Acquisitions

12 Months Ended

Jul. 31, 2020

Business Combinations [Abstract]

Acquisitions

Note 14 – Acquisitions:

NuGenerex Diagnostics LLC:

On January 18, 2017, the Company acquired a 51% interest in NGDx pursuant to the Acquisition Agreement. The Acquisition Agreement provided the Company with a call option which the Company exercised on November 30, 2018 to acquire the remaining 49% of NGDx and a retirement of NGDx shareholder loans in the amount of $13,431,706 (including interest) (the “Call Option”) for the aggregate purchase price of $1. On November 30, 2018, the call option was exercised, and the Company acquired the remaining 49% of NGDx.

Pursuant to the Acquisition Agreement, the Company also issued a warrant to a former shareholder of NGDx, Stephen L. Berkman, to acquire 15,000,000 (21,000,000 post Stock Split) additional shares of Generex common stock for $2.50 ($1.78 post Stock Split) per share exercisable through December 1, 2019.

Fair Value of the NGDx Assets

The intangible assets acquired includes In–Process Research & Development (“IPR&D”). The Fair Value of the IPR&D intangible asset using an Asset Cost Accumulation methodology as of January 18, 2017 (the “Valuation Date”) was determined to be $2,911,377. Intangible assets are generally amortized on a straight-line basis over the useful lives of the assets. The Company is currently not amortizing the in-process research and development until it becomes commercially viable and placed in service. At the time when the intangible assets are placed in service the Company will determine a useful life.

The net purchase price of NGDx was determined to be as follows:

	Stock Price at Closing		Shares		Fair Value
Purchase price:
Common Stock at closing	$	0.23		1,117,011	$	253,721
Common Stock after closing	$	0.23		420		95
Common Stock post reverse stock split	$	0.23		4,830,000		1,097,100
Total purchase price				5,947,431	$	1,350,916

The total consideration was valued at $1,350,916 on the date of the acquisition. As of July 31, 2019, all warrants relating to this acquisition upon issuance resulted in additional paid in capital of $9,032,435.

Upon the exercise of the Call Option, the fair values of the warrants and call option was updated through the issuance and exercise date and the change in the fair value of the contingent purchase consideration of a loss of $4,397,507 and a gain of $15,147,591 was recorded and included in the consolidated statements of operations and comprehensive income for the year ending July 31, 2019.  The Company adopted a sequencing policy and determined that the warrants with fixed exercise price were excluded from derivative consideration. The remaining fair value of the call option and the warrant payable remaining at the time of exercise of the call option and issuance of the warrant was charged against additional paid-in capital as an elimination of non-controlling interest for a loss of $6,951,015.

Fair Value Assumptions Used in Accounting for the Warrant

The Company used the Black-Scholes option-pricing model to calculate the fair value of the warrant. The Black-Scholes option-pricing model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. The key inputs used in the fair value calculations were as follows:

	December 1,  2018
Exercise price		1.78
Time to expiration		3.14 years
Risk-free interest rate		3.01	%
Estimated volatility		138.61	%
Dividend		—
Stock price at valuation date	$	0.64

Fair Value Assumptions Used in Accounting for Call Option

The Company used the Monte Carlo model to calculate the fair value of the call option. The valuations are based on assumptions as of the valuation date with regard to the value of the asset acquired net of impairment, the risk-free interest rate, the estimated volatility of the stock price in the future, the time to expiration and the stock price at the date of valuation.

The following assumptions were used in estimating the value of the Call Option:

	December 1,  2018
Risk-free interest rate		2.52	%
Estimated volatility		164.43	%
Remaining Term		1.13 years
Stock price at valuation date	$	0.64

Veneto:

On October 3, 2018, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Veneto Holdings, L.L.C. (“Veneto”) to purchase certain assets of Veneto.  

Effective on October 3, 2018, NuGenerex Distribution Solutions, LLC assigned the Veneto Asset Purchase Agreement to NuGenerex Distribution Solutions 2, LLC.  The sole member of that LLC is NuGenerex Management Services, Inc., a wholly-owned subsidiary of Generex Biotechnology Corporation.

