10-K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                     For the fiscal year ended July 31, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934


         For the transition period from ____________ to _______________

                        Commission file number 000-25169
                                               ---------------

                        GENEREX BIOTECHNOLOGY CORPORATION
             ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

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

         33 Harbour Square, Suite 202, Toronto,               Canada M5J 2G2
        ----------------------------------------              --------------
       (Address of principal executive offices)                 (Zip Code)

        Registrant's telephone number, including area code: 416/364-2551
                                                            ------------

Securities registered pursuant to Section 12(b) of the Act:
                                      None

Securities registered pursuant to section 12(g) of the Act:

                     Common Stock, par value $.001 per share
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed 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 report(s), and (2) has been subject to such filing
requirements for the past 90 days.
                                    Yes     [X]               No       [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
                                            [   ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant at October 15, 2001, based on the closing price as of that date, was
approximately $20,283,528.

At October 15, 2001, the registrant had 20,682,634 shares of Common Stock
outstanding.

                    Documents incorporated by reference: None





                           Forward-Looking Statements

Certain statements in the "Business" (Item 1) section, "Management's Discussion
and Analysis of Financial Conditions and Results of Operations" (Item 7), the
notes to our audited financial statements (Item 8) and elsewhere in this Annual
Report on Form 10-K constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements can be
identified by introductory words such as "expects", "plans", "intends",
"believes", "will", "estimates", "forecasts", "projects" or words of similar
meaning, and by the fact that they do not relate strictly to historical or
current facts. Forward-looking statements address, among other things, our
expectations concerning the efficacy of our platform buccal delivery technology,
our expectations concerning product candidates for our technology, our
expectations concerning our development and license agreement with Lilly, our
expectations of when different phases of clinical activity may commence and our
expectations of when regulatory submissions may be filed or when regulatory
approvals may be received.

Any or all of our forward-looking statements may turn out to be wrong. They can
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:

     o   the inherent uncertainties of product development based on a new and as
         yet not fully proven drug delivery technology,

     o   the risks and uncertainties regarding the actual effect on humans of
         seemingly safe and efficacious formulations when tested clinically,

     o   the inherent uncertainties associated with clinical trials of product
         candidates,

     o   the inherent uncertainties associated with the process of obtaining
         regulatory approval to market product candidates, and

     o   adverse developments in our collaboration with Lilly regarding oral
         insulin, which is currently our only product candidate that has moved
         beyond preliminary research and development.

Additional factors that could affect future results are set forth throughout the
"Business" (Item 1) section, including the subsection entitled "Certain
Additional Risk Factors", and elsewhere in this Annual Report on Form 10-K.

PART I

Item 1. Business.

Overview

Generex Biotechnology Corporation is engaged in the research and development of
drug delivery technologies. Our primary focus at the present time is our
proprietary technology for the administration of formulations of large molecule
drugs to the oral (buccal) cavity using a hand-held aerosol applicator.

A substantial number of large molecule drugs (i.e., drugs composed of molecules
with a higher than specified molecular weight) have been approved for sale in
the United States or are presently undergoing clinical trials as part of the
process to obtain such approval, including various proteins, peptides,
monoclonal antibodies, hormones and vaccines. Unlike small molecule drugs, which
generally can be administered by various methods, large molecule drugs
historically have been administered predominately by injection. The principal
reasons for this have been the vulnerability of large molecule drugs to
digestion and the relatively large size of the molecule itself, which makes
absorption into the blood stream through the skin or mucosa inefficient or
ineffective.

All injection therapies involve varying degrees of discomfort and inconvenience.
With chronic and sub-chronic diseases, the discomfort and inconvenience
associated with injection therapies frequently results in less than optimal




patient acceptance of and compliance with the prescribed treatment plan. Poor
acceptance and compliance can lead to medical complications and higher disease
management costs. Also, elderly, infirm and pediatric patients with chronic or
sub-chronic conditions may not be able to self-inject their medications. In such
cases assistance is required which increases both the cost and inconvenience of
the therapy.

Our goal is to develop proprietary formulations of large molecule drugs that can
be administered through the buccal mucosa, primarily the inner cheek walls,
thereby eliminating or reducing the need for injections. We believe that our
buccal delivery technology is a platform technology that has application to many
large molecule drugs, and provides a convenient, non-invasive, accurate and cost
effective way to administer such drugs. We have identified several large
molecule drugs as possible candidates for development, but to date have focused
our development efforts on a buccal insulin product.

Between January 1999 and September 2000, we conducted clinical trials of our
buccal insulin product in the United States, Canada and Europe. In September
2000, we entered into a Development and License Agreement with Eli Lilly and
Company to develop this product. Prior to entering into the agreement with
Lilly, we had not reached a point in our clinical program at which we were
prepared to apply for regulatory approvals to market the product in any country,
and we did not anticipate receiving any such approvals for a number of years.
Under the terms of our agreement with Lilly, Lilly will be responsible generally
for clinical trials and regulatory approvals on a worldwide basis for all
products developed under the agreement. Lilly also will have the exclusive right
to market the products worldwide. Our principal responsibilities under the Lilly
agreement will be to continue development, as required, of our proprietary
formulation and on our RapidMist(TM) device, which is described below.

In January 2001, we established a joint venture with a wholly owned subsidiary
of Elan Corporation, plc. The joint venture will pursue the application of
certain of our and Elan's drug delivery technologies, including our platform
technology for the buccal delivery of pharmaceutical products, for the treatment
of prostate cancer, endometriosis and/or the suppression of testosterone and
estrogen. The parties intend to select at least one pharmaceutical product for
research and development under the joint venture within one year's time. The
parties will conduct the joint venture through Generex (Bermuda), Ltd., a
Bermuda limited liability company. Generex (Bermuda), Ltd. was granted
non-exclusive licenses to utilize our buccal delivery technology and certain
Elan drug delivery technologies.

We are a development stage company, and prior to the first quarter of the
current fiscal year had not received any revenues from operations. We have no
products approved for commercial sale by drug regulatory authorities and only
one product, our oral insulin formulation, for which we have begun the
regulatory approval process. As noted above, however, we believe that our buccal
delivery technology is a platform technology that has application to a large
number of large molecule drugs in addition to insulin. Fentanyl, morphine,
estrogen, heparin, monoclonal antibodies, human growth hormone, fertility
hormone, as well as a number of vaccines are among the compounds that we have
identified as possible candidates for product development.

Buccal Delivery Technology

Our buccal delivery technology involves the preparation of a proprietary
formulation in which an active pharmaceutical agent is placed in solution with a
combination of absorption enhancers and other excipients classified generally
recognized as safe ("GRAS") by the Food and Drug Administration when used in
accordance with specified quantity and other limitations. The resulting
formulation, which is stable at room temperature, is aerosolized with a
pharmaceutical grade chemical propellant and is administered to the patient
using our proprietary RapidMist(TM) device. The device is a small, lightweight,
hand-held, easy-to- use aerosol applicator comprised of a container for the
formulation, a metered dose valve, an actuator and dust cap. Using the device,
the patient self-administers the formulation by spraying it into the mouth. The
device contains multiple applications, the number being dependent, among other
things, on the concentration of the formulation. Absorption of the
pharmaceutical agent occurs in the buccal cavity, principally through the inner
cheek walls. In clinical studies of our insulin product, insulin absorption in
the buccal cavity has been shown to be very rapid.

Buccal Insulin Product

Insulin is a hormone that is naturally secreted by the pancreas to regulate the
level of glucose, a type of sugar, in the bloodstream. The term diabetes refers
to a group of disorders that are characterized by the inability of the body to




properly regulate blood glucose levels. When glucose is abundant, it is
converted into fat and stored for use when food is not available. When glucose
is not available from food, these fats are broken down into free fatty acids
that stimulate glucose production. Insulin acts by stimulating the use of
glucose as fuel and by inhibiting the production of glucose. In a healthy
individual, a balance is maintained between insulin secretion and glucose
metabolism.

There are two major types of diabetes. Type 1 diabetes (juvenile onset diabetes
or insulin dependent diabetes) refers to the condition where the pancreas
produces little or no insulin. Type 1 diabetes accounts for 5-10 percent of
diabetes cases. It often occurs in children and young adults. Type 1 diabetics
must take daily insulin injections, typically three to five times per day, to
regulate blood glucose levels.

In Type 2 diabetes (adult onset or non-insulin dependent diabetes mellitus), the
body does not produce enough insulin, or cannot properly use the insulin
produced. Type 2 diabetes is the most common form of the disease and accounts
for 90-95 percent of diabetes cases. In addition to insulin therapy, Type 2
diabetics may take oral drugs that stimulate the production of insulin by the
pancreas or that help the body to more effectively use insulin.

If not treated, diabetes can lead to blindness, kidney disease, nerve disease,
amputation, heart disease and stroke. Each year, from 12,000 to 24,000 people
lose their sight because of diabetes. Diabetes is also the leading cause of
end-stage renal disease (kidney failure), accounting for about 40% of new cases.
In addition, about 60-70 percent of people with diabetes have mild to severe
forms of diabetic nerve damage, which, in severe forms, can lead to lower limb
amputations. Diabetics are also 2 to 4 times more likely to have heart disease,
which is present in 75 percent of diabetes-related deaths, and are 2 to 4 times
more likely to suffer a stroke.

There is no known cure for diabetes. The World Health Organization estimates
that there are currently over 1.5 billion diabetics worldwide. It is further
estimated that this number will almost double by the year 2025. There are
estimated to be 17 million people suffering from diabetes in North America
alone, approximately 5 million of whom are undiagnosed, and diabetes is the
second largest cause of death by disease in North America.

We conducted the first clinical trials of our buccal insulin formulation with
human subjects in Ecuador in January 1998. We ultimately conducted a number of
studies in Ecuador in 1998, each of which involved a selection of between 8 and
10 patients. The principal purpose of these studies was to evaluate the
effectiveness of our oral insulin formulation in humans compared with injected
insulin and placebos.

On the basis of the test results in Ecuador and other pre-clinical data, we made
an Investigatory New Drug submission to the Health Protection Branch in Canada
(Canada's equivalent to the United States' Food and Drug Administration) in July
1998, and received permission from the Canadian regulators to proceed with
clinical trials in September 1998. We filed an Investigational New Drug
Application with the Food and Drug Administration in October 1998, and received
FDA approval to proceed with human trials in November 1998.

We began our clinical trial programs in Canada and the United States in January
1999. Between January 1999 and September 2000 we conducted clinical trials of
our insulin formulation involving approximately 200 Type 1 and Type 2 diabetic
patients and healthy volunteers. The study protocol in most trials involved
administration of two different doses of our insulin formulation following
either a liquid sustacal meal or a standard meal challenge. The objective of
these studies was to evaluate our insulin formulation's efficacy in controlling
post-prandial (meal related) glucose levels. These trials demonstrated that our
insulin formulation controlled post-prandial hyperglycemia in a manner
comparable to injected insulin.

As noted above, in September 2000 we entered into a Development and License
Agreement with Eli Lilly and Company covering an insulin product based upon our
buccal delivery technology. Under this agreement, Lilly will be responsible
generally for clinical trials and regulatory approvals for this product on a
worldwide basis. Lilly has not yet authorized the commencement of clinical
trials under the agreement. However, in furtherance of our product development
responsibilities under the agreement with Lilly, we are conducting limited
clinical studies in the United States, Canada, Europe and Ecuador.




Other Large Molecule Drug Projects

We have identified numerous compounds, other than insulin, as candidates for
product development. We have had discussions of possible research collaborations
with various pharmaceutical companies concerning use of our large molecule drug
delivery technology with these compounds, which include monoclonal antibodies,
human growth hormone, fertility hormone, fentanyl, morphine, estrogen and
heparin, and a number of vaccines.

Prior to entering into our agreement with Lilly covering the insulin product, we
had not aggressively pursued development opportunities apart from insulin
because we believed it was more advantageous to concentrate our resources,
particularly our financial resources, on developing the insulin product. While
the insulin product remains our first priority, we believe that Lilly's
involvement will relieve us of a substantial portion of the costs associated
with conducting the clinical program for the insulin product. We also raised
approximately $37 million from private placements of our common stock during the
last fiscal year. Based on the financial structure of the Lilly agreement and
the amounts raised through private placements, we believe we now have sufficient
financial resources to pursue development of additional products.

Corporate History

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

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

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

Government Regulation

Our research and development activities, and the eventual manufacturing and
marketing of our products, are subject to extensive regulation by the Food and
Drug Administration in the United States (FDA) and comparable regulatory
authorities in other countries. Among other things, extensive regulation puts a
burden on our ability to bring products to market. While these regulations apply
to all competitors in our industry, many of our competitors have extensive
experience in dealing with FDA and other regulators, while we do not. Also,
other companies in our industry do not depend completely on products which still
need to be approved by government regulators, as we now do.

If requisite regulatory approvals are not obtained and maintained, our business
will be substantially harmed. In many if not all cases, we expect that our
development partners will control or participate extensively in the regulatory
approval process once a development agreement is in place. The following
discussion summarizes the principal features of food and drug regulation in the
United States and other countries as they affect our business.

United States. All aspects of our research, development and foreseeable
commercial activities are subject to extensive regulation by FDA and other
regulatory authorities in the United States. United States federal and state
statutes and regulations govern, among other things, the testing, manufacture,
safety, efficacy, labeling, storage, record keeping, approval, advertising and
promotion of pharmaceutical products. The regulatory approval process, including
clinical trials, usually takes several years and requires the expenditure of
substantial resources. If regulatory approval of a product is granted, the
approval may include significant limitations on the uses for which the product
may be marketed.



The steps required before a pharmaceutical product may be marketed in the United
States include:

     o   preclinical tests;

     o   the submission to FDA of an Investigational New Drug application, which
         must become effective before human clinical trials commence;

     o   human clinical trials to establish the safety and efficacy of the drug;

     o   the submission of a New Drug Application to FDA; and

     o   FDA approval of the New Drug Application, including approval of all
         product labeling and advertising.

Preclinical tests include laboratory evaluation of product chemistry,
formulation and stability, as well as animal studies to assess the potential
safety and efficacy of each product. The results of the preclinical tests are
submitted to FDA as part of the Investigational New Drug application and are
reviewed by FDA before the commencement of human clinical trials. Unless FDA
objects to the Investigational New Drug application, the Investigational New
Drug application becomes effective 30 days following its receipt by FDA. The
Investigational New Drug application for our oral insulin formulation became
effective in November 1998.

Clinical trials involve the administration of the new drug to humans under the
supervision of a qualified investigator. The protocols for the trials must be
submitted to FDA as part of the Investigational New Drug application. Also, each
clinical trial must be approved and conducted under the auspices of an
Institutional Review Board, which considers, among other things, ethical
factors, the safety of human subjects, and the possible liability of the
institution conducting the clinical trials.

Clinical trials are typically conducted in three sequential phases (Phase I,
Phase II, and Phase III), but the phases may overlap. Phase I clinical trials
test the drug on healthy human subjects for safety and other aspects, but not
effectiveness. Phase II clinical trials are conducted in a limited patient
population to gather evidence about the efficacy of the drug for specific
purposes, to determine dosage tolerance and optimal dosages, and to identify
possible adverse effects and safety risks.

When a compound has shown evidence of efficacy and acceptable safety in Phase II
evaluations, Phase III clinical trials are undertaken to evaluate clinical
efficacy and to test for safety in an expanded patient population at clinical
trial sites in different geographical locations. FDA and other regulatory
authorities require that the safety and efficacy of therapeutic product
candidates be supported through at least two adequate and well-controlled Phase
III clinical trials.

In the United States, the results of preclinical studies and clinical trials, if
successful, are submitted to FDA in a New Drug Application to seek approval to
market and commercialize the drug product for a specified use. FDA may deny a
New Drug Application if it believes that applicable regulatory criteria are not
satisfied. FDA also may require additional testing for safety and efficacy of
the drug. We cannot be sure that any of our proposed products will receive FDA
approval. Even if approved by FDA, our products and the facilities used to
manufacture our products will remain subject to review and periodic inspection
by FDA.

To supply drug products for use in the United States, foreign and domestic
manufacturing facilities must be registered with, and approved by, FDA.
Manufacturing facilities must also comply with FDA's Good Manufacturing
Practices, and domestic facilities are subject to periodic inspection by FDA.
Products manufactured outside the United States are inspected by regulatory
authorities in those countries under agreements with FDA. To comply with Good
Manufacturing Practices, manufacturers must expend substantial funds, time and
effort in the area of production and quality control. FDA stringently applies
its regulatory standards for manufacturing. Discovery of previously unknown
problems with respect to a product, manufacturer or facility may result in
consequences with commercial significance. These include restrictions on the
product, manufacturer or facility, suspensions of regulatory approvals,
operating restrictions, delays in obtaining new product approvals, withdrawals
of the product from the market, product recalls, fines, injunctions and criminal
prosecution.



Foreign Countries. Before we are permitted to market any of our products outside
of the United States, those products will be subject to regulatory approval by
foreign government agencies similar to FDA. These requirements vary widely from
country to country. Generally, however, no action can be taken to market any
drug product in a country until an appropriate application has been approved by
the regulatory authorities in that country. FDA approval does not assure
approval by other regulatory authorities. The current approval process varies
from country to country, and the time spent in gaining approval varies from that
required for FDA approval. The Canadian regulatory process is substantially
similar to that of the United States. We obtained regulatory approval to begin
clinical trials in Canada in November 1998. In Ecuador, regulatory authorities
approved the limited non-commercial distribution of our oral insulin formulation
in September 1998.

Marketing

We intend to rely on collaborative arrangements with one or more other companies
that possess strong pharmaceutical marketing and distribution resources to
perform these functions for us. Accordingly, we will not have the same control
over marketing and distribution that we would have if we conducted these
functions ourselves.

With respect to our insulin product, Lilly has exclusive, worldwide marketing
rights to the product under our development and license agreement. Except for
our agreement with Lilly with respect to our oral insulin product, we do not
have any agreements with any other companies for marketing or distributing our
products.

Manufacturing

To date, we have produced our oral insulin formulation only under laboratory
conditions on a small scale. In December 2000, we completed our pilot
manufacturing facility in Toronto in the same commercial complex in which our
original laboratory is located, and we are in the process of obtaining
regulatory approval for the facility. We believe that this facility will be
capable of producing our insulin product at levels necessary to supply our needs
for late stage human clinical trials of the product and for initial commercial
sales outside the United States. However, we have not yet actually produced
product at those levels.

Under our agreement with Lilly, Lilly may select us, but is not required to
select us, to manufacture products developed under that agreement. In order to
qualify for consideration in this role, we will have to satisfy Lilly that we
can supply such products at the requisite levels of quality, cost and
reliability in compliance with all applicable regulatory requirements. We have
no experience in resolving the staffing, manufacturing, regulatory and quality
control problems that are likely to come up in developing and running a large
scale manufacturing operation. Our failure to solve problems of this nature
would lead to loss of any opportunity to manufacture products developed under
our agreement with Lilly, and could delay or prevent our ability to bring other
products to market and inhibit sales after a product comes to market. In any
event, we will need to significantly increase our manufacturing capability in
order to manufacture any product in commercial quantities.

We own facilities in Brampton, Ontario, and Mississauga, Ontario, both within 25
miles from downtown Toronto, that were purchased with the intention of improving
and equipping them for manufacturing. These facilities are currently leased to
unrelated third parties, however, we believe we can place these facilities into
production of our insulin product or other products within 12 to 18 months lead
time if additional production capabilities are necessary.

Raw Material Supplies

The excipients used in our formulation are available from numerous sources in
sufficient quantities for clinical purposes, and we believe that they will be
available in sufficient quantities for commercial purposes when required,
although we have not yet attempted to secure a commercial supply of any such
products.

Components suitable for our RapidMist device are available from a limited number
of potential suppliers, as is the chemical propellant used in the device. We
believe that the components which now comprise the device will be utilized with
the commercial version of our insulin product irrespective of what manufacturing
arrangements are ultimately chosen by Lilly, i.e., whether or not we perform the




formulating and filling function. We have secured supply arrangements with the
manufacturers of all components and the propellant that we presently use in our
RapidMist device for commercial quantities of such components and the
propellant. All such suppliers are prominent, reputable and reliable suppliers
to the pharmaceutical industry. Because we now have a single supplier for each
of these components and propellant, however, we are more vulnerable to supply
interruptions than would be the case if we had multiple suppliers for each
component. We do not believe that the risk of a single source of supply for
proprietary raw materials or device components is unusual in the pharmaceutical
industry.

Lilly will supply the pharmaceutical compounds that are used in products
developed under our agreement with Lilly. We expect that similar arrangements
will be made with future development and marketing partners under licensing and
development agreements covering other products.

Intellectual Property

We currently have been issued five U.S. patents pertaining to aspects of buccal
delivery technology, and we have eleven U.S. patent applications and one
Canadian patent application pending, including applications that cover our oral
insulin formulation and technology. In addition, we hold one U.S. patent and one
Canadian patent and have two Canadian applications pending that pertain to
delivery technologies other than our buccal delivery technology. We also have an
indirect interest in three drug delivery patents held by another company,
Centrum Biotechnologies, Inc., which is fifty (50%) percent owned by us.

Our long-term success will substantially depend upon our ability to obtain
patent protection for our technology and our ability to protect our technology
from infringement, misappropriation, discovery and duplication. We cannot be
sure that any of our pending patent applications will be granted, or that any
patents which we own or obtain in the future will fully protect our position.
Our patent rights, and the patent rights of biotechnology and pharmaceutical
companies in general, are highly uncertain and include complex legal and factual
issues. We believe that our existing technology and the patents which we hold or
have applied for do not infringe any one else's patent rights. We believe our
patent rights will provide meaningful protection against others duplicating our
proprietary technologies. We cannot be sure of this, however, because of the
complexity of the legal and scientific issues that could arise in litigation
over these issues. (See "Legal Proceedings" (Item 3) for discussion of certain
legal proceedings involving intellectual property issues.)

We also rely on trade secrets and other unpatented proprietary information. We
seek to protect this information, in part, by confidentiality agreements with
our employees, consultants, advisors and collaborators.

Competition

We expect that products based upon our buccal delivery technology and any other
products that we may develop will compete directly with products developed by
pharmaceutical companies, universities, government agencies and public and
private research organizations.

Products developed by our competitors may use a different active pharmaceutical
agent to treat the same medical condition or indication as our product or may
provide for the delivery of substantially the same active pharmaceutical
ingredient as our products using different methods of administration. For
example, a number of pharmaceutical and biotechnology companies are engaged in
various stages of research, development and testing of alternatives to insulin
therapy for the treatment of diabetes, as well as new methods of delivering
insulin. These methods, including nasal, transdermal and pulmonary, may
ultimately successfully deliver insulin to diabetic patients. Many of our
competitors and potential competitors have substantially greater scientific
research and product development capabilities, as well as financial, marketing
and human resources, than we do.

Where the same or substantially the same active ingredient is available using
alternative delivery means, we expect that competition among products will be
based, among other things, on product safety, efficacy, ease of use,
availability, price, marketing and distribution. When different active
pharmaceutical ingredients are involved, these same competitive factors will
apply to both the active agent and the delivery method.




We consider other drug delivery companies to be direct competitors for the
cooperation and support of major drug and biotechnology companies that own or
market proprietary pharmaceutical compounds, as well as for the ultimate patient
market. Among drug delivery companies, those that are known to be developing
delivery systems for insulin and other pharmaceutical agents that we have
identified as product candidates using our technology are of primary concern.
Within this category, we consider Inhale Therapeutics, Inc. to be our principal
competitor for our insulin product.

Inhale Therapeutics, Inc. is developing a customized insulin formulation that is
processed into a fine, dry powder and administered to the deep lung using a
proprietary inhalation device developed for this purpose. Inhale has announced
successful results using its inhaled product in Phase II clinical trials, and is
now engaged in Phase III trials. Inhale is developing its insulin product in
collaboration with Pfizer, Inc., which in turn has announced agreements to
co-develop and co-promote the use of inhaled insulin with Aventis, a leading
pharmaceutical company which presently manufactures insulin for sale primarily
in Europe. Inhale is also developing pulmonary products with large molecule
drugs other than insulin, and has stated that it is investigating the use of its
inhalation technology with small molecule drugs.

Aradigm Corporation, which has announced a joint development agreement with Novo
Nordisk A/S to jointly develop a pulmonary delivery system for insulin by
inhalation, also may be considered a direct competitor of ours in the insulin
area. Novo Nordisk is one of the two leading manufacturers of insulin in the
world, the other being Eli Lilly and Company. Aradigm began Phase II testing of
its inhalation product in the second half of 1998.

Other companies have announced development efforts relating to alternative (to
injection) methods of delivering insulin or other large molecule drugs,
including Dura Pharmaceuticals, which announced a collaboration with Eli Lilly
and Company in 1998 to develop a pulmonary method of administering insulin, and
Alkermes, which announced a collaboration with Eli Lilly and Company in April
2000 to develop a pulmonary method of administering insulin. Other companies
developing alternative means of delivering insulin and other large molecule
drugs include: Emisphere (pills taken orally), Nobex (pills taken orally), and
Nastech (nasal), among others. These companies are at various stages of clinical
development.

In addition to other delivery systems for insulin, there are numerous products
which have been approved for use in the treatment of Type 2 diabetics in place
of or in addition to insulin therapy. These products may also be considered
competitive with insulin products.

Environmental Compliance

Our manufacturing, research and development activities involve the controlled
use of hazardous materials and chemicals. We believe that our procedures for
handling and disposing of these materials comply with all applicable government
regulations. However, we cannot eliminate the risk of accidental contamination
or injury from these materials. If an accident occurred, we could be held liable
for damages, and these damages could severely impact our financial condition. We
are also subject to many environmental, health and workplace safety laws and
regulations, particularly those governing laboratory procedures, exposure to
blood-borne pathogens, and the handling of hazardous biological materials.
Violations and the cost of compliance with these laws and regulations could
adversely affect us. However, we do not believe that compliance with the United
States, Canadian or other environmental laws will have a material effect on us
in the foreseeable future.

Research and Development Expenditures

A substantial portion of our activities to date have been in research and
development. In the period from inception to July 31, 2001, our expenditures on
research and development were $26,316,114. These included $19,149,860 in the
year ended July 31, 2001, which includes a one-time charge for the licensing fee
in connection with the Elan transaction, $3,476,436 in the year ended July 31,
2000 and $1,853,108 in the year ended July 31, 1999. (See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" (Item
7) for discussion of the licensing fee in connection with the Elan transaction.)



Employees

At September 30, 2001, we had 22 full-time employees, including our executive
officers and other individuals who work for us full time but are employed by
management companies that provide their services. Thirteen of our employees are
executive and administrative, five are scientific and technical personnel who
engage primarily in development activities and in preparing formulations for
testing and clinical trials, and four are engaged in corporate and product
promotion, public relations and investor relations. We believe our employee
relations are good. None of our employees is covered by a collective bargaining
agreement.

We will continue to need qualified scientific personnel and personnel with
experience in clinical testing, government regulation and manufacturing. We may
have difficulty in obtaining qualified scientific and technical personnel as
there is strong competition for these people from other pharmaceutical and
biotechnology companies as well as universities and research institutions. Our
business could be materially harmed if we are unable to recruit and retain
qualified scientific, administrative and executive personnel to support our
expanding activities, or if one or more members of our limited scientific and
management staff were unable or unwilling to continue their association with us.
We do not have fixed term agreements with any of our key management or
scientific staff, other than Dr. Pankaj Modi. The fact that we have a fixed term
contract with Dr. Modi, however, does not guarantee his continued availability.

We also use non-employee consultants to assist us in formulating research and
development strategy, in preparing regulatory submissions, in developing
protocols for clinical trials, and in designing, equipping and staffing our
manufacturing facilities. These consultants and advisors usually have the right
to terminate their relationship with us on short notice. Loss of some of these
key advisors could interrupt or delay development of one or more of our products
or otherwise adversely affect our business plans.

Certain Additional Risk Factors

In addition to historical facts or statements of current condition, this Annual
Report on Form 10-K contains forward-looking statements. Forward-looking
statements provide our current expectations or forecasts of future events.

The following discussion outlines certain factors that we think could cause our
actual outcomes and results to differ materially from our forward-looking
statements. These factors are in addition to those set forth elsewhere in this
Annual Report on Form 10-K.

Our technologies and products are at an early stage of development.

We are a development stage company. We have a very limited history of
operations, and we do not expect ongoing revenues from operations in the
immediately foreseeable future. We have no products approved for commercial sale
at the present time. We may not be successful in obtaining regulatory clearance
for the sale of existing or any future products, or any of these products may
not be commercially viable.

In September 2000, as noted above, we entered into a development and license
agreement to work with Eli Lilly and Company on the development of our oral
insulin product. Under the terms of the agreement with Lilly, we will receive
milestone payments only if the project reaches specified development milestones
and we will be entitled to license royalties based on product sales only if the
product is successfully brought to market.

Prior to entering into the agreement with Lilly, we had conducted some
preliminary clinical trials of our oral insulin product in the United States,
Canada and Europe. Our clinical program, however, had not reached a point where
we were prepared to apply for regulatory approvals to market the product in any
country. Going forward under the agreement, Lilly will be responsible generally
for clinical trials and regulatory approvals on a worldwide basis. Lilly also
will have the exclusive right to market the product worldwide. Our principal
responsibilities will be to continue development, as required, on our oral
insulin formulation and on the RapidMist(TM) device.

Clinical trials under the agreement have not yet commenced. At this time, we
cannot predict when or if we will reach any of the development milestones under
the agreement and when or if any clinical trials might commence under the
agreement.

