10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended July 31, 2006

o 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	(I.R.S. Employer
incorporation or organization)	Identification No.)
33 Harbour Square, Suite 202, Toronto, Canada	M5J 2G2
(Address of principal executive offices)	(Zip Code)

(416) 364-2551

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $.001 par value per share	The NASDAQ Stock Market LLC

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes oNo þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes oNo þ

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 reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þNo o

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. o No þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer oAccelerated filer þNon-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes oNo þ

As of January 31, 2006, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $82,310,308 based on the closing sale price as reported on the NASDAQ Capital Market. Generex Biotechnology Corporation has no non-voting common equity. At October 10, 2006, there were 107,616,478 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Proxy Statement for the registrant’s Annual Meeting of Stockholders, or an amendment to this Annual Report on Form 10-K, to filed within 120 after the end of the fiscal year ended July 31, 2006, are incorporated by reference into Part III of this Annual Report on Form 10-K.

Generex Biotechnology Corporation

Form 10-K

July 31, 2006

Index

		Page
Forward-Looking Statements		1
Part I
Item 1.	Business.	2
Item 1A.	Risk Factors.	18
Item 1B.	Unresolved Staff Comments.	23
Item 2.	Properties.	23
Item 3.	Legal Proceedings.	24
Item 4.	Submission of Matters to a Vote of Security Holders.	25
Part II
Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	26
Item 6.	Selected Financial Data.	28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	29
Item 8.	Financial Statements and Supplementary Data.	43
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	103
Item 9A.	Controls and Procedures.	103
Item 9B.	Other Information.	104
Part III
Item 10.	Directors and Executive Officers of the Registrant.	104
Item 11.	Executive Compensation.	104
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	104
Item 13.	Certain Relationships and Related Transactions.	104
Item 14.	Principal Accountant Fees and Services.	104
Part IV
Item 15.	Exhibits and Financial Statement Schedules.	105
Signatures		116
Schedule II		117

As used herein, the terms the “Company,” “Generex,” “we,” “us,” or “our” refer to Generex Biotechnology Corporation, a Delaware corporation.

Forward-Looking Statements

Certain matters in this Annual Report on Form 10-K, including, without limitation, certain matters discussed under Item 1 - Business, Item 1A - Risk Factors, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 7A - Quantitative and Qualitative Disclosures about Market Risk, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this Annual Report that address activities, events or developments that we expect or anticipate will or may occur in the future, including such matters as our projections, future capital expenditures, business strategy, competitive strengths, goals, expansion, market and industry developments and the growth of our businesses and operations, are forward-looking statements. These statements can be identified by introductory words such as "expects," “anticipates,” "plans," "intends," "believes," "will," "estimates," "forecasts," "projects" or words of similar meaning, and by the fact that they do not relate strictly to historical or current facts. Our forward-looking statements address, among other things:

· our expectations concerning product candidates for our technologies;

· our expectations concerning existing or potential development and license agreements for third-party collaborations and joint ventures;

· our expectations of when different phases of clinical activity may commence;

· our expectations of when regulatory submissions may be filed or when regulatory approvals may be received; and

· our expectations of when commercial sales of our products may commence and when actual revenue from the product sales may be received.

Any or all of our forward-looking statements may turn out to be wrong. They may be affected by inaccurate assumptions that we might make or by known or unknown risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in our forward-looking statements. Among the factors that could affect future results are:

· the inherent uncertainties of product development based on our new and as yet not fully proven technologies;

· the risks and uncertainties regarding the actual effect on humans of seemingly safe and efficacious formulations and treatments when tested clinically;

· the inherent uncertainties associated with clinical trials of product candidates;

· the inherent uncertainties associated with the process of obtaining regulatory approval to market product candidates; and

· the inherent uncertainties associated with commercialization of products that have received regulatory approval.

Additional factors that could affect future results are set forth below under Item 1A. Risk Factors. We caution investors that the forward-looking statements contained in this Report must be interpreted and understood in light of conditions and circumstances that exist as of the date of this Report. We expressly disclaim any obligation or undertaking to update or revise forward-looking statements made in this Report to reflect any changes in management's expectations resulting from future events or changes in the conditions or circumstances upon which such expectations are based.

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Part I

Item 1. Business.

General

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

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

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

Subsidiaries

Following our reorganization in 1999, Generex Pharmaceuticals Inc., which is incorporated in Ontario, Canada, remained as our wholly-owned subsidiary. All of our Canadian operations are performed by Generex Pharmaceuticals.

We formed Generex (Bermuda), Inc., which is organized in Bermuda, in January 2001 in connection with a joint venture with Elan International Services, Ltd., a wholly-owned subsidiary of Elan Corporation, plc, to pursue the application of certain of our and Elan's drug delivery technologies, including our platform technology for the buccal delivery of pharmaceutical products. In December 2004, we and Elan agreed to terminate the joint venture. Under the termination agreement, we retained all of our intellectual property rights and obtained full ownership of Generex (Bermuda). Generex (Bermuda) currently does not conduct any business activities.

In August 2003, we acquired Antigen Express, Inc. Antigen is engaged in the research and development of technologies and immunomedicines for the treatment of malignant, infectious, autoimmune and allergic diseases.

We formed Generex Pharmaceuticals (USA) LLC, which is organized in North Carolina, USA, in February 2006 as a wholly-owned subsidiary. Generex Pharmaceuticals (USA) LLC has not yet commenced any business operations. We formed Generex Marketing & Distribution Inc., which is organized in Ontario, Canada, in September 2006. Generex Marketing & Distribution Inc. has not yet commenced any business operations.

Overview of Business

We are engaged primarily in the research, development and commercialization of drug delivery systems and technologies. Our primary focus at the present time is our proprietary technology for the administration of formulations of large molecule drugs to the oral (buccal) cavity using a hand-held aerosol applicator. Through our wholly-owned subsidiary, Antigen, we have expanded our focus to include immunomedicines.

We seek to develop proprietary formulations of large molecule drugs that can be administered through the buccal mucosa, primarily the inner cheek walls, thereby eliminating or reducing the need for injections. All injection therapies involve varying degrees of discomfort and inconvenience. With chronic and sub-chronic diseases, the discomfort and inconvenience associated with injection therapies frequently results in less than optimal patient acceptance of, and compliance with, the prescribed treatment plan. Poor acceptance and compliance can lead to medical complications and higher disease management costs. Also, elderly, infirm and pediatric patients with chronic or sub-chronic conditions may not be able to self-inject their medications. In such cases, assistance is required which increases both the cost and inconvenience of the therapy.

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We believe that our buccal delivery technology is a platform technology that has application to many large molecule drugs and provides a convenient, non-invasive, accurate and cost-effective way to administer such drugs. We have identified several large molecule drugs as possible candidates for development, including estrogen, heparin, monoclonal antibodies, human growth hormone and fertility hormone, but to date have focused our development efforts on only one product, Generex Oral-lyn™, an insulin formulation administered as a fine spray into the oral cavity using our proprietary hand-held aerosol spray applicator known as RapidMist™.

Our subsidiary, Antigen, concentrates on developing proprietary vaccine formulations that work by stimulating the immune system to either attack offending agents (i.e., cancer cells, bacteria, and viruses) or to stop attacking benign elements (i.e., self proteins and allergens). Our immunomedicine products are based on two platform technologies that were discovered by Antigen’s founder and are in the early stages of development. Development efforts are underway in breast cancer, melanoma, prostate cancer, HIV, influenza virus, smallpox, SARS and Type I diabetes mellitus. We have established collaborations with clinical investigators at academic centers to advance these technologies.

We are a development stage company. From inception through the end of the 2006 fiscal year, we had not received any revenues from product sales. We have only two products that have been approved for commercial marketing and sale: our oral insulin formulation, Generex Oral-lyn™, which was approved for commercial marketing and sale in Ecuador; and our confectionary, Glucose RapidSpray™, which will be available for purchase in the United States and Canada. We expect to receive revenues from product sales in the fiscal year ending July 31, 2007.

We operate in only one segment: the research, development and commercialization of drug delivery systems and technologies for metabolic and immunological diseases.

Buccal Delivery Technology and Products

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

Buccal Insulin Product

Insulin is a hormone that is naturally secreted by the pancreas to regulate the level of glucose, a type of sugar, in the bloodstream. The term “diabetes” refers to a group of disorders that are characterized by the inability of the body to properly regulate blood glucose levels. When glucose is abundant, it is converted into fat and stored for use when food is not available. When glucose is not available from food, these fats are broken down into free fatty acids that stimulate glucose production. Insulin acts by stimulating the use of glucose as fuel and by inhibiting the production of glucose. In a healthy individual, a balance is maintained between insulin secretion and glucose metabolism.

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

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

If not treated, diabetes can lead to blindness, kidney disease, nerve disease, amputations, heart disease and stroke. Each year, between 12,000 and 24,000 people suffer vision impairment or complete blindness because of diabetes. Diabetes is also the leading cause of end-stage renal disease (kidney failure), accounting for about 40 percent of new cases.

In addition, about 60-70 percent of people with diabetes have mild to severe forms of diabetic nerve damage, which, in severe forms, can lead to lower limb amputations. Diabetics are also two to four times more likely to have heart disease, which is present in 75 percent of diabetes-related deaths, and are two to four times more likely to suffer a stroke.

