.**
    **Subsequent
      Events (Continued)**
 On June
7, 2005, the Company extended the maturity date of convertible debentures issued
in March and April (see Note 6) from May 15, 2005 to July 22, 2005.  As
consideration for the extensions, the Company issued warrants to the holders of
the convertible debentures to purchase an aggregate of 1,463,414 shares of the
Company's common stock at $0.82 per share.  The warrants were fully vested
on date of issuance and will expire on June 7, 2010.
 
 In May
2005, the Company issued an aggregate of 1,165,437 shares of common stock
resulting from the conversion of $954,000 of convertible debenture principal and
$1,658 of accrued interest.
 
  18
 
 **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 "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, 2005
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 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;
      and
 Ÿ
    our
      expectations of when regulatory submissions may be filed or when
      regulatory approvals may be received.
 
 Any or
all of our forward-looking statements may turn out to be wrong. They may be
affected by inaccurate assumptions that we might make or by known or unknown
risks and uncertainties. Actual outcomes and results may differ materially from
what is expressed or implied in our forward-looking statements. Among the
factors that could affect future results are:
 
 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; and
 Ÿ
    the
      inherent uncertainties associated with the process of obtaining regulatory
      approval to market product candidates; and
 Ÿ
    the
      inherent uncertainties associated with commercialization of products that
      have received regulatory approval.
 
 Additional
factors that could affect future results are set forth below under the caption
“Risk Factors.” We caution investors that the forward-looking statements
contained in this Report must be interpreted and understood in light of
conditions and circumstances that exist as of the date of this Report. We
expressly disclaim any obligation or undertaking to update or revise
forward-looking statements made in this Report 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.
 
 19
 **General**
 
 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"). 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.
 
 A
substantial number of large molecule drugs (i.e., drugs composed of molecules
with a higher than specified molecular weight) have been approved for sale in
the United States or are presently undergoing clinical trials as part of the
process to obtain such approval, including various proteins, peptides,
monoclonal antibodies, hormones and vaccines. Unlike small molecule drugs, which
generally can be administered by various methods, large molecule drugs
historically have been administered predominately by injection. The principal
reasons for this have been the vulnerability of large molecule drugs to
digestion and the relatively large size of the molecule itself, which makes
absorption into the blood stream through the skin or mucosa inefficient or
ineffective.
 
 All
injection therapies involve varying degrees of discomfort and inconvenience.
With chronic and sub-chronic diseases, the discomfort and inconvenience
associated with injection therapies frequently results in less than optimal
patient acceptance of, and compliance with, the prescribed treatment plan. Poor
acceptance and compliance can lead to medical complications and higher disease
management costs. Also, elderly, infirm and pediatric patients with chronic or
sub-chronic conditions may not be able to self-inject their medications. In such
cases, assistance is required which increases both the cost and inconvenience of
the therapy.
 
 20
 Our goal
is to develop proprietary formulations of large molecule drugs that can be
administered through the buccal mucosa, primarily the inner cheek walls, thereby
eliminating or reducing the need for injections. We believe that our buccal
delivery technology is a platform technology that has application to many large
molecule drugs, and provides a convenient, non-invasive, accurate and
cost-effective way to administer such drugs. We have identified several large
molecule drugs as possible candidates for development, but to date have focused
our development efforts on a buccal insulin product.
 
 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 800 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. The Bulk Supply Agreement establishes purchase prices,
minimum purchase requirements, maximum amounts which may be purchased in each
year and a non-refundable prepayment of $1,500,000 to be applied against amounts
due for purchases.
 
 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 is 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.
 
 In
connection with the joint venture, EIS purchased 1,000 shares of a new series of
our preferred stock, designated as Series A Preferred Stock, for $12,015,000,
which EIS transferred, shortly thereafter, to Elan Pharmaceuticals Investment
III, an affiliate of Elan ("EPIL III"). We applied the proceeds from the sale of
the Series A Preferred Stock to subscribe for an 80.1% equity ownership interest
in Generex (Bermuda), Ltd. EIS paid in capital of $2,985,000 to subscribe for a
19.9% equity ownership interest in the joint venture entity. In accordance with
the terms of the Series A Preferred Stock, if any shares of Series A Preferred
Stock were to be outstanding on January 16, 2007, we would have been required to
redeem the shares of Series A Preferred Stock at a redemption price equal to the
aggregate Series A Preferred Stock liquidation preference, either in cash, or in
shares of common stock with a fair market value equal to the redemption price.
Alternatively, the Series A Preferred Stock could have been converted, under
certain conditions, into shares of our common stock. EIS also purchased 344,116
shares of our common stock for $5,000,000. We were permitted to use the proceeds
of this sale for any corporate purpose.
 
 21
 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. Pursuant to the terms of the Termination Agreement, (i)
except for a common stock purchase warrant that was issued by us to Elan, which
was amended to permit Elan or any other holder thereof to transfer the warrant
without our consent, the parties agreed to terminate all agreements entered into
in connection with the joint venture, and (ii) Elan agreed to transfer all
shares of capital stock of Generex (Bermuda) owned by it to us. Accordingly, all
rights granted by each party to the other terminated, including, without
limitation, Elan's right to appoint a member to our Board of Directors, all
other rights granted under the terms of the joint venture terminated, each party
retained its intellectual property rights, we obtained full ownership of Generex
(Bermuda), and all representatives of Elan who were officers and/or directors of
Generex (Bermuda) resigned.
 
 In
connection with negotiating the Termination Agreement, EPIL III approached us
for consent to transfer the Series A Preferred Stock by way of an auction
process. Although we provided our consent to the transfer, it was contingent
upon EPIL III agreeing to satisfy the following conditions: (i) the auction
process could conclude no later than December 15, 2004 and EPIL III's
disposition of the shares could conclude no later than December 31, 2004 (the
"Closing Date"), (ii) the buyer had to immediately convert the Series A
Preferred Stock at the voluntary conversion price of $25.77 (calculated pursuant
to the terms of the certificate of designation for the Series A Preferred Stock
resulting in the issuance of 534,085 shares of common stock), (iii) EPIL III's
registration rights could not be transferred, and (iv) for a period of two (2)
years after the Closing Date, the purchaser of the Series A Preferred Stock
could not transfer the shares of common stock issuable upon conversion thereof
and we would have the right to redeem the shares of common stock at a per share
price of 150% of the average closing price of the common stock on The Nasdaq
SmallCap Market for the twenty (20) days immediately preceding the Closing Date.
On or around December 15, 2004, EPIL III conducted the auction and received an
offer to buy the shares of Series A Preferred Stock. On or around December 31,
2004, EPIL III sold the shares of Series A Preferred Stock, and the purchaser
thereof immediately converted the Series A Preferred Stock into shares of our
common stock.
  The
conversion of the Series A Preferred Stock was particularly critical because the
mandatory redemption feature required us to classify the Series A Preferred
Stock as approximately $14,300,000 of mezzanine equity. Upon conversion of the
Series A Preferred Stock, however, we were able to reclassify the approximately
$14,300,000 of mezzanine equity as common equity on our balance sheet. This, in
turn, allowed us to regain compliance with NASDAQ's Market Place 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.
 
 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 an executive officer of Antigen, the Ii-Key hybrid peptides and
Ii-Suppression. The immunomedicine products 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, 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.
 
 22
 We do not
expect to receive any revenues from product sales in the current fiscal year.
However, we have received and we expect to continue to receive some revenue from
research grants for Antigen's immunomedicine products. During the three-month
period ended April 30, 2005, we received a total of $43,750 in such research
grants, $263,250 during the nine-month period ended April 30, 2005, and we
received a total of $890,434 **** in such
research grants. We do not expect the research grants to fully fund Antigen's
expenses. We expect to satisfy all of our cash needs during the current year
from capital raised through equity financings.
 
 We are a
development stage company, and from inception through the end of fiscal quarter
April 30, 2005 had not received any revenues from operations other than the
up-front payment from Lilly. We have begun the regulatory approval process for
only three products, our oral insulin formulation, morphine and fentanyl. We
have only one product, our oral insulin formulation, that has been approved for
commercial marketing and sale by drug regulatory authorities, and that approval
was obtained in Ecuador in early May 2005. We believe that our buccal delivery
technology is a platform technology that has application to a large number of
large molecule drugs in addition to insulin. Estrogen, heparin, monoclonal
antibodies, human growth hormone, fertility hormone, as well as a number of
vaccines are among the compounds that we have identified as possible candidates
for product development.
 
 **Disclosure
Regarding Research and Development Projects**
 
 Our major
research and development projects are the refinement of our basic buccal
delivery technology, our buccal insulin project and our buccal morphine product.
 
 Both our
insulin product and our morphine product are in clinical trials. In Canada, we
have recently begun Phase II-B trials for insulin. In order to obtain FDA and
Canadian HPB approval for any of our product candidates, we will be required to
complete "Phase III" trials which involve testing our product with a large
number of patients over a significant period of time. The conduct of Phase III
trials will require significantly greater funds than we either have on hand or
have experience in raising in any year or two years' time. We will therefore
need to receive funding from a corporate collaborator, or engage in fundraising
on a scale with which we have no experience.
 
 Our
insulin product, Oral-lynTM, was approved for commercial sale by drug regulatory
authorities in Ecuador in early May 2005. It is our intention that our South
American joint venture partner, PharmaBrand S.A., will handle the commercial
launch of Oral-lynTM in Ecuador, subject to obtaining financing needed for launch
and a suitable production facility. We will require substantial amounts in
additional funding to successfully launch Oral-lynTM on a commercial basis in
Ecuador.
 
 Because
of various uncertainties, we cannot predict the timing of completion and
commercialization of our buccal insulin or buccal morphine products. These
uncertainties include the success of current studies, our ability to obtain the
required financing and the time required to obtain regulatory approval even if
our research and development efforts are completed and successful. 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 may benefit all of our potential
products. In the first nine months of fiscal 2005, approximately 85% of our
$6,586,764 in research expenses was attributable to insulin and platform
technology development, and approximately 1% was attributable to morphine and
fentanyl projects. As morphine and fentanyl are both narcotic painkillers, the
research is related. In the same period of fiscal 2004, approximately 90% of our
$5,378,284 of research and development was expended for insulin and platform
technology, and approximately 1% for morphine and fentanyl.
 
 23
 Approximately
14% or $936,223 of our research and development expenses for the nine-month
period ended April 30, 2005 were related to Antigen's immunomedicine products
compared to approximately 10% or $547,370 for the same period ended April 30,
2004. Because these products are in a very early, pre-clinical stage of
development, all of the expenses were accounted for as basic research and no
distinctions were made as to particular products. Because of the early stage of
development, we cannot predict the timing of completion of any products arising
from this technology, or when products from this technology might begin
producing revenues. However, we can predict that we do not expect to begin
clinical trials during the current fiscal year.
 
