UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





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


EXCHANGE
ACT OF 1934





For the
quarterly period ended October 31, 2008





o TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934





For
the transition period from _________________ to ________________





COMMISSION
FILE NUMBER: 0-25169





GENEREX BIOTECHNOLOGY
CORPORATION


(Exact
name of registrant as specified in its charter)




Delaware
                
                98-0178636(State of other jurisdiction of
                  incorporation or
                  organization)
                
                (IRS Employer Identification No.)




33 HARBOUR SQUARE, SUITE 202


TORONTO, ONTARIO


CANADA M5J
2G2


(Address
of principal executive offices)





416/364-2551


(Registrant's
telephone number, including area code)




Not
applicable


(Former
name, former address and former fiscal year


if
changed since last report)





Indicate
by check mark whether the registrant: (1) has filed all reports required by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. x Yes  o No




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




Large
accelerated filer   ̈    Accelerated
filer  x




Non-accelerated
filer   ̈        Smaller
reporting company   ̈





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


o Yes x No





The
number of outstanding shares of the registrant's common stock, par value $.001,
was 123,766,346 as of December 4, 2008.








GENEREX
BIOTECHNOLOGY CORPORATION





INDEX




PART
      I. FINANCIAL INFORMATIONItem
      1.     Financial Statements.(Unaudited)Consolidated
      Balance Sheets -October
      31, 2008 and July 31, 2007
                              1Consolidated
      Statements of Operations — For the three monthPeriods
      ended October 31, 2008 and 2007, and cumulative fromNovember
      2, 1995 to October 31, 2008
                              2Consolidated
      Statements of Cash Flows — For the three monthPeriods
      ended October 31, 2008 and 2007, and cumulative fromNovember
      2, 1995 to October 31, 2008
                              3Notes
      to Consolidated Financial Statements
                              4Item
      2. Management's Discussion and Analysis of Financial Condition and
      Results of Operations
                              14Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk
                              26Item
      4. Controls and Procedures
                              27PART
      II: OTHER INFORMATIONItem
      1. Legal Proceedings
                              27Item
      1A. Risk Factors
                              27Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds
                              30Item
      3. Defaults Upon Senior Securities
                              30Item
      4. Submission of Matters to a Vote of Security
Holders
                              30Item
      5. Other Information
                              31Item
      6. Exhibits
                              31Signatures
                              31










PART I. FINANCIAL
INFORMATION





Item
1. Financial Statements





GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
BALANCE SHEETS





October 31,
                
                
                July 31,2008
                
                
                2008(Unaudited)ASSETSCurrent
      Assets:Cash
      and cash equivalents
                
                $
                8,616,855
                
                
                $
                17,237,510Short-term
      investments
                
                
                8,850,000
                
                
                
                8,852,214Accounts
      receivable
                
                
                99,854
                
                
                
                81,784Inventory
                
                
                1,417,126
                
                
                
                1,465,222Convertible
      debentures - advance payments
                
                
                759,450
                
                
                
                —Other
      current assets
                
                
                1,013,911
                
                
                
                380,927Deferred
      debt issuance costs
                
                
                563,903
                
                
                
                506,608Total
      Current Assets
                
                
                21,321,099
                
                
                
                28,524,265Deferred
      Debt Issuance Costs
                
                
                —
                
                
                
                211,086Property
      and Equipment, Net
                
                
                1,538,551
                
                
                
                1,744,974Assets
      Held for Investment, Net
                
                
                3,117,059
                
                
                
                3,713,317Patents,
      Net
                
                
                3,857,312
                
                
                
                3,954,241TOTAL
      ASSETS
                
                $
                29,834,021
                
                
                $
                38,147,883LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      Liabilities:Accounts
      payable and accrued expenses
                
                $
                6,803,978
                
                
                $
                7,469,710Deferred
      revenue and rebate liability
                
                
                155,949
                
                
                
                125,598Current
      maturities of long-term debt
                
                
                1,376,768
                
                
                
                1,832,684Current
      maturities of obligations under capital lease
                
                
                39,106
                
                
                
                —Convertible
      debentures, net of debt discount of $11,921,646 and  $15,931,480
      at October 31, 2008 and July 31, 2008, respectively
                
                
                4,598,354
                
                
                
                4,718,520Total
      Current Liabilities
                
                
                12,974,155
                
                
                
                14,146,512Obligations
      Under Capital Lease, Net
                
                
                40,872
                
                
                
                —Long-Term
      Debt, Net
                
                
                1,303,653
                
                
                
                1,354,564Commitments
      and ContingenciesStockholders’
      Equity:Special
      Voting Rights Preferred Stock, $.001 par value;
      authorized  1,000 shares at October 31, 2008 and July 31, 2008;
      -0- shares issued and outstanding at October 31, 2008 and July 31,
      2008
                
                
                —
                
                
                
                —Common
      stock, $.001 par value; authorized 500,000,000 shares
      at  October 31, 2008 and July 31, 2008; 121,852,374 and
      111,992,603 shares  issued and outstanding at October 31, 2008
      and July 31, 2008, respectively
                
                
                121,852
                
                
                
                111,992Additional
      paid-in capital
                
                
                274,772,053
                
                
                
                269,849,581Deficit
      accumulated during the development stage
                
                
                (259,926,445
                )
                
                
                (248,229,261
                )Accumulated
      other comprehensive income
                
                
                547,881
                
                
                
                914,495Total
      Stockholders’ Equity
                
                
                15,515,341
                
                
                
                22,646,807TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                
                $
                29,834,021
                
                
                $
                38,147,883





The
Notes to Consolidated Financial Statements are an integral part of these
statements.


1





GENEREX BIOTECHNOLOGY CORPORATION AND
SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF OPERATIONS





Cumulative FromNovember 2, 1995For the Three Months Ended
                
                
                (Date of Inception)October 31,
                
                
                to October 31,2008
                
                
                2007
                
                
                2008(Unaudited)
                
                
                (Unaudited)
                
                
                (Unaudited)Revenues
                
                $
                538,886
                
                
                $
                46,427
                
                
                $
                3,043,650Sales
      discounts
                
                
                (540
                )
                
                
                (1,714
                )
                
                
                (5,919
                )Net
      Revenue
                
                
                538,346
                
                
                
                44,713
                
                
                
                3,037,731Cost
      of Goods Sold
                
                
                22,192
                
                
                
                19,931
                
                
                
                135,840Operating
      Expenses:Research
      and development
                
                
                4,355,689
                
                
                
                3,847,803
                
                
                
                94,171,183Research
      and development -related party
                
                
                —
                
                
                
                —
                
                
                
                220,218Selling
      and marketing
                
                
                837,198
                
                
                
                367,420
                
                
                
                3,148,793General
      and administrative
                
                
                2,847,913
                
                
                
                3,515,920
                
                
                
                108,484,379General
      and administrative -related party
                
                
                —
                
                
                
                —
                
                
                
                314,328Total
      Operating Expenses
                
                
                8,040,800
                
                
                
                7,731,143
                
                
                
                206,338,901Operating
      Loss
                
                
                (7,524,646
                )
                
                
                (7,706,361
                )
                
                
                (203,437,010
                )Other
      Income (Expense):Miscellaneous
      income (expense)
                
                
                5
                
                
                
                —
                
                
                
                196,263Income
      from rental operations, net
                
                
                88,380
                
                
                
                82,087
                
                
                
                1,339,841Interest
      income
                
                
                168,465
                
                
                
                460,035
                
                
                
                7,677,362Interest
      expense
                
                
                (4,429,388
                )
                
                
                (57,674
                )
                
                
                (52,311,961
                )Loss
      on extinguishment of debt
                
                
                —
                
                
                
                —
                
                
                
                (14,134,068
                )Net
      Loss Before Undernoted
                
                
                (11,697,184
                )
                
                
                (7,221,913
                )
                
                
                (260,669,573
                )Minority
      Interest Share of Loss
                
                
                —
                
                
                
                —
                
                
                
                3,038,185Net
      Loss
                
                
                (11,697,184
                )
                
                
                (7,221,913
                )
                
                
                (257,631,388
                )Preferred
      Stock Dividend
                
                
                —
                
                
                
                —
                
                
                
                2,295,057Net
      Loss Available to Common  Shareholders
                
                $
                (11,697,184
                )
                
                $
                (7,221,913
                )
                
                $
                (259,926,445
                )Basic
      and Diluted Net Loss Per  Common Share
                
                $
                (.10
                )
                
                $
                (.07
                )Weighted
      Average Number of Shares  of Common Stock
      Outstanding
                
                
                118,109,023
                
                
                
                110,060,027





The
Notes to Consolidated Financial Statements are an integral part of these
statements.


2





GENEREX BIOTECHNOLOGY CORPORATION AND
SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF CASH FLOWS





Cumulative FromNovember 2, 1995For the Three Months Ended
                
                
                (Date of Inception)October 31,
                
                
                to October 31,2008
                
                
                2007
                
                
                2008(Unaudited)
                
                
                (Unaudited)
                
                
                (Unaudited)Cash
      Flows From Operating Activities:Net
      loss
                
                $
                (11,697,184
                )
                
                $
                (7,221,913
                )
                
                $
                (257,631,388
                )Adjustments
      to reconcile net loss to net cash used  in operating
      activities:Depreciation
      and amortization
                
                
                216,172
                
                
                
                306,569
                
                
                
                7,183,037Minority
      interest share of loss
                
                
                —
                
                
                
                —
                
                
                
                (3,038,185
                )Reduction
      of notes receivable - common stock in exchange  for services
      rendered
                
                
                —
                
                
                
                —
                
                
                
                423,882Write-off
      of uncollectible notes receivable - common stock
                
                
                —
                
                
                
                —
                
                
                
                391,103Write-off
      of deferred offering costs
                
                
                —
                
                
                
                —
                
                
                
                3,406,196Write-off
      of abandoned patents
                
                
                —
                
                
                
                —
                
                
                
                913,196Loss
      on disposal of property and equipment
                
                
                —
                
                
                
                —
                
                
                
                911Loss
      on extinguishment of debt
                
                
                —
                
                
                
                —
                
                
                
                14,134,069Common
      stock issued as employee compensation
                
                
                55,136
                
                
                
                910,205
                
                
                
                3,536,401Issuance
      of options and option modifications as
      employee  compensation
                
                
                9,680
                
                
                
                —
                
                
                
                82,258Common
      stock issued for services rendered
                
                
                46,649
                
                
                
                261,283
                
                
                
                8,572,847Amortization
      of prepaid services in conjunction with common  stock
      issuance
                
                
                —
                
                
                
                —
                
                
                
                138,375Non-cash
      compensation expense
                
                
                —
                
                
                
                —
                
                
                
                45,390Stock
      options and warrants issued for services rendered
                
                
                —
                
                
                
                —
                
                
                
                7,354,723Issuance
      of warrants as additional exercise right inducement
                
                
                —
                
                
                
                —
                
                
                
                21,437,909Preferred
      stock issued for services rendered
                
                
                —
                
                
                
                —
                
                
                
                100Treasury
      stock redeemed for non-performance of services
                
                
                —
                
                
                
                —
                
                
                
                (138,000
                )Amortization
      of deferred debt issuance costs and loan  origination
      fees
                
                
                153,791
                
                
                
                —
                
                
                
                1,841,726Amortization
      of discount on convertible debentures
                
                
                4,009,835
                
                
                
                —
                
                
                
                26,423,946Common
      stock issued as interest payment on
      convertible  debentures
                
                
                252,083
                
                
                
                —
                
                
                
                536,542Interest
      on short-term advance
                
                
                —
                
                
                
                —
                
                
                
                22,190Founders’
      shares transferred for services rendered
                
                
                —
                
                
                
                —
                
                
                
                353,506Fees
      in connection with short-term refinancing of  long-term
      debt
                
                
                —
                
                
                
                —
                
                
                
                113,274Changes
      in operating assets and liabilities (excluding the  effects of
      acquisition):Accounts
      receivable
                
                
                (30,674
                )
                
                
                15,632
                
                
                
                (118,055
                )Miscellaneous
      receivables
                
                
                —
                
                
                
                —
                
                
                
                43,812Inventory
                
                
                (60,179
                )
                
                
                (130,766
                )
                
                
                (1,523,620
                )Other
      current assets
                
                
                (40,087
                )
                
                
                47,736
                
                
                
                (115,113
                )Accounts
      payable and accrued expenses
                
                
                (574,680
                )
                
                
                159,076
                
                
                
                11,515,940Deferred
      revenue
                
                
                37,018
                
                
                
                12,824
                
                
                
                162,530Other,
      net
                
                
                —
                
                
                
                —
                
                
                
                110,317Net
      Cash Used in Operating Activities
                
                
                (7,622,440
                )
                
                
                (5,639,354
                )
                
                
                (153,820,181
                )Cash
      Flows From Investing Activities:Purchase
      of property and equipment
                
                
                (1,385
                )
                
                
                (1,575
                )
                
                
                (4,594,932
                )Costs
      incurred for patents
                
                
                (30,537
                )
                
                
                (81,527
                )
                
                
                (2,080,899
                )Change
      in restricted cash
                
                
                —
                
                
                
                —
                
                
                
                45,872Proceeds
      from maturity of short term investments
                
                
                2,214
                
                
                
                4,181,210
                
                
                
                186,392,918Purchases
      of short-term investments
                
                
                —
                
                
                
                (17,754,808
                )
                
                
                (195,242,918
                )Cash
      received in conjunction with merger
                
                
                —
                
                
                
                —
                
                
                
                82,232Advances
      to Antigen Express, Inc.
                