The aggregate purchase price for the Assets is $35,000,000 including the Promissory Note. At the Second Closing, the Company will pay the principal of the Promissory Note plus interest to Veneto, (i) $9,000,000 will be paid by the Company into a trust or other fiduciary account acceptable to Veneto to be used exclusively for satisfaction of certain contingent liabilities of Veneto and subsidiaries of Veneto not being acquired by the Company, (ii) $3,000,000 will be paid by the Company into an escrow account to secure potential obligations of Veneto in respect of the Second Closing date working capital and under the indemnification provisions of the Agreement and (iii) the balance will be payable directly to Veneto in cash.

The Company had also entered into a temporary fee-for-service arrangement with Veneto and one of its subsidiaries for Veneto to provide management, personnel, operational, administrative and other services with respect to the First Closing Assets pending the Second Closing. At the Second Closing, all of Veneto personnel providing these services became employees or consultants of the Company, and, therefore, Veneto no longer provides these services.

At the First Closing, the Promissory Note issued to Veneto in the original principal amount of $15,000,000 with interest at an annual rate of 5.0% and guaranteed by Generex and Joseph Moscato, and secured by a first priority security interest in the Company’s assets other than the First Closing Assets was subsequently cancelled upon the issuance of the new promissory note on the Second Closing in the principal amount of $35,000,000 with an annual of 12.0% and guaranteed by Generex and Joseph Moscato.

On November 1, 2018 the Company consummated the acquisition of the Second Closing Assets, consisting primarily of Veneto’s management services organization business and two additional ancillary services. The aggregate price for the First Closing Assets and the Second Closing Assets was $30,000,000. The Company issued a promissory note in the principal amount of $35,000,000 (the “New Note”) consisting of the $30,000,000 purchase price and a $5,000,000 original issue discount, as the sole consideration payable on the Second Closing Date. In addition, we agreed to assume approximately $3.8 million in outstanding institutional debt of Veneto subsidiaries, but will have the use of Veneto cash which would otherwise have been applied to paying down the debt.

There was $62,500 of accrued interest on the first closing $15,000,000 note and an additional $1,716,129 of accrued interest on the second closing $35,000,000 promissory note for a total of $1,778,629 accrued interest through March 28, 2019 when the Company entered into an Amendment Agreement (the “Amendment”). This Amendment between with Veneto and the equity owners of Veneto (the “Veneto Members”) to restructure the payment of the obligation that in satisfaction of all obligations the Company would cause to be delivered 8,400,000 shares of the Company’s common stock (the “Generex Shares”) to be delivered on or before April 22, 2019; plus an aggregate 5,500,000 shares of the Company’s subsidiary, common stock of Antigen Express, Inc.(“Antigen Shares”). The Company and the Veneto Members further agreed to certain downside protection between $1.78 per share and $1.07 per share subject to terms and conditions contained in the agreement. The Generex Shares were delivered on May 23, 2019, but due to the current and ongoing litigation with the Veneto Members, the NGIO have not been delivered.

As a result of the Amended Agreement entered into on March 28, 2019 (“the Amendment”) with Veneto and the equity owners of Veneto (the “Veneto Members”) to restructure the Promissory Note, the Company was evaluated for downside protection associated with the 8,400,000 issued shares in lieu of cash payments against the Promissory Note. Based on the valuation as of the date of agreement on March 28, 2019, an allocation of $6,424,338 was allocated to derivative liability for downside protection. As of July 31, 2019, the downside protection had a market change of $3,085,502 and held a value of $3,338,836. On June 15, 2020 the downside protection expired pursuant to the Amendment. Therefore, the liability is reclassified from derivative liability to common stock payable.