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

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

We conducted the first clinical trials of our buccal insulin formulation with human subjects in Ecuador in January 1998. We ultimately conducted a number of studies in Ecuador in 1998, each of which involved a selection of between 8 and 10 patients. The principal purpose of these studies was to evaluate the effectiveness of our oral insulin formulation in humans compared with injected insulin and placebos. In March 2004, we entered into a Letter of Intent for the establishment of a joint venture with PharmaBrand S.A., a distributor of pharmaceutical products in Central and Latin America. In August 2004, we sought approval for the manufacturing, marketing, distribution and sale of Generex Oral-lyn™ and the RapidMist™ Diabetes Management System from the Ecuadorian Ministry of Public Health. In May 2005, we received approval from the Ecuadorian Ministry of Public Health for the commercial marketing and sale of Generex Oral-lyn™ for treatment of Type 1 and Type 2 diabetes. We have successfully completed of the delivery and installation of a turnkey Generex Oral-lyn™ filling operation at the facilities of PharmaBrand in Quito, Ecuador. PharmaBrand is our joint venture partner for the commercialization of Generex Oral-lyn™ in Latin America. The first commercial production run of Generex Oral-lyn™ in Ecuador was completed in May, 2006. The first commercial sales of Generex Oral-lyn™ by PharmaBrand in Ecuador occurred in June, 2006. We expect to receive the revenues from the sale of Generex Oral-lyn™ in Ecuador in the second quarter of our 2007 fiscal year.

On the basis of the test results in Ecuador and other pre-clinical data, we made an Investigatory New Drug submission to the Health Protection Branch in Canada (Canada's equivalent to the FDA) in July 1998, and received permission from the Canadian regulators to proceed with clinical trials in September 1998. We filed an Investigational New Drug application with the FDA in October 1998, and received FDA approval to proceed with human trials in November 1998. Annual reports have been filed with the FDA each year since that time.

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

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In April 2003, a Phase II-B clinical trial protocol was approved in Canada. Thereafter, a pilot trial was successfully undertaken in Ecuador (the results of which have been reported at several scientific symposia) to optimize the oral insulin formulation to transition to late-stage clinical trials. In September 2006 a Clinical Trial Application relating to our Generex Oral-lyn™ protocol for late-stage trials was approved by Health Canada; we expect to use the data collected from these trials in the New Drug Submission that will be prepared concurrently with the progression of the late-stage trials.

In anticipation of undertaking late-stage clinical trials of Generex Oral-lyn™ in Canada, we entered into an agreement with Cardinal Health PTS, LLC for the manufacture of clinical trial batches of Generex Oral-lyn™. Under the terms of the agreement, which we entered into in June 2006, production is contingent upon several conditions, including the execution of a quality agreement between the parties and our submission of a purchase order. We executed a clinical supply agreement with Cardinal Health and a related quality agreement in September 2006.

Buccal Glucose Product - Glucose RapidSpray™

In August 2006, we introduced our new Glucose RapidSpray™ product in the U.S. at the American Association of Diabetes Educators 33rd Annual Meeting & Exhibition in Los Angeles. Using our proprietary RapidMist™ platform technology, this product provides an alternative for people who require or want additional glucose in their diet and delivers a fat-free, low-calorie glucose formulation directly into the mouth. In September 2006, we entered into wholesale purchase agreement with Cardinal Health for the distribution of Glucose RapidSpray™ in retail stores across United States. We expect to procure additional distribution agreements with wholesalers and retail chains to distribute this product in stores throughout the United States. We anticipate that the product will be available in such stores in October, 2006.

Metformin Gum Product/Strategic Alliance

In May 2006, we established a collaborative alliance with Fertin Pharma A/S, a leading Danish manufacturer of medicinal chewing gum, for the development of a metformin medicinal chewing gum for the treatment of Type-2 diabetes mellitus and obesity. Metformin is a generic drug used to regulate blood glucose levels by reducing the amount of glucose produced by the liver, reducing the amount of glucose absorbed from food in the stomach, and by making the insulin produced by the body work more effectively to reduce the amount of glucose already in the blood. It is an important staple of the standard of care for patients with Type-2 diabetes mellitus.

Through this collaborative relationship, we will seek to combine our proprietary buccal drug delivery platform technologies with Fertin's know-how related to gum base formulations, solubilization systems, and taste masking/modification to create a metformin medicinal chewing gum that will deliver metformin into the body via the buccal mucosa rather than in its current tablet form. We anticipate that this delivery method, in addition to being much more rapid and providing a much more specific and effective dosing regimen, could avoid some of the adverse side effects associated with taking metformin in tablet form, such as nausea, vomiting, abdominal pain, diarrhea, abdominal bloating, and increased gas production. In addition, metformin gum could avoid the bitter taste and large doses associated with the tablet form and thus improve therapeutic compliance, particularly among younger patients.

We anticipate that we will conduct a clinical study in Canada during in late 2006 to establish bioequivalence with a Canadian Reference Product.  This will encompass the preparation and submission of a Clinical Trial Application (“CTA”) to Health Canada, the authorization to proceed, and the actual execution of the clinical study, which we estimate will be completed in the third or fourth quarter of our 2007 fiscal year.  Once completed, we anticipate that an Abbreviated New Drug Submission with full support data will be prepared and submitted to Health Canada, where we will be seeking regulatory approval/authorization for the manufacturing, marketing, and sale of the product.  A pre-CTA meeting may be initiated to provide Health Canada with the Study plans and receive concurrence of our initiatives. Similar regulatory activities will be conducted in Ecuador in fiscal 2007.

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If we successfully develop the metformin medicinal chewing gum, we would market it as a companion product to Generex Oral-lyn™. We believe that a combination therapy of Generex Oral-lyn™, metformin gum, and other traditional oral agents could optimize the treatment of Type-2 diabetes and, possibly, delay the onset of certain complications associated with diabetes.

Potential Buccal Morphine and Fentanyl Products

The delivery of morphine and fentanyl by oral formulation (pills) and injection for the treatment of moderate to severe breakthrough and postoperative pain often fails to provide patients with adequate relief and control because, among other reasons, breakthrough and postoperative pain are characterized as being moderate to severe in intensity and have a rapid onset of action and a short to medium duration. Not only does delivery by pills have a slow onset of action, it is often difficult for patients to adjust their doses, with the result that patients are either over or under medicated. Injections are invasive and require an attendant to administer the medication which reduces the patient's control over the pain and may cause increased anxiety. We believe that a buccal delivery formulation for morphine and fentanyl would have a critical series of attributes well suited for the treatment of breakthrough and post operative pain, would be cost-effective and would have a demonstrable improvement over current delivery methods, including fast access to the circulatory system, precise dosing control and a simple, self-administration procedure.

We made an Investigatory New Drug submission for buccal morphine to the Health Protection Branch in Canada in January 2002, and received permission from the Canadian regulators to proceed with clinical trials in March 2002. We made an Investigatory New Drug submission for fentanyl to the Health Protection Branch in Canada in August 2002, and received permission from the Canadian regulators to proceed with clinical trials in October 2002. During fiscal year ended July 31, 2006, we did not actively pursue our buccal morphine and buccal fentanyl projects.

Other Potential Buccal Products

We have had discussions of possible research collaborations with various pharmaceutical companies concerning use of our large molecule drug delivery technology with other compounds, including monoclonal antibodies, human growth hormone, fertility hormone, estrogen and heparin, and a number of vaccines. We have not aggressively pursued development opportunities apart from insulin because we believe it is more advantageous to concentrate our resources, particularly our financial resources, on commercializing the insulin product.

Immunomedicine Technology and Products

Our wholly-owned subsidiary Antigen is developing proprietary vaccine formulations based upon two platform technologies that were discovered by its founder, the Ii-Key hybrid peptides and Ii-Suppression. These technologies are applicable for either antigen-specific immune stimulation or suppression, depending upon the dosing and formulation of its products. Using active stimulation, we are focusing on major diseases such as breast and prostate cancer, H5 avian influenza and HIV. Autoimmune disease such as diabetes, multiple sclerosis and allergic asthma are the focus of our antigen-specific immune suppression work.

A peptide immunotherapeutic for patients with HER-2/neu positive breast cancer is currently in Phase I clinical trials. Based on positive results in that trial, we entered into an agreement in August 2006 with the Euroclinic, a private center in Athens, Greece, to commence clinical trials with the same compound as an immunotherapeutic vaccine for prostate cancer. We expect that the new prostate cancer studies will involve 30 patients and will evaluate primarily immunological responsiveness to a dose of the vaccine previously shown to be well tolerated in breast cancer patients. These studies are expected to begin in December, 2006.

The same technology used to enhance immunogenicity is being applied in the development of a synthetic peptide vaccine for H5N1 avian influenza, which could be produced more quickly and cost-efficiently than current inactivated influenza vaccines that contain trace levels of egg protein and involve time-consuming and costly production. In February 2006, representatives of Antigen held a Pre-Investigational New Drug application meeting with the FDA regarding plans for the commencement of clinical trials of this technology. We expect to conduct toxicology and pre-clinical lethal virus challenge studies in animals prior to submitting any Investigational New Drug application with respect to this technology.

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We have not filed an Investigational New Drug application to begin clinical trials with respect to Antigen’s technology, other than a Physician’s Investigational New Drug application for the Phase 1 trial in patients with stage II HER-2/neu positive breast cancer. All other immunomedicine products are in the pre-clinical stage of development.

Government Regulation

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

If requisite regulatory approvals are not obtained and maintained, our business will be substantially harmed. In many cases, we expect that extant and prospective development partners will participate in the regulatory approval process. The following discussion summarizes the principal features of food and drug regulation in the United States and other countries as they affect our business.