                
                —
                
                
                
                —
                
                
                
                (32,000
                )Increase
      in officers’ loans receivable
                
                
                —
                
                
                
                —
                
                
                
                (1,126,157
                )Change
      in deposits
                
                
                (608,279
                )
                
                
                (33,566
                )
                
                
                (1,260,350
                )Change
      in notes receivable - common stock
                
                
                —
                
                
                
                —
                
                
                
                (91,103
                )Change
      in due from related parties
                
                
                —
                
                
                
                —
                
                
                
                (2,222,390
                )Other,
      net
                
                
                —
                
                
                
                —
                
                
                
                89,683Net
      Cash Provided by (Used in) Investing Activities
                
                
                (637,987
                )
                
                
                (13,690,266
                )
                
                
                (20,040,044
                )Cash
      Flows From Financing Activities:Proceeds
      from short-term advance
                
                
                —
                
                
                
                —
                
                
                
                325,179Repayment
      of short-term advance
                
                
                —
                
                
                
                —
                
                
                
                (347,369
                )Proceeds
      from issuance of long-term debt
                
                
                —
                
                
                
                —
                
                
                
                2,005,609Repayment
      of long-term debt
                
                
                (21,567
                )
                
                
                (21,500
                )
                
                
                (1,963,411
                )Repayment
      of obligations under capital lease
                
                
                (3,024
                )
                
                
                —
                
                
                
                (3,024
                )Change
      in due to related parties
                
                
                —
                
                
                
                —
                
                
                
                154,541Proceeds
      from exercise of warrants
                
                
                —
                
                
                
                —
                
                
                
                44,015,049Proceeds
      from exercise of stock options
                
                
                56,000
                
                
                
                —
                
                
                
                5,001,916Proceeds
      from minority interest investment
                
                
                —
                
                
                
                —
                
                
                
                3,038,185Proceeds
      from issuance of preferred stock
                
                
                —
                
                
                
                —
                
                
                
                12,015,000Redemption
      of SVR preferred stock
                
                
                —
                
                
                
                —
                
                
                
                (100
                )Proceeds
      from issuance of convertible debentures, net
                
                
                —
                
                
                
                —
                
                
                
                40,704,930Payment
      of costs associated with convertible debentures
                
                
                —
                
                
                
                —
                
                
                
                (722,750
                )Repayments
      of convertible debentures
                
                
                (376,667
                )
                
                
                —
                
                
                
                (1,012,424
                )Purchase
      of treasury stock
                
                
                —
                
                
                
                —
                
                
                
                (483,869
                )Proceeds
      from issuance of common stock, net
                
                
                —
                
                
                
                —
                
                
                
                80,283,719Purchase
      and retirement of common stock
                
                
                —
                
                
                
                —
                
                
                
                (497,522
                )Net
      Cash Provided by Financing Activities
                
                
                (345,258
                )
                
                
                (21,500
                )
                
                
                182,513,659Effect
      of Exchange Rates on Cash
                
                
                (14,970
                )
                
                
                (1,211
                )
                
                
                (36,579
                )Net
      Increase (Decrease) in Cash and Cash Equivalents
                
                
                (8,620,655
                )
                
                
                (19,352,331
                )
                
                
                8,616,855Cash
      and Cash Equivalents, Beginning of Period
                
                
                17,237,510
                
                
                
                21,026,067
                
                
                
                —Cash
      and Cash Equivalents, End of Period
                
                $
                8,616,855
                
                
                $
                1,673,736
                
                
                $
                8,616,855





The
Notes to Consolidated Financial Statements are an integral part of these
statements.


3


GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
              Basis
      of Presentation
 The
accompanying unaudited interim consolidated financial statements have been
prepared pursuant to the rules and regulations for reporting on Form
10-Q.  Accordingly, certain information and disclosures required by
generally accepted accounting principles for complete financial statements are
not included herein.  The interim statements should be read in
conjunction with the financial statements and notes thereto included in the
Company’s latest Annual Report on Form 10-K.  The results for the
three months ended may not be indicative of the results for the entire
year.
 
 Interim
statements are subject to possible adjustments in connection with the annual
audit of the Company’s accounts for the fiscal year 2009.  In the
Company’s opinion, all adjustments necessary for a fair presentation of these
interim statements have been included and are of a normal and recurring
nature.
 
 The
Company is a development stage company, which has a limited history of
operations and whose revenues primarily comprised of $1 million received in
conjunction with the execution of a development agreement, grant revenue from
government agencies related to Antigen’s operations and $550,000 in conjunction
with the execution of a licensing agreement.  The Company currently is
recognizing revenue from the sale of three of its four commercially available
products.  Additionally, the Company has several product candidates
that are in various research or early stages of pre-clinical and clinical
development.  There can be no assurance that the Company will be
successful in obtaining regulatory clearance for the sale of existing or any
future products or that any of the Company’s products will be commercially
viable.
 
 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
September 2006, the FASB issued SFAS No. 157, ”Fair Value Measurements”
(“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring
fair value in accordance with accounting principles generally accepted in the
United States, and expands disclosures about fair value measurements. SFAS 157
was effective for financial statements issued for fiscal years beginning after
November 15, 2007, with earlier application encouraged, but the issuance of
FASB Staff Position SFAS No. 157-2 has delayed the effective date to fiscal
years beginning after November 15, 2008 as it relates to non-financial
assets and non-financial liabilities. Any amounts recognized upon adoption as a
cumulative-effect adjustment will be recorded to the opening balance of retained
earnings in the year of adoption. The adoption of SFAS 157 did not have a
material effect on the Company’s financial condition or results of
operations.
 
 4
 
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 In
February 2007, the FASB issued SFAS No. 159, “Establishing the Fair Value
Option for Financial Assets and Liabilities” (“SFAS 159”) to permit all entities
to choose to elect to measure eligible financial instruments and certain other
items at fair value. The decision whether to elect the fair value option
may occur for each eligible item either on a specified election date or
according to a preexisting policy for specified types of eligible items.
However, that decision must also take place on a date on which criteria under
SFAS 159 occurs. Finally, the decision to elect the fair value option shall
be made on an instrument-by-instrument basis, except in certain circumstances.
An entity shall report unrealized gains and losses on items for which the fair
value option has been elected in earnings at each subsequent reporting date.
SFAS 159 applies to fiscal years beginning after November 15, 2007, with
early adoption permitted for an entity that has also elected to apply the
provisions of SFAS 157. The adoption of SFAS 159 did not have a material effect
on the Company’s financial condition or results of operations.
 
 In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”
(“SFAS 141(R)”). This Statement replaces SFAS No. 141, “Business
Combinations” (“SFAS 141”). This Statement retains the fundamental requirements
in SFAS 141 that the acquisition method of accounting (which SFAS 141 called the
purchase method) be used for all business combinations and for an acquirer to be
identified for each business combination. This Statement also establishes
principles and requirements for how the acquirer: a) recognizes and measures in
its financial statements the identifiable assets acquired, the liabilities
assumed, and any non-controlling interest in the acquiree; b) recognizes and
measures the goodwill acquired in the business combination or a gain from a
bargain purchase and c) determines what information to disclose to enable users
of the financial statements to evaluate the nature and financial effects of the
business combination. SFAS 141(R) will apply prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. An entity
may not apply it before that date. The Company is currently evaluating the
impact of this statement on its results of operations and financial
position.
 
 In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements” (“SFAS 160”). This Statement amends ARB 51 to
establish accounting and reporting standards for the non-controlling (minority)
interest in a subsidiary and for the deconsolidation of a subsidiary. It
clarifies that a non-controlling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. SFAS 160 is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2008.  Earlier adoption is prohibited.  The Company is currently
evaluating the impact of this statement on its results of operations and
financial position.
 
 In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities,” and Amendment of FASB Statement No.
133.  SFAS 161 amends SFAS 133, “Accounting for Derivative Instruments
and Hedging Activities,” to amend and expand the disclosure requirements of SFAS
133 to provide greater transparency about (i) how and why an entity uses
derivative instruments, (ii) how derivative instruments and related hedge items
are accounted for under SFAS 133 and its related interpretations, and (iii) how
derivative instruments and related hedged items affect an entity’s financial
position, results of operations and cash flows. To meet those objectives, SFAS
161 requires qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value amounts of gains and
losses on derivative instruments and disclosures about credit-risk-related
contingent features in derivative agreements. SFAS 161 is effective for fiscal
years and interim periods beginning after November 15, 2008.  Earlier
adoption is encouraged.  The Company is currently evaluating the
impact of SFAS 161 on its financial position, results of operations and cash
flows.
 
 5
 
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles" ("SFAS 162"). SFAS 162 is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with U.S. GAAP for nongovernmental entities. SFAS 162 is
effective 60 days following the Securities and Exchange Commission's approval of
the Public Company Accounting Oversight Board auditing amendments to AU Section
411, "The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles." The Company does not expect SFAS 162 to have a material
effect on its consolidated financial statements.
 
 In May
2008, the FASB issued Staff Position (“FSP”) APB 14-1, “Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlements).”  This FSP requires a portion of
this type of convertible debt to be recorded as equity and to record interest
expense on the debt portion at a rate that would have been charged on
nonconvertible debt with the same terms. This FSP takes effect in the first
quarter of fiscal years beginning after December 15, 2008 and will be applied
retrospectively for all periods presented. It will be effective for the Company
on August 1, 2009.  This FSP will apply to the Company’s convertible
debentures.  The Company is currently evaluating how it may affect the
consolidated financial statements.
 
 In June
2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted
in Share-Based Payment Transactions Are Participating
Securities.”  Securities participating in dividends with common stock
according to a formula are participating securities. This FSP determined that
unvested shares of restricted stock and stock units with nonforfeitable rights
to dividends are participating securities. Participating securities require the
“two-class” method to be used to calculate basic earnings per share. This method
lowers basic earnings per common share. This FSP takes effect in the first
quarter of fiscal years beginning after December 15, 2008 and will be applied
retrospectively for all periods presented.  It will be effective for
the Company on August 1, 2009.  The Company does not expect FSP EITF
03-6-1 to have a material effect on its consolidated financial
statements.
 
 3.
              Fair
      Value Measurements
 
 On August
1, 2008 the Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS
No. 157”), for financial assets and liabilities. This statement provides a
framework for measuring fair value and requires expanded disclosures regarding
fair value measurements. SFAS No. 157 defines fair value as the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, which for the
first quarter of fiscal 2009 is October 31, 2008.
  The
fair-value hierarchy established in SFAS No. 157 prioritizes the inputs
used in valuation techniques into three levels as follows:
 Level-1 –
Observable inputs – quoted prices in active markets for identical assets and
liabilities;
 6
 
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Level-2
      – Observable inputs other than the quoted prices in active markets for
      identical assets and liabilities – such as quoted prices for similar
      instruments, quoted prices for identical or similar instruments in
      inactive markets, or other inputs that are observable or can be
      corroborated by observable market data;Level-3
      – Unobservable inputs – includes amounts derived from valuation models
      where one or more significant inputs are unobservable and require the
      Company to develop relevant
assumptions.
  The
following table summarizes the financial assets and liabilities measured at
fair value on a recurring basis as of the measurement date, October 31,
2008, and the basis for that measurement, by level within the fair value
hierarchy:
 
 Balance as of
                      October 31,
                      2008
                    
                    
                    Quoted prices
                      in active
                      markets for
                      identical
                      assets
                      (Level 1)
                    
                    
                    Significant other
                      observable
                      inputs
                      (Level 2)
                    
                    
                    Significant
                      unobservable
                      inputs
                      (Level 3)Financial
      assetsShort-terminvestments
                    
                    $
                    8,850,000
                    
                    
                    $
                    —
                    
                    
                    $
                    8,850,000
                    
                    
                    $
                    —Total
                    
                    $
                    8,850,000
                    
                    
                    $
                    —
                    
                    
                    $
                    8,850,000
                    
                    
                    $
                    —
 
 4.
              Stock-Based
      Compensation
 As of
October 31, 2008, the Company had three stockholder-approved stock incentive
plans under which shares and options exercisable for shares of common stock have
been or may be granted to employees, directors, consultants and advisors. A
total of 2,000,000 shares of common stock are reserved for issuance under the
2000 Stock Option Plan (the 2000 Plan), a total of 12,000,000 shares of common
stock are reserved for issuance under the 2001 Stock Option Plan (the 2001 Plan)
and 10,000,000 shares of common stock are reserved for issuance under the 2006
Stock Plan (the 2006 Plan). Restricted shares can only be issued under the 2006
Plan. At October 31, 2008, there were 2,000,000, 2,612,490 and 7,837,000 shares
of common stock reserved for future awards under the 2000 Plan, 2001 Plan and
2006 Plan, respectively.
 
 The 2000,
2001 and 2006 Plans (the Plans) are administered by the Board of Directors (the
Board). The Board is authorized to select from among eligible employees,
directors, advisors and consultants those individuals to whom options are to be
granted and to determine the number of shares to be subject to, and the terms
and conditions of the options. The Board is also authorized to prescribe, amend
and rescind terms relating to options granted under the Plans. Generally, the
interpretation and construction of any provision of the Plans or any options
granted hereunder is within the discretion of the Board.
 
 The Plans
provide that options may or may not be Incentive Stock Options (ISOs) within the
meaning of Section 422 of the Internal Revenue Code. Only employees of the
Company are eligible to receive ISOs, while employees and non-employee
directors, advisors and consultants are eligible to receive options which are
not ISOs, i.e. “Non-Qualified Options.” The options granted by the Board in
connection with its adoption of the Plans were Non-Qualified Options. In
addition, the 2006 Plan also provides for restricted stock grants.
 
 7
 
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 The fair
value of each option granted is estimated on grant date using the Black-Scholes
option pricing model which takes into account as of the grant date the exercise
price and expected life of the option, the current price of the underlying stock
and its expected volatility, expected dividends on the stock and the risk-free
interest rate for the term of the option.
 
 The fair
value of each option award is estimated on the date of grant using the
Black-Scholes option pricing model.  In the case of restricted stock
grants under the 2006 Plan, fair market value of the shares is the market
price.
 
 The
following is a summary of the common stock options granted, forfeited or expired
and exercised under the Plan for the three months ended October 31,
2008:
  Weighted
                          
                          
                          WeightedAverage
                          
                          
                          AverageExercise
                          
                          
                          Remaining
                          
                          
                          AggregatePrice
                          
                          
                          Contractual
                          
                          
                          IntrinsicShares
                          
                          
                          Share
                          
                          
                          Term (Years)
                          
                          
                          ValueOutstanding,
      August 1, 2008
                          
                          
                          6,246,638
                          
                          
                          $
                          0.66Granted
                          
                          
                          —
                          
                          
                          $
                          —Forfeited
      or expired
                          
                          
                          —
                          
                          
                          $
                          —Exercised
                          
                          
                          (100,000
                          )
                          
                          $
                          0.56Outstanding,
      October 31, 2008
                          
                          
                          6,146,638
                          
                          
                          $
                          0.67
                          
                          
                          
                          1.14
                          
                          
                          $
                          848,812Exercisable,
      October 31, 2008
                          
                          
                          6,059,138
                          
                          
                          $
                          
                          
                          
                          
                          
                          
                          
                          $
                          848,812Grant
      Date Fair Value of Forfeited or Expired Options
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          n/aTotal
      Intrinsic Value of Options Exercised
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          15,111
  The
following is a summary of the non-vested common stock options granted, vested
and forfeited under the Plan:
 
 Weighted Average
                        Grant DateOptions
                      
                      
                      Fair ValueOutstanding,
      August 1, 2008
                      
                      
                      87,500
                      
                      
                      $
                      0.59Granted
                      
                      
                      —
                      
                      
                      $
                      —Vested
                      
                      
                      —
                      
                      
                      $
                      —Forfeited
                      
                      
                      —
                      
                      
                      $
                      —Outstanding,
      October 31, 2008
                      
                      
                      87,500
                      
                      
                      $
                      0.59
 
 As of
October 31, 2008, the Company had $35,492 of total unrecognized compensation
cost related to non-vested share-based compensation arrangements granted under
the Plan.  That cost is expected to be recognized over a
weighted-average period of 1.6 years.
 