 Developments
in Fiscal Quarter ended April 30, 2005
 
 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. The Company is of the view that the claims
are wholly without merit and intends to defend this action vigorously. The
Company is not able to predict the ultimate outcome of this legal proceeding at
the present time or estimate an amount or range of potential loss, if any, from
this legal proceeding.
 
 The
Company entered into a Promissory Note and Agreement with Cranshire Capital,
L.P. ("Cranshire") on March 28, 2005 and entered into a Promissory Note and
Agreement with Omicron Master Trust ("Omicron") on April 6, 2005 pursuant to
which Cranshire and Omicron loaned the Company the principal amount of $500,000
and $100,000, respectively. As additional consideration for the loans from
Cranshire and Omicron, the Company issued on April 28, 2005 a warrant to
Cranshire to purchase an aggregate of 1,219,512 shares of the Company's common
stock and a warrant to Omicron to purchase an aggregate of 243,902 shares of the
Company's common stock, both of which will expire on April 27, 2010. The terms
and conditions of the loans from Cranshire and Omicron, as well as the rights of
Cranshire and Omicron under the warrants, are described below under the caption *Financial
Condition, Liquidity and Resources* of this *Part
I - Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations* .
 
 On March
30, 2005, the Company entered into an Assistance Agreement with Eckert Seamans
Cherin & Mellott, LLC, ("Eckert Seamans"), pursuant to which Eckert Seamans
advanced the Company funds in the amount of $325,179.48 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 Company’s 6% Secured Convertible
Debentures. The terms and conditions of the Assistance Agreement with Eckert
Seamans, as well as the Company’s obligations with respect to the 6% Secured
Convertible Debentures, are described below under the caption *Financial
Condition, Liquidity and Resources* of this *Part
I - Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations* .
 
 On March
31, 2005 Generex Pharmaceuticals Inc. (“GPI”), a wholly-owned subsidiary of the
Company, entered into a mortgage loan transaction pursuant to which GPI borrowed
approximately $183,804 ($230,000 CND) (the “March Loan”). The net proceeds to
GPI after fees and disbursements were approximately $159,596 ($200,800 CND). The
March Loan was secured by, *inter
alia* , a
charge registered against real property owned by GPI. The loan was for a term of
two years with an annual interest rate of 13.5 % calculated
monthly.
 On April
12, 2005, the Company issued 175,316 shares of common stock resulting from the
conversion of $143,500 of convertible debenture principal.
 
 24
 On April
27, 2005 GPI entered into a mortgage loan transaction pursuant to which GPI
borrowed approximately $345,738 ($435,000 CND) (the “April Loan”). The net
proceeds to GPI after fees and disbursements were approximately $265,145
($333,600 CND). The April Loan was secured by, *inter
alia* , charges
registered against real property owned by GPI. The loan was for a term of one
year with an annual interest rate of 16.5 % calculated monthly.
 
 Developments
Subsequent to Fiscal Quarter Ended April 30, 2005 .
 
 In May
2005, the Company issued an aggregate of 1,165,437 shares of common stock
resulting from the conversion of $954,000 of convertible debenture principal and
$1,658 of accrued interest.
 
 On May 3,
2005, the Company announced that Oral-lynTM, its proprietary oral insulin spray
formulation, was approved for commercial marketing and sale by the Ecuadorian
Ministry of Public Health for the treatment of both Type-1 and Type-2 diabetes.
Oral-lynTM is delivered via the Company's proprietary RapidMistTM device into the
human mouth where it is absorbed with no lung deposition. The Company expects
that its South American joint venture partner, PharmaBrand S.A., will handle the
commercial launch of Oral-lynTM in Ecuador, subject to obtaining financing needed
for launch and a suitable production facility. The Company is continuing its
efforts to secure the participation of a multi-national pharmaceutical
co-marketing partner for the balance of South America.
 
 On May
19, 2005, the March Loan and the April Loan were consolidated and restructured
(the “Consolidated Loan”). Pursuant to the revised arrangement, GPI repaid an
aggregate of approximately $210,622 ($265,000 CND) (the “Consolidated Loan
Repayment”) in respect of the March Loan and the April Loan, leaving a
Consolidated Loan principal of approximately $317,920 ($400,000 CND). GPI paid
an aggregate of approximately $28,595 in fees and disbursements in connection
with the Consolidated Loan. The Consolidated Loan is secured by, *inter
alia* , charges
against real property owned by GPI. The loan was for a term of 1 year with an
annual interest rate of 16.5 % calculated monthly.
 
 On May
19, 2005, GPI
entered into two additional mortgage loan transactions pursuant to which GPI
borrowed an aggregate of approximately $643,788 ($810,000 CND) (together, the
“May Loans”). The net proceeds to GPI after fees and disbursements (including
fees and disbursements in connection with the Consolidated Loan) and the
Consolidated Loan Repayment were approximately $377,029 ($474,369 CND). The May
Loans are secured by, *inter
alia* , charges
registered against real property owned by GPI. Both loans are for a term of one
year with an annual interest rate of 4.924% as to the $246388 loan and 4.913% as
to the $397,400 loan calculated semi-annually.
 
 On May
25, 2005, the Company received notice from the Staff of The Nasdaq Stock Market
informing the Company that, during the 180 calendar day period ending May 23,
2005, the Company had not regained compliance with Marketplace Rule 4310(c)(4),
which requires the Company to have a minimum bid price per share of at least
$1.00 for 30 consecutive business days; however, the Staff noted that on May 23,
2005, the Company met all initial inclusion criteria for the SmallCap Market set
forth in Marketplace Rule 4310(c), except for bid price. Therefore, in
accordance with Marketplace Rule 4310(c)(8)(D), the Company has an additional
180 calendar days, or until November 21, 2005, to regain compliance with Rule
4310(c)(4). If, at any time before November 21, 2005, the bid price of the
Company’s common stock closes at $1.00 per share or more for a minimum of 10
consecutive business days, the Company will regain compliance with the
Rule.
 
 25
 In the
event that the Company cannot demonstrate compliance with Marketplace Rule
4310(c)(4) by November 21, 2005 and is not eligible for an additional compliance
period, the Staff will notify the Company that its securities will be delisted,
at which time the Company may appeal the Staff’s determination to a Listing
Qualifications Panel. Pending the decision of the Listing Qualification Panel,
the Company’s common stock will continue to trade on the SmallCap Market.
 
 The
Company first received notice from the Staff of the Company’s noncompliance with
Rule 4310(c)(4) on November 24, 2004 and was granted an initial 180 calendar day
period, or until May 23, 2005, to regain compliance.
 
 On June
7, 2005, Cranshire agreed to extend the interest payment date and the maturity
date under the March 28, 2005 Promissory Note and Agreement with the Company
from May 15, 2005 to July 22, 2005. On June 7, 2005, Omicron agreed to an
identical extension of the interest payment date and the maturity date under the
April 6, 2005 Promissory Note and Agreement with the Company. As consideration
for the extensions from Cranshire and Omicron, the Company contemporaneously
issued on a warrant to Cranshire to purchase an aggregate of 1,219,512 shares of
the Company's common stock and a warrant to Omicron to purchase an aggregate of
243,902 shares of the Company's common stock, both of which will expire on June
7, 2010. The rights of Cranshire and Omicron under the June 7, 2005 warrants are
described below under the caption Financial Condition, Liquidity and Resources
of this Part I - Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
 
 **Restatement**
 
 Subsequent
to the issuance of the Company’s financial statements for the year ended July
31, 2001, management determined that its Series A Preferred Stock should be
reclassified from stockholders' equity to mezzanine equity on our balance sheet,
in accordance with Emerging Issues Task Force Topic D-98, "Classification and
Measurement of Redeemable Securities," because the redemption feature of the
Series A Preferred Stock was beyond our control. This restatement did not affect
net loss for the year ended July 31, 2001, nor did it affect total assets. The
Series A Preferred stock should have been included outside the statement of
stockholders' equity from the date of its issuance in January 2001. The Series A
Preferred Stock has been converted into shares of our common stock. Accordingly,
the Series A Preferred Stock has been removed as mezzanine equity from our
balance sheet and the common stock has been classified as stockholders'
equity.
  Results
of Operations - Three and nine months ended April 30, 2005 and 2004
  We have
been in the development stage since inception and have not generated any
operating revenues to date, other than $1,000,000 in revenues received in
connection with the Development and License Agreement with Lilly in the quarter
ended October 31, 2000. To date, we have received a total of $890,434 in
research grants of which $263,250 was received during the nine months ended
April 30, 2005.
  Our net
loss for the quarter ended April 30, 2005 was
$ 4,696,670 versus
$4,900,075 in the corresponding quarter of the prior fiscal year. The decrease
in net loss in this fiscal quarter versus the corresponding quarter of the prior
fiscal year is due to a decrease of $1,383,368 in research and development
expenses and a decrease of $391,583 in general and administrative expenses. The
increase in interest expense of $ 1 ,366,2 07 reflects
additional interest paid in connection with the Debentures issued on November
12, 2004 and has lessened the impact of the decrease of operating expenses onto
net loss for the quarter.
  The
decrease in general and administrative expenses in the quarter ended April 30,
2005, compared to the quarter ended April 30, 2004, was the result of decreased
legal, advertising and travel expenses. The decrease in general and
administrative expenses was partially offset by increased executive
compensation, mortgage financing costs and an increase in financial and
consulting services incurred this year that were paid by the issuance of common
stock.
  26
  The
decrease in research and development expenses in the three-month period ending
April 30, 2005 compared to the corresponding period of the prior fiscal year
reflects reduced level of research and development activities of our oral
insulin project, offset by additional research and development activities by
Antigen and increased activities of regulatory consultants.
  Our net
loss for the nine months ended April 30, 2005 increased to $ 17,652,880 versus
$13,286,965 for the corresponding period of the prior fiscal year. The increase
in net loss was due primarily to an increase in operating expenses of $2,109,375
and additional interest expense related to convertible debentures of $ 2,126,261. The
increase in operating expenses was due to research and development expenses of
$6,586, 764,
versus $5,378,284 for the corresponding period of the prior fiscal year and
general and administrative expenses of $9,231,266, versus $8,487,814 for the
corresponding period of the prior fiscal year. The increase in operating
expenses was related to the activities of Antigen, bulk insulin purchases,
increased activities of regulatory consultants and higher clinical activity
compared to the first nine months of 2004. The increase also reflects severance
paid to an employee and executive compensation increase, increase in financing
and consulting costs and write-off of the notes receivable.
 
 Inflation
and changing prices have not had a significant effect on continuing operations
and are not expected to have a material effect in the foreseeable
future.
 
