-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q8rh+fksInSTvavG/lY8eo6kKhvBXhJKHUrh4qhhNb0AbqoMBqnnVddZQDDVmfuq udqYcTA6pbAVjT/tu2aAjA== 0000950116-03-004682.txt : 20031128 0000950116-03-004682.hdr.sgml : 20031127 20031128152610 ACCESSION NUMBER: 0000950116-03-004682 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030731 FILED AS OF DATE: 20031128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENEREX BIOTECHNOLOGY CORP CENTRAL INDEX KEY: 0001059784 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 820490211 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-25169 FILM NUMBER: 031028646 BUSINESS ADDRESS: STREET 1: 33 HARBOUR SQ STREET 2: STE 202 CITY: TORONTO ONTARIO CANADA STATE: A1 ZIP: M5J 2G2 BUSINESS PHONE: 4163642551 MAIL ADDRESS: STREET 1: 33 HARBOUR SQ STREET 2: STE 202 CITY: TORONTO ONTARIO CA STATE: A1 ZIP: M5J 2G2 10-K/A 1 tenka.txt 10-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (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, 2003 [ ] 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 Internet Website: www.generex.com 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. [ X ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) Yes [ ] No [X] The aggregate market value of the voting stock held by non-affiliates of the registrant at November 25, 2003, based on the closing price as of that date, was approximately $31,072,983. At November 25, 2003, the registrant had 27,643,160 shares of common stock outstanding. Documents incorporated by reference: None PART III This Form 10-K/A furnishes the information required by Part III (Items 10, 11, 12, 13 and 14). Item 10. Directors and Executive Officers of the Registrant
Name Age Position Held with Generex - ---- --- -------------------------- Anna E. Gluskin 52 Chairman, President, Chief Executive Officer and Director Rose C. Perri 36 Chief Operating Officer, Acting Chief Financial Officer, Treasurer, Secretary and Director Pankaj Modi, Ph.D. 49 Vice President, Research and Development and Director Gerald Bernstein, M.D. 70 Director, Vice President Medical Affairs Mark Fletcher, Esquire 38 Executive Vice President and General Counsel J. Michael Rosen 52 Director Peter Levitch 71 Director John P. Barratt 59 Director
All directors are elected to hold office until the next annual meeting of stockholders following election and until their successors are duly elected and qualified. Executive officers are appointed by the Board of Directors and serve at the discretion of the Board. Anna E. Gluskin -- Director since September 1997. Ms. Gluskin has served as the President and Chief Executive Officer of Generex since October 1997 and the Chairman since November 2002. She 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. Rose 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. Effective November 2002, Ms. Perri became acting Chief Financial Officer. Pankaj Modi, Ph.D. -- Director since September 1997. Dr. Modi has served as Vice President, Research and Development of Generex 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, 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. Gerald Bernstein, M.D. -- Director since October 2002. Dr. Gerald Bernstein has served as Vice President of Generex since October 1, 2001. Dr. Bernstein acts as a key liaison for Generex on medical and scientific affairs to the medical, scientific and financial communities and consults with Generex under a consulting agreement on research and medical affairs and on development activities. Dr. Bernstein has been an associate clinical professor at the Albert Einstein College of Medicine in New York and an attending physician at Beth Israel Medical Center, Lenox Hill Hospital and Montefore Medical Center, all in New York. He is a former president of the American Diabetes Association. Mark Fletcher, Esq. of Generex -- Mr. Fletcher has served as Executive Vice President and General Counsel of Generex since April 2003. From October 2001 to March 2003, Mr. Fletcher was engaged in the private practice of law as a partner at Goodman and Carr LLP, a leading Toronto law firm. From March 1993 to September 2001, Mr. Fletcher was a partner at Brans, Lehun, Baldwin LLP, a law firm in Toronto. Mr. Fletcher received his LL.B. from the University of Western Ontario in 1989 and was admitted to the Ontario Bar in 1991. 2 J. Michael Rosen -- Director since August 2000. Mr. Rosen has been a principal in a number of related travel management and hotel marketing businesses since 1978. The principal companies in this group, all of which are headquartered in Ontario, are Uniworld Travel & Tours, Inc., Nevada Vacations, Inc., Casino Vacations, Inc. and Casino Tours, Inc. Mr. Rosen presently serves as the President or a Vice President, and the Chief Financial Officer, of each of these companies. Mr. Rosen is an accountant by training, and was engaged in the private practice of accounting prior to 1978. Peter Levitch - Director since October 2002. Mr. Levitch has been President of Peter Levitch & Associates, an independent consulting firm to health professionals since 1981. In this capacity, he advises companies through the various stages of the development of pharmaceuticals, medical devices, biologics and diagnostics, including clinical evaluation and the FDA regulatory approval phases. He has served as an advisor to more than 200 leading biotechnology and biological firms, including Amgen, Genentech, Immunex, DuPont, Baxter and Johnson and Johnson. Prior to 1981, Mr. Levitch was Vice President, Clinical and Regulatory Affairs at Oxford Research International Corp. and held senior positions managing the regulatory and clinical programs at Ortho Diagnostic Systems (a subsidiary of Johnson & Johnson). John P. Barratt -- Director since March 2003. Mr. Barratt is Chief Operating Officer of Beyond.com, a company by which he has been employed since 2000. From January 1996 to September 2000, Mr. Barratt served as partner-in-residence for the Quorum Group of Companies, an international investment partnership specializing in providing debt and equity capital to the emerging high growth technology sector. From 1988 to December 1995, Mr. Barratt was Executive Vice President and Chief Operating Officer of Coscan Development Corporation. He previously held a number of senior-level management positions, including Deputy Chief Executive of Lloyds Bank Canada. Mr. Barratt also currently serves as a director of GLP NT Corporation and BNN Split Corporation. Mr. Barratt also serves on the Advisory Board of Brascan SoundVest Diversified Income Fund. Generex entered into a joint venture with Elan Corporation, plc ("Elan") and certain affiliates of Elan in January 2001. Pursuant to a Securities Purchase Agreement dated January 16, 2001 between Generex, Elan and Elan International Services, Ltd. ("EIS"), a subsidiary of Elan, EIS has the right to nominate one director to Generex's Board of Directors for so long as EIS or its affiliates own at least 1.0% of the issued and outstanding shares of common stock. Dr. Ivan Lieberburg was the nominee of EIS thereunder. Dr. Lieberburg resigned effective August 1, 2002. EIS has not informed Generex of its nominee to replace Dr. Lieberburg or whether it intends to replace Dr. Lieberburg. Under the terms of the Securities Purchase Agreement, the EIS-nominated director may not in any event have more than 15% of the aggregate voting power of the Board of Directors as a whole. See "Certain Relationships and Related Transactions" for a description of the Generex securities owned by, or that may be acquired by, Elan or its affiliates. Dr. Modi holds the position of Vice President, Research and Development pursuant to a consulting agreement that was originally entered into as of October 1, 1996, that was amended and supplemented as of January 7, 1998, and that was amended and supplemented as of December 31, 2000. An amendment to Dr. Modi's consulting agreement was approved by the Board of Directors in January 2002. Under the consulting agreement, Generex must use its best efforts to cause Dr. Modi to be nominated for election and elected a director of Generex for as long as the consulting agreement is in force. There are no family relationships among our officers and directors. Other Key Employees and Consultants Slava Jarnitskii is our Financial Controller. He began his employment with Generex Pharmaceuticals in September 1996 and has been in the employment of Generex since its acquisition of Generex Pharmaceuticals in October 1997. Before his employment with Generex Pharmaceuticals, Mr. Jarnitskii received a Masters of Business Administration degree from York University in September 1996. 