We believe that we can use our buccal delivery successfully with other large
molecule drugs in addition to insulin. We have engaged in preliminary research
and development work on other applications, but we have not devoted significant





time or resources to this effort to date. In January 2001, as noted above, we
entered into a joint venture with a subsidiary of Elan Corporation, plc. The
purpose of the joint venture is to pursue the application of certain of our and
Elan's drug delivery technologies -- including our large molecule drug delivery
technology -- to pharmaceutical products for the treatment of prostate cancer
and endometriosis and/or the suppression of testosterone and estrogen. However,
we and Elan have not yet selected a specific product for research and
development under the joint venture, and we cannot predict whether our
technology can be applied successfully to any such product, when or if selected.

We have not, and may not, receive regulatory approval to sell our products.

We have engaged primarily in research and development activities since our
inception. We have no products approved for commercial sale by drug regulatory
authorities. We have begun the regulatory approval process for only one product,
our oral insulin formulation.

Notwithstanding our development and license agreement with Lilly and the
participation of Lilly in the research and development process, we may not be
able to develop our insulin product successfully. In order to obtain regulatory
approvals for our insulin product, it will be necessary to demonstrate, among
other things, that:

     o   the product is physically and chemically stable under a range of
         storage, shipping and usage conditions;

     o   the results of administering the product to patients are reproducible
         in terms of the amounts of insulin delivered to the oral cavity and
         absorbed in the bloodstream; and

     o   there are no serious adverse safety issues associated with use of the
         product.

Under our agreement, Lilly also has the option of developing a number of
additional products using our platform buccal delivery technology. There is even
greater uncertainty and risk related to the regulatory approval process for
other products besides our insulin product that may be developed, whether with
Lilly or independently of Lilly. This is because we have not developed any other
product candidate to the extent that we have developed the insulin product.

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

Even if regulatory approval to market our oral insulin product is obtained, many
factors may prevent the product from ever being sold in commercial quantities.
Some of these factors are beyond our control, such as:

     o   acceptance of the formulation by health care professionals and diabetic
         patients;

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

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

We may not be able to compete with diabetes treatments now being marketed and
developed by other companies.

Our oral insulin product will compete with existing and new therapies for
treating diabetes, including administration of insulin by injection. We are
aware of a number of companies currently seeking to develop alternative means of
delivering insulin, as well as new drugs intended to replace insulin therapy at
least in part. In the longer term, we also face competition from companies that
seek to develop cures for diabetes through techniques for correcting the genetic
deficiencies that underlie diseases such as diabetes.

We will have to depend upon others for marketing and distribution of our
products, and we may be forced to enter into contracts limiting the benefits we
may receive and the control we have over our products.

We intend to rely on collaborative arrangements with one or more other companies
that possess strong marketing and distribution resources to perform these
functions for us. Except for the agreement with Lilly relating to our oral




insulin product, we do not have any agreements with other companies for
marketing or distributing our products. We may be forced to enter into contracts
for the marketing and distribution of our products that substantially limit the
potential benefits to us from commercializing these products. In addition, we
will not have the same control over marketing and distribution that we would
have if we conducted these functions ourselves.

We will need additional capital, which may not be available to us when we need
it.

We have incurred substantial losses from operations since our inception, and we
expect to continue to incur substantial losses for the immediately foreseeable
future. Under our agreement with Lilly, we expect Lilly to fund a substantial
portion of the costs relating to the clinical program and regulatory approvals
for our insulin product, and for any other products that may be developed under
the agreement should we reach that stage of activity. We may, however, incur
significant costs to fulfill our responsibilities under the agreement with
Lilly. We also may require funds in excess of our existing cash resources:

     o   to proceed under our joint venture with Elan, which requires us to fund
         80% of initial product development costs;

     o   to develop new products based on our oral delivery technology,
         including clinical testing relating to new products;

     o   to develop or acquire other delivery technologies or other lines of
         business;

     o   to establish and expand our manufacturing capabilities; and

     o   to finance general and administrative and research activities that are
         not related to specific products under development.

Our agreement with Lilly provides for us to receive milestone payments if the
project reaches specified development milestones and for us to receive license
royalties based on product sales if the product is successfully brought to
market. Given that these payments are contingent on events that we cannot be
sure will occur, we cannot be certain of when or if we will receive any further
payments from Lilly. In any event, we do not expect to receive revenues under
the agreement with Lilly or under any future development agreements that are
sufficient to satisfy all of our cash requirements.

In the past, we have funded most of our development and other costs through
equity financing. Unforeseen problems, including materially negative
developments in our relationship with Lilly, 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 also 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.

If we are not able to obtain sufficient patent protection for our buccal
delivery technology, we may face competition from potential competitors who may
use the unprotected aspects of our technology to our disadvantage.

Our long-term success will substantially depend upon protecting our technology
from infringement, misappropriation, discovery and duplication. We currently
have been issued five U.S. patents pertaining to aspects of buccal delivery
technology, and we have eleven U.S. patent applications and one Canadian patent
application pending, including applications that, if granted, would cover our
oral insulin formulation and technology. In addition, we hold one U.S. patent
and one Canadian patent and have two Canadian applications pending that pertain
to delivery technologies other than our buccal delivery technology. We also have
an indirect interest in three drug delivery patents held by another company,
Centrum Biotechnologies, Inc., which is 50% owned by us.




We cannot be sure that any of our pending patent applications will be granted,
or that any patents that we own or will obtain in the future will fully protect
our position. Our patent rights, and the patent rights of biotechnology and
pharmaceutical companies in general, are highly uncertain and include complex
legal and factual issues. We believe that our existing technology and the
patents we hold or have applied for do not infringe any one else's patent
rights. We believe our patent rights will provide meaningful protection against
others duplicating our proprietary technologies. We cannot be sure of this,
however, because of the complexity of the legal and scientific issues that could
arise in litigation over these issues. (See "Legal Proceedings" (Item 3) for
discussion of certain legal proceedings invoving intellectual property issues.)
Furthermore, patent applications are maintained in secrecy in the United States
until the patents are approved, and in most foreign countries for a period of
time following the date from which priority is claimed. A third party's pending
patent applications may cover any technology that we currently are developing.

We also hold some of our technology as trade secrets. We seek to protect this
information, in part, by confidentiality agreements with our employees,
consultants, advisors and collaborators.

Enforcement of an arbitration award may result in adverse effects upon Generex.

On October 2, 1998, Sands Brothers & Co. Ltd., a New York City-based investment
banking and brokerage firm, initiated an arbitration against us under New York
Stock Exchange rules. Sands alleged that it had the right to receive, for
nominal consideration, approximately 1.5 million shares of our common stock.
Sands based its claim upon an October 1997 letter agreement that was purported
by Sands to confirm an agreement appointing Sands as the exclusive financial
advisor to Generex Pharmaceuticals, Inc., a subsidiary that we acquired in late
1997. In exchange therefor, the letter agreement purported to grant Sands the
right to acquire 17% of Generex Pharmaceuticals common stock for nominal
consideration. Sands claimed that its right to receive shares of Generex
Pharmaceuticals common stock applies to our common stock since outstanding
shares of Generex Pharmaceuticals common stock were converted into shares of our
common stock in the acquisition. Sands' claims also included additional shares
allegedly due as a fee related to that acquisition, and $144,000 in monthly fees
allegedly due under the terms of the purported agreement.

Pursuant to an arbitration award dated September 22, 1999, the arbitration panel
that heard this case awarded Sands $14,070 and issued a declaratory judgment
requiring us to issue to Sands a warrant to purchase 1,530,020 shares of our
common stock pursuant to and in accordance with the terms of the purported
October 1997 letter agreement. On October 13, 1999, Sands commenced a special
proceeding to confirm the arbitration award in the Supreme Court of the State of
New York, County of New York (the "New York Supreme Court"). On November 10,
1999, we moved to vacate the arbitration award. On March 20, 2000, the New York
Supreme Court granted Sands' petition to confirm the award and denied our motion
to vacate the award. We appealed and on January 23, 2001, the New York State
Appellate Division, First Department (the "Appellate Division"), modified the
judgment of the New York Supreme Court that had confirmed the arbitration award
against us. The Appellate Division affirmed the portion of the New York Supreme
Court judgment that had confirmed the granting of monetary relief of $14,070 to
Sands but modified the judgment to vacate the portion of the arbitration award
directing the issuance to Sands of a warrant to purchase 1,530,020 shares of the
our common stock. The Appellate Division held that the portion of the award
directing us to issue warrants to Sands is too indefinite to be enforceable and
remanded the matter to the arbitration panel for a final and definite award with
respect to such relief or its equivalent (including possibly an award of
monetary damages). The arbitration panel commenced hearings on the matters
remanded by the Appellate Division in June 2001 and is expected to conclude its
consideration of such matters and render its decision during the fourth calendar
quarter of 2001. We are not able to estimate an amount or range of potential
loss from this legal proceeding at the present time.

Our consolidated financial condition would be materially adversely affected to
the extent that Sands receives shares of our common stock for little or no
consideration or substantial monetary damages as a result of this legal
proceeding.

We face significant product liability risks, which may have a negative effect on
our financial performance.

The administration of drugs to humans, whether in clinical trials or
commercially, can result in product liability claims whether or not the drugs
are actually at fault for causing an injury. Furthermore, our products may
cause, or may appear to have caused, serious adverse side effects (including
death) or potentially dangerous drug interactions that we may not learn about or
understand fully until the drug has been administered to patients for some time.
Product liability claims can be expensive to defend and may result in large
judgments or settlements against us, which could have a negative effect on our







financial performance. We maintain product liability insurance in amounts we
believe to be commercially reasonable for our current level of activity and
exposure, but claims could exceed our coverage limits. Furthermore, we cannot be
certain that we will always be able to purchase sufficient insurance at an
affordable price. Even if a product liability claim is not successful, the
adverse publicity and time and expense of defending such a claim may interfere
with our business.

The results and timing of our research and development activities, including
future clinical trials, are difficult to predict, subject to future setbacks
and, ultimately, may not result in any additional pharmaceutical products, which
may adversely affect our business.

We are focused on the development of our oral insulin product in the immediate
future, and ultimately upon additional products using our platform buccal
delivery technology. In pursuing these objectives, we may undertake a range of
activities, which include engaging in discovery research and process
development, conducting preclinical and clinical studies, and seeking regulatory
approval in the United States and abroad. In all of these areas, we have
relatively limited resources and compete against larger multinational
pharmaceutical companies. Moreover, even if we undertake these activities in an
effective and efficient manner, regulatory approval for the sale of new
pharmaceutical products remains highly uncertain since, in our industry, the
majority of compounds discovered do not enter clinical studies and the majority
of therapeutic candidates fail to show the human safety and efficacy necessary
for regulatory approval and successful commercialization.

Preclinical testing and clinical trials must demonstrate that a product
candidate is safe and efficacious. The results from preclinical testing and
early clinical trials may not be predictive of results obtained in subsequent
clinical trials, and we cannot be sure that these clinical trials would
demonstrate the safety and efficacy necessary to obtain regulatory approval for
any product candidates. A number of companies in the biotechnology and
pharmaceutical industries have suffered significant setbacks in advanced
clinical trials, even after obtaining promising results in earlier trials. In
addition, certain clinical trials are conducted with patients having the most
advanced stages of disease. During the course of treatment, these patients may
die or suffer other adverse medical effects for reasons that may not be related
to the pharmaceutical agent being tested. Such events can have a negative impact
on the statistical analysis of clinical trial results.

The completion of clinical trials of product candidates may be delayed by many
factors. One such factor is the rate of enrollment of patients. We cannot
control the rate at which patients would present themselves for enrollment, and
we cannot be sure that the rate of patient enrollment would be consistent with
our expectations or be sufficient to enable clinical trials of product
candidates to be completed in a timely manner or at all. Any significant delays
in, or termination of, clinical trials of product candidates can have a material
adverse effect on our business.

We cannot be sure that we will be permitted by regulatory authorities to
undertake additional clinical trials for any product candidates, or that if such
trials are conducted, any product candidates will prove to be safe and
efficacious or will receive regulatory approvals. Any delays in or termination
of these clinical trial efforts can have a material adverse effect on product
development.

Our research and development and marketing efforts are highly dependent at
present on corporate collaborators and other third parties who may not devote
sufficient time, resources and attention to our programs, which may limit our
efforts to successfully develop and market potential products.

Because we have limited resources, we have sought to enter into collaboration
agreements with other pharmaceutical companies. Our primary collaboration
agreement at present is our development and license agreement with Eli Lilly and
Company. As is often the case in such collaboration agreements, Lilly has
substantial control over the supply of bulk drugs for commercial use or for use
in clinical trials; the design and execution of clinical studies; the process of
obtaining regulatory approval to market the product; and/or the eventual
marketing and selling of any approved product. In each of these areas, Lilly, or
any other collaborator with whom we may enter into such collaboration
agreements, may not support fully our research and commercial interests since
our program may compete for time, attention and resources with such
collaborator's internal programs. As such, we cannot be sure that either Lilly
or any other corporate collaborators will share our perspectives on the relative
importance of our program, that they will commit sufficient resources to our
program to move it forward effectively, or that the program will advance as
rapidly as it might if we had retained complete control of all research,
development, regulatory and commercialization decisions. Additionally, we may





find it necessary from time to time to seek new or additional partners to assist
us in commercializing our products. It is uncertain whether we would be
successful in establishing any such new or additional relationships.

We may incur additional losses.

To date, we have not been profitable and our accumulated net loss was
approximately $49 million at July 31, 2001. 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. We cannot
be sure that we will obtain required regulatory approvals, or successfully
develop, commercialize, manufacture and market any other product candidates.

The price of our shares may be volatile.

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

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

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

     o   variations in operating results;

     o   changes in governmental regulations;

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

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

Our outstanding Special Voting Rights Preferred Stock and provisions of our
Certificate of Incorporation could delay or prevent the acquisition or sale of
Generex.

Holders of our Special Voting Rights Preferred Stock have the ability to prevent
any change of control of Generex. Our Vice President of Research and
Development, Dr. Pankaj Modi, owns all of our Special Voting Rights Preferred
Stock. In addition, our Certificate of Incorporation permits our Board of
Directors to designate new series of preferred stock and issue those shares
without any vote or action by the shareholders. Such newly authorized and issued
shares of preferred stock could contain terms that grant special voting rights
to the holders of such shares that make it more difficult to obtain shareholder
approval for an acquisition of Generex or increase the cost of any such
acquisition.

Item 2. Properties.

Our executive and principal administrative offices occupy approximately 5,000
square feet of office space in the Business Centre at 33 Harbour Square in
downtown Toronto, Ontario, Canada. We own the Business Centre, which comprises
approximately 9,100 square feet of usable space. The space in the Centre that is
not used by us is leased to third parties. Rental income is accounted for as a
reduction of our occupancy costs.

We also own a laboratory facility in Toronto that we have used for limited
production of our oral insulin formulation for clinical purposes, and have
completed a pilot manufacturing facility for our insulin product in the same
commercial complex. Our laboratory facility is approximately 2,650 square feet.
Our pilot manufacturing facility, which also includes laboratory facilities, is
approximately 4,800 square feet, a portion of which has been leased to third
parties. We have obtained regulatory approval for the laboratory facility, and
we are currently in the process of obtaining regulatory approval for the pilot
manufacturing facility.





We have first mortgages on our Toronto properties totaling $692,660 at July 31,
2001. Our mortgages require the payment of interest, with minimal principal
reduction, prior to their due date (November 1, 2002 with respect to $174,565
and May 25, 2005 with respect to $518,095).

At this time, we do not expect to need manufacturing capabilities beyond our
pilot facility before the end of the current fiscal year. We have acquired,
however, an 11,625 square foot building in Brampton, Ontario, which is
approximately 25 miles outside Toronto, and a 13,500 square foot building in
Mississauga, Ontario, which is about 20 miles from downtown Toronto, for
ultimate use in manufacturing. We have done preliminary work on these
facilities, but we do not expect to make a substantial investment in improving
and equipping them for manufacturing operations until our requirements in this
area are better defined. Both properties are currently leased to third parties.

Item 3. Legal Proceedings.

Sands Brothers & Co. Ltd. v. Generex Biotechnology Corporation. On October 2,
1998, Sands Brothers & Co. Ltd., a New York City-based investment banking and
brokerage firm, initiated an arbitration against us under New York Stock
Exchange rules. Sands alleged that it had the right to receive, for nominal
consideration, approximately 1.5 million shares of our common stock. Sands based
its claim upon an October 1997 letter agreement that was purported by Sands to
confirm an agreement appointing Sands as the exclusive financial advisor to
Generex Pharmaceuticals, Inc., a subsidiary that we acquired in late 1997. In
exchange therefor, the letter agreement purported to grant Sands the right to
acquire 17% of Generex Pharmaceuticals common stock for nominal consideration.
Sands claimed that its right to receive shares of Generex Pharmaceuticals common
stock applies to our common stock since outstanding shares of Generex
Pharmaceuticals common stock were converted into shares of our common stock in
the acquisition. Sands' claims also included additional shares allegedly due as
a fee related to that acquisition, and $144,000 in monthly fees allegedly due
under the terms of the purported agreement.

Pursuant to an arbitration award dated September 22, 1999, the arbitration panel
that heard this case awarded Sands $14,070 and issued a declaratory judgment
requiring us to issue to Sands a warrant to purchase 1,530,020 shares of our
common stock pursuant to and in accordance with the terms of the purported
October 1997 letter agreement. On October 13, 1999, Sands commenced a special
proceeding to confirm the arbitration award in the Supreme Court of the State of
New York, County of New York (the "New York Supreme Court"). On November 10,
1999, we moved to vacate the arbitration award. On March 20, 2000, the New York
Supreme Court granted Sands' petition to confirm the award and denied our motion
to vacate the award. We appealed and on January 23, 2001, the New York State
Appellate Division, First Department (the "Appellate Division"), modified the
judgment of the New York Supreme Court that had confirmed the arbitration award
against us. The Appellate Division affirmed the portion of the New York Supreme
Court judgment that had confirmed the granting of monetary relief of $14,070 to
Sands but modified the judgment to vacate the portion of the arbitration award
directing the issuance to Sands of a warrant to purchase 1,530,020 shares of the
our common stock. The Appellate Division held that the portion of the award
directing us to issue warrants to Sands is too indefinite to be enforceable and
remanded the matter to the arbitration panel for a final and definite award with
respect to such relief or its equivalent (including possibly an award of
monetary damages). The arbitration panel commenced hearings on the matters
remanded by the Appellate Division in June 2001 and is expected to conclude its
consideration of such matters and render its decision during the fourth calendar
quarter of 2001. We are not able to estimate an amount or range of potential
loss from this legal proceeding at the present time.

MQS, Inc. v. Generex Biotechnology Corporation. In February 1999, MQS, Inc., a
former consultant, commenced a civil action against us in the United States
District Court for the District of New Jersey claiming that 242,168 shares of
our common stock and $243,066 are due to it for services that it rendered
through December 22, 1998. MQS claimed that we used proprietary technology of
MQS in developing our aerosol applicator and in formulating our oral insulin
formulation for aerosol application. We filed our answer to MQS's claims in May
1999, in which we denied that MQS is entitled to the relief that it was seeking
and denied that any of our products or technology incorporates any proprietary
technology belonging to MQS. We also filed a counterclaim against MQS for breach
of contract, as well as claims based upon unauthorized use and misappropriation
of our trade secrets and technology. In January 2001, we entered into a
settlement agreement with MQS whereby we paid the plaintiff certain amounts in
cash and common stock that were not material to the consolidated financial
position of the Company and whereby the claims of the parties were dismissed
with prejudice. The settlement agreement prohibits MQS from developing,
manufacturing, licensing or marketing any insulin or non-insulin product that
uses our platform technology.



Subash Chandarana et al. v Generex Biotechnology Corporation et al. In February
2001, Subash Chandarana, a former business associate of Dr. Pankaj Modi, our
Vice President of Research and Development, and an entity called Centrum
Technologies Inc. commenced an action in the Ontario Superior Court of Justice
against us and Dr. Modi seeking, among other things, damages for alleged
breaches of contract and tortious acts related to a business relationship
between Chandarana and Modi that ceased in July 1996. The plaintiffs' statement
of claim also seeks to enjoin the use, if any, by us of three patents allegedly
owned by the company called Centrum Technologies Inc. On July 20, 2001, we filed
a preliminary motion to dismiss the action of Centrum Technologies Inc. as a
nonexistent entity or, alternatively, to stay such action on the grounds of want
of authority of such entity to commence the action and, in the further
alternative, to dismiss such action for failure to produce documents referred to
in the statement of claim. We intend to defend this action vigorously. We are
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.

We maintain product liability coverage for claims arising from the use of our
products in clinical trials, but do not have any insurance that covers our
potential liability in any of the legal proceedings described above.

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

We did not submit any matters to a vote of stockholders in the fourth quarter of
the fiscal year ended July 31, 2001.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the names, ages and positions of the executive
officers of the Company:


Name                            Age      Position Held
----                            ---      -------------
                                    
Anna E. Gluskin                 50       President, Chief Executive Officer and Director
Pankaj Modi, Ph.D.              47       Vice President, Research & Development and Director
E. Mark Perri                   40       Chairman, Chief Financial Officer and Director
Rose C. Perri                   34       Chief Operating Officer, Treasurer, Secretary and Director



Anna E. Gluskin - Director since September 1997. Ms. Gluskin has served as the
President and Chief Executive Officer of Generex since October 1997. She held
comparable positions with Generex Pharmaceuticals, Inc. from its formation in
1995 until its acquisition by Generex in October 1997.

Pankaj Modi, Ph.D. - Director since September 1997. Dr. Modi has served as Vice
President, Research and Development, since October 1997. Prior to that time, Dr.
Modi was Director of Insulin Research for Generex Pharmaceuticals, Inc., a
position he assumed in October 1996. Prior to joining Generex Pharmaceuticals
Inc., Dr. Modi was engaged in independent research and was employed as a senior
researcher at McMaster University in Hamilton, Ontario from February 1994
through October 1996.

E. Mark Perri - Director since September 1997. Mr. Perri has served as the
Chairman and Chief Financial Officer of Generex since October 1997. He held
comparable positions with Generex Pharmaceuticals, Inc. from its formation in
1995 until its acquisition by Generex in October 1997.

Rose C. Perri - Director since September 1997. Ms. Perri has served as Treasurer
and Secretary of Generex since October 1997, and as Chief Operating Officer
since August 1998. She was an officer of Generex Pharmaceuticals, Inc. from its
formation in 1995 until its acquisition by Generex in October 1997.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

"Bid" and "asked" prices for our common stock were quoted on the Nasdaq OTC
Electronic Bulletin Board from February 1998 to May 2000. On May 5, 2000, our
common stock began trading on The Nasdaq Stock Market's National Market (the
"Nasdaq National Market"). Prior to February 1998, there was no public market
for our common stock.



The table below sets forth the high and low inter-dealer bid quotations for our
common stock for certain periods prior to May 5, 2000, as furnished by the
Nasdaq OTC Bulletin Board. These are "inter-dealer" quotations, without retail
mark-up, mark-down or commissions, and may not represent actual transactions.
The table also sets forth the high and low sales prices of our common stock
reported by The Nasdaq Stock Market for these periods beginning May 5, 2000.


                                    Interdealer Bid Quotations                          Sales Prices
                                    (not actual transactions)                          (actual transactions)
                                    High             Low                                High              Low

                                                                                              
2000
----
First quarter                       $9.88            $4.62                                 --               --
Second quarter                      $13.88           $1.06                              $  .38            $4.78
Third quarter                       $24.75           $4.00                              $24.88            $7.56
Fourth quarter                      $14.69            $.03                              $14.75            $10.00

2001
----
First quarter                                                                           $11.50            $4.25
Second quarter                                                                          $11.60            $4.58
Third quarter                                                                           $10.00            $2.91
Fourth quarter (through                                                                 $ 4.35            $3.55
         October 15, 2001)


The closing sales price for our common stock reported on October 15, 2001, was
$4.25.

At October 15, 2001, there were 674 holders of record of our common stock.

Dividends

We have not paid dividends on our common stock in the past and have no present
intention of paying dividends in the foreseeable future.

Recent Sales of Unregistered Securities

In the period from August 1, 2000 until July 31, 2001, we have offered and sold
common stock and other securities in a number of transactions, including the
transactions described below, in reliance upon exemptions from the registration
requirements of the Securities Act of 1933. In the transactions described below,
unless otherwise indicated, we relied upon the exemptions from registration
provided in Section 4(2) of the Securities Act, and Rule 506 of Regulation D
thereunder. No "public solicitation", as that term is defined in Rule 502(c) of
Regulation D, was employed by or in connection with the sale of these
securities. All purchasers were, to our reasonable belief, accredited investors
who purchased for investment. All disclosures required under Rule 502(d) of
Regulation D were made by us, and all other conditions to the availability of
the Rule 506 exemption were, to our knowledge and belief, complied with by us.

In order to assure that resale restrictions applicable to restricted securities
are complied with, we placed a legend evidencing the restrictions on all
certificates representing the shares, and issued "stop transfer" instructions to
our transfer agent to prevent unapproved transfers.

Transactions in the year ended July 31, 2001, and not previously reported on a
Quarterly Report on Form 10-Q were as follows:

(a) On or about July 6, 2001, we completed a private placement of 1,189,189
units of securities ("Units") for cash at a price of $9.25 per Unit. Each Unit
consisted of a share of common stock and a warrant to purchase .25 shares of
common stock at an initial exercise price of $10.175 per share. The Units were
sold without registration under the Securities Act of 1933 (the "1933 Act") in
reliance upon the exemption from registration provided in Section 4(2) thereof


and Rule 506 of Regulation D promulgated thereunder. Under the terms of sale, we
have agreed to register the shares of common stock issued to the investors and
the shares of common stock issuable upon exercise of the warrants for sale under
the 1933 Act.

(b) On or about July 6, 2001, we also completed a second private placement of
64,864 units of securities ("Units") for cash at a price of $9.25 per Unit. Each
Unit consisted of a share of common stock and a warrant to purchase .25 shares
of common stock at an initial exercise price of $10.175 per share. The Units
were sold without registration under the 1933 Act in reliance upon the exemption
from registration provided in Section 4(2) thereof and Rule 506 of Regulation D
promulgated thereunder. Under the terms of sale, we have agreed to register the
shares of common stock issued to the investors and the shares of common stock
issuable upon exercise of the warrants for sale under the 1933 Act.

Item 6. Selected Financial Data.

The following selected financial data is derived from and should be read in
conjunction with our financial statements and related notes, which appear
elsewhere in this annual report. Our financial statements as of July 31, 2001
and for the year ended July 31, 2001 have been audited by Deloitte & Touche LLP.
Our financial statements for the years ended July 31, 2000 and 1999 were audited
by WithumSmith+Brown.



                                                                             Years Ended July 31
                                                                             -------------------
(In thousands, except per share data)                 2001          2000           1999          1998          1997          2001*
                                                                                                            
Operating Results
     Revenue                                      $  1,000             --            --             --            --       $1,000
     Net Loss                                     $(27,097)       $(8,841)      $(6,240)       $(4,664)       (1,379)    $(48,914)
     Cash dividends per share                           --             --            --             --            --           --
Loss per common share:
     Basic and diluted net loss
          per common share                           (1.44)          (.58)         (.47)          (.46)         (.25)          --
Financial Positions:
     Total Assets                                   42,666         10,341         8,890          5,456         3,673           --
     Long-term Debt                                    693            722           996          1,324            --           --
     Stockholder's Investment                       39,322          8,415         7,310          2,642         3,449           --


*Cumulative from November 2, 1995 (Date of Inception) to July 31, 2001










Item 7. Management's Discussion and Analysis of Financial Condition and
        Results of Operation.

General

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

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

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

Business History. We are engaged in the development of proprietary drug delivery
technology. Our principal business focus has been to develop a technology for
buccal delivery (absorption through the inner cheek walls) of large molecule
drugs, i.e., drugs composed of molecules with molecular weights above a
specified level. Large molecule drugs historically have been administered only
by injection because their size inhibits or precludes absorption if administered
by oral, transdermal, transnasal or other means.

Our first product is an insulin formulation that is administered as a fine spray
into the oral cavity using a hand-held aerosol spray applicator. Between January
1999 and September 2000, we conducted clinical trials on this product in the
United States, Canada and Europe. In September 2000, we entered into an
agreement to develop this product with Eli Lilly and Company. Under this
agreement, Lilly is responsible for conducting clinical trials of the product,
securing regulatory approvals and marketing on a worldwide basis. Lilly also has
the option to develop certain additional products using our buccal delivery
technology depending on the success of the initial product. We received
$1,000,000 in connection with our entry into the agreement and will receive
certain other initial fees and milestone payments subject to the attainment of
certain product development milestones, as well as royalty payments based on
product sales should any products be approved for commercial sale. Lilly also
has the option to develop certain additional products using our buccal delivery
technology depending on the success of the initial product.

In January 2001, we established a joint venture with Elan International
Services, Ltd. ("EIS"), a wholly owed subsidiary of Elan Corporation, plc (EIS
and Elan Corporation, plc being collectively referred to as "Elan"). The joint
venture will pursue the application of certain of our and Elan's drug delivery
technologies, including our platform technology for the buccal delivery of
pharmaceutical products, for the treatment of prostate cancer, endometriosis
and/or the suppression of testosterone and estrogen. The parties intend to
select at least one pharmaceutical product for research and development under
the joint venture within one year's time. The parties will conduct the joint
venture through Generex (Bermuda), Ltd., a Bermuda limited liability company.

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. In the future, we expect to undertake development of additional
products based on this technology that are not covered by our agreement with
Lilly.

We do not expect to receive any revenues from product sales in the current
fiscal year. We received a $1,000,000 signing fee, which is included in revenues
as all necessary requirements have been satisfied, under the terms of the
agreement with Lilly in the first fiscal quarter of FY 2001. We expect, however,
to satisfy a substantial majority of our cash needs during the current year from
capital raised through prior equity financing.

