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, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission file number 000-25169
GENEREX BIOTECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 98-0178636
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
33 Harbour Square, Suite 202, Toronto, Canada M5J2G2
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 416/364-2551
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant at October 15, 2001, based on the closing price as of that date, was
approximately $64,625,733.
At October 15, 2001, the registrant had 20,682,634 shares of Common Stock
outstanding.
Documents incorporated by reference: None
This Form 10-K/A amends the aggregate market value of voting stock held by
non-affiliates (set forth on the cover page), furnishes the information required
by Part III (Items 10, 11, 12 and 13) and includes two additional exhibits under
Part IV, Item 14.
Part III.
Item 10. Directors and Executive Officers of the Company
As of November 15, 2001, the executive officers and directors of Generex
Biotechnology Corporation (the "Company") were as follows:
Name Age Position Held with the Company
---- --- ------------------------------
Anna E. Gluskin 50 President, Chief Executive Officer and Director
Michael Hawke, M.D. 60 Director
Ivan M. Lieberburg, Ph.D., M.D. 52 Director
Pankaj Modi, Ph.D. 47 Vice President, Research and Development and Director
E. Mark Perri 40 Chairman, Chief Financial Officer and Director
Rose C. Perri 34 Chief Operating Officer, Treasurer, Secretary and Director
Jan Michael Rosen 50 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.
Anna E. Gluskin - Director since September 1997. Ms. Gluskin has served as
the President and Chief Executive Officer of the Company since October 1997. She
held comparable positions with Generex Pharmaceuticals, Inc. from its formation
in 1995 until its acquisition by the Company in October 1997.
Michael Hawke, M.D. - Director since March 2000. Dr. Hawke presently is a
Professor in the Departments of Otolaryngology and Pathology at the University
of Toronto, and is on the staff of the Departments of Otolaryngology at St.
Joseph's Health Center, The Toronto Hospital and Mount Sinai Hospital, all
located in Toronto. He has held these positions for more than the previous five
years. Dr. Hawke has approximately thirty years experience as a medical
researcher, educator and practitioner.
Ivan M. Lieberburg Ph.D., M.D. - Director since May 2001. Dr. Lieberburg is
an Executive Vice President and the Chief Scientific and Medical Officer for
Elan Corporation, plc (worldwide pharmaceutical and biotechnology company).
Prior to joining Elan in 1987, Dr. Lieberburg held faculty positions at Albert
Einstein College of Medicine and Mt. Sinai School of Medicine in New York. He
currently holds an appointment as Clinical Professor of Medicine at the
University of California, San Francisco.
Pankaj Modi, Ph.D. - Director since September 1997. Dr. Modi has served as
Vice President, Research and Development of the Company 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.
E. Mark Perri - Director since September 1997. Mr. Perri has served as the
Chairman and Chief Financial Officer of the Company since October 1997. He held
comparable positions with Generex Pharmaceuticals, Inc. from its formation in
1995 until its acquisition by the Company in October 1997.
2
Rose C. Perri - Director since September 1997. Ms. Perri has served as
Treasurer and Secretary of the Company 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 the
Company in October 1997.
Jan 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.
The Company entered into a joint venture with Elan Corporation, plc ("Elan") and
certain affiliates of Elan in January 2001. (For information relating to the
joint venture, see Item 13, "Certain Relationships and Related Transactions".)
Pursuant to the Securities Purchase Agreement dated January 16, 2001, between
the Company, Elan and Elan International Services, Ltd. ("EIS"), a subsidiary of
Elan, EIS has the right to nominate one director to the Company's Board of
Directors for so long as EIS or its affiliates own at least 1.0% of the issued
and outstanding shares of the Company's common stock. Dr. Lieberburg is the
nominee of EIS thereunder. An 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.
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
further amended and supplemented as of December 31, 2000. Under the consulting
agreement, the Company must use its best efforts to cause Dr. Modi to be
nominated for election and elected a director of the Company for as long as the
consulting agreement is in force. (For information relating to Dr. Modi's
consulting agreement, see Item 11, "Executive Compensation".)