 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.
 
 At April
30, 2005, we had cash and short-term investments (primarily notes of United
States corporations) of approximately $435,874. At July 31, 2004, our cash and
short term investments were approximately $5  million.
The decrease was attributable to the use of cash for ongoing operations. At
April 30, 2005, we believed that our anticipated cash position was sufficient to
meet our working capital needs for the next three months based on the pace of
our planned development 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.
 
 The
Company issued 6% Secured Convertible Debentures (the “Debentures”) and related
warrants on November 12, 2004 in connection with a private placement for an
aggregate purchase price of $4,000,000. The Debentures have a term of fifteen
months and amortize over thirteen months in thirteen equal monthly installments
beginning on February 1, 2005. Interest on the principal amount outstanding will
accrue at a rate of six percent per annum. The Company may pay principal and
accrued interest in cash or, at its option, in shares of common stock. If the
Company elects to pay principal and interest in shares of its common stock, the
value of each share of common stock will be equal to the lesser of (i) $0.82 and
(ii) ninety percent (90%) of the average of the twenty (20) trading day volume
weighted average price for the common stock for the twenty (20) trading day
period immediately preceding the date of payment. At the option of the holder of
each Debenture, the principal amount outstanding under each Debenture is
initially convertible at any time after the closing of the private placement
into shares of the Company’s common stock at a conversion price of $0.82. The
conversion price of each Debenture is based on the average of the ten trading
day volume weighted average price for the common stock for the ten trading day
period immediately preceding the date definitive agreements for purchase of the
Debentures were signed. The warrants are 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 is 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 are each subject to an
anti-dilution adjustment upon the issuance by the Company of securities at a
price per share less than the then conversion price or exercise price, as
applicable.
 
 27
 In
connection with the issuance of the Debentures, the Company granted an
Additional Investment Right to holders of the Debentures. Pursuant to the terms
of each Additional Investment Right, each holder has 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. The Company 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 pursuant to the November
2004 private placement of Debentures and related warrants exceeded 19.99% of the
outstanding shares of the Company’s 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 the Company’s 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 the Company’s
stockholders at the Annual Meeting of Stockholders held on April 5, 2005 as
described below in *Part
II - Item 4. Submission of Matters to a Vote of Security
Holders* .
 
 The
Company entered into a Promissory Note and Agreement with Cranshire Capital,
L.P. ("Cranshire") on March 28, 2005 and entered into a Promissory Note and
Agreement with Omicron Master Trust ("Omicron") on April 6, 2005 pursuant to
which Cranshire and Omicron loaned the Company the principal amount of $500,000
and $100,000, respectively (the "Notes"). The outstanding principal balance
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 as described below. The Notes are
subordinate to the obligations of the Company under the Debentures. The Company
was obligated to use a portion of the proceeds received from Cranshire to pay
two of the holders (not including Cranshire or Omicron) of the Debentures the
full amount of the March 1, 2005 monthly amortization payments due under the
Debentures.
 
 On April
28, 2005, as additional consideration for the loans from Cranshire and Omicron,
the Company issued Cranshire a warrant to purchase an aggregate of 1,219,512
shares of the Company's common stock and issued Omicron a warrant to purchase an
aggregate of 243,902 shares of the Company's common stock, both of which will
expire on April 27, 2010 (the "Warrants"). At the holders’ option, the
outstanding principal balance under the Notes, together with any accrued but
unpaid interest thereon, and the Warrants are convertible or exercisable into
shares of common stock at the conversion/exercise price of $0.82 per share.
Cranshire and Omicron have agreed that they will neither convert the Notes nor
exercise the Warrants if such conversion or exercise would cause Cranshire and
Omicron, together with their respective affiliates, to beneficially own more
than 9.99% of the shares of common stock then outstanding. The Company has
agreed to register the shares of common stock issued upon conversion of the
Notes and exercise of the Warrants for resale in the next registration statement
on which such shares may be registered that the Company files with the
Securities and Exchange Commission (the "SEC").
 
 28
 Cranshire's
and Omicron’s right to convert the Notes is subject to certain participation
rights of Iroquois Capital, L.P. and Smithfield Fiduciary, LLC, which, together
with Cranshire and Omicron, are the holders of the Debentures issued pursuant to
a Securities Purchase Agreement, which closed on November 15, 2004 (the
"Securities Purchase Agreement"). The Securities Purchase Agreement is discussed
in and filed as an exhibit to the Company's Current Report on Form 8-K, filed
November 12, 2004. The participation rights granted to the holders of the
Debentures under the Securities Purchase Agreement provide that, upon any
financing by the Company or any of its subsidiaries of common stock or debt or
securities convertible or exercisable into common stock, each such holder will
have the right to purchase up to 100% of such financing. To the Company’s
knowledge, none of the other holders of Debentures have elected to exercise
their participation rights with respect to the Notes.
 
 The
Company did not pay
the outstanding principal balance originally due on
May 15, 2005 under the Notes. Interest on the outstanding principal balance
under the Notes began accruing before the maturity date at the rate of 10% per
annum . On June
7, 2005, Cranshire and Omicron
agreed to extend the interest payment
date and the maturity date of each of the Notes from May 15, 2005 to July 22,
2005. In consideration for the foregoing extension, the Company
contemporaneously issued Cranshire a warrant to purchase an aggregate of
1,219,512 shares of the Company's common stock and issued Omicron a warrant to
purchase an aggregate of 243,902 shares of the Company's common stock, both of
which will expire on June 7,
2010 (the "Amendment Warrants"). At the holder’s option , each
Amendment Warrant will be
exercisable into shares of the Company’s common stock at the exercise
price of $0.82 per share . Each of
Cranshire and Omicron has agreed that it will not exercise its Amendment Warrant
if such exercise would cause it, together with its affiliates, to beneficially
own more than 9.99% of the shares of the Company’s common stock then
outstanding. The Company has agreed to register the shares of common stock
issuable upon exercise of the Amendment Warrants for resale in the next
registration statement on which such shares may be registered that the Company
files with the SEC.
 
 On March
30, 2005, the Company also entered into an Assistance Agreement with Eckert
Seamans Cherin & Mellott, LLC, ("Eckert Seamans"), pursuant to which Eckert
Seamans advanced the Company funds in the amount of $325,179.48 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 (the
"Assistance Agreement"). The Company has agreed to repay such advance without
interest in three equal installments due on October 1, 2005, November 1, 2005
and December 1, 2005. If the Company fails to pay any installment when due, all
amounts owed to Eckert Seamans will be payable on demand, and interest on such
unpaid amounts will accrue at the rate of 8% per annum. In connection with this
transaction, the Company executed a release in favor of Eckert Seamans. Eckert
Seamans has represented the Company in various transactions and matters since
1998 and represented the Company with respect to the Securities Purchase
Agreement and certain other transactions relating to the Debentures but did not
represent the Company with respect to the Assistance Agreement or the release
executed in connection therewith.
 
 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.
 
 29
 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.
 
 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
    6,353,216
    5,404,234
    948,982
    0
    0Capital
      Lease Obligations
    0
    0
    0
    0
    0Operating
      Lease Obligations
    85,924
    39,455
    36,308
    10,161
    0Purchase
      Obligations
    0
    0
    0
    0
    0Other
      Long-Term Liabilities Reflected on the Registrant's Balance Sheet under
      GAAP
    0
    0
    0
    0
    0Total
    $6,439,140
    $5,443,689
    $985,290
    $10,161
    $0
 
 30
 
 **Related
Party Transactions**
 
 On May 3,
2001, we advanced $334,300 to each of three senior officers, who are also our
stockholders, in exchange for promissory notes. These notes bore interest at
8.5% per annum and were payable in full on May 1, 2002. These notes were
guaranteed by a related company owned by these officers and secured by a pledge
of 2,500,000 shares of our common stock owned by this related company. On June
3, 2002, our Board of Directors extended the maturity date of the loans to
October 1, 2002. The other terms and conditions of the loans and guaranty
remained unchanged and in full force and effect. As of July 31, 2002, the
balance outstanding on these notes, including accrued interest, was $1,114,084.
Pursuant to a decision made by the Compensation Committee as of August 30, 2002,
these loans were satisfied through the application of 592,716 shares of pledged
stock, at a value of $1.90 per share, which represented the lowest closing price
during the sixty days prior to August 30, 2002.
 
 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.
 
 On August
7, 2002, we purchased real estate with an aggregate purchase price of
approximately $1.6 million from an unaffiliated party. In connection with that
transaction, Angara Enterprises, Inc., a licensed real estate broker that is an
affiliate of Anna Gluskin, our Chairman, President and Chief Executive Officer,
received a commission from the proceeds of the sale to the seller in the amount
of 3% of the purchase price, or $45,714. We believe that this is less than the
aggregate commission which would have been payable if a commission had been
negotiated with an unaffiliated broker on an arm's length basis.
 
 We
utilize a management company to manage all of our real properties. The property
management company is owned by Rose Perri, our Chief Operating Officer, Chief
Financial Officer, Treasurer and Secretary, Anna Gluskin and the estate of Mark
Perri, our former Chairman of the Board. In the fiscal years ended July 31, 2004
and 2003 we paid the management company approximately $40,180 and $33,237,
respectively, in management fees.
 
 **New
Accounting Pronouncements**
 
 In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
SFAS No. 123R “Share Based Payment.” This statement is a revision to SFAS
123 and supersedes Accounting Principles Board (APB) Opinion No. 25,
“Accounting for Stock Issued to Employees,” and amends FASB Statement
No. 95, “Statement of Cash Flows”. This statement requires a public entity
to expense the cost of employee services received in exchange for an award of
equity instruments using the fair-value-based method. This statement also
provides guidance on valuing and expensing these awards, as well as disclosure
requirements of these equity arrangements. This statement is effective for the
next fiscal year that begins after June 15, 2005.
 
 31
 SFAS
123R permits public companies to choose between the following two adoption
methods:
 
 1.
    A
      “modified prospective” method in which compensation cost is recognized
      beginning with the effective date (a) based on the requirements of
      SFAS 123R for all share-based payments granted after the effective date
      and (b) based on the requirements of Statement 123 for all awards
      granted to employees prior to the effective date of SFAS 123R that remain
      unvested on the effective date; or2.
    A
      “modified retrospective” method which includes the requirements of the
      modified prospective method described above, but also permits entities to
      restate based on the amounts previously recognized under SFAS 123 for
      purposes of pro forma disclosures either (a) all prior periods
      presented or (b) prior interim periods of the year of adoption.
 