Results of Operations - - 2001 Compared with 2000

We had a net loss of $27,097,210 in the year ended July 31, 2001 (FY 2001)
compared to a loss of $8,841,047 in the year ended July 31, 2000 (FY 2000). The
increase in our FY 2001 net loss resulted from increases in research and
development expenses (to $19,149,860 from $3,476,436) and in general and
administrative expenses (to $13,287,679 from $5,567,520). Our interest and
miscellaneous income in FY 2001 increased to $1,355,329 from $202,909 in FY
2000. The accounting treatment of the minority shareholder's share of the loss
generated by Generex (Bermuda), Ltd., resulted in a $2,985,000 minority interest
share of loss. In addition, we received $1,000,000 in revenues in connection
with the agreement with Lilly.

The principal reasons for the increase in our research and development expense
in FY 2001 were:

     o   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 (The Company's consolidated net loss, which includes this
         expense, however, was partially offset by approximately $2.9 million of
         minority interest, reflecting Elan's 19.9% ownership interest in the
         joint venture.); and

     o   increased expenditures relating to clinical studies of our oral insulin
         formulation.

The principal reasons for the increase in our general and administrative
expenses in FY 2001 were:

     o   expenses incurred in connection with the termination in August 2001 of
         the equity line facility, pursuant to which the Company paid $245,000
         to Tradersbloom Limited, $750,000 to Ladenburg Thalman & Co., and
         expensed the deferred financing costs (the fair value of the warrants,
         approximately $3,406,196), all of which were included in FY 2001;

     o   increased travel and other costs of $1,524,997 (to $2,663,059 from
         $538,062) associated with attendance at and sponsorship of industry
         seminars and exhibitions and other promotional activities;

     o   an increase of $959,124 in legal and accounting fees and expenses (to
         $2,479,850 from $1,520,726) related primarily to legal and accounting
         services in connection with reporting requirements under the Securities
         and Exchange Act of 1934, litigation defense costs and increased legal
         activity necessitated by increased equity financing and business
         activity;

     o   increased personnel costs of $207,658 (to $576,665 from $369,007)
         related primarily to additions in our technical and administrative
         staff during FY 2001; and



     o   expenses associated with the 2001 annual meeting of stockholders.


Results of Operations - - 2000 Compared With 1999

We had a net loss of $8,841,047 in the year ended July 31, 2000 (FY 2000)
compared to a loss of $6,239,602 in the year ended July 31, 1999 (FY 1999). The
increase in our FY 2000 net loss resulted from increases in research and
development expenses (to $3,476,436 from $1,853,108) and in general and
administrative expenses (to $5,567,520 from $4,374,523). Our net interest and
miscellaneous income in FY 2000 increased to $202,909 from a net expense of
$11,971 in FY 1999, primarily as a result of increased interest income in FY
2000.

The principal reasons for the increase in our research and development expense
in FY 2000 were:

     o   increased expenditures relating to clinical trials of our oral insulin
         formulation primarily attributable to the expanded scope of these
         trials in FY 2000 to include additional sites in the United States and
         Europe, and the fact that trials did not commence in FY 1999 until the
         second quarter; and

     o   costs associated with operations of our pilot manufacturing facility in
         Toronto which supports our clinical program.

The principal reasons for the increase in our general and administrative
expenses in FY 2000 were:

     o   an increase of $684,344 in legal and accounting fees and expenses (to
         $1,520,726 from $836,382) related primarily to legal and accounting
         services in connection with reporting requirements under the Securities
         and Exchange Act of 1934, litigation defense costs and increased legal
         activity necessitated by increased business activity;

     o   increased personnel costs of $198,122 (to $369,007 from $170,885)
         related primarily to additions to our technical and administrative
         staff during FY 2000; and

     o   increased travel and other costs of $93,298 (to $538,062 from $444,764)
         associated with attendance at and sponsorship of industry seminars and
         exhibitions and other promotional activities.

In both of the last two fiscal years, we incurred substantial expenses for
financial advisory and other financing services that were not related to a
specific financing and, therefore, were accounted for as general and
administrative expenses. These expenses ($1,845,408 in FY 2001 and $1,573,604 in
FY 2000) were paid primarily through the issuance of shares of common stock
and/or warrants and options to purchase common stock. We believe that any
similar expenses incurred in the current fiscal year will not exceed the level
of such expenses in FY 2001.

Liquidity and Capital Resources

To date we have financed our development stage activities primarily through
private placements of common stock. In FY 2001, we issued approximately 3.82
million shares of common stock for cash proceeds of approximately $37.4 million
(net of financing costs of approximately $2.9 million). Additionally, we granted
stock options, warrants and shares of common stock to consultants, advisors and
employees with a value of $5,742,592 for services rendered, of which $292,592
was included in financing costs. As a result of our sales of common stock for
cash and our use of stock options, warrants and shares of common stock to pay
for certain services during FY 2001, our stockholders' equity increased to
approximately $39.3 million at July 31, 2001, versus approximately $8.42 million
at July 31, 2000, notwithstanding our net loss during the year.

At July 31, 2001, we had on hand cash and short term investments (primarily
notes of U.S. corporations) of approximately $37 million versus $7.17 million at
July 31, 2000. In the final quarter of FY 2001, we received additional equity
capital of approximately $531,000 from the sale of 103,500 shares of common
stock upon exercise of outstanding warrants. In the final quarter of FY 2001, we
received additional equity capital of approximately $10.8 million (net of
financing costs of approximately $.75 million) from two private placements of
units of securities consisting of 1.0 shares of common stock and warrants to
purchase an additional .25 shares of common stock at a price of $9.25 per unit.




We believe that our current cash position is sufficient to meet all of our
working capital needs for at least the next 12 months. Beyond that, we may
require additional funds to support our working capital requirements or for
other purposes and may seek to raise funds through private or public equity
financing or from other sources. If we were unable to raise additional capital
as needed, we could be required to "scale back" or otherwise revise our business
plan. Any significant scale back of operations or modification of our business
plan due to a lack of funding could be expected to 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.

Transactions with Affiliates

On May 3, 2001, the Company's three senior officers, who are also shareholders
of the Company, were advanced $334,300 each, in exchange for promissory notes.
These notes bear interest at 8.5 percent per annum and are payable in full on
May 1, 2002. These notes are guaranteed by a related company owned by these
officers and secured by a pledge of 2,500,000 shares of the Company's common
stock currently owned by this related company. As of July 31, 2001, the balance
outstanding on these notes, including accrued interest, was $1,023,743.

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" 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. We
do not foresee a need for, and therefore do not anticipate, any related party
transactions in the current fiscal year.

New Accounting Pronouncements

In June 1998, 1999, and 2000, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133, and SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities, respectively. These statements
require companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. The adoption on
August 1, 2000 of these statements did not have a significant impact on the
Company's financial position or results of operations.

In December 1999, the SEC issued Staff Accounting Bulletin No. 101 (SAB 101),
Revenue Recognition in Financial Statements. SAB 101 provides guidance on the
recognition, presentation, and disclosure of revenues in financial statements of
all public registrants. In October 2000, the SEC issued a Frequently Asked
Questions document related to SAB 101 which provides interpretive guidance. The
Company adopted SAB 101 in fiscal year 2001, and the adoption of SAB 101 did not
have a significant impact on the Company's financial position or results of
operations.

In June 2001, the FASB issued SFAS No. 141, Business Combinations. SFAS No. 141
addresses the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination. SFAS No. 141 is applicable
to business combinations beginning July 1, 2001. The adoption of this statement
did not have a significant impact on the Company's financial position or results
of operations.

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 142 addresses the recognition and measurement of goodwill and
other intangible assets subsequent to their acquisition. SFAS No. 142 also
addresses the initial recognition and measurement of intangible assets acquired
outside of a business combination whether acquired individually or with a group
of other assets. Goodwill and intangible assets previously recorded, in the





Company's financial statements, will be affected by the provisions of SFAS No.
142. This statement provides that intangible assets with finite useful lives be
amortized and that intangible assets with indefinite lives and goodwill will not
be amortized, but will rather be tested at least annually for impairment. SFAS
No. 142 will be effective for the Company's fiscal year 2002, however management
is assessing the impact that SFAS No. 142 will have on the Company's financial
position and results of operations.


Item 7A. Quantitative and Qualitative Disclosures About Market Price

We are not presently subject to any material market risk exposures. We are
exposed to market risk associated with interest rate changes in the exchange
rates between U.S. and Canadian currencies.

We have neither issued nor own any long term debt instruments, or any other
financial instruments as to which we would be subject to material risks,
including market risks, related to interest rate movements. At the present time,
we maintain our cash in short term government or government guaranteed
instruments, short term commercial paper, interest bearing bank deposits or
demand bank deposits which do not earn interest. A substantial majority of these
instruments and deposits are denominated in U.S. dollars, with the exception of
funds denominated in Canadian dollars on deposit in Canadian banks to meet short
term operating needs in Canada. At the present time, with the exception of
professional fees and costs associated with the conduct of clinical trials in
the United States and Europe, substantially all of our operating expense
obligations are denominated in Canadian dollars. We do not presently employ any
hedging or similar strategy intended to mitigate against losses that could be
incurred as a result of fluctuations in the exchange rates between U.S. and
Canadian currencies



               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




                                                                           PAGE
                                                                           ----

Independent Auditors' Reports                                            F-1-2


Consolidated Balance Sheets
July 31, 2001 and 2000                                                   F-3


Consolidated Statements of Operations
For the Years Ended July 31, 2001, 2000 and 1999
and Cumulative From Inception to July 31, 2001                           F-4


Consolidated Statements of Changes in Stockholders' Equity
For the Period November 2, 1995 (Date of Inception)
to July 31, 2001                                                         F-5-10


Consolidated Statements of Cash Flows
For the Years Ended July 31, 2001, 2000 and 1999
and Cumulative From Inception to July 31, 2001                           F-11



Notes to Consolidated Financial Statements                               F-12-31






Item 8. Financial Statements and Supplementary Data
Independent Auditors' Report



To the Board of Directors and Stockholders of
Generex Biotechnology Corporation

We have audited the accompanying consolidated balance sheet of Generex
Biotechnology Corporation and Subsidiaries (a development stage company) as at
July 31, 2001 and the consolidated statement of operations, shareholders' equity
and of cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at July 31, 2001 and
the results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.




DELOITTE & TOUCHE LLP
-----------------------------------
DELOITTE & TOUCHE LLP
Chartered Accountants

Toronto, Ontario
October 2, 2001


                                       F-1



INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders,
Generex Biotechnology Corporation:

We have audited the accompanying consolidated balance sheet of Generex
Biotechnology Corporation and Subsidiaries (a development stage company) as of
July 31, 2000 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the two-year period
ended July 31, 2000, and the cumulative amounts of operations and cash flows for
the period November 2, 1995 (date of inception) to July 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Generex
Biotechnology Corporation and Subsidiaries as of July 31, 2000 and the
consolidated results of their operations, and their cash flows for each of the
years in the two-year period ended July 31, 2000, and the cumulative amounts of
operations and cash flows for the period November 2, 1995 (date of inception) to
July 31, 2000 in conformity with accounting principles generally accepted in the
United States of America.



WithumSmith+Brown
New Brunswick, New Jersey
September 14, 2000

                                       F-2


               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS


                                                                                                       July 31,
                                                                                       -----------------------------------
                                                                                             2001                2000
                                                                                       ----------------     --------------
                                                                                                            
         ASSETS

Current Assets:
   Cash and cash equivalents                                                              $ 10,109,559       $  3,204,905
   Short-term investments                                                                   26,892,729          3,966,263
   Officers' loans receivable                                                                1,023,743                 --
   Miscellaneous receivables                                                                    12,865             16,138
   Other current assets                                                                        112,620             99,041
                                                                                          ------------       ------------
         Total Current Assets                                                               38,151,516          7,286,347

Property and Equipment, Net                                                                  3,727,761          2,395,867
Patents, Net                                                                                   434,307            267,369
Deposits                                                                                        20,000             47,914
Due From Related Parties                                                                       332,289            343,773
                                                                                          ------------       ------------

         TOTAL ASSETS                                                                     $ 42,665,873       $ 10,341,270
                                                                                          ============       ============

         LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable and accrued expenses                                                  $  2,650,773       $  1,204,282
   Current maturities of long-term debt                                                          9,634              9,404
                                                                                          ------------       ------------
         Total Current Liabilities                                                           2,660,407          1,213,686

Long-Term Debt, Less Current Maturities                                                        683,026            712,559
Commitments and Contingencies (Note 7)

Stockholders' Equity:
   Series A, preferred stock, $.001 par value; (liquidation preference
     $12,015,000); authorized 1,000,000 shares, issued and
     outstanding 1,000 and -0- at July 31, 2001 and 2000, respectively                               1                 --
   Special Voting Rights Preferred stock, $.001 par value; authorized,
     issued and outstanding 1,000 shares at July 31, 2001 and 2000                                   1                  1
   Common stock, $.001 par value; authorized 50,000,000 shares,
     issued and outstanding 20,681,526 and 16,326,333 shares
     at July 31, 2001 and 2000, respectively                                                    20,681             16,327
   Additional paid-in capital                                                               88,776,859         30,435,066
   Notes receivable - common stock                                                            (314,300)           (54,118)
   Deficit accumulated during the development stage                                        (48,913,935)       (21,816,725)
   Accumulated other comprehensive loss                                                       (246,867)          (165,526)
                                                                                          ------------       ------------
         Total Stockholders' Equity                                                         39,322,440          8,415,025
                                                                                          ------------       ------------

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                       $ 42,665,873       $ 10,341,270
                                                                                          ============       ============




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

                                       F-3




               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS





                                                                                                               Cumulative
                                                                      For the Years Ended                      November 2,
                                                                            July 31,                          1995 (Date of
                                                          --------------------------------------------        Inception) to
                                                               2001           2000           1999            July 31, 2001
                                                          -------------   ------------   -------------       ---------------
                                                                                                     
Revenues                                                      1,000,000    $        --     $        --         $  1,000,000

Operating Expenses:
   Research and development                                  19,149,860      3,476,436       1,853,108           26,095,896
   Research and development - related party                          --             --              --              220,218
   General and administrative                                13,287,679      5,567,520       4,374,523           27,751,469
   General and administrative- related party                         --             --              --              314,328
                                                           ------------    -----------     -----------         ------------
       Total Operating Expenses                              32,437,539      9,043,956       6,227,631           54,381,911
                                                           ------------    -----------     -----------         ------------

Operating Loss                                              (31,437,539)    (9,043,956)     (6,227,631)         (53,381,911)

Other Income (Expense):
   Miscellaneous income                                          10,664          7,906              --               18,570
   Interest income                                            1,417,847        272,808          55,190            1,745,845
   Interest expense                                             (73,182)       (77,805)        (67,161)            (281,439)
                                                           ------------    -----------     -----------         ------------

Net Loss Before the Undernoted                              (30,082,210)    (8,841,047)     (6,239,602)         (51,898,935)

Minority Interest Share of Loss                               2,985,000             --              --            2,985,000
                                                           ------------    -----------     ------------        ------------

Net Loss                                                   $(27,097,210)   $(8,841,047)    $(6,239,602)        $(48,913,935)
                                                           ============    ===========     ===========         ============

Basic and Diluted Net Loss Per Common
   Share                                                   $      (1.44)   $      (.58)    $      (.47)
                                                           ============    ===========     ===========

Weighted Average Number of Shares of
   Common Stock Outstanding                                  18,769,077     15,189,781      13,260,260
                                                           ============    ===========     ===========



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

                                       F-4




                        GENEREX BIOTECHOLOGY CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
      FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2001



                                                                                 Series A                          SVR
                                                      Common                    Preferred                       Preferred
                                                       Stock                      Stock                           Stock
                                             ------------------------    ------------------------       ------------------------
                                               Shares        Amount        Shares        Amount           Shares        Amount
                                             ---------     ----------    ---------     ----------       ---------     ----------
                                                                                                        
Balance November 2, 1995
  (Inception)                                       --     $       --           --     $       --              --     $       --
Issuance of common stock for cash,
  February 1996, $.0254                        321,429            321           --             --              --             --
Issuance of common stock for cash,
  February 1996, $.0510                         35,142             35           --             --              --             --
Issuance of common stock for cash,
  February 1996, $.5099                        216,428            216           --             --              --             --
Issuance of common stock for cash,
  March 1996, $10.2428                           2,500              3           --             --              --             --
Issuance of common stock for cash,
  April 1996, $.0516                           489,850            490           --             --              --             --
Issuance of common stock for cash,
  May 1996, $.0512                             115,571            116           --             --              --             --
Issuance of common stock for cash,
  May 1996, $.5115                             428,072            428           --             --              --             --
Issuance of common stock for cash,
  May 1996, $10.2302                           129,818            130           --             --              --             --
Issuance of common stock for cash,
  July 1996, $.0051                          2,606,528          2,606           --             --              --             --
Issuance of common stock for cash,
  July 1996, $.0255                            142,857            143           --             --              --             --
Issuance of common stock for cash,
  July 1996, $.0513                             35,714             36           --             --              --             --
Issuance of common stock for cash,
  July 1996, $10.1847                           63,855             64           --             --              --             --
Costs related to issuance of common
  Stock                                             --             --           --             --              --             --
Founders Shares transferred for services
  Rendered                                          --             --           --             --              --             --
Comprehensive Income (Loss):
  Net loss                                          --             --           --             --              --             --
  Other comprehensive income (loss)

    Currency translation adjustment                 --             --           --             --              --             --
      Total Comprehensive Income (Loss)
                                             ---------    -----------    ---------     ----------       ---------     ----------
Balance, July 31, 1996                       4,587,764    $     4,588           --     $       --              --     $       --
                                             =========    ===========    =========     ==========       =========     ==========



[RESTUBBED]


                                                                                               Deficit
                                                               Notes                         Accumulated
                                               Additional   Receivable         Other          During the         Total
                                                Paid-In      - Common      Comprehensive     Development      Stockholders'
                                                Capital        Stock       Income (Loss)         Stage           Equity
                                               ----------   ----------     -------------     -----------      -------------
                                                                                                    
Balance November 2, 1995
  (Inception)                                  $       --    $      --      $      --        $        --      $         --
Issuance of common stock for cash,
  February 1996, $.0254                             7,838           --             --                 --             8,159
Issuance of common stock for cash,
  February 1996, $.0510                             1,757           --             --                 --             1,792
Issuance of common stock for cash,
  February 1996, $.5099                           110,142           --             --                 --           110,358
Issuance of common stock for cash,
  March 1996, $10.2428                             25,604           --             --                 --            25,607
Issuance of common stock for cash,
  April 1996, $.0516                               24,773           --             --                 --            25,263
Issuance of common stock for cash,
  May 1996, $.0512                                  5,796           --             --                 --             5,912
Issuance of common stock for cash,
  May 1996, $.5115                                218,534           --             --                 --           218,962
Issuance of common stock for cash,
  May 1996, $10.2302                            1,327,934           --             --                 --         1,328,064
Issuance of common stock for cash,
  July 1996, $.0051                                10,777           --             --                 --            13,383
Issuance of common stock for cash,
  July 1996, $.0255                                 3,494           --             --                 --             3,637
Issuance of common stock for cash,
  July 1996, $.0513                                 1,797           --             --                 --             1,833
Issuance of common stock for cash,
  July 1996, $10.1847                             650,282           --             --                 --           650,346
Costs related to issuance of common
  Stock                                           (10,252)          --             --                 --           (10,252)
Founders Shares transferred for services
  Rendered                                        330,025           --             --                 --           330,025
Comprehensive Income (Loss):
  Net loss                                             --           --             --           (693,448)         (693,448)
  Other comprehensive income (loss)
    Currency translation adjustment                    --           --         (4,017)                --            (4,017)
                                                                          -----------        -----------      ------------
      Total Comprehensive Income (Loss)                                        (4,017)          (693,448)         (697,465)
                                               ----------    ---------    -----------        -----------      ------------
Balance, July 31, 1996                         $2,708,501    $      --    $    (4,017)       $  (693,448)     $  2,015,624
                                               ==========    =========    ===========        ===========      ============



                                       F-5


                       GENEREX BIOTECHNOLOGY CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
      FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2001



                                                                                 Series A                          SVR
                                                      Common                    Preferred                       Preferred
                                                       Stock                      Stock                           Stock
                                             ------------------------    ------------------------       ------------------------
                                               Shares        Amount        Shares        Amount           Shares        Amount
                                             ---------     ----------    ---------     ----------       ---------     ----------
                                                                                                        
Balance, August 1, 1996                      4,587,764    $    4,588            --       $      --       $     --       $      --
Issuance of common stock for cash,
  September 1996, $.0509                         2,143             2            --              --             --              --
Issuance of common stock for cash,
  December 1996, $10.2421                        1,429             1            --              --             --              --
Issuance of common stock for cash,
  January 1997, $.0518                           1,466             1            --              --             --              --
Issuance of common stock for cash,
  March 1997, $10.0833                              12            --            --              --             --              --
Issuance of common stock for cash,
  May 1997, $.0512                               4,233             4            --              --             --              --
Issuance of common stock for cash,
  May 1997, $.5060                           4,285,714         4,286            --              --             --              --
Costs related to issuance of common
  stock, May 1997                                   --            --            --              --             --              --
Issuance of common stock for cash,
  May 1997, $10.1194                            18,214            18            --              --             --              --
Issuance of common stock for cash,
  June 1997, $.0504                             10,714            11            --              --             --              --
Issuance of common stock for cash,
  June 1997, $.5047                             32,143            32            --              --             --              --
Issuance of common stock for cash,
  June 1997, $8.9810                            29,579            30            --              --             --              --
Issuance of common stock for cash,
  June 1997, $10.0978                              714             1            --              --             --              --
Issuance of common stock for cash,
  July 1997, $10.1214                           25,993            26            --              --             --              --
Costs related to issuance of common
  stock                                             --            --            --              --             --              --
Founders Shares transferred for services
  rendered                                          --            --            --              --             --              --
Comprehensive Income (Loss):
  Net loss                                          --            --            --              --             --              --
  Other comprehensive income (loss)
    Currency translation adjustment                 --            --            --              --             --              --

      Total Comprehensive Income (Loss)
                                             ---------    -----------    ---------      ----------      ---------      ----------
Balance, July 31, 1997                       9,000,118    $     9,000           --      $       --             --      $       --
                                             =========    ===========    =========      ==========      =========      ==========




[RESTUBBED TABLE]


                       GENEREX BIOTECHNOLOGY CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
     FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2001--
                                  (Continued)


                                                                                               Deficit
                                                               Notes                         Accumulated
                                               Additional   Receivable         Other          During the         Total
                                                Paid-In      - Common      Comprehensive     Development      Stockholders'
                                                Capital        Stock       Income (Loss)         Stage           Equity
                                               ----------   ----------     -------------     -----------      -------------
                                                                                                        
Balance, August 1, 1996                        $2,708,501   $       --     $      (4,017)     $  (693,448)    $   2,015,624
Issuance of common stock for cash,
  September 1996, $.0509                              107           --                --               --               109
Issuance of common stock for cash,
  December 1996, $10.2421                          14,635           --                --               --            14,636
Issuance of common stock for cash,
  January 1997, $.0518                                 75           --                --               --                76
Issuance of common stock for cash,
  March 1997, $10.0833                                121           --                --               --               121
Issuance of common stock for cash,
  May 1997, $.0512                                    213           --                --               --               217
Issuance of common stock for cash,
  May 1997, $.5060                              2,164,127           --                --               --         2,168,413
Costs related to issuance of common
  stock, May 1997                                (108,421)          --                --               --          (108,421)
Issuance of common stock for cash,
  May 1997, $10.1194                              184,297           --                --               --           184,315
Issuance of common stock for cash,
  June 1997, $.0504                                   529           --                --               --               540
Issuance of common stock for cash,
  June 1997, $.5047                                16,190           --                --               --            16,222
Issuance of common stock for cash,
  June 1997, $8.9810                              265,618           --                --               --           265,648
Issuance of common stock for cash,
  June 1997, $10.0978                               7,209           --                --               --             7,210
Issuance of common stock for cash,
  July 1997, $10.1214                             263,060           --                --               --           263,086
Costs related to issuance of common
  stock                                           (26,960)          --                --               --           (26,960)
Founders Shares transferred for services
  rendered                                         23,481           --                --               --            23,481
Comprehensive Income (Loss):
  Net loss                                             --           --                --       (1,379,024)       (1,379,024)
  Other comprehensive income (loss)
    Currency translation adjustment                    --           --             3,543               --             3,543
                                                                           -------------      -----------      ------------
      Total Comprehensive Income (Loss)                                            3,543       (1,379,024)       (1,375,481)
                                               ----------   ----------     -------------      -----------      ------------
Balance, July 31, 1997                         $5,512,782           --     $        (474)     $(2,072,472)     $  3,448,836
                                               ==========   ==========     =============      ===========      ============


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


                                       F-6





                       GENEREX BIOTECHNOLOGY CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
      FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2001



                                                                             Series A            SVR
                                                         Common              Preferred         Preferred
                                                         Stock                Stock              Stock           Additional
                                                         -----                -----              -----            Paid-In
                                                  Shares       Amount    Shares     Amount  Shares     Amount     Capital
                                                 ---------    -------    ---------  ------ ----------  ------    ----------
                                                                                                  
Balance, August 1, 1997                          9,000,118    $ 9,000       --       $--        --      $--      $5,512,782
Issuance of warrants issued in exchange
  for services rendered, October 1997, $.50             --         --       --        --        --       --         234,000
Issuance of common stock in exchange
  for services rendered, December 1997,
  $0.0467                                          234,000        234       --        --        --       --          10,698
Issuance of SRV Preferred Sock in exchange
  for services rendered, January 1998, $.001            --         --       --        --     1,000        1              99
Shares issued pursuant to the January 9, 1998
  reverse merger between GBC-Delaware, Inc.
  and Generex Biotechnology Corporation          1,105,000      1,105       --        --        --       --          (1,105)
Issuance of common stock for cash, March
  1998, $2.50                                       70,753         71       --        --        --       --         176,812
Issuance of common stock for cash,
  April 1998, $2.50                                 60,000         60       --        --        --       --         149,940
Issuance of common stock in exchange
  for services rendered, April 1998, $2.50          38,172         38       --        --        --       --          95,392
Issuance of common stock for cash, May
  1998, $2.50                                      756,500        757       --        --        --       --       1,890,493
Issuance of common stock in exchange
  for services rendered, May 1998, $2.50           162,000        162       --        --        --       --         404,838
Issuance of warrants issued in exchange
  for services rendered, May 1998, $.60                 --         --       --        --        --       --         300,000
Issuance of common stock for cash, June
  1998, $2.50                                      286,000        286       --        --        --       --         714,714
Exercise of warrants for cash, June
  1998, $0.0667                                    234,000        234       --        --        --       --          15,374
Issuance of common stock in exchange
for services rendered, June 1998, $2.50             24,729         24       --        --        --       --          61,799
Net loss
Other comprehensive income (loss)
  Currency translation adjustment                       --         --       --        --        --       --              --
    Total Comprehensive Income (Loss)
                                                ----------    -------     ----      ----     -----     ----      ----------
Balance, July 31, 1998                          11,971,272    $11,971       --       $--     1,000      $ 1      $9,565,836
                                                ==========    =======     ====      ====     =====     ====      ==========





(RESTUBBED TABLE)

                       GENEREX BIOTECHNOLOGY CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
     FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2001--
                                  (Continued)


                                                                                     Deficit
                                                      Notes                         Accumulated
                                                    Receivable         Other        During the        Total
                                                    - Common        Comprehensive   Development     Stockholders'
                                                       Stock        Income (Loss)     Stage           Equity
                                                    ----------      -------------- ------------     ------------
                                                                                         
Balance, August 1, 1997                                  $--        $    (474)     $(2,072,472)      $3,448,836
Issuance of warrants issued in exchange
  for services rendered, October 1997, $.50               --               --               --          234,000
Issuance of common stock in exchange
  for services rendered, December 1997,
  $0.0467                                                 --               --               --           10,932
Issuance of SRV Preferred Sock in exchange
  for services rendered, January 1998, $.001              --               --               --              100
Shares issued pursuant to the January 9, 1998
  reverse merger between GBC-Delaware, Inc.
  and Generex Biotechnology Corporation                   --               --               --               --
Issuance of common stock for cash, March
  1998, $2.50                                             --               --               --          176,883
Issuance of common stock for cash,
  April 1998, $2.50                                       --               --               --          150,000
Issuance of common stock in exchange
  for services rendered, April 1998, $2.50                --               --               --           95,430
Issuance of common stock for cash, May
  1998, $2.50                                             --               --               --        1,891,250
Issuance of common stock in exchange
  for services rendered, May 1998, $2.50                  --               --               --          405,000
Issuance of warrants issued in exchange
  for services rendered, May 1998, $.60                   --               --               --          300,000
Issuance of common stock for cash, June
  1998, $2.50                                             --               --               --          715,000
Exercise of warrants for cash, June
  1998, $0.0667                                           --               --               --           15,608
Issuance of common stock in exchange
for services rendered, June 1998, $2.50                   --               --               --           61,823
Net loss                                                                            (4,663,604)      (4,663,604)
Other comprehensive income (loss)
  Currency translation adjustment                         --         (198,959)              --         (198,959)
                                                                    ---------      -----------       ----------
    Total Comprehensive Income (Loss)                                (198,959)      (4,663,604)      (4,862,563)
                                                        ----        ---------      -----------       ----------
Balance, July 31, 1998                                   $--        $(199,433)     $(6,736,076)      $2,642,299
                                                        ====        =========      ===========       ==========


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



                                       F-7


                       GENEREX BIOTECHNOLOGY CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
      FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2001