Mark Perri and Rose Perri are siblings. There are no other 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 the
Company 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.
Dr. Gerald Bernstein was elected a Vice President of the Company effective as of
October 1, 2001. Dr. Bernstein acts as a key liaison for the Company on medical
and scientific affairs to the medical, scientific and financial communities and
consults with the company 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.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that the Company's
directors and executive officers, and any persons who own more than ten percent
of the Company's common stock, file with the Securities and Exchange Commission
("SEC") initial reports of ownership and reports of changes in ownership of the
common stock and other equity securities of the Company. Such persons are
required by SEC regulations to furnish the Company with copies of all such
reports that they file. To the knowledge of the Company, based upon its review
of these reports, all Section 16 reports required to be filed by our directors
and executive officers during the fiscal year ended July 31, 2001 were filed on
a timely basis.
3
Item 11. Executive Compensation
Compensation of Executive Officers
The following table sets forth, for the Company'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 the
Company other than the CEO whose salary and bonus payments exceeded $100,000 for
the fiscal year ended July 31, 2001.
Summary Compensation Table
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards
------
Name and Year Salary Bonus Other
Principal Ended ($) ($) Annual
Position July 31 (3) Compensation Options (#)
---------------------------------------------------------------------------------------------------
Anna E. Gluskin (1), 2001 127,240 250,000 * -0-
President and 2000 105,385 -0- * 300,000
Chief Executive 1999 136,483 -0- * -0-
Officer
E. Mark Perri (1), 2001 95,081 180,000 * -0-
Chairman and 2000 103,249 -0- * 250,000
Chief Financial 1999 120,777 -0- * -0-
Officer
Rose C. Perri (1), 2001 81,068 100,000 * -0-
Chief Operating, 2000 97,147 -0- * 250,000
Officer, Treasurer 1999 120,777 -0- * -0-
and Secretary
Pankaj Modi (2), 2001 250,000 300,000 * 150,000 (4)
Vice President, 2000 89,723 5,302 * 300,000
Research and 1999 87,472 4,374 * -0-
Development
----------------------
* Perquisites and other personal benefits, securities or other property received
by each executive officer did not exceed the lesser of $50,000 or 10% of such
executive officer's salary and bonus.
(1) Portions of the cash compensation paid to Ms. Gluskin, Mr. Perri and Ms.
Perri are attributable to amounts paid indirectly through a management services
agreement with a corporation of which Ms. Gluskin, Mr. Perri and Ms. Perri are
equal owners.
(2) All of the cash compensation paid to Dr. Modi is paid indirectly to him
through a corporation owned 100% by him.
(3) Cash compensation is stated in the table in U.S. dollars. To the extent any
cash compensation was paid in Canadian dollars, it has been converted into U.S.
dollars based on the weighted average Canadian/U.S. dollar exchange rate for the
years ended July 31, 2001, 2000 and 1999, respectively.
(4) Granted on October 23, 2001 with effect as of July 31, 2001 pursuant to the
terms of Dr. Modi's consulting agreement. These options were granted under the
Company's 2001 Stock Option Plan, which is subject to stockholder approval.
4
Option Grants during the 2001 Fiscal Year
The following tables set forth information related to options to
purchase the Company's common stock granted to the CEO and the named executive
officers during the fiscal year ended July 31, 2001.
Potential realizable value at
assumed annual rates of stock
Individual grants appreciation for option term
---------------------------------------------------------------------------- ----------------------------
Percent of
Number of total options
securities granted to
underlying employees Exercise of
options in fiscal base price Expiration
Name granted (#) year (%)(2) ($/Sh) date 5% ($) 10%
----------------- ----------- ----------- ----------- ---------- -------- ------
Anna E. Gluskin 0 --- --- --- --- ---
E. Mark Perri 0 --- --- --- --- ---
Rose C. Perri 0 --- --- --- --- ---
Pankaj Modi 150,000 (1) 12.0 8.7 9/24/06 360,000 796,500
------------------------
(1) Granted on October 23, 2001 with effect as of July 31, 2001 pursuant to the
terms of Dr. Modi's consulting agreement. These options were granted under
the Company's 2001 Stock Option Plan, which is subject to stockholder
approval.