 As
permitted by SFAS 123, the Company currently accounts for share-based payments
to employees using APB Opinion 25’s intrinsic value method and, as such, the
Company generally recognizes no compensation cost for employee stock options.
The impact of the adoption of SFAS 123R cannot be predicted at this time because
it will be depend on levels of share-based payments granted in the future.
However, valuation of employee stock options under SFAS 123R is similar to SFAS
123, with minor exceptions. The impact on the results of operations and earnings
per share had the Company adopted SFAS 123, is described in the stock-based
compensation section of Note 3 in the *Notes
to Consolidated Financial Statements* in *Part
I - Financial Information* of this
Quarterly Report on Form 10-Q. Accordingly, the adoption of SFAS 123R’s fair
value method will have a significant impact on the Company’s results of
operations, although it will have no impact on the Company’s overall financial
position. SFAS 123R also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash flow, rather
than as an operating cash flow as required under current literature. This
requirement will reduce net operating cash flows and increase net financing cash
flows in periods after adoption. Due to timing of the release of SFAS 123R, the
Company has not yet completed the analysis of the ultimate impact that this new
pronouncement will have on the results of operations, nor the method of adoption
for this new standard.
 
 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. The Company is currently evaluating
the impact of adopting this statement.
 
 **Risk
Factors**
 
 An
investment in our stock is very speculative and involves a high degree of risk.
You should carefully consider the following important factors, as well as the
other information in this Report and the other reports that we have filed
heretofore (and will file hereafter) with the SEC, before purchasing our stock.
The following discussion outlines certain factors that we think could cause our
actual outcomes and results to differ materially from our forward-looking
statements.
  In
addition to historical facts or statements of current condition, this Annual
Report on Form 10-K contains forward-looking statements. Forward-looking
statements provide our current expectations or forecasts of future events.
 
 32
 The
following discussion outlines certain factors that we think could cause our
actual outcomes and results to differ materially from our forward-looking
statements. These factors are in addition to those set forth elsewhere in this
Quarterly Report on Form 10-Q.
 
 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 ongoing revenues from operation in the immediately foreseeable future. To
date, we have not been profitable and our accumulated net loss before preferred
stock dividend was
$ 111,884,196 at April
30, 2005. 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 or marketing, 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:
 
 ·
    to
      proceed with the development of our buccal insulin
  product;
 ·
    to
      develop other buccal and immunomedicine
products;
 ·
    to
      develop new products based on our buccal delivery and immunomedicine
      technologies, including clinical testing relating to new
      products;
 ·
    to
      develop or acquire other technologies or other lines of
      business;
 ·
    to
      establish and expand our manufacturing capabilities;
 ·
    to
      finance general and administrative and research activities that are not
      related to specific products under development;
and
 ·
    to
      finance the research and development activities of our new subsidiary
      Antigen.
 
 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 three 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.
 
 33
 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.
 
 *New
equity financing could dilute current stockholders.*
 
 If we
raise funds through equity financing to meet the needs discussed above, it will
have a dilutive effect on existing holders of our shares by reducing their
percentage ownership. The shares may be sold at a time when the market price is
low because we need the funds. This will dilute existing holders more than if
our stock price was higher. In addition, equity financings normally involve
shares sold at a discount to the current market price.
 
 *Our
research and development and marketing efforts are likely to be highly dependent
on corporate collaborators and other third parties who may not devote sufficient
time, resources and attention to our programs, which may limit our efforts to
successfully develop and market potential products* .
 
 Because
we have limited resources, we have sought to enter into collaboration agreements
with other pharmaceutical companies that will assist us in developing, testing,
obtaining governmental approval for and commercializing products using our
buccal delivery and immunomedicine technologies. Any collaborator with whom we
may enter into such collaboration agreements may not support fully our research
and commercial interests since our program may compete for time, attention and
resources with such collaborator's internal programs. Therefore, these
collaborators may not commit sufficient resources to our program to move it
forward effectively, or that the program will advance as rapidly as it might if
we had retained complete control of all research, development, regulatory and
commercialization decisions.
 
 Risks
Related to Our Technologies
 
 *Because
our technologies and products are at an early stage of development, we cannot
expect revenues in the foreseeable future.*
 
 With the
exception of 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, 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 800 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.
 
 34
 *We
will not receive revenues from operations until we receive regulatory approval
to sell our products in one or more countries other than Ecuador. 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
and fentanyl products in other countries. Our immunomedicine products are in the
pre-clinical stage of development.
 
 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.
 
 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.
 
 *Due
to legal and factual uncertainties regarding the scope and protection afforded
by patents and other proprietary rights, we may not have meaningful protection
from competition.*
 
 Our
long-term success will substantially depend upon our ability to protect our
proprietary technologies from infringement, misappropriation, discovery and
duplication and avoid infringing the proprietary rights of others. Our patent
rights, and the patent rights of biotechnology and pharmaceutical companies in
general, are highly uncertain and include complex legal and factual issues.
Because of this, our pending patent applications may not be granted. These
uncertainties also mean that any patents that we own or will obtain in the
future could be subject to challenge, and even if not challenged, may not
provide us with meaningful protection from competition. Due to our financial
uncertainties, we may not possess the financial resources necessary to enforce
our patents. Patents already issued to us or our pending applications may become
subject to dispute, and any dispute could be resolved against us.
 
 Because a
substantial number of patents have been issued in the field of alternative drug
delivery and because patent positions can be highly uncertain and frequently
involve complex legal and factual questions, the breadth of claims obtained in
any application or the enforceability of our patents cannot be predicted.
Consequently, we do not know whether any of our pending or future patent
applications will result in the issuance of patents or, to the extent patents
have been issued or will be issued, whether these patents will be subject to
further proceedings limiting their scope, will provide significant proprietary
protection or competitive advantage, or will be circumvented or invalidated.
 
 Also
because of these legal and factual uncertainties, and because pending patent
applications are held in secrecy for varying periods in the United States and
other countries, even after reasonable investigation we may not know with
certainty whether any products that we (or a licensee) may develop will infringe
upon any patent or other intellectual property right of a third party. For
example, we are aware of certain patents owned by third parties that such
parties could attempt to use in the future in efforts to affect our freedom to
practice some of the patents that we own or have applied for. Based upon the
science and scope of these third party patents, we believe that the patents that
we own or have applied for do not infringe any such third party patents;
however, we cannot know for certain whether we could successfully defend our
position, if challenged. We may incur substantial costs if we are required to
defend the Company in patent suits brought by third parties. These legal actions
could seek damages and seek to enjoin testing, manufacturing and marketing of
the accused product or process. In addition to potential liability for
significant damages, we could be required to obtain a license to continue to
manufacture or market the accused product or process.
 
 35
 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:
 
 ·
    acceptance
      of the formulation or treatment by health care professionals and diabetic
      patients;
 ·
    the
      availability, effectiveness and relative cost of alternative diabetes or
      immunomedicine treatments that may be developed by competitors;
      and
 ·
    the
      availability of third-party (i.e., insurer and governmental agency)
      reimbursements.
 
 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 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. Many 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.
 
 36
 *If
government programs and insurance companies do not agree to pay for or reimburse
patients for our products, we will not be successful.*
 
 Sales of
our oral insulin formulation in Ecuador and our potential products in other
markets depend in part on the availability of reimbursement by third-party
payers such as government health administration authorities, private health
insurers and other organizations. Third-party payers often challenge the price
and cost-effectiveness of medical products and services. Governmental approval
of health care products does not guarantee that these third party payers will
pay for the products. Even if third party payers do accept our product, the
amounts they pay may not be adequate to enable us to realize a profit.
Legislation and regulations affecting the pricing of pharmaceuticals may change
before our products are approved for marketing and any such changes could
further limit reimbursement.
 
 Risks
Related to Potential Liabilities
 
 *We
face significant product liability risks, which may have a negative effect on
our financial condition.*
 
 The
administration of drugs or treatments to humans, whether in clinical trials or
commercially, can result in product liability claims whether or not the drugs or
treatments are actually at fault for causing an injury. Furthermore, our
products may cause, or may appear to have caused, serious adverse side effects
(including death) or potentially dangerous drug interactions that we may not
learn about or understand fully until the drug or treatment has been
administered to patients for some time. Product liability claims can be
expensive to defend and may result in large judgments or settlements against us,
which could have a severe negative effect on our financial condition. We
maintain product liability insurance in amounts we believe to be commercially
reasonable for our current level of activity and exposure, but claims could
exceed our coverage limits. Furthermore, due to factors in the insurance market
generally and our own experience, we may not always be able to purchase
sufficient insurance at an affordable price. Even if a product liability claim
is not successful, the adverse publicity and time and expense of defending such
a claim may interfere with our business.
 
 *Outcome
of an Arbitration Proceeding with Sands Brothers may have an adverse impact on
us.*
 
 On
October 2, 1998, Sands Brothers & Co. Ltd., a New York City-based investment
banking and brokerage firm, initiated an arbitration against us under New York
Stock Exchange rules. Sands alleged that it had the right to receive, for
nominal consideration, approximately 1.5 million shares of our common stock.
Sands based its claim upon an October 1997 letter agreement that was purported
by Sands to confirm an agreement appointing Sands as the exclusive financial
advisor to Generex Pharmaceuticals, Inc., a subsidiary that we acquired in late
1997. In exchange therefor, the letter agreement purported to grant Sands the
right to acquire 17% of Generex Pharmaceuticals' common stock for nominal
consideration. Sands claimed that its right to receive shares of Generex
Pharmaceuticals' common stock applies to our common stock since outstanding
shares of Generex Pharmaceuticals' common stock were converted into shares of
our common stock in the acquisition. Sands' claims also included additional
shares allegedly due as a fee related to that acquisition, and $144,000 in
monthly fees allegedly due under the terms of the purported agreement.
 
 After
several arbitration and court proceedings, on October 29, 2002, the Appellate
Division of the New York Supreme Court issued a decision remanding the issue of
damages to a new panel of arbitrators and limiting the issue of damages before
the new panel to reliance damages which is not to include an award of lost
profits. Reliance damages are out-of-pocket damages incurred by Sands.
 
 On August
17, 2004, the Arbitration Panel of the New York Stock Exchange issued a final
award in the case of Sands vs. the Company, awarding Sands $150,000 in reliance
damages. A motion to confirm this award has been awarded to Sands. Sands has
advised the Company that it intends to seek leave from the New York Court of
Appeals to appeal the prior orders of the Appellate Division vacating the prior
Arbitration Panel's warrant awards. Consequently, it is likely that there will
be further legal proceedings with respect to this matter. Accordingly, only
$150,000 has been recorded in the accompanying financial statements.
 
 37
 The case
is still ongoing and our ultimate liability cannot yet be determined with
certainty. Our financial condition would be materially adversely affected to the
extent that Sands receives shares of our common stock for little or no
consideration or substantial monetary damages as a result of this legal
proceeding. Apart from $150,000 accrual, we are not able to estimate an amount
or range of potential loss from this legal proceeding at the present time.
 