                                                                               Series A                  SVR
                                                         Common                Preferred              Preferred
                                                         Stock                   Stock                  Stock            Additional
                                                         ------                  -----                  -----              Paid-In
                                                   Shares         Amount    Shares      Amount    Shares      Amount       Capital
                                                  --------       --------   -------     ------    ------   -----------   -----------
                                                                                                     
Balance, August 1, 1998                          11,971,272    $    11,971       --    $    --     1,000    $    1      $ 9,565,836
Issuance of common stock for cash, August
  1998, $3.00                                       100,000            100       --         --        --        --          299,900
Issuance of common stock for cash, August
  1998, $3.50                                        19,482             19       --         --        --        --           68,168
Redemption of Common Stock for cash,
  September 1998, $7.75                             (15,357)           (15)      --         --        --        --         (119,051)
Issuance of common stock for cash,
  September - October 1998, $3.00                   220,297            220       --         --        --        --          660,671
Issuance of common stock for cash, August -
  October 1998, $4.10                               210,818            211       --         --        --        --          864,142
Issuance of common stock in exchange for
  services rendered, August -
  October 1998, $2.50                                21,439             21       --         --        --        --           53,577
Issuance of common stock in exchange for
  services rendered, August -
  October 1998, $4.10                                18,065             18       --         --        --        --           74,048
Issuance of Common Stock in exchange
  for services rendered, September
  1998, $4.10                                       180,000            180       --         --        --        --          737,820
Issuance of warrants in exchange for
  services rendered, October 1998, $.26                  --             --       --         --        --        --            2,064
Issuance of stock options in exchange for
  services rendered, November 1998, $1.85                --             --       --         --        --        --           92,500
Issuance of warrants in exchange for
  services rendered, November 1998, $1.64                --             --       --         --        --        --          246,000
Issuance of common stock for cash,
  November 1998 - January 1999, $3.50               180,000            180       --         --        --        --          629,820
Issuance of common stock for cash,
  November 1998 - January 1999, $4.00               275,000            275       --         --        --        --        1,099,725
Issuance of common stock for cash,
  November 1998 - January 1999, $4.10                96,852             97       --         --        --        --          397,003
Issuance of common stock in exchange
  for services rendered, November 1998 -
  January 1999, $4.10                                28,718             29       --         --        --        --          117,715
Issuance of common stock for cash,
  November 1998 - January 1999, $5.00                20,000             20       --         --        --        --           99,980
Issuance of common stock for cash,
  November 1998 - January 1999, $5.50                15,000             15       --         --        --        --           82,485
Issuance of common stock in exchange for
  services rendered, January 1999, $5.00                392             --       --         --        --        --            1,960
Issuance of common stock for cash,
  February 1999, $5.00                                6,000              6       --         --        --        --           29,994
Issuance of common stock in exchange for
  services rendered, February 1999, $6.00             5,000              5       --         --        --        --           29,995
Issuance of common stock for cash,
  March 1999, $6.00                                  11,000             11       --         --        --        --           65,989
Issuance of common stock for cash,
  April 1999, $5.50                                 363,637            364       --         --        --        --        1,999,640
Issuance of warrants in exchange for
  services rendered, April 1999, $3.21                   --             --       --         --        --        --          160,500
Issuance of warrants in exchange for
  services rendered, April 1999, $3.17                   --             --       --         --        --        --          317,000
Issuance of warrants in exchange for
  services rendered, April 1999, $2.89                   --             --       --         --        --        --          144,500
Issuance of warrants in exchange for
  services rendered, April 1999, $3.27                   --             --       --         --        --        --          184,310
Stock adjustment                                        714              1       --         --        --        --               (1)
Issuance of common stock for cash,
  May 1999, $5.50                                   272,728            273       --         --        --        --        1,499,731
Issuance of common stock in exchange for
  services rendered, May - June 1999, $5.50          60,874             61       --         --        --        --          334,746
Exercise of warrants for cash,
  June 1999, $5.00                                  388,375            389       --         --        --        --        1,941,484
Exercise of warrants in exchange for note
  receivable, June 1999, $5.00                       94,776             95       --         --        --        --          473,787
Exercise of warrants in exchange for
  services rendered, June 1999, $5.00                13,396             13       --         --        --        --           66,967
Reduction of note receivable in exchange for
  services rendered                                      --             --       --         --        --        --             --
Shares tendered in conjunction with warrant
  exercise, June 1999, $7.8125                     (323,920)          (324)      --         --        --        --       (2,530,301)
Exercise of warrants for shares tendered,
  June 1999, $5.00                                  506,125            506       --         --        --        --        2,530,119
Cost of warrants redeemed for cash                       --             --       --         --        --        --           (3,769)
Cost related to warrant redemption,
  June 1999                                              --             --       --         --        --        --         (135,431)
Costs related to issuance of common stock                --             --       --         --        --        --       (1,179,895)
Comprehensive Income (Loss):
  Net Loss                                               --             --       --         --        --        --               --
  Other comprehensive income:
   Currency translation adjustment                       --             --       --         --        --        --               --

    Total Comprehensive Income (Loss)
                                                -----------    -----------  -------    -------   -------   -------     ------------
Balance, July 31, 1999                           14,740,683   $     14,741       --    $    --     1,000    $    1     $ 20,903,728
                                                ===========   ============  =======    =======   =======   =======     ============

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





                       GENEREX BIOTECHNOLOGY CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
      FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2001--
                                  (Continued)
[RESTUBBED TABLE]


                                                                                Deficit
                                                   Notes                      Accumulated
                                                 Receivable        Other       During the        Total
                                                 - Common      Comprehensive   Development    Stockholders'
                                                   Stock       Income (Loss)     Stage           Equity
                                                ------------   -------------  ------------    -------------
                                                                                  
Balance, August 1, 1998                         $       --     $  (199,433)   $(6,736,076)     $ 2,642,299
Issuance of common stock for cash, August
  1998, $3.00                                           --              --             --          300,000
Issuance of common stock for cash, August
  1998, $3.50                                           --              --             --           68,187
Redemption of Common Stock for cash,
  September 1998, $7.75                                 --              --             --         (119,066)
Issuance of common stock for cash,
  September - October 1998, $3.00                       --              --             --          660,891
Issuance of common stock for cash, August -
  October 1998, $4.10                                   --              --             --          864,353
Issuance of common stock in exchange for
  services rendered, August -
  October 1998, $2.50                                   --              --             --           53,598
Issuance of common stock in exchange for
  services rendered, August -
  October 1998, $4.10                                   --              --             --           74,066
Issuance of Common Stock in exchange
  for services rendered, September
  1998, $4.10                                           --              --             --          738,000
Issuance of warrants in exchange for
  services rendered, October 1998, $.26                 --              --             --            2,064
Issuance of stock options in exchange for
  services rendered, November 1998, $1.85               --              --             --           92,500
Issuance of warrants in exchange for
  services rendered, November 1998, $1.64               --              --             --          246,000
Issuance of common stock for cash,
  November 1998 - January 1999, $3.50                   --              --             --          630,000
Issuance of common stock for cash,
  November 1998 - January 1999, $4.00                   --              --             --        1,100,000
Issuance of common stock for cash,
  November 1998 - January 1999, $4.10                   --              --             --          397,100
Issuance of common stock in exchange
  for services rendered, November 1998 -
  January 1999, $4.10                                   --              --             --          117,744
Issuance of common stock for cash,
  November 1998 - January 1999, $5.00                   --              --             --          100,000
Issuance of common stock for cash,
  November 1998 - January 1999, $5.50                   --              --             --           82,500
Issuance of common stock in exchange for
  services rendered, January 1999, $5.00                --              --             --            1,960
Issuance of common stock for cash,
  February 1999, $5.00                                  --              --             --           30,000
Issuance of common stock in exchange for
  services rendered, February 1999, $6.00               --              --             --           30,000
Issuance of common stock for cash,
  March 1999, $6.00                                     --              --             --           66,000
Issuance of common stock for cash,
  April 1999, $5.50                                     --              --             --        2,000,004
Issuance of warrants in exchange for
  services rendered, April 1999, $3.21                  --              --             --          160,500
Issuance of warrants in exchange for
  services rendered, April 1999, $3.17                  --              --             --          317,000
Issuance of warrants in exchange for
  services rendered, April 1999, $2.89                  --              --             --          144,500
Issuance of warrants in exchange for
  services rendered, April 1999, $3.27                  --              --             --          184,310
Stock adjustment                                        --              --             --               --
Issuance of common stock for cash,
  May 1999, $5.50                                       --              --             --        1,500,004
Issuance of common stock in exchange for
  services rendered, May - June 1999, $5.50             --              --             --          334,807
Exercise of warrants for cash, June 1999, $5.00         --              --             --        1,941,873
Exercise of warrants in exchange for note
  receivable, June 1999, $5.00                    (473,882)             --             --               --
Exercise of warrants in exchange for
  services rendered, June 1999, $5.00                   --              --             --           66,980
Reduction of note receivable in exchange for
  services rendered                                 38,979              --             --           38,979
Shares tendered in conjunction with warrant
  exercise, June 1999, $7.8125                          --              --             --       (2,530,625)
Exercise of warrants for shares tendered,
  June 1999, $5.00                                      --              --             --        2,530,625
Cost of warrants redeemed for cash                      --              --             --           (3,769)
Cost related to warrant redemption, June 1999           --              --             --         (135,431)
Costs related to issuance of common stock               --              --             --       (1,179,895)
Comprehensive Income (Loss):
  Net Loss                                              --              --     (6,239,602)      (6,239,602)
  Other comprehensive income:
   Currency translation adjustment                      --           1,393             --            1,393
                                                                ----------   ------------     ------------
    Total Comprehensive Income (Loss)                                1,393     (6,239,602)      (6,238,209)
                                                ----------      ----------   ------------     ------------
Balance, July 31, 1999                          $ (434,903)     $ (198,040)  $(12,975,678)    $  7,309,849
                                                ==========      ==========   ============     ============


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


                                       F-8


                       GENEREX BIOTECHNOLOGY CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
      FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2001




                                                                                 Series A          SVR
                                                             Common             Preferred        Preferred
                                                             Stock                Stock            Stock         Additional
                                                             -----                -----            -----          Paid-In
                                                     Shares        Amount    Shares  Amount   Shares  Amount      Capital
                                                  ----------      -------    ------  ------   ------  ------    ------------
                                                                                              
Balance, August 1, 1999                           14,740,683      $ 14,741      --    $ --     1,000    $ 1     $ 20,903,728
Adjustment for exercise of warrants recorded
  June 1999, $5.00                                    (2,300)           (2)     --      --        --     --                2
Issuance of common stock for cash,
  September 1999, $6.00                                2,500             2      --      --        --     --           14,998
Issuance of common stock for cash pursuant to
  private placement, January 2000, $4.25             470,590           471      --      --        --     --        1,999,537
Financing costs associated with private
  placement, January, 2000                                --            --      --      --        --     --         (220,192)
Issuance of stock in exchange for services
  rendered, January 2000, $5.00                        8,100             8      --      --        --     --           40,492
Granting of stock options for services
  rendered, January 2000                                  --            --      --      --        --     --          568,850
Granting of 150,000 stock warrants for
  services rendered, January 2000                         --            --      --      --        --     --          355,500
Exercise of stock warrants for cash,
  February 2000, $5.50                                 2,000             2      --      --        --     --           10,998
Exercise of stock warrants for cash,
  March 2000, $5.50                                   29,091            29      --      --        --     --          159,972
Exercise of stock warrants for cash,
  March 2000, $6.00                                    2,000             2      --      --        --     --           11,998
Exercise of stock warrants for cash,
  March 2000, $7.50                                    8,000             8      --      --        --     --           59,992
Issuance of common stock for cash pursuant to
  private placement, June 2000, $6.00              1,041,669         1,042      --      --        --     --        6,248,972
Financing costs associated with private
  placement, June 2000                                    --            --      --      --        --     --         (385,607)
Issuance of common stock for services,
  June 2000, $6.00                                     4,300             4      --      --        --     --           25,796
Exercise of warrants for cash, July 2000, $6.00        3,000             3      --      --        --     --           17,997
Exercise of warrants for cash, July 2000, $7.50       16,700            17      --      --        --     --          125,233
Granting of stock options for services
  rendered, July 2000                                     --            --      --      --        --     --          496,800
Reduction of note receivable in exchange for
  services rendered                                       --            --      --      --        --     --               --
Accrue interest on note receivable                        --            --      --      --        --     --               --
Comprehensive Income (Loss):
  Net Loss                                                --            --      --      --        --     --               --
  Other comprehensive income (loss):
    Currency translation adjustment                       --            --      --      --        --     --               --

      Total Comprehensive Income (Loss)
                                                  ----------      --------    ----    ----     -----   ----     ------------
Balance, July 31, 2000                            16,326,333      $ 16,327      --    $ --     1,000    $ 1     $ 30,435,066
                                                  ==========      ========    ====    ====     =====   ====     ============






                       GENEREX BIOTECHNOLOGY CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
     FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2001--
                                   (Continued)

(RESTUBBED TABLE)




                                                                                  Deficit
                                                     Notes                       Accumulated
                                                  Receivable        Other         During the         Total
                                                   - Common      Comprehensive   Development      Stockholders'
                                                     Stock       Income (Loss)      Stage            Equity
                                                   ----------    -------------   --------------   -------------
                                                                                        
Balance, August 1, 1999                            $ (434,903)     $ (198,040)    $(12,975,678)     $ 7,309,849
Adjustment for exercise of warrants recorded
  June 1999, $5.00                                         --              --               --               --
Issuance of common stock for cash,
  September 1999, $6.00                                    --              --               --           15,000
Issuance of common stock for cash pursuant to
  private placement, January 2000, $4.25                   --              --               --        2,000,008
Financing costs associated with private
  placement, January, 2000                                 --              --               --         (220,192)
Issuance of stock in exchange for services
  rendered, January 2000, $5.00                            --              --               --           40,500
Granting of stock options for services
  rendered, January 2000                                   --              --               --          568,850
Granting of 150,000 stock warrants for
  services rendered, January 2000                          --              --               --          355,500
Exercise of stock warrants for cash,
  February 2000, $5.50                                     --              --               --           11,000
Exercise of stock warrants for cash,
  March 2000, $5.50                                        --              --               --          160,001
Exercise of stock warrants for cash,
  March 2000, $6.00                                        --              --               --           12,000
Exercise of stock warrants for cash,
  March 2000, $7.50                                        --              --               --           60,000
Issuance of common stock for cash pursuant to
  private placement, June 2000, $6.00                      --              --               --        6,250,014
Financing costs associated with private
  placement, June 2000                                     --              --               --         (385,607)
Issuance of common stock for services,
  June 2000, $6.00                                         --              --               --           25,800
Exercise of warrants for cash, July 2000, $6.00            --              --               --           18,000
Exercise of warrants for cash, July 2000, $7.50            --              --               --          125,250
Granting of stock options for services
  rendered, July 2000                                      --              --               --          496,800
Reduction of note receivable in exchange for
  services rendered                                   384,903              --               --          384,903
Accrue interest on note receivable                     (4,118)             --               --           (4,118)
Comprehensive Income (Loss):
  Net Loss                                                 --              --       (8,841,047)     (8,841,047)
  Other comprehensive income (loss):
    Currency translation adjustment                        --          32,514               --           32,514
                                                      -------      ----------     ------------      -----------
      Total Comprehensive Income (Loss)                                32,514       (8,841,047)      (8,808,533)
                                                   ----------      ----------     ------------      -----------
Balance, July 31, 2000                             $  (54,118)     $ (165,526)    $(21,816,725)     $ 8,415,025
                                                   ==========      ==========     ============      ===========


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



                                       F-9

                       GENEREX BIOTECHNOLOGY CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
      FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2001


                                                                                Series A                SVR
                                                         Common                 Preferred             Preferred
                                                         Stock                    Stock                 Stock            Additional
                                                         ------                   -----                 -----              Paid-In
                                                   Shares         Amount    Shares      Amount    Shares      Amount       Capital
                                                  --------       --------   -------     ------    ------   -----------   -----------
                                                                                                     
Balance, August 1, 2000                           16,326,333   $     16,327       --    $    --      1,000   $      1  $ 30,435,066
Exercise of stock warrants for cash,
  August 2000, $6.00                                   2,000              2       --         --         --         --        11,998
Issuance of common stock for services rendered
  August 2000                                         35,000             35       --         --         --         --       411,215
Issuance of stock warrants in exchange for
  equity line agreement, August 2000                      --             --       --         --         --         --     3,406,196
Exercise of stock warrants for cash,
  August 2000, $7.50                                  30,300             30       --         --         --         --       227,220
Exercise of stock warrants for cash,
  August 2000, $8.6625                                30,000             30       --         --         --         --       259,845
Cashless exercise of stock warrants,
  August 2000                                          8,600              9       --         --         --         --            (9)
Exercise of stock warrants for cash,
  August 2000, $10.00                                 10,000             10       --         --         --         --        99,990
Exercise of stock warrants for cash,
  September 2000, $8.6625                             63,335             63       --         --         --         --       548,576
Exercise of stock warrants for cash,
  September 2000, $5.50                               16,182             16       --         --         --         --        88,986
Exercise of stock warrants for cash,
  September 2000, $6.00                               53,087             53       --         --         --         --       318,470
Exercise of stock warrants for cash,
  September 2000, $10.00                               9,584             10       --         --         --         --        95,830
Exercise of stock warrants for cash,
  September 2000, $7.50                               32,416             32       --         --         --         --       243,088
Issuance of common stock for cash pursuant to
  private placement, October 2000, $11.00          2,151,093          2,151       --         --         --         --    23,659,872
Exercise of stock warrants for cash, Oct.
  2000, $6.00                                          1,000              1       --         --         --         --         5,999
Financing costs associated with private
  placement, October 2000                                 --             --       --         --         --         --    (1,956,340)
Exercise of stock warrants for cash,
  November - December 2000, $4.25                     23,528             23       --         --         --         --        99,971
Cashless exercise of stock warrants,
  December 2000                                        3,118              3       --         --         --         --            (3)
Exercise of stock warrants for cash,
  November - December 2000, $6.00                     22,913             23       --         --         --         --       137,455
Exercise of stock warrants for cash,
  December 2000, $7.00                                 8,823              9       --         --         --         --        61,752
Issuance of common stock as employee
  compensation, December 2000                          8,650              8       --         --         --         --       100,548
Exercise of stock warrants for cash,
  January 2001, $6.00                                  3,000              3       --         --         --         --        17,997
Issuance of common stock for cash pursuant to
  private placement, January 2001, $14.53            344,116            344       --         --         --         --     4,999,656
Financing costs associated with private
  placement, January 2001                                 --             --       --         --         --         --      (200,000)
Issuance of common stock pursuant to
  litigation settlement, January 2001                  2,832              2       --         --         --         --        21,096
Issuance of Series A Preferred Stock,
  January 2001                                            --             --    1,000          1         --         --    12,014,999
Granting of stock options in exchange for
  services rendered, January 2001                         --             --       --         --         --         --       745,000
Granting of stock options in exchange for
  services rendered, February 2001                        --             --       --         --         --         --       129,600
Exercise of stock options for cash,
  February 2001, $5.00                                50,000             50       --         --         --         --       249,950
Exercise of stock warrants for cash,
  March 2001, $6.00                                      500              1       --         --         --         --         2,999
Exercise of stock options in exchange for
  note receivable, March 2001                         50,000             50       --         --         --         --       249,950
Issuance of common stock in exchange for
  services rendered, March 2001, $5.50                 8,000              8       --         --         --         --        43,992
Granting of stock options in exchange for
  services rendered, May 2001                             --             --       --         --         --         --       592,300
Exercise of stock options for cash, June 2001,
  $5.00                                               75,000             75       --         --         --         --       374,925
Exercise of stock options for cash, June 2001,
  $5.50                                               12,500             12       --         --         --         --        68,738
Exercise of warrants for cash, June 2001, $6.00        4,000              4       --         --         --         --        23,996
Exercise of stock options for cash, July 2001,
  $5.00                                                7,500              8       --         --         --         --        37,492
Exercise of stock options for cash, July 2001,
  $5.50                                                2,500              3       --         --         --         --        13,747
Exercise of warrants for cash, July 2001, $6.00        2,000              2       --         --         --         --        11,998
Issuance of common stock for cash pursuant to
  private placement, July 2001, $9.25              1,254,053          1,254       --         --         --         --    11,598,736
Financing costs associated with private
  placement, July 2001                                    --             --       --         --         --         --      (768,599)
Shares issued in exchange for services
  rendered, July 2001, 9.25                           23,784             24       --         --         --         --       219,978
Shares issued for Anti-Dilution Provisions,
  July 2001                                            5,779              6       --         --         --         --        53,450
Issuance of stock warrants in exchange for
  services, rendered, July 2001                           --             --       --         --         --         --        19,134
Accrued interest on note receivable                       --             --       --         --         --         --            --
Comprehensive Income (Loss):
  Net Loss                                                --             --       --         --         --         --            --
  Other comprehensive income (loss):
   Currency translation adjustment                        --             --       --         --         --         --            --

    Total Comprehensive Income (Loss)
                                                 -----------    -----------  -------    -------     ------   --------  ------------
Balance at July 31, 2001                          20,681,526    $    20,681    1,000    $     1      1,000    $     1  $ 88,776,859
                                                 ===========    ===========  =======    =======     ======    =======  ============

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





                       GENEREX BIOTECHNOLOGY CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
      FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2001--
                                  (Continued)

[RESTUBBED TABLE]


                                                                                Deficit
                                                   Notes                      Accumulated
                                                 Receivable        Other       During the        Total
                                                 - Common      Comprehensive   Development    Stockholders'
                                                   Stock       Income (Loss)     Stage           Equity
                                                ------------   -------------  ------------    -------------
                                                                                  
Balance, August 1, 2000                        $    (54,118)   $   (165,526)   $ (21,816,725)  $  8,415,025
Exercise of stock warrants for cash,
  August 2000, $6.00                                     --              --               --         12,000
Issuance of common stock for services rendered
  August 2000                                            --              --               --        411,250
Issuance of stock warrants in exchange for
  equity line agreement, August 2000                     --              --               --      3,406,196
Exercise of stock warrants for cash,
  August 2000, $7.50                                     --              --               --        227,250
Exercise of stock warrants for cash,
  August 2000, $8.6625                                   --              --               --        259,875
Cashless exercise of stock warrants,
  August 2000                                            --              --               --             --
Exercise of stock warrants for cash,
  August 2000, $10.00                                    --              --               --        100,000
Exercise of stock warrants for cash,
  September 2000, $8.6625                                --              --               --        548,639
Exercise of stock warrants for cash,
  September 2000, $5.50                                  --              --               --         89,002
Exercise of stock warrants for cash,
  September 2000, $6.00                                  --              --               --        318,523
Exercise of stock warrants for cash,
  September 2000, $10.00                                 --              --               --         95,840
Exercise of stock warrants for cash,
  September 2000, $7.50                                  --              --               --        243,120
Issuance of common stock for cash pursuant to
  private placement, October 2000, $11.00                --              --               --     23,662,023
Exercise of stock warrants for cash, Oct.
  2000, $6.00                                            --              --               --          6,000
Financing costs associated with private
  placement, October 2000                                --              --               --     (1,956,340)
Exercise of stock warrants for cash,
  November - December 2000, $4.25                        --              --               --         99,994
Cashless exercise of stock warrants,
  December 2000                                          --              --               --             --
Exercise of stock warrants for cash,
  November - December 2000, $6.00                        --              --               --        137,478
Exercise of stock warrants for cash,
  December 2000, $7.00                                   --              --               --         61,761
Issuance of common stock as employee
  compensation, December 2000                            --              --               --        100,556
Exercise of stock warrants for cash,
  January 2001, $6.00                                    --              --               --         18,000
Issuance of common stock for cash pursuant to
  private placement, January 2001, $14.53                --              --               --      5,000,000
Financing costs associated with private
  placement, January 2001                                --              --               --       (200,000)
Issuance of common stock pursuant to
  litigation settlement, January 2001                    --              --               --         21,098
Issuance of Series A Preferred Stock,
  January 2001                                           --              --               --     12,015,000
Granting of stock options in exchange for
  services rendered, January 2001                        --              --               --        745,000
Granting of stock options in exchange for
  services rendered, February 2001                       --              --               --        129,600
Exercise of stock options for cash,
  February 2001, $5.00                                   --              --               --        250,000
Exercise of stock warrants for cash,
  March 2001, $6.00                                      --              --               --          3,000
Exercise of stock options in exchange for
  note receivable, March 2001                      (250,000)             --               --             --
Issuance of common stock in exchange for
  services rendered, March 2001, $5.50                   --              --               --         44,000
Granting of stock options in exchange for
  services rendered, May 2001                            --              --               --        592,300
Exercise of stock options for cash, June 2001,
  $5.00                                                  --              --               --        375,000
Exercise of stock options for cash, June 2001,
  $5.50                                                  --              --               --         68,750
Exercise of warrants for cash, June 2001,
  $6.00                                                  --              --               --         24,000
Exercise of stock options for cash, July 2001,
  $5.00                                                  --              --               --         37,500
Exercise of stock options for cash, July 2001,
  $5.50                                                  --              --               --         13,750
Exercise of warrants for cash, July 2001,
  $6.00                                                  --              --               --         12,000
Issuance of common stock for cash pursuant
  to private placement, July 2001, $9.25                 --              --               --     11,599,990
Financing costs associated with private
  placement, July 2001                                   --              --               --       (768,599)
Shares issued in exchange for services
  rendered, July 2001, 9.25                              --              --               --        220,002
Shares issued for Anti-Dilution Provisions,
  July 2001                                              --              --               --         53,456
Issuance of stock warrants in exchange for
  services, rendered, July 2001                          --              --               --         19,134
Accrued interest on note receivable                 (10,182)             --               --        (10,182)
Comprehensive Income (Loss):
  Net Loss                                               --              --      (27,097,210)   (27,097,210)
  Other comprehensive income (loss):
   Currency translation adjustment                       --         (81,341)              --        (81,341)
                                                                 -----------    ------------    -----------
    Total Comprehensive Income (Loss)                               (81,341)     (27,097,210)   (27,178,551)
                                                  ----------     ----------     ------------    -----------
Balance at July 31, 2001                          $ (314,300)    $ (246,867)    $(48,913,935)   $39,322,440
                                                  ==========     ==========     ============    ===========

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



                                      F-10



               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                                                   Cumulative
                                                                            For the Years Ended                    November 2,
                                                                                  July 31,                        1995 (Date of
                                                             ------------------------------------------------     Inception) to
                                                                  2001              2000             1999         July 31, 2001
                                                              --------------   ---------------   -------------    -------------
                                                                                                          
Cash Flows Used in Operating Activities:
   Net loss                                                   $(27,097,210)      $(8,841,047)     $(6,239,602)    $(48,913,935)
   Adjustments to reconcile net loss to net
     cash used in operating activities:
     Depreciation and amortization                                 230,600            86,804           79,784          441,277
     Minority interest share of loss                            (2,985,000)               --               --       (2,985,000)
     Reduction of notes receivable - common stock
       in exchange for services rendered                                --           384,903           38,979          423,882
     Write-off of deferred offering costs                        3,406,196                --               --        3,406,196
     Common stock issued for services rendered                     829,264            66,300          612,175        2,069,992
     Stock options and warrants issued for services
       rendered                                                  1,486,036         1,421,150        1,146,874        4,588,060
     Preferred stock issued for services rendered                       --                --               --              100
     Founders' shares transferred for services
       rendered                                                         --                --               --          353,506
     Changes in operating assets and liabilities:
       Miscellaneous receivables                                     2,747           170,481           27,571           30,620
       Other current assets                                        (14,858)           21,219           12,610         (117,606)
       Accounts payable and accrued expenses                     1,479,803           773,506          (87,134)       3,492,121
       Other, net                                                       --                --               --          110,317
                                                              ------------       -----------      -----------     ------------
         Net Cash Used in Operating Activities                 (22,662,422)       (5,916,684)      (4,408,743)     (37,100,470)

Cash Flows From Investing Activities:
   Purchase of property and equipment                           (1,623,017)         (381,163)        (217,018)      (2,296,971)
   Costs incurred for patents                                     (197,434)         (269,499)              --         (466,933)
   Change in restricted cash                                            --                --          105,655           (5,595)
   Increase in officers' loans receivable                       (1,023,743)               --               --       (1,023,743)
   Purchase of short-term investments                          (22,926,466)       (3,733,918)        (232,345)     (26,892,729)
   Change in deposits                                               27,396            19,720               --           29,515
   Change in notes receivable - common stock                       (10,182)           (4,118)              --          (14,300)
   Change in due from related parties                                   --           290,973          428,216       (2,255,197)
   Other, net                                                           --                --               --           89,683
                                                              ------------       -----------      -----------     ------------
         Net Cash (Used in)Provided By
           Investing Activities                                (25,753,446)       (4,078,005)          84,508      (32,836,270)

Cash Flows From Financing Activities:
   Proceeds from issuance of long-term debt                             --                --               --          993,149
   Repayment of long-term debt                                      (5,208)         (480,738)        (416,649)        (965,984)
   Change in due to related parties                                     --                --          (81,483)         154,541
   Proceeds from exercise of warrants                            2,256,482                --               --        2,256,482
   Proceeds from exercise of stock options                         745,000                --               --          745,000
   Proceeds from minority interest investment                    2,985,000                --               --        2,985,000
   Proceeds from issuance of common stock, net                  37,337,074         8,045,474        8,488,798       61,999,294
   Proceeds from issuance of preferred stock                    12,015,000                --               --       12,015,000
   Purchase and retirement of common stock                              --                --         (119,066)        (119,066)
                                                              ------------       -----------      -----------     ------------
         Net Cash Provided By Financing Activities              55,333,348         7,564,736        7,871,600       80,063,416
Effect of Exchange Rates on Cash                                   (12,826)            1,657           (4,991)         (17,117)
                                                              ------------       -----------      -----------     ------------
Net Increase (Decrease) in Cash and Cash
   Equivalents                                                   6,904,654        (2,428,296)       3,542,374       10,109,559
Cash and Cash Equivalents, Beginning of Year                     3,204,905         5,633,201        2,090,827               --
                                                              ------------       -----------      -----------     ------------
Cash and Cash Equivalents, End of Year                        $ 10,109,559       $ 3,204,905      $ 5,633,201     $ 10,109,559
                                                              ============       ===========      ===========     ============



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


                                      F-11



               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1 - Organization and Business:
-----------------------------------

         Generex Biotechnology Corporation (the Company) was incorporated in
         Delaware in September 1997 for the purpose of acquiring Generex
         Pharmaceuticals, Inc. (Generex Pharmaceuticals), a Canadian corporation
         formed in November 1995 to engage in pharmaceutical and
         biotechnological research and other activities. The Company's
         acquisition of Generex Pharmaceuticals was completed in October 1997 in
         a transaction in which the holders of all outstanding shares of Generex
         Pharmaceuticals exchanged their shares for shares of the Company's
         common stock.