3 Dr. Robert E. Humphreys, MD, PhD, is currently Executive Vice-President and Chief Operating Officer of our subsidiary, Antigen Express, Inc.. Dr. Humphreys founded Antigen in 1999 and was its President. He has extensive experience in the National Institute of Health, arthritis, cancer and diabetes study sections. Dr. Humphreys is the principal inventor on 6 awarded US patents and has over 150 peer-reviewed publications to his credit. Prior to founding Antigen, Dr. Humphreys was Professor of Medicine and Pharmacology at University of Massachusetts Medical School. He received his MD and PhD degrees from Yale University and post-doctoral fellow degree in immunology from Harvard University. He also received his initial training at Bethesda Naval Hospital. Dr. Minzhen Xu is Vice President - Biology of Antigen. Dr. Xu received an MD from Shanghai Medical University in China and a PhD in immunology from University of Massachusetts Medical School. He has been with Antigen since its inception and is the company's chief experimentalist. Audit Committee Financial Expert The Board of Directors at Generex has determined that at least one person serving on its Audit Committee is an "audit committee financial expert" as defined under Item 401(h) of Regulation S-K. Mr. Barratt, a member of the Audit Committee, is an audit committee financial expert and is independent as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act. MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS The business affairs of Generex are managed under the direction of the Board of Directors. During the fiscal year ended July 31, 2003, Generex's Board of Directors held five meetings and took action by unanimous consent eight times. During the fiscal year ended July 31, 2003, all of the directors attended all of the Board of Directors meetings that were held. The Board of Directors has established two committees, the Audit Committee and the Compensation Committee. The Audit Committee which was established on March 1, 2000, met two times during the fiscal year ended July 31, 2003. During fiscal 2003, the Audit Committee was initially composed of Mr. Rosen, who was the chairman of the Audit Committee, our former director Dr. Hawke, and Mr. Levitch. Dr. Hawke resigned from the Board effective March 13, 2003. On March 19, 2003, the Board of Director's elected Mr. Barratt to fill the vacancy on the Board left by Dr. Hawke's resignation and appointed Mr. Barratt as a member of the Audit Committee. At that time, Mr. Barratt was also elected as Chairman of the Audit Committee. All of the members of the Audit Committee attended all of the meetings that they were eligible to attend. The Audit Committee is currently composed of Mr. Rosen, Mr. Levitch and Mr. Barratt. The Board of Directors has adopted an Audit Committee charter that specifies the duties of the Audit Committee. Generex's common stock is listed on the Nasdaq SmallCap Market. Therefore, Generex is governed by the applicable rules of the Nasdaq SmallCap Market. The listing requirements for Nasdaq SmallCap Market issuers require that each issuer's audit committee be comprised of three independent directors. Mr. Rosen, Mr. Barratt and Mr. Levitch meet the definition of independence under Rule 4200(a)(14) of the listing requirements. The Board of Directors has been conducting a search for at least one or more additional director(s) who meet the definition of independence under the Nasdaq SmallCap Market listing requirements and intends to add at least one such additional director to the Board of Directors by the end of the current fiscal year. At or prior to its next annual meeting of stockholders, Generex will be required by recently adopted Nasdaq rules to have a Board of Directors consisting of a majority of independent directors. The Compensation Committee was formed on July 30, 2001 and met two times during the fiscal year ended July 31, 2003. During fiscal 2003, the Compensation Committee was initially composed of Dr. Hawke, who was the Chairman of the Compensation Committee, Mr. Rosen and our former director, Dr. Lieberburg. Dr. Lieberburg resigned in August, 2002 and Dr. Hawke resigned effective March 13, 4 2003. Mr. Levitch was appointed as a member of the Compensation Committee in October 2002 and Mr. Barratt was appointed as a member of the Compensation Committee upon his election to the Board of Directors on March 19, 2003. All of the members of the Compensation Committee attended all of the meetings of the Compensation Committee. The Compensation Committee is currently composed of Mr. Barratt, Mr. Rosen and Mr. Levitch. Report of the Audit Committee The Audit Committee reviewed and discussed Generex's audited financial statements for the fiscal year ended July 31, 2003 with management. The Audit Committee discussed with BDO Dunwoody, LLP, Generex's independent public accountants for the fiscal year ended July 31, 2003, the matters required to be discussed by Statement on Auditing Standards No. 61. The Audit Committee received the written disclosures and the letter from BDO Dunwoody, LLP required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and discussed with BDO Dunwoody, LLP its independence. Based on the review and discussions described above, among other things, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Generex's Annual Report on Form 10-K for the fiscal year ended July 31, 2003. Submitted by the Audit Committee John P. Barratt (Chairman) J. Michael Rosen Peter Levitch The foregoing Report of the Audit Committee shall not be deemed to be soliciting material, to be filed with the Securities and Exchange Commission (the "SEC") or to be incorporated by reference into any of Generex's previous or future filings with the SEC, except as otherwise explicitly specified by Generex in any such filing. Report of the Compensation Committee on Executive Compensation Currently, there is no chairman of the Compensation Committee. Mr. Levitch, Mr. Rosen and Mr. Barratt are the members of the Compensation Committee. Mr. Levitch became a member in October 2002 and Mr. Barratt became a member in March 2003. Compensation Philosophy. The goals of Generex's compensation program are to attract and retain talented executives, to motivate these executives to achieve Generex's business goals, to align executive and stockholder interests and to recognize individual contributions as well as overall business results. The key elements of Generex's executive compensation are base salary, cash bonuses and stock options. While the elements of compensation are considered separately, the Compensation Committee ultimately looks to the value of the total compensation package provided by Generex to the individual executive. At the end of the fiscal year ended July 31, 2001, the Compensation Committee conducted a review of Generex's executive compensation program. This review included a comprehensive report from an independent executive compensation consultant and compared Generex's total executive compensation, including base salaries, cash bonuses and stock options, to a peer group of publicly traded biotechnology companies. For the fiscal year ended July 31, 2001, the Compensation Committee targeted total cash compensation for Generex executives to the median of the peer group. For the fiscal year ended July 31, 2002, the Compensation Committee targeted total cash compensation for executives at the higher end of the peer group. In setting this policy, the Compensation Committee took into account Generex's relatively lean management structure and the number of roles filled by each officer. After the end of fiscal year ended July 31, 2003, the Compensation Committee determined that notwithstanding substantial efforts made on the Company's behalf by the executive officers and the substantial challenges faced by the Company given its stage of development, the 5 salaries received by the executive officers, having been "brought to market" the previous year, represented the higher end of the compensation range for executives at similar development stage companies. The Committee therefore determined that the salaries represented appropriate cash compensation, awarded no bonuses for 2003 and made no changes to salaries for fiscal 2004. During all relevant periods, Dr. Modi's compensation has been based on his contract. The contract provides for a predetermined salary and achievement based bonuses. Base Salaries. Prior to 2001, Generex historically paid very modest base salaries to its executive officers, relying on option grants to supplement the low base salaries. The Compensation Committee implemented increases for fiscal 2002 to bring the base salaries of Generex's executives in line with base salaries of Generex's principal competitors. Continuing this philosophy, Ms. Gluskin's salary for 2003 was set at the same rate as 2002, and Ms. Perri received a modest increase based primarily on the increase in her responsibilities after the death of Mark Perri, Generex's former Chairman and Chief Financial Officer. Cash Bonuses. Cash bonuses were granted for fiscal 2002 in order to recognize and reward the executives of Generex for their performance and for the accomplishments achieved by Generex during fiscal 2002. The Compensation Committee adopted performance objectives for executive officers in fiscal 