 Risks
Related to the Market for Our Common Stock
 
 *Our
common stock may be delisted from The Nasdaq SmallCap 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 SmallCap Market. The Nasdaq
SmallCap 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 Market Place
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 SmallCap
Market and begin trading on the over-the-counter bulletin board.
 
 In
addition, for continued listing on both The Nasdaq National Market and SmallCap
Market, our stock price must be at least $1.00. Since October of 2004, our stock
price traded below this minimum per share requirement for thirty (30)
consecutive business days. As a result, on November 24, 2004, we received notice
from The Nasdaq Stock Market informing us that we do 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 SmallCap
Market set forth in Marketplace Rule 4310(c), except for bid price. Therefore,
in accordance with Marketplace Rule 4310(c)(8)(D), we have an additional 180
calendar days to regain compliance with Rule 4310(c)(4). Although we have until
November 21, 2005 to regain compliance with the Rule, there is no guarantee that
the bid price of our common stock will close at $1.00 per share or more for a
minimum period of ten (10) consecutive business days, which is the minimum
period of time The Nasdaq Stock Market requires to regain
compliance.
 
 38
 In the
event that we cannot demonstrate compliance with Marketplace Rule 4310(c)(4) by
November 21, 2005 and is not eligible for an additional compliance period, the
Staff will notify us that our stock will be delisted, at which time we may
appeal the Staff’s determination to a Listing Qualifications Panel. Pending the
decision of the Listing Qualification Panel, our common stock will continue to
trade on the SmallCap Market. If we are not successful in such an appeal, our
stock will likely trade on NASDAQ’s over-the-counter bulletin board, assuming we
meet the requisite criteria.
 
 *If
our stock is delisted from NASDAQ SmallCap 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 SEC'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:
 
 ·
    announcements
      of research activities and technology innovations or new products by us or
      our competitors;
 ·
    changes
      in market valuation of companies in our industry
  generally;
 ·
    variations
      in operating results;
 ·
    changes
      in governmental regulations;
 ·
    developments
      in patent and other proprietary rights;
 ·
    public
      concern as to the safety of drugs or treatments developed by us or
      others;
 ·
    results
      of clinical trials of our products or our competitors' products;
      and
 ·
    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.
 
 *Our
outstanding Special Voting Rights Preferred Stock and provisions of our Restated
Certificate of Incorporation could delay or prevent the acquisition or sale of
our business.*
 
 Holders
of our Special Voting Rights Preferred Stock have the ability to prevent any
change of control in us. Dr. Pankaj Modi, a former officer and director of
Generex, owns all of our Special Voting Rights Preferred Stock. In addition, our
Restated Certificate of Incorporation permits our Board of Directors to
designate new series of preferred stock and issue those shares without any vote
or action by our stockholders. Such newly authorized and issued shares of
preferred stock could contain terms that grant special voting rights to the
holders of such shares that make it more difficult to obtain stockholder
approval for an acquisition of our business or increase the cost of any such
acquisition.
 
 39
 **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, 2005, we have fixed rate debt totaling $2,819,793. This amount
consists of the following:
 
 Loan
      Amount
    Interest
      Rate per Annum$784,194
    5.8%$317,920
    8.5%$598,372
    9.7%$193,365
    10%$397,400
    11.5%$182,804
    13.5%$345,738
    16.5%2,819,793
    *Total*
 
 These
debt instruments mature from July 2005 through August 2006 . 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.
 
 40
 **Changes
in internal controls**
 
 There was
no change in our internal controls 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**
 
 In
February 2005, a consultant filed a Statement of Claim in the Ontario Superior
Court of Justice, File No., 05-CV-284560 PD1 seeking approximately $600,000 in
damages for alleged contract breaches in respect of unpaid remuneration and
other compensation allegedly owed to him. The Company is of the view that it has
no liability in this matter and intends to defend this action vigorously. Due to
the early stage of this action, the Company is not able to predict the ultimate
outcome of this legal proceeding at the present time or estimate an amount or
range of potential loss, if any, from this legal proceeding.
  **Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.**
  (i)  On March
28, 2005, the Company entered into a convertible promissory note in the
principal amount of $500,000. On April 28, 2005, in connection therewith, the
Company issued a warrant to purchase an aggregate of 1,219,512 shares of the
Company's common stock. See the discussion of this transaction in this Quarterly
Report on Form 10-Q above under *Part
I - Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations - Financial Condition, Liquidity and
Resources* . A
description of this transaction is contained in the Company’s Current Report on
Form 8-K, filed with the SEC on April 1, 2005.
  (ii)  On April
5, 2005, the Company’s Board of Directors directed that the payment of all
unpaid director fees due and owing to John P. Barratt and Brian T. McGee as of
the close of business on April 4, 2005 be satisfied by the issuance under the
Amended Generex Biotechnology Corporation 2001 Stock Option Plan (the “Plan”) of
stock options to purchase shares of common stock at the exercise price of $0.001
per share. The number of shares awarded was calculated using the closing price
of the common stock on The Nasdaq SmallCap Market on April 4, 2005 ($0.56 per
share). Accordingly, Messrs. Barratt and McGee each received options to purchase
35,714 shares of common stock in respect of such unpaid director fees. All of
the options became exercisable immediately upon grant and expire on April 4,
2010. The option agreements relating to the foregoing option issuances to
Messrs. Barratt and McGee are attached as Exhibits 10.6 and 10.7 to this
Quarterly Report on Form 10-Q. In the event that the issuance of stock options
to Messrs. Barratt and McGee in payment of unpaid director fees is deemed to be
a “sale” as that term is defined under Section 2(a)(3) of the Securities Act of
1933, as amended (the “Securities Act”), each such “sale” is exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof.
Messrs. Barratt and McGee, as directors of the Company, are “accredited
investors” as that term is defined in Rule 501(a) of Regulation D. The sale, if
any, 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.
  41
 (iii)  As
previously reported on the Company’s Current Report on Form 8-K filed with the
SEC on April 11, 2005, the Company’s Board of Directors, on April 5, 2005,
increased the annual base salaries of certain executive officers effective as of
August 1, 2004. Anna E. Gluskin’s annual base salary was increased from $350,000
to $425,000; Rose C. Perri’s annual base salary was increased from $295,000 to
$325,000; and Mark A. Fletcher’s annual base salary was increased from $130,000
to $250,000. The Board of Directors directed that the payment of any and all
unpaid salary amounts to Ms. Gluskin, Ms. Perri and Mr. Fletcher as of April 4,
2005, including all unpaid amounts arising from such retroactive increases and
any and all salary amounts foregone by Ms. Gluskin and Ms. Perri, be satisfied
by the issuance under the Plan of stock options to purchase shares of common
stock at the exercise price of $0.001 per share. The number of shares awarded
was calculated using the closing price of the common stock on the NASDAQ
SmallCap Market on April 4, 2005 ($0.56 per share). Accordingly, Ms. Gluskin,
Ms. Perri and Mr. Fletcher received options to purchase 301,032, 166,916 and
142,857 shares of common stock, respectively, in respect of such retroactive
salary adjustments calculated for the period from August 1, 2004 to March 31,
2005 and foregone salary accrued through March 31, 2005. All of the options
became exercisable immediately upon grant and expire on April 4, 2010. The
option agreements relating to the foregoing option grants to Mr. Fletcher, Ms.
Gluskin and Ms. Perri are attached as Exhibits 10.12, 10.13 and 10.14,
respectively, to this Quarterly Report on Form 10-Q. In the event that the
issuance of stock options to Mr. Fletcher, Ms. Gluskin and Ms. Perri in
satisfaction of retroactive salary adjustments and the issuance of such options
to Ms. Gluskin and Ms. Perri in satisfaction of foregone salary is deemed to be
a “sale” as that term is defined under Section 2(a)(3) of the Securities Act,
each such “sale” is exempt from registration under the Securities Act in
reliance upon Section 4(2) thereof. Mr. Fletcher, Ms. Gluskin and Ms. Perri, as
executive officers of the Company and, in the case of Ms. Gluskin and Ms. Perri,
as directors of the Company, are “accredited investors” as that term is defined
in Rule 501(a) of Regulation D. The sale, if any, 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.
  (iv)  On April
6, 2005, the Company entered into a convertible promissory note in the principal
amount of $100,000. On April 28, 2005, in connection therewith, the Company
issued a warrant to purchase an aggregate of 243,902 shares of the Company's
common stock. See the discussion of this transaction in this Quarterly Report on
Form 10-Q above under *Part
I - Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations - Financial Condition, Liquidity and
Resources* . A
description of this transaction is contained in the Company’s Current Report on
Form 8-K, filed with the SEC on April 12, 2005.
  (v)  On April
28 2005, the Company issued 250,000 shares of common stock at a per share price
of $0.82 to Investor Relations International (“IRI”) in partial consideration
for services to be rendered by IRI under a Letter of Engagement and Work
Authorization which the Company and IRI entered into on February 18, 2005 and
pursuant to which IRI agreed to conduct a retail investor marketing campaign as
requested by the Company for an initial period of two months. On April 28, 2005,
the Company also issued 100,000 shares of common stock at a per share price of
$0.82 to IRI in partial consideration for certain investor relation and
financial communication services to be rendered by IRI commencing April 1, 2005
under a separate Letter of Engagement and Work Authorization entered into by the
Company and IRI on February 18, 2005 (the “Investor Relations Engagement
Letter”). Pursuant to the terms of the Investor Relations Engagement Letter, the
Company is obligated to issue an additional 500,000 shares of common stock in
the event that the Company is not delisted from NASDAQ’s SmallCap Market. All
shares of the Company’s common stock issued to IRI shall be restricted for
twelve 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. IRI has represented to the Company 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 sales 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.
  42
 (vi)  On April
28, 2005, the Company issued to The Aethena Group, LLC (“Aethena”) a warrant to
purchase up to 100,000 shares of the Company’s common stock at a price per share
of $0.82 as partial consideration for Aethena’s acting as the Company’s
non-exclusive finder with respect to investors for private placements sales by
the Company pursuant to the terms of the Finder’s Agreement entered into by the
Company and Aethena on March 22, 2005. The warrant issued to Aethena has a
five-year term and provides for cashless exercise after 12 months if the Company
has not registered the shares underlying the warrant under the Securities Act.
The number of shares underlying the warrant will be subject to equitable
adjustment for stock splits, stock dividends and similar events. Aethena has
certain “piggyback” registration rights with respect to the shares of common
stock underlying the warrant. The sale of the warrant to Aethena, including the
shares of common stock to be issued upon exercise of the warrant, is exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof.
Aethena has represented to the Company that it is an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D. The warrant is, and the
certificates issued for the shares of common stock to be issued upon exercise of
the warrant will be, legended to indicate that they are restricted. The sales of
such securities did not involve the use of underwriters, and no commissions were
paid in connection with the issuance or sale, if any, thereof.
  (vii)  Prior to
April 30, 2005, the Company issued an aggregate of 950,927 shares of restricted
common stock to certain suppliers of goods and services in satisfaction of an
aggregate of US $779,760 in accounts payable owed by the Company, including
Instituto de Endocrinologia Metabolismo y Reproduccion in Quito, Ecuador which
received 625,461 shares in satisfaction of $512,877.63 in accounts payable and
Teleconsa S.A. in Quito, Ecuador which received 164,634 shares in satisfaction
of $135,000 in accounts payable. The number of shares awarded was calculated
using a price per share of $0.82. The sales of the restricted stock are exempt
from registration under the Securities Act in reliance upon Section 4(2)
thereof. Each of the suppliers to which the Company has issued restricted shares
of common stock has represented to the Company that it is an “accredited
investor” as that term is defined in Rule 501(a) of Regulation D. The
certificates issued for the shares of common stock issued to such suppliers were
legended to indicate that they are restricted. The sales 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.
  (viii)  On June
7, 2005, Cranshire agreed to extend the interest payment date and the maturity
date under the March 28, 2005 Promissory Note and Agreement with the Company
from May 15, 2005 to July 22, 2005. On June 7, 2005, Omicron agreed to an
identical extension of the interest payment date and the maturity date under the
April 6, 2005 Promissory Note and Agreement with the Company. As consideration
for the extensions from Cranshire and Omicron, the Company contemporaneously
issued on a warrant to Cranshire to purchase an aggregate of 1,219,512 shares of
the Company's common stock and a warrant to Omicron to purchase an aggregate of
243,902 shares of the Company's common stock, both of which will expire on June
7, 2010. See the discussion of these transactions in this
Quarterly Report on Form 10-Q above
under Part I - Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations - Financial Condition, Liquidity and
Resources. A description of these transactions is contained in the Company’s
Current Report on Form 8-K, filed with the SEC on June 10, 2005.
 