(2) Includes options granted to consultants and advisors.
Fiscal Year End Option Values
No options were exercised by the CEO or the named executive officers
during the fiscal year ended July 31, 2001. The following table provides
information relating to the number and value of options held by the CEO and the
named executive officers at fiscal year end.
Number of securities
underlying exercised Value of unexercised
options at in-the-money options
July 31, 2001 at July 31, 2001
Shares acquired Value (#) ($)
Name on exercise (#) realized ($) Exercisable/Unexercisable Exercisable/Unexercisable (1)
---- --------------- ------------ ------------------------- -----------------------------
Anna E. Gluskin -0- -0- 300,000/0 537,500/0
E. Mark Perri -0- -0- 250,000/0 490,625/0
Rose C. Perri -0- -0- 250,000/0 490,625/0
Pankaj Modi -0- -0- 300,000/150,000 665,625/0
-----------------------------------------------------------------------------------------------------------------------------
(1) Based on the closing price of our common stock ($4.25) at October 15, 2001.
5
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
None of our directors received any cash compensation for their services
as directors during the fiscal year ended July 31, 2001. Dr. Hawke was granted
options on May 18, 2001 under the Company's 2001 Stock Option Plan to purchase
20,000 shares of the Company's common stock in recognition of his service as a
director. Mr. Rosen was granted options on August 18, 2000 under the Company's
2000 Stock Option Plan to purchase 20,000 shares of the Company's common stock
and options on May 18, 2001 under the 2001 Plan to purchase 20,000 shares of the
Company's common stock in recognition of his service as a director. The options
under the 2001 Plan were granted subject to stockholder approval of the 2001
Plan.
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, the Company and
Generex Pharmaceuticals, Inc., a wholly-owned subsidiary of the Company. 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 the Company and Generex
Pharmaceuticals, and both the Company and Generex Pharmaceuticals are jointly
and severally responsible for the payment to Dr. Modi of all amounts due under
the 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 the
Company at any time after January 1, 2003 upon 12 months' prior written notice.
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. During the first calendar
quarter of 2001, a $300,000 bonus was paid to Dr. Modi in respect of Dr Modi's
services in securing the development and license agreement between the Company
and Eli Lilly and Company ("Lilly"). Dr. Modi will also receive certain
additional bonus payments based upon the Lilly agreement or any similar
agreements entered into by the Company 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 the Company common stock in each of the next ten
fiscal years, starting with the fiscal year ending July 31, 2001. The options
may be granted only under option plans of the Company that have been approved by
the stockholders.
In connection with amending and supplementing the consulting agreement
in January 1998, the Company issued 1,000 shares of Special Voting Rights
Preferred Stock ("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 the Company's Board of Directors if a change of control occurs; and
o the holders of Special Preferred Stock have the right to approve any
transaction that would result in a change of control.
6
A "change of control" is deemed to occur if the Company's founders
(namely, Ms. Gluskin, Dr. Modi, Mr. Perri or Ms. Perri) should cease to
constitute at least 60% of the Company's directors, or if any person becomes
either Chairman of the Board of Directors or Chief Executive Officer of the
Company 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.
Compensation Committee Interlocks and Insider Participation
Ms. Gluskin, Dr. Modi, Mr. Perri and Ms. Perri, all of whom are both
directors and executive officers of the Company, participated during the fiscal
year ended July 31, 2001 in some discussions and decisions of the Board of
Directors concerning compensation to be paid to the executive officers of the
Company. Effective July 31, 2001, all decisions regarding executive compensation
are made by the Compensation Committee of the Board of Directors. Dr. Hawke is
chairman of the Compensation Committee and Dr. Lieberburg and Mr. Rosen are the
other members of the Compensation Committee. For information relating to
transactions involving the Company and Ms. Gluskin, Mr. Perri and Ms. Perri, see
Item 13, "Certain Relationships and Related Transactions".