 8
 
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 In August
2007, the Company issued 550,000 shares of common stock under the 2006 Plan in
the form of restricted stock awards to officers.  The fair value of
these shares was based on the quoted market price of the Company’s common stock
on the dates of the issuance is $830,500. These shares were issued as an
incentive to retain key employees and officers.  A portion of these
shares vested immediately while the remaining portion will vest over two years
from the date of the grant.  The following table summarizes the
Company’s non-vested restricted stock activity for the three months ended
October 31, 2008:
 
 WeightedAverageGrant DateNumber of
                    
                    
                    FairShares
                    
                    
                    ValueNon-vested
      stock, August 1, 2008
                    
                    
                    237,500
                    
                    
                    $
                    1.51Granted
                    
                    
                    —
                    
                    
                    
                    —Vested
                    
                    
                    (118,750
                    )
                    
                    
                    1.51Forfeited
                    
                    
                    —
                    
                    
                    
                    —Non-vested
      stock, October 31, 2008
                    
                    
                    118,750
                    
                    
                    $
                    1.51
 
 As of
October 31, 2008, approximately $70,978 of total unrecognized compensation costs
related to unvested shares is expected to be recognized over the remaining
service period of 1 year.
 
 5.
              Comprehensive
      Income/(Loss)
 
 Comprehensive
loss, which includes net loss and the change in the foreign currency translation
account, for the three months ended October 31, 2008 and 2007 was $12,063,798
and $6,987,534, respectively.
 
 6.
              Accounts
      Payable and Accrued Expenses
 Accounts
payable and accrued expenses consist of the following:
 
 October 31,
                    
                    
                    July 31,2008
                    
                    
                    2008Accounts
      Payable
                    
                    $
                    1,983,859
                    
                    
                    $
                    2,613,789Research
      and Development
                    
                    
                    2,061,169
                    
                    
                    
                    2,048,101Executive
      Compensation
                    
                    
                    2,427,319
                    
                    
                    
                    2,469,026Financial
      Services
                    
                    
                    331,631
                    
                    
                    
                    338,794Total
                    
                    $
                    6,803,978
                    
                    
                    $
                    7,469,710
 
 9
 
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 7.
              Secured
      Convertible Debentures
 The
Company is contractually obligated under various convertible promissory notes
(“convertible debentures”) with accredited investors.  The convertible
debentures are convertible into shares of the Company's common stock at a price
as stipulated in each debenture.
 
 The
convertible debentures are accounted for in accordance with EITF 98-5 and
00-27.  The following summarizes the significant terms and accounting
for each convertible debenture entered into by the Company.
 
 Notes/Debenture$20,650,000Date
      Issued
                        
                        
                        3/2008Promissory
      Note Amount
                        
                        $
                        (A
                        )#
      of Promissory Notes
                        
                        
                        6Terms
                        
                        (B
                        )Conversion
      Price
                        
                        $
                        1.21Gross
      Proceeds
                        
                        $
                        20,650,000Net
      Cash Proceeds
                        
                        $
                        20,450,000Warrants
      Issued to Investors (C)
                        
                        
                        42,665,274Warrant
      Exercise Price
                        
                        $
                        1.21Existing
      Warrants Re-priced (D)
                        
                        
                        12,697,024Re-priced
      Warrant Exercise Price (D)
                        
                        
                        1.10Warrant
      Fair Value (WFV) (includes value of re-priced warrants)
                        
                        $
                        21,976,130Warrant
      Relative Fair Value (WRFV)
                        
                        $
                        10,646,218Black-Scholes
      Model Assumptions
                        
                        (E
                        )Beneficial
      Conversion Feature (BCF)
                        
                        $
                        8,768,946Costs
      associated with issuance classified as deferred debt issuance
      costs
                        
                        $
                        722,750Amortization
      of WFV and BCF as Non-cash Interest Expense
                        
                        $
                        7,493,519Principal
      and Interest Converted
                        
                        $
                        —Shares
      Issued Upon Conversion
                        
                        
                        —Principal
      and Interest Repayments in Shares of Common Stock
                        
                        $
                        4,764,864Shares
      Issued for Principal and  Interest Repayments
                        
                        
                        9,610,400Principal
      and Interest Repayments in Cash
                        
                        $
                        941,100
 
 10
 
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  (A)
              $7,000,000;
      $5,000,000; $3,650,000; $2,000,000;
$1,000,000
 
 (B)
                The
      debentures carry an 8% coupon and mature September 30, 2009, provided,
      however, the maturity date may be extended at the option of the
      holder.  The debentures carry a 18-month term and amortize in 15
      installments commencing in the fifth month of the term.  The
      principal and interest payments are payable in cash or, at the Company's
      option, the lower of (i) the then applicable conversion price and (ii) the
      price which shall be computed as 90% of the arithmetic average of the VWAP
      of the common stock on each of the twenty (20) consecutive trading days
      immediately preceding the applicable installment date, subject to certain
      conditions. Each installment payment elected by the Company to be repaid
      in shares requires the Company to deliver the number of shares estimated
      to satisfy the installment payment 20 trading days preceding the
      installment due date. The difference in the value of these shares and the
      installment payment on the installment date is required to be delivered to
      investors by issuing additional shares. In addition, each debenture lists
      certain “Events of Default”, which include, without limitation, any
      default in the payment of principal or interest in respect of the
      debentures as when they become due and payable, the Company’s failure to
      observe or perform any other covenant, agreement or warranty contained in
      the agreements relating to the debentures.  Upon the occurrence
      of the “Event of Default”, the holder may require us to redeem all or any
      portion of the debentures upon written notice.  Other conditions
      in the notes impede the Company’s ability to make its monthly installment
      payments in shares of its common stock.  Two of such conditions
      – the effectiveness of the registration statement for at least 30 days
      prior to installment notice and listing maintenance minimum bid price
      requirement of The NASDAQ Stock Market, were not met requiring the Company
      to procure waivers from the debenture holders in respect to these
      conditions.
 
 (C)
                The
      warrants issued to investors are comprised of the following: Series A
      warrants 5,257,729; Series A-1 warrants 7,541,857; Series B warrants
      17,066,108; Series C warrants
12,799,580.
 
 a.
                The
      Series C warrants are issuable contingent upon exercise of Series B
      warrants.  The relative fair value associated with the Series C
      warrants at the commitment date amounted to $1,234,836.  At such
      time the contingency is met, the Company would include the relative fair
      value as a charge to interest expense.  The Company has
      accounted for this contingency in accordance with EITF 98-5 and
      00-27.  At October 31, 2008, Series B warrants have not been
      exercised and therefore the contingency has not been
  met.
 
 (D)
                The
      Company re-priced 12,697,024 existing warrants.  The value
      associated with the re-priced warrants amounted to $5,399,160 and was
      valued using the Black-Scholes pricing model.  The value of the
      re-priced warrants has been added to the value of the new warrants issued
      (see (B) above) and accounted for in accordance with EITF 98-5 and
      00-27.
 
 (E)
                Black-Scholes
      pricing model assumptions used in valuing the existing warrants were: risk
      free interest (2.70 percent); expected volatility (.8611); life of 1 1⁄2
      years, 7 years and 7 1⁄2 years.
 
 As of
October 31, 2008, the $4,598,354 net outstanding balance of convertible
debentures is comprised of $16,520,000 of debt net of unamortized debt discount
of $11,921,646.  As of July 31, 2008, the $4,718,520 net outstanding
balance of convertible debentures was comprised of $20,650,000 of debt net of
unamortized debt discount of $15,931,480.
 
 11
 
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 8.
              Pending
      Litigation
 In
February 2001, a former business associate of the former Vice President of
Research and Development (“VP”) of the Company and an entity known as Centrum
Technologies Inc. (“CTI”) commenced an action in the Ontario Superior Court of
Justice against the Company and the VP seeking, among other things, damages for
alleged breaches of contract and tortious acts related to a business
relationship between this former associate and the VP that ceased in July 1996.
The plaintiffs’ statement of claim also seeks to enjoin the use, if any, by the
Company of three patents allegedly owned by CTI. The three patents are entitled
Liquid Formulations for
Proteinic Pharmaceuticals, Vaccine Delivery System for
Immunization, Using Biodegradable Polymer Microspheres, and Controlled Releases of Drugs or
Hormones in Biodegradable Polymer Microspheres.  It is the
Company’s position that the buccal drug delivery technologies which are the
subject matter of the Company’s research, development, and commercialization
efforts, including Generex Oral-lynTM and the RapidMistTM Diabetes Management
System, do not make use of, are not derivative of, do not infringe upon, and are
entirely different from the intellectual property identified in the plaintiffs’
statement of claim. On July 20, 2001, the Company filed a preliminary motion to
dismiss the action of CTI as a nonexistent entity or, alternatively, to stay
such action on the grounds of want of authority of such entity to commence the
action. The plaintiffs brought a cross motion to amend the statement of claim to
substitute Centrum Biotechnologies, Inc. (“CBI”) for CTI. CBI is a corporation
of which 50 percent of the shares are owned by the former business associate and
the remaining 50 percent are owned by the Company. Consequently, the
shareholders of CBI are in a deadlock. The court granted the Company’s motion to
dismiss the action of CTI and denied the plaintiffs’ cross motion without
prejudice to the former business associate to seek leave to bring a derivative
action in the name of or on behalf of CBI. The former business associate
subsequently filed an application with the Ontario Superior Court of Justice for
an order granting him leave to file an action in the name of and on behalf of
CBI against the VP and the Company. The Company opposed the application. In
September 2003, the Ontario Superior Court of Justice granted the request and
issued an order giving the former business associate leave to file an action in
the name of and on behalf of CBI against the VP and the Company. A statement of
claim was served in July 2004. The Company is not able to predict the ultimate
outcome of this legal proceeding at the present time or to estimate an amount or
range of potential loss, if any, from this legal proceeding.
 
 The
Company is involved in certain other legal proceedings in addition to those
specifically described herein. Subject to the uncertainty inherent in all
litigation, the Company does not believe at the present time that the resolution
of any of these legal proceedings is likely to have a material adverse effect on
the Company’s financial position, operations or cash flows.
 
 With
respect to all litigation, as additional information concerning the estimates
used by the Company becomes known, the Company reassesses its position both with
respect to accrued liabilities and other potential exposures.
 
 9.
              Net
      Loss Per Share
 Basic
earnings per shares (EPS) and Diluted EPS for the three months ended October 31,
2008 and 2007 have been computed by dividing the net loss available to common
stockholders for each respective period by the weighted average shares
outstanding during that period.  All outstanding options, warrants,
non-vested restricted stock and shares to be issued upon conversion of the
outstanding convertible debentures, representing approximately 76,837,722 and
22,814,296 incremental shares, have been excluded from the 2008 and 2007
computation of Diluted EPS as they are anti-dilutive due to the losses
generated.
 
 12
 
 GENEREX
BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 10.
                Supplemental
      Disclosure of Cash Flow
Information
 For the Three Months EndedOctober 31,2008
                    
                    
                    2007Cash
      paid during the period for:Interest
                    
                    $
                    618,099
                    
                    
                    $
                    57,673Income
      taxes
                    
                    $
                    —
                    
                    
                    $
                    —Disclosure
      of non-cash investing and financing activities:Issuance
      of common stock as satisfaction of accrued executive
      compensation
                    
                    $
                    —
                    
                    
                    $
                    471,875Issuance
      of common stock as repayment of
      convertible  debentures
                    
                    $
                    3,753,334
                    
                    
                    $
                    —Issuance
      of common stock as convertible debentures advance payments
                    
                    $
                    759,450
                    
                    
                    $
                    —Purchase
      of property and equipment through the issuance of obligations under
      capital lease
                    
                    $
                    83,002
                    
                    
                    $
                    —
  11.
                Stockholders’
      Equity
 During
the three months ended October 31, 2008, the Company issued 95,500 shares of
common stock to various consultants for services rendered in the amount of
$46,651.  The shares were valued at $0.32 to $0.80 per share based on
the quoted market price of the Company’s common stock on the dates of the
issuances.
 
 During
the three months ended October 31, 2008, the Company issued 53,871 shares of
common stock valued at $55,136 as employee compensation.  The shares
were valued at $0.31 to $0.72 per share based on the quoted market price of the
Company’s common stock on the dates of the issuances.
 
 During
the three months ended October 31, 2008, the Company received aggregate cash
proceeds of $56,000 from exercises of stock options.  The Company
issued 100,000 shares of common stock as a result of these
transactions.
 