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

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

         The Company is engaged in the research and development of drug delivery
         systems and technology. Since its inception, the Company has devoted
         its efforts and resources to the development of a platform technology
         for the oral administration of large molecule drugs, including
         proteins, peptides, monoclonal antibodies, hormones and vaccines, which
         historically have been administered by injection, either subcutaneously
         or intravenously.

         The Company is a development stage company, which has a limited history
         of operations and has not generated any revenues from operations with
         the exception of the $1 million received in conjunction with the
         execution of a development agreement (see Note 7). The Company has no
         products approved for commercial sale at the present time. 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.

Note 2 - Summary of Significant Accounting Policies:
----------------------------------------------------

         Principles of Consolidation
         The consolidated financial statements include the accounts of the
         Company and all of its subsidiaries in which a controlling interest is
         maintained. For those consolidated subsidiaries where the Company
         ownership is less than 100 percent, the outside stockholders' interests
         are shown as minority interests. All significant intercompany
         transactions and balances have been eliminated.

                                      F-12


               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 2 - Summary of Significant Accounting Policies (Continued):
----------------------------------------------------------------

         Development Stage Corporation
         The accompanying consolidated financial statements have been prepared
         in accordance with the provisions of Statement of Financial Accounting
         Standard No. 7, "Accounting and Reporting by Development Stage
         Enterprises."

         Cash and Cash Equivalents
         The Company considers all highly liquid investments purchased with a
         maturity of three months or less to be cash equivalents.

         Short-Term Investments
         At July 31, 2001 and 2000, short-term investments consisted of
         short-term notes of U.S. corporations with original maturities of
         between three to twelve months. At July 31, 2001 and 2000, the cost of
         the investments approximated market value.

         Property and Equipment
         Property and equipment are recorded at cost less accumulated
         depreciation. Depreciation is provided on the straight-line method over
         the estimated useful lives of the assets, which range from three to
         thirty years. Gains and losses on depreciable assets retired or sold
         are recognized in the statement of operations in the year of disposal.
         Repairs and maintenance expenditures are expensed as incurred.

         Patents
         Legal costs incurred to establish patents are capitalized. Capitalized
         costs are amortized on the straight-line method over the related patent
         term.

         Research and Development Costs
         Expenditures for research and development are expensed as incurred and
         include, among other costs, those related to the production of
         experimental drugs, including payroll costs, and amounts incurred for
         conducting clinical trials. Amounts expected to be received from
         governments under research and development tax credit arrangements are
         offset against the related expenses. Included in miscellaneous
         receivables is $12,865 and $16,138 of such a receivable due from the
         Canadian government at July 31, 2001 and 2000, respectively.

         Income Taxes
         Income taxes are accounted for under the asset and liability method
         prescribed by Statement of Financial Accounting Standards No. 109,
         "Accounting for Income Taxes." Deferred income taxes are recorded for
         temporary differences between financial statement carrying amounts and
         the tax basis of assets and liabilities. Deferred tax assets and
         liabilities reflect the tax rates expected to be in effect for the
         years in which the differences are expected to reverse. A valuation
         allowance is provided if it is more likely than not that some or all of
         the deferred tax asset will not be realized.

         Reclassification
         Certain amounts reported in the 2000 financial statements have been
         reclassified to conform to the 2001 presentation.


                                      F-13

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 2 - Summary of Significant Accounting Policies (Continued):
----------------------------------------------------------------

         Stock-Based Compensation
         As permitted by the provisions of Statement of Financial Accounting
         Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
         123), the Company follows Accounting Principles Board Opinion No. 25,
         "Accounting for Stock Issued to Employees" (APB 25) and related
         interpretations in accounting for its employee stock option plans.
         Under APB 25, if the exercise price of the Company's employee stock
         options equals or exceeds the fair market value of the underlying stock
         on the date of grant, no compensation expense is recognized. Stock
         options and warrants issued to non employees are accounted for based on
         the fair value of the consideration received or the fair value of the
         equity instruments issued, whichever is more reliably measurable.

         Net Loss Per Common Share
         The Company has adopted Statement of Financial Accounting Standards No.
         128, "Earnings per Share" (SFAS 128), which requires presentation of
         basic earnings per share (Basic EPS) and diluted earnings per share
         (Diluted EPS) by all entities that have publicly traded common stock or
         potential common stock (options, warrants, convertible securities or
         contingent stock arrangements).

         Basic EPS is computed by dividing income (loss) available to common
         stockholders by the weighted average number of common shares
         outstanding during the period. Diluted EPS gives effect to all dilutive
         potential common shares outstanding during the period. The computation
         of Diluted EPS does not assume conversion, exercise or contingent
         exercise of securities that would have an antidilutive effect on
         earnings. Refer to Note 12 for methodology for determining net loss per
         share.

         Comprehensive Loss
         The Company has adopted Statement of Financial Accounting Standards No.
         130, "Reporting Comprehensive Income." Other comprehensive income
         (loss), which includes only foreign currency translation adjustments,
         is shown in the Statement of Changes in Stockholders' Equity.

         Effects of Recent Accounting Pronouncements
         In June 1998, 1999, and 2000, the FASB issued SFAS No. 133, Accounting
         for Derivative Instruments and Hedging Activities, SFAS No. 137,
         Accounting for Derivative Instruments and Hedging Activities - Deferral
         of the Effective Date of FASB Statement No. 133, and SFAS no. 138,
         Accounting for Certain Derivative Instruments and Certain Hedging
         Activities, respectively. These statements require companies to record
         derivatives on the balance sheet as assets or liabilities, measured at
         fair value. Gains or losses resulting from changes in the values of
         those derivatives would be accounted for depending on the use of the
         derivative and whether it qualifies for hedge accounting. The adoption
         of these statements on August 1, 2000 did not have a significant impact
         on the Company's financial position or results of operations.

         In December 1999, the SEC issued Staff Accounting Bulletin No. 101 (SAB
         101), Revenue Recognition in Financial Statements. SAB 101 provides
         guidance on the recognition, presentation, and disclosure of revenues
         in financial statements of all public registrants. In October 2000, the
         SEC issued a Frequently Asked Questions document related to SAB 101
         which provides interpretive guidance. The Company adopted SAB 101 in
         fiscal year 2001, and the adoption of SAB 101 did not have a
         significant impact on the Company's financial position or results of
         operations.

                                      F-14

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 2 - Summary of Significant Accounting Policies (Continued):
----------------------------------------------------------------

         Effects of Recent Accounting Pronouncements (Continued)
         In June 2001, the FASB issued SFAS No. 141, Business Combinations. SFAS
         No. 141 addresses the initial recognition and measurement of goodwill
         and other intangible assets acquired in a business combination. SFAS
         No. 141 is applicable to business combinations beginning July 1, 2001.
         The adoption of this statement did not have a significant impact on the
         Company's financial position or results of operations.

         In June 2001, the FASB issued SFAS No. 142, Goodwill and Other
         Intangible Assets. SFAS No. 142 addresses the recognition and
         measurement of goodwill and other intangible assets subsequent to their
         acquisition. SFAS No. 142 also addresses the initial recognition and
         measurement of intangible assets acquired outside of a business
         combination whether acquired individually or with a group of other
         assets. Goodwill and intangible assets previously recorded, in the
         Company's financial statements, will be affected by the provisions of
         SFAS No. 142. This statement provides that intangible assets with
         finite useful lives be amortized and that intangible assets with
         indefinite lives and goodwill will not be amortized, but will rather be
         tested at least annually for impairment. SFAS No. 142 will be effective
         for the Company's fiscal year 2002, however management is assessing the
         impact that SFAS No. 142 will have on the Company's financial position
         and results of operations.

         Concentration of Credit Risk
         The Company maintains cash balances, at times, with financial
         institutions in the amount which are more than amounts insured by the
         Canada Deposit Insurance Corporation and the Federal Deposit Insurance
         Corporation. Management monitors the soundness of these institutions
         and considers the Company's risk negligible.

         The Company places its short-term investments in short-term debt
         instruments of high quality U.S. corporations. The Company does not
         believe there is a significant credit risk relating to these
         investments.

         Use of Estimates
         The preparation of financial statements in conformity with generally
         accepted accounting principles 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
         dates of the financial statements and the reported amounts of revenues
         and expenses during the reporting periods. Actual results could differ
         from those estimates.

         Foreign Currency Translation
         Foreign denominated assets and liabilities of the Company are
         translated into US dollars at the prevailing exchange rates in effect
         at the end of the reporting period. Income statement accounts are
         translated at a weighted average of exchange rates which were in effect
         during the period. Translation adjustments that arise from translating
         the foreign subsidiary's financial statements from local currency to US
         currency are recorded in the other comprehensive income (loss)
         component of stockholders' equity.

         Financial Instruments
         The carrying values of accounts payable and accrued expenses
         approximate their fair values. The fair value of the Company's
         long-term debt is assumed to approximate its book value.

                                      F-15

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 3 - Property and Equipment:
--------------------------------

         The costs and accumulated depreciation of property and equipment are
         summarized as follows:


                                                                                                        July 31,
                                                                                           -----------------------------------
                                                                                                  2001               2000
                                                                                           --------------       --------------

                                                                                                                 
         Land                                                                                $   293,902          $  304,060
         Buildings and Improvements                                                            1,901,907           1,814,724
         Furniture and Fixtures                                                                   68,229               8,190
         Office Equipment                                                                         60,229              62,311
         Lab Equipment                                                                         1,814,028             415,753
                                                                                              ----------          ----------

         Total Property and Equipment                                                          4,138,295           2,605,038
         Less: Accumulated Depreciation                                                          410,534             209,171
                                                                                              ----------          ----------
         Property and Equipment, Net                                                          $3,727,761          $2,395,867
                                                                                              ==========          ==========


         Depreciation expense amounted to $209,114, $85,781 and $79,784 for the
         years ended 2001, 2000 and 1999, respectively.

Note 4 - Patents:
-----------------

         The costs and accumulated amortization of patents are summarized as
         follows:


                                                                                                         July 31,
                                                                                             -------------------------------
                                                                                                2001                 2000
                                                                                             ------------         ----------
                                                                                                                
         Patents                                                                                $456,860           $268,392
         Less:  Accumulated Amortization                                                          22,553              1,023
                                                                                                --------           --------
         Patents, Net                                                                           $434,307           $267,369
                                                                                                ========           ========


         Amortization expense amounted to $21,486, $1,023 and $-0- for the years
         ended July 31, 2001 2000 and 1999, respectively.

Note 5 - Income Taxes:
----------------------

         The Company has incurred losses since inception, which have generated
         net operating loss carryforwards. The net operating loss carryforwards
         arise from both United States and Canadian sources. As of July 31,
         2001, the Company has approximately $19,730,659 and $10,270,030 in net
         operating loss carryforwards to offset taxable income in the United
         States, which expire in 2013 through 2016, and Canada, which expire in
         2005 through 2008, respectively. These loss carryforwards are subject
         to limitation in future years should certain ownership changes occur.

         For the years ended July 31, 2001, 2000 and 1999, the Company's
         effective tax rate differs from the federal statutory rate principally
         due to net operating losses and other temporary differences for which
         no benefit was recorded.

                                      F-16

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 5 - Income Taxes (Continued):
----------------------------------

         Deferred tax assets consist of the following:



                                                                                                         July 31,
                                                                                           ----------------------------------
                                                                                                 2001                2000
                                                                                           --------------       -------------
                                                                                                                
         Net operating loss carryforwards                                                   $ 12,513,777         $ 7,169,137
         Amortization of financing fees                                                           80,922              84,629
         Amortization of reorganization costs                                                    214,392                  --
                                                                                            ------------         -----------
              Total deferred tax assets                                                       12,809,091           7,253,766
         Valuation allowance                                                                 (12,809,091)         (7,253,766)
                                                                                            ------------         -----------

              Net deferred tax assets                                                       $         --          $       --
                                                                                            ============          ==========


Note 6 - Accounts Payable and Accrued Expense:
---------------------------------------------

         Accounts payable and accrued expenses consist of the following:



                                                                                                          July 31,
                                                                                            -----------------------------------
                                                                                                   2001               2000
                                                                                            ---------------     ---------------
                                                                                                                  

         Accounts Payable                                                                      $  896,061         $  863,660
         Litigation                                                                               191,653            234,504
         Clinical                                                                                 147,699                 --
         Accrued Legal Fees                                                                       420,360            106,118
         Financial Services                                                                       995,000                 --
                                                                                               ----------         ----------
              Total                                                                            $2,650,773         $1,204,282
                                                                                               ==========         ==========


Note 7 - Commitments and Contingent Liabilities:
------------------------------------------------

         Consulting Services
         In October 1996, the Company entered into a Consulting Agreement with
         its Vice President of Research and Development (the V.P.) pursuant to
         which, among other things, the V.P. assigned to the Company his entire
         right, title and interest in and to all inventions, ideas, designs and
         discoveries made by him during the term of such agreements which relate
         in any manner to the actual or demonstratably anticipated business,
         work, undertaking or research and development of the Company.
         Concurrently with execution of this Consulting Agreement, the V.P. and
         the Company entered into an Assignment and Assumption Agreement
         pursuant to which the V.P. assigned to the Company his interests in and
         to specific drug delivery systems, controlled release drug delivery
         systems, and technology patents invented/discovered/conceived by the
         V.P. prior to the execution of the Agreement, including three existing
         patents covering insulin delivery systems, applicable to peptides and
         proteins; drug vaccines and hormones delivery; and controlled release
         of drugs and hormones (the "Existing Patents"). In addition to the
         Existing Patents, the V.P. assigned to the Company his interest in four
         US and/or Canadian patent applications and certain abstracts covering,
         among other things, liposomes drug delivery for vaccines, drugs,
         hormones, peptides and cosmetic delivery; transdermal drug delivery for
         proteins, peptides, hormones and small molecules; controlled release
         drug delivery systems for capsules, caplets, and liquid suspensions;
         and DNA technology relating to insulin preparation (collectively,
         "Other Existing Technology"). At the time of this assignment, the
         Existing Patents were owned of record by a Canadian corporation, which
         was 50 percent owned by the V.P. The Company subsequently acquired the
         V.P.'s interest in this corporation for no additional consideration.

                                       F-17

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 7 - Commitments and Contingent Liabilities (Continued):
------------------------------------------------------------

         Consulting Services (Continued)
         The Consulting Agreement was amended and supplemented as of January 7,
         1998 and further amended and supplemented as of December 31, 2000. The
         Consulting Agreement, as amended and supplemented, continues through
         July 31, 2010, subject to termination without cause by the V.P. or the
         Company at any time after January 31, 2003 upon 12 months' prior
         written notice. The Consulting Agreement provides for an annual base
         compensation of $250,000 per year (starting August 1, 2000), subject to
         annual increases. In addition, the Consulting Agreement provides for
         certain bonus compensation to be paid to the V.P. for achievement of
         certain milestones under the Company's development agreements with
         pharmaceutical companies. During the 2001 fiscal year, the Company paid
         the V.P. $300,000 for his involvement in securing a development
         agreement for a specific product with a pharmaceutical company. The
         Consulting Agreement also provides for the V.P. to be granted options
         to purchase 150,000 shares of common stock in each of the next 10
         fiscal years, starting with the 2001 fiscal year. The options must be
         granted under option plans approved by the Company's stockholders.

         In connection with amending and supplementing the Consulting Agreement
         in January 1998, the Company issued 1,000 shares of Special Voting
         Rights Preferred Stock to the V.P. See Note 10 for description of
         Special Voting Rights Preferred Stock.

         Leases
         The Company has entered into various lease agreements for the use of
         vehicles and office equipment.

         Aggregate minimum annual lease commitments of the Company as of July
         31, 2001 are as follows:

                           Year                                    Amount
                           ----                                    ------
                           2002                                   $22,008
                           2003                                    18,099
                           2004                                     9,801
                           2005                                     3,431
                           Thereafter                                  --
                                                                  -------
                           Total Minimum Lease Payments           $53,339
                                                                  =======


         Lease expense amounted to $20,753, $20,175 and $19,240 for the years
         ended July 31, 2001, 2000 and 1999, respectively.

         The preceding data reflects existing leases and does not include
         replacements upon their expiration. In the normal course of business,
         operating leases are generally renewed or replaced by other leases.

                                       F-18


               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 7 - Commitments and Contingent Liabilities (Continued):
------------------------------------------------------------

         Rental Operations
         The Company leases a portion of the floor that it owns in an office
         building located in Toronto, Canada, as well as two commercial
         buildings. The following represents the approximate minimum amount of
         sublease income to be received in years ending after July 31, 2001:

                                   Year                          Amount
                                   ----                          ------
                                   2002                        $ 36,240
                                   2003                          24,817
                                   2004                          24,817
                                   2005                          24,817
                                   2006                           4,136
                                   Thereafter                        --
                                                               --------
                                   Total                       $114,827
                                                               ========

         Supply Agreements
         On July 19, 2000, the Company entered into a supply agreement with
         Valois, S.A. and Valois of America, Inc. (collectively Valois), to
         supply the Company with certain products developed and manufactured by
         Valois. In August 2000, in conjunction with the execution of the
         exclusive supply agreement, the Company delivered 35,000 shares of its
         common stock to Valois and recorded an expense of $411,250. Pursuant to
         the agreement, the Company shall pay milestone payments to Valois
         within 30 days of July 19 beginning in fiscal 2001 for the next five
         years. If the milestone obligations are not met after a five-year
         period, the Company shall pay Valois an annual payment of $50,000. In
         the event the Company chooses to end the agreement after the fifth
         anniversary, the Company shall pay Valois a one-time payment of
         $350,000.

         On August 28, 2000, the Company entered into a supply agreement with
         Presspart Manufacturing Limited, whereby the Company will purchase its
         entire requirements for products to use in the administration of
         insulin through the buccal mucosa and shall not purchase the products
         or any metal containers competitive to the products from any other
         person in exchange for an exclusive non-transferable royalty free
         irrevocable license to use the products. The contract shall continue
         for a minimum period of four contract years from the end of the first
         contract year in which the quantity of products purchased by the
         Company from Presspart exceeds 10,000,000, and thereafter, shall
         continue until terminated by either party by giving twelve months
         written notice.

         Pending Litigation
         On October 2, 1998, Sands Brothers & Co. Ltd., a New York City-based
         investment banking and brokerage firm, initiated an arbitration against
         the Company under New York Stock Exchange rules. Sands alleged that it
         had the right to receive, for nominal consideration, approximately 1.5
         million shares of the Company's common stock. Sands based its claim
         upon an October 1997 letter agreement that was purported by Sands to
         confirm an agreement appointing Sands as the exclusive financial
         advisor to Generex Pharmaceuticals, Inc., a subsidiary of the Company
         that was acquired in late 1997. In exchange, the letter agreement
         purported to grant Sands the right to acquire 17% of Generex
         Pharmaceuticals common stock for nominal consideration. Sands claimed
         that its right to receive shares of Generex Pharmaceuticals common
         stock applies to the Company's common stock since outstanding shares of
         Generex Pharmaceuticals common stock were converted into shares of the
         Company's common stock in the acquisition. Sands' claims also included
         additional shares allegedly due as a fee related to that acquisition,
         and $144,000 in monthly fees allegedly due under the terms of the
         purported agreement.

                                       F-19

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 7 - Commitments and Contingent Liabilities (Continued):
------------------------------------------------------------

         Pending Litigation (Continued)
         Pursuant to an arbitration award dated September 22, 1999, the
         arbitration panel that heard this case awarded Sands $14,070 and issued
         a declaratory judgment requiring the Company to issue to Sands a
         warrant to purchase 1,530,020 shares of the Company's common stock
         pursuant to and in accordance with the terms of the purported October
         1997 letter agreement. On October 13, 1999, Sands commenced a special
         proceeding to confirm the arbitration award in the Supreme Court of the
         State of New York, County of New York (the "New York Supreme Court").
         On November 10, 1999, the Company moved to vacate the arbitration
         award. On March 20, 2000, the New York Supreme Court granted Sands'
         petition to confirm the award and denied the Company's motion to vacate
         the award. The Company appealed and on January 23, 2001, the New York
         State Appellate Division, First Department (the "Appellate Division"),
         modified the judgment of the New York Supreme Court that had confirmed
         the arbitration award against the Company. The Appellate Division
         affirmed the portion of the New York Supreme Court judgment that had
         confirmed the granting of monetary relief of $14,070 to Sands but
         modified the judgment to vacate the portion of the arbitration award
         directing the issuance to Sands of a warrant to purchase 1,530,020
         shares of the Company's common stock. The Appellate Division held that
         the portion of the award directing the Company to issue warrants to
         Sands is too indefinite to be enforceable and remanded the matter to
         the arbitration panel for a final and definite award with respect to
         such relief or its equivalent (including possibly an award of monetary
         damages). The arbitration panel commenced hearings on the matters
         remanded by the Appellate Division in June 2001 and is expected to
         conclude its consideration of such matters and render its decision
         during the fourth calendar quarter of 2001. The Company is not able to
         estimate an amount or range of potential loss from this legal
         proceeding at the present time. Therefore, no provision has been
         recorded in the accompanying financial statements.

         In February 1999, MQS, Inc., a former consultant, commenced a civil
         action against the Company in the United States District Court for the
         District of New Jersey claiming, among other things, that 242,168
         shares of common stock and $243,066 were due to it for services that it
         rendered through December 22, 1998. In January 2001, the Company
         entered into a settlement agreement with MQS whereby the Company paid
         the plaintiff certain amounts in cash and common stock that were not
         material to the consolidated financial position of the Company and
         whereby the claims of the parties were dismissed with prejudice.

         In February 2001, a former business associate of the Vice President of
         Research and Development (VP), and an entity called Centrum
         Technologies Inc. commenced an action in the Ontario Superior Court of
         Justice against the Company and the VP seeking, among other things,
         damages for alleged breaches of contract and tortious acts related to a
         business relationship between this former associate and the VP that
         ceased in July 1996. The plaintiffs' statement of claim also seeks to
         enjoin the use, if any, by the Company of three patents allegedly owned
         by the company called Centrum Technologies Inc. On July 20, 2001, the
         Company filed a preliminary motion to dismiss the action of Centrum
         Technologies Inc. as a nonexistent entity or, alternatively, to stay
         such action on the grounds of want of authority of such entity to
         commence the action and, in the further alternative, to dismiss such
         action for failure to produce documents referred to in the statement of
         claim. The Company intends to defend this action vigorously. The
         Company is not able to predict the ultimate outcome of this legal
         proceeding at the present time or to estimate an amount or range of
         potential loss, if any, from this legal proceeding.

                                       F-20

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 7 - Commitments and Contingent Liabilities (Continued):
------------------------------------------------------------

         Pending Litigation (Continued)
         In February 1997, a former employee of Generex Pharmaceuticals, Inc.,
         commenced an action in the Ontario Superior Court of Justice for
         wrongful dismissal. The Ontario Superior Court of Justice rendered
         judgment in favor of the plaintiff for approximately $127,000 plus
         interest in November 1999 and further awarded costs to the plaintiff in
         March 2000. An appeal of the judgment was filed with the Court of
         Appeal for Ontario in April 2000. The Company intends to continue its
         vigorous defense of this action. The Company does not believe that the
         ultimate resolution of this legal proceeding will have a material
         effect on the consolidated financial position of the Company. The
         Company has established a reserve for potential loss contingencies
         related to the resolution of this legal proceeding, the amount of which
         of is not material to the consolidated financial position of the
         Company.

         In March 1999, a former consultant to the Company commenced an action
         in the Ontario Superior Court of Justice against the Company seeking
         approximately $94,000 and 1,465 shares of the Company's Common Stock
         for alleged breach of contract damages and additional amounts in
         punitive damages. In April 1999, the Company filed a counterclaim for
         monies the Company believes are due to the Company from this former
         consultant. The parties have nearly completed discovery, pending the
         resolution of certain outstanding motions. The Company intends to
         continue its vigorous defense of this action. The Company does not
         believe that the ultimate resolution of this legal proceeding will have
         a material effect on the consolidated financial position of the
         Company. The Company has established a reserve for potential loss
         contingencies related to the resolution of this legal proceeding, the
         amount of which of is not material to the consolidated financial
         position of the Company.

         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 consolidated financial
         position.

         With respect to all litigation, as additional information concerning
         the estimates used by the Company become known, the Company reassesses
         its position both with respect to accrued liabilities and other
         potential exposures. Estimates that are particularly sensitive to
         future change relate to legal matters, which are subject to change as
         events evolve and as additional information becomes available during
         the administration and litigation process.

         Concentrations In Development Arrangements
         The Company has a development arrangement with a major pharmaceutical
         company, whereby the pharmaceutical company is primarily responsible
         for conducting clinical trials related to a specific agreed upon
         product, securing regulatory approvals and marketing on a worldwide
         basis. The Company is primarily responsible for completing all
         necessary product research and development. Although the Company
         presently has sufficient funds to meet its foreseeable obligations, the
         costs of the Company's obligations may be significant, and may exceed
         current funds. If the development arrangement were to be curtailed or
         terminated, the market perception of the prospects for the Company's
         product, the timing of regulatory approvals, and the Company's ability
         to raise funds could be adversely affected.

         In conjunction with the execution of this development arrangement, the
         Company received an agreement signing fee of $1,000,000 which is
         included in revenues as all necessary requirements have been satisfied.


                                       F-21


               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 8 - Related Party Transactions:
------------------------------------

         The amounts due from (to) related parties at July 31, exclusive of the
         officers' loans receivable, are as follows:


                                                                                                      Golden
                                        The             Angara          Angara         Ching          Bull
                                     Great Tao         Equities       Investments,     Chew An       Estates,
                                        Inc.             Inc.            Inc.         Breweries        Inc.           EBI, Inc.
                                   --------------   --------------  ---------------   ---------     ------------    ------------
                                                                                                     
     Beginning Balance,
        August 1, 1999               $(102,638)      $ 274,700        $(52,651)        $(94)        $164,998           $337,293
     Cash advance                           --        (213,871)             --           --          (30,300)                --
     Company expenses
        paid by related parties             --              --              --           --          (46,953)                --
     Other (b)                          (2,457)          6,578          (1,261)          (3)           3,952              6,480
     Transfer/assumption
        of related party
          liabilities (a)              105,095         (67,407)         53,912           97          (91,697)                --
                                     ---------       ---------        --------        -----         --------           --------
     Ending Balance,
        July 31, 2000                       --              --              --           --               --            343,773
     Other (b)                              --              --              --           --               --            (11,484)
                                     ---------       ---------        --------        -----         --------           --------
     Ending Balance,
        July 31, 2001                $      --       $      --        $     --         $ --         $     --           $332,289
                                     =========       =========        ========        =====         ========           ========


         (a)  Officers of the Company are also shareholders in the related
              companies and have agreed to the transfer/assumption of the
              offsetting amounts which were due from (to) related parties.

         (b)  Effect of foreign currency translation adjustments.

         These amounts are non-interest bearing. There are no fixed terms of
         repayment.

         Each of the above related parties is owned in whole or in part by the
         Company's Chairman of the Board. In addition, EBI, Inc. and Golden Bull
         Estates, Inc. are shareholders of the Company.

         Management feels that the related party expenses provided by such
         parties were transacted at terms and amounts that would have been
         obtained had the transactions been consummated with unrelated third
         parties. The exception to this is the non-recording of interest income
         and expense on the balances due to/from related parties. The Company
         estimates the following additional amounts would have been recorded if
         such transactions were consummated under arms length agreements:



                                                         For the Years Ended July 31,
                                       -----------------------------------------------------------
                                              2001                 2000                1999
                                       -----------------    -----------------    -----------------
                                                                               

          Interest Income                   $32,209               $60,962             $79,118
          Interest Expense                  $    --               $14,938             $18,117


                                       F-22

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8 - Related Party Transactions (Continued):
------------------------------------------------

         The interest income/expense amounts were computed at estimated
         prevailing rates based on the average receivable/payable balance
         outstanding during the periods reflected.

         As of July 31, 2001, the Company's four senior officers, who are also
         shareholders of the Company were compensated indirectly by the Company
         through management services contracts between the Company and
         management firms of which they are owners. The amounts paid to these
         management firms amounted to $672,477 for the year ended July 31, 2001.

         As of July 31, 2000, the Company's three senior officers, who are also
         shareholders of the Company were compensated indirectly by the Company
         through management services contracts between the Company and a
         management firm of which they were equal owners. The amounts paid to
         this management firm amounted to $343,594 and $388,420 for the years
         ended July 31, 2000 and 1999 respectively.

         See Note 7 for a discussion of the consulting agreement with the
         Company's Vice President of Research and Development.

