10-Q/A 1 0001.txt 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A Amendment No. 1 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended January 31, 2001 [ ] 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 82-0490211 --------------------------- --------------------------------- (State of other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 33 HARBOR 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 [ ] No APPLICABLE ONLY TO CORPORATE ISSUERS The number of outstanding shares of the registrant's Common Stock, par value $.001, was 19,181,018 as of January 31, 2001. By this amendment, we hereby correct pages 14 and 15 of our Report on Form 10-Q for the fiscal quarter ended January 31, 2001, and, in particular, the descriptions set forth therein of our conditional right to require Elan International Services, Ltd. ("EIS") to purchase an additional $1,000,000 of our Common Stock in the future. The following restates pages 14 and 15 of our Report on Form 10-Q for the fiscal quarter ended January 31, 2001 in their entirety. In connection with the joint venture, EIS purchased 1,000 shares of a new series of our preferred stock, designated as Series A Preferred Stock, for $12,015,000. We applied the proceeds from the sale of the Series A Preferred Stock to subscribe for an 80.1% equity ownership interest in Generex (Bermuda), Ltd. EIS paid in capital of $2,985,000 to subscribe for a 19.9% equity interest in Generex (Bermuda), Ltd. While we initially own 80.1% of the joint venture entity, EIS has the right, subject to certain conditions, to increase its ownership up to 50% by exchanging the Series A Preferred Stock for 30.1% of our interest in the joint venture entity. Generex (Bermuda), Ltd. was granted non-exclusive licenses to utilize our buccal delivery technology and certain Elan drug delivery technologies. Using the funds from its initial capitalization, Generex (Bermuda), Ltd. paid a non-refundable license fee of $15,000,000 to Elan in consideration for being granted the rights to utilize the Elan drug delivery technologies. EIS also purchased 344,116 shares of our Common Stock for $5,000,000. We may use the proceeds of this sale for any corporate purpose. If the joint venture achieves certain milestones, we may require EIS to purchase an additional $1,000,000 of our Common Stock at a 30% premium to the then prevailing fair market value of our Common Stock. Our buccal delivery technology is a platform technology that we believe has application to a significant number of large molecule drugs in addition to insulin. During our current fiscal year, we expect to begin development of additional products based on this technology that are not covered by the Lilly Agreement or the joint venture with Elan. Results of Operations We have been in the development stage since inception and have not generated any substantial operating revenues to date, other than $1,000,000 in revenues received in connection with the Lilly Agreement. Our net loss for the quarter ended January 31, 2001, was $14,205,305, versus $2,878,873 for the corresponding quarter of the prior fiscal year. The increase is attributable to the accounting treatment for our joint venture with Elan, which resulted in a $15,000,000 research and development expense for the license fee paid by Generex (Bermuda), Ltd. to Elan for technology rights that was partially offset by $2,985,000 of minority interest (reflecting Elan's 19.9% ownership of the joint venture entity). Excluding the costs associated with the license fee, our net loss quarter to quarter would have decreased, reflecting slightly lower operating expenses and increased interest income (due to higher cash and short term investment balances). Our net loss for the six months ended January 31, 2001, was $15,349,512, versus $3,997,645 for the corresponding period of the prior fiscal year. As with the quarterly period, the increased net loss for the six month period is attributable to the accounting treatment of our joint venture with Elan. Excluding the costs associated with the license fee, our net loss period to period would have decreased significantly, reflecting the $1,000,000 in revenues received during the period in connection with the Lilly Agreement and increased interest income partially offset by increased research and development expenses (including expenditures related to clinical development and costs related to the construction and set up of a pilot manufacturing facility) and increased general and administrative expenses (including additional expenses associated with management of clinical development, legal and professional services, and increased investor relations activities). 14 Financial Condition, Liquidity and Resources To date we have financed our development stage activities primarily through private placements of Common Stock and contract research and milestone payments. At January 31, 2001, we had cash and short term investments (primarily notes of United States corporations) of approximately $31.92 million. At July 31, 2000, our cash and short term investments were approximately $7.17 million. The increase in our cash and short term investments was primarily the result of additional equity capital of approximately $22 million (net of financing costs of approximately $1.66 million) from the October 2000 sale of 2,151,093 units of our securities for cash at a price of $11.00 per unit, and $5 million from the January 2000 sale to EIS of 344,116 shares of our Common Stock for cash at a price of $14.529 per share. The only impact of the joint venture with Elan on our financial condition and liquidity was the $5 million of additional equity capital. Our cash position was not affected by the expenditure of $12,015,000 received as proceeds from the sale of 1,000 shares of our Series A Preferred Stock to EIS to subscribe for an 80.1% equity interest in Generex (Bermuda), Ltd. We believe that our cash on hand is sufficient to fund our operations and capital expenditures for the current fiscal year and well into the next fiscal year. Beyond that, we may require additional funds to support certain clinical trials of our oral insulin formulation in Canada (for which we have retained responsibility, subject to certain reimbursement rights, under the Lilly Agreement), to fund our share of research and development expenses related to our joint venture with Elan, and to fund other research and development activities and general and administrative expenses. If we were unable to raise additional capital as needed, we could be required to "scale back" or otherwise revise our business plans. Any significant scale back of operations or modification of our business plans due to a lack of funding could be expected to materially and adversely affect our prospects. In the past we have funded most of our development and other costs with equity financing. While we have been able to raise equity capital as required, unforeseen problems with our clinical program or materially negative developments in general economic conditions could interfere with our ability to raise additional equity capital as needed, or materially adversely affect the terms upon which such capital is available. We presently have a $50 million equity "draw down" commitment from an investor pursuant to which, subject to certain limitations and the satisfaction of certain conditions, we have the right to require the investor to purchase up to $50 million of our Common Stock at a 10% discount to the then current market price of the Common Stock. We do not presently have any plans to utilize the equity "draw down" commitment in the foreseeable future. We also have the right to require EIS to purchase $1 million of our Common Stock, if the joint venture achieves certain milestones, at a 30% premium to the then prevailing fair market value of our Common Stock. We do not presently anticipate that the conditions that would entitle us to exercise this discretionary right will be satisfied until at least the end of the next fiscal year or beyond. Transactions with Affiliates 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 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, we have duly caused this report to be signed on our behalf by the undersigned. DATE: March 20, 2001 GENEREX BIOTECHNOLOGY CORPORATION By: /s/ E. Mark Perri ------------------------------------ E. Mark Perri Chairman and Chief Financial Officer