 **Item
3. Defaults Upon Senior Securities**
  The
Company did not pay the outstanding principal balances under the $500,000
convertible promissory note entered into with Cranshire on March 28, 20005 and
the $100,000 convertible promissory note entered into with Omicron on April 6,
2005 (collectively, the “Notes”). The outstanding principal balance under each
of the Notes was originally due and
payable on May 15, 2005,
but, on June 7,
2005, Cranshire and Omicron agreed to extend the interest
payment date and the
maturity date of each Note
to July 22, 2005. For more
information about the Notes and a description of the conversion rights of
Cranshire and Omicron under the Notes, see *Part
I - Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations - Financial Condition, Liquidity and
Resources* .
  43
 **Item
4. Submission of Matters to a Vote of Security Holders**
  The
Annual Meeting of Stockholders of the Company was held on April 5, 2005. At the
meeting, 23,745,691 shares
of common stock were represented out of
35,733,643 shares that were entitled
to vote. The
Company’s stockholders took the following actions at the Annual
Meeting:
 
 ·
    elected
      all seven nominees to the Board of
Directors;
 
 ·
    a
      proposal to authorize the Board of Directors to issue up to 10,000,000
      shares of common stock at less than market price in excess of amounts
      permitted under NASDAQ rules;
 
 ·
    a
      proposal to authorize the Board of Directors to issue up to 18,487,425
      shares of common stock, in excess of the 6,962,447 shares of common stock
      the Board of Directors is permitted to issue without prior stockholder
      approval, (i)(a) as payment for outstanding principal of, and interest on,
      the Debentures or (b) upon conversion of the Debentures into shares of
      common stock, and (ii) upon exercise of warrants and additional investment
      rights issued in connection with the issuance of the
      Debentures;
 
 ·
    a
      proposal to authorize the Board of Directors to temporarily or permanently
      reduce the exercise price of some or all of the Company’s warrants to a
      price not less than 90% of the common stock's market price at the time the
      exercise prices are reduced;
 
 ·
    a
      proposal to amend the Amended Generex Biotechnology Corporation 2001 Stock
      Option Plan to increase the number of shares issuable upon exercise of
      options granted under the Plan from 8,000,000 to 12,000,000;
      and
 
 ·
    ratified
      the appointment of BDO Dunwoody, LLP as independent public accountants for
      the Company for the fiscal year ending July 31,
2005.
 
 The
results of the vote for the Board of Directors was as follows:
 
 **Election
      of nominees to Board of Directors for terms expiring May
      2005**
    **Votes
      For**
    **Votes
      Against**
    **Abstentions**Mindy
      J. Allport-Settle
    23,638,929
    0
    106,762Peter
      Amanatides
    23,640,366
    0
    105,325John
      P. Barratt
    23,642,554
    0
    103,137Gerald
      Bernstein, M.D.
    23,632,376
    0
    113,315Anna
      E. Gluskin
    23,559,057
    0
    186,634Brian
      T. McGee
    23,639,601
    0
    106,090Rose
      C. Perri
    23,629,706
    0
    115,985
 
 44
 The
stockholders of the Company also approved the following proposals:
 
 ·
    The
      proposal to authorize the Board of Directors, in the three-month period
      commencing with the date of the Annual Meeting, to issue, without prior
      stockholder approval, in connection with capital raising transactions,
      and/or acquisitions of assets, businesses or companies, up to 10,000,000
      shares of common stock, including options, warrants, securities or other
      rights convertible into common stock, in the aggregate, in excess of the
      number of shares that NASDAQ's Rules 4350(i)(1)(C) and (D) permit the
      Company to issue in such transactions without prior stockholder approval,
      the issuance of such 10,000,000 shares to be upon such terms as the Board
      of Directors shall deem to be in the best interests of the Company, for a
      price of not less than 70% of the market price at the time of such
      issuance and for an aggregate consideration not to exceed $50,000,000,
      which such authorization shall include shares of common stock issued by
      the Company at or above market price prior to the date of the Annual
      Meeting (a "Prior Issuance") in the event The NASDAQ Stock Market, Inc.
      integrates (i) a new below market issuance by the Company within the
      three-month period commencing on the date of the Annual Meeting with (ii)
      the Prior Issuance (“Proposal 2”);
 
 ·
    The
      proposal to authorize the Board of Directors to issue up to 18,487,425
      shares of common stock, in excess of the 6,962,447 shares of common stock
      the Board of Directors is permitted to issue without prior stockholder
      approval, (i) (a) as payment for outstanding principal of, and interest
      on, the Debentures issued by the Company on November 10, 2004 or (b) upon
      conversion of the Debentures into shares of common stock, and (ii) upon
      exercise of warrants and additional investment rights issued in connection
      with the issuance of the Debentures (“Proposal
3”);
 
 ·
    The
      proposal to authorize the Board of Directors to temporarily or permanently
      reduce the exercise price of some or all of the Company’s 12,789,343
      outstanding common stock purchase warrants to a price not less than 90% of
      the common stock's market price at the time of the Board of Director's
      determination to reduce the exercise price (“Proposal 4”);
 
 ·
    The
      proposal to approve the amendment of the Amended Generex Biotechnology
      Corporation 2001 Stock Option Plan increasing the number of shares
      issuable upon exercise of options from 8,000,000 to 12,000,000 (“Proposal
      5”); and
 
 ·
    The
      proposal to ratify the appointment of BDO Dunwoody, LLP as independent
      public accountants for the Company for the fiscal year ending July 31,
      2005 (“Ratification of BDO Dunwoody, LLP”).
 
 The
results on the votes of the proposals were as follows:
 
 **Proposal**
    **Votes
      For**
    **Votes
      Against**
    **Abstention**
    **Broker
      Non-Votes**Proposal
      2
    3,683,732
    377,994
    457,182
    19,226,783Proposal
      3
    3,681,146
    348,802
    488,959
    19,226,784Proposal
      4
    3,730,137
    758,329
    30,440
    19,226,785Proposal
      5
    3,622,784
    435,346
    460,777
    19,226,784Ratification
      of BDO Dunwoody, LLP
    23,225,364
    72,030
    448,296
    1
 
 45
 
 **Item
5. Other Information**
  (a)(i)  On April
5, 2005, the Board of Directors of the Company elected Eric von Hofe as
Vice-President, Product Development, and Dr. Roberto F. Cid as Vice-President,
Sales and Marketing.
 
 (ii)  On March
31, 2005, Generex Pharmaceuticals, Inc. (“GPI”), a wholly-owned subsidiary of
the Company entered into a mortgage loan transaction pursuant to which GPI
borrowed approximately
 $183,804
($230,000 CND) (the “March Loan”). The net proceeds to GPI after fees and
disbursements were approximately $159,596 ($200,800 CND). The March Loan was
secured by, *inter
alia* , a
charge registered against real property owned by GPI. The March Loan was for a
term of two years with an annual interest rate of 13.5 % calculated monthly. The
March Loan requires monthly payments of interest only .
 
 (iii)  On April
27, 2005 GPI entered into a mortgage loan transaction pursuant to which GPI
borrowed approximately $345,738 ($435,000 CND) (the “April Loan”). The net
proceeds to GPI after fees and disbursements were approximately $265,145
($333,600 CND). The April Loan was secured by, *inter
alia* , charges
registered against real property owned by GPI. The April Loan was for a term of
one year with an annual interest rate of 16.5 % calculated monthly. The April
Loan requires interest only payments for the first two months and interest plus
$10,000 principal payments beginning the third month.
 
 (iv)  On May
19, 2005, the March Loan and the April Loan were consolidated and restructured
(the “Consolidated Loan”). Pursuant to the revised arrangement, GPI repaid an
aggregate of approximately $210,622 ($265,000 CND) (the “Consolidated Loan
Repayment”) in respect of the March Loan and the April Loan, leaving a
Consolidated Loan principal of approximately $317,920 ($400,000 CND). GPI paid
an aggregate of approximately $28,595 in fees and disbursements in connection
with the Consolidated Loan. The Consolidated Loan is secured by, *inter
alia* , charges
against real property owned by GPI. The Consolidated Loan was for a term of one
year with an annual interest rate of 16.5 % calculated monthly and requires
payments of approximately $7,900 ($10,000 CAD) in principal plus monthly
interest
 
 (v)  On May
19, 2005, GPI
entered into two additional mortgage loan transactions pursuant to which GPI
borrowed an aggregate of approximately $643,788 ($810,000 CND) (together, the
“May Loans”). The net proceeds to GPI after fees and disbursements (including
fees and disbursements in connection with the Consolidated Loan) and the
Consolidated Loan Repayment were approximately $377,029 ($474,369 CND). The May
Loans are secured by, *inter
alia* , charges
registered against real property owned by GPI. The May Loans are for a term of
one year with an annual interest rate of 4.924% as to the $246,388 loan and
4.913% as to the $397,400 loan calculated semi-annually. These loans require
monthly payments of principal and interest.
 