 During
the three months ended October 31, 2008, the Company issued 9,610,400 shares of
common stock valued at $4,764,864 as repayment of convertible debentures and
accrued interest (see Note 7).  The shares were valued at $0.29 to
$0.65 per share based on the quoted market price of the Company’s common stock
on the dates of the issuances.
  The
stockholders’ equity transactions as described above are summarized as
follow:
  Additional
                        
                        
                        TotalCommon Stock
                        
                        
                        Paid-In
                        
                        
                        Stockholders’Shares
                        
                        
                        Amount
                        
                        
                        Capital
                        
                        
                        EquityIssuance
      of common stock for services
                        
                        
                        95,500
                        
                        
                        $
                        96
                        
                        
                        $
                        46,555
                        
                        
                        $
                        46,651Issuance
      of common stock as employee compensation
                        
                        
                        53,871
                        
                        
                        
                        54
                        
                        
                        
                        25,197
                        
                        
                        
                        25,251Stock-based
      executive compensation
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        39,565
                        
                        
                        
                        39,565Stocks
      options exercised for cash
                        
                        
                        100,000
                        
                        
                        
                        100
                        
                        
                        
                        55,900
                        
                        
                        
                        56,000Issuance
      of common stock as repayment of convertible debentures, accrued interest
      and prepayment
                        
                        
                        9,610,400
                        
                        
                        
                        9,610
                        
                        
                        
                        4,755,254
                        
                        
                        
                        4,764,864Total
                        
                        
                        9,859,771
                        
                        
                        $
                        9,860
                        
                        
                        $
                        4,922,471
                        
                        
                        $
                        4,932,331
  13




Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations





As used
herein, the terms the “Company,” “Generex,” “we,” “us,” or “our” refer to
Generex Biotechnology Corporation, a Delaware corporation. The following
discussion and analysis by management provides information with respect to our
financial condition and results of operations for the three-month periods ended
October 31, 2008 and 2007. This discussion should be read in conjunction with
the information contained in Part I, Item 1A - Risk
Factors and Part II,
Item 8 - Financial Statements and Supplementary Data in our Annual Report
on Form 10-K, as amended, for the year ended July 31, 2008 and the information
contained in Part I, Item 1 -
Financial Statements and Part II, Item 1A- Risk Factorsin this Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 2008.





Forward-Looking
Statements





We have
made statements in this Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere in this Quarterly Report on Form 10-Q of Generex
Biotechnology Corporation for the fiscal quarter ended October 31, 2008 that may
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Act"). The Act limits our
liability in any lawsuit based on forward-looking statements that we have made.
All statements, other than statements of historical facts, included in this
Quarterly Report that address activities, events or developments that we expect
or anticipate will or may occur in the future, including such matters as our
projections, future capital expenditures, business strategy, competitive
strengths, goals, expansion, market and industry developments and the growth of
our businesses and operations, are forward-looking statements. These statements
can be identified by introductory words such as "expects," “anticipates,”
"plans," "intends," "believes," "will," "estimates," "projects" or words of
similar meaning, and by the fact that they do not relate strictly to historical
or current facts. Our forward-looking statements address, among other
things:




·
            our
      expectations concerning product candidates for our
      technologies;·
            our
      expectations concerning existing or potential development and license
      agreements for third-party collaborations and joint
    ventures;·
            our
      expectations of when different phases of clinical activity may commence
      and conclude;·
            our
      expectations of when regulatory submissions may be filed or when
      regulatory approvals may be received; and·
            our
      expectations of when commercial sales of our products may commence and
      when actual revenue from the product sales may be
  received.





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





·
            the
      inherent uncertainties of product development based on our new and as yet
      not fully proven technologies;·
            the
      risks and uncertainties regarding the actual effect on humans of seemingly
      safe and efficacious formulations and treatments when tested
      clinically;·
            the
      inherent uncertainties associated with clinical trials of product
      candidates;·
            the
      inherent uncertainties associated with the process of obtaining regulatory
      approval to market product candidates;·
            the
      inherent uncertainties associated with commercialization of products that
      have received regulatory approval;·
            the
      volatility of, and recent decline in, our stock price and the impact on
      our ability to pay installments due on our outstanding senior secured
      notes in stock rather than cash; and·
            our
      ability to obtain the necessary financing to fund our
      operations.


14


Additional
factors that could affect future results are set forth in Part I, Item 1A Risk Factors
of our Annual Report on Form 10-K, as amended, for the year ended July 31, 2008
and in Part II, Item 1A. Risk
Factors of this Quarterly Report on Form 10-Q. We caution investors that
the forward-looking statements contained in this Quarterly Report must be
interpreted and understood in light of conditions and circumstances that exist
as of the date of this Quarterly Report. We expressly disclaim any obligation or
undertaking to update or revise forward-looking statements to reflect any
changes in management's expectations resulting from future events or changes in
the conditions or circumstances upon which such expectations are
based.




Executive
Summary





Overview
of Business





We are
engaged primarily in the research, development and commercialization of drug
delivery systems and technologies. Our primary focus at the present time is our
proprietary technology for the administration of formulations of large molecule
drugs to the oral (buccal) cavity using a hand-held aerosol applicator. Through
our wholly-owned subsidiary, Antigen, we have expanded our focus to include
immunomedicines incorporating proprietary vaccine formulations.





We
believe that our buccal delivery technology is a platform technology that has
application to many large molecule drugs and provides a convenient,
non-invasive, accurate and cost-effective way to administer such drugs. We have
identified several large molecule drugs as possible candidates for development,
including estrogen, heparin, monoclonal antibodies, human growth hormone and
fertility hormone, but to date have focused our development efforts primarily on
one pharmaceutical product, Generex Oral-lynTM, an insulin formulation
administered as a fine spray into the oral cavity using our proprietary
hand-held aerosol spray applicator known as RapidMistTM. To date, we have
received regulatory approval in Ecuador and India for the commercial marketing
and sale of Generex Oral-lynTM. In March 2008, we initiated Phase III clinical
trials for this product in the U.S. with the first patient screening for such
trials at a clinical study site in Texas. The patient screening at other
participating clinical sites in the U.S. and Canada is ongoing. Currently over
285 patients have been enrolled in 74 clinical sites around the world, including
sites in the United States, Canada, Bulgaria, Poland, Romania, Russia and
Ukraine.





We
received a Special Access Program (SAP) authorization from Health Canada for a
patient-specific, physician-supervised treatment of Type-1 diabetes with Generex
Oral-lynTM in April 2008. SAP provides access to non-marketed drugs for
practitioners treating patients with serious or life-threatening conditions when
conventional therapies have failed, are not available or unsuitable. We received
a similar authorization from health authorities in Netherlands in September
2008. We will continue to expand our SAP participation in additional countries
around the world.





Using our
buccal delivery technology, we also have launched a line of over-the-counter
glucose and energy sprays , including Glucose RapidSprayTM, GlucoBreakTM, and
BaBOOM!TM Energy Spray. We believe these products will complement Generex
Oral-lynTM and may provide us with an additional revenue stream prior to the
commercialization of Generex Oral-lynTM in other major
jurisdictions.





In early
November 2008, we submitted our product dossier to the Ministry of Health in
Damascus, Syria through Generex MENA, our branch office in Dubai.  The
dossier includes Generex Oral-lynTM.  We also submitted a file to
register our proprietary over-the-counter products, including Glucose
RapidSprayTM, 7-Day Diet Aid SprayTM (marketed as Crave-NxTM in the United States
and Canada) and BaBOOM!TM Energy Spray.  The Syrian Ministry of Health
will review the dossier and inform us of any additional requests for information
that it may have. There have been no immediate queries, and we anticipate
registration before the end of calendar year 2009. It is estimated that among
Syria's population of 20 million, between 3 million and 3.5 million people have
diabetes.





In
October 2008, we announced the enrollment of subjects in our bioequivalency
clinical trial of MetControlTM, our proprietary Metformin medicinal chewing gum
product.  The protocol for the study is an open-label, two-treatment,
two-period, randomized, crossover study comparing MetControlTM and immediate
release MetforminTM tablets in healthy volunteers. The study results will allow
us to proceed with additional research and development initiatives and consider
regulatory agency registration applications.


15





Our
subsidiary, Antigen, concentrates on developing proprietary vaccine formulations
that work by stimulating the immune system to either attack offending agents
(i.e., cancer cells, bacteria, and viruses) or to stop attacking benign elements
(i.e., self proteins and allergens). Our immunomedicine products are based on
two platform technologies and are in the early stages of development. We
continue clinical development of Antigen’s synthetic peptide vaccines designed
to stimulate a potent and specific immune response against tumors expressing the
HER-2/neu oncogene for patients with HER-2/neu positive breast cancer in a Phase
II clinical trial and patients with prostate cancer and against avian influenza
in two Phase I trials. Development efforts also are underway for seasonal
influenza virus, HIV, HPV, melanoma, ovarian cancer, allergy and Type I diabetes
mellitus. We have established collaborations with clinical investigators at
academic centers to advance these technologies.





We face
competition from other providers of alternate forms of insulin. Some of our most
significant competitors, Pfizer, Eli Lilly, and Novo Nordisk, recently announced
that they will discontinue development and/or sale of their inhalable forms of
insulin. Generex Oral-lynTM is not an inhaled insulin; rather, it is a buccally
absorbed formulation with no residual pulmonary deposition. We believe that our
buccal delivery technology offers several advantages over inhaled insulin,
including the avoidance of pulmonary inhalation, which requires frequent
physician monitoring, ease of use and portability.





We are a
development stage company. From inception through the end of the year ended July
31, 2008, we have received only limited revenues from operations. In the fiscal
year ended July 31, 2008, we received approximately $128,039 in revenues from
sales of Glucose RapidSprayTM.  In the fiscal quarter ended October 31,
2008, we received approximately $38,886 in revenues from sales of Glucose
RapidSprayTM.  These numbers do not reflect deferred sales to the
customers during the respective period with the right of return.  We
also received an upfront non-refundable license fee of $500,000 pursuant to a
product licensing and distribution agreement with Dong Sung Pharm Co. Ltd. for
the importation, marketing, distribution and sale of Generex Oral-lynTM in South
Korea.





We
operate in only one segment: the research, development and commercialization of
drug delivery systems and technologies for metabolic and immunological
diseases.





We were
incorporated in the State of Delaware in 1997. Our principal executive offices
are located at 33 Harbour Square, Suite 202, Toronto, Canada, and our telephone
number at that address is (416) 364-2551. We maintain an Internet website at
www.generex.com.  We
make available free of charge on or through our website our filings with the
SEC.





Accounting
for Research and Development Projects





Our major
research and development projects are the refinement of our platform buccal
delivery technology, our buccal insulin project (Generex Oral-lynTM), our buccal
morphine product and Antigen’s peptide immunotherapeutic vaccines.





During
the last fiscal quarter, we expended resources on the clinical testing and
commercialization, of our buccal insulin product, Generex Oral-lynTM. In July
2007, we received no objection from the FDA to proceed with our long-term
multi-center Phase III study protocol for Generex Oral-lynTM. Late-stage trials
involve testing our product with a large number of patients over a significant
period of time. The completion of late-stage trials in Canada and eventually the
United States may require significantly greater funds than we currently have on
hand.





Generex
Oral-lynTM was approved for commercial sale by drug regulatory authorities in
Ecuador in May 2005. PharmaBrand handled the commercial launch of Generex
Oral-lynTM in Ecuador in June 2006. While we anticipate generating revenue from
sales of Generex Oral-lynTM in Ecuador, we do not expect that such revenues will
be sufficient to sustain our research and development and regulatory
activities.





Generex
Oral-lynTM was approved for importation and commercial sale in India in November
2007. We have entered into a licensing and distribution agreement with Shreya
Life Sciences Pvt. Ltd. and are working with Shreya to prepare for the
commercial launch of the product in India.




Although
we initiated regulatory approval process for our morphine and fentanyl buccal
products, we did not expend resources to further this product during our last
fiscal year.





During
the last fiscal quarter, we expended resources on research and development
relating to Antigen’s peptide immunotherapeutic vaccines and related
technologies. One Antigen vaccine is currently in Phase II clinical trials in
the United States involving patients with HER-2/neu positive breast cancer, and
an Antigen vaccine for H5N1 avian influenza is in Phase I clinical trials
conducted at the Lebanese-Canadian Hospital in Beirut. Antigen’s prostate cancer
vaccine based on AE37 is currently in Phase I clinical trials in Greece.
Preliminary pre-clinical work has commenced with respect to the experimental
vaccine for patients with acute myeloid leukemia at Beijing Daopei Hospital in
China.


16





Because
of various uncertainties, we cannot predict the timing of completion and
commercialization of our buccal insulin or buccal morphine products or Antigen’s
peptide immunotherapeutic vaccines or related technologies. These uncertainties
include the success of current studies, our ability to obtain the required
financing and the time required to obtain regulatory approval even if our
research and development efforts are completed and successful, our ability to
enter into collaborative marketing and distribution agreements with
third-parties, and the success of such marketing and distribution arrangements.
For the same reasons, we cannot predict when any products may begin to produce
net cash inflows.




Most of
our buccal delivery research and development activities to date have involved
developing our platform technology for use with insulin. Insubstantial amounts
have been expended on projects with other drugs, including morphine and
fentanyl, and those projects involved a substantial amount of platform
technology development. As a result, we have not made significant distinctions
in the accounting for research and development expenses among products, as a
significant portion of all research has involved improvements to the platform
technology in connection with insulin, which may benefit all of our potential
buccal products. During the quarter ended October 31, 2008, approximately 88.3%
of our $4,355,689 in research expenses was attributable to insulin and platform
technology development, and we did not have any research expenses related to
morphine, fentanyl or other buccal projects.  During the quarter ended
October 31, 2007, approximately 84% of our $3,847,803 in research expenses was
attributable to insulin and platform technology development, and we did not have
any research expenses related to morphine, fentanyl or other buccal
projects.





Approximately
11.7%, or $510,660, of our research and development expenses for the quarter
ended October 31, 2008 was related to Antigen's immunomedicine
products compared to approximately 16%, or $635,980, of our research and
development expenses for the quarter ended
October 31, 2007.  Because these products are in initial
phases of clinical trials or early, pre-clinical stage of development (with the
exception of the Phase II clinical trials of Antigen HER-2/neu positive breast
cancer vaccine that are underway), all of the expenses were accounted for as
basic research and no distinctions were made as to particular products. Due to
the early stage of development, we cannot predict the timing of completion of
any products arising from this technology, or when products from this technology
might begin producing revenues.





Critical
Accounting Policies





Our
discussion and analysis of our financial condition and results of operations is
based on our consolidated financial statements which have been prepared in
conformity with accounting principles generally accepted in the United States of
America. It requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.





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





Revenue Recognition.
Net sales of Glucose RapidSprayTM, BaBOOM!TM Energy Spray and GlucoBreakTM are
generally recognized in the period in which the products are delivered. Delivery
of the products generally completes the criteria for revenue recognition for the
Company. In the event where the customers have the right of return, sales are
deferred until the right of return lapses or the product is resold.





Inventory.Inventories are stated at the lower of cost or market with cost
determined using the first-in first-out method. Management considers such
factors as the amount of inventory on hand and in the distribution channel,
estimated time to sell such inventory, inventories shelf life and current market
conditions when determining whether the lower cost or market is used. As
appropriate, a provision is recorded to reduce inventories to their net
realizable value.  Inventory also includes the cost of products sold
to the customers with the rights of return.