United States

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

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

·   quality test/studies;

·   pre-clinical tests /studies;

·   submission to the FDA of Investigational New Drug Applications (“INDs”) and/or Amendments for each planned human clinical trial;

·   FDA acceptance of INDs, which permit human clinical trials to commence;

·   commencement and completion of numerous human clinical trials to establish the safety and efficacy of the subject drug;

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

·   FDA approval of the New Drug Application, including approval of all product labeling

Quality and pre-clinical tests and studies include: laboratory evaluation of Drug Substance and Drug Product chemistry, formulation/manufacturing, and stability profiling, as well as a large number of animal studies to assess the potential safety and efficacy of each product. Typically, the pre-clinical studies consist of the following:

Pharmacology

· Primary and Secondary Pharmacodynamics

· Safety Pharmacology

· Other Pharmacodynamics

Pharmacokinetics (“PK”)

· Single and Multiple Dose Kinetics

· Tissue Distribution

· Metabolism

· PK Drug Interactions

· Other PK studies

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Toxicology

· Single and Multiple Dose Toxicity

· Genotoxicity

· Carcinogenicity

·Reproduction Toxicity

·Other Toxicity

The results of the quality and pre-clinical tests/studies, in addition to any non-clinical pharmacology, are submitted to the FDA along with the initial clinical study protocol (see descriptive of process below) as part of the initial IND and are reviewed by the FDA before the commencement of human clinical trials. Unless the FDA objects to it, the IND becomes effective 30 days following its receipt by the FDA. Subsequent clinical studies may begin as soon as the protocols are submitted. FDA reviews all protocols, protocol amendments, adverse event reports, study reports, and annual reports in connection with a new pharmacological product.

The IND for our oral insulin formulation became effective in November 1998. Amendments are also subsequently filed as new Clinical Studies and their corresponding Study Protocols are proposed. We filed an Investigational New Drug Application for buccal morphine in January 2002.  The Physician’s Investigational New Drug Application for the Phase 1 trial of AE37, Antigen’s synthetic peptide vaccine designed to stimulate a potent and specific immune response against tumors expressing the HER-2/neu oncogene, in patients with stage II HER-2/neu positive breast cancer became effective in March 2006. 

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

Clinical trials are typically conducted in three sequential phases (Phase I, Phase II, and Phase III), but the phases may overlap. Phase I clinical trials test the drug on healthy human subjects for safety and other aspects, but not effectiveness. Phase II clinical trials are conducted in a limited patient population to gather evidence about the efficacy of the drug for specific purposes, to determine dosage tolerance and optimal dosages, and to identify possible adverse effects and safety risks. When a compound has shown evidence of efficacy and acceptable safety in Phase II evaluations, Phase III clinical trials are undertaken to evaluate clinical efficacy and to test for safety in an expanded patient population at clinical trial sites in different geographical locations.  The FDA and other regulatory authorities require that the safety and efficacy of therapeutic product candidates be supported through at least two adequate and well-controlled Phase III clinical trials (known as “Pivotal Trials”).  The successful completion of Phase III clinical trials is a mandatory step in the approval process for the manufacturing, marketing, and sale of products.

In the United States, the results of quality, pre-clinical studies and clinical trials, if successful, are submitted to the FDA in a New Drug Application (“NDA”) to seek approval to market and commercialize the drug product for a specified use. The NDA is far more specific than the IND and must also include proposed labeling and detailed technical sections based on the data collected. The FDA has 10 months to take an action for a standard application (and shorter for a priority application). It may deny a NDA if it believes that applicable regulatory criteria are not satisfied. The FDA also may require additional testing for safety and efficacy of the drug. We cannot be sure that any of our proposed products will receive FDA approval. The multi-tiered approval process means that our products could fail to advance to subsequent steps without the requisite data, studies, and FDA approval along the way. Even if approved by the FDA, our products and the facilities used to manufacture our products will remain subject to review and periodic inspection by the FDA.

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

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One final hurdle that is closely associated with the cGMP inspections is the Pre Approval Inspection that FDA carries out prior to the issuance of a marketing license. FDA inspectors combine cGMP compliance with a review of research and development documents that were used in the formal New Drug Application. A close inspection of historic data is reviewed to confirm data and to demonstrate that a company has carried out the activities as presented in the New Drug Application. This is generally a long inspection and requires a team of individuals from the company to “host” the FDA inspector(s).

Foreign Countries

Before we are permitted to market any of our products outside of the United States, those products will be subject to regulatory approval by foreign government agencies similar to the FDA.  These requirements vary widely from country to country. Generally, however, no action can be taken to market any drug product in a country until an appropriate application has been submitted by a sponsor and approved by the regulatory authorities in that country. Again, similar to the FDA, each country will mandate a specific financial consideration for the Marketing Application dossiers being submitted. Although an important consideration, FDA approval does not assure approval by other regulatory authorities. The current approval process varies from country to country, and the time spent in gaining approval varies from that required for FDA approval. The Canadian regulatory process is substantially similar to that of the United States. We obtained regulatory approval to begin clinical trials of our oral insulin formulation in Canada in November 1998. We obtained regulatory approval to begin clinical trials of our buccal morphine product in Canada in March 2002.  In April 2003, we received approval of an Oral-lyn™ Phase II-B clinical trial protocol in Canada.  We received regulatory approval to begin clinical trials of our fentanyl product in Canada in October 2002.  In May 2005, we received approval from the Ecuadorian Ministry of Public Health for the commercial marketing and sale of Generex Oral- lyn™ for treatment of Type 1 and Type 2 diabetes. In September 2006 Health Canada approved our Clinical Trial Application in respect of our proposed Generex Oral-lyn™ protocol for late-stage trials; we expect to use the data collected from these trials in the New Drug Submission that will be prepared concurrently with the progression of the late-stage trials.

Marketing

PharmaBrand, our joint venture partner for the commercialization of Generex Oral-lyn™ in Latin and South America, launched commercial sales of Generex Oral-lyn^TM in Ecuador in June, 2006. Together with PharmaBrand, we implemented education, marketing and training programs for physicians in Ecuador to support the sale of Generex Oral-lyn™. Generex Oral-lyn™ is available through physician referrals in Ecuador. We possess the worldwide marketing rights to our oral insulin product.

In September 2006, we entered into wholesale purchase agreement with Cardinal Health for the distribution of Glucose RapidSpray™ in retail stores across United States. We expect to procure additional distribution agreements with wholesalers and retail chains for the purposes of distribution of Glucose RapidSpray™ across United States and Canada in fiscal 2007.

With respect to marketing, we intend to rely on contracting or collaborative arrangements with other companies that possess strong pharmaceutical marketing and distribution resources to perform these functions for us. Accordingly, we may not have the same control over marketing and distribution that we would have if we conducted these functions ourselves. Except for our arrangements with Cardinal Health for the distribution of Glucose RapidSpray™, we do not have any agreements with any other companies for marketing or distributing our products.

Manufacturing

In December 2000, we completed our pilot manufacturing facility for Generex Oral-lyn™ in Toronto, Canada in the same commercial complex in which our laboratories are located. In the first quarter of fiscal year 2006, we initiated a scale-up commercial production run of several thousand canisters of Generex Oral-lyn™ at this facility. We shipped the production run to PharmaBrand in support of the launch of commercial sales of Generex Oral-lyn™ in Ecuador.. We will need to significantly increase our manufacturing capability or engage contract manufacturers in order to manufacture any product in significant commercial quantities.

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In March 2006, we successfully completed of the delivery and installation of a turnkey Generex Oral-lyn™ filling operation at the facilities of PharmaBrand, S.A. in Quito, Ecuador for the purposes of commercial supply and sales in that country and, as we procure the necessary registrations, in other South American countries. We anticipate that the capacity of this facility will be sufficient to support additional clinical trials requirements in other countries in Latin America and initial commercial sales in Ecuador.

In anticipation of undertaking late-stage clinical trials of Generex Oral-lyn™ in Canada, we entered into an agreement with Cardinal Health PTS, LLC in June 2006, pursuant to which Cardinal Health will manufacture clinical trial batches of Generex Oral-lyn™. Under the terms of the agreement, Cardinal Health will formulate and fill clinical trial batches of canisters at its manufacturing and analytical services facility in Research Triangle Park, North Carolina. Cardinal Health will schedule production after certain conditions are satisfied, including the execution of a quality agreement between the parties and receipt of a purchase order from us. The parties’ performance under the agreement will be subject to a clinical supply agreement, which we signed in September 2006.

Our subsidiary Antigen leases office and laboratory space in Worcester, Massachusetts, which is sufficient for its present needs. The laboratory is approximately 820 square feet and has permission to store and use biohazardous (including recombinant DNA materials) and flammable chemicals.

Raw Material Supplies

The excipients used in our formulation are available from numerous sources in sufficient quantities for clinical purposes, and we believe that they will be available in sufficient quantities for commercial purposes when required, although we have not yet attempted to secure a guaranteed commercial supply of any such products. Components suitable for our RapidMist™ device are available from a limited number of potential suppliers, as is the chemical propellant used in the device. The components which now comprise the device will be utilized with the commercial version of our insulin product in Ecuador and other South American countries, as well as the components for the commercial version of our new glucose product in the United States. We have secured supply arrangements with manufacturers for each of the components and the propellant that we presently use in our RapidMist™ device for commercial quantities of such components All such suppliers are prominent, reputable and reliable suppliers to the pharmaceutical industry. Because we now have a single supplier for each of these components and propellant, however, we are more vulnerable to supply interruptions than would be the case if we had multiple suppliers for each component. We do not believe that the risk of supply for proprietary raw materials or device components is unusual in the pharmaceutical industry.