2002. Executive officer bonuses were based on the executive's position within Generex, the Company's attainment of the objectives and individual contributions to the attainment of the objectives. The Compensation Committee met to determine 2002 bonuses after Mr. Mark Perri's death. In determining bonuses for Ms. Gluskin and Ms. Rose Perri, the Compensation Committee also took into account the need to provide appropriate incentives to maintain a stable management team following Mr. Mark Perri's death. The Compensation Committee judged that the executive officer bonus awards for fiscal 2002 were consistent with each executive's level of accomplishment and appropriately reflected Generex's achievement of the objectives and the Compensation Committee's other goals. As discussed above, the Compensation Committee determined that the salaries (and in the case of Mark Fletcher, guaranteed bonus) received by the executive officers during fiscal 2003 represented appropriate cash compensation. Therefore, no cash bonuses were awarded to the executive officers for fiscal 2003, other than Mr. Fletcher's guaranteed bonus. At the same time, the Committee decided to develop a plan for 2004 that would tie potential executive bonuses to measurable and realistic milestones. Under his agreement with Generex, Mr. Fletcher receives a guaranteed bonus of $30,000 per annum, payable in quarterly installments, while he is employed by Generex. Dr. Modi's contract currently provides for bonuses based on specific milestones. Stock Options. The purpose of stock option grants is to provide an additional incentive to Generex employees, including executive officers, to contribute materially to the growth of Generex. Stock options are granted to align the interests of the recipients with the interests of stockholders. In November 2002, the Committee granted 350,000 options to Ms. Gluskin and 300,000 options to Ms. Perri for fiscal year 2003, as well as 200,000 options to the estate of Mark Perri, in consideration of his services in 2002. Mr. Fletcher received options for 250,000 shares upon initiation of his employment in March 2003. Dr. Modi receives options for 150,000 shares each year under the terms of his agreement with the Company. In November 2003, the Committee granted Ms. Gluskin and Ms. Perri options for 100,000 shares each. Chief Executive Officer Compensation. Ms. Gluskin's compensation for the fiscal year ended July 31, 2003 was determined in accordance with the compensation policies described above. Ms. Gluskin was paid a cash salary of approximately $350,000, which the Committee deemed appropriate compensation, and received no cash bonus for 2003. The compensation paid to Ms. Gluskin for fiscal 2003 was considered to give appropriate incentives to Ms. Gluskin to continue to promote the strategic objectives of Generex and to enhance stockholder value. Deductibility of Compensation. Section 162(m) of the Internal Revenue Code (the "Code") does not allow public companies to take a Federal income tax deduction for compensation paid to certain executive officers, to the extent that compensation exceeds $1 million for any such officer in any fiscal year. This limitation does not apply to compensation that qualifies as "performance-based compensation" under the Code. The Board of Directors believes that at the present time it is 6 quite unlikely that the compensation paid to any executive officer will exceed $1 million in any fiscal year. Therefore, the Board of Directors has not taken any measures to date specifically to qualify any of the compensation paid to its executive officers as "performance-based compensation" under the Code. Submitted by the Compensation Committee Peter Levitch J. Michael Rosen John P. Barratt The foregoing Report of the Compensation Committee on Executive Compensation and the following Performance Graph shall not be deemed to be soliciting material, to be filed with the SEC or to be incorporated by reference into any of Generex's previous or future filings with the SEC, except as otherwise explicitly specified by Generex in any such filing. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") requires that Generex's directors and executive officers, and any persons who own more than ten percent of the common stock, file with the SEC initial reports of ownership and reports of changes in ownership of the common stock and other equity securities of Generex. Such persons are required by SEC regulations to furnish Generex with copies of all such reports that they file. Form 4 Reports were not filed to disclose the receipt of (i) options to purchase 350,000 shares of common stock by Ms. Gluskin on November 26, 2002, (ii) options to purchase 300,000 shares of common stock by Ms. Perri on November 26, 2002, and (iii) options to purchase 50,000 shares of common stock by Mr. Rosen on November 29, 2002, all under the Generex Biotechnology Corporation 2001 Stock Option Plan, but the receipt of such options were disclosed in timely filed Form 5 Reports. To the knowledge of Generex, based upon its review of these reports, all other Section 16 reports required to be filed by our directors and executive officers during the fiscal year ended July 31, 2003 were filed on a timely basis. Item 11. Compensation Of Executive Officers And Directors Compensation of Executive Officers The following table sets forth, for Generex's last three fiscal years, all compensation awarded to, earned by or paid to the chief executive officer ("CEO") and the three most highly compensated executive officers of Generex other than the CEO whose salary and bonus payments exceeded $100,000 for the fiscal year ended July 31, 2003. Summary Compensation Table
- ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL COMPENSATION LONG-TERM COMPENSATION - ------------------------------------------------------------------------------------------------------------------------------------ AWARDS PAYOUTS - ------------------------------------------------------------------------------------------------------------------------------------ Name and Principal Year Ended Salary Bonus Other Annual Restricted Securities LTIP All Position July 31 ($) ($) Compensation Stock Underlying Payouts Other (3) Award(s) Options Compensation ($) (#) ($) - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Anna E. Gluskin (1), 2003 350,000 0 * 0 350,000(4) 0 0 President and Chief 2002 350,000 125,000 * 0 0 0 0 Executive Officer 2001 127,240 250,000 * 0 0 0 0 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Rose C. Perri (1), 2003 295,000 0 * 0 300,000(4) 0 0 Chief Operating 2002 250,000 100,000 * 0 0 0 0 Officer, acting Chief 2001 81,068 100,000 * 0 0 0 0 Financial Officer, 0 Treasurer and Secretary - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Pankaj Modi (2), 2003 262,500 0 * 0 150,000(5) 0 0 Vice President, 2002 262,500 0 * 0 150,000 0 0 Research and Development 2001 250,000 300,000 * 0 150,000 0 0 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Mark Fletcher, 2003 $100,000 $15,000(6) * 0 250,000(7) 0 0 Executive Vice President and General Counsel - ------------------------------------------------------------------------------------------------------------------------------------
7 * Perquisites and other personal benefits, securities or other property received by each executive officer did not exceed the lesser of $50,000 or 10% of such executive officer's salary and bonus. (1) Portions of the cash compensation paid to Ms. Gluskin and Ms. Rose Perri are attributable to amounts paid indirectly through a management services agreement with a corporation of which, at July 31, 2003, Ms. Gluskin and Ms. Rose Perri were equal owners. (2) All of the cash compensation paid to Dr. Modi is paid indirectly to him through a corporation owned 100% by him. (3) Cash compensation is stated in the table in U.S. dollars. To the extent any cash compensation was paid in Canadian dollars, it has been converted into U.S. dollars based on the weighted average Canadian/U.S. dollar exchange rate for the years ended July 31, 2003, 2002 and 2001, respectively. (4) These options were granted under the Generex Biotechnology Corporation 2001 Stock Option Plan on November 26, 2002 with effect as of November 26, 2002. (5) Granted as of July 31, 2003 pursuant to the terms of Dr. Modi's consulting agreement. These options were granted under the Generex Biotechnology Corporation 2001 Stock Option Plan. (6) Mr. Fletcher's employment agreement guarantees him a bonus of $30,000 annually, payable in quarterly installments. (7) Granted on March 19, 2003 with effect as of April 21, 2003 pursuant to the terms of Mr. Fletcher's employment agreement. These options were granted under the Generex Biotechnology Corporation 2001 Stock Option Plan. 8 Option Grants during the 2003 Fiscal Year The following tables set forth information related to options to purchase common stock granted to the CEO and the named executive officers during the fiscal year ended July 31, 2003.