         On May 3, 2001, the Company's three senior officers, who are also
         shareholders of the Company, were given loans of $334,300 each, in
         exchange for promissory notes. These notes bear interest at 8.5 percent
         per annum and are payable in full on May 1, 2002. These notes are
         guaranteed by a related company owned by these officers and secured by
         2,500,000 pledged shares of the Company Common Stock currently owned by
         this related company. As of July 31, 2001, the balance outstanding on
         these notes, including accrued interest, was $1,023,743.

Note 9 - Long-Term Debt:
------------------------

         Long-term debt consists of the following:


                                                                                                           July 31,
                                                                                                  ----------------------------
                                                                                                      2001           2000
                                                                                                  ------------    ------------
                                                                                                                
         Mortgage payable - interest at 9.7 percent per annum, monthly
         payments of principal and interest of $4,778, final payment due May
         25, 2005, secured by all assets of the Company                                              $518,095       $541,661

         Mortgage payable - interest at 10 percent per annum, monthly payments
         of principal and interest of $1,782, final payment due November 1,
         2002, secured by real property located at 11 Carlaw Avenue, Toronto,
         Canada                                                                                       174,565        180,302
                                                                                                     --------       --------

         Total Debt                                                                                   692,660        721,963
         Less Current Maturities                                                                        9,634          9,404
                                                                                                     --------       --------
         Long-Term Debt, Less Current Maturities                                                     $683,026       $712,559
                                                                                                     ========       ========

                                       F-23


               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 9 - Long-Term Debt (Continued):
------------------------------------

         Aggregate maturities of long-term debt of the Company due within the
         next five years ending July 31, are as follows:


                                 Year                          Amount
                                 ----                          ------
                                 2002                         $  9,634
                                 2003                          177,556
                                 2004                            7,268
                                 2005                          498,202
                                 Thereafter                         --
                                                              --------

                                 Total                        $692,660
                                                              ========

Note 10 - Stockholders' Equity:
-------------------------------

          Reverse Merger
          On January 9, 1998, the Company issued 9,234,118 shares of common
          stock to acquire GBC - Delaware, Inc.. For accounting purposes, the
          acquisition of GBC - Delaware, Inc. by the Company has been treated as
          a reverse merger. Accordingly, the 9,234,118 shares issued to acquire
          GBC - Delaware, Inc. have been treated as outstanding from November 2,
          1995 (as adjusted for historical issuances of GBC - Delaware, Inc. and
          Generex Pharmaceuticals, Inc. during the period from November 2, 1995
          to January 8, 1998) and the previously outstanding 1,105,000 shares
          have been treated as issued on the acquisition date. Since the assets
          and liabilities acquired on this date were immaterial, no amounts have
          been assigned to common stock as a result of this transaction. (See
          Note 1)

          Warrants
          As of July 31, 2001, the Company has the following warrants to
          purchase common stock outstanding:


               Number of Shares                               Warrant Exercise                            Warrant
                To be Purchased                                Price Per Share                        Expiration Date
               ----------------                               -----------------                      -----------------
                                                                                                      
                       7,937                                      $21.82                             September 6, 2002
                     370,589                                      $ 7.00                             January 17, 2003
                     500,000                                      $ 2.50                             March 31, 2003
                     568,647                                      $12.15                             August 15, 2003
                     150,000                                      $10.00                             November 17, 2003
                     112,584                                      $ 7.50                             January 31, 2004
                       3,500                                      $ 6.00                             February 17, 2004
                      53,000                                      $ 6.00                             April 6, 2004
                       9,091                                      $ 5.50                             April 26, 2004
                       3,243                                      $14.53                             July 6, 2004
                      11,764                                      $ 4.25                             January 7, 2005
                     948,334                                      $ 8.66                             May 17, 2005
                      19,584                                      $10.00                             May 17, 2005
                     543,987                                      $12.99                             September 29, 2005
                      75,000                                      $25.15                             January 16, 2006
                     313,515                                      $10.18                             July 6, 2006

                                       F-24

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 10 - Stockholders' Equity (Continued):
-------------------------------------------

          Notes Receivable - Common Stock
          Notes receivable - common stock consists of two separate promissory
          notes. The first promissory note was issued in conjunction with the
          redemption of Series A Redeemable Common Stock Purchase Warrants in
          June 1999, and was for $50,000. This note, which was originally due on
          December 1, 1999, was initially extended until October 1, 2000, and
          then extended until June 1, 2001. On July 31, 2001 the uncollected
          balance on this note, including accrued interest at 7 percent was
          $57,720 and a new promissory note was signed. Under the terms of the
          new note, the principal of $57,720, together with accrued interest at
          7 percent per annum, is due July 31, 2002. The second promissory note
          was issued in conjunction with the exercise of 50,000 Common Stock
          Options in March 2001, and was for $250,000. This note is due on March
          15, 2002. As of July 31, 2001 the outstanding balance on this note,
          including accrued interest at 7 percent was $256,580.

          Preferred Stock
          The Company has authorized 1,000,000 shares with a par value of
          one-tenth of a cent ($.001) per share of preferred stock. The
          preferred stock may be issued in various series and shall have
          preference as to dividends and to liquidation of the Company. The
          Company's Board of Directors is authorized to establish the specific
          rights, preferences, voting privileges and restrictions of such
          preferred stock, or any series thereof.

          Series A Preferred Stock
          The Company has issued 1,000 shares of Series A Preferred Stock
          (Series A) with a par value of $.001. The holder has the right at any
          time after January 16, 2004 to convert Series A shares into shares of
          common stock of the Company; the number of shares of common stock
          issuable upon conversion is variable based on a formula which reflects
          the common stock price. The holder also has the option to exchange the
          shares of the Company's Series A Preferred stock for 3,612 shares of
          the Company's convertible preferred shares of Generex (Bermuda), Ltd.
          which represents 30.1% of the Company's equity ownership in Generex
          (Bermuda) Ltd. Upon exercise, the holder and the Company would each
          own 50% of Generex (Bermuda) Ltd. (See Note 16 for discussions of
          Generex (Bermuda), Ltd.) Holders of Series A shares are not entitled
          to vote. In addition, the holders of Series A shares are entitled to
          receive a dividend per share equal to the dividend declared and paid
          on shares of the Company's common stock as and when dividends are
          declared and paid on the Company's common stock and are also entitled
          to receive a mandatory annual dividend equal to 6 percent per year on
          the original issue price of $12,015 per share. This dividend is to be
          compounded each anniversary of the date of issuance of the Series A
          shares and payable by issuance of additional Series A shares valued at
          the original issue price. The Company has the right to redeem all
          outstanding Series A shares on January 16, 2007 for cash or shares of
          common stock upon written notice.

          Special Voting Rights Preferred Stock
          The Company has issued 1,000 shares of Special Voting Rights Preferred
          Stock (SVR) with a par value of $.001. The Company has the right at
          any time after December 31, 2000, upon written notice to all holders
          of preferred shares, to redeem SVR Shares at $.10 per share. Holders
          of SVR Shares are not entitled to vote, except as specifically
          required by applicable law or in the event of change in control, as
          defined. In addition, holders of SVR Shares are entitled to receive a
          dividend per share equal to the dividend declared and paid on shares
          of the Company's common stock as and when dividends are declared and
          paid on the Company's common stock.

                                       F-25

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11 - Stock Based Compensation:
-----------------------------------

          Stock Option Plans
          The Company has three stock option plans under which options
          exercisable for shares of common stock have been or may be granted to
          employees, directors, consultants and advisors. A total of 1,500,000
          shares of common stock are reserved for issuance under the 1998 Stock
          Option Plan (the 1998 Plan), a total of 2,000,000 shares of common
          stock are reserved for issuance under the 2000 Stock Option Plan (the
          2000 Plan) and a total of 4,000,000 shares of common stock are
          reserved for issuance under the 2001 Stock Option Plan (the 2001
          Plan). The 2001 Plan was adopted in May 2001 by the Board of
          Directors, but is subject to stockholder approval at the next annual
          meeting of stockholders.

          The 1998, 2000 and 2001 Plans (the Plans) have been administered by
          the Board of Directors, but are expected to be administered by the
          Compensation Committee (the Committee) in the future. References to
          the Committee herein include the Board of Directors so long as it
          continues to administer the Plans directly.

          The Committee is authorized to select from among eligible employees,
          directors, advisors and consultants those individuals to whom options
          are to be granted and to determine the number of shares to be subject
          to, and the terms and conditions of, the options. The Committee also
          is authorized to prescribe, amend and rescind terms relating to
          options granted under the Plans and the interpretation of options.
          Generally, the interpretation and construction of any provision of the
          Plans or any options granted thereunder is within the discretion of
          the Committee.

          The Plans provide that options may or may not be Incentive Stock
          Options (ISOs) within the meaning of Section 422 of the Internal
          Revenue Code. Only employees of the Company are eligible to receive
          ISOs, while employees and non-employee directors, advisors and
          consultants are eligible to receive options which are not ISOs, i.e.
          "Non-Qualified Options." The options granted by the Board in
          connection with its adoption of the Plans are Non-Qualified Options.

          The following is a summary of the common stock options granted,
          canceled or exercised under the Plan:



                                                                                                  Weighted Average
                                                                                                 Exercise Price Per
                                                                             Shares                    Share
                                                                          -------------         -------------------

                                                                                                  
                  Outstanding - August 1, 1998                                   --                      --
                  Granted                                                    50,000                   $8.00
                  Canceled                                                       --                      --
                  Exercised                                                      --                      --
                                                                          ---------
                  Outstanding - July 31, 1999                                50,000                   $8.00
                  Granted                                                 3,004,500                    6.35
                  Canceled                                                       --                      --
                  Exercised                                                      --                      --
                                                                          ---------
                  Outstanding - July 31, 2000                             3,054,500                    6.38
                  Granted                                                 1,455,000                    6.14
                  Canceled                                                       --                      --
                  Exercised                                                 197,500                    5.04
                                                                          ---------
                  Outstanding - July 31, 2001                             4,312,000                   $6.59
                                                                          =========



                                       F-26

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 11 - Stock Based Compensation (Continued):
-----------------------------------------------

          Stock Option Plans (continued)
          The following table summarizes information on stock options
          outstanding at July 31, 2001:


                                                     Options Outstanding                       Options Exercisable
                                      ------------------------------------------------      -------------------------------
                                                           Weighted
                                           Number           Average        Weighted           Number            Weighted
                                       Outstanding        Contractual       Average          Exercisable        Average
               Range of                     at               Life          Exercise              at             Exercise
           Exercise Price             July 31, 2001         (Years)         Price          July 31, 2001         Price
           --------------             ----------------    ------------    -----------      -------------      ------------
                                                                                                   
           $5.00-$5.50                   2,237,500           4.12          $ 5.09            1,217,500          $ 5.01
           $7.56-$8.00                   1,974,500           3.89          $ 7.60            1,924,500          $ 7.60
               $10.21                      100,000           3.50          $10.21               40,000          $10.21


          Options exercisable at July 31 are as follows:

                                       1999                          50,000
                                       2000                       1,162,500

           Had compensation cost for the Company's options granted to employees
           been determined consistent with SFAS 123, the Company's net loss and
           loss per share would be affected as follows:


                                                                                        For the Years Ended July 31,
                                                                           ----------------------------------------------------
                                                                                 2001               2000              1999
                                                                           -----------------   ----------------  --------------
                                                                                                            
           Net Loss:
              As reported                                                   $27,097,210         $ 8,841,047        $6,239,602
                                                                            ===========         ===========        ==========
              Pro forma                                                     $31,755,510         $17,230,637        $6,239,602
                                                                            ===========         ===========        ==========

           Loss Per Share:
              As reported                                                   $     (1.44)        $     (.58)        $    (.47)
                                                                            ===========         ==========         =========
              Pro forma                                                     $     (1.69)        $    (1.13)        $    (.47)
                                                                            ===========         ==========         =========


          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 following is the average of the data used
          to calculate the fair value:


                                                        Risk-Free             Expected            Expected        Expected
                                                      Interest Rate         Life (Years)         Volatility       Dividends
                                                      -------------         -----------          ----------       ---------
                                                                                                            
           July 31, 2001                                  4.66%                     5                .9332              --
           July 31, 2000                                  4.80%                     5                .6200              --


          The weighted average fair value of the Company's stock options
          calculated using the Black-Scholes option-pricing model for options
          granted during the years ended July 31, 2001, 2000 and 1999 was $4.12,
          $3.22 and $1.85 per share, respectively.

                                       F-27

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 12 - Net Loss Per Share:
-----------------------------

          Basic EPS and Diluted EPS for the years ended July 31, 2001, 2000 and
          1999 have been computed by dividing the net loss for each respective
          period by the weighted average shares outstanding during that period.
          All outstanding warrants and options have been excluded from the
          computation of Diluted EPS as they are antidilutive due to the losses
          generated in each year.

Note 13 - Supplemental Disclosure of Cash Flow Information:
-----------------------------------------------------------



                                                                                 For the Years Ended July 31,
                                                                 ---------------------------------------------------------------
                                                                       2001                    2000                   1999
                                                                 -------------------    -------------------    -----------------
                                                                                                             
           Cash paid during the year for:
              Interest                                                $77,230                 $73,687               $67,161
              Income taxes                                            $    --                 $    --               $    --


           Disclosure of non-cash investing and financing activities:


                                                                                                                 

           Year Ended July 31, 2001
           ------------------------
              The fair value of warrants issued as consideration for an equity
                financing agreement was initially capitalized as deferred
                offering
                costs and subsequently expensed                                                                 $3,406,196
              Note receivable was accepted in conjunction with exercise of
                common stock options                                                                            $  250,000
              Common stock was issued as settlement of an accrued liability                                     $   21,098
           Year Ended July 31, 2000
           ------------------------
              Long-term debt was assumed in conjunction with acquisition
                of property                                                                                     $  186,805
              Long-term debt was refinanced with new long-term debt                                             $  541,200
              Amounts due from related parties were transferred in conjunction
                with the assumption of amounts due to related parties                                           $  159,022
           Year Ended July 31, 1999
           ------------------------
              Long-term debt was assumed in conjunction with acquisition
                of property                                                                                     $   82,968
              Settlement of liability arising from the violation of financing
                agreement with issuance of common stock                                                         $  738,000
              Deposit was utilized to acquire property and equipment                                            $   16,740
              Notes receivable were accepted in conjunction with issuance
                of common stock                                                                                 $  473,882


Note 14 - Segment Information:
------------------------------

          The Company follows Statement of Financial Accounting Standards No.
          131, "Disclosures about Segments of an Enterprise and Related
          Information: (SFAS 131). SFAS 131 superseded Statement of Financial
          Accounting Standards No. 14, "Financial Reporting for Segments of a
          Business Enterprise." SFAS 131 establishes standards for the way that
          public business enterprises report information about operating
          segments in annual financial statements and requires that those
          enterprises report selected information about operating segments in
          interim financial reports. SFAS 131 also establishes standards for
          related disclosures about products and services, geographic areas, and
          major customers.

                                       F-28

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 14 - Segment Information (Continued):
------------------------------------------

          The Company has three reportable operating segments, United States,
          Canada and Bermuda, which are organized, managed and analyzed
          geographically and operate in one industry segment: the development of
          proprietary drug delivery technology focused on formulations to
          administer large molecule drugs by mouth. The Company evaluates
          operating segment performance based primarily on certain operating
          expenses.

          The regions to which the Company had identifiable assets and operating
          losses are presented in the following table. Identifiable assets are
          those that can be directly associated with a geographic area.
          Operating loss by geographic segment does not include an allocation of
          general corporate expenses.


                                                                          Identifiable             Operating
                                                                             Assets                   Loss
                                                                         ----------------        ---------------
                                                                                                 
                  2001
                  ----
             General Corporate                                              $38,227,315            $11,768,696
             Canada                                                           4,438,558             19,668,843
             United States                                                           --                     --
             Bermuda                                                                 --                     --
                                                                            -----------            -----------
                  Total                                                     $42,665,873            $31,437,539
                                                                            ===========            ===========

                  2000
                  ----
             General Corporate                                              $ 7,314,834            $ 4,741,225
             Canada                                                           3,026,436              4,302,731
             United States                                                           --                     --
                                                                            -----------            -----------
                  Total                                                     $10,341,270            $ 9,043,956
                                                                            ===========            ===========

                  1999
                  ----
             General Corporate                                              $ 5,427,170            $ 3,758,685
             Canada                                                           3,462,496              2,468,946
             United States                                                           --                     --
                                                                            -----------            -----------

                  Total                                                     $ 8,889,666            $ 6,227,631
                                                                            ===========            ===========

                                       F-29


               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15 - Quarterly Information (Unaudited):
--------------------------------------------

          The following schedule sets forth certain unaudited financial data for
          the preceding eight quarters ending July 31, 2001. In our opinion, the
          unaudited information set forth below has been prepared on the same
          basis as the audited information and includes all adjustments
          necessary to present fairly the information set forth herein. The
          operating results for the quarter are not indicative of results for
          any future period.


                                                           Q1                   Q2                 Q3                  Q4
                                                    ---------------     ----------------     ---------------    ----------------
                                                                                                           
             Fiscal Year July 31, 2001:
             -------------------------

             Previously reported
              Contract research revenue             $ 1,000,000         $         --         $        --         $        --
              Operating loss                        $(1,344,532)        $(17,673,192)        $(3,087,422)        $(8,587,393)
              Net loss                              $(1,144,207)        $(14,205,305)        $(2,714,097)        $(8,288,601)
              Net loss per share                    $     (0.07)        $      (0.75)        $     (0.14)        $     (0.42)

             As Restated
              Contract research revenue             $ 1,000,000         $         --         $        --         $        --
              Operating loss                        $(1,344,532)        $(18,418,192)        $(3,087,422)        $(8,587,393)
              Net loss                              $(1,144,207)        $(14,950,305)        $(2,714,097)        $(8,288,601)
              Net loss per share                    $     (0.07)        $      (0.79)        $     (0.14)        $     (0.42)

             Fiscal Year July 31, 2000:
             -------------------------
              Contract research revenue             $        --         $         --         $        --         $        --
              Operating loss                        $(1,182,342)        $ (2,913,996)        $(2,323,101)        $(2,624,517)
              Net loss                              $(1,118,772)        $ (2,878,873)        $(2,291,130)        $(2,552,272)
              Net loss per share                    $     (0.08)        $      (0.19)        $     (0.15)        $     (0.16)


          The Company's interim financial information for Q2 has been restated
          to recognize additional compensation expense related to stock options
          issued to a consultant.

Note 16 - Collaborative Agreements:
-----------------------------------

          On January 16, 2001, the Company established a joint venture with Elan
          International Services, Ltd. ("EIS"), a wholly owned subsidiary of
          Elan Corporation, plc (EIS and Elan Corporation, plc being
          collectively referred to as "Elan"). Through the joint venture, the
          parties will pursue the application of certain of the Company's and
          Elan's drug delivery technologies, including the Company's platform
          technology for the buccal delivery of large molecule drugs, to
          pharmaceutical products for the treatment of prostate cancer,
          endometriosis and/or the suppression of testosterone and estrogen. The
          parties will conduct the joint venture through Generex (Bermuda),
          Ltd., a Bermuda limited liability company. The parties are free to
          develop other products on their own outside the field of the joint
          venture.

          The Company applied the $12,015,000 that it received from EIS for the
          shares of the Company's Series A Preferred Stock (see Note 10) to form
          Generex (Bermuda), Ltd. The Company's interest in this company
          consists of 6,000 shares of Generex (Bermuda) Ltd. common stock and
          3,612 shares of convertible preferred stock, representing an 80.1%
          equity ownership interest in Generex (Bermuda) Ltd. At the same time,
          EIS remitted $2,985,000 to purchase 2,388 shares of Generex (Bermuda)
          Ltd. convertible preferred stock, representing a 19.9% equity
          ownership interest in Generex (Bermuda) Ltd. As of July 31, 2001, the
          minority interest has been reduced to $-0- due to their share of
          Generex (Bermuda), Ltd.'s net loss.

                                       F-30

               GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 16 - Collaborative Agreements (Continued):
-----------------------------------------------

          The parties intend to select at least one pharmaceutical product for
          research and development under the joint venture by January 2002. The
          parties will establish a research and development plan and budget upon
          selection of the pharmaceutical product that will be the initial focus
          of the joint venture. Generex (Bermuda), Ltd. has been granted rights
          to use the Company's buccal delivery technology and certain Elan drug
          delivery technologies for purposes of the joint venture. Using the
          funds from the initial capitalization, Generex (Bermuda) Ltd. paid a
          nonrefundable license fee of $15,000,000 to Elan in consideration for
          being granted rights to use the Elan drug delivery technologies. The
          Company expensed the entire cost of the license as a research and
          development expense because of the uncertainties surrounding the
          future realization of revenue from the use of the license.

Note 17 - Subsequent Events (Unaudited):
----------------------------------------

          Subsequent events occurring after July 31, 2001 consist of the
          following:

          On August 7, 2001, the Company entered into a termination agreement
          with Tradersbloom, Limited, pursuant to which the parties terminated
          the equity draw down facility entered into August 14, 2000. Under the
          terms of this facility, the Company was able to sell to Tradersbloom,
          from time to time, shares of their common stock up to a maximum sale
          of $50,000,000. In conjunction with the execution of this agreement,
          warrants to purchase 568,647 shares of common stock were issued. The
          fair value of these warrants was capitalized as deferred financing
          costs. In conjunction with the termination of this agreement, the
          Company paid $245,000 to satisfy its obligations to Tradersbloom and
          expensed the deferred financing costs in the year ended July 31, 2001.
          Neither the Company nor Tradersbloom has any further rights or
          obligations under the equity draw down facility.

          On September 25, 2001, the Board of Directors of the Company
          authorized the repurchase of up to $1 million of the Company's common
          stock from the open market.

                                       F-31




Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure.



Not applicable.



                                    PART III

The information required by Item 10 "Directors and Executive Officers of the
Registrant"; Item 11 "Executive Compensation"; Item 12 "Security Ownership of
Certain Beneficial Owners and Management"; and Item 13 "Certain Relationships
and Related Transactions" will be provided in an amendment to this Annual Report
on Form 10-K to be filed with the Commission not later than 120 days after the
end of the fiscal year to which this report relates.



                                     PART IV



Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)      Exhibits

Exhibit No.                   Description
-----------                   -----------

3.1         Restated Certificate of Incorporation of Generex Biotechnology
            Corporation filed as Exhibit 3.1 to our Quarterly Report on Form
            10-Q for the quarter ended April 30, 1999 filed June 14, 1999 is
            incorporated herein by reference.

3.2         Bylaws of the Company filed as Exhibit 3.2 to our Registration
            Statement on Form S-1 (File no. 333-82667) filed July 12, 1999
            ("1999 S-1") is incorporated herein by reference.

4.1         Form of common stock certificate filed as Exhibit 4.2 with our 1999
            S-1 is incorporated herein by reference.

4.2.1       1998 Stock Option Plan filed as Exhibit 4.3 to our 1999 S-1 is
            incorporated herein by reference.

4.2.2       2000 Stock Option Plan, filed as Exhibit 4.3.2 to our Form 10-K
            filed with the Commission on October 30, 2001, is incorporated
            herein by reference.

4.2.3*      2001 Stock Option Plan.

4.3         Form of Securities Purchase Agreement entered into with Cranshire
            Capital, L.P.; RAM Trading Ltd.; Gryphon Master Fund; Kodiak
            Opportunity, L.P.; Kodiak Opportunity 3C7, L.P.; Kodiak Opportunity
            Offshore, Ltd.; Novelly Exempt Trust; Langley Partners, L.P.;
            Montrose Investments, Ltd.; WEC Asset Management, LLC; ZLP Master
            Technology Fund, Ltd.; Alpha Capital Aktiengesellschaft; and The
            dotCOM Fund, LLC, dated July 3, 2001 filed as an exhibit to our
            Report on Form 8-K dated July 6, 2001 and filed on July 17, 2001
            ("July 2001 8-K") is incorporated herein by reference.

4.4         Form of Registration Rights Agreement entered into with Cranshire
            Capital, L.P.; RAM Trading Ltd.; Gryphon Master Fund; Kodiak
            Opportunity, L.P.; Kodiak Opportunity 3C7, L.P.; Kodiak Opportunity
            Offshore, Ltd.; Novelly Exempt Trust; Langley Partners, L.P.;
            Montrose Investments, Ltd.; WEC Asset Management, LLC; ZLP Master
            Technology Fund, Ltd.; Alpha Capital Aktiengesellschaft; and The
            dotCOM Fund, LLC, dated July 3, 2001 filed as an exhibit to our July
            2001 8-K is incorporated herein by reference.


4.5         Form of Warrant granted to Cranshire Capital, L.P.; RAM Trading
            Ltd.; Gryphon Master Fund; Kodiak Opportunity, L.P.; Kodiak
            Opportunity 3C7, L.P.; Kodiak Opportunity Offshore, Ltd.; Novelly
            Exempt Trust; Langley Partners, L.P.; Montrose Investments, Ltd.;
            WEC Asset Management, LLC; ZLP Master Technology Fund, Ltd.; Alpha
            Capital Aktiengesellschaft; and The dotCOM Fund, LLC, dated July 6,
            2001, filed as an exhibit to our July 2001 8-K, is incorporated
            herein by reference.

4.6         Securities Purchase Agreement entered into with Capital Ventures
            International, dated July 3, 2001, filed as an exhibit to our July
            2001 8-K, is incorporated herein by reference.

4.7         Registration Rights Agreement entered into with Capital Ventures
            International, dated July 3, 2001, filed as an exhibit to our July
            2001 8-K, is incorporated herein by reference.

4.8         Warrant granted to Capital Ventures International, dated July 3,
            2001, filed as an exhibit to our July 2001 8-K, is incorporated
            herein by reference.

4.9         Form of Securities Purchase Agreement entered into with Elliott
            International, L.P.; and Elliott Associates, L.P., dated July 3,
            2001, filed as an exhibit to our July 2001 8-K, is incorporated
            herein by reference.

4.10        Form of Registration Rights Agreement entered into with Elliott
            International, L.P.; and Elliott Associates, L.P., dated July 3,
            2001, filed as an exhibit to our July 2001 8-K, is incorporated
            herein by reference.

4.11        Warrant issued to Elliott International, L.P. and Elliott
            Associates, L.P., dated July 5, 2001, filed as an exhibit to our
            July 2001 8-K, is incorporated herein by reference.

4.12        Form of Warrant issued to Ladenburg Thalmann & Co., Inc. dated July
            6, 2001, filed as an exhibit to our Registration Statement on Form
            S-3 (File No. 333-67118) filed August 8, 2001, is incorporated
            herein by reference.

4.13        Registration Rights Agreement dated January 16, 2001 between Generex
            Biotechnology Corporation and Elan International Services, Ltd.
            filed as an exhibit to our Report on Form 8-K dated January 16, 2001
            and filed on January 23, 2001 ("January 2001 8-K") is incorporated
            herein by reference.

4.14        Form of Warrant issued to Elan International Services, Ltd. filed as
            an exhibit to our January 2001 8-K is incorporated herein by
            reference.

4.15        Certificate of Designations, Preferences and Rights of Series A
            Preferred Stock filed as an exhibit to our January 2001 8-K is
            incorporated herein by reference.

4.16        Securities Purchase Agreement dated January 16, 2001, between
            Generex Biotechnology Corporation, Elan International Services, Ltd.
            and Elan Corporation, plc., filed as an exhibit to our Report on
            Form 8-K/A dated January 16, 2001 and filed on February 1, 2001 is
            incorporated herein by reference.

4.17        Form of Securities Purchase Agreement entered into with certain
            parties to October 2000 Private Placement filed as an exhibit to our
            Report on Form 8-K dated October 4, 2000 and filed on October 16,
            2000 ("October 2000 8-K") is incorporated herein by reference.

4.18        Form of Registration Rights Agreement entered into with certain
            parties to October 2000 Private Placement filed as an exhibit to our
            October 2000 8-K is incorporated herein by reference.

4.19        Form of Warrant issued to certain parties to October 2000 Private
            Placement filed as an exhibit to our October 2000 8-K is
            incorporated herein by reference.



10.1.1      Consulting Agreement with Pankaj Modi filed as Exhibit 10.1.1 to our
            Registration Statement on Form 10 filed December 14, 1999 ("1999
            Form 10") is incorporated herein by reference.

10.1.2      Assignment and Assumption Agreement with Pankaj Modi filed as
            Exhibit 10.1.2 to our 1999 Form 10 is incorporated herein by
            reference.

10.1.3*     Memorandum of Agreement dated January 7, 1998 between Generex
            Pharmaceuticals, Inc., GHI Inc., Generex Biotechnology Corporation,
            Dr. Pankaj Modi and Galaxy Technology, Canada.

10.1.4*     Supplemental Agreement dated December 31, 2000 between Generex
            Pharmaceuticals, Inc., Generex Biotechnology Corporation and Dr.
            Pankaj Modi.

21*         Subsidiaries of the Registrant

23.1.1*     Consent of Deloitte & Touche LLP, independent public accountants.

23.1.2*     Consent of WithumSmith+Brown, independent public accountants.

24*         Powers of Attorney

-------------------------------------
* Filed herewith. All other exhibits are incorporated by reference,
  as described.


(b)      Reports on Form 8- K

         The following Reports on Form 8-K were filed during the last quarter of
the fiscal year:

         1.       Report on Form 8-K, filed with the Commission on May 22, 2001,
                  announcing an increase in the size of Generex's Board of
                  Directors from six to seven members, the appointment of Ivan
                  Lieberburg, Ph.D., M.D. as a director of Generex, and the
                  removal of Generex from the Nasdaq Biotechnology Index.