Insulin is available worldwide from only a few sources. However, alternative supplies of insulin are under development. We currently procure recombinant human insulin crystals for clinical trials and commercial production in Ecuador from time to time from a European supplier whose production facility is GMP certified by the FDA and European health authorities. We are working towards the establishment of a guaranteed long-term supply arrangement with this supplier. We are also exploring potential alternative sources of supply. We also believe future development and marketing partners under licensing and development agreements, if any, will provide, or assist us to obtain, pharmaceutical compounds that are used in products covered under such agreements. Components used in the production of our Glucose RapidSpray™, glucose and all excipients, are available from a number of potential suppliers. We have not secured commercial supply agreements with any of them.

While morphine is a controlled substance, it is readily available for use in clinical trials. We currently have the appropriate licenses and facilities for acquiring and storing morphine in Canada. Various regulatory issues surround the import of morphine into the United States, and we will need to address these issues prior to commencing clinical trials in the United States.

Raw materials for our pre-clinical development stage immunomedicine products include amino acids (for peptide therapeutics) and oligonucleotides (for genetic constructs). These materials are readily available from commercial suppliers. We utilize the services of several commercial laboratories for the manufacturing of our pre-clinical development stage immunomedicine products.

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Intellectual Property

We hold a number of patents in the United States and foreign countries covering our buccal and other delivery technologies. We also have developed brand names and trademarks for products in all areas. We consider the overall protection of our patent, trademark and other intellectual property rights to be of material value and acts to protect these rights from infringement.

Patents are a key determinant of market exclusivity for most branded pharmaceutical products. Protection for individual products or technologies extends for varying periods in accordance with the expiration dates of patents in the various countries. The protection afforded, which may also vary from country to country, depends upon the type of patent, its scope of coverage and the availability of meaningful legal remedies in the country.

We currently have nineteen issued U.S. patents and three pending U.S. patent application pertaining to aspects of buccal delivery technology including oral administration of macromolecular formulations (including insulin) as well as pain relief medications (e.g. morphine, fentanyl).  We currently hold two issued Canadian patents and eleven pending Canadian patent applications also relating to aspects of buccal drug delivery technology.  We also hold fifty-three issued patents and forty-eight pending patent applications covering our drug delivery technology in jurisdictions other than the U.S. and Canada, including Japan.  In addition, we have one issued Canadian patent, one U.S. patent and one pending U.S. patent application pertaining to delivery technologies other than our buccal delivery technology.

We also have an indirect interest in seven drug delivery patents held by another company, Centrum Biotechnologies, Inc.

Our subsidiary Antigen currently holds six issued U.S. patents, three Australian patents, four other foreign patents, six pending U.S. patent applications and thirty foreign patent applications concerning technology for modulating the immune system via activation of antigen-specific helper T lymphocytes. Some of these patents are held under exclusive licenses from the University of Massachusetts. Dr. Robert Humphreys, a retired officer of Antigen, and Dr. Minzhen Xu, an officer of Antigen, are the listed inventors or co-inventors on all of these patents and patent applications, including those licensed from the University of Massachusetts.

In addition to patents, we hold intellectual property in the form of trademark applications worldwide on products such as Generex Oral-lyn™. Trademarks have no effect on market exclusivity for a product, but are considered to have marketing value. Trademark protection continues in some countries as long as used; in other countries, as long as registered. Registration is for fixed terms and can be renewed indefinitely.

We possess the worldwide manufacturing and marketing rights to our oral insulin product.

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

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

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Competition

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

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

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

We consider other drug delivery and biotechnology companies to be direct competitors for the cooperation and support of major drug and biotechnology companies that own or market proprietary pharmaceutical compounds and technologies, as well as for the ultimate patient market. Of primary concern to us are the competitor companies that are known to be developing delivery systems for insulin and other pharmaceutical agents that we have identified as product candidates and technologies to enhance the presentation of peptide antigens.

The following descriptions of our competitors and their products were obtained from their filings with the Securities and Exchange Commission and/or information available on their websites.

Buccal Insulin Product

Nektar Therapeutics, formerly Inhale Therapeutic Systems, Inc. ("Nektar"), has developed, in collaboration with Pfizer Inc., a customized insulin formulation that is processed into a fine, dry powder and administered to the deep lung using a proprietary inhalation device developed for this purpose. In July 2006, Nektar announced that Pfizer will begin a phased-in rollout of Exubera® Inhalation Powder in the United States. It is expected that initial supplies of Exubera will be available across the U.S. beginning in September 2006. Nektar manufactures the Exubera Inhalers and supports the manufacturing of the powder processing for the insulin powder. Exubera has been approved in the United States, the European Union and Brazil for the treatment of adults with Type 1 or Type 2 diabetes for the control of high blood sugar levels. Nektar also is developing pulmonary products with large molecule drugs other than insulin and has stated that it is investigating the use of its inhalation technology with small molecule drugs.

Aradigm Corporation ("Aradigm"), which has announced a joint development agreement with Novo Nordisk A/S to jointly develop a pulmonary delivery system for insulin by inhalation, also may be considered a direct competitor of ours in the insulin area. Novo Nordisk is one of the two leading manufacturers of insulin in the world, the other being Eli Lilly and Company.  Aradigm and Novo Nordisk initiated Phase III clinical trials in September 2002 in Australia.  In April 2004, Novo Nordisk announced results from a planned interim analysis of the initial Phase III trial and decided to amend the current trial protocol.  In April 2006, Novo Nordisk announced that it expected to re-initiate the Phase III clinical trials of the AERx® insulin Diabetes Management System in the second quarter of 2006 on a worldwide basis with a primary focus on the European Union and the United States. The program is estimated to take three years to complete.

Other companies have announced development efforts relating to non-injection methods of delivering insulin or other large molecule drugs, including Alkermes Pharmaceuticals, Inc., which announced a collaboration with Lilly in April 2000 to develop a pulmonary method of administering insulin and is currently conducting Phase III clinical trials.  MannKind Corporation is developing an inhaled insulin product named Technosphere™ Insulin, which is currently conducting Phase III clinical trials in the United States and in Europe.  There are also a number of companies developing alternative means of delivering insulin in the form of oral pills, transdermal patches, and intranasal methods, which are at early stages of development.

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

Buccal Morphine and Fentanyl Products

Cephalon, Inc. currently markets Actiq® in the United States and has recently acquired the rights to the product in Europe. Actiq® delivers buccal transmucosal fentanyl to the cheek walls through the use of a lollipop. In November 1998, the FDA cleared Actiq® for marketing for use in the management of breakthrough cancer pain. The product was launched in March 1999 in the United States. In June 2006, Cephalon announced that it received an approval letter from the FDA for Fentora™ (fentanyl buccal tablet) and intends to submit a response to the FDA by the end of July. Apparently, the FDA has indicated that no additional safety or efficacy data for this product are required and that the labeling has been essentially finalized. Fentora™ is a fentanyl buccal tablet that is placed between the patient’s upper cheek and gum.

Nastech Pharmaceuticals is developing an intranasal formulation of morphine that is in Phase II clinical trials.  Results reported to date show the product to be safe and efficacious in the treatment of episodes of breakthrough pain. Nastech is currently seeking a licensing partner for this product.

Immunomedicine Technology and Products

A number of companies that are engaged in the development of immunomedicines employ technologies that are competitive to our subsidiary Antigen. Zycos Inc. has developed the Biotope® technology, and Cel-Sci Corporation has developed the LEAPS delivery technology. Epimmune, Inc., now Pharmexa-Epimmune, has developed the PADRE® technology. Pharmexa-Epimmune is a U.S. subsidiary of Pharmexa A/S, an international biotechnology company in the field of active immunotherapy and vaccines for the treatment of cancer, serious chronic and infectious diseases. These companies have initiated early stage clinical trials for several products for the treatment of cancer, autoimmune, and allergic diseases. These companies also have established collaborations with academic centers and other companies for the development of certain products.

Environmental Compliance

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

Research and Development Expenditures

A substantial portion of our activities to date have been in research and development. In the period from inception to July 31, 2006, our expenditures on research and development were $61,330,191. These included $6,191,528 in the year ended July 31, 2006, $7,750,731 in the year ended July 31, 2005 and $8,522,984 in the year ended July 31, 2004. The decrease in our research and development activities in 2006 compared to 2005 is due primarily to a reduction of clinical trial activities due to preparations for the Generex Oral-lyn™ Clinical Trial Application in Canada. The decrease in our research and development expenses in 2005 compared to 2004 was due principally to reduction of our level of research and development activities, offset by increased activities of Antigen and regulatory consultants.

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Financial Information About Geographic Areas

The regions in which we had identifiable assets and revenues and the amounts of such identifiable assets and revenues for each of the last three fiscal years are presented Note 19 in the Notes to Consolidated Financial Statements in Part II - Item. 8 Financial Statements and Supplementary Data of this Annual Report on Form 10-K. Identifiable assets are those that can be directly associated with a geographic area.

Employees

At September 30, 2006, we had twenty-three full-time employees, including our executive officers and other individuals who work for us full-time but are employed by management companies that provide their services, and ten employees of our subsidiary Antigen. Twelve of our employees are executive and administrative, nine are scientific and technical personnel who engage primarily in development activities and in preparing formulations for testing and clinical trials, and two are engaged in corporate and product promotion, public relations and investor relations. We believe our employee relations are good. None of our employees is covered by a collective bargaining agreement.