Fair Value of the Veneto Acquisition

The following table summarizes the allocation of the preliminary purchase price as of the Veneto acquisition as of the First Closing and the Second Closing:

	“First Closing” completed on  October 3, 2018		“Second Closing” completed on  November 1, 2018		Total
Cash and cash equivalents	$	2,410,150	$	—	$	2,410,150
Accounts receivable, net		1,935,078		—		1,935,078
Inventory, net		1,068,856		—		1,068,856
Prepaid expenses		95,804		—		95,804
Property and equipment, net		652,590		—		652,590
Other receivables		1,014,316		—		1,014,316
Notes receivable - LT		1,387,763		—		1,387,763
Other assets, net		25,745		—		25,745
Intangible assets, net		35,603		7,110,000		7,145,603
Total assets acquired		8,625,905		7,110,000		15,735,905
Total current liabilities		2,509,887		—		2,509,887
Notes payable		—		3,403,948		3,403,948
Total liabilities assumed		2,509,887		3,403,948		5,913,835
Net identifiable assets acquired		6,116,018		3,706,052		9,822,070
Goodwill		8,883,982		16,293,948		25,177,930
Total consideration transferred	$	15,000,000	$	20,000,000	$	35,000,000

The following table summarizes the allocation of the revalued purchase price as of the Veneto acquisition as of the First Closing and the Second Closing during the year ending July 31, 2019: 

	“First Closing” completed on  October 3, 2018		“Second Closing” completed on  November 1, 2018			Total
Cash and cash equivalents	$	2,410,150	$	—		$	2,410,150
Accounts receivable, net		1,430,638		—			1,490,638
Inventory, net		1,068,856		—			1,068,856
Prepaid expenses		95,804		—			95,804
Property and equipment, net		652,590		—			652,590
Other receivables		1,014,316		—			1,014,316
Notes receivable - LT		1,387,763		—			1,387,763
Other assets, net		25,745		—			25,745
Intangible assets, net		35,603		811,000			846,603
Total assets acquired		8,181,465		811,000			8,992,465
Total current liabilities		2,065,448		—			2,065,448
Notes payable		—		3,403,948			3,403,948
Total liabilities assumed		2,065,448		3,403,948			5,469,396
Net identifiable assets acquired		6,116,017		(2,592,948	)		3,523,069
Goodwill							15,051,769
Total consideration transferred	$	—	$	—		$	18,574,838

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification® (“ASC”) Topic 310, “Receivables”, this agreement is classified as a note receivable and carried at their net realizable value net of allowance of credit losses when management determines that it is probable a loss has been incurred. Notes receivable are charged off against the allowance for credit losses when management determines that the notes receivable are uncollectible and the Company ceases collection efforts. The Company recognizes a portion of the note as interest income in the accompanying consolidated financial statements.

The note receivable for $1,387,763 acquired during the first closing of Veneto on October 3, 2018 was to be automatically converted per the purchase agreement into 6% ownership of a third-party company. Due to the ongoing litigation with Veneto, management has not been able to obtain evidence that this note was converted into 6% ownership of the third-party company. In July 2019, Management reviewed all aspects of this transactions and concluded that it has no reason to believe that this amount will be recovered, as such they deem the note receivable of $1,387,763 to be fully impaired.

The significant intangible assets identified in the purchase price allocation discussed above include developed software and technology, referral base (recurring revenue from the MSO investments and their use of Company owned pharmacies) and non-compete agreements with continued employment of key employees. Tradenames and trademarks were not valued as tradenames and trademarks will not be maintained going forward. To value the developed software and technology, the Company utilized the relief from royalty method, a form of the income approach to value the developed software and technology which assumes a limited technology life and market share adjusted by assumed obsolescence with a terminal value. The referral base was valued using a multi-period excess earnings method, a form of the income approach. The Company utilized the with and without method, a form of the income approach to value non-compete agreements with Generex.

The preliminary amounts assigned to the identifiable intangible assets, the estimated useful lives, and the estimated amortization expense related to these identifiable intangible assets are as follows:

	Preliminary  Fair  Value		Average  Estimated  Life
Developed Software/Technology	$	131,000		5
Referral Base		—		15
Non-compete agreements		680,000		3
	$	811,000

Intangible assets are generally amortized on a straight-line basis over the useful lives of the assets.