Impairment of Long-Lived
Assets. Management reviews for impairment whenever events or changes in
circumstances indicate that the carrying amount of property and equipment may
not be recoverable under the provisions of Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." If it is determined that an impairment loss has occurred based upon
expected future cash flows, the loss is recognized in the Statement of
Operations.


17





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.





Share-based
compensation. Management determines value of stock-based compensation in
accordance with Statement of Financial Accounting Standards No. 123(R)
“Share-Based Payment” which revises SFAS No. 123 “Accounting for Stock-Based
Compensation” for stock and options grants to employees.  We also
follow the guidance of Emerging Issues Task Force 96-18 “Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services” for equity instruments issued to
consultants.





Results
of Operations




Three
Months Ended October 31, 2008 Compared to Three Months Ended October 31,
2007





Our net
loss for the quarter ended October 31, 2008 was $11,697,184 versus $7,221,913 in
the corresponding quarter of the prior fiscal year. The increase in net loss in
this fiscal quarter versus the corresponding quarter of the prior fiscal year is
primarily due to the interest expense recorded in connection with our
convertible debentures, an increase in research and development expenses in
connection with preparations for global Phase III clinical trials of Generex
Oral-lynTM at sites in the United States, Canada, and Europe and an increase in
selling expenses and despite the decrease in our general and administrative
expenses.  Our operating loss for the quarter ended October 31, 2008
decreased to $7,524,646 compared to $7,706,361 in the first fiscal quarter of
2007.  The decrease in operating loss resulted from a decrease in
general and administrative expenses (to $2,847,913 from $3,515,920) that was
partially offset by an increase in research and development expenses (to
$4,355,689 from $3,847,803) and an increase in selling expense (to $837,198 from
$367,420). Our revenues in the first quarter ended October 31, 2008 increased to
$538,346 from $44,713 for the quarter ended October 31, 2007 primarily due to
the licensing arrangement in South Korea.  Our net revenues from sales
of our glucose products decreased to $38,346 in the first quarter of fiscal 2009
from $44,713 in the first quarter of fiscal 2008. The decrease in net revenue is
attributable to a reduction in sales of Glucose RapidSprayTM in the last fiscal
quarter compared to stocking sales in the first quarter of fiscal
2008.





The
increase in research and development expenses in the last fiscal quarter
reflects an increased level of research and development of our oral insulin
product and platform technology in connection with global Phase III clinical
trials.  The decrease in general and administrative expenses reflects
the decrease in expenses for consulting and financial services in the current
fiscal quarter compared to last year, a modest reduction in travel and
accounting expenses, despite a small increase in legal costs.  The
selling expenses are associated with the commercial sales of Glucose RapidSprayTM
and BaBOOMTM Energy Spray that began in fiscal 2007.





Our
interest expense in the first quarter of fiscal 2009 increased to $4,429,388
compared to interest expense of $57,674 in the first quarter of fiscal 2008 due
to interest recognized on the secured convertible notes issued in March 2008 in
connection with a private placement.  Our interest income decreased to
$168,465 in the first quarter of fiscal 2009 compared to $460,035 in the same
quarter for the last year primarily due to lower market interest rates and lower
cash balances.  We received a slightly higher income from rental
operations (net of expense) of $88,380 in the first quarter of fiscal 2009
compared to $82,087 in the same quarter for the last year.




Financial
Condition, Liquidity and Resources





Sources
of Liquidity





To date
we have financed our development stage activities primarily through private
placements of our common stock and securities convertible into our common
stock.  We have also made significant short –term investments in
high-grade auction rate securities which we are currently are in the process of
liquidating.


18





We
believe that the commencement of Phase III clinical trial trials for Oral-lynTM
in the United States and Canada is a significant milestone event. We also
anticipate that the commercial launch of Oral-lynTM in India, which is expected
in before the end of calendar 2008, will provide us with revenue in fiscal
2009.  We believe that the successful commercial launch of Oral-lynTM
in India, will enhance our ability to access additional sources of
funding.  For instance, in August 2008, we entered into a product
licensing and distribution agreement with Dong Sung Pharm Co. Ltd. for the
importation, marketing, distribution and sale of Generex Oral-lynTM in South
Korea.  Under this agreement, we received an upfront non-refundable
license fee of $500,000 and will receive a non-refundable license fee of
$500,000 at such time as we obtain governmental approval for the importation,
marketing, distribution and sale of the product in South Korea.  When
it places its first order of Oral-lynTM, Dong-Sung also will make a $500,000
pre-payment against which product purchases will be applied.





We will
continue to require substantial funds to continue research and development,
including preclinical studies and clinical trials of our product candidates, and
to commence sales and marketing efforts if the FDA or other regulatory approvals
are obtained.  Management may seek to meet all or some of our
operating cash flow requirements through financing activities, such as private
placement of our common stock, preferred stock offerings and offerings of debt
and convertible debt instruments.  We filed a shelf registration
statement with the Securities and Exchange Commission (“SEC”) to register an
indeterminate number of shares of common stock and preferred stock and an
indeterminate number of warrants and units, the aggregate initial offering price
of which is not to exceed $150,000,000, but we have not offered any shares
pursuant to this registration statement to date. Management is actively pursuing
industry collaboration activities, including product licensing and specific
project financing. We are also examining options for the procurement of a
reliable long-term insulin supply for our future commercial needs.





As of
October 31, 2008, we believed that our anticipated cash position was sufficient
to meet our working capital needs for the next twelve months based on the pace
of our planned activities.  Beyond that, we may require additional
funds to support our working capital requirements or for other
purposes.




While we
have generally been able to raise equity capital as required, our cash balances
were very low during portions of fiscal 2005 and unforeseen problems with our
clinical program, manufacturing and commercialization plans in Ecuador and India
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.  Our inability to obtain required funding will have a
material adverse effect on one or more of our research or development programs
or curtail some of our commercialization efforts.





Auction
Rate Securities





At
October 31, 2008, we had short-term investments of approximately $8.9
million.  The balance was reduced to $8.1 million in November
2008.  All of our short-term investments represent investment in
high-grade auction rate securities.  The continued negative conditions
in the global credit markets have prevented some investors from liquidating
their holdings of auction rate securities because the amount of securities
submitted for sale has exceeded the amount of purchase orders for such
securities.





We have
been advised that our auction rate securities will be redeemed in Phase II of
the Citi Auction Security Settlement on or before December 23,
2008.  We cannot predict whether future auctions or redemptions
related to our auction rate securities will be successful.  If we are
not able to monetize some or all of our auction rate securities, we could suffer
a loss, and such loss could have a material adverse effect on our ability to
finance our future ongoing operations.





Financing
– 8% Secured Convertible Notes and Warrants





On March
31, 2008, we entered into a Securities Purchase Agreement and related documents
with existing institutional investors relating to a private placement of 8%
secured convertible notes (the “Notes”) and warrants (the “Warrants”) for
aggregate gross proceeds to us of $20,650,000.





The Notes
have an 18-month maturity and amortize over fifteen months in fifteen equal
monthly installments beginning on August 1, 2008. Interest on the principal
amount outstanding under the Notes will accrue at a rate of eight percent (8%)
per
annum.  We may pay installments of principal and accrued
interest in cash or, at our option, in shares of our common stock subject to the
satisfaction of certain conditions. If we elect to pay principal and interest in
shares of our common stock, the value of each share of common stock will be
equal to the lower of (a) the conversion price, and (b) 90% of the average of
the volume weighted average prices of the common stock on each of the twenty
(20) consecutive trading days immediately preceding the applicable payment
date.


19





At the
option of each Noteholder, the principal amount outstanding under each Note is
convertible at any time into shares of our common stock at the initial
conversion price of $1.21, which represents 110% of the closing bid price of our
common stock on the NASDAQ Capital Market on the closing date,
March 31, 2008.





We are
prohibited from issuing any variable priced equity or variable priced
equity-linked securities as long as any Note is outstanding. We also are
prohibited from issuing any equity or equity-linked securities until 90 days
after the effective date of a registration statement covering the resale of the
shares of our common stock issuable pursuant to the Notes and Warrants, with
limited exceptions.  In addition, until the later of (i) 12 months
after the effective date of such a registration statement and (ii) the date the
Notes have been repaid or converted in full, the investors will have the right
to participate in any capital raising transactions that we
undertake.





The
Warrants issued in connection with the March 2008 Securities Purchase Agreement
include:





(i)
            Series
      A and A-1 Warrants, which are exercisable for a period of 7 years into an
      aggregate of 75% of the number of shares of our common stock initially
      issuable upon conversion of the Notes, with the Series A Warrants being
      exercisable into 5,257,729 shares immediately upon issuance and the Series
      A-1 warrants being exercisable into 7,541,857 shares beginning October 1,
      2008;(ii)
            Series
      B Warrants, which are exercisable beginning October 1, 2008 into 100% of
      the shares of our common stock initially issuable upon conversion of the
      Notes (initially 17,066,166 shares) and remaining exercisable for a period
      of 18 months after a registration statement covering the shares of common
      stock issuable upon conversion or exercise of the Notes and Warrants is
      declared effective by the SEC; and(iii)
            Series
      C Warrants, which are exercisable for a period of 7 years beginning
      October 1, 2008, but only to the extent that the Series B Warrant are
      exercised and only in the same percentage that the Series B Warrants are
      exercised, up to a maximum percentage of 75% of the number of shares of
      our common stock initially issuable upon conversion of the Notes
      (initially a maximum of 12,799,580
shares).





The
initial exercise price of each Series A Warrant, Series A-1 Warrant, Series B
Warrant and Series C Warrant is $1.21.





In
addition, in connection with the transaction, we (a) reduced the strike price of
our outstanding common stock purchase warrants that are held by the investors in
the March 2008 private placement and certain other warrant holders and that have
strike prices ranging from $1.25 to $3.00, to $1.10, which equals the closing
bid price of the common stock on the NASDAQ Capital Market on the closing date,
March 31, 2008, and (b) extended the expiration date of such warrants to
March 31, 2015. The holders of those warrants will waive all
anti-dilution entitlements they have in respect of any of our previously issued
securities with respect to the issuance or conversion of the Notes, the payment
of the installments or interest in shares of the common stock, or the issuance
or exercise of the Warrants.





As of
October 31, 2008, we incurred interest expense of $4,375,722 related to the
Notes that includes non cash accounting expense of $4,009,835 relating to debt
discount.





We may
receive additional proceeds from the exercise of Warrants, although the warrants
include a cashless exercise feature.  As of October 1, 2008, all of
the warrants issued in March 2008 became exercisable.  At October 31,
2008, outstanding Warrants issued in connection with the March 2008 Securities
Purchase Agreement and the repriced warrants described above were as
follows:





Date Issued
                        
                        Aggregate No. of
                          Shares Unexercised
                        
                        Exercise
                          Price*
                        
                        Exercise Date
                        
                        Expiration DateMarch
      31, 2008
                        
                        12,697,024
                        
                        $
                        1.10
                        
                        March 31,
      2008
                        
                        March
      31, 2015March
      31, 2008
                        
                        5,257,729
                        
                        $
                        1.21
                        
                        March
      31, 2008
                        
                        March
      31, 2015March
      31, 2008
                        
                        20,341,437
                        
                        $
                        1.21
                        
                        October
      1, 2008
                        
                        October
      1, 2015March
      31, 2008
                        
                        17,066,117
                        
                        $
                        1.21
                        
                        October
      1, 2008
                        
                        October
      1,
2009


*Subject
to anti-dilution adjustments upon issuance of securities at a price per share of
common stock less than the then applicable exercise price or the market price of
our common stock at that time, whichever is lower.


20





Payments
on Notes





In July
and August 2008, we entered into waiver and consent agreements with the
Noteholders to allow us to convert some or all of the installment amounts due on
the Notes on the August 1st,
September 1st and
October 1st
installment dates into shares of our common stock, subject to certain
conditions.  We sought waivers from the Noteholders due to our failure
to meet certain conditions precedent to the conversion of installment amounts
under the Notes as of the August 1st
installment notice date, including:





·
            the
      registration statement for the resale of all of the shares of common stock
      underlying the Notes and the Warrants was not effective at least thirty
      days prior to the installment notice date of August 1, 2008;
      and





·
            we
      failed to comply with the minimum bid price requirement of Marketplace
      Rule 4310(c)(4) of The Nasdaq Stock
Market.





Pursuant
to the consent and waiver agreements, all of the Noteholders, with the exception
of Iroquois Master Fund Ltd. and Iroquois Capital Opportunity Fund, LP
(together, the “Iroquois Funds”), agreed to waive satisfaction of (i) the
effective registration statement requirement with respect the September 1, 2008
installment date, and (ii) the listing maintenance condition with respect to the
September 1, 2008 and October 1, 2008 installment dates.  Thus, we
converted  the installment amounts due on each of the September 1st and
October 1st
installment dates into shares of our common stock.  The Iroquois Funds
agreed to waive satisfaction of the two conditions precedent to our conversion
of installments amounts with respect the September 1, 2008 installment date such
that we converted the September 1, 2008 installment amount due to the Iroquois
Funds into shares of our common stock.





In
addition, subject to certain conditions, three of the investors - Cranshire
Capital, L.P., Portside Growth and Opportunity Fund, and Smithfield Fiduciary
LLC -, consented to our conversion and redemption, as applicable, of the
installment amount due on August 1, 2008 as follows:





·
            On
      the August 1st
      installment date, we paid the accrued and unpaid interest in
      cash.





·
            We
      paid the balance of the August 1st installment amount in shares of our
      common stock as follows:





·
            50%
      of the shares were issued at the same time and in the same manner as the
      shares issued in payment of the September 1, 2008 installment amount;
      and





·
            50%
      of the shares were issued at the same time and in the same manner as the
      shares issued in payment of the October 1, 2008 installment
      amount.





·
            The
      shares issued in respect of the August 1st installment amount were
      calculated using the lower of:




·
              the
      then applicable conversion
price,




·
            the
      price computed as 90% of the arithmetic average of the volume weighted
      average price (“VWAP”) of the common stock on each of the twenty
      consecutive trading days immediately preceding August 1, 2008
      and





·
            the
      price computed as 90% of the arithmetic average of the VWAP of the common
      stock on each of the twenty consecutive trading days immediately preceding
      the delivery or deemed delivery of our installment notice with respect to
      the installment amount due on September 1, 2008 or October 1, 2008, as
      applicable.