We will continue to need qualified scientific personnel and personnel with experience in clinical testing, government regulation and manufacturing. We may have difficulty in obtaining qualified scientific and technical personnel as there is strong competition for such personnel from other pharmaceutical and biotechnology companies, as well as universities and research institutions. Our business could be materially harmed if we are unable to recruit and retain qualified scientific, administrative and executive personnel to support our expanding activities, or if one or more members of our limited scientific and management staff were unable or unwilling to continue their association with us. With the exception of employment agreements with Anna Gluskin, our Chief Executive Officer and President, Rose Perri, our Chief Operating Officer and Chief Financial Officer, Mark Fletcher, our Executive Vice-President and General Counsel, ,Dr. Gerald Bernstein, our Vice President Medical Affairs, Eric von Hofe, our Vice-President Technology Development, Minzhen Xu, Vice-President Biology of Antigen, and Nikoletta Kallinteris, Senior Research Associate, we do not have fixed term agreements with any of our key management or scientific staff. Our former Vice President, Research and Development, Dr. Pankaj Modi, had a Consulting Agreement with us, the effective termination date of which was August 25, 2005. Dr. Modi resigned from his position with us on August 26, 2004. We do not believe that Dr. Modi's resignation or the termination of his Consulting Agreement with us has, or will, materially adversely affect us.

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

Executive Officers and Directors

Name	Age	Position Held with Generex
Anna E. Gluskin	55	Chairman, President, Chief Executive Officer and Director
Rose C. Perri	39	Chief Operating Officer, Chief Financial Officer, Treasurer, Secretary and Director
Gerald Bernstein, M.D.	73	Director, Vice President Medical Affairs
Mark Fletcher, Esquire	40	Executive Vice President and General Counsel
John P. Barratt	62	Director
Mindy J. Allport-Settle	36	Director
Brian T. McGee	45	Director
Peter G. Amanatides	42	Director
David E. Wires	55	Director

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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 Chairperson of the Generex Board of Directors 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. Perri has served as Treasurer and Secretary of Generex since October 1997, and as Chief Operating Officer since August 1998. She served as Acting Chief Financial from November 2002 until April 2005 when she was appointed Chief Financial Officer. She was an officer of Generex Pharmaceuticals Inc. from its formation in 1995 until its acquisition by Generex in October 1997.

Gerald Bernstein, M.D. Director since October 2002. Dr. Bernstein has served as Vice President Medical Affairs 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 is 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 was president of the American Diabetes Association from 1998 to 1999.

Mark Fletcher, Esq. Mr. Fletcher has served as our Executive Vice President and General Counsel 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.

John P. Barratt. Independent Director since March 2003. Mr. Barratt is currently a member of the Generex Audit Committee. Mr. Barratt currently serves as the Board Liaison Officer of The Caldwell Partners International, a role he commenced in July 2006. From April 2005 to July 2006 Mr. Barratt served as Chief Operating Officer of The Caldwell Partners International. The Caldwell Partners International is a Canadian based human capital professional services company. Mr. Barratt continues, concurrently, as the court-appointed Responsible Person and Liquidation Manager of Beyond.com Corporation, Debtor-in-Possession, a U.S. Chapter 11 Bankruptcy case, in which capacity Mr. Barratt reports to the bankruptcy court and to the U.S. Trustee’s Office. The Beyond.com case is expected to be granted final decree in 2006 at which point the Chapter 11 case will terminate as will his duties to the court and the U.S. Trustee’s Office. From September 2000 until the date of its Chapter 11 bankruptcy filing in January 2002, Mr. Barratt acted in the capacity of Chief Operating Officer of Beyond.com Corporation, an electronic fulfillment provider. Between 1996 and 2000, Mr. Barratt was partner-in-residence with the Quorum Group of Companies, an international investment partnership specializing in providing debt and/or equity capital coupled with strategic direction to emerging technology companies. Between 1988 and 1995, Mr. Barratt held a number of positions with Coscan Development Corporation, a real estate development company, the last position of which was Executive Vice-President and Chief Operating Officer. Mr. Barratt currently serves on a number of Boards of Directors, including Brascade Corporation, GLP NT Corporation and BNN Split Corporation, and is a member of the Board of Directors and Chairman of the Risk Policy Committee of the Bank of China (Canada). Mr. Barratt also serves on the Advisory Boards of the following Brascan SoundVest funds: Diversified Income Fund, Total Return Fund, Rising Distribution Split Trust and Focused Business Trust. In addition, Mr. Barratt is a member of the Advisory Board of the Brascan Adjustable Rate Trust I.

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Mindy J. Allport-Settle. Independent Director since February 2004. Ms. Allport-Settle is a member of the Generex Audit and Regulatory Compliance Committees and Chairperson of the Generex Compensation Committee. Ms. Allport-Settle has been President and Chief Executive Officer of Integrated Development, LLC ("Integrated") since 1998.  Integrated is an independent consulting firm to the pharmaceutical industry, providing informed guidance in operational, project and contract management, new business development and regulatory compliance.  In addition to her position with Integrated, Ms. Allport-Settle has been a Vice-President of Impact Management Services, Inc. ("IMS") from 2003 to 2005, which also provides consulting services to the pharmaceutical industry.  In her positions at Integrated and IMS, Ms. Allport-Settle has worked with several major pharmaceutical companies. From 2001 to 2002, Ms. Allport-Settle was Director of Client Services for Scriptorium Publishing Services.  From 1992 to 1994, Ms. Allport-Settle was an Eye Bank Technician/Organ Procurement Surgeon for the NC Eye & Human Tissue Bank; and from 1991 to 1998, Ms. Allport-Settle was a healthcare and general medical compliance training consultant and a contract writer and photographer.  Ms. Allport-Settle holds a Bachelor’s degree from the University of North Carolina, a Master of Business Administration in Global Management from the University of Phoenix, and completed Harvard Business School's executive education program Compensation Committees: Preparing for the Challenges Ahead.

Brian T. McGee. Independent Director since March 2004. Mr. McGee is currently the Chairman of the Generex Audit Committee. Mr. McGee has been a partner of Zeifman & Company, LLP ("Zeifman") since 1995. Mr. McGee began working at Zeifman shortly after receiving a B.A. degree in Commerce from the University of Toronto in 1985. Zeifman is a Chartered Accounting firm based in Toronto, Ontario. A significant element of Zeifman's business is public corporation accounting and auditing. Mr. McGee is a Chartered Accountant. Throughout his career, Mr. McGee has focused on, among other areas, public corporation accounting and auditing. In 1992, Mr. McGee completed courses focused on International Taxation and Corporation Reorganizations at the Canadian Institute of Chartered Accountants and in 2003, Mr. McGee completed corporate governance courses on compensation and audit committees at Harvard Business School. In April 2004 Mr. McGee received his CPA designation from The American Institute of Certified Public Accountants.

Peter G. Amanatides. Independent Director since April 2005. Mr. Amanatides is currently the Chairman of the Generex Regulatory Compliance Committee and a member of the Generex Compensation Committee. Mr. Amanatides has been working in the pharmaceutical and biotechnology industry since 1988. Since November 2004, Mr. Amanatides has been President and Chief Operating Officer of Pharmalogika, Inc., a North Carolina-based service provider for the pharmaceutical and biotechnology industry. Since April 2002, Mr. Amanatides has held the positions of Director and Vice President within the Quality Organization for DSM Pharmaceuticals and DSM Biologics, both divisions of DSM Pharmaceutical Products, Inc. From February 1999 to April 2002, Mr. Amanatides served as Director of Quality Systems for Celera Genomics, a division of Applied Biosystems involved in genomics and pharmaceutical discovery. Mr. Amanatides received a B.S. degree in biology from Regents College, Albany, New York and a M.S. degree in Biotechnology and Molecular Biology from Hood College, Frederick, Maryland. Mr. Amanatides has also held ASQ Certification as a certified Quality Manager.

David E. Wires. Independent Director since April 2006. Mr. Wires is currently a member of the Generex Compensation Committee. Mr. Wires has been a partner in the Toronto law firm of Wires Jolley, LLP since its founding in 2002. Prior to that, he was a partner in McCague Wires Peacock Borlack McInnis & Lloyd. In 1997, he was appointed a commissioner of the Ontario Pension Commission, and from 1998 to 2003, he continued as a member of the Ontario Financial Services Tribunal on appointment by the Lieutenant Governor in Council. He graduated from Carleton University with a Bachelor of Arts in 1973 and continued his education at the University of Ottawa where he graduated in 1976 with a Bachelor of Laws, Magna Cum Laude, and at Osgoode Hall Law School, York University where he graduated with a Master of Laws in 1988. He is certified as a specialist in civil litigation by the Law Society of Upper Canada. Outside his practice, David is a panelist on the China International Trade and Arbitration Commission, Beijing. The Certified General Accountants Association of Ontario awarded David their Ontario Distinguished Service Award. David is a member of the Canadian Bar Association and an associate of the American Bar Association, the Advocate Society and past Chair of the Joint Committee on Court Reform, the Toronto Case Management Advisory Committee. He has been engaged as an instructor and lecturer for the Law Society of Upper Canada, the Advocates Society, the Canadian Institute, the Advocate's Society Intensive Trial Advocacy Program, York University, the Canadian Society for the Advancement of Legal Technology, the Canadian Bar Association and the Canadian Corporation Counsel Association.

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Our Board of Directors nominated Mr. Wires for election as director at our Annual Meeting of the Stockholders held on May 30, 2006, which increased the size of our Board to eight directors. Five of the eight directors are independent of Generex management.

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.

George Markus is our Manager of Regulatory Affairs. Mr. Markus holds a B.Sc. (Honours) in theoretical chemistry from Dalhousie University and an M.Sc. in analytical chemistry from McGill University. He is an instructor at the Academy of Applied Pharmaceutical Sciences in Toronto, Canada. In his more than twenty years in the industry, he has been President & Chief Executive Officer of Consolidated Clinical Research of Canada Inc., a site management organization (SMO) that manages the coordination of clinical research sites, and has worked in Quality Assurance / Special Projects / Clinical Operations and as a Director, Regulatory Affairs for Dimethaid Research Inc. Mr. Markus has also held regulatory affairs positions with Pasteur Merieux Connaught, Biovail Corporation International, Sanofi Winthrop, Genpharm Inc. Pharmaceuticals, and Sandoz Canada Inc.