No executive officer of the Company 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 the Company (excluding
entities that are wholly owned by one or more of the executive officers).
Item 12. Security Ownership Of Certain Beneficial Owners And Management
The table on the following page sets forth information regarding the beneficial
ownership of our common stock by:
o Our executive officers and directors;
o All directors and executive officers as a group; and
o Each person known to us to beneficially own more than five percent
(5%) of our outstanding shares of common stock.
The information contained in this table is as of October 15, 2001. At
that date, we had 20,682,634 shares of common stock outstanding. In addition to
our common stock, we have outstanding 1,000 shares of our Special Voting Rights
Preferred Stock. All of the shares of Special Voting Rights Preferred Stock are
owned by Dr. Pankaj Modi. In connection with the Company's joint venture with
Elan, the Company issued 1,000 shares of Series A Preferred Stock, all of which
are presently held of record by an affiliate of Elan.
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.
Name of
Beneficial Owner Beneficial Ownership
---------------- --------------------
Number of Percent of Class
Shares
(i) Directors and Executive Officers
Anna E. Gluskin 1,488,127(1) 7.2%
Michael Hawke, M.D. 71,000(2) *
Ivan M. Lieberburg, Ph.D., M.D. 10,000(3) *
Pankaj Modi, Ph.D. 1,400,200(4) 6.8%
7
Name of
Beneficial Owner Beneficial Ownership
---------------- --------------------
Number of Percent of Class
Shares
E. Mark Perri 4,542,792(5) 22.0%
Rose C. Perri 1,438,026(6) 7.0%
Jan Michael Rosen 92,587(7) *
Officers and directors as a group 6,666,732(8) 32.2%
(ii) Other Beneficial Owners (and their addresses)
EBI, Inc. In Trust
c/o Miller & Simons
First Floor, Butterfield Square
P.O. Box 260 1,441,496(9) 7.0%
Providencials
Turks and Cacaos Islands
British West Indies
GHI, Inc. In Trust
c/o Miller & Simons
First Floor, Butterfield Square
P.O. Box 260 2,500,050(10) 12.1%
Providencials
Turks and Cacaos Islands
British West Indies
Smallcap World Fund, Inc.
c/o Capital Research and 1,243,467(11) 6.0%
Management Company
333 South Hope Street
Los Angeles, CA 90071
-------------------
*Less than one percent.
(1) Includes 1,188,000 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 the Company's 1998 Stock Option Plan (the "1998 Plan") and 200,000
shares issuable upon the exercise of an option granted under the Company's 2000
Stock Option Plan (the "2000 Plan").
(2) Includes 50,000 shares issuable upon the exercise of an option granted under
the 1998 Plan and 20,000 shares issuable upon the exercise of an option granted
under the 2000 Plan, but does not include 20,000 shares issuable upon the
exercise of an option granted under the Company's 2001 Stock Option Plan (the
"2001 Plan") which is not presently exercisable but will become exercisable if
the 2001 Plan is approved by the stockholders.
(3) Does not include any shares that are owned by, or that may be acquired by,
Elan or its affiliates. See Item 13, "Certain Relationships and Related
Transactions" for a description of shares of our common stock that are owned by,
or that may be acquired by, Elan or its affiliates.
(4) 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. Does not include 150,000 shares issuable upon the
exercise of an option granted under the 2001 Plan which is not presently
exercisable but will become exercisable if the 2001 Plan is approved by the
stockholders. The options granted under the 2001 Plan were granted on October
23, 2001 with effect as of July 31, 2001 pursuant to the terms of Dr. Modi's
consulting agreement, as amended. Dr. Modi also owns all the outstanding shares
of the Company's Special Voting Rights Preferred Stock. This stock is not
convertible into common stock.