 46
 **Item
6. Exhibits**
 
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**3(i)
    Restated
      Certificate of Incorporation of Generex Biotechnology Corporation, as
      amended (incorporated by reference to Exhibit 3.1 to Generex Biotechnology
      Corporation’s Report on Form 10-Q for the quarter ended January 31, 2004
      filed on March 15, 2004)3(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
    Certificate
      of Designations, Preferences and Rights of Series A Preferred Stock
      (incorporated by reference to Exhibit 4.4 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on January 23,
  2001)4.3
    Form
      of Warrant issued to Ladenburg Thalmann & Co., Inc. dated July 6, 2001
      (incorporated by reference to Exhibit 4.15 to Generex Biotechnology
      Corporation’s Registration Statement on Form S-3 (File No. 333-67118)
      filed on August 8, 2001)4.4
    Form
      of Warrant granted to Cranshire Capital, L.P.; RAM Trading Ltd.; Gryphon
      Master Fund; Kodiak Opportunity, L.P.; Kodiak Opportunity 3C7, L.P.;
      Kodiak Opportunity Offshore, Ltd.; Novelly Exempt Trust; Langley Partners,
      L.P.; Montrose Investments, Ltd.; WEC Asset Management, LLC; ZLP Master
      Technology Fund, Ltd.; Alpha Capital Aktiengesellschaft; and The dotCOM
      Fund, LLC, dated July 6, 2001 (incorporated by reference to Exhibit 3 to
      Generex Biotechnology Corporation’s Report on Form 8-K filed on July 17,
      2001)4.5
    Warrant
      granted to Capital Ventures International, dated July 3, 2001
      (incorporated by reference to Exhibit 6 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on July 17,
2001)4.6
    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)4.7
    Form
      of Warrant issued to certain parties to October 2000 Private Placement
      (incorporated by reference to Exhibit 4 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on October 16,
  2000)4.8
    Form
      of Warrant (GCR Series) held by Robert P. Carter, Harvey Kaye, Fittube,
      Inc., Edward Maskaly and Gulfstream Capital Group, L.C. (incorporated by
      reference to Exhibit 4.4.2 to Generex Biotechnology Corporation’s
      Registration Statement on Form 10 filed on December 14, 1998, as amended
      February 24, 1999)4.9
    Letter
      Agreement and Warrant with M. H. Meyerson & Co., Inc. dated November
      17, 1998 (incorporated by reference to Exhibit 4.4.4 to Generex
      Biotechnology Corporation’s Registration Statement on Form 10 filed on
      December 14, 1998, as amended February 24, 1999)4.10.1
    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)
  47
 
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**
 4.10.2
    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)4.10.3
    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)4.10.4
    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)4.10.5
    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)4.10.6
    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)4.10.7
    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)4.11.1
    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)4.11.2
    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)
  4.11.3
    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/A filed on March 24, 2004)
  48
 
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**
 4.11.4
    Form
      of Additional Investment Right issued in connection with Exhibit 4.11.1
      (incorporated by reference to Exhibit 4.4 to Generex Biotechnology
      Corporation’s Report on Form 8-K/A filed on March 24,
  2004)4.12.1
    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)4.12.2
    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)4.12.3
    Warrant
      issued in connection with Exhibit 4.12.1 (incorporated by reference to
      Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)4.12.4
    Additional
      Investment Right issued in connection with Exhibit 4.12.1 (incorporated by
      reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.13.1
    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)4.13.2
    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)4.13.3
    Warrant
      issued in connection with Exhibit 4.13.1 (incorporated by reference to
      Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)
  4.13.4
    Additional
      Investment Right issued in connection with Exhibit 4.13.1 (incorporated by
      reference to Exhibit 4.8 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.14.1
    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)4.14.2
    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)
  49
 
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**
 4.14.3
    Warrant
      issued in connection with Exhibit 4.14.1 (incorporated by reference to
      Exhibit 4.11 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)4.14.4
    Additional
      Investment Right issued in connection with Exhibit 4.14.1 (incorporated by
      reference to Exhibit 4.12 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.14.5
    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)4.15.1
    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)4.15.2
    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)4.15.3
    Warrant
      issued in connection with Exhibit 4.15.1 (incorporated by reference to
      Exhibit 4.16 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)4.15.4
    Additional
      Investment Right issued in connection with Exhibit 4.15.1 (incorporated by
      reference to Exhibit 4.17 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.16.1
    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)4.16.2
    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)4.16.3
    Warrant
      issued in connection with Exhibit 4.16.1 (incorporated by reference to
      Exhibit 4.20 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)4.16.4
    Additional
      Investment Right issued in connection with Exhibit 4.16.1 (incorporated by
      reference to Exhibit 4.21 Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)
  50
 
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**
 4.17.1
    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)4.17.2
    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)4.17.3
    Form
      of Warrant issued in connection with Exhibit 4.17.1 (incorporated by
      reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on July 14, 2004)4.17.4
    Form
      of Additional Investment Right issued in connection Exhibit 4.17.1
      (incorporated by reference to Exhibit 4.4 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on July 14,
2004)4.18.1
    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)4.18.2
    Form
      of 6% Secured Convertible Debenture issued in connection with Exhibit
      4.21.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on November 12,
    2004)4.18.3
    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)4.18.4
    Form
      of Warrant issued in connection with Exhibit 4.18.1 (incorporated by
      reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on November 12, 2004)4.18.5
    Form
      of Additional Investment Right issued in connection with Exhibit 4.18.1
      (incorporated by reference to Exhibit 4.5 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on November 12,
    2004)4.18.6
    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)4.18.7
    Form
      of Voting Agreement entered into in connection with Exhibit 4.18.1
      (incorporated by reference to Exhibit 4.7 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on November 12,
    2004)
  51
 
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**
 4.19
    Termination
      Agreement, dated December 17, 2004, by and among Generex Biotechnology
      Corporation and Elan Corporation plc and Elan International Services,
      Ltd.4.20
    Warrant
      issued to The Aethena Group, LLC on April 28, 20054.21.1
    Promissory
      Note and Agreement, dated March 28, 2005 by and between Generex
      Biotechnology Corporation and Cranshire Capital, L.P. (incorporated by
      reference to Exhibit 4 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on April 1, 2005)4.21.2
    Warrant
      issued to Cranshire Capital, L.P. entered into in connection with Exhibit
      4.21.14.22.1
    Promissory
      Note and Agreement,entered
      intoApril 6, 2005 by and between Generex Biotechnology Corporation and Omicron
      Master Trust4.22.2
    Warrant
      issued to Omicron Master Trust entered into in connection with Exhibit
      4.22.14.23.1
    June
      7, 2005 Amendment to Promissory Note and Agreement, dated March 28, 2005
      by and between Generex Biotechnology Corporation and Cranshire Capital,
      L.P. (incorporated by reference to Exhibit 4.1 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on June 10,
2005)4.23.2
    Warrant
      issued by Generex Biotechnology Corporation to Cranshire Capital, L.P. on
      June 7, 2005 in connection with Exhibit 4.23.1 (incorporated by reference
      to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on June 10, 2005)4.24.1
    June
      7, 2005 Amendment to Promissory Note and Agreement, entered into April 6,
      2005 by and between Generex Biotechnology Corporation and Omicron Master
      Trust4.24.2
    Warrant
      issued by Generex Biotechnology Corporation to Omicron Master Trust on
      June 7, 2005 in connection with Exhibit 4.24.1 (incorporated by reference
      to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on June 10, 2005)9
    Form
      of Voting Agreement entered into in connection with Exhibit 4.18.1
      (incorporated by reference to Exhibit 4.7 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on November 12,
    2004)10.1
    Assistance
      Agreement, dated March 30, 2005 by and between Generex Biotechnology
      Corporation and Eckert Seamans Cherin & Mellott, LLC (incorporated by
      reference to Exhibit 10 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on April 1, 2005)10.2
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and
      Mindy J. Allport-Settle to purchase 100,000 shares of Common Stock at the
      exercise price of $0.56 per share
  52
 
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**
 10.3
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and
      Peter G. Amanatides to purchase 100,000 shares of Common Stock at the
      exercise price of $0.56 per share10.4
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and John
      P. Barratt to purchase 100,000 shares of Common Stock at the exercise
      price of $0.56 per share10.5
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and
      Brian T. McGee to purchase 100,000 shares of Common Stock at the exercise
      price of $0.56 per share10.6
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and John
      P. Barratt to purchase 35,714 shares of Common Stock at the exercise price
      of $0.001 per share10.7
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and
      Brian T. McGee to purchase 35,714 shares of Common Stock at the exercise
      price of $0.001 per share10.8
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and
      Gerald Bernstein, M.D. to purchase 100,000 shares of Common Stock at the
      exercise price of $0.61 per share10.9
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and Mark
      Fletcher to purchase 250,000 shares of Common Stock at the exercise price
      of $0.61 per share10.10
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and Anna
      E. Gluskin to purchase 250,000 shares of Common Stock at the exercise
      price of $0.61 per share10.11
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and Rose
      C. Perri to purchase 250,000 shares of Common Stock at the exercise price
      of $0.61 per share10.12
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and Mark
      A. Fletcher to purchase 470,726 shares of Common Stock at the exercise
      price of $0.001 per share10.13
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and Anna
      E. Gluskin to purchase 1,120,704 shares of Common Stock at the exercise
      price of $0.001 per share10.14
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and Rose
      C. Perri to purchase 576,752 shares of Common Stock at the exercise price
      of $0.001 per share10.15
    Annual
      Base Salaries for Certain Executive Officers Effective August 1,
      200410.16
    Employment
      Agreement by and between Generex Biotechnology Corporation and Gerald
      Bernstein M.D.10.17
    Promissory
      Note and Agreement, dated March 28, 2005 by and between Generex
      Biotechnology Corporation and Cranshire Capital, L.P. (incorporated by
      reference to Exhibit 4 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on April 1, 2005)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.
   53
   **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.
 