Potential realizable value at assumed annual rates of stock Individual grants appreciation for option term ----------------------------- -------------------------------------- Percent of Number of total Securities options Underlying granted to Options employees in Exercise Price Expiration 5%($) 10%($) Name granted (#) fiscal year (%) ($/Sh) Date Anna E. Gluskin 350,000(1) 19.89% $2.10 11/25/07 $203,067 $448,725 Rose C. Perri 300,000(1) 17.05% $2.10 11/25/07 $174,057 $384,621 Pankaj Modi 150,000(2) 8.52% $1.52 7/30/08 $ 62,992 $139,196 Mark Fletcher 250,000(3) 14.20% $0.89 04/20/03 $ 61,473 $135,838
(1) These options were granted under the Generex Biotechnology Corporation 2001 Stock Option Plan on November 26, 2002 with effect as of November 26, 2002. (2) Granted on July 31, 2003 with effect as of July 31, 2003 pursuant to the terms of Dr. Modi's consulting agreement. These options were granted under the Generex Biotechnology Corporation 2001 Stock Option Plan. (3) Granted on March 19, 2003 with effect as of April 21, 2003 pursuant to the terms of Mr. Fletcher's employment agreement. These options were granted under the Generex Biotechnology Corporation 2001 Stock Option Plan. 9 Fiscal Year End Option Values No options were exercised by the CEO or the named executive officers during the fiscal year ended July 31, 2003. The following table provides information relating to the number and value of options held by the CEO and the named executive officers at fiscal year end.
Number of securities underlying unexercised Value of unexercised options at July 31, 2003 options at July 31, 2003 Shares Acquired (#) Exercisable/ ($) Exercisable(1)/ Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable Anna E. Gluskin -0- -0- 650,000/0 0/0 Rose C. Perri -0- -0- 550,000/0 0/0 Pankaj Modi -0- -0- 750,000/0 $21,000/0 Mark Fletcher -0- -0- 250,000/0 $192,500/0
- ------------------ (1) Based on the closing price of common stock ($1.66) on November 21, 2003. Other Benefit Plans We have no long-term incentive plans or defined benefit or actuarial pension plans, and have not repriced any options previously granted to the above named officers. Directors' Compensation; Other Compensation Directors who are not officers or employees of the Company receive cash compensation of $10,000 each fiscal quarter. Mr. Levitch and Mr. Barratt each received $10,000 upon becoming directors, applicable to the quarter in which their service began. Each outside director received options exercisable for 50,000 shares for fiscal 2003. Mr. Levitch and Mr. Barratt also received options for an additional 20,000 shares each upon appointment to the Board of Directors. Dr. Modi is compensated through a consulting agreement that was originally entered into as of October 1, 1996, that was amended and supplemented as of January 7, 1998, and that was further amended and supplemented as of December 31, 2000. The parties to the agreement are Dr. Modi, Generex and Generex Pharmaceuticals, Inc., a wholly-owned subsidiary of Generex. An amendment to Dr. Modi's consulting agreement was approved by the Board of Directors in January 2002 granting Dr. Modi cash bonuses upon the occurrence of certain events in connection with the extension of the joint venture with Elan to include Morphine. All references to the consulting agreement in the following discussion relate to the agreement, as amended and supplemented. Pursuant to the terms of the consulting agreement, Dr. Modi holds the position of Vice President, Research and Development of Generex and Generex Pharmaceuticals, and both Generex and Generex Pharmaceuticals are jointly and severally responsible for the payment to Dr. Modi of all amounts due under the consulting agreement. The agreement provides for Dr. Modi's term of service to extend through July 31, 2010, subject to termination without cause by Dr. Modi or Generex at any time after January 1, 2003 upon 12 months' prior written notice. In connection with amending and supplementing the consulting agreement in January 1998, Generex issued 1,000 shares of Special Voting Rights Preferred Stock ("Special Preferred Stock") to Dr. Modi, comprising all of the outstanding shares of Special Preferred Stock. Special Preferred Stock does not generally carry the right to vote, but does have the following special voting rights: o the holders of Special Preferred Stock have the right to elect a majority of Generex's Board of Directors if a change of control occurs; and 10 o the holders of Special Preferred Stock have the right to approve any transaction that would result in a change of control. A "change of control" is deemed to occur if Generex's founders (namely, Ms. Gluskin, Dr. Modi or Ms. Rose Perri), or directors appointed or nominated with the approval of Generex's founders, should cease to constitute at least 60% of Generex's directors, or if any person becomes either Chairman of the Board of Directors or Chief Executive Officer of Generex without the prior approval of the founders. If a change of control were to occur, Dr. Modi would thereafter be able to elect a majority of the directors. No change of control has occurred to date. The consulting agreement provides for an annual base compensation of $250,000 a year, effective as of August 1, 2000, subject to certain cost-of-living increases. In addition, Dr. Modi is entitled to receive certain bonus compensation during the term of the agreement. Dr. Modi will also receive certain additional bonus payments based upon agreements entered into by Generex for rights granted to third parties to develop, manufacture and/or market products based upon ideas, improvements, designs or discoveries made or conceived by Dr. Modi. The consulting agreement provides for Dr. Modi to be granted options to purchase 150,000 shares of common stock in each of the next ten fiscal years, starting with the fiscal year ended July 31, 2001. The options may be granted only under option plans of Generex that have been approved by the stockholders. Dr. Bernstein is compensated through an employment agreement, dated April 1, 2002, between Dr. Bernstein and Generex. Pursuant to the terms of the employment agreement, Dr. Bernstein holds the position of Vice President of Medical Affairs. The employment agreement provides for Dr. Bernstein's term of service to extend through March 31, 2005, subject to (i) termination without cause by Dr. Bernstein or Generex upon 90 days' prior written notice and (ii) for cause by Generex immediately upon the giving of notice. The employment agreement provides for an annual base compensation of $150,000 a year, effective as of April 1, 2002. During each year of the employment agreement, Dr. Bernstein may receive cash bonuses at the discretion of the Board of Directors and is entitled to receive options to purchase 50,000 shares of common stock. Mr. Fletcher is compensated through an employment agreement, dated March 17, 2003, between Mr. Fletcher and Generex. Pursuant to the terms of the employment agreement, Mr. Fletcher holds the position of Executive Vice President and General Counsel. The employment agreement provides for Mr. Fletcher's term of service to extend through March 16, 2008, subject to (i) termination without cause by Generex upon 30 days' prior written notice and (ii) for cause by Generex immediately upon the giving of notice. The employment agreement provides for an annual base compensation of $100,000 a year, effective as of March 17, 2003. During each year of the employment agreement, Mr. Fletcher shall receive a cash bonus of $30,000, payable in quarterly installments, and may receive additional cash bonuses at the discretion of the Board of Directors. Upon entering into the employment agreement Mr. Fletcher received options to purchase 250,000 shares of common stock. Compensation Committee Interlocks and Insider Participation Effective July 30, 2001, decisions regarding executive compensation were made by the Compensation Committee of the Board of Directors. Mr. Levitch, Mr. Rosen and Mr. Barratt are the members of the Compensation Committee. No executive officer of Generex has served on the board of directors or compensation committee of any other entity that has or has had one or more executive officers serving as a director of Generex (excluding entities that are wholly owned by one or more of the executive officers). 11 Existing Stock Compensation Plans The following table sets forth as of November 1, 2003 information regarding our existing compensation plans and individual compensation arrangements pursuant to which our equity securities are authorized for issuance to employees or non-employees (such as directors, consultants and advisors) in exchange for consideration in the form of services:
- ------------------------------- ----------------------------- ----------------------------- ----------------------------- Plan Category Number of securities to be Weighted-average exercise Number of securities issued upon exercise of price of outstanding remaining available for outstanding options, options, warrants and rights future issuance under warrants and rights equity compensation plans (excluding securities reflected in column (a)) - ------------------------------- ----------------------------- ----------------------------- ----------------------------- (a) (b) (c) - ------------------------------- ----------------------------- ----------------------------- ----------------------------- Equity compensation plans approved by security holders 1998 Stock Option Plan 1,095,500 $5.13 0 2000 Stock Option Plan 1,804,500 $7.74 195,500 2001 Stock Option Plan 3.858,159 $3.37 141,841 --------- ----- ------- Total 6,758,159 $4.82 337,341 - ------------------------------- ----------------------------- ----------------------------- ----------------------------- Equity compensation plans not approved by security holders 0 0 0 - ------------------------------- ----------------------------- ----------------------------- ----------------------------- Total 6,758,159 $4.82 337,341 - ------------------------------- ----------------------------- ----------------------------- -----------------------------
12 STOCK PERFORMANCE GRAPH Set forth below is a line graph comparing the cumulative total return on Generex's common stock with cumulative total returns of the Nasdaq Stock Market (U.S. Companies) and the Nasdaq Biotechnology Index for the period commencing May 5, 2000 (the date Generex's common stock was first listed for trading on the Nasdaq Stock Market) and ending on July 31, 2003. The graph assumes that $100 was invested on May 5, 2000, in Generex's common stock, the stocks in the Nasdaq Stock Market (U.S. Companies) and the stocks comprising the Nasdaq Biotechnology Index, and that all dividends were reinvested. Generex's common stock has been trading on the Nasdaq SmallCap Market since June 5, 2003. [GRAPH OMITTED]
05/2000 07/2000 07/2001 07/2002 07/2003 ------- ------- ------- ------- ------- Generex Biotechnology Corporation 100.0 72.5 81.4 21.5 14.0 Nasdaq Stock Market 100.0 99.2 53.2 35.2 46.0 Nasdaq Biotechnology Index 100.0 109.5 91.3 58.8 86.7
Item 12. Security Ownership Of Certain Beneficial Owners And Management The tables on the following pages sets forth information regarding the beneficial ownership of the common stock by: o Generex's executive officers and directors; o All directors and executive officers as a group; and o Each person known to Generex to beneficially own more than five percent (5%) of our outstanding shares of common stock. The information contained in these tables is as of November 1, 2003. At that date, Generex had 27,672,260 shares of common stock outstanding. In addition to common stock, Generex has outstanding 1,000 shares of Special Voting Rights Preferred Stock. All of the shares of Special Voting Rights Preferred Stock are owned by Dr. Pankaj Modi. In connection with Generex's joint venture with Elan, Generex issued 1,000 shares of Series A Preferred Stock to an affiliate of Elan. After the issuance of annual dividends, 1,123 shares of Series A Preferred are currently outstanding. Neither series of preferred stock generally have voting rights. A person is deemed to be a beneficial owner of shares if he has the power to vote or dispose of the shares. This power can be exclusive or shared, direct or indirect. In addition, a person is considered by SEC rules to beneficially own shares underlying options or warrants that are presently exercisable or that will become exercisable within sixty (60) days. 13 BENEFICIAL OWNERSHIP
Name of Beneficial Owner Number of Shares Percent of Class (i) Directors and Executive Officers John P. Barratt............................................ 140,000(1) * Gerald Bernstein, M.D...................................... 63,628(2) * Mark Fletcher.............................................. 250,000(3) * Anna E. Gluskin............................................ 1,603,794(4) 5.7% Peter Levitch.............................................. 189,483(5) * Pankaj Modi, Ph.D.......................................... 1,700,200(6) 6.1% Rose C. Perri ............................................. 4,650,202(7) 16.6% J. Michael Rosen .......................................... 218,730(8) * Officers and directors as a group ......................... 7,862,370(9) 28.4% (ii) Other Beneficial Owners (and their addresses) Cranshire Capital, L.P. ................................... 2,744,504(10) 9.9% 666 Dundee Road, Suite 1901 Northbrook, IL 60062 EBI, Inc. In Trust ........................................ 1,441,496(11) 5.3% c/o Miller & Simons First Floor, Butterfield Square P.O. Box 260 Providencials Turks and Caicos Islands British West Indies GHI, Inc. In Trust ........................................ 1,907,334(12) 7.0% c/o Miller & Simons First Floor, Butterfield Square P.O. Box 260 Providencials Turks and Caicos Islands British West Indies
* Less than one percent. (1) Includes 70,000 options granted on March 19, 2003 and 70,000 options granted on October 30, 2003 all under the Generex Biotechnology Corporation 2001 Stock Option Plan (the "2001 Plan"). (2) Includes shares issuable upon exercise of 50,000 options granted in November 2002, 5,159 options granted on December 31, 2001 and 5,000 options granted on January 3, 2000, all under the 2001 Plan and pursuant to Dr. Bernstein's Employment Agreement with Generex and his prior consulting agreement. (3) Includes 250,000 shares issuable upon the exercise of an option granted under the 2001 Plan. 14 (4) Includes 953,667 shares owned of record by GHI, Inc. that are beneficially owned by Ms. Gluskin, 100,000 shares issuable upon the exercise of an option granted under Generex's 1998 Stock Option Plan (the "1998 Plan"), 200,000 shares issuable upon the exercise of an option granted under Generex's 2000 Stock Option Plan (the "2000 Plan"), and 350,000 shares issuable upon exercise of an option granted under the 2001 Plan. (5) Includes 140,000 shares issuable upon the exercise of options granted under the 2001 Plan. (6) Includes 150,000 shares issuable upon the exercise of an option granted under the 1998 Plan and 150,000 shares issuable upon the exercise of an option granted under the 2000 Plan. Also includes 300,000 shares issuable upon the exercise of options granted under the 2001 Plan. Dr. Modi also owns all the outstanding shares of Generex's Special Voting Rights Preferred Stock. This stock is not convertible into Common Stock. (7) Includes 953,667 shares owned of record by GHI, Inc. that are beneficially owned by Ms. Rose Perri, 100,000 shares issuable upon the exercise of an option granted under the 1998 Plan, 150,000 shares issuable upon the exercise of an option granted under the 2000 Plan, and 300,000 shares issuable upon exercise of an option under the 2001 Plan. Also includes the shares and options that are owned by the estate of Mr. Mark Perri, of which Ms. Rose Perri is executor and beneficiary, but is not considered to beneficially own for some purposes: 45,914 shares previously owned of record by Mr. Mark Perri; 1,100,000 shares owned of record by EBI, Inc. (of which Mr. Mark Perri was beneficial owner); 305,332 shares held of record by brokerage accounts and options for 200,000 shares which survived Mr. Perri's death. Also includes 341,496 shares owned of record by EBI, Inc., which Ms. Rose Perri may be deemed to beneficially own because of the power to vote the shares but which are beneficially owned by other stockholders because they are entitled to the economic benefits of the shares. Ms. Rose Perri is also deemed to beneficially own an additional 953,667 shares owned of record by GHI, Inc. by holding the right to vote such shares. These shares are also beneficially owned by Ms. Gluskin. (8) Includes 20,000 shares issuable upon the exercise of an option granted under the 2000 Plan, and 120,000 shares issuable upon exercise of options granted under the 2001 Plan. Also includes 7,943 shares owned by a company of which Mr. Rosen is an officer and indirect 25% owner; Mr. Rosen may be deemed to beneficially own these shares because he shares voting power and investment power with respect to such shares. (9) Includes 2,450,159 shares issuable upon the exercise of options. Includes 1,441,496 shares owned of record by EBI, Inc. but beneficially owned or deemed to be beneficially owned by Ms. Rose Perri. Includes 1,907,334 shares owned of record by GHI, Inc. but beneficially owned by Ms. Gluskin or Ms. Rose Perri. (10) Includes 1,310,840 outstanding shares and 1,425,664 shares issuable upon exercise of warrants. Warrants which would otherwise be exercisable for 927,535 shares, however, contain a provision stating that they are not exercisable to the extent exercise would result in the holder's beneficially owning more than 9.9% of Generex's outstanding common