8
(5) Includes 45,914 shares owned of record by Mr. Perri, and a total of
1,529,382 shares beneficially owned by Mr. Perri but owned of record by EBI,
Inc. (1,100,000 shares), GHI, Inc. (124,050 shares) and First Marathon
Securities Corp. (305,332 shares). Also includes: (a) 100,000 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, (b)
2,376,000 shares owned of record by GHI, Inc., which Mr. Perri may be deemed to
beneficially own because of his power to vote the shares but which are
beneficially owned by Ms. Gluskin or Ms. Perri; and (c) 341,496 shares owned of
record by EBI, Inc., which Mr. Perri may be deemed to beneficially own because
of his power to vote the shares but which are beneficially owned by other
shareholders because they are entitled to the economic benefits of the shares.
(6) Includes 1,188,000 shares owned of record by GHI, Inc. that are beneficially
owned by Ms. Perri, 100,000 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.
(7) Includes 1,800 shares owned of record by Uniworld Travel and Tours, Inc.,
and 20,000 shares issuable upon the exercise of an option granted under the 2000
Plan, but does not include 20,000 shares issuable upon exercise of an option
granted under the 2001 Plan which is not presently exercisable but will become
exercisable if the 2001 Plan is approved by the stockholders.
(8) Includes 500,000 shares issuable upon presenting exercisable options granted
under the 1998 Plan, and 690,000 shares issuable upon the exercise of options
granted under the 2000 Plan. Does not include any shares issuable upon the
exercise of options granted under the 2001 Plan, all of which are subject to
stockholder approval of the 2001 Plan. Includes 1,441,496 shares owned of record
by EBI, Inc. but beneficially owned or deemed to be beneficially owned by Mr.
Perri. Includes 2,500,050 shares owned of record by GHI, Inc. but beneficially
owned by Ms. Gluskin, Mr. Perri or Ms. Perri (but eliminates any doublecounting
of shares that are beneficially owned by Ms. Gluskin and Ms. Perri but also
deemed to be beneficially owned by Mr. Perri).
(9) All these shares also are deemed to be beneficially owned by Mr. Perri
because he has the sole power to vote the shares. With respect to 1,100,000 of
the shares owned of record by EBI, Inc., Mr. Perri also has investment power and
otherwise is entitled to the economic benefits of ownership.
(10) Mr. Perri beneficially owns 124,050 of the shares owned of record by GHI,
Inc. by reason of his ownership of investment power and other economic benefits
associated with such shares and his sole power to vote the shares. Ms. Gluskin
and Ms. Perri each own beneficially 1,188,000 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 and Ms. Perri also are deemed to be beneficially owned by Mr. Perri
because he has the sole power to vote the shares.
(11) Includes warrants to purchase a total of 164,467 shares of our common
stock.
9
Item 13. Certain Relationships and Related Transactions
The Company acquired Generex Pharmaceuticals, Inc. in October 1997.
Prior to the Company's acquisition of Generex Pharmaceuticals, it was a private
Canadian corporation majority-owned and controlled by Mr. Perri, Ms. Perri and
Ms. Gluskin. Unless otherwise indicated, the transactions described below
occurred prior to the acquisition of Generex Pharmaceuticals or pursuant to
contractual arrangements entered into prior to that time. The Company 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 the Company.
Real Estate Financing Transactions: In May 1997, EBI, Inc., a company
controlled by Mr. 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 the Company'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, 2001, 2000 and 1999. The balance due from EBI at July 31,
2001, was $508,165 (CAD) (approximately $332,289 (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 the Company.