Goodwill initially represented the excess of the purchase price over the fair market value of net assets acquired. Goodwill for Veneto Acquisition was $8.9 million as of the date of the First Closing and $16.3 million as of the date of the Second Closing. Based on the Amended Agreement (the “Amendment”) entered into on March 28, 2019 referred to above which stipulated that in lieu any cash payments, the Company would deliver shares of the Company’s common stock (the “Generex Shares”). Additionally, in pursuant to ASC 805 and specifically, ASC 805-10-25-14, the Company recognized the change in assets and liabilities as a result of facts and circumstances that existed as of the acquisition date that would have resulted in the recognition of the assets and liabilities with the corresponding decrease of goodwill from $24.2 million to $13.6 million.

As of July 31, 2020, Company recorded an impairment goodwill in the amount of $3,808,231 leaving a fair value of goodwill for Veneto of $11,243,537 (see Note 2 – Goodwill, Impairment or Disposal of Long-Lived Assets and Intangibles).

Regentys and Olaregen:

On January 7, 2019, the Company closed two separate Acquisition Agreements pursuant to which the Company acquired a 51% interest in both Regentys Corporation (“Regentys”) and Olaregen Therapeutix Inc. (“Olaregen”).

The Company accounted for the acquisitions of both Regentys and Olaregen as business combinations using the purchase method of accounting as prescribed in Accounting Standards Codification 805, Business Combinations (“ASC 805”) and ASC 820 – Fair Value Measurements and Disclosures (“ASC 820”). In accordance with ASC 805 and ASC 820, the Company used its best estimates and assumptions to accurately assign fair value to the tangible assets acquired, identifiable intangible assets and liabilities assumed as of the acquisition dates. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed.

Regentys:

On November 28, 2018, Generex and Regentys entered into a binding letter of intent (“LOI”) contemplating the Company’s acquisition of 51% of the outstanding capital stock of Regentys for a total consideration of $15,000,000. On January 7, 2019 the Company completed a definitive Stock Purchase Agreement and related documents effecting the transactions contemplated by the LOI.

Pursuant to a Stock Purchase Agreement between the Company and Regentys (the “Purchase Agreement”) the Company acquired 12,048,161 newly issued shares of the Regentys common stock representing 51% percent of the issued and outstanding capital stock of Regentys (“Regentys Shares”).

In addition to $400,000 paid to Regentys upon signing of the LOI, the purchase price for the Regentys Shares will consist of the following cash payments, with the proceeds intended to be used for specific purposes, as noted:

• $3,450,000 to initiate pre-clinical activities on or before January 15, 2019. As of the date this report was filed, the Company has paid $650,000 and the remaining balance of $2,800,000 is payable on or before November 30, 2019 per extension in amended agreement.

 • $2,000,000 to initiate patient recruitment activities on or before May 1, 2019. As of the date this report was filed, the Company has not yet paid this installment and the full balance of $2,000,000 is payable on or before November 30, 2019 per extension in amended agreement.

 • $3,000,000 to initiate a first-in-human pilot study on or before September 1, 2019.

 • $5,000,000 to initiate a human pivotal study on or before February 1, 2020.

 • $1,150,000 to submit a 510(k) de novo submission to the FDA on or about February 1, 2021.

The Company issued its Promissory Note in the amount of $14,600,000 (the “Note’) representing its obligation to pay the above amounts. The Note is secured by a pledge of the Regentys shares pursuant to a Pledge and Security Agreement. In the event that Generex does not make any of the first three payments listed above, at Regentys’ option either:

• Generex will forfeit all of the Regentys shares issued with no refund of amounts paid; or

 • Generex will issue shares of its common stock to Regentys equivalent to 110% of the value of the missing payment, which shares will be registered for resale.

In the event Generex does not make either or both of the fourth and fifth payments, its share ownership of Regentys will be proportionately reduced.