         2.       Report on Form 8-K, filed with the Commission on July 17,
                  2001, announcing two private placements completed on or about
                  July 6, 2001 in which Generex raised $11,59,994.75 through the
                  sale of units consisting of one share of common stock and a
                  warrant to purchase .25 shares of common stock. The units were
                  sold without registration under the Securities Act of 1933 in
                  reliance upon the exemption from registration provided in
                  Section 4(2) thereof and Rule 506 of Regulation D promulgated
                  thereunder.

         3.       Report on Form 8-K, filed with the Commission on August 15,
                  2001, announcing that Generex had entered into a termination
                  agreement with Tradersbloom Limited pursuant to which the
                  equity draw down facility was terminated.



                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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 this 23rd day of October
2001.


GENEREX BIOTECHNOLOGY CORPORATION


By:  /s/ Anna E. Gluskin
   ----------------------------
     Anna E. Gluskin, President


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.




                                                                Capacity in Which
                      Name                                           Signed                             Date
                      ----                                      -----------------                       ----
                                                                                                   
/s/ Anna E. Gluskin                                            President and Chief              October 23, 2001
--------------------                                            Executive Officer
Anna E. Gluskin


/s/ E. Mark Perri                                                Chairman, Chief                October 23, 2001
--------------------                                     Financial and Accounting Officer
E. Mark Perri


/s/ Rose C. Perri                                           Secretary, Treasurer and            October 23, 2001
-------------------                                          Chief Operating Officer
Rose C. Perri


/s/Pankaj Modi*                                             Vice President, Research            October 23, 2001
------------------                                               and Development
Pankaj Modi


/s/ Michael Hawke*                                                  Director                    October 23, 2001
------------------
Michael Hawke


/s/ Ivan M. Lieberburg*                                             Director                    October 23, 2001
-----------------------
Ivan M. Lieberburg

/s/ Jan Michael Rosen*                                              Director                    October 23, 2001
-----------------------
Jan Michael Rosen

*By: /s/ E. Mark Perri
----------------------
E. Mark Perri, as Attorney-in-fact

EX-4

                                                                   EXHIBIT 4.2.3

                        GENEREX BIOTECHNOLOGY CORPORATION
                             2001 STOCK OPTION PLAN
                             ----------------------


         The purpose of the Generex Biotechnology Corporation 2001 Stock Plan
(the "Plan") is to provide (i) designated employees of Generex Biotechnology
Corporation (the "Company") and its subsidiaries, (ii) certain consultants and
advisors who perform services for the Company or its subsidiaries and (iii)
non-employee members of the Board of Directors of the Company (the "Board") with
the opportunity to receive grants of incentive stock options and nonqualified
stock options (collectively, "Options"). The Company believes that the Plan will
encourage the participants to contribute materially to the growth of the
Company, thereby benefiting the Company's stockholders, and will align the
economic interests of the participants with those of the stockholders.

1.       Administration

         (a) Committee. The Plan shall be administered and interpreted by the
Compensation Committee (the "Committee") of the Board, which consists of two or
more persons who are "outside directors" as defined under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and related Treasury
regulations and "non-employee directors" as defined under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). However, the
Board may ratify or approve any Option grants as it deems appropriate.

         (b) Committee Authority. The Committee shall have the sole authority to
(i) determine the individuals to whom Options shall be granted under the Plan,
(ii) determine the type, size and terms of the Options to be made to each such
individual, (iii) determine the time when the Options will be granted and the
duration of any applicable exercise period, including the criteria for
exercisability and the acceleration of exercisability, (iv) amend the terms of
any previously issued Option and (v) deal with any other matters arising under
the Plan.

         (c) Delegation. The Committee may delegate certain of its duties to one
or more of its members or to one or more agents as it may deem advisable. The
Committee may employ attorneys, agents, consultants, accountants or other
persons, and shall be entitled to rely upon the advice, opinions or valuations
of such persons.

         (d) Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.

2.       Shares Subject to the Plan

         (a) Shares Authorized. Subject to adjustment as described below, the
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan or upon which awards under the Plan
may be granted is 4,000,000 shares. The maximum aggregate number of shares of
Company Stock that shall be subject to Options granted under the Plan to any
individual during any calendar year shall be 400,000 shares.. The shares may be
authorized but unissued shares of Company Stock or reacquired shares of Company
Stock, including shares purchased by the Company on the open market for purposes
of the Plan. If and to the extent Options granted under the Plan terminate,
expire, or are canceled, forfeited, exchanged or surrendered without having been
exercised, the shares subject to such Options shall again be available for
purposes of the Plan, unless otherwise provided by the Committee.

         (b) Adjustments. If there is any change in the number or kind of shares
of Company Stock outstanding by reason of (i) stock dividend, spinoff,
recapitalization, stock split or combination or exchange of shares, (ii) merger,
reorganization or consolidation, (iii) reclassification or change in par value
or (iv) any other extraordinary or unusual event affecting the outstanding





Company Stock as a class without the Company's receipt of consideration, or if
the value of outstanding shares of Company Stock is substantially reduced as a
result of a spinoff or the Company's payment of an extraordinary dividend or
distribution, the maximum number of shares of Company Stock available under the
Plan, the maximum number of shares of Company Stock that any individual
participating in the Plan may be granted in any year, the number of shares
covered by outstanding Options, the kind of shares issued under the Plan, and
the price per share or the applicable market value of such Options may be
appropriately adjusted by the Committee to reflect any increase or decrease in
the number of, or change in the kind or value of, issued shares of Company Stock
to preclude, to the extent practicable, the enlargement or dilution of rights
and benefits under such Options; provided, however, that any fractional shares
resulting from such adjustment shall be eliminated. Any adjustments determined
by the Committee shall be final, binding and conclusive.

3.       Eligibility for Participation

         (a) Eligible Persons. All employees of the Company and its subsidiaries
("Employees") and members of the Board who are not Employees ("Non-Employee
Directors") shall be eligible to participate in the Plan. Consultants and
advisors who perform services for the Company or any of its subsidiaries ("Key
Advisors") shall be eligible to participate in the Plan if the Key Advisors
render bona fide services to the Company or its subsidiaries, the services are
not in connection with the offer and sale of securities in a capital-raising
transaction and the Key Advisors do not directly or indirectly promote or
maintain a market for the Company's securities.

         (b) Selection of Optionees. The Committee shall select the Employees,
Non-Employee Directors and Key Advisors to receive Options and shall determine
the number of shares of Company Stock subject to a particular Option in such
manner as the Committee determines. Employees, Key Advisors and Non-Employee
Directors who receive Options under this Plan shall hereinafter be referred to
as "Optionees."

4.       Granting of Options

         (a) Option Agreements. All Options shall be subject to the terms and
conditions set forth herein and to such other terms and conditions consistent
with this Plan as the Committee deems appropriate and as are specified in
writing by the Committee to the individual in a grant instrument or an amendment
to the grant instrument (the "Option Agreement"). The Committee shall approve
the form and provisions of each Option Agreement.

         (b) Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each Option.

         (c) Type of Option and Price.

                  (i) The Committee may grant Options that are intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Code ("Incentive Stock options") or Options that are not intended so to qualify
("Nonqualified Stock Options") or any combination of Incentive Stock Options and
Nonqualified Stock Options, all in accordance with the terms and conditions set
forth herein. Incentive Stock Options may be granted only to Employees of the
Company or a parent or subsidiary (within the meaning of Section 424(f) of the
Code). Nonqualified Stock Options may be granted to Employees, Non-Employee
Directors and Key Advisors. Unless otherwise provided in the Option Agreement,
any Option granted under this Plan to an Employee is intended to be an Incentive
Stock Option.

                  (ii) The purchase price (the "Exercise Price") of Company
Stock subject to an Option shall be determined by the Committee and may be equal
to or less than the Fair Market Value (as defined below) of a share of Company
Stock on the date the Option is granted; provided, however, that (x) the
Exercise Price of an Incentive Stock Option shall be equal to the Fair Market
Value of a share of Company Stock on the date the Incentive Stock Option is
granted and (y) an Incentive Stock Option may not be granted to an Employee who,
at the time of grant, owns stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or any parent or
subsidiary of the Company, unless the Exercise Price per share is not less than
110% of the Fair Market Value of Company Stock on the date of grant.



                  (iii) The Fair Market Value per share shall be the closing
price of the Company Stock on the relevant date or (if there were no trades on
that date) the latest preceding date upon which a sale was reported.

         (d) Option Term. The Committee shall determine the term of each Option.
The term of any Option shall not exceed ten years from the date of grant, which
date of grant is determined by the Committee. However, an Incentive Stock Option
that is granted to an Employee who, at the time of grant, owns stock possessing
more than ten percent of the total combined voting power of all classes of stock
of the Company, or any parent or subsidiary of the Company, may not have a term
that exceeds five years from the date of grant.

         (e) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Option Agreement. Unless a
different vesting schedule is specified by the Committee in an Option Agreement,
Options granted under this Plan shall vest in one-half increments on each annual
anniversary of the date of grant over a period of two years. The Committee may
accelerate, and may provide in the Option Agreement for the acceleration of, the
exercisability of any or all outstanding Options at any time for any reason.

         (f) Reload Options. In the event that shares of Company Stock are used
to exercise an Option, the terms of such Option may provide for the grant of
additional Options, or the Committee may grant additional Options, to purchase a
number of shares of Company Stock equal to the number of whole shares used to
exercise the Option and the number of whole shares, if any, withheld in payment
of any taxes. Such Options shall be granted with an Exercise Price equal to the
Fair Market Value of the Company Stock on the date of grant of such additional
Options, or at such other Exercise Price as the Committee may establish, for a
term not longer than the unexpired term of the exercised Option and on such
other terms as the Committee shall determine.

         (g) Limit on Incentive Stock Options. Each Incentive Stock Option shall
provide that, if the aggregate Fair Market Value of the stock on the date of the
grant with respect to which Incentive Stock Options are exercisable for the
first time by an Optionee during any calendar year, under the Plan or any other
stock option plan of the Company or a parent or subsidiary, exceeds $100,000,
then the Option, as to the excess, shall be treated as a Nonqualified Stock
Option.

5.       Termination of Employment, Disability or Death

         (a) General Rule. Except as provided below, an Option may only be
exercised while the Optionee is employed by, or providing service to, the
Company as an Employee, Key Advisor or member of the Board. In the event that an
Optionee ceases to be employed by, or provide service to, the Company for any
reason other than (i) termination by the Company without Cause (as defined
below), (ii) voluntary termination by the Optionee, (iii) Disability (as defined
below) or (iv) death, any Option held by the Optionee shall terminate
immediately (unless the Committee specifies otherwise). In addition,
notwithstanding any other provision of this Plan, if the Committee determines
that the Optionee has engaged in conduct that constitutes Cause at any time
while the Optionee is employed by, or providing service to, the Company or after
the Optionee's termination of employment or service, any Option held by the
Optionee shall immediately terminate and the Optionee shall automatically
forfeit all shares underlying any exercised portion of an Option for which the
Company has not yet delivered the share certificates, upon refund by the Company
of the Exercise Price paid by the Optionee for such shares. Upon any exercise of
an Option, the Company may withhold delivery of share certificates pending
resolution of an inquiry that could lead to a finding resulting in a forfeiture.

         (b) Termination Without Cause; Voluntary Termination. In the event that
an Optionee ceases to be employed by, or provide service to, the Company as a
result of (i) termination by the Company without Cause (as defined below) or
(ii) voluntary termination by the Optionee, any Option which is otherwise
exercisable by the Optionee shall terminate unless exercised within 90 days
after the date on which the Optionee ceases to be employed by, or provide
service to, the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Except as otherwise provided by the Committee, any of the
Optionee's Options that are not otherwise exercisable as of the date on which
the Optionee ceases to be employed by, or provide service to, the Company shall
terminate as of such date.



         (c) Termination Because Disabled. In the event the Optionee ceases to
be employed by, or provide service to, the Company because the Optionee is
Disabled, any Option which is otherwise exercisable by the Optionee shall
terminate unless exercised within one year after the date on which the Optionee
ceases to be employed by, or provide service to, the Company (or within such
other period of time as may be specified by the Committee), but in any event no
later than the date of expiration of the Option term. Except as otherwise
provided by the Committee, any of the Optionee's Options which are not otherwise
exercisable as of the date on which the Optionee ceases to be employed by, or
provide service to, the Company shall terminate as of such date.

         (d) Death. If the Optionee dies while employed by, or providing service
to, the Company or within 90 days after the date on which the Optionee ceases to
be employed or provide service on account of a termination specified in Section
5(b) above (or within such other period of time as may be specified by the
Committee), any Option that is otherwise exercisable by the Optionee shall
terminate unless exercised within one year after the date on which the Optionee
dies or otherwise ceased to be employed by, or provide service to, the Company
(or within such other period of time as may be specified by the Committee), but
in any event no later than the date of expiration of the Option term. Except as
otherwise provided by the Committee, any of the Optionee's Options that are not
otherwise exercisable as of the date on which the Optionee dies or otherwise
ceased to be employed by, or provide service to, the Company shall terminate as
of such date.

         (e)      Definitions.

                  (i) The term "Company" shall mean the Company and its parent
and subsidiary corporations or other entities, as determined by the Committee.

                  (ii) "Employed by, or provide service to, the Company" shall
mean employment or service as an Employee, Key Advisor or member of the Board
(so that an Optionee shall not be considered to have terminated employment or
service until the Optionee ceases to be an Employee, Key Advisor and member of
the Board), unless the Committee determines otherwise.

                  (iii) "Disability" shall mean an Optionee's becoming disabled
under the Company's long-term disability plan, or, if the Optionee is not
covered under such plan or no such plan is maintained, and in the case of an
Incentive Stock Option, "Disability" shall mean an Optionee's becoming disabled
within the meaning of Section 22(e)(3) of the Code.

                  (iv) "Cause" shall mean, except to the extent specified
otherwise by the Committee, a finding by the Committee that the Optionee has:
(i) breached his or her employment or service contract with the Company; (ii)
engaged in disloyalty to the Company, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty in the course
of his or her employment or service; (iii) disclosed trade secrets or
confidential information of the Company to persons not entitled to receive such
information; (iv) breached any written confidentiality, non-competition or
non-solicitation agreement between the Optionee and the Company; or (v) has
engaged in such other behavior detrimental to the interests of the Company as
the Committee determines.

6.       Exercise of Options.

         (a) Notice of Exercise. A Optionee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company.

         (b) Payment of Exercise Price. Along with the notice of exercise, the
Optionee shall pay the Exercise Price for an Option as specified by the
Committee (i) in cash, (ii) with the approval of the Committee, by delivering
shares of Company Stock owned by the Optionee (including Company Stock acquired
in connection with the exercise of an Option, subject to such restrictions as
the Committee deems appropriate) valued at Fair Market Value on the date of
exercise, (iii) with the approval of the Committee, by surrender of outstanding
awards under the Plan or (iv) by such other method as the Committee may approve.
Shares of Company Stock used to exercise an Option shall have been held by the
Optionee for the requisite period of time to avoid adverse accounting
consequences to the Company with respect to the Option.



         (c) Payment of Tax. The Optionee shall pay the amount of any
withholding tax due at the time of exercise.

7.       Deferrals

         The Committee may permit or require an Optionee to defer receipt of the
delivery of shares that would otherwise be due to such Optionee in connection
with any Option. If any such deferral election is permitted or required, the
Committee shall, in its sole discretion, establish rules and procedures for such
deferrals.

8.       Withholding of Taxes

         (a) Required Withholding. All Options under the Plan shall be subject
to applicable federal (including FICA), state, local and other tax withholding
requirements. The Company shall have the right to deduct from any amounts paid
to the Optionee, any federal, state, local or other taxes required by law to be
withheld with respect to such Options. The Company may require that the Optionee
or other person receiving or exercising Options pay to the Company the amount of
any federal, state, local or other taxes that the Company is required to
withhold with respect to such Options, or the Company may deduct from other
wages paid by the Company the amount of any withholding taxes due with respect
to such Options.

         (b) Election to Withhold Shares. If the Committee so permits, an
Optionee may elect, in the form and manner prescribed by the Committee, to
satisfy the Company's income tax withholding obligation with respect to Options
paid in Company Stock by having shares withheld up to an amount that does not
exceed the Optionee's minimum applicable withholding tax rate for federal
(including FICA), state, local and other tax liabilities.

9.       Transferability of Options

         (a) Nontransferability of Options. Except as provided below, only the
Optionee may exercise rights under an Option during the Optionee's lifetime. A
Optionee may not transfer those rights except (i) by will or by the laws of
descent and distribution or (ii) with respect to Nonqualified Stock Options, if
permitted in any specific case by the Committee, pursuant to a domestic
relations order or otherwise as permitted by the Committee. When an Optionee
dies, the personal representative or other person entitled to succeed to the
rights of the Optionee ("Successor Optionee") may exercise such rights. A
Successor Optionee must furnish proof satisfactory to the Company of his or her
right to receive the Option under the Optionee's will or under the applicable
laws of descent and distribution.

         (b) Transfer of Nonqualified Stock Options. Notwithstanding the
foregoing, the Committee may provide that an Optionee may transfer Nonqualified
Stock Options to family members, or one or more trusts or other entities for the
benefit of or owned by family members, consistent with the applicable securities
laws, according to such terms as the Committee may determine; provided that the
Optionee receives no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same terms and conditions
as were applicable to the Option immediately before the transfer.

10.      Change of Control of the Company

         As used herein, a "Change of Control" shall be deemed to have occurred
if:

         (a) Unless the Board approves such acquisition, any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, in a single transaction or series of transactions, of securities
of the Company representing more than 20 percent of the voting power of the then
outstanding securities of the Company; provided that a Change of Control shall
not be deemed to occur as a result of a change of ownership resulting from the
death of a stockholder, and a Change of Control shall not be deemed to occur as
a result of a transaction in which the Company becomes a subsidiary of another
corporation and in which the stockholders of the Company, immediately prior to
the transaction, will beneficially own, immediately after the transaction,
shares entitling such stockholders to more than 20 percent of all votes to which
all stockholders of the parent corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote);




         (b) A merger or consolidation of the Company is consummated with
another corporation where the stockholders of the Company, immediately prior to
the merger or consolidation, will not beneficially own, immediately after the
merger or consolidation, shares entitling such stockholders to more than 80
percent of all votes to which all stockholders of the surviving corporation
would be entitled in the election of directors (without consideration of the
rights of any class of stock to elect directors by a separate class vote);

         (c) A sale or other disposition of all or substantially all of the
assets of the Company occurs;

         (d) A liquidation or dissolution of the Company occurs; or

         (e) Shares of the Company's Special Voting Rights Preferred Stock are
outstanding and a "Change of Control" under the terms and conditions of such
securities occurs.

11.      Consequences of a Change of Control

         (a) Notice and Acceleration. Unless the Committee determines otherwise,
any outstanding Options that are not yet exercisable or vested shall become
exercisable or vested as of the Change of Control. The Committee shall provide
notice to Optionees of the Change of Control as soon as practicable.

         (b) Assumption of Options. Upon a Change of Control where the Company
is not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
that are not exercised shall be assumed by, or replaced with comparable options
or rights by, the surviving corporation (or a parent or subsidiary of the
surviving corporation).

         (c) Other Alternatives. Notwithstanding the foregoing, subject to
subsection (d) below, in the event of a Change of Control, the Committee may
take one or both of the following actions with respect to any or all outstanding
Options: (i) the Committee may require that Optionees surrender their
outstanding Options in exchange for a payment by the Company, in cash or Company
Stock as determined by the Committee, in an amount equal to the amount by which
the then Fair Market Value of the shares of Company Stock subject to the
Optionee's unexercised Options exceeds the Exercise Price of the Options; or
(ii) the Committee may, after giving Optionees an opportunity to exercise their
outstanding Options, terminate any or all unexercised Options at such time as
the Committee deems appropriate. Such surrender or termination or settlement
shall take place as of the date of the Change of Control or such other date as
the Committee may specify.

         (d) Limitations. Notwithstanding anything in the Plan to the contrary,
in the event of a Change of Control, the Committee shall not have the right to
take any actions described in the Plan (including without limitation actions
described in subsection (c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right or action, the Change of Control would qualify for such treatments
and the Company intends to use such treatments with respect to the Change of
Control.

12.      Requirements for Issuance or Transfer of Shares

         (a) Limitations on Issuance or Transfer of Shares. No Company Stock
shall be issued or transferred in connection with any Option hereunder unless
and until all legal requirements applicable to the issuance or transfer of such
Company Stock have been complied with to the satisfaction of the Committee. The
Committee shall have the right to condition any Option made to any Optionee
hereunder on such Optionee's undertaking in writing to comply with such
restrictions on his or her subsequent disposition of such shares of Company
Stock as the Committee shall deem necessary or advisable, and certificates
representing such shares may be legended to reflect any such restrictions.
Certificates representing shares of Company Stock issued or transferred under
the Plan will be subject to such stop-transfer orders and other restrictions as
may be required by applicable laws, regulations and interpretations, including
any requirement that a legend be placed thereon.

         (b) Lock-Up Period. If so requested by the Company or any
representative of the underwriters (the "Managing Underwriter") in connection
with any underwritten offering of securities of the Company under the Securities
Act of 1933, as amended (the "Securities Act"), an Optionee (including any
successors or assigns) shall not sell or otherwise transfer any shares or other





securities of the Company during the 30-day period preceding and the 180-day
period following the effective date of a registration statement of the Company
filed under the Securities Act for such underwritten offering (or such shorter
period as may be requested by the Managing Underwriter and agreed to by the
Company) (the "Market Standoff Period"). The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such Market Standoff Period.

13.      Cancellation and Recission of Options

         (a) Unless the Option Agreement specifies otherwise, the Committee may
cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired,
unpaid or deferred Options at any time if the Optionee is not in compliance with
all applicable provisions of the Option Agreement and the Plan, or if the
Optionee engages in any "Detrimental Activity." For purposes of this Section 16,
"Detrimental Activity" shall include: (i) the rendering of services for any
organization or engaging directly or indirectly in any business which is or
becomes competitive with the Company, or which organization or business, or the
rendering of services to such organization or business, is or becomes otherwise
prejudicial to or in conflict with the interests of the Company; (ii) the
disclosure to anyone outside the Company, or the use in other than the Company's
business, without prior written authorization from the Company, of any
confidential information or material, in violation of the Company's applicable
agreement with the Optionee or of the Company's applicable policy regarding
confidential information and intellectual property; (iii) the failure or refusal
to disclose promptly and to assign to the Company, pursuant to the Company's
applicable agreement with the Optionee or to the Company's applicable policy
regarding confidential information and intellectual property, all right, title
and interest in any invention or idea, patentable or not, made or conceived by
the Optionee during employment by the Company, relating in any manner to the
actual or anticipated business, research or development work of the Company, or
the failure or refusal to do anything reasonably necessary to enable the Company
to secure a patent where appropriate in the United States and in other
countries; (iv) activity that results in termination of the Optionee's
employment for cause; (v) a violation of any rules, policies, procedures or
guidelines of the Company, including (but not limited to) the Company's business
conduct guidelines; (vi) any attempt (directly or indirectly) to induce any
employee of the Company to be employed or perform services elsewhere or any
attempt (directly or indirectly) to solicit the trade or business of any current
or prospective customer, supplier or partner of the Company; (vii) the
Optionee's being convicted of, or entering a guilty plea with respect to, a
crime, whether or not connected with the Company; or (viii) any other conduct or
act determined to be injurious, detrimental or prejudicial to any interest of
the Company.

         (b) Upon exercise, payment or delivery pursuant to an Option, the
Optionee shall certify in a manner acceptable to the Company that he or she is
in compliance with the terms and conditions of the Plan. In the event an
Optionee fails to comply with the provisions of paragraphs (a)(i)-(viii) of this
Section 13 prior to, or during the six months after, any exercise, payment or
delivery pursuant to an Award, such exercise, payment or delivery may be
rescinded within two years thereafter. In the event of any such rescission, the
Optionee shall pay to the Company the amount of any gain realized or payment
received as a result of the rescinded exercise, payment or delivery, in such
manner and on such terms and conditions as may be required, and the Company
shall be entitled to set-off against the amount of any such gain any amount owed
to the Optionee by the Company.

         (c) The Committee, in its sole discretion, may grant to an Optionee, in
exchange for the surrender and cancellation of an Option previously granted to
the Optionee, a new Option in the same or different form and containing such
terms, including without limitation a price that is higher or lower than any
price provided in the award so surrendered or cancelled.

14.      Amendment and Termination of the Plan

         (a) Amendment. The Committee may amend or terminate the Plan at any
time; provided, however, that the Committee shall not increase the aggregate
number of shares of Company Stock that may be issued or transferred under the
Plan or upon which awards under the Plan may be granted, or otherwise materially
amend the Plan, without stockholder approval if such approval is required in
order to comply with the Code or applicable laws, or to comply with applicable
stock exchange requirements.

         (b) Termination of Plan. No Incentive Stock Option may be granted more
than ten years from the Plan's effective date. The Plan may be terminated by the
Committee at any time.



         (c) Termination and Amendment of Outstanding Options. A termination or
amendment of the Plan that occurs after an Option is made shall not materially
impair the rights of an Optionee unless the Optionee consents or unless the
Committee acts under Section 20(b). The termination of the Plan shall not impair
the power and authority of the Committee with respect to an outstanding Option.
Whether or not the Plan has terminated, an outstanding Option may be terminated
or amended under Section 20(b) or may be amended by agreement of the Company and
the Optionee consistent with the Plan.

         (d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.

15.      Funding of the Plan

         This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Options under this Plan. In no event shall
interest be paid or accrued on any Option, including unpaid installments of
Options.

16.      Rights of Participants

         Nothing in this Plan shall entitle any Employee, Key Advisor,
Non-Employee Director or other person to any claim or right to be granted an
Option under this Plan. Neither this Plan nor any action taken hereunder shall
be construed as giving any individual any rights to be retained by or in the
employ of the Company or any other employment rights.

17.      No Fractional Shares

         No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Option. The Committee shall determine whether cash,
other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.

18.      Headings

         Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.

19.      Effective Date of the Plan.  Subject to approval by the Company's
stockholders, the Plan shall be effective as of May 4, 2001.

20.      Miscellaneous

         (a) Options in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to grant Options under this Plan in connection with the acquisition,
by purchase, lease, merger, consolidation or otherwise, of the business or
assets of any corporation, firm or association, including Options to employees
thereof who become Employees of the Company, or for other proper corporate
purposes, or (ii) limit the right of the Company to grant stock options or make
other awards outside of this Plan. Without limiting the foregoing, the Committee
may grant an Option to an employee of another corporation who becomes an
Employee by reason of a corporate merger, consolidation, acquisition of stock or
property, reorganization or liquidation involving the Company or any of its
subsidiaries in substitution for a stock option or stock awards grant made by
such corporation. The terms and conditions of the substitute Options may vary
from the terms and conditions required by the Plan and from those of the
substituted stock incentives. The Committee shall prescribe the provisions of
the substitute grants.

         (b) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Options shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. The Committee may revoke
any Option if it is contrary to law or modify an Option to bring it into
compliance with any valid and mandatory government regulation. The Committee may
also adopt rules regarding the withholding of taxes on payments to Optionees.
The Committee may, in its sole discretion, agree to limit its authority under
this Section.

         (c) Governing Law. The validity, construction, interpretation and
effect of the Plan and Option Agreements issued under the Plan shall be governed
and construed by and determined in accordance with the laws of State of
Delaware, without giving effect to the conflict of laws provisions thereof.

EX-10.13

                                                                  EXHIBIT 10.1.3


                             MEMORANDUM OF AGREEMENT



                  THIS AGREEMENT made as of the 7th day of January, 1998,
between GENEREX PHARMACEUTICALS INC., an Ontario corporation, GHI, INC. ("GHI"),
a Turks and Cacos corporation, GENEREX BIOTECHNOLOGY CORPORATION, a Delaware
corporation, DR. PANKAJ MODI ("Modi"), an individual, and GALAXY TECHNOLOGY,
CANADA ("Galaxy"), a proprietorship of Modi's.

                  WHEREAS, Modi was engaged by Generex Pharmaceuticals, Inc.
("GPI") to provide certain services to GPI in connection with its research and
development initiatives pursuant to a Consulting Agreement made as of the 1st
day of October, 1996 (the "Consulting Agreement") between CPI and Modi; and

                  WHEREAS, pursuant to an Assignment and Assumption Agreement
made as of the 1st day of October, 1997 (the "Assignment and Assumption
Agreement"), Modi assigned to GPI all of his rights, title and interests in and
to certain drug delivery systems and the intellectual property associated
therewith (collectively, the "Technology") and, in that regard, has executed and
delivered to GPI a number of related specific assignments (the "Specific
Assignments"); and

                  WHEREAS, in connection with the execution of the Consulting
Agreement and Assignment of certain technology to GPI, Modi received shares of
GPI common stock, which shares were held of record by GHI for Modi's benefit,
and subsequently exchanged by GHI for shares of Generex Biotechnology
corporation ("GBC"); and

                  WHEREAS, GBC now owns 100% of the outstanding capital stock of
GPI; and

                  WHEREAS, Modi owns and controls Galaxy; and

                  WHEREAS, Modi has approached management of GPI and GBC, and
indicated that he executed and delivered the Consulting Agreement, Assignment
and Assumption Agreement and the Specific Assignments because he had satisfied
himself that E. Mark Perri, the current Chairman of the Board of GPI, Anna E.
Gluskin, the current President of GPI, and Rose C. Perri (collectively, the
"Management Group"), the founders and directing mind and will of GPI and the
individuals who currently manage or supervise the management of the business and
affairs of GPI, had the requisite skills, motivation and vision to make the
Technology a medical and commercial success on a worldwide basis, and in
reliance upon their representations to him that he would have a central role in
the ongoing research and development of the Technology; and

                  WHEREAS, Modi considers that his and the Management Group's
continued involvement is crucial to the successful development of the Technology
and the successful commercial marketing and sale of products employing the
Technology ("Technology Products"); and

                  WHEREAS, Modi has advised GPI that he intends to exercise his
right to terminate the Consulting Agreement in the absence of agreements and
procedures that will assure the continued involvement of Modi and the Management
Group in the development of the Technology and, ultimately, the manufacture of
Technology Products; and

                  WHEREAS, GPI and GBC consider that the continued involvement
and dedication of Modi is crucial to the successful creation and implementation
of the research and development initiatives required to create commercially
viable Technology Products;

                  NOW, THEREFORE, in consideration of Modi's continued support
of GPI and the Technology pursuant to the Consulting Agreement and for other
good and valuable consideration, the parties agree as follows:



                  1. Extension of Terms of Consulting Agreement. The Consulting
Agreement is hereby extended to and including December 31, 2004, and paragraph 5
of the Consulting Agreement is amended accordingly. During the term of the
Consulting Agreement, Modi shall have the title of Vice President, Research and
Development of GPI and of GBC.