 
 
 DATE: June 14, 2005**GENEREX BIOTECHNOLOGY
      CORPORATION**By: /s/ Rose C. Perri
    By: /s/ Anna
GluskinPrincipal Financial Officer
    Chief Executive Officer
  54
  **Generex
Biotechnology Corporation**
 Form
10-Q
 April 30,
2005
 **Exhibit
Index**
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**3(i)
    Restated
      Certificate of Incorporation of Generex Biotechnology Corporation, as
      amended (incorporated by reference to Exhibit 3.1 to Generex Biotechnology
      Corporation’s Report on Form 10-Q for the quarter ended January 31, 2004
      filed on March 15, 2004)3(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
    Certificate
      of Designations, Preferences and Rights of Series A Preferred Stock
      (incorporated by reference to Exhibit 4.4 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on January 23,
  2001)4.3
    Form
      of Warrant issued to Ladenburg Thalmann & Co., Inc. dated July 6, 2001
      (incorporated by reference to Exhibit 4.15 to Generex Biotechnology
      Corporation’s Registration Statement on Form S-3 (File No. 333-67118)
      filed on August 8, 2001)4.4
    Form
      of Warrant granted to Cranshire Capital, L.P.; RAM Trading Ltd.; Gryphon
      Master Fund; Kodiak Opportunity, L.P.; Kodiak Opportunity 3C7, L.P.;
      Kodiak Opportunity Offshore, Ltd.; Novelly Exempt Trust; Langley Partners,
      L.P.; Montrose Investments, Ltd.; WEC Asset Management, LLC; ZLP Master
      Technology Fund, Ltd.; Alpha Capital Aktiengesellschaft; and The dotCOM
      Fund, LLC, dated July 6, 2001 (incorporated by reference to Exhibit 3 to
      Generex Biotechnology Corporation’s Report on Form 8-K filed on July 17,
      2001)4.5
    Warrant
      granted to Capital Ventures International, dated July 3, 2001
      (incorporated by reference to Exhibit 6 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on July 17,
2001)4.6
    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)4.7
    Form
      of Warrant issued to certain parties to October 2000 Private Placement
      (incorporated by reference to Exhibit 4 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on October 16,
  2000)4.8
    Form
      of Warrant (GCR Series) held by Robert P. Carter, Harvey Kaye, Fittube,
      Inc., Edward Maskaly and Gulfstream Capital Group, L.C. (incorporated by
      reference to Exhibit 4.4.2 to Generex Biotechnology Corporation’s
      Registration Statement on Form 10 filed on December 14, 1998, as amended
      February 24, 1999)4.9
    Letter
      Agreement and Warrant with M. H. Meyerson & Co., Inc. dated November
      17, 1998 (incorporated by reference to Exhibit 4.4.4 to Generex
      Biotechnology Corporation’s Registration Statement on Form 10 filed on
      December 14, 1998, as amended February 24, 1999)4.10.1
    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)
  55
 
 **Generex
Biotechnology Corporation**
 Form
10-Q
 April 30,
2005
 **Exhibit
Index**
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**
 4.10.2
    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)4.10.3
    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)4.10.4
    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)4.10.5
    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)4.10.6
    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)4.10.7
    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)4.11.1
    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)4.11.2
    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)
  4.11.3
    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/A filed on March 24, 2004)
  56
 
 **Generex
Biotechnology Corporation**
 Form
10-Q
 April 30,
2005
 **Exhibit
Index**
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**
 4.11.4
    Form
      of Additional Investment Right issued in connection with Exhibit 4.11.1
      (incorporated by reference to Exhibit 4.4 to Generex Biotechnology
      Corporation’s Report on Form 8-K/A filed on March 24,
  2004)4.12.1
    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)4.12.2
    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)4.12.3
    Warrant
      issued in connection with Exhibit 4.12.1 (incorporated by reference to
      Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)4.12.4
    Additional
      Investment Right issued in connection with Exhibit 4.12.1 (incorporated by
      reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.13.1
    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)4.13.2
    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)4.13.3
    Warrant
      issued in connection with Exhibit 4.13.1 (incorporated by reference to
      Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)
  4.13.4
    Additional
      Investment Right issued in connection with Exhibit 4.13.1 (incorporated by
      reference to Exhibit 4.8 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.14.1
    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)4.14.2
    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)
  57
 
 **Generex
Biotechnology Corporation**
 Form
10-Q
 April 30,
2005
 **Exhibit
Index**
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**
 4.14.3
    Warrant
      issued in connection with Exhibit 4.14.1 (incorporated by reference to
      Exhibit 4.11 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)4.14.4
    Additional
      Investment Right issued in connection with Exhibit 4.14.1 (incorporated by
      reference to Exhibit 4.12 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.14.5
    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)4.15.1
    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)4.15.2
    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)4.15.3
    Warrant
      issued in connection with Exhibit 4.15.1 (incorporated by reference to
      Exhibit 4.16 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)4.15.4
    Additional
      Investment Right issued in connection with Exhibit 4.15.1 (incorporated by
      reference to Exhibit 4.17 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.16.1
    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)4.16.2
    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)4.16.3
    Warrant
      issued in connection with Exhibit 4.16.1 (incorporated by reference to
      Exhibit 4.20 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)4.16.4
    Additional
      Investment Right issued in connection with Exhibit 4.16.1 (incorporated by
      reference to Exhibit 4.21 Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)
  58
 
 **Generex
Biotechnology Corporation**
 Form
10-Q
 April 30,
2005
 **Exhibit
Index**
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**
 4.17.1
    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)4.17.2
    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)4.17.3
    Form
      of Warrant issued in connection with Exhibit 4.17.1 (incorporated by
      reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on July 14, 2004)4.17.4
    Form
      of Additional Investment Right issued in connection Exhibit 4.17.1
      (incorporated by reference to Exhibit 4.4 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on July 14,
2004)4.18.1
    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)4.18.2
    Form
      of 6% Secured Convertible Debenture issued in connection with Exhibit
      4.21.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on November 12,
    2004)4.18.3
    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)4.18.4
    Form
      of Warrant issued in connection with Exhibit 4.18.1 (incorporated by
      reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on November 12, 2004)4.18.5
    Form
      of Additional Investment Right issued in connection with Exhibit 4.18.1
      (incorporated by reference to Exhibit 4.5 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on November 12,
    2004)4.18.6
    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)4.18.7
    Form
      of Voting Agreement entered into in connection with Exhibit 4.18.1
      (incorporated by reference to Exhibit 4.7 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on November 12,
    2004)
  59
 
 **Generex
Biotechnology Corporation**
 Form
10-Q
 April 30,
2005
 **Exhibit
Index**
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**
 4.19
    Termination
      Agreement, dated December 17, 2004, by and among Generex Biotechnology
      Corporation and Elan Corporation plc and Elan International Services,
      Ltd.4.20
    Warrant
      issued to The Aethena Group, LLC on April 28, 20054.21.1
    Promissory
      Note and Agreement, dated March 28, 2005 by and between Generex
      Biotechnology Corporation and Cranshire Capital, L.P. (incorporated by
      reference to Exhibit 4 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on April 1, 2005)4.21.2
    Warrant
      issued to Cranshire Capital, L.P. entered into in connection with Exhibit
      4.21.14.22.1
    Promissory
      Note and Agreement,entered
      intoApril 6, 2005 by and between Generex Biotechnology Corporation and Omicron
      Master Trust4.22.2
    Warrant
      issued to Omicron Master Trust entered into in connection with Exhibit
      4.22.14.23.1
    June
      7, 2005 Amendment to Promissory Note and Agreement, dated March 28, 2005
      by and between Generex Biotechnology Corporation and Cranshire Capital,
      L.P. (incorporated by reference to Exhibit 4.1 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on June 10,
2005)4.23.2
    Warrant
      issued by Generex Biotechnology Corporation to Cranshire Capital, L.P. on
      June 7, 2005 in connection with Exhibit 4.23.1 (incorporated by reference
      to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on June 10, 2005)4.24.1
    June
      7, 2005 Amendment to Promissory Note and Agreement, entered into April 6,
      2005 by and between Generex Biotechnology Corporation and Omicron Master
      Trust4.24.2
    Warrant
      issued by Generex Biotechnology Corporation to Omicron Master Trust on
      June 7, 2005 in connection with Exhibit 4.24.1 (incorporated by reference
      to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on June 10, 2005)9
    Form
      of Voting Agreement entered into in connection with Exhibit 4.18.1
      (incorporated by reference to Exhibit 4.7 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on November 12,
    2004)10.1
    Assistance
      Agreement, dated March 30, 2005 by and between Generex Biotechnology
      Corporation and Eckert Seamans Cherin & Mellott, LLC (incorporated by
      reference to Exhibit 10 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on April 1, 2005)10.2
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and
      Mindy J. Allport-Settle to purchase 100,000 shares of Common Stock at the
      exercise price of $0.56 per share
  60
 
 **Generex
Biotechnology Corporation**
 Form
10-Q
 April 30,
2005
 **Exhibit
Index**
 **Exhibit**
      **Number**
      **________**
    **Description
      of Exhibit****(1)**
      **_____________________**
 10.3
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and
      Peter G. Amanatides to purchase 100,000 shares of Common Stock at the
      exercise price of $0.56 per share10.4
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and John
      P. Barratt to purchase 100,000 shares of Common Stock at the exercise
      price of $0.56 per share10.5
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and
      Brian T. McGee to purchase 100,000 shares of Common Stock at the exercise
      price of $0.56 per share10.6
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and John
      P. Barratt to purchase 35,714 shares of Common Stock at the exercise price
      of $0.001 per share10.7
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and
      Brian T. McGee to purchase 35,714 shares of Common Stock at the exercise
      price of $0.001 per share10.8
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and
      Gerald Bernstein, M.D. to purchase 100,000 shares of Common Stock at the
      exercise price of $0.61 per share10.9
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and Mark
      Fletcher to purchase 250,000 shares of Common Stock at the exercise price
      of $0.61 per share10.10
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and Anna
      E. Gluskin to purchase 250,000 shares of Common Stock at the exercise
      price of $0.61 per share10.11
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and Rose
      C. Perri to purchase 250,000 shares of Common Stock at the exercise price
      of $0.61 per share10.12
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and Mark
      A. Fletcher to purchase 470,726 shares of Common Stock at the exercise
      price of $0.001 per share10.13
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and Anna
      E. Gluskin to purchase 1,120,704 shares of Common Stock at the exercise
      price of $0.001 per share10.14
    Stock
      Option Agreement by and between Generex Biotechnology Corporation and Rose
      C. Perri to purchase 576,752 shares of Common Stock at the exercise price
      of $0.001 per share10.15
    Annual
      Base Salaries for Certain Executive Officers Effective August 1,
      200410.16
    Employment
      Agreement by and between Generex Biotechnology Corporation and Gerald
      Bernstein M.D.10.17
    Promissory
      Note and Agreement, dated March 28, 2005 by and between Generex
      Biotechnology Corporation and Cranshire Capital, L.P. (incorporated by
      reference to Exhibit 4 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on April 1, 2005)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.
   61