On March 14, 2019, the Company and Regentys amended the Stock Purchase Agreement and Promissory Note to extend the due date of the remaining balance of the first tranche of Guaranteed Payments amounting to $2,800,000 on or before April 1, 2019. On October 31, 2019, the Company and Regentys signed an extension to extend the due date on or before November 30, 2019. The extensions of the due date have no impact on the existing schedule of future payments or any additional terms within the Note. Regentys has not filed any notice of default as of the date of publication, and Generex continues to provide Regentys with business opportunities continuing the relationship.

Fair Value of the Regentys Acquisition

The following table summarizes the allocation of the preliminary purchase price as of the Regentys acquisition:

	Preliminary Allocations as of    January 7, 2019			Allocation Adjustments			Revised Allocation
Cash and cash equivalents	$	61,857		$	—		$	61,857
Other current assets		13,138			20,543			33,681
Property and equipment, net		444			—			444
Accounts payable and accrued liabilities		(1,181,920	)		(306,951	)		(1,488,871	)
Notes payable		(639,009	)		29,685			(609,324	)
Loans form related parties		(16,506	)		(399,999	)		(416,505	)
Deferred tax liability		(889,782	)		30,320			(859,462	)
In-Process research & development		3,510,680			(119,630	)		3,391,050
Non-Controlling interest, net of proceeds:
Note receivable from Generex		14,345,205			(2,791	)		14,342,414
Redeemable non-controlling interest		(4,073,898	)					(4,073,898	)
Non-controlling interest		(9,870,762	)		(2,791	)		(9,873,553	)
Cash paid prior to the time of closing		—			400,000			400,000
Total Fair Value of Assets Acquired		1,259,447			(351,614	)		907,833
Consideration:
Cash paid prior to the time of closing		400,000			—			400,000
Note receivable from Generex		14,345,205			(2,791	)		14,342,414
Goodwill	$	13,485,758		$	348,823		$	13,834,581

The redeemable non-controlling interest of $4,073,898, representing the Series Stock A, was determined by deducting the total consideration paid of $14,745,205 from the total purchase value totaling $28,689,865 based on a convergence method in an Option Pricing Model using the Regentys capital structure with 12,048,161 newly issued shares of the Regentys common stock representing 51% percent of the issued and outstanding capital stock of Regentys. See Note 7 – Redeemable Non-Controlling Interest.

Olaregen:

On November 27, 2018, Generex and Olaregen entered into a binding letter of intent (“LOI”) contemplating the Company’s acquisition of 51% of the outstanding capital stock of Olaregen for a total consideration of twelve million dollars ($12,000,000).

As of January 7, 2019, the Company completed a definitive Stock Purchase Agreement (“Purchase Agreement”) and related documents effecting the transactions contemplated by the LOI.

The Company acquired 3,282,632 newly issued shares of the Olaregen common stock representing 51% percent of the issued and outstanding capital stock of Olaregen (“Olaregen Shares”).

In addition to $400,000 paid to Olaregen upon signing of the LOI, the purchase price for the Olaregen Shares will consist of the following cash payments: 

• $800,000 on or before January 15, 2019. The Company has paid this installment.

 • $800,000 on or before January 31, 2019. As of the date this report was filed, the Company has paid $491,500 of this installment and remaining balance of $308,500 is payable on or before November 30, 2019 per extension in amended agreement.

 • $3,000,000 on or before April 1, 2019. As of the date this report was filed, the Company has not yet paid this installment and the full balance of $3,000,000 is payable on or before November 31, 2019 per extension in amended agreement.

 • $1,000,000 On or before May 31, 2019. As of the date this report was filed, the Company has not yet paid this installment and the full balance of $1,000,000 is payable on or before November 30, 2019 per extension in amended agreement.

 • $6,000,000 on or before September 30, 2019.

In addition, during May 2019, Generex pursuant to a Stock Purchase Agreement purchased 592,682 shares of Series A Preferred Stock of Olaregen in exchange for 4,000,000 shares of the Company’s common stock and a $2,000,000 Promissory Note bearing interest at 7% per annum (the “Notes”) originally due and payable on August 1, 2019. As of the date this report was filed, the Company has not yet paid the balance due of this Note.