Another
investor, Rockmore Investment Master Fund Ltd, consented to our conversion and
redemption, as the case may be, of the August 1st
installment amount in the manner described above, except that we paid 50% of the
principal balance of the August 1st
installment amount plus accrued and unpaid interest in cash on August 1st, and we
paid the remaining 50% of the principal balance of the August 1st
installment amount in shares of common stock, delivering half of such shares
together with the September 1, 2008 installment amount and half of such shares
together with the October 1, 2008 installment amount.


21





We
obtained similar waivers from all investors in respect to our November 1, 2008
installment amount.  Based on the recent decline in our stock price,
we paid the principal and interest amounts due on December 1, 2008 in
cash.  As of December 4, 2008, we have issued 11,755,077 shares
of common stock and paid $2,317,767 in cash to repay Note principal and accrued
interest in the aggregate amount of $7,699,850.





For the
foreseeable future, we will monitor the market conditions and the price of our
stock and determine on a month-by-month basis whether to pay our principal
payment obligations under the Notes in cash or in stock.





Because
of the decrease in our stock price since the filing of the registration
statement required under the Notes, we believe that the registration statement
does not likely include a sufficient number of shares to allow us to make all of
the remaining principal and interest payments in shares rather than in
cash.  We believe that we will be able to negotiate relief from the
requirement that an additional registration statement be filed in the near
future to comply with the condition precedent under the Notes because all of the
shares we would issue in the absence of a registration statement would be
eligible for resale by the investors pursuant to Rule 144.  (To the
extent that the holders exercise the Series A-1, Series B and Series C Warrants
pursuant to the cashless exercise feature contained therein, the holders will
have satisfied the holding period mandated by the SEC under Rule
144.)  As of the filing of this Quarterly Report on Form 10-Q,
however, we have not negotiated such arrangements and it is possible that we
will need to pay the majority of the remaining principal and interest on the
Notes in cash.





With
respect to our noncompliance with Marketplace Rule 4310(c)(4), which requires us
to have a minimum bid price per share of at least $1.00 for 30 consecutive
business days, we have until April 27, 2009 to regain compliance with
the Rule.  NASDAQ’s temporary suspension of the enforcement of
Marketplace Rule 4310(c)(4) has extended the initial cure period of 180
days.  If, at anytime prior to April 27,  2009, the bid
price of our common stock closes at $1.00 per share or more for a minimum period
of ten consecutive business days, we will regain compliance with the
Rule.  In addition, assuming that we meet the initial listing
criteria, we may seek an additional 180 calendar day period to regain compliance
after April 27, 2009.  We believe that as our late-stage clinical
trials of Generex Oral-lynTM progress in the United States, Canada, Europe and
certain countries in Eastern Europe, investor confidence in Generex will
increase, which would have a positive effect on our stock price and enable us to
meet the minimum bid price requirement under Marketplace Rule
4310(c)(4).  To the extent that we have not achieved compliance with
this rule on future installment notice dates, we will seek further waivers from
the Noteholders with respect to this condition if we decide to pay principle
payment obligations under the Notes in stock.





Cash
Flows for the Three Months Ended October 31, 2008





For the
three months ended October 31, 2008, we used $7,622,440 in cash to fund our
operating activities. The use for operating activities included a net loss of
$11,697,184, a net increase in inventory and inventory deposits of $60,179, a
$30,674 increase in accounts receivable, a decrease of $574,680 in accounts
payable and accrued expenses, an increase of $40,087 in other current assets,
offset by an increase of $37,018 in deferred revenue.





The use
of cash was offset by non-cash increases of approximately $216,172 related to
depreciation and amortization, $64,816 in stock-based compensation to employees,
$46,649 in stock-based compensation for services to consultants, $153,791 in
amortization of the loan origination fee and deferred debt issuance cost and
$4,009,835 of amortization of debt discount and $252,083 stock issued for
interest related to the March 2008 convertible note transaction.





We had
net cash flows used in investing activities of $637,987 in the fiscal quarter
ended October 31, 2008, primarily consisting of $608,279 in changes in
deposits, payments for property and equipment of $1,385 and cost incurred for
patents of $30,537. This was offset by $2,214 in proceeds from maturity of
short-term investments.





We had
net cash flows used in financing activities of $345,258 in the fiscal quarter
ended October 31, 2008.  Proceeds from the exercise of stock
options were $56,000.  We made payments on our notes payable and
long-term debt of $401,258.





Our net
working capital at October 31, 2008 decreased from July 31, 2008 by
$6,030,809 to $8,346,944, which was attributed largely to our net loss for the
quarter.





Funding
Requirements





We expect
to devote substantial resources to obtaining regulatory approval of Generex
Oral-lynTM in the U.S., Canada and Europe and to commercializing Generex
Oral-lynTM in India and Ecuador.  We also will devote resources to
obtaining approval for the importation, marketing and commercialization of
Generex Oral-lynTM in other countries where we have licensed
distributors.  In addition, we will expend resources on further
clinical development of our immunotherapeutic vaccines. Our future funding
requirements and our ability to raise additional capital will depend on factors
that include:


22





·
            the
      timing and amount of expense incurred to complete our clinical
      trials;





·
            the
      costs and timing of the regulatory process as we seek approval of our
      products in development;





·
            the
      advancement of our products in
development;




·
              our
      ability to generate new relationships with industry partners throughout
      the world that will provide us with regulatory assistance and long-term
      commercialization opportunities;
 
 ·
              the
      timing, receipt and amount of sales, if any, from Generex Oral-lynTM in
      India and Ecuador;




·
            the
      timing, receipt and amount of sales, if any, from our over-the-counter
      products;





·
            the
      cost of manufacturing (paid to third parties) of our licensed products,
      and the cost of marketing and sales activities of those
      products;





·
            the
      costs of prosecuting, maintaining, and enforcing patent claims, if any
      claims are made;





·
            our
      ability to maintain existing collaborative relationships and establish new
      relationships as we advance our products in development;
    and





·
            the
      receptivity of the financial market to biopharmaceutical
      companies.





Off-Balance
Sheet Arrangements





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





Contractual
Obligations





The
following table of contractual obligations as of October 31, 2008 includes
interest obligations.





Payments Due by PeriodContractual Obligations
                    
                    Total
                    
                    
                    Less than 1
                      Year
                    
                    
                    1-3 years
                    
                    
                    3-5 years
                    
                    
                    More than
                      5 yearsLong-Term
      Debt Obligations
                    
                    
                    3,011,247
                    
                    
                    
                    1,523,948
                    
                    
                    
                    1,277,208
                    
                    
                    
                    51,980
                    
                    
                    
                    158,111Convertible
      Debt Obligations
                    
                    
                    17,245,350
                    
                    
                    
                    17,245,350Capital
      Lease Obligations
                    
                    
                    91,462
                    
                    
                    
                    47,720
                    
                    
                    
                    43,742Operating
      Lease Obligations
                    
                    
                    414,961
                    
                    
                    
                    138,561
                    
                    
                    
                    200,607
                    
                    
                    
                    75,629
                    
                    
                    
                    164Purchase
      ObligationsOther
      Long-Term Liabilities Reflected on the Registrant's Balance Sheet under
      GAAPTotal
                    
                    $
                    20,763,020
                    
                    
                    $
                    18,955,579
                    
                    
                    $
                    1,521,557
                    
                    
                    $
                    127,609
                    
                    
                    $
                    158,275





Convertible
debt obligations represent scheduled principal and interest payments on our 8%
secured convertible notes. Remaining principal of $16,520,000 is payable in
monthly installments, through September 2009. Principal may be paid, at our
option, in cash or shares of our common stock, subject to the satisfaction of
certain equity conditions delineated in the notes.  Because investors
may convert principal into common stock, at any time, at their option, the
timing of principal and interest payments may accelerate relative to this
schedule.


23





Certain
Relationships and Related Transactions




Related
Transactions





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





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.





On
December 9, 2005, our Board of Directors approved a one-time recompense payment
in the aggregate amount of $1,000,000 for each of Ms. Gluskin, our Chairwoman,
Chief Executive Officer and President, and Ms. Rose Perri, our Chief Operating
Officer, Chief Financial Officer, Treasurer and Secretary, in recognition of the
company’s failure to remunerate each of Ms. Gluskin and Ms. Perri in each of the
fiscal years ended July 31, 1998, 1999, 2000 and 2001 in a fair and reasonable
manner commensurate with comparable industry standards and Ms. Gluskin’s and Ms.
Perri’s duties, responsibilities and performance during such years. The payment
of such amount to each of Ms. Gluskin and Ms. Perri will be made (a) in cash at
such time or times and in such amounts as determined solely by Ms. Gluskin or
Ms. Perri, as applicable, and/or (b) in shares of our common stock at such time
or times as determined by Ms. Gluskin or Ms. Perri, as applicable, provided that
the conversion price for any such shares shall be equal to the average closing
price of our common stock on the NASDAQ Capital Market for the 20 successive
trading days immediately preceding, but not including, December 9, 2005. The
amounts were not paid as of October 31, 2008 with the exception of
$415,742.30 that was used by Ms. Perri to repay Note Receivable, Due from
Related Party. The amount was due from EBI, Inc., a shareholder of the Company
that is controlled by the estate of the Company’s former Chairman of the Board,
Mark Perri. The note was not interest bearing, unsecured and did not have any
fixed terms of repayment. The note was extended to EBI, Inc. in May
1997.





Real Estate Transactions: 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 Ms. Gluskin 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.




On
December 9, 2005, our Board of Directors approved the grant to Ms. Perri of a
right of first refusal in respect of any sale, transfer, assignment or other
disposition of either or both real properties municipally known as 1740 Sismet
Road, Mississauga, Ontario and 98 Stafford Drive, Brampton, Ontario
(collectively, the “Properties”). We granted Ms. Perri this right in recognition
of the fair market value transfer to us during the fiscal year ended July 31,
1998 by Ms. Perri (or parties related to her) of the Properties.





We
utilize a management company to manage all of our real properties. The property
management company is owned by Ms. Perri, Ms. Gluskin and the estate of Mark
Perri, our former Chairman of the Board. In the fiscal quarters ended October
31, 2008 and 2007, we paid the management company approximately $12,756 and
$13,141, respectively, in management fees. We believe that the amounts paid to
the management company approximate the rates that would be charged by a
non-affiliated property management company.





Legal Fees. David Wires, a
former director, is a partner of the firm Wires Jolley LLP. Wires Jolley
represents us in various matters. During fiscal 2008, we paid approximately
$44,000 in fees to Wires Jolley. We continue to use Wires Jolley and expect to
pay legal fees in similar amounts to the firm in fiscal 2009.


24


Private Placement of Notes and
Warrants. One of the institutional investors in the March 2008 private
placement of the Notes and Warrants was Cranshire Capital,
L.P.  Cranshire purchased Notes in the aggregate principal amount of
$5,000,000 and received Series A Warrants initially exercisable for 1,273,058
shares of common stock, Series A-1 Warrants initially exercisable for 1,826,115
shares, Series B Warrants initially exercisable for 4,132,231 and Series C
Warrants initially exercisable for 3,099,173. On April 9, 2008, following the
closing of the March 2008 private placement, Cranshire jointly filed a Schedule
13G with Downsview Capital, Inc. and Mitchell P. Kopin reporting beneficial
ownership of more than 5% of our outstanding shares of common
stock.





New
Accounting Pronouncements





In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS
157"). SFAS 157 defines fair value, establishes a framework for measuring fair
value in accordance with accounting principles generally accepted in the United
States, and expands disclosures about fair value measurements. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, with earlier application encouraged. Any amounts recognized
upon adoption as a cumulative effect adjustment will be recorded to the opening
balance of retained earnings in the year of adoption. On November 15, 2007, the
FASB granted a one year deferral for non-financial assets and liabilities to
comply with SFAS No. 157, however, the effective date for financial assets
remains intact. We are currently evaluating the impact of this statement on our
results of operations or financial position.





In
February 2007, the FASB issued SFAS No. 159, “Establishing the Fair Value Option
for Financial Assets and Liabilities” (“SFAS 159”) to permit all entities to
choose to elect to measure eligible financial instruments at fair value. The
decision whether to elect the fair value option may occur for each eligible item
either on a specified election date or according to a preexisting policy for
specified types of eligible items. However, that decision must also take place
on a date on which criteria under SFAS 159 occurs. Finally, the decision to
elect the fair value option shall be made on an instrument-by-instrument basis,
except in certain circumstances. An entity shall report unrealized gains and
losses on items for which the fair value option has been elected in earnings at
each subsequent reporting date. SFAS 159 applies to fiscal years beginning after
November 15, 2007, with early adoption permitted for an entity that has also
elected to apply the provisions of SFAS 157. We are currently evaluating the
impact of this statement on our results of operations or financial
position.





In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”
(“SFAS 141(R)”). This Statement replaces SFAS No. 141, “Business
Combinations” (“SFAS 141”). This Statement retains the fundamental requirements
in SFAS 141 that the acquisition method of accounting (which SFAS 141 called the
purchase method) be used for all business combinations and for an acquirer to be
identified for each business combination. This Statement also establishes
principles and requirements for how the acquirer: a) recognizes and measures in
its financial statements the identifiable assets acquired, the liabilities
assumed, and any non-controlling interest in the acquiree; b) recognizes and
measures the goodwill acquired in the business combination or a gain from a
bargain purchase and c) determines what information to disclose to enable users
of the financial statements to evaluate the nature and financial effects of the
business combination. SFAS 141(R) will apply prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. An entity
may not apply it before that date. We are currently evaluating the impact of
this statement on our results of operations or financial position.





In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements” (“SFAS 160”). This Statement amends ARB 51 to
establish accounting and reporting standards for the non-controlling (minority)
interest in a subsidiary and for the deconsolidation of a subsidiary. It
clarifies that a non-controlling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. SFAS 160 is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2008.  Earlier adoption is prohibited. We are currently evaluating the
impact of this statement on our results of operations or financial
position.





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities,” and Amendment of FASB Statement No. 133. SFAS 161
amends SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,”
to amend and expand the disclosure requirements of SFAS 133 to provide greater
transparency about (i) how and why an entity uses derivative instruments, (ii)
how derivative instruments and related hedge items are accounted for under SFAS
133 and its related interpretations, and (iii) how derivative instruments and
related hedged items affect an entity’s financial position, results of
operations and cash flows. To meet those objectives, SFAS 161 requires
qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of gains and losses on
derivative instruments and disclosures about credit-risk-related contingent
features in derivative agreements. SFAS 161 is effective for fiscal years and
interim periods beginning after November 15, 2008.  Earlier adoption is
encouraged. We are currently evaluating the impact of this statement on our
results of operations or financial position.