                  2. Compensation. Modi's annual fee for services is increased
to $132,000 (CDN) per year, payable in equal monthly installments of $11,000,
effective as of the earlier of (a) first day of the first month following the
date that GPI and GBC, collectively, receive additional equity capital of
$2,000,000 (US) or more, or (b) April 1, 1998.

                  3. Revisions of Section 7 of Consulting Agreement. Section 7
of the Consulting Agreement is amended and restated in its entirety to provide
the following:

         7. Termination

            This Agreement shall terminate upon the death of the
            Consultant or declaration by a court of competent jurisdiction
            that the Consultant is a mentally incompetent person or
            incapable of handling his affairs due to mental incompetence,
            and may be terminated:

            (a) at any time by mutual agreement of the Corporation and the
            Consultant in writing;

            (b) by Consultant at any time after January 1, 2001, upon twelve
            (12) months notice;

            (c) by the Corporation for just cause at any time by giving thirty
            (30) days written notice thereof to the Consultant. As used herein,
            the term "just cause" shall mean and be limited to:

                  (i) a material breach of trust by the Consultant which causes
            or threatens serious injury to the Corporation;

                  (ii) gross negligence or incompetence on the part of the
            Consultant;

                  (iii) a material breach of any provision of this Agreement by
            the Consultant;

                  (iv) inability of the Consultant as a result of a bona fide
            illness, physical or mental, to attend to his duties hereunder for a
            period of twenty-four (24) consecutive weeks, which period shall be
            deemed to commence with such inability and shall continue until the
            Consultant is once again able to attend to his duties hereunder on a
            regular basis;

                  (v) disobedience or intentional neglect by the Consultant of
            any written directive of the Chief Executive Officer of the
            Corporation which is neither inconsistent with Consultant's duties,
            authority or rights under this or any other agreement between
            Consultant and the Corporation, nor outside the scope of his normal
            duties as Vice President, Research and Development; or

                  (vi) any action by the Consultant taken with the intent to
            materially and adversely affect a material interest of the
            Corporation.

         4. Consent Required. During the term of the Consultant Agreement,
neither GPI nor GBC, without first consulting with Modi and obtaining his
express consent or approval, which consent or approval shall not be withheld by
Dr. Modi unreasonably, shall do any of the following or suffer or permit any
affiliate of theirs or any other person to do any of the following:

                  (a) Publish any papers or otherwise make any public disclosure
of previously unpublished research, formulations, test results or other
confidential and/or proprietary data relating to the Technology; or

                  (b) Enter into a contract for the manufacture of Technology
Products, or components of Technology Products; or



                  (c) License any other person or entity to use the Technology.

                  For purposes hereof, in determining whether or not withholding
consent to any of the foregoing actions is unreasonable, among the factors that
shall be considered, in the case of (a), are the possible injury to the
Corporation and/or the Corporation's research and development program and, in
the case of (b) and (c), the commercial and scientific reputation and expertise
and financial strength of a prospective manufacturer or licensee.

         5. Election of Modi as a Director. So long as the Consulting Agreement
is in force, GPI and GBC shall use their best efforts to cause Modi to be
nominated for election and elected a director of both GPI and GBC.

         6. Issuance of Special Voting Rights Preferred Stock. Simultaneously
with the execution and delivery of this Agreement, and in consideration of his
execution of this Agreement and the sum of $100.00 (US), receipt of which is
acknowledged, GBC shall issue and deliver to Modi one thousand (1,000) shares of
GBC's Special Voting Rights Preferred Stock (the "SVR Preferred"), the special
voting and other rights of which are set forth in the form of "Designation of
Special Voting Rights Preferred Stock" attached hereto as Exhibit "A". So long
as the SVR Preferred is outstanding, GBC shall not issue any shares of capital
stock or take any other corporate actions which would limit or interfere with
the exercise of the voting rights of holders of SVR Preferred.

         7. Reimbursement for Prior Costs Incurred. GPI shall pay $150,000 (CDN)
to Modi to reimburse Modi for costs previously incurred by him in connection
with preparation and filing of patent applications and conducting of tests and
clinical trials relating to the Technology. This amount shall be paid in three
$50,000 installments on March 31, 1998, June 30, 1998 and September 30, 1998.

         8. Counsel for the Transaction. (a) each of the parties hereto has
requested Joseph Chicco ("Chicco") of the firm Connolly Epstein Chicco Foxman
Engelmyer & Ewing, Philadelphia, PA, to represent him/it in connection with the
preparation and execution of this Memorandum of Agreement. Each of the parties
understands that Chicco represents GPI and GBC in matters wholly unrelated to
this transaction, but that the business of GPI and GPC is materially dependent
on Modi's research and inventions. The parties understand that, with respect to
the transactions contemplated by this Memorandum of Agreement, no communications
to Chicco by a party shall be considered confidential so as to preclude
disclosure to other parties, and the parties acknowledge that Chicco has advised
them that he may communicate information obtained from one party to one or more
other parties, and will communicate all such information received to another
party upon its request. The parties understand that, in this capacity, Chicco
cannot be an advocate for his or its interest against the interest of one or
more of the other parties. Rather , his role shall be to advise each party on
the effect and meaning of various terms that may be proposed by one or more of
the parties, and to attempt to mediate and facilitate a resolution of any
disputed proposals. Chicco's fees and expenses in connection with this
representation shall be paid by GBC.

         (b) Each of the parties waives all real and potential conflicts of
         interests that arise out of Chicco's multiple representation of the
         parties in this transaction.

         9. GBC Common Stock. GHI presently owns 8,688,427 shares of GBC Common
Stock. GHI and each of the other parties hereto acknowledge that 3,095,238 of
such shares (the "Modi Shares") are held in trust for Modi. At Modi's request,
record ownership of the Modi Shares shall be transferred to Modi or his nominee
by GHI.

         10. Galaxy. All assignments of Technology heretofore made by Modi are
intended to include all rights, title and interest of Galaxy in and to such
Technology.

         11. Governing Law. This Memorandum of Agreement shall be governed by
the laws of the Province of Ontario and of Canada applicable therein, and the
parties hereby irrevocably attorn to the jurisdiction of the courts of the
Province of Ontario, except that the parties' rights and obligations with
respect to paragraph 6 above shall be governed by the laws of the State of
Delaware.




         12. Assignment. The benefits of this Memorandum of Agreement may not be
assigned, in whole or in part, by any party without the prior written consent of
the others, but this Agreement nevertheless shall be binding upon the parties,
their respective heirs, legal personal representatives, successors and permitted
assigns.

         IN WITNESS WHEREOF, the parties have executive and delivered this
Memorandum of Agreement as of the date first written above.

Witness:


                                                                
         S/                                                   S/Pankaj Modi
------------------------------------                 --------------------------------------------
                                                     Pankaj Modi, individually and on behalf
                                                     Of Galaxy Technology, Canada

                                                     GENEREX PHARMACEUTICALS INC.


                                                     Per:     S/Anna E. Gluskin
                                                         ----------------------------------------
                                                              Anna E. Gluskin, President


                                                     Per:     S/E. Mark Perri
                                                         ----------------------------------------
                                                              E. Mark Perri, Chairman

                                                     GENEREX BIOTECHNOLOGY CORP.


                                                     Per:     S/Anna E. Gluskin
                                                         ----------------------------------------
                                                              Anna E. Gluskin, President


                                                     Per:     S/E. Mark Perri
                                                         ----------------------------------------
                                                              E. Mark Perri, Chairman


                                                     GHI, INC.


                                                     Per:     S/Anna E. Gluskin
                                                         ----------------------------------------
                                                              Anna E. Gluskin, President


                                                     Per:     S/E. Mark Perri
                                                         ----------------------------------------
                                                              E. Mark Perri, Chairman

EX-10.14

                                                                 EXHIBIT 10.1.4

                             SUPPLEMENTAL AGREEMENT



         THIS AGREEMENT, made as of the 31st day of December, 2000, by and among
GENEREX PHARMACEUTICALS, INC. ("GPI"), an Ontario corporation, GENEREX
BIOTECHNOLOGY CORPORATION ("GBC"), a Delaware corporation, and PANKAJ MODI
("Modi"), an individual.

         WHEREAS, effective October 1, 1996, pursuant to a Consulting Agreement
dated as of that date between GPI and Modi (the "Consulting Agreement"), Modi
was engaged as a consultant by GPI and assigned and transferred to GPI all
Inventions (as defined in the Consulting Agreement) relating to the actual or
demonstrably anticipated business, work, undertaking or research and development
of GPI made or conceived by Modi during the term of the Consulting Agreement;
and

         WHEREAS, on January 7, 1998, the parties to this Supplemental
Agreement, together with GHI, Inc., a Turks and Cacos corporation, entered into
a Memorandum of Agreement (the "Memorandum of Agreement") that modified or
superseded portions of the Consulting Agreement, primarily relating to the
compensation due to Modi for his past and future services to GPI and GBC; and

         WHEREAS, the parties now wish to amend the term and compensation
arrangements provided for in the Consulting Agreement and the Memorandum of
Agreement (collectively, the "Prior Agreements"), and to provide additional
terms of Modi's engagement.

         NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the parties agree as
follows:

         4. Extension of Terms of Consulting Agreement. Subject to the early
termination provisions set forth in Section 6 below, the Consulting Agreement,
as amended hereby, is extended to and including July 31, 2010 (the "Termination
Date"), and is hereinafter referred to as "this Agreement". During the extended
term of this Agreement, Modi shall continue to hold the position of Vice
President, Research and Development of GPI and of GBC.

         5. Base Compensation and Car Allowance. (a) For all services rendered
to GBC, GPI and other subsidiaries of GBC (collectively, "Generex"), Modi will
receive annual base compensation of $250,000* effective as of August 1, 2000.
The base compensation and all other compensation payable to Modi under this
Agreement may be allocated within Generex in the discretion of GBC. Whatever
allocation is made, however, GBC and GPI shall be jointly and severally
responsible for the payment to Modi of all amounts due under this Agreement.

                  (b) The difference between (i) the base compensation due to
Modi under paragraph 2(a) above for the period August 1, 2000, through December
31, 2000 (i.e., 5/12ths of $250,000, or $104,166.65, and (ii) the compensation
actually paid to Modi for services to Generex during that period, shall be paid
to Modi in a lump sum upon execution of this Agreement. Thereafter, commencing
January 1, 2001, Modi's Base Compensation shall be paid to him no less
frequently than semi-monthly, in arrears, or on such other basis as Modi and GBC
may agree upon.

                  (c) Commencing January 1, 2001, Modi shall be paid a monthly
car allowance of $1,500 for the lease, use and maintenance of, and insurance
upon, an automobile for his personal and business use. Modi shall maintain
insurance on such automobile for his own and Generex' benefits with carriers,
coverage and policy limits consistent with policies adopted by Generex for
insurance on company-owned automobiles and automobiles owned by Generex
executives but used from time to time on Generex business. The car allowance
shall be paid monthly in advance, unless Modi and GNBT otherwise agree.

--------------
* All dollar figures in this Agreement refer to US dollars.



                  (d) Modi's Base Compensation and car allowance shall be
increased by 5% annually effective on January 1st in each calendar year
beginning in 2002 (e.g., to illustrate, in calendar year 2002, Modi's Base
Compensation shall be $262,500, and in calendar year 2003, Base Compensation
shall be $275,625).

         6. Bonus Compensation. In addition to base compensation, during the
term of this Agreement Modi shall receive bonus and incentive compensation for
services to Generex as follows:


                  (a) A bonus of $300,000 shall be paid in respect of Modi's
services in securing the development and license agreement dated September 5,
2000, between GBC and Eli Lilly and Company (the "Lilly Agreement"). This bonus
shall be paid as follows: $150,000 upon execution of this Agreement and $150,000
on February 15, 2001.

                  (b) Modi shall receive a bonus of 5% of all milestone
payments, additional signing fees or initial fees received by Generex pursuant
to Sections 6.2 and 6.4 of the Lilly Agreement and any subsequent agreement
between Generex and Lilly providing for comparable payments (the "Lilly
Payments"), excluding the $1,000,000 signing fee received in October 2000.
Stated otherwise for purposes of clarity, Modi shall receive as a bonus $.05 for
each $1.00 of Lilly Payments that Generex receives after the date of this
Agreement. These bonus payments will be paid to Modi as and when the Lilly
Payments are received by Generex from Lilly.

                  (c) In addition to the bonus payable under paragraph (b) above
relating to Lilly Payments, Modi shall receive additional bonuses equal to (i)
25% of the first $1,000,000 of any signing fee, licensing fee or similar "up
front" payment not tied to a GBT performance milestone that is received during
the term of this Agreement (excluding Lilly Payments) pursuant to development,
marketing, licensing or similar agreements hereafter entered into by Generex to
the extent that such payments are received in consideration of rights granted to
third parties to develop, manufacture and/or market products based upon
Inventions ("Other Products"); (ii) 5% of all "up front fees of the nature
described in the preceding clause to the extent such fees exceed $1,000,000; and
(iii) 5% of all of milestone payments and similar payments tied to the
development of Other Products that are received by Generex. As used in this
Agreement, the term "Inventions" shall have the same meaning as in Section 9 of
the Consulting Agreement, except that "Generex", as defined herein, shall be
substituted for "Corporation" in such definition.

         9. Stock Options. (a) Modi shall be granted options to purchase 150,000
shares of GBC's common stock in each of the next ten fiscal years of GBC ending
during the term of this Agreement, i.e., beginning with the present fiscal year
ending July 31, 2001, and ending with the fiscal year ending July 31, 2010. The
options shall be granted as of the last Friday in July (the "date of grant") of
each such fiscal year, and shall have the following terms:

                           (i) The option price shall equal the average closing
sale price of publicly-traded shares of GBC common stock during normal trading
hours reported for the five trading days preceding the date of grant (the
"valuation period"). If GBC's common stock is not traded on an exchange or
quotation system that reports actual sales transactions on the date of grant,
the average closing bid price for the shares shall be used in lieu of the
closing sale price. If neither closing sales prices nor bid prices are reported
during the valuation period, the option price shall be the fair market value of
GBC's publicly traded shares of common stock on the date of grant as determined
by GBC's Board of Directors.

                           (ii) The terms of the options shall be five (5) years
from the date of grant, subject, however, to early termination pursuant to
Sections 7(c), (d) and (e) below.

                           (iii) The options shall vest immediately on the date
of grant.


                           (iv) The options shall not be transferable except by
gift or bequest to Modi's "family members" or pursuant to a "domestic relations
order", as those terms are described in the instruction to Form S-8 adopted
under the Securities Act of 1933.

                           (v) The number and kind of shares issuable upon the
exercise of options to be granted under this Agreement shall be adjusted to
reflect stock splits, recapitalizations, reorganizations and similar corporate
events affecting GBC. The exercise price of and number and kind of shares
subject to outstanding options shall be adjusted in the same manner as options
granted under GBC's 2000 Stock Option Plan pursuant to the express terms of that
Plan.

                           (vi) GBC shall use its best efforts to register under
the Securities Act of 1933 on Form S-8 or other available form for sale to Modi
and for resale by Modi all shares issuable upon the exercise of options granted
under this Agreement.


                  (b) In accordance with the qualification requirements
applicable to issuers with securities included in The Nasdaq Stock Market, GBC's
obligations under this Section 4 are subject to approval by GBC's stockholders.
GBC agrees to submit these terms to shareholders for their approval at the Year
2000 Annual Meeting of GBC's shareholder. If for any reason the stock option
grants contemplated by this Agreement are not approved by shareholders, GBC
shall grant to Modi in lieu thereof stock appreciation rights (SARs) that will
provide to Modi the same potential economic benefits as the option plan,
excluding consideration of differences, if any, in income tax treatment under
applicable laws.

         10. Additional Authority. During the term of this Agreement, Modi shall
have final authority with respect to the hiring and continued employment of all
Generex personnel (including consultants) engaged in research and development
activities relating to products based upon Inventions, within budgetary and
personnel constraints approved by Boards of Directors of GBC (or GPI in the case
of employees or consultants employed or engaged by GPI). Notwithstanding the
foregoing, if Modi fails to fill any research and development position that (a)
is created by GBC's Board of Directors (or GPI's Board of Directors in the case
of employees or consultants employed or engaged by GPI), or (b) becomes
available due to termination of the employment or engagement of another employee
or consultant, within the 90 day period following the creation or opening of
such position, such position may be filled by a candidate approved by the
President of GBC (or GPI, in the case of employees or consultants employed or
engaged by GPI).

         11. Early Termination. Section 7 of the Consulting Agreement, as
amended and restated by Section 3 of the Memorandum of Agreement, is superseded
in its entirety by the following provisions of this Agreement:

                  (a) This Agreement shall terminate upon Modi's death or the
declaration by a court of competent jurisdiction that Modi is a mentally
incompetent person or incapable of handling his affairs due to mental
incompetence.

                  (b) This Agreement may be terminated by GBC if Modi is unable,
as a result of a bona fide illness, physical or mental, to attend to his duties
hereunder for a period of six (6) consecutive months, which period shall be
deemed to commence with such inability and shall continue until Modi is once
again able to attend to his duties hereunder on a regular basis.

                  (c) This Agreement may be terminated at any time by mutual
agreement, in writing, of GBC and Modi.

                  (d) This Agreement may be terminated by Modi or by GBC,
without cause, at any time after January 1, 2003, upon twelve (12) months prior
written notice.

                  (e) This Agreement may be terminated by GBC for just cause at
any time by giving thirty (30) days written notice thereof to Modi. As used
herein, the term "just cause" shall mean and be limited to (i) a material breach
of trust by Modi which causes or threatens serious injury to Generex, or (ii)
any action by Modi taken with the intent to materially and adversely affect a
material interest of Generex, or with knowledge that such action would result in
such a material adverse affect to Generex, whether or not such affect is
prevented from occurring by Generex or any other person or by events unrelated
to Modi's actions.

         12. Effect of Early Termination. If this Agreement is terminated prior
to the Termination Date pursuant to Section 6 hereof, then, lieu of base
compensation, bonus and incentive compensation and stock options to which Modi
is entitled under this Agreement, the following provisions shall apply

                  (a) If this Agreement is terminated under Section 6(a) or (b)
above: (i) Generex shall pay to Modi (or his legal representative) in a lump sum
within sixty (60) days from such early termination an amount equal to the lesser
of $500,000 or the aggregate amount that would have been paid to Modi under
Section 2 above from the date of such termination to the Termination Date had
such early termination not occurred;




                           (ii) Generex shall pay to Modi all bonus payments
that would have been paid to Modi under Sections 3(b) and 3(c) of this Agreement
as and when such payment would have been made had such early termination not
occurred, provided that no bonus payments shall be due with respect to milestone
payments, signing fees or similar payments received by Generex under license or
other agreements entered into by Generex after the date of such early
termination unless and to the extent that such post-early termination contracts
replace or supersede contractual obligations in force as of the date of such
early termination; and

                           (iii) All options granted to Modi prior to the date
of such early termination shall remain in full force, unaffected by such early
termination.

                  (b) If this Agreement is terminated under Section 6(c), the
provisions of Section 7(a) above shall apply unless the parties otherwise
provide in the written agreement pursuant to which such early termination is
effected.

                  (c) If this Agreement is terminated by GBC under Section 6(d)
above, then the provisions of Section 7(a) shall apply except (x) that the
minimum payment referred to in Section 7(a)(i) shall be the greater of
$1,000,000 or the amount that would have been paid to Modi under Section 2 above
from the date of such early termination to the Termination Date had such early
termination not occurred, and (y) Modi shall be entitled to bonus payments in
respect of any milestone payments, signing fees or similar payments received by
Generex pursuant to license or other agreements relating to Inventions,
irrespective of whether or not such licenses or agreements were entered into
prior to the date of such early termination.

                  (d) If this Agreement is terminated by Modi under Section 6(d)
above, then (i)Generex shall pay to Modi all bonus payments that would have been
paid to Modi under Sections 3(b) and 3(c) of this Agreement as and when such
payment would have been made had such early termination not occurred, provided
that no bonus payments shall be due with respect to milestone payments, signing
fees or similar payments received by Generex under license or other agreements
entered into by Generex after the date of such early termination unless and to
the extent that such post-early termination contracts replace or supersede
contractual obligations in force as of the date of such early termination; and
(ii) all options granted to Modi under this Agreement prior to the date of such
early termination shall terminate on the first anniversary of the date of such
early termination.

                  (e) If this Agreement is terminated by Generex under Section
6(e), then Modi shall be entitled to base compensation and bonus payments
accrued to the date of such early termination, and no more, and all options
granted pursuant to Section 4 above shall terminate at the close of business on
the fifth business day following the date of such early termination.

         13. Counsel for the Transaction. Each of the parties hereto has
requested Joseph Chicco ("Chicco") of the firm Eckert Seamans Cherin & Mellott,
LLC, Philadelphia, PA, to represent him/it in connection with the preparation
and execution of this Supplemental Agreement. Each such party understands that
Chicco and his firm are regularly employed as attorneys for GBC and GPI in
numerous matters wholly unrelated to this transaction, but that the business of
GPI and GPC is materially dependent on Modi's research and inventions. With
respect to the transactions contemplated by this Agreement, however, no
communications to Chicco by a party shall be considered confidential so as to
preclude disclosure to other parties, and the parties acknowledge that Chicco
has advised them that he may communicate information obtained from one party to
one or more other parties, and will communicate all such information received to
another party upon its request. The parties understand that, in this capacity,
Chicco cannot be and will not be an advocate for the interest of any party
against the interest of one or more of the other parties. Rather , Chicco's role
shall be to advise each party on the effect and meaning of various terms that
may be proposed by one or more of the parties, and to attempt to mediate and
facilitate a resolution of any disputed proposals.

         (b) Each of the parties waives all real and potential conflicts of
interests that arise out of Chicco's multiple representation of the parties in
this transaction, and agrees that Chicco's fees and expenses in connection with
the negotiation, preparation and execution of this Agreement shall be paid by
GBC.




         14. Governing Law. This Agreement shall be governed by the laws of the
Province of Ontario and of Canada applicable therein, and the parties hereby
irrevocably consent to the jurisdiction of the courts of the Province of
Ontario, except that (a) the parties' rights and obligations with respect to
Section 6 of the Consulting Agreement relating to Modi's Special Voting Rights
Preferred Stock and the provisions of this Agreement relating to the grant of
stock options shall be governed by the laws of the State of Delaware, and (b)
where applicable, US securities laws shall control the construction and
enforcement of this Agreement.

         15. Prior Agreements. (a) The Consulting Agreement, the Memorandum of
Agreement and the Supplemental Agreement shall be construed as a single
Agreement. In the event of any inconsistency between the Consulting Agreement
and the Memorandum of Agreement, the Memorandum of Agreement shall control. In
the event of any inconsistency between either of the Prior Agreements and the
Supplemental Agreement, the Supplemental Agreement shall control. To the extent
that they relate to Modi's compensation, the terms of the Prior Agreements are
intended to be and are superseded by the terms of the Supplemental Agreement.

         (b) Modi acknowledges that he has received all compensation to which he
is entitled under the Prior Agreements, including shares of GBC common stock
held by GHI referred to in the Memorandum of Agreement.

         (c) Except to the extent that they are superseded by a later term of
this Agreement, the Prior Agreements remain in full force and effect.

         (d) The parties expressly acknowledge that Modi's obligations under
Section 9 of the Consulting Agreement shall survive any termination of this
Agreement.

         IN WITNESS WHEREOF, the parties have executive and delivered this
Memorandum of Agreement as of the date first written above.

Witness:

                                       GENEREX PHARMACEUTICALS INC.


                                       Per:     /s/ Anna E. Gluskin
                                           ------------------------------------
                                                Anna E. Gluskin, President


                                       Per:     /s/ E. Mark Perri
                                           ------------------------------------
                                                E. Mark Perri, Chairman

                                       GENEREX BIOTECHNOLOGY
                                                CORPORATION


                                       Per:     /s/ Anna E. Gluskin
                                           ------------------------------------
                                                Anna E. Gluskin, President


                                       Per:     /s/ E. Mark Perri
                                           ------------------------------------
                                                E. Mark Perri, Chairman


                                                /s/ Pankaj Modi
                                       ----------------------------------------
                                                Pankaj Modi

EX-21

                                                                      Exhibit 21



                SUBSIDIARIES OF GENEREX BIOTECHNOLOGY CORPORATION



Name                                                 Place of Incorporation
-----                                                ----------------------

Generex Pharmaceuticals, Inc.                        Ontario, Canada
Generex (Bermuda) Inc.                               Bermuda


All subsidiaries are 100% owned except for Generex (Bermuda), which is 80.1%
owned.

All subsidiaries conduct business only under their respective corporate names.

EX-23.1.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statements No.
333-67118, 333-51194 and No. 333-42452 of Generex Biotechnology Corporation and
Subsidiaries (the Company) on Amendment No. 1 to Forms S-3, Amendment No. 3 to
Form S-3, and Amendment No. 2 to Form S-3, respectively, of our report dated
October 2, 2001 appearing in this Annual Report on Form 10-K of the Company for
the year ended July 31, 2001.




/s/ DELOITTE & TOUCHE LLP
-------------------------
DELOITTE & TOUCHE LLP
Toronto, Ontario
October 26, 2001

EX-23.1.2

                         CONSENT OF INDEPENDENT AUDITORS


The Annual Report of Generex Biotechnology Corporation and Subsidiaries (the
Company) for its fiscal year ended July 31, 2001, includes our report dated
September 14, 2000, on the consolidated financial statements of the Company as
of July 31, 2000 and 1999 and for the years ended July 31, 2000 and 1999. We
consent to the incorporation by reference of our report on such consolidated
financial statements in the following registration statements of the Company on
Form S-3: registration numbers 333-67118, 333-51194, and 333-42452.




WithumSmith+Brown
New Brunswick, New Jersey
October 26, 2001

EX-24

                                                                      EXHIBIT 24

                        GENEREX BIOTECHNOLOGY CORPORATION

                                POWER OF ATTORNEY

         Each person whose signature appears below hereby constitutes and
appoints Anna E. Gluskin, E. Mark Perri and Rose C. Perri, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, in connection with any outstanding
securities of Generex Biotechnology Corporation (the "Company"), or any public
offering or other issuance of any securities of the Company authorized by the
Board of directors of the Company pursuant to due authorization by such Board,
(1) to execute and file, or cause to be filed, with the United States Securities
and Exchange Commission (the "Commission"), (A) registration statements and any
and all amendments (including post-effective amendments), and exhibits thereto
and any and all other documents in connection therewith as required by the
Commission in connection with such registration under the Securities Act of
1933, as amended, and (B) any report or other document required to be filed by
the Company with the Commission pursuant to the Securities Exchange Act of 1934,
as amended, (2) to execute and file, or cause to be filed, any application for
registration or exemption therefrom, any report or any other document required
to be filed by the Company under the Blue Sky or securities law of any state and
to furnish any other information required in connection therewith, (3) to
execute and file, or cause to be filed, any application for registration or
exemption therefrom under the securities laws of any jurisdiction outside the
United States of America, including any reports or other documents required to
be filed subsequent to the issuance of such securities, and (4) to execute and
file, or cause to be filed, any application for listing such securities on the
Nasdaq National Market, or any other securities exchange in any other
jurisdiction where any such securities are proposed to be sold, granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act required to be done as he or she might or could
do in person, hereby ratifying and confirming all that such attorneys-in-fact
and agents, and each of them, may lawfully do or cause to be done by virtue of
this power of attorney. Each person whose signature appears below may at any
time revoke this power of attorney as to himself or herself only by an
instrument in writing specifying that this power of attorney is revoked as to
him or her as of the date of execution of such instrument or at a subsequent
specified date. This power of attorney shall be revoked automatically with
respect to any person whose signature appears below effective on the date he or
she ceases to be a member of the Board of Directors or an officer of the
Company. Any revocation hereof shall not void or otherwise affect any acts
performed by any attorney-in-fact and agent named herein pursuant to this power
of attorney prior to the effective date of such revocation.

Dated:  October 23, 2001


SIGNATURE                        TITLE
---------                        ------

/s/ Anna E. Gluskin              President, Chief Executive Officer and Director
---------------------------
Anna E. Gluskin

/s/ E. Mark Perri                Vice President, Chief Financial Officer
---------------------------      and Director
E. Mark Perri

/s/ Rose C. Perri                Chief Operating Officer, Treasurer,
---------------------------      Secretary and Director
Rose C. Perri

/s/ Pankaj Modi, Ph.D.           Vice President, Research and Development
---------------------------      and Director
Pankaj Modi, Ph.D.

/s/ Michael Hawke, M.D.          Director
---------------------------
Michael Hawke, M.D.

 /s/ Ivan M. Lieberburg          Director
---------------------------
Ivan M. Lieberburg

 /s/ Jan Michael Rosen           Director
---------------------------
Jan Michael Rosen