The Company issued its Promissory Note in the amount of $11,600,000 (the “Note’) representing its obligation to pay the above amounts. The Note is secured by a pledge of the Olaregen shares pursuant to a Pledge and Security Agreement. In the event that Generex fails to pay the installment due on November 30, 2019, Generex will forfeit the shares allocated to that installment (1,600,000 Olaregen shares) and Olaregen will be entitled to “claw back” fifty percent (50%) of any and all shares paid for by the prior payments.

On March 14, 2019, the Company and Olaregen amended the Stock Purchase Agreement and Promissory Note to extend the due date of the remaining balance of the second tranche of Guaranteed Payments amounting to $600,000 on or before April 1, 2019. The Company remitted additional payments of $200,000 on April 30, 2019 and $38,500 on May 17, 2019. On May 22, 2019, the Company and Olaregen amended the agreement to extend the due date of the remaining balance of the second tranche of Guaranteed Payments amounting to $361,500, the full balance of the third tranche amounting to $3,000,000 and the full balance of the fourth tranche amounting to $1,000,000 (total of $4,361,500) on or before June 30, 2019. The extensions of the due date had no impact on the existing schedule of future payments or any additional terms within the Note.

Fair Value of the Olaregen Acquisition

The following table summarizes the allocation of the preliminary purchase price as of the Olaregen acquisition:

	Preliminary Allocations as of    January 7, 2019			Allocation Adjustments			Revised Allocation
Cash and cash equivalents	$	608,419		$	(400,000	)	$	208,419
Prepaid expenses		20,488			—			20,488
Inventory		408,501			—			408,501
Other current assets		37,950			—			37,950
Accounts payable		(216,670	)		—			(216,670	)
Accrued liabilities		(216,694	)		—			(216,694	)
Deferred tax liability		(1,040,173	)		397,513			(642,660	)
In-Process research & development		3,980,000			(1,521,000	)		2,459,000
Non-compete agreements		790,000			(260,000	)		530,000
Non-Controlling interest, net of proceeds:
Note receivable from Generex		11,472,663			—			11,472,663
Non-controlling interest		(11,999,559	)		—			(11,999,559	)
Cash paid prior to the time of closing		—			400,000			400,000
Total Fair Value of Assets Acquired		3,844,925			(1,383,485	)		2,461,440
Consideration:
Cash paid prior to the time of closing		400,000			—			400,000
Note receivable from Generex		11,472,663			—			11,472,664
Goodwill	$	8,027,738		$	1,383,485		$	9,411,224

The components of the acquired intangible assets were as follows:

	Preliminary  Fair  Value		Average Estimated Life
In-process research and development	$	3,980,000		—
Non-compete agreement		790,000		3
	$	4,770,000

Subsequent to the original acquisition of Olaregen, the Company entered into a Share Exchange Agreement on August 16, 2019 to purchase an additional 900,000 shares in Olaregen Therapeutix Inc. from Olaregen Therapeutix LLC representing increasing Generex’s ownership from approximately 62% to 76%. Furthermore, on February 14, 2020, Olaregen exchanged all of its outstanding shares for 5,950,000 shares of Generex common stock and 2,765,000 shares of NGIO. After this transaction, Generex owns 100% of the outstanding shares of Olaregen.

MediSource and Pantheon:

On August 1, 2019, the Company, through its wholly owned subsidiary NDS, closed on Asset Purchase Agreements as amended on October 10, 2019 (the “APAs”) for the purchase of substantially all the operating assets of MediSource Partners, LLC (“MediSource”) and Pantheon Medical - Foot & Ankle, LLC (“Pantheon”).

MediSource contracts with vendors (including Pantheon) for nationwide distribution of implants and devices for spine, hips, knees, foot, ankle, hand, and wrist surgeries. Additional product lines include biologics (blood, bone, tissue, and stem cells), durable medical equipment, and soft goods. MediSource also supplies kits to process bone marrow aspirates and platelet rich plasma biologics at the time of surgery.