Dr. Jaime Davidson, MD, FACP, FACE was appointed a consultant Medical Director for Generex in July, 2006. Dr. Davidson is the President of Endocrine and Diabetes Associates of Texas, based at the Medical City Dallas Hospital complex, and a Clinical Associate Professor of Internal Medicine at University of Texas Southwestern Medical Center in Dallas, Texas. Dr. Davidson chaired the Diabetes Consensus Guidelines for the American College of Endocrinology and serves as Director of the Annual Intensive Diabetes, Endocrinology and Metabolic Diseases Course for the University of Southern California Keck School of Medicine. He serves as a council member for the Texas Department of Health Services, appointed by Texas Governor Rick Perry. In 2006 Dr. Davidson was distinguished by the American Association of Clinical Endocrinologists with an award for his contributions to the improvement of endocrine health for under-served populations, and by the American Diabetes Association with the Harold Rifkin MD award for his international contributions in the diabetes field. In the past, he has held positions with the National Diabetes Advisory Board, the National Institutes of Health, the Centers for Disease Control, the Institute of Medicine, and the boards of directors of the American Diabetes Association, the American Association of Clinical Endocrinologists, and the American College of Endocrinology. He served in higher education for a six year term as a Regent of Midwestern State University in Texas appointed by then Governor George W. Bush. He has also served in the President's Council for Fitness and Sports, chaired the Texas Diabetes Council of the Texas Department of Health for several years where he instituted the Texas Diabetes Algorithm, and under his guidance the Texas Diabetes Institute was established with the University of Texas Health Science Center in San Antonio, Texas. Dr. Davidson's experience in clinical pharmacology began with a Clinical Pharmacology Fellowship at Lilly Laboratories for Clinical Research and it continued with multiple clinical trials. In addition, he was an advisor to the Food and Drug Administration (FDA) on the Endocrinology and Metabolism Advisory Board. Dr. Davidson's Internal Medicine training was completed at Scott and White Hospital (now known as Texas A&M University) and his Endocrinology training at University Of Indiana.

Eric von Hofe, Ph.D., is currently President of Antigen. He has extensive experience with technology development projects, including his previous position at Millennium Pharmaceuticals as Director of Programs & Operations, Discovery Research. Prior to that, Dr. von Hofe was Director, New Targets at Hybridon, Inc., where he coordinated in-house and collaborative research that critically validated gene targets for novel antisense medicines. Dr. von Hofe also held the position of Assistant Professor of Pharmacology at the University of Massachusetts Medical School, where he received a National Cancer Institute Career Development Award for defining mechanisms by which alkylating carcinogens create cancers. He received his Ph.D. from the University of Southern California in Experimental Pathology and was a postdoctoral fellow at both the University of Zurich and Harvard School of Public Health. His work has been published in twenty-eight articles in peer-reviewed journals, and he has been an inventor on four patents.

Dr. Minzhen Xu is Vice President - Biology of Antigen. Dr. Xu received an M.D. from Shanghai Medical University in China and a Ph.D. in immunology from University of Massachusetts Medical School. He has been with Antigen since its inception and is the company’s chief experimentalist.

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Item 1A. Risk Factors

Our business and results of operations are subject to numerous risks, uncertainties and other factors that you should be aware of, some of which are described below. The risks, uncertainties and other factors described below are not the only ones facing our company. Additional risks, uncertainties and other factors not presently known to us or that we currently deem immaterial may also impair our business operations.

Any of the risks, uncertainties and other factors could have a materially adverse effect on our business, financial condition or results of operations and could cause the trading price of our common stock to decline substantially.

Risks Related to Our Financial Condition

We have a history of losses and will incur additional losses.

We are a development stage company with a limited history of operations, and do not expect sufficient revenues to support our operation in the immediately foreseeable future. We do expect to receive some revenue from the sale of our oral insulin product in Ecuador in the second quarter of fiscal 2007. To date, we have not been profitable and our accumulated net loss before preferred stock dividend was $186,200,255 at July 31, 2006. Our losses have resulted principally from costs incurred in research and development, including clinical trials, and from general and administrative costs associated with our operations. While we seek to attain profitability, we cannot be sure that we will ever achieve product and other revenue sufficient for us to attain this objective.

With the exception of Generex Oral-lyn™ which is currently selling in Ecuador and Glucose RapidSpray™ which we expect to begin selling in the United States in October, 2006 our product candidates are in research or early stages of pre-clinical and clinical development. We will need to conduct substantial additional research, development and clinical trials. We will also need to receive necessary regulatory clearances both in the United States and foreign countries and obtain meaningful patent protection for and establish freedom to commercialize each of our product candidates. We cannot be sure that we will obtain required regulatory approvals, or successfully research, develop, commercialize, manufacture and market any other product candidates. We expect that these activities, together with future general and administrative activities, will result in significant expenses for the foreseeable future.

We will need additional capital.

To progress in product development or marketing, we will need additional capital which may not be available to us. This may delay our progress in product development or market.

We will require funds in excess of our existing cash resources:

· to proceed with the development of our buccal insulin product;

· to finance the research and development of new products based on our buccal delivery and immunomedicine technologies, including clinical testing relating to new products;

· to finance the research and development activities of our subsidiary Antigen with respect to other potential technologies;

· to commercially launch and market developed products;

· to develop or acquire other technologies or other lines of business;

· to establish and expand our manufacturing capabilities;

· to finance general and administrative activities that are not related to specific products under development; and

· to otherwise carry on business.

In the past, we have funded most of our development and other costs through equity financing. We anticipate that our existing capital resources will enable us to maintain currently planned operations through the next 12 months. However, this expectation is based on our current operating plan, which could change as a result of many factors, and we may need additional funding sooner than anticipated. Because our operating and capital resources are insufficient to meet future requirements, we will have to raise additional funds in the near future to continue the development and commercialization of our products. Unforeseen problems, including materially negative developments in our clinical trials or in general economic conditions, could interfere with our ability to raise additional equity capital or materially adversely affect the terms upon which such funding is available.

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It is possible that we will be unable to obtain additional funding as and when we need it. If we were unable to obtain additional funding as and when needed, we could be forced to delay the progress of certain development efforts. Such a scenario poses risks. For example, our ability to bring a product to market and obtain revenues could be delayed, our competitors could develop products ahead of us, and/or we could be forced to relinquish rights to technologies, products or potential products.

Any new equity financing will dilute current stockholders.

If we raise funds through equity financing to meet the needs discussed above, it will have a dilutive effect on existing holders of our shares by reducing their percentage ownership. The shares may be sold at a time when the market price is low because we need the funds. This will dilute existing holders more than if our stock price was higher. In addition, equity financings normally involve shares sold at a discount to the current market price.

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

Because we have limited resources, we have sought to enter into collaboration agreements with other pharmaceutical companies that will assist us in developing, testing, obtaining governmental approval for and commercializing products using our buccal delivery and immunomedicine technologies. Any collaborator with whom we may enter into such collaboration agreements may not support fully our research and commercial interests since our program may compete for time, attention and resources with such collaborator's internal programs. Therefore, these collaborators may not commit sufficient resources to our program to move it forward effectively, or that the program will advance as rapidly as it might if we had retained complete control of all research, development, regulatory and commercialization decisions.

Risks Related to Our Technologies

With the exception of Generex Oral-lyn™ and Glucose RapidSpray™, our technologies and products are at an early stage of development and we cannot expect revenues in respect thereof in the foreseeable future.

We have no products approved for commercial sale at the present time with the exception of Generex Oral-lyn™ and Glucose RapidSpray™. To be profitable, we must not only successfully research, develop and obtain regulatory approval for our products under development, but also manufacture, introduce, market and distribute them once development is completed. We may not be successful in one or more of these stages of the development or commercialization of our products, and/or any of the products we develop may not be commercially viable.

Although Generex Oral-lyn™, our proprietary oral insulin spray formulation, has been approved for commercial marketing and sale in Ecuador, and Glucose RapidSpray™, our confectionary product, will be available for purchase in the United States, we have yet to manufacture, market and distribute these products on a large-scale commercial basis. Until we can establish that they are commercially viable products, we will not receive significant revenues from ongoing operations.

Until we receive regulatory approval to sell our products in additional countries, our ability to generate revenues from operations may be limited and those revenues may be insufficient to sustain operations. Many factors impact our ability to obtain approvals for commercially viable products.*

Only our oral insulin product has been approved for commercial sale by drug regulatory authorities, and that approval was obtained in Ecuador. We have begun the regulatory approval process for our oral insulin, buccal morphine and fentanyl products in other countries. Our immunomedicine products are in the pre-clinical stage of development, with the exception of our Phase 1 trial in human patients with stage II HER-2/neu positive breast cancer.

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Pre-clinical and clinical trials of our products, and the manufacturing and marketing of our technologies, are subject to extensive, costly and rigorous regulation by governmental authorities in the United States, Canada and other countries. The process of obtaining required regulatory approvals from the FDA and other regulatory authorities often takes many years, is expensive and can vary significantly based on the type, complexity and novelty of the product candidates. For these reasons, it is possible we will not receive regulatory approval for any prescription pharmaceutical product candidate in any country other than Ecuador.

In addition, we cannot be sure when or if we will be permitted by regulatory agencies to undertake additional clinical trials or to commence any particular phase of clinical trials. Because of this, statements in this Annual Report on Form 10-K regarding the expected timing of clinical trials cannot be regarded as actual predictions of when we will obtain regulatory approval for any "phase" of clinical trials.