25





In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles" ("SFAS 162"). SFAS 162 is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with U.S. GAAP for nongovernmental entities. SFAS 162 is
effective 60 days following the Securities and Exchange Commission's approval of
the Public Company Accounting Oversight Board auditing amendments to AU Section
411, "The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles." We do not expect SFAS 162 to have a material effect on
our consolidated financial statements.





The FASB
issued Staff Position (“FSP”) EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,” in
June 2008. Securities participating in dividends with common stock according to
a formula are participating securities. This FSP determined unvested shares of
restricted stock and stock units with nonforfeitable rights to dividends are
participating securities. Participating securities require the “two-class”
method to be used to calculate basic earnings per share. This method lowers
basic earnings per common share. This FSP takes effect in the first quarter of
fiscal years beginning after December 15, 2008 and will be applied
retrospectively for all periods presented and will be effective for Generex on
August 1, 2009. We do not expect FSP EITF 03-6-1 to have a material effect on
our consolidated financial statements.





The FASB
issued FSP APB 14-1, “Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash Settlements),” in May
2008. This FSP requires a portion of this type of convertible debt to be
recorded as equity and to record interest expense on the debt portion at a rate
that would have been charged on nonconvertible debt with the same terms. This
FSP takes effect in the first quarter of fiscal years beginning after December
15, 2008 and will be applied retrospectively for all periods presented. It will
be effective for the Generex on August 1, 2009. This FSP will apply to our
convertible debentures.  We are currently evaluating how it may affect
our consolidated financial statements.





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.





Our
exposure to market risk for changes in interest rates relates primarily to our
auction rate securities.  During last fiscal year, investment banks
were reporting an inability to successfully obtain subscribers for high credit
quality auction rate securities.  As of October 31, 2008, we held such
auction rate securities with a par value totaling $8.9 million.  The
balance was reduced to $8.1 million in November 2008.  In the event we
need access to the funds invested in these securities, we will not be able to
liquidate these securities until a future auction of these securities is
successful, they are refinanced and redeemed by the issuers, or a buyer is found
outside of the auction process.





At the
present time, we maintain our cash in short-term government or government
guaranteed instruments, short-term commercial paper, and 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
October 31, 2008, we had fixed rate debt totaling $2,680,421. This amount
consists of the following:





Loan Amount
                      
                      Interest Rate
                        per Annum607,296
                      
                      
                      6.82
                      %568,740
                      
                      
                      7.60
                      %331,040
                      
                      
                      8.50
                      %175,322
                      
                      
                      10
                      %998,023
                      
                      
                      6.07
                      %2,680,421
                      
                      Total


26





These
debt instruments mature from March 2009 through October 2013. 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





Prior to
the filing of this Quarterly Report on Form 10-Q, an evaluation was performed
under the supervision of and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of
our disclosure controls and procedures. Based on the evaluation our Chief
Executive Officer and Chief Financial Officer have concluded that, as of the end
of the period covered by this Quarterly Report of Form 10-Q, the Company’s
disclosure controls and procedures were effective to ensure that information
required to be disclosed by the Company in reports that it files or submits
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC and is accumulated and communicated to the
Company’s management, as appropriate, to allow timely decisions regarding
required disclosures.





Changes
in internal control over financial reporting





There was
no change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15(d)-15(f) under the Exchange Act) during the period covered by
this Quarterly Report on Form 10-Q that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.





PART
II - OTHER INFORMATION





Item
1. Legal Proceedings.





None.




Item
1A. Risk Factors.





In
addition to the other information included in this Quarterly Report on Form
10-Q, you should carefully review and consider the factors discussed in Part I, Item 1A - Risk
Factors of our Annual Report on Form 10-K, as amended, for the year ended
July 31, 2008, certain of which have been updated below. These factors
materially affect our business, financial condition or future results of
operations. The risks, uncertainties and other factors described in our Annual
Report on Form 10-K and below are not the only ones facing our company.
Additional risks, uncertainties and other factors not presently known to us or
that we currently deem immaterial may also impair our business operations,
financial condition or operating results. Any of the risks, uncertainties and
other factors could cause the trading price of our common stock to decline
substantially.





Risks
Related to Our Financial Condition





We
have a history of losses and will incur additional losses.





We are a
development stage company with a limited history of operations, and do not
expect sufficient revenues to support our operation in the immediately
foreseeable future. In the fiscal quarter ended October 31, 2008, we
received modest revenues from sales of Glucose RapidSprayTM . We did not recognize any
revenue from the sale of our oral insulin product in Ecuador or India in fiscal
2008.  We do not expect to receive any revenues in Ecuador until we
enter into a definitive manufacturing and distribution agreement with our
business partner there. While we have entered into a licensing and distribution
agreement with a leading Indian-based pharmaceutical company and insulin
distributor, we do not anticipate significant revenue from the initial
commercial launch of Generex Oral-lynTM in India sometime this fiscal
year.


27





To date,
we have not been profitable and our accumulated net loss available to
shareholders was $259,926,445 at October 31, 2008. Our losses have resulted
principally from costs incurred in research and development, including clinical
trials, and from general and administrative costs associated with our
operations. While we seek to attain profitability, we cannot be sure that we
will ever achieve product and other revenue sufficient for us to attain this
objective.





With the
exception of Generex Oral-lynTM which is currently available for sale in Ecuador
and has been approved for sale in India and our over-the-counter glucose and
energy spray products, Glucose RapidSprayTM, BaBOOM!TM Energy Spray and
GlucoBreakTM, our product candidates are in research or early stages of
pre-clinical and clinical development. We will need to conduct substantial
additional research, development and clinical trials. We will also need to
receive necessary regulatory clearances both in the United States and foreign
countries and obtain meaningful patent protection for and establish freedom to
commercialize each of our product candidates. We must also complete further
clinical trials and seek regulatory approvals for Generex Oral-lynTM in countries
outside of Ecuador and India. 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
will 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
      finance the research and development of new products based on our buccal
      delivery and immunomedicine technologies, including clinical testing
      relating to new products;·
            to
      finance the research and development activities of our subsidiary Antigen
      with respect to other potential technologies;·
            to
      commercially launch and market developed products;·
            to
      develop or acquire other technologies or other lines of
      business;·
            to
      establish and expand our manufacturing capabilities;·
            to
      finance general and administrative activities that are not related to
      specific products under development; and·
            to
      otherwise carry on business.





In the
past, we have funded most of our development and other costs through equity
financing. We anticipate that our existing capital resources will enable us to
maintain currently planned operations through the next twelve months. However,
this expectation is based on our current operating plan, which could change as a
result of many factors, including a further decline in the price of our stock,
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.





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.


28





Negative
conditions in the global credit markets may impair the liquidity of our
investment in auction rate securities.





Our
short-term investments consist of AAA-rated auction rate securities at a current
value of $8.1 million. The continued negative conditions in the global credit
markets have prevented some investors from liquidating their holdings of auction
rate securities because the amount of securities submitted for sale has exceeded
the amount of purchase orders for such securities.  We have been
advised that our auction rate securities will be redeemed in Phase II of the
Citi Auction Security Settlement on or before
December 23, 2008.  We cannot predict whether future
auctions or redemptions related to our auction rate securities will be
successful.  If we are not able to monetize some or all of our auction
rate securities, we could suffer a loss, and such loss could have a material
adverse effect on our ability to finance our future ongoing
operations.





Risks
Related to the Market for Our Common Stock





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





On July
23, 2008, we received notice from The Nasdaq Stock Market that we were not
compliance with Marketplace Rule 4310(c)(4), which requires us to have a minimum
bid price per share of at least $1.00 for thirty (30) consecutive business
days.  In accordance with Marketplace Rule 4310(c)(8)(D), we had 180
calendar days, or until January 20, 2009, subject to extension, to regain
compliance with this Rule.





On
October 16, 2008, NASDAQ temporarily suspended enforcement of the minimum bid
price requirement until January 19, 2009.  With the suspension, we now
have until April 27, 2009 to comply with the minimum bid price
requirement.  Therefore, if, at anytime prior to
April 27, 2009, the bid price of our common stock closes at $1.00 per
share or more for a minimum period of ten (10) consecutive business days, we
will regain compliance with the Rule.





In the
event that we cannot demonstrate compliance with NASDAQ Rule 4310(c)(4) by the
specified deadline and are not eligible for an additional compliance period, the
staff will notify us that our stock would be delisted, at which time we can
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 NASDAQ Capital Market. If we are not successful in such an appeal,
our stock would likely trade on NASDAQ’s over-the-counter bulletin board,
assuming we meet the requisite criteria.





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.


29





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.  During the third calendar quarter of 2008, we,
like many other publicly traded companies, have experienced a sharp decline in
the price of our stock attributable to concerns about the current global
recession.  The widespread decline in stock prices led The Nasdaq
Stock Market to temporarily suspend its minimum bid price requirement until mid
January 2009.





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





In the
fiscal quarter ended October 31, 2008, we sold common stock and other securities
in transactions in reliance upon exemptions from the registration requirements
of the Securities Act.





We have
issued shares of our common stock to CEOcast, Inc., a consultant, pursuant to an
agreement to provide us with investor relation services until August 21, 2008.
The agreement was extended until January 22, 2009.  During the
three months ended October 31, 2008, we issued 50,000 shares of common stock to
CEOcast pursuant to this agreement. The sale of such shares was exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof. We
believe that CEOcast, Inc. is an “accredited investor” as that term is defined
in Rule 501(a) of Regulation D under the Securities Act. The certificates issued
for the shares of common stock will include a legend to indicate that they are
restricted. The sales of such securities did not involve the use of
underwriters, and no commissions were paid in connection therewith.





During
the three months ended October 31, 2008, we issued 8,000 shares of common stock
to American Capital Ventures, Inc. pursuant to an agreement with us for
financial services. The sale of such shares was exempt from registration under
the Securities Act in reliance upon Section 4(2) thereof.  We believe
that American Capital Ventures, Inc. is an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D under the Securities Act. The
certificates issued for the shares of common stock will include a legend to
indicate that they are restricted. The sales of such securities did not involve
the use of underwriters, and no commissions were paid in connection
therewith.





During
the three months ended October 31, 2008, we issued 37,500 shares of our
restricted common stock as partial consideration for the provision of services
by The Abajian Group, LLC under a consulting agreement with us. William Abajian,
a Business Development Consultant to Generex, is a principal of The Abajian
Group, LLC. The sale of such shares was exempt from registration under the
Securities Act in reliance upon Section 4(2) thereof. We believe that The
Abajian Group, LLC. is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D under the Securities Act. The certificates issued for the
shares of common stock will include a legend to indicate that they are
restricted. The sales of such securities did not involve the use of
underwriters, and no commissions were paid in connection therewith.





Issuer
Purchases of Equity Securities





Neither
we nor any affiliated purchaser (as defined in Section 240.10 b-18(a)(3) of the
Exchange Act) purchased any of our equity securities during the fiscal quarter
ended October 31, 2008.





Item 3. Defaults
Upon Senior Securities.





None.





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





None.


30





Item
5. Other Information.





Reference
is made to the disclosure set forth under Item 2 - Unregistered Sales of
Equity Securities and Use of Proceeds under the caption Unregistered Sales of Equity
Securities in this Quarterly Report on Form 10-Q, which is incorporated
by reference herein.





Item
6. Exhibits.





Exhibits
are incorporated herein by reference or are filed with this quarterly report as
set forth in the Exhibit Index beginning on page 32 hereof.





SIGNATURES





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





GENEREX BIOTECHNOLOGY CORPORATION(Registrant)Date: December 9, 2008
                  By:
                  /s/ Anna E. GluskinAnna E. GluskinPresident and Chief Executive OfficerDate: December 9, 2008
                  By:
                  /s/ Rose C. PerriRose C. PerriChief Financial Officer


31




EXHIBIT
INDEX




Exhibit
                      Number
                    
                    Description of Exhibit(1)2
                    
                    Agreement
      and Plan of Merger among Generex Biotechnology Corporation, Antigen
      Express, Inc. and AGEXP Acquisition Inc. (incorporated by reference to
      Exhibit 2.1 to Generex Biotechnology Corporation’s Current Report on Form
      8-K filed on August 15, 2003)3(i)
                    
                    Restated
      Certificate of Incorporation of Generex Biotechnology Corporation
      (incorporated by reference to Exhibit 3(II) to Generex Biotechnology
      Corporation’s Report on Form 10-Q filed on June 19,
  2006)3(ii)
                    
                    Amended
      and Restated By-Laws of Generex Biotechnology Corporation (incorporated by
      reference to Exhibit 3.2(ii) to Generex Biotechnology Corporation’s Report
      on Form 8-K filed December 5, 2007)4.1
                    
                    Form
      of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to
      Generex Biotechnology Corporation’s Registration Statement on Form S-1
      (File No. 333-82667) filed on July 12, 1999)4.2.1
                    
                    Form
      of Securities Purchase Agreement entered into with Cranshire Capital,
      L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore Capital,
      Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard Todd
      Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated by
      reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
      Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13,
      2003)4.2.2
                    
                    Form
      of Registration Rights Agreement entered into with Cranshire Capital,
      L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore Capital,
      Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard Todd
      Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated by
      reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
      Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13,
      2003)4.2.3
                    
                    Form
      of Warrant granted to Cranshire Capital, L.P.; Gryphon Partners, L.P.;
      Langley Partners, L.P.; Lakeshore Capital, Ltd.; LH Financial; Omicron
      Capital; Photon Fund, Ltd.; Howard Todd Horberg and Vertical Ventures, LLC
      dated May 29, 2003 (incorporated by reference to Exhibit 4.3 to Generex
      Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended
      April 30, 2003 filed on August 13, 2003)4.3
                    
                    Form
      of replacement Warrant issued to warrant holders exercising at reduced
      exercise price in May and June 2003 (incorporated by reference to Exhibit
      4.13.7 to Generex Biotechnology Corporation’s Report on Form 10-K for the
      period ended July 31, 2003 filed on October 29, 2003)4.4.1
                    