stock. (11) All these shares were previously beneficially owned by Mr. Mark Perri but are now deemed to be beneficially owned by Ms. Rose Perri because she has the sole power to vote the shares. With respect to 1,100,000 of the shares owned of record by EBI, Inc., Ms. Rose Perri also has investment power and otherwise is entitled to the economic benefits of ownership. (12) Ms. Gluskin and Ms. Rose Perri each own beneficially 953,667 of the shares owned of record by GHI, Inc. by reason of their ownership of investment power and other economic benefits associated with such shares. The shares beneficially owned by Ms. Gluskin also are deemed to be beneficially owned by Ms. Rose Perri because she has the sole power to vote the shares. Item 13. Certain Relationships and Related Transactions. Generex acquired Generex Pharmaceuticals, Inc. in October 1997. Prior to Generex's acquisition of Generex Pharmaceuticals, Generex was a private Canadian corporation majority-owned and controlled by Mr. Mark Perri, Ms. Rose Perri and Ms. Gluskin. Unless otherwise indicated, the transactions described below occurred prior to the acquisition of Generex Pharmaceuticals or pursuant to 15 contractual arrangements entered into prior to that time. Generex presently has a policy requiring approval by stockholders or by a majority of disinterested directors of transactions in which one of our directors has a material interest apart from such director's interest in Generex. Real Estate Financing Transactions: In May 1997, EBI, Inc., a company controlled by Mr. Mark Perri, acquired shares of common stock of Generex Pharmaceuticals for $3 million (CAD) which, based on the exchange rate then in effect, represented approximately $2.1 million (US). Generex Pharmaceutical's use of those funds was restricted to acquiring an insulin research facility. Subsequently this restriction was eased to permit use of the funds to acquire properties used for manufacturing Generex's oral insulin product and other proprietary drug delivery products, and related testing, laboratory and administrative services. Under the terms of the investment, Generex Pharmaceuticals was required to lend these funds back to EBI until they were needed for the purposes specified. The entire amount was loaned back to EBI and was outstanding at July 31, 1997. During the period ended July 31, 1998, a total of $2,491,835 (CAD) was repaid by EBI. There were no repayments made in the years ended July 31, 2003, 2002 and 2001. The balance due from EBI at July 31, 2003, was $508,165 (CAD) (approximately $362,779 (US) based on the exchange rate then in effect). These funds are due on demand by Generex Pharmaceuticals, provided they are used for the purchase and/or construction or equipping of oral insulin manufacturing and testing facilities. The amounts repaid by EBI were used primarily to purchase and improve certain of the real estate and buildings owned by Generex Pharmaceuticals. Related Party Transactions: Between November 1995 and July 31, 1998, companies owned and controlled by Mr. Mark Perri, Ms. Rose Perri and Ms. Gluskin incurred a net indebtedness of $629,234 to Generex Pharmaceuticals, excluding the indebtedness of EBI described in the preceding paragraph. This indebtedness arose from cash advances and the payment by Generex Pharmaceuticals of expenses incurred by these companies, net of repayments and payment of expenses on behalf of Generex Pharmaceuticals. At July 31, 1999, these companies' net indebtedness to Generex Pharmaceuticals, exclusive of the EBI indebtedness described above, was $284,315. At July 31, 2000, this balance had been reduced to zero. The transactions between Generex Pharmaceuticals and entities owned and controlled by Mr. Mark Perri, Ms. Rose Perri and Ms. Gluskin were not negotiated at arms-length, and were not on normal commercial terms. No interest was charged on any of the advances, and the transactions were of far greater financial benefit and convenience to Mr. Mark Perri, Ms. Rose Perri and Ms. Gluskin than to Generex Pharmaceuticals. These transactions and financing arrangements were mostly initiated prior to the transaction in which Generex acquired Generex Pharmaceuticals, and no such transactions have taken place since January 1, 1999. Generex presently has a policy requiring the approval of the Board of Directors, including a majority of disinterested directors, for any transactions in which a director has a material interest apart from such director's interest in Generex. Prior to January 1, 1999, a portion of our general and administrative expenses resulted from transactions with affiliated persons, and a number of capital transactions also involved affiliated persons. Although these transactions were not the result of "arms-length" negotiations, we do not believe that this fact had a material impact on our results of operations or financial position. Prior to December 31, 1998, we classified certain payments to executive officers for compensation and expense reimbursements as "Research and Development - related party" and "General and Administrative - related party" because the executive officers received such payments through personal services corporations rather than directly. After December 31, 1998, these payments have been and will continue to be accounted for as though the payments were made directly to the officers, and not as a related party transaction. We do not foresee a need for, and therefore do not anticipate, any related party transactions in the current fiscal year. We utilize a management company to manage all of our real properties. The property management company is owned by Rose Perri, Anna Gluskin and the estate of Mark Perri, our former Chairman of the Board. For the fiscal years ended July 31, 2003, 2002 and 2001, we have paid the management company $33,237, $37,535 and $38,450, respectively, in management fees. Loans to Executive Officers: On May 3, 2001, Generex's three senior officers, who are also shareholders of Generex, were advanced $334,300 each, in exchange for promissory notes. These notes bore interest at 8.5 percent per annum and were payable in full on May 1, 2002. These notes were guaranteed by a related company owned by these officers and secured by a pledge of 2,500,000 shares of 16 Generex's common stock owned by this related company. On June 3, 2002, Generex's Board of Directors extended the maturity date of the loans to October 1, 2002. The other terms and conditions of the loans and guaranty remained unchanged and in full force and effect. As of July 31, 2002, the balance outstanding on these notes, including accrued interest, was $1,114,084. Subsequent to July 31, 2002, pursuant to a decision made as of August 30, 2002, these loans were satisfied by application of pledged stock, at a value of $1.90 per share, which represented the lowest closing price during the sixty days prior to August 30, 2002. Brokerage Payment: On August 7, 2002, Generex Pharmaceuticals purchased real estate with an aggregate purchase price of approximately $1,525,000, from an unaffiliated party. In connection with that transaction, Angara Enterprises, Inc., a licensed real estate broker that is an affiliate of Ms. Gluskin, received a commission from the proceeds of the sale to the seller, in the amount of 3% of the purchase price, or $45,714. Management believes that this is less than the aggregate commission which would have been payable if an unaffiliated broker had been used. Joint Venture with Elan: In January 2001, Generex established a joint venture with Elan International Services, Ltd. ("EIS") and Elan Corporation, plc ("Elan"). Pursuant to the Securities Purchase Agreement dated January 16, 2001, between Generex, Elan and EIS, EIS has the right to nominate one director to Generex's Board of Directors for so long as EIS or its affiliates own at least 1.0% of the issued and outstanding shares of common stock. Dr. Lieberburg was the nominee of EIS thereunder. Dr. Lieberburg resigned effective August 1, 2002 because he felt that due to the increasing demands of his position with Elan Corporation, he could no longer devote the time and attention necessary to serve as a director of Generex. EIS has not informed Generex as to its nominee to replace Dr. Lieberburg. In connection with the transaction, EIS purchased 344,116 shares of common stock for $5,000,000 and was issued a warrant to acquire 75,000 shares of common stock at $25.15 per share. If the joint venture achieves certain milestones, Generex may require EIS to purchase an additional $1,000,000 of common stock at a 30% premium to the then prevailing fair market value of shares of common stock. EIS also purchased 1,000 shares of a new series of Generex preferred stock, designated as Series A Preferred Stock, for $12,015,000. The proceeds from the sale of the Series A Preferred Stock were applied by Generex 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 Generex initially owns 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 Generex's interest in the joint venture entity. Alternatively, the Series A Preferred Stock may be converted, under certain conditions, into shares of Generex's common stock. In January of 2002, Generex declared a 6% stock dividend of Series A Preferred stock. The shares of common stock and shares of Series A Preferred Stock presently are held of record by an affiliate of EIS. Item 14. Principal Accountant Fees and Services. Fees Paid to Generex's Independent Public Accountants The following table sets forth the aggregate fees paid by Generex for the fiscal years ended July 31, 2002 and July 31, 2003 to its independent auditors:
July 31, 2002 July 31, 2003 ------------- ------------- Audit Fees................................... $ 102,929(1) $ 74,925(4) Audit-Related Fees........................... $ 0(2) $ 50,932(5) All Other Fees ........................... $ 0(3) $ 0(6)
(1) Includes the aggregate fees billed for professional services rendered by Deloitte & Touche for the audit of Generex's annual financial statements for the fiscal year ended July 31, 2002 and the reviews of financial statements included in Generex's Quarterly Reports on Form 10-Q for the 2002 fiscal year. This amount is shown in U.S. Dollars and was converted from Canadian dollars to U.S. dollars based on the exchange rate on January 15, 2003. 17 (2) No amounts were billed by Deloitte & Touche in fiscal 2002 for related services. (3) No amounts were billed by Deloitte & Touche in fiscal 2002 for any other services. (4) Represents charges of BDO Dunwoody, Generex's auditor for fiscal year ended July 31, 2003. (5) Represents amounts billed by Deloitte & Touche for review of financial statements contained in Generex's Quarterly Reports on Form 10-Q prior to their dismissal on July 1, 2003, and review of registration statements incorporating by reference their reports. (6) Neither Deloitte & Touche nor BDO Dunwoody billed amounts for any other services. Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. Exhibits
Exhibit No. Description - ---------- ----------- 14 Code of Ethics for all Executive Officers and Directors of Generex Biotechnology Corporation* 21 Subsidiaries of Generex Biotechnology Corporation* 31.1.2 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 31.2.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32 Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
- ------------------------- * Filed herewith. 18 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 28th day of November, 2003. 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.
Name Capacity in Which Signed Date - ---- ------------------------- ---- /s/ President and Chief Executive November 28, 2003 - -------------------- Officer Anna E. Gluskin /s/ Secretary, Treasurer and Chief November 28, 2003 - -------------------- Operating Officer Rose C. Perri /s/ Vice President, Research and November 28, 2003 - -------------------- Development Pankaj Modi /s/ Director November 28, 2003 - -------------------- Gerald Bernstein /s/ Executive Vice President and November 28, 2003 - -------------------- General Counsel Mark Fletcher /s/ Director November 28, 2003 - -------------------- J. Michael Rosen /s/ Director November 28, 2003 - -------------------- Peter Levitch /s/ Director November 28, 2003 - -------------------- John P. Barratt /s/ Controller November 28, 2003 - -------------------- Slava Jarnitskii
19 EX-14 3 ex14.txt EXHIBIT 14 EXHIBIT 14 CODE OF ETHICS for all Executive Officers and Directors of GENEREX BIOTECHNOLOGY CORPORATION SECTION I A. Overview This Code of Ethics and Business Conduct (the "Code") embodies the commitment of Generex Biotechnology Corporation to conduct our business in accordance with all applicable laws, rules and regulations and the highest ethical standards. All Executive Officers (as defined below) and members of the Board of Directors of the Company ("Directors") are expected to adhere to the principles and procedures set forth in this Code that apply to them. We also expect the consultants and advisors we retain generally to abide by this Code. (For purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder, this Code is the Company's code of ethics for senior financial and executive officers.) For purposes of this Code, the term "Executive Officer" is defined to include, without limitation, the Company's President, Chief Executive Officer, Chief Financial Officer (principal financial/accounting officer), Chief Operating Officer, any Vice-President, Controller, Secretary, Treasurer and any other personnel performing similar functions. B. Basic Standard of Ethics Executive Officers and Directors shall observe the highest standards of ethical conduct. In the performance of their duties, they shall protect and foster shareholder value through fair dealings, complete honesty and full disclosure in all manners of business. Executive Officers and Directors shall maintain the highest standards of integrity, both in the workplace and outside the workplace, fully observing all laws and applicable regulations. C. Conflicts of Interest Executive Officers and Directors shall avoid all conflicts of interest. A "conflict of interest" occurs when an individual's private interest improperly interferes with the interests of the Company or when an Executive Officer or Director faces a choice between what is in their best personal interest (financial or otherwise) and the interest of the Company. In particular, an Executive Officer or Director must never use or attempt to use his or her position at the Company to obtain any improper personal benefit for himself or herself, for his or her family members, or for any other person, including loans or guarantees of obligations, from any person or entity. When a conflict of interest arises, it is important that each Executive Officer and Director act with great care to avoid even the appearance that their actions were not in the best interests of the Company. If an Executive Officer or Director is faced with a situation in which their objectivity may be questioned because of individual interests or family or personal relationships, the Executive Officer or Director must immediately notify an Ethics Contact (as defined in Section III). Any Executive Officer or Director who is aware of a material transaction or relationship that could reasonably be expected to give rise to a conflict of interest should discuss the matter promptly with an Ethics Contact. D. Loans The Company prohibits the loan, in any form, of money to Executive Officers or Directors. This prohibition includes any guarantee by the Company of a loan to an Executive Officer or Director from a third party. E. Personal Finances Executive Officers and Directors are required to ensure that their personal finances and personal financial dealings are prudent and do not place the Executive Officer or Director in a potentially compromising position as it relates to the Company's interests. F. Public Disclosure It is the Company's policy that the information in its public communications, including all filings and periodic reports submitted to the U.S. Securities and Exchange Commission (the "SEC"), be full, fair, accurate, timely and understandable. To this end, the Company has established disclosure controls and procedures. Executive Officers who are involved in the Company's disclosure process are responsible for acting in furtherance of these policies and procedures. In particular, these individuals are required to: (i) maintain familiarity with the disclosure requirements applicable to the Company; (ii) oversee the Company's disclosure controls and procedures to ensure that information required to be disclosed in the Company's filings to the SEC is identified and processed on a timely basis; and (iii) take steps to regularly obtain and evaluate information in their area of responsibility. These individuals (and Executive Officers and Directors generally) are prohibited from knowingly misrepresenting, omitting, or causing others to misrepresent or omit, material facts about the Company to others, whether within or outside the Company, including the Company's independent auditors. In addition, any Executive Officer who has a supervisory role in the Company's disclosure process has an obligation to discharge his or her responsibilities diligently. G. Compliance with Laws, Rules and Regulations It is the Company's policy to comply with all applicable laws, rules and regulations. It is the personal responsibility of each Executive Officer and Director to adhere to the standards and restrictions imposed by those laws, rules and regulations. Generally, it is both illegal and against Company policy for any Executive Officer or Director who is aware of material nonpublic information relating to the Company, any of the Company's clients or any