Loans to and from Stockholders: Between November 1995 and July 31,
1998, companies owned and controlled by Mr. Perri, Ms. 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. Perri, Ms. 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. Perri, Ms. Perri and Ms. Gluskin than to Generex
Pharmaceuticals. These transactions and financing arrangements were mostly
initiated prior to the transaction in which the Company acquired Generex
Pharmaceuticals, and no such transactions have taken place since January 1,
1999. The Company 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 the Company.
Loans to Executive Officers: On May 3, 2001, the Company loaned $334,300
each to Mr. Perri, Ms. Perri and Ms. Gluskin in exchange for promissory notes.
These notes bear interest at 8.5 percent per annum and are payable in full on
May 1, 2002. These notes are guaranteed by GHI, Inc., a related company owned by
these officers and secured by a pledge of 2,500,000 shares of the Company's
common stock currently owned by GHI, Inc. As of October 31, 2001, the balance
outstanding on these notes, including accrued interest, was $ 1,046,215. The
loans were approved by a majority of the disinterested directors.
Joint Venture with Elan: In January 2001, we established a joint venture
with Elan International Services, Ltd. ("EIS"), a wholly owed subsidiary of Elan
Corporation, plc ("Elan"). Pursuant to the Securities Purchase Agreement dated
January 16, 2001, between the Company, Elan and EIS, EIS has the right to
nominate one director to the Company's Board of Directors for so long as EIS or
its affiliates own at least 1.0% of the issued and outstanding shares of the
Company's common stock. Dr. Lieberburg is the nominee of EIS thereunder.
10
In connection with the transaction, EIS purchased 344,116 shares of our
common stock for $5,000,000 and was issued a warrant to acquire 75,000 shares of
our common stock at $25.15 per share. If the joint venture achieves certain
milestones, we may require EIS to purchase an additional $1,000,000 of our
common stock at a 30% premium to the then prevailing fair market value of our
common stock. EIS also purchased 1,000 shares of a new series of our preferred
stock, designated as Series A Preferred Stock, for $12,015,000. We applied the
proceeds from the sale of the Series A Preferred Stock to subscribe for an 80.1%
equity ownership interest in Generex (Bermuda), Ltd. EIS paid in capital of
$2,985,000 to subscribe for a 19.9% equity interest in Generex (Bermuda), Ltd.
While we initially own 80.1% of the joint venture entity, EIS has the right,
subject to certain conditions, to increase its ownership up to 50% by exchanging
the Series A Preferred Stock for 30.1% of our interest in the joint venture
entity. Alternatively, the Series A Preferred Stock may be converted, under
certain conditions, into shares of our common stock at a conversion price of
$25.71 per share. The shares of our common stock and shares of Series A
Preferred Stock presently are held of record by an affiliate of EIS.
Part IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
23.1.1. Supplemental Consent of Deloitte & Touche LLP,
independent public accountant.
23.1.2. Supplemental Consent of WithumSmith+Brown,
independent public accountant.
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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 by the
undersigned, thereunto duly authorized, this 26 day of November, 2001.
GENEREX BIOTECHNOLOGY CORPORATION
By: /s/ Anna E. Gluskin
----------------------------
Anna E. Gluskin, President
Name Capacity in which signed Date
---- ------------------------ ----
/s/ Anna E. Gluskin President, Chief Executive Officer November 26, 2001
--------------------------- and Director
Anna E. Gluskin
/s/ E. Mark Perri Chairman, Chief Financial Officer November 26, 2001
--------------------------- and Director
E. Mark Perri (principal financial and accounting officer)
/s/ Rose C. Perri Secretary, Treasurer, Chief Operating November 26, 2001
--------------------------- Officer and Director
Rose C. Perri
/s/ Pankaj Modi* Vice President, Research and Development November 26, 2001
--------------------------- and Director
Pankaj Modi
/s/ Michael Hawke* Director November 26, 2001
---------------------------
Michael Hawke
/s/ Ivan M. Lieberburg* Director November 26, 2001
---------------------------
Ivan M. Lieberburg
/s/ Jan Michael Rosen* Director November 26, 2001
---------------------------
Jan Michael Rosen
*By /s/ E. Mark Perri
---------------------------
E. Mark Perri, as Attorney-in-fact
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