Pantheon sells a physician friendly, “all-in-one,” integrated kit that includes plates, screws, and tools required for orthopedic surgeons and podiatrists conducting foot and ankle surgeries. Over the next three years, Pantheon expects to develop and submit several new product lines to the FDA, which will include cannulated surgical screws and surgical staples, as well as a proprietary Hammertoe System.

The goal in acquiring these operating companies is that they expect to provide multiple and significant revenue streams through delivery of patient-focused healthcare products and services, thus generating value and ultimately creating goodwill upon acquisition.

Travis H. Bird was the CEO and principal owner of both Pantheon and MediSource.

Under the APAs:

• Generex issued 400,000 shares of common stock in exchange for the Pantheon assets, and 560,000 shares of common stock in exchange for the MediSource assets.

 • Both MediSource and Pantheon agreed to waive the 1.4:1 stock split.

 • Each of Pantheon and MediSource will retain 50% of its cash on hand and 50% of its accounts receivable, with the remainder transferred to NDS at closing.

 • Generex and NDS will not assume any Pantheon or MediSource liabilities except for post-closing obligations under assumed contracts.

 • Pantheon and MediSource will not transfer their Medicare and Medicaid numbers.

At closing, Mr. Bird entered into an 18-month consulting agreement with NDS (the “Travis Bird Consulting Agreement”). As compensation, Mr. Bird was to receive Generex common stock with a value of $250,000, as well as monthly payments equaling $97,222. The monthly payments were to be paid from any available cash from the operations of Pantheon and MediSource. Any remaining balance of such monthly payments was to consist of common stock. The agreement specified the shares are to be freely tradeable.

In addition, Mr. Bird agreed to fully assign and exchange any ownership rights in any new technology he develops with the Company, in exchange for a payment of $500,000 in value of common stock for each completed item submitted to the FDA. Travis Bird terminated the Travis Bird Consulting Agreement on July 20, 2020 and he is no longer entitled to further commissions from future net sales. For the year ended July 31, 2020, Travis earned $1,404,915 under this agreement and has been paid $773,366, leaving a balance of $631,549.

MediSource & Pantheon Contingent Consideration and Earn-out Payments

Pantheon

• Generex and NDS will pay up to up to Five Hundred Thousand Dollars ($500,000.00) worth of GNBT Stock at a 15% discount during each of the following three (3) years provide Panthen achieved amounts above and beyond each annual EBIDTA target, plus additional amounts of GNBT Stock for achieving additional EBIDTA targets above the initial thresholds.

• For the annual period between August 1, 2019 and July 31, 2020, the initial threshold of $1,000,000 EBIDTA (a $500,000 increase) the Company would provide an earn out bonus of $500,000 of GNBT Stock at 15% discount, plus for every $100,000 of EBITDA over $1,000,000 achieved, $50,000 of GNBT Stock at 15% discount.

• For the annual period between August 1, 2020 and July 31, 2021, if the EBIDTA target of $1,500,000 EBIDTA, the Company would provide an earn out bonus of $500,000 of GNBT Stock at 15% discount, plus for every $100,000 of EBITDA over $1,500,000 achieved, $50,000 of GNBT Stock at 15% discount.

• For the annual period between August 1, 2020 and July 31, 2021, if the EBIDTA target of $2,000,000 EBIDTA, the Company would provide an earn out bonus of $500,000 of GNBT Stock at 15% discount, plus for every $100,000 of EBITDA over $2,000,000 achieved, $50,000 of GNBT Stock at 15% discount.

• As of July 31, 2020, no earn-out was achieved.

MediSource  

• Generex and NDS will pay up to $500,000 in cash to MediSource as an earn out payment. No payment will be made unless the business conducted by NDS using the former MediSource assets has EBITDA in the twelve months following closing in excess of $130,000. If the MediSource business’s EBITDA meets or exceeds $500,000, the entire $500,000 will be paid. If the MediSource business’s EBITDA exceeds $130,000 but is less than $500,000, a pro rata portion of the $500,000 earn-out will be paid. (the “MediSource Earn-out”) As of July 31, 2020, no earn-out was achieved and nor anticipated for the remainder of the earn-out period.