Delays in obtaining United States or other foreign approvals for our products could result in substantial additional costs to us, and, therefore, could adversely affect our ability to compete with other companies. If regulatory approval is ultimately granted in any country other than Ecuador, the approval may place limitations on the intended use of the product we wish to commercialize, and may restrict the way in which we are permitted to market the product.

Due to legal and factual uncertainties regarding the scope and protection afforded by patents and other proprietary rights, we may not have meaningful protection from competition.

Our long-term success will substantially depend upon our ability to protect our proprietary technologies from infringement, misappropriation, discovery and duplication and avoid infringing the proprietary rights of others. Our patent rights, and the patent rights of biotechnology and pharmaceutical companies in general, are highly uncertain and include complex legal and factual issues. Because of this, our pending patent applications may not be granted. These uncertainties also mean that any patents that we own or will obtain in the future could be subject to challenge, and even if not challenged, may not provide us with meaningful protection from competition. Due to our financial uncertainties, we may not possess the financial resources necessary to enforce our patents. Patents already issued to us or our pending applications may become subject to dispute, and any dispute could be resolved against us.

Because a substantial number of patents have been issued in the field of alternative drug delivery and because patent positions can be highly uncertain and frequently involve complex legal and factual questions, the breadth of claims obtained in any application or the enforceability of our patents cannot be predicted. Consequently, we do not know whether any of our pending or future patent applications will result in the issuance of patents or, to the extent patents have been issued or will be issued, whether these patents will be subject to further proceedings limiting their scope, will provide significant proprietary protection or competitive advantage, or will be circumvented or invalidated.

Also because of these legal and factual uncertainties, and because pending patent applications are held in secrecy for varying periods in the United States and other countries, even after reasonable investigation we may not know with certainty whether any products that we (or a licensee) may develop will infringe upon any patent or other intellectual property right of a third party. For example, we are aware of certain patents owned by third parties that such parties could attempt to use in the future in efforts to affect our freedom to practice some of the patents that we own or have applied for. Based upon the science and scope of these third-party patents, we believe that the patents that we own or have applied for do not infringe any such third-party patents; however, we cannot know for certain whether we could successfully defend our position, if challenged. We may incur substantial costs if we are required to defend our intellectual property in patent suits brought by third parties. These legal actions could seek damages and seek to enjoin testing, manufacturing and marketing of the accused product or process. In addition to potential liability for significant damages, we could be required to obtain a license to continue to manufacture or market the accused product or process.

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Risks Related to Marketing of Our Potential Products

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

Even if we obtain regulatory approval to market our oral insulin product or any other prescription pharmaceutical product candidate in another country other than Ecuador, many factors may prevent the product from ever being sold in commercial quantities. Similarly, the successful commercialization of our confectionary may be hindered. Some of these factors are beyond our control, such as:

· acceptance of the formulation or treatment by health care professionals and diabetic patients;

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

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

We will not receive significant revenues from Generex Oral-lyn™ in Ecuador or Glucose RapidSpray™ in the United States or any of our other products that may receive regulatory approval until we can successfully manufacture, market and distribute them in the relevant market.

We will have to depend upon others for marketing and distribution of our products, and we may be forced to enter into contracts limiting the benefits we may receive and the control we have over our products. We intend to rely on collaborative arrangements with one or more other companies that possess strong marketing and distribution resources to perform these functions for us. We may not be able to enter into beneficial contracts, and we may be forced to enter into contracts for the marketing and distribution of our products that substantially limit the potential benefits to us from commercializing these products. In addition, we will not have the same control over marketing and distribution that we would have if we conducted these functions ourselves.

We may not be able to compete with treatments now being marketed and developed, or which may be developed and marketed in the future by other companies.

Our products will compete with existing and new therapies and treatments. We are aware of a number of companies that have developed or are currently seeking to develop alternative means of delivering insulin, as well as new drugs intended to replace insulin therapy at least in part. We are also aware of a number of companies currently seeking to develop alternative means of enhancing and suppressing peptides. In the longer term, we also face competition from companies that seek to develop cures for diabetes and other malignant, infectious, autoimmune and allergic diseases through techniques for correcting the genetic deficiencies that underlie such diseases.

Numerous pharmaceutical, biotechnology and drug delivery companies, hospitals, research organizations, individual scientists and nonprofit organizations are engaged in the development of alternatives to our technologies. Some of these companies have greater research and development capabilities, experience, manufacturing, marketing, financial and managerial resources than we do. Accordingly, our competitors may succeed in developing competing technologies, obtaining FDA approval for products or gaining market acceptance more rapidly than we can.

In January, 2006, the FDA approved Pfizer, Inc.’s inhalable form of insulin, the first non-injected insulin to be approved by the FDA. Pfizer’s product in inhaled through the mouth and absorbed in the lungs. While we believe that absorption though the buccal cavity offers several advantages over absorption through the lungs, Pfizer’s early approval could allow it to capture a large portion of the market. It is expected that initial supplies of Pfizer’s inhalable form of insulin, marketed as Exubera®, will be available across the U.S. beginning in September 2006.

If government programs and insurance companies do not agree to pay for or reimburse patients for our products, our success will be impacted.

Sales of our oral insulin formulation in Ecuador and our potential products in other markets depend in part on the availability of reimbursement by third-party payers such as government health administration authorities, private health insurers and other organizations. Third-party payers often challenge the price and cost-effectiveness of medical products and services. Governmental approval of health care products does not guarantee that these third-party payers will pay for the products. Even if third-party payers do accept our product, the amounts they pay may not be adequate to enable us to realize a profit. Legislation and regulations affecting the pricing of pharmaceuticals may change before our products are approved for marketing and any such changes could further limit reimbursement.

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Risks Related to Potential Liabilities

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

The administration of drugs or treatments to humans, whether in clinical trials or commercially, can result in product liability claims whether or not the drugs or treatments are actually at fault for causing an injury. Furthermore, our products may cause, or may appear to have caused, serious adverse side effects (including death) or potentially dangerous drug interactions that we may not learn about or understand fully until the drug or treatment has been administered to patients for some time. Product liability claims can be expensive to defend and may result in large judgments or settlements against us, which could have a severe negative effect on our financial condition. We maintain product liability insurance in amounts we believe to be commercially reasonable for our current level of activity and exposure, but claims could exceed our coverage limits. Furthermore, due to factors in the insurance market generally and our own experience, we may not always be able to purchase sufficient insurance at an affordable price. Even if a product liability claim is not successful, the adverse publicity and time and expense of defending such a claim may interfere with our business.

Risks Related to the Market for Our Common Stock

Our common stock could be delisted from The NASDAQ Capital Market.

In the past, we have failed to comply with certain of NASDAQ’s listing requirements. In late 2004, we did not comply with NASDAQ Rule 4310(c)(2)(B) which requires us to have a minimum of $2,500,000 in stockholders' equity or $35,000,000 market value of listed securities or $500,000 of net income from continuing operations for the most recently completed fiscal year or two of the three most recently completed fiscal years. While we regained compliance with this standard, we are still in the development stage. Consequently, there is no guarantee that we will sustain compliance with this standard. In the event we cannot sustain compliance, our shares of common stock may be delisted from The NASDAQ Capital Market and begin trading on the over-the-counter bulletin board, assuming we meet the requisite criteria.

In addition, from October 2004 until October 2005, we failed to comply with NASDAQ Rule 4310(c)(4) which requires us to have a minimum bid price per share of at least $1.00. Although we regained compliance with the minimum bid price requirement in November 2005, there is no guarantee that the bid price of our common stock will remain at or above $1.00 per share. In the event that the price of our common stock falls below $1.00 per share for thirty (30) consecutive trading days, we would likely receive a notice from The NASDAQ Stock Market LLC informing us of our noncompliance with NASDAQ Rule 4310(c)(4) and giving us 180 calendar days, subject to extension, to regain compliance with the Rule. In the event that we could not demonstrate compliance with NASDAQ Rule 4310(c)(4) by the specified deadline and were not eligible for an additional compliance period, the Staff would notify us that our stock would be delisted, at which time we could appeal the Staff’s determination to a Listing Qualifications Panel. Pending the decision of the Listing Qualification Panel, our common stock would continue to trade on the NASDAQ Capital Market. If we were not successful in such an appeal, our stock would likely trade on NASDAQ’s over-the-counter bulletin board, assuming we meet the requisite criteria.

If we fail to maintain compliance with applicable NASDAQ Rules and our stock is delisted from the NASDAQ Capital Market, it may become subject to Penny Stock Regulations and there will be less interest for our stock in the market. This may result in lower prices for our stock and make it more difficult for us to obtain financing.

If our stock is not listed on NASDAQ and fails to maintain a price of $5.00 or more per share, our stock would become subject to the Securities and Exchange Commission's "Penny Stock" rules. These rules require a broker to deliver, prior to any transaction involving a Penny Stock, a disclosure schedule explaining the Penny Stock Market and its risks. Additionally, broker/dealers who recommend Penny Stocks to persons other than established customers and accredited investors must make a special written suitability determination and receive the purchaser's written agreement to a transaction prior to the sale. In the event our stock becomes subject to these rules, it will become more difficult for broker/dealers to sell our common stock. Therefore, it may be more difficult for us to obtain financing.

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The price of our common stock may be volatile.

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

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

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

· variations in operating results;

· changes in governmental regulations;

· developments in patent and other proprietary rights;

· public concern as to the safety of drugs or treatments developed by us or others;

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

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

From time to time, we may hire companies to assist us in pursuing investor relations strategies to generate increased volumes of investment in our common stock. Such activities may result, among other things, in causing the price of our common stock to increase on a short-term basis.