other private or governmental issuer of securities to buy or sell any securities of those issuers, or recommend that another person buy, sell or hold the securities of those issuers. More detailed rules governing the trading of securities by the Company's Executive Officers and Directors are set forth in the Company's policy on insider trading. Any Executive Officer or Director who is uncertain about the legal rules involving his or her purchase or sale of any Company securities or any securities in issuers that he or she is familiar with by virtue of his or her work for the Company should consult with the Company's General Counsel (in the absence of a General Counsel, Executive Officers and Directors should report any irregularity or breach to the Company's outside counsel that prepares its periodic reports under the U.S. securities laws) before making any such purchase or sale. 2 H. Protection and Proper Use of Company Assets All Executive Officers and Directors should protect the Company's assets and ensure their efficient use. All Company assets should be used for legitimate business purposes only. The Company's Executive Officers must ensure the maintenance of internal controls to provide guidance and overall protection of company assets, financial integrity and reporting accuracy. Executive Officers may not: (i) make personal use of Company assets which create any additional cost for, interfere with work duties or violates any Company policies; (ii) manipulate financial accounts, records or reports for personal gain or otherwise; or (iii) maintain off-the-book accounts to facilitate questionable or illegal payments. Executive Officers must: (i) prepare all corporate and governmental reports and documents with accurate information (such documents shall include, but shall not be limited to, periodic reports and other filings in connection with the U.S. securities laws and documents prepared for the U.S. Food and Drug Administration and similar organizations in other countries); (ii) maintain books, accounts and records according to generally accepted accounting principles, using enough detail to reflect accurately and fairly company transactions; (iii) record transactions in a timely manner, so that no misleading financial information is created (these transactions include, but are not limited to: income, expense, indebtedness, obligation, reserves and acquisition or disposition of assets); and (iv) establish internal financial controls that are documented and reviewed for their integrity and application quarterly by the appropriate Executive Officers before submission of quarterly SEC filings. Should any irregularities, non-compliance with internal controls or abuses be observed, the observing Executive Officer should report such directly to an Ethics Contact. SECTION II A. Corporate Opportunities Executive Officers and Directors owe a duty to the Company to advance the Company's legitimate business interests when the opportunity to do so arises. Executive Officers and Directors are prohibited from taking for themselves (or directing to a third party) a business opportunity that is discovered through the use of corporate property, information or position, unless the Company has already been offered the opportunity and turned it down. More generally, Executive Officers and Directors are prohibited from using corporate property, information or position for personal gain or competing with the Company. Any use of Company property or services that is not solely for the benefit of the Company must be approved beforehand through the Ethics Contact. B. Confidentiality In carrying out the Company's business, Executive Officers and Directors often learn confidential or proprietary information about the Company or other third parties. Executive Officers and Directors must maintain the confidentiality of all information so entrusted to them, except when disclosure is authorized or legally mandated. Confidential or proprietary information includes, among other things, any non-public information concerning the Company, including its businesses, financial performance, results or prospects, and any non-public information provided by a third party with the expectation that the information will be kept confidential and used solely for the business purpose for which it was conveyed. C. Fair Dealing Each Executive Officer should endeavor to deal fairly with the Company's clients, service providers, suppliers, competitors and employees. No Executive Officer should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice. 3 SECTION III A. Interpretation of the Code Executive Officers and Directors should strive to identify and raise potential ethical issues before they lead to problems, and should ask about the application of this Code whenever in doubt. Any questions relating to how the policies and procedures contained in this Code should be interpreted or applied should be addressed to an Ethics Contact. For purposes of this Code, an Ethics Contact is any of the following: o any member of the Audit Committee of the Company's Board of Directors; o the Company's General Counsel (in the absence of a General Counsel, the Company's outside counsel that prepares its periodic reports under the U.S. securities laws shall be an Ethics Contact); o A meeting of the full Audit Committee; or o A meeting of the full Board of Directors, provided at least two independent directors are present. Decisions is such a case shall be made by a majority of the independent directors present. Any Ethics Contact may refer any issue to, or seek assistance on any issue from, the General Counsel (or the outside counsel who prepares the periodic reports under the U.S. securities laws.) B. Reporting Violations All Executive Officers and Directors are duty bound to report any irregularities or breaches of this Code of Ethics to an Ethics Contact. To the extent possible, such reports will be treated confidentially. The Company will take such disciplinary or preventive action as it deems appropriate to address any existing or potential violation of this Code brought to its attention. Any Executive Officer or Director who ignores or violates any of the principles or procedures in this Code, or any Executive Officer or Director who penalizes another Executive Officer or other Company personnel for following these standards will be subject to appropriate disciplinary action, which may include immediate dismissal. C. Waivers of This Code From time to time, the Company may waive certain provisions of this Code. Any Executive Officer or Director who believes that a waiver may be called for should discuss the matter with an Ethics Contact. Waivers may be made only by the Board of Directors or the Audit Committee of the Board of Directors. 4 EX-21 4 ex21.txt EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF GENEREX BIOTECHNOLOGY CORPORATION Name Place of Incorporation - ---- ----------------------- Generex Pharmaceuticals, Inc. Ontario, Canada Generex (Bermuda), Inc. Bermuda Antigen Express, Inc. Delaware, USA 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-31 5 ex31-1_2.txt EXHIBIT 31.1.2 EXHIBIT 31.1.2 CERTIFICATION I, Anna E. Gluskin, certify that: 1. I have reviewed this Amendment No.1 to Annual Report on Form 10-K of Generex Biotechnology Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. DATE: November 28, 2003 By: /s/ Anna E. Gluskin ---------------------------------------- Anna E. Gluskin, Chief Executive Officer (Principal Executive Officer) EX-31 6 ex31-2_2.txt EXHIBIT 31.2.2 EXHIBIT 31.2.2 CERTIFICATION I, Rose C. Perri, certify that: 1. I have reviewed this Amendment No.1 to Annual Report on Form 10-K of Generex Biotechnology Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. DATE: November 28, 2003 By: /s/ Rose C. Perri -------------------------------------------- Rose C. Perri, Chief Operating Officer (Principal Financial and Accounting Officer) EX-32 7 ex32.txt EXHIBIT 32 EXHIBIT 32 CERTIFICATIONS Pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. ss. 1350, as adopted), Anna E. Gluskin, Chief Executive Officer and President of Generex Biotechnology Corporation (the "Company"), and Rose C. Perri, Chief Operating Officer of the Company, each hereby certifies that, to the best of his or her knowledge: 1. The Company's Amendment No.1 to Annual Report on Form 10-K for the period ended July 31, 2003, and to which this Certification is attached as Exhibit 32 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the end of the period covered by the Report. DATE: November 28, 2003 By: /s/ Anna E. Gluskin ---------------------------------------- Anna E. Gluskin, Chief Executive Officer (Principal Executive Officer) DATE: November 28, 2003 By: /s/ Rose C. Perri -------------------------------------------- Rose C. Perri, Chief Operating Officer (Principal Financial and Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----