• As of July 31, 2020, no earn-out was achieved.

Travis Bird Consulting Agreement

• In the event the EBITDA targets are met for one or both MediSource and Pantheon, Travis Bird was entitled to receive sales commissions equal to 15% of net sales during the first year following closing, and 10% of net sales during the second year pursuant to the “Travis Bird Consulting Agreement” described below As of July 31, 2020, no earn-out was achieved by Travis Bird and the Travis Bird Consulting Agreement was terminated effective July 20, 2020 and Travis Bird is no longer entitled to further commissions from future net sales.

• As of July 31, 2020, no earn-out was achieved.

The Company accounted for the Acquisition of MediSource and Pantheon as a business combination using the purchase method of accounting as prescribed in Accounting Standards Codification 805, Business Combinations (“ASC 805”) and ASC 820 – Fair Value Measurements and Disclosures (“ASC 820”). In accordance with ASC 805 and ASC 820, we used our best estimates and assumptions to accurately assign fair value to the tangible assets acquired, identifiable intangible assets and liabilities assumed as of the acquisition dates. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed. 

The initial fair value of contingent consideration derived from the earn out payments was originally estimated at the date of acquisition of MediSource and Pantheon to be $409,790 and $354,292, respectfully, recorded as a current liability. During fiscal year ending July 31, 2020, the Company adjusted the contingent consideration to 473,949 and 409,763, respectively, with such changes recognized in income from operations. Changes in fair values reflect new information about the probability and timing of meeting the conditions of the gross revenue target. Due to the termination of the Travis Bird Consulting Agreement, the earn out payments will not be achieved. Therefore, the liability for the contingent consideration was relieved. As of July 31, 2020, the fair value of the contingent consideration for MediSource and Pantheon was $0. 

Fair Value of the MediSource Acquisition

The following table summarizes the allocation of the preliminary purchase price as of the MediSource acquisition:

	Preliminary Allocation as of August 1, 2019
Cash and cash equivalents	$	13,895
Other current assets		11,864
Property and equipment, net		8,992
Accounts payable and accrued liabilities		(31,439	)
Net Tangible Assets	$	3,312
Tradename / Trademarks		47,600
Business Contracts		346,800
Non-Competes		124,600
Total Fair Value of Assets Acquired		522,312
Consideration:
Fair value of common stock		479,980
Contingent consideration		409,790
Consideration included in consulting agreement		104,168
Total Purchase Price		993,938
Goodwill	$	471,626

During fiscal year ending July 31, 2020, we identified indicators of impairment related to the Company’s acquisition of MediSource and Pantheon on August 1, 2019 (see Note 2 – Goodwill, Impairment or Disposal of Long-Lived Assets and Intangibles). 

Fair Value of the Pantheon Acquisition

The following table summarizes the allocation of the preliminary purchase price as of the Pantheon acquisition:

	Preliminary Allocation as of August 1, 2019
Cash and cash equivalents	$	35,410
Accounts receivable		133,269
Prepaid expenses		3,336
Inventory		266,071
Medical Equipment, net		67,299
Accounts payable		(53,242	)
Accrued liabilities		(15,573	)
Net Tangible Assets	$	436,570
Tradename / Trademarks		55,400
IP/Technology		41,500
Non-compete agreement		232,100
Customer Base		274,600
Total assets acquired	$	1,040,170
Consideration:
Fair value of common stock		671,972
Contingent consideration		354,292
Consideration included in consulting agreement		145,833
Goodwill	$	131,927

 The components of the acquired intangible assets were as follows:

	Preliminary Fair Value		Average Estimated Life
Tradename / Trademarks	$	103,000		15
IP/Technology		41,500		5
Business Contracts		346,800		15
Customer Base		274,600		10
Non-compete agreement		356,700		3
	$	1,112,600