Organization of Business and Going Concern

6 Months Ended

Jan. 31, 2018

Accounting Policies [Abstract]

Organization and Business

 Note 1 – Organization of Business and Going Concern:

Generex Biotechnology Corporation (“Generex” or the “Company”), was formed in the State of Delaware on September 4, 1997 and its year-end is July 31. It is engaged primarily in the research and development of drug delivery systems and the use of the Company’s proprietary technology for the administration of formulations of large molecule drugs to the oral (buccal) cavity using a hand-held aerosol applicator; and through the Company’s wholly-owned subsidiary, Antigen Express, Inc. (“Antigen”), has undertaken work on immunomedicines incorporating proprietary vaccine formulations.

On January 18, 2017, the Company closed an Acquisition Agreement pursuant to which the Company acquired a 51% interest in Hema Diagnostic Systems, LLC (“HDS”), a Florida limited liability company established in December 2000 to market and distribute rapid test devices including infectious diseases. Since 2002, HDS has been developing an expanding line of rapid diagnostic tests (RDTs) including such diseases as Human Immunodeficiency Virus (HIV) – 1/2, tuberculosis, malaria, hepatitis, syphilis, typhoid and dengue as well as other infectious diseases.

On December 28, 2017, the Company completed the acquisition of the assets and 100% of the membership interests of two pre-operational pharmacies, Empire State Pharmacy Holdings, LLC and Grainland Pharmacy Holdings, LLC.

The accompanying unaudited condensed interim consolidated financial statements (“interim statements”) have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by generally accepted accounting principles for complete consolidated financial statements are not included herein. The interim statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K.

The Company’s accounting policies did not include Revenue Recognition in the latest Annual Report on Form 10-K.

On November 29, 2017, the Company’s wholly owned subsidiary, Antigen Express, Inc. (“Antigen”), entered into a License and Research Agreement (the “License Agreement”) with Shenzhen BioScien Pharmaceuticals Co., Ltd., (“Shenzhen”). Under the License Agreement, Antigen granted Shenzhen an exclusive license (the “License”) to use Antigen’s patents, know-how, data and other intellectual property relating to Antigen’s AE37 peptide to develop and sell products for the prevention and treatment of prostate cancer in China (including Taiwan, Hong Kong and Macau).

In exchange for the License, Shenzhen has agreed, inter alia, to the following financial consideration:

• a $700,000 non-refundable initial payment;

• milestone payments of $1,000,000 each upon completion of Phase II and Phase III studies;

• a milestone payment of $2,000,000 upon regulatory approval of a product covered by the License; and

• a 10% royalty on net sales, provided the patents are in force and there are no approved generic equivalents.

Shenzhen, generally, will be responsible for conducting clinical trials, securing Chinese regulatory approvals, and marketing in China for all products developed under the Agreement.

In the three and six-month period ended January 31, 2018 the Company recognized revenue for an amount equal to $700,000 representing the non-refundable initial payment, in accordance with FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria are met (1) persuasive evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably assured.

The results for the three and six-month period ended January 31, 2018 may not be indicative of the results for the entire year.

Interim statements are subject to possible adjustments in connection with the annual audit of the Company’s accounts for fiscal year 2018. In the Company’s opinion, all adjustments necessary for a fair presentation of these interim statements have been included and are of a normal and recurring nature. 

On March 14, 2017, the Company effected a one-for-one thousand (1:1,000) reverse stock split whereby the Company (i) decreased the number of authorized shares of Common Stock by a ratio equal to one-for-one thousand (1:1,000) (the “Reverse Split Ratio”), and (ii) correspondingly and proportionately decreased, by a ratio equal to the Reverse Split Ratio, the number of issued and outstanding shares of Common Stock (the “Reverse Stock Split”). Proportional adjustments for the reverse stock split were made to the Company's outstanding stock options, warrants and equity incentive plans for all periods presented.

On August 24, 2017, the Company and Core Tech Solutions, Inc. (“Core Tech”) entered into a letter of intent (“LOI”) contemplating Company’s acquisition of a controlling interest of the outstanding capital stock of Core Tech. This LOI was terminated on December 18, 2017.

Certain prior period amounts have been reclassified in the Consolidated Cash Flow Statement for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations.

Going Concern

The accompanying unaudited condensed interim consolidated financial statements have been prepared in conformity with US GAAP, which contemplate continuation of the Company as a going concern. The Company has experienced negative cash flows from operations since inception and has an accumulated deficit of approximately $428 million and a working capital deficiency of approximately $22 million at January 31, 2018. The Company has funded its activities to date almost exclusively from debt and equity financings.

The Company will continue to require substantial funds to pursue its extant business initiatives and to implement its new investment acquisition plans.  Management’s plans in order to meet its operating cash flow requirements include financing activities such as private placements of its common stock, preferred stock offerings, and issuances of debt and convertible debt instruments.  Management is also actively pursuing financial and strategic alternatives, including strategic investments and divestitures, industry collaboration activities and strategic partners.

It is management’s opinion that these conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the balance sheet date. There are no assurances that such additional funding will be achieved and that the Company will succeed in its future operations. The unaudited condensed interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s inability to obtain required funding in the near future or its inability to obtain funding on favorable terms will have a material adverse effect on its operations and strategic development plan for future growth. If the Company cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition and business prospects will be materially and adversely affected, and the Company may have to cease operations.