                    Securities
      Purchase Agreement, dated December 19, 2003, by and among Generex
      Biotechnology Corporation and the investors named therein (incorporated by
      reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
      Form 8-K/A filed on March 24, 2004)4.4.2
                    
                    Registration
      Rights Agreement, dated December 19, 2003, by and among Generex
      Biotechnology Corporation and the investors named therein (incorporated by
      reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
      Form 8-K/A filed on March 24, 2004)4.4.3
                    
                    Form
      of Warrant issued in connection with Exhibit 4.4.1 (incorporated by
      reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
      Form 8-K/A filed on March 24, 2004)4.4.4
                    
                    Form
      of Additional Investment Right issued in connection with Exhibit 4.4.1
      (incorporated by reference to Exhibit 4.4 to Generex Biotechnology
      Corporation’s Report on Form 8-K/A filed on March 24,
  2004)


32





Exhibit
                    Number
                  
                  Description of Exhibit(1)4.5.1
                  
                  Securities
      Purchase Agreement, dated January 7, 2004, by and between Generex
      Biotechnology Corporation and ICN Capital Limited (incorporated by
      reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.5.2
                  
                  Registration
      Rights Agreement, dated January 7, 2004, by and between Generex
      Biotechnology Corporation and ICN Capital Limited (incorporated by
      reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.5.3
                  
                  Warrant
      issued in connection with Exhibit 4.5.1 (incorporated by reference to
      Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)4.5.4
                  
                  Additional
      Investment Right issued in connection with Exhibit 4.5.1 (incorporated by
      reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.6.1
                  
                  Securities
      Purchase Agreement, dated January 9, 2004, by and between Generex
      Biotechnology Corporation and Vertical Ventures, LLC (incorporated by
      reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.6.2
                  
                  Registration
      Rights Agreement, dated January 9, 2004, by and between Generex
      Biotechnology Corporation and Vertical Ventures, LLC (incorporated by
      reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.6.3
                  
                  Warrant
      issued in connection with Exhibit 4.6.1 (incorporated by reference to
      Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)4.6.4
                  
                  Additional
      Investment Right issued in connection with Exhibit 4.6.1 (incorporated by
      reference to Exhibit 4.8 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.7.1
                  
                  Securities
      Purchase Agreement, dated February 6, 2004, by and between Generex
      Biotechnology Corporation and Alexandra Global Master Fund, Ltd.
      (incorporated by reference to Exhibit 4.9 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on March 1,
2004)4.7.2
                  
                  Registration
      Rights Agreement, dated February 6, 2004, by and between Generex
      Biotechnology Corporation and Alexandra Global Master Fund, Ltd.
      (incorporated by reference to Exhibit 4.10 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on March 1,
2004)4.7.3
                  
                  Warrant
      issued in connection with Exhibit 4.7.1 (incorporated by reference to
      Exhibit 4.11 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)4.7.4
                  
                  Additional
      Investment Right issued in connection with Exhibit 4.7.1 (incorporated by
      reference to Exhibit 4.12 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.7.5
                  
                  Escrow
      Agreement, dated February 26, 2004, by and among Generex Biotechnology
      Corporation, Eckert Seamans Cherin & Mellott, LLC and Alexandra Global
      Master Fund, Ltd. (incorporated by reference to Exhibit 4.13 to Generex
      Biotechnology Corporation’s Report on Form 8-K filed on March 1,
      2004)4.8.1
                  
                  Securities
      Purchase Agreement, dated February 11, 2004, by and between Generex
      Biotechnology Corporation and Michael Sourlis (incorporated by reference
      to Exhibit 4.14 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)4.8.2
                  
                  Registration
      Rights Agreement, dated February 11, 2004, by and between Generex
      Biotechnology Corporation and Michael Sourlis (incorporated by reference
      to Exhibit 4.15 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1,
2004)


33





Exhibit
                  Number
                
                Description of Exhibit(1)4.8.3
                
                Additional
      Investment Right issued in connection with Exhibit 4.8.1 (incorporated by
      reference to Exhibit 4.17 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.9.1
                
                Securities
      Purchase Agreement, dated February 13, 2004, by and between Generex
      Biotechnology Corporation and Zapfe Holdings, Inc. (incorporated by
      reference to Exhibit 4.18 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.9.2
                
                Registration
      Rights Agreement, dated February 13, 2004, by and between Generex
      Biotechnology Corporation and Zapfe Holdings, Inc. (incorporated by
      reference to Exhibit 4.19 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.9.3
                
                Warrant
      issued in connection with Exhibit 4.9.1 (incorporated by reference to
      Exhibit 4.20 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 1, 2004)4.9.4
                
                Additional
      Investment Right issued in connection with Exhibit 4.9.1 (incorporated by
      reference to Exhibit 4.21 Generex Biotechnology Corporation’s Report on
      Form 8-K filed on March 1, 2004)4.10.1
                
                Securities
      Purchase Agreement, dated June 23, 2004, by and among Generex
      Biotechnology Corporation and the investors named therein (incorporated by
      reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on July 14, 2004)4.10.2
                
                Registration
      Rights Agreement, dated June 23, 2004, by and among Generex Biotechnology
      Corporation and the investors (incorporated by reference to Exhibit 4.2 to
      Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14,
      2004)4.10.3
                
                Form
      of Warrant issued in connection with Exhibit 4.10.1 (incorporated by
      reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on July 14, 2004)4.10.4
                
                Form
      of Additional Investment Right issued in connection Exhibit 4.10.1
      (incorporated by reference to Exhibit 4.4 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on July 14,
2004)4.11.1
                
                Securities
      Purchase Agreement, dated November 10, 2004, by and among Generex
      Biotechnology Corporation and the investors named therein (incorporated by
      reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on November 12, 2004)4.11.2
                
                Form
      of 6% Secured Convertible Debenture issued in connection with Exhibit
      4.11.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on November 12,
    2004)4.11.3
                
                Registration
      Rights Agreement, dated November 10, 2004, by and among Generex
      Biotechnology Corporation and the investors named therein (incorporated by
      reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on
      Form 8-K filed on November 12, 2004)4.11.4
                
                Form
      of Voting Agreement entered into in connection with Exhibit 4.11.1
      (incorporated by reference to Exhibit 4.7 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on November 12,
    2004)4.12
                
                Warrant
      issued to The Aethena Group, LLC on April 28, 2005 (incorporated by
      reference to Exhibit 4.20 to Generex Biotechnology Corporation’s Quarterly
      Report on Form 10-Q filed on June 14, 2005)4.13.1
                
                Amendment
      No. 4 to Securities Purchase Agreement and Registration Rights Agreement
      entered into by and between Generex Biotechnology Corporation and the
      Purchasers listed on the signature pages thereto on January 19, 2006
      (incorporated by reference herein to Exhibit 4.1 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on January 20,
  2006)


34





Exhibit
                  Number
                
                Description of Exhibit(1)4.13.2
                
                Form
      of Additional AIRs issued in connection with Exhibit 4.13.1 (incorporated
      by reference herein to Exhibit 4.4 to Generex Biotechnology Corporation’s
      Report on Form 8-K filed on January 20, 2006)4.14
                
                Form
      of Warrant issued by Generex Biotechnology Corporation on January 23, 2006
      (incorporated by reference to Exhibit 4.2 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on January 24,
  2006)4.15.1
                
                Agreement
      to Amend Warrants between Generex Biotechnology Corporation and Cranshire
      Capital L.P. dated February 27, 2006 (incorporated by reference to Exhibit
      4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on
      February 28, 2006).4.15.2
                
                Agreement
      to Amend Warrants between Generex Biotechnology Corporation and Omicron
      Master Trust dated February 27, 2006 (incorporated by reference to Exhibit
      4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on
      February 28, 2006).4.15.3
                
                Agreement
      to Amend Warrants between Generex Biotechnology Corporation and Iroquois
      Capital L.P. dated February 27, 2006 (incorporated by reference to Exhibit
      4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on
      February 28, 2006).4.15.4
                
                Agreement
      to Amend Warrants between Generex Biotechnology Corporation and Smithfield
      Fiduciary LLC dated February 27, 2006 (incorporated by reference to
      Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on February 28, 2006).4.15.5
                
                Form
      of Warrant issued by Generex Biotechnology Corporation on February 27,
      2006 (incorporated by reference to Exhibit 4.26 to Generex Biotechnology
      Corporation’s Report on Form 10-K filed on October 16,
    2006)4.16.1
                
                Agreement
      to Amend Additional Investment Right between Generex Biotechnology
      Corporation and Cranshire Capital, L.P. dated February 28, 2006
      (incorporated by reference to Exhibit 4.1 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on March 1,
  2006).4.16.2
                
                Agreement
      to Amend Additional Investment Right between Generex Biotechnology
      Corporation and Omicron Master Trust dated February 28, 2006 (incorporated
      by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report
      on Form 8-K filed on March 1, 2006).4.16.3
                
                Agreement
      to Amend Additional Investment Right between Generex Biotechnology
      Corporation and Iroquois Capital LP dated February 28, 2006 (incorporated
      by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report
      on Form 8-K filed on March 1, 2006).4.16.4
                
                Agreement
      to Amend Additional Investment Right between Generex Biotechnology
      Corporation and Smithfield Fiduciary LLC dated February 28, 2006
      (incorporated by reference to Exhibit 4.4 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on March 1,
  2006).4.16.5
                
                Form
      of Additional AIR Debenture issued by Generex Biotechnology Corporation on
      February 28, 2006 (incorporated by reference to Exhibit 4.31 to Generex
      Biotechnology Corporation’s Report on Form 10-K filed on October 16,
      2006)4.16.6
                
                Form
      of Additional AIR Warrant issued by Generex Biotechnology Corporation on
      February 28, 2006 (incorporated by reference to Exhibit 4.32 to Generex
      Biotechnology Corporation’s Report on Form 10-K filed on October 16,
      2006)4.17.1
                
                Form
      of Agreement to Amend Warrants between Generex Biotechnology Corporation
      and the Investors dated March 6, 2006 (incorporated by reference to
      Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on March 7,
2006).


35





Exhibit
                  Number
                
                Description of Exhibit(1)4.17.2
                
                Form
      of Warrant issued by Generex Biotechnology Corporation on March 6, 2006
      (incorporated by reference to Exhibit 4.2 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on March 7,
2006)4.18
                
                Warrant
      issued by Generex Biotechnology Corporation on April 17, 2006 to Zapfe
      Holdings, Inc. (incorporated by reference to Exhibit 4.33 to Generex
      Biotechnology Corporation’s Report on Form 10-Q filed on June 14,
      2006)4.19
                
                Form
      of Warrant issued by Generex Biotechnology Corporation on April 17, 2006
      to certain employees (incorporated by reference to Exhibit 4.34 to Generex
      Biotechnology Corporation’s Report on Form 10-Q filed on June 14,
      2006).4.20.1
                
                Securities
      Purchase Agreement entered into by and between Generex Biotechnology
      Corporation and four Investors on June 1, 2006 (incorporated by reference
      to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on June 2, 2006)4.20.2
                
                Form
      of Warrant issued by Generex Biotechnology Corporation on June 1, 2006
      (incorporated by reference to Exhibit 4.2 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on June 2, 2006)4.21.1
                
                Form
      of Amendment to Outstanding Warrants (incorporated by reference to Exhibit
      4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on
      June 2, 2006)4.21.2
                
                Form
      of Warrant issued by Generex Biotechnology Corporation on June 1, 2006 in
      connection with Exhibit 4.39 (incorporated by reference to Exhibit 4.4 to
      Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2,
      2006)4.22.1
                
                Securities
      Purchase Agreement, dated as of March 31, 2008 among the Registrant and
      each of the purchasers named therein (incorporated by reference to Exhibit
      4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on
      April 2, 2008)4.22.2
                
                Form
      of 8% Secured Convertible Note, as amended (incorporated by reference to
      Exhibit 4.2 to Generex Biotechnology Corporation’s Registration Statement
      (333-150562) on Form S-3 filed on April 30, 2008)4.22.3
                
                Form
      of Series A Warrant, as amended (incorporated by reference to Exhibit 4.3
      to Generex Biotechnology Corporation’s Registration Statement on Form S-3
      (333-150562) filed on April 30, 2008)4.22.4
                
                Form
      of Series A-1 Warrant, as amended (incorporated by reference to Exhibit
      4.4 to Generex Biotechnology Corporation’s Registration Statement on Form
      S-3 (333-150562) filed on April 30, 2008)4.22.5
                
                Form
      of Series B Warrant, as amended (incorporated by reference to Exhibit 4.5
      to Generex Biotechnology Corporation’s Registration Statement on Form S-3
      (333-150562) filed on April 30, 2008)4.22.6
                
                Form
      of Series C Warrant, as amended (incorporated by reference to Exhibit 4.6
      to Generex Biotechnology Corporation’s Registration Statement on Form S-3
      (333-150562) filed on April 30, 2008)4.22.7
                
                Registration
      Rights Agreement, dated March 31, 2008, among Registrant and each of the
      purchasers under Securities Purchase Agreement (incorporated by reference
      to Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K
      filed on April 2, 2008)4.22.8
                
                Security
      Agreement (incorporated by reference to Exhibit 4.8 to Generex
      Biotechnology Corporation’s Report on Form 8-K filed on April 2,
      2008)4.22.9
                
                Form
      of Guaranty (incorporated by reference to Exhibit 4.9 to Generex
      Biotechnology Corporation’s Report on Form 8-K filed on April 2,
      2008)


36





Exhibit
                  Number
                
                Description of Exhibit(1)9
                
                Form
      of Voting Agreement entered into in connection with Exhibit 4.11.1
      (incorporated by reference to Exhibit 4.7 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on November 12,
    2004)10.1
                
                Form
      of Consent and Waiver Agreement entered into with Cranshire Capital, L.P.,
      Portside Growth and Opportunity Fund and, Smithfield Fiduciary LLC
      (incorporated by reference to Exhibit 10.1 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on August 1,
  2008)10.2
                
                Form
      of Consent and Waiver Agreement entered into with Rockmore Investment
      Master Fund Ltd. (incorporated by reference to Exhibit 10.2 to Generex
      Biotechnology Corporation’s Report on Form 8-K filed on August 1,
      2008)10.3
                
                Form
      of Consent and Waiver Agreement entered into with the Iroquois Funds
      (incorporated by reference to Exhibit 10.3 to Generex Biotechnology
      Corporation’s Report on Form 8-K filed on August 1,
  2008)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.


37