Furthermore, the stock market generally and the market for stocks of companies with lower market capitalizations and small biopharmaceutical companies, like us, have from time to time experienced, and likely will again experience significant price and volume fluctuations that are unrelated to the operating performance of a particular company.

Provisions of our Restated Certificate of Incorporation could delay or prevent the acquisition or sale of our business.

Our Restated Certificate of Incorporation permits our Board of Directors to designate new series of preferred stock and issue those shares without any vote or action by our stockholders. Such newly authorized and issued shares of preferred stock could contain terms that grant special voting rights to the holders of such shares that make it more difficult to obtain stockholder approval for an acquisition of our business or increase the cost of any such acquisition.

Item 1B.Unresolved Staff Comments.

None.

Item 2.Properties.

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

We own a laboratory facility in Toronto that we have used for limited production of our oral insulin formulation for clinical purposes, and have completed a pilot manufacturing facility for our insulin and glucose products in the same commercial complex. Our laboratory facility is approximately 2,650 square feet. Our pilot manufacturing facility, which also includes laboratory facilities, is approximately 4,800 square feet. We also own all additional units in the same building where our pilot manufacturing facility is located. These units are currently leased to third parties with the exception of two units being used by us for packaging and storage. These units are reflected in Assets Held for Investments on accompanying consolidated balance sheets. All of these spaces could be used for manufacturing facilities if necessary. We have obtained regulatory approval for the laboratory facility and the pilot manufacturing facility.

We have mortgages on our Toronto properties totaling $3,036,164 at July 31, 2006. These mortgages require the payment of interest, with minimal principal reduction, prior to their due dates. These mortgages currently require an aggregate approximately $24,000 in monthly debt service payments. Aggregate principal maturities for these mortgages will be $428,059 in fiscal 2007 and $2,608,105 in fiscal 2008 and thereafter.

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We lease approximately 1,710 square feet of office and laboratory space in Worcester, Massachusetts that Antigen uses for its research and development activities at an annual rent of $100,080. This space is sufficient for Antigen’s present activities.

We do not expect to need additional manufacturing capabilities in Canada related to our insulin product beyond our pilot facility before the end of the current fiscal year. We own an 11,625 square foot building in Brampton, Ontario, which is approximately 25 miles outside Toronto, and a 13,500 square foot building in Mississauga, Ontario, which is about 20 miles from downtown Toronto. Both properties are currently leased to third parties. These properties are reflected in Assets Held for Investments on accompanying consolidated balance sheets.

We could use our other properties to expand research, development or testing of our buccal and immunomedicine products if current facilities prove inadequate for our needs.

Item 3.Legal Proceedings.

Sands Brothers & Co. Ltd. v. Generex Biotechnology Corporation. On January 10, 2006 the Court of Appeals of New York denied a motion by Sands Brothers & Co., Ltd., a New York City-based investment banking and brokerage firm, for leave to appeal the January 23, 2001 and October 29, 2002 decisions and orders of the Appellate Division (First Department). The Appellate Division's October 27, 2002 decision and order affirmed a lower court's order vacating a New York Stock Exchange arbitration panel's award granting Sands Brothers a warrant to purchase 1,530,020 shares of our common stock and modified that order by remanding the issue of damages to a new panel of arbitrators expressly limiting damages to reliance damages, which would not include damages for lost profits. On August 17, 2004, the arbitration panel awarded Sands Brothers $150,000 in reliance damages, which award was confirmed by the lower court. In September 2005, Sands Brothers filed a motion seeking leave to appeal to the Court of Appeals of New York. The denial of Sand Brothers' motion lets stand the prior decisions and orders of the Appellate Division vacating the arbitration awards which had granted Sands Brothers a warrant to purchase our common stock. In March 2006, we paid $150,000 plus $10,541 in interest to Sands Brothers in satisfaction of the judgment.

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

Subash Chandarana et al. v. Generex Biotechnology Corporation. In February 2001, a former business associate of Dr. Pankaj Modi ("Modi") and an entity called Centrum Technologies Inc. ("CTI") commenced an action in the Ontario Superior Court of Justice against us and Modi seeking, among other things, damages for alleged breaches of contract and tortious acts related to a business relationship between this former associate and Modi that ceased in July 1996. The plaintiffs’ statement of claim also seeks to enjoin the use, if any, by us of three patents allegedly owned by CTI. On July 20, 2001, we filed a preliminary motion to dismiss the action of CTI as a nonexistent entity or, alternatively, to stay such action on the grounds of want of authority of such entity to commence the action. The plaintiffs brought a cross motion to amend the statement of claim to substitute Centrum Biotechnologies, Inc. ("CBI") for CTI. CBI is a corporation of which 50 percent of the shares are owned by the former business associate and the remaining 50 percent are owned by us. Consequently, the shareholders of CBI are in a deadlock. The court granted our motion to dismiss the action of CTI and denied the plaintiffs’ cross motion without prejudice to the former business associate to seek leave to bring a derivative action in the name of or on behalf of CBI. The former business associate subsequently filed an application with the Ontario Superior Court of Justice for an order granting him leave to file an action in the name of and on behalf of CBI against Modi and us. We opposed the application. In September 2003, the Ontario Superior Court of Justice granted the request and issued an order giving the former business associate leave to file an action in the name of and on behalf of CBI against Modi and us. A statement of claim was served in July 2004. We are not able to predict the ultimate outcome of this legal proceeding at the present time or to estimate an amount or range of potential loss, if any, from this legal proceeding.

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Pankaj Modi vs. Generex Biotechnology Corporation. In February 2005, a consultant filed a Statement of Claim in the Ontario Superior Court of Justice, File No., 05-CV-284560 PD1, seeking approximately $600,000 in damages for alleged contract breaches in respect of unpaid remuneration and other compensation allegedly owed to him. In March 2006 the action was dismissed, on consent, without costs. No payment was made by us to settle this litigation.

Michael Powell. In August, 2006, Michael Powell commenced an action against certain defendants, including us and certain of our officers, in the Ontario Superior Court of Justice, claiming compensatory damages, special and punitive damages and various forms of injunctive and declaratory relief for breach of contract and various business torts. We believe the claims against us are frivolous and completely without merit. We are not a party to any agreement with the plaintiff. Much of the requested relief relates to the plaintiff’s position and ownership interest in and accounting for the expenses of an entity in which Generex has no interest. We have not used any intellectual property or information owned by the other entity. All intellectual property, information and business claimed to be owned or conducted by the entity in which the plaintiff claims an interest are completely unrelated to any product or technology we are currently developing or intend to develop. Therefore, even if the court were to award some declaratory or injunctive relief, we would not be affected. We are defending this action vigorously. We are not able to predict the ultimate outcome of this legal proceeding at the present time or to estimate an amount or range of potential loss, if any, from this legal proceeding.

Shemano Group, Inc. On September 26, 2006, Shemano Group, Inc. initiated a National Association of Securities Dealers arbitration proceeding against us. Shemano claims it is entitled to be paid fees in connection with our private placements in September 2005, January 2006 and July 2006, pursuant to an Exclusive Finder’s Agreement dated November 1, 2004. Shemano claims it is entitled to fees of $945,000 in cash and warrants exercisable for 405,000 shares of our common stock. We received notice of this proceeding in early October, 2006, and at the time this Annual Report was prepared for filing we were evaluating our position and defenses with legal counsel.

We are involved in certain other legal proceedings in addition to those specifically described herein. Subject to the uncertainty inherent in all litigation, we do not believe at the present time that the resolution of any of these legal proceedings is likely to have a material adverse effect on our financial position, operations or cash flows.

With respect to all litigation matters, as additional information concerning the estimates used by us becomes known, we reassess each matter’s position both with respect to accrued liabilities and other potential exposures.

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

Our Annual Meeting of Stockholders was held on May 30, 2006. At the meeting, 80,073,583 shares of common stock were represented out of 97,848,797 shares that were entitled to vote. Our stockholders took the following actions at the Annual Meeting:

· elected all eight nominees to the Board of Directors;

· approved the potential issuance and sale of equity securities below market price in excess of shares permitted to be issued without prior stockholder approval under NASDAQ Marketplace Rule 4350(i)(1)(D) (Proposal 2);

· approved the adoption of a stockholder rights plan that will allow the Board of Directors to declare a dividend of one share purchase right for each outstanding share of our common stock (Proposal 3);

· approved the adoption of the Generex Biotechnology Corporation 2006 Stock Plan (Proposal 4);

· approved an amendment to our Restated Certificate of Incorporation, as amended, to increase the number of authorized shares of common stock from 150,000,000 to 500,000,000 (Proposal 5); and

· ratified the appointment of Danziger & Hochman, Chartered Accountants as our independent public accountants for the fiscal year ending July 31, 2006.

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The results of the vote for the Board of Directors was as follows:

Election of nominees to Board of Directors for terms expiring June 1, 2007	Votes For	Votes Against	Abstentions
Mindy J. Allport-Settle	98.471% 78,849,634	0.000% 0	1.529% 1,223,949
Peter Amanatides	98.480% 78,856,409	0.000% 0	1.520% 1,217,174
John P. Barratt	98.462% 78,842,217	0.000% 0	1.538% 1,231,366
Gerald Bernstein, M.D.	98.413% 78,802,831	0.000% 0	1.587% 1,270,752
Anna E. Gluskin	98.377% 78,774,084	0.000% 0	1.623% 1,299,499
Brian T. McGee	98.505% 78,876,794	0.000% 0	1.495% 1,196,789
Rose C. Perri	98.395% 78,788,180	0.000% 0	1.605% 1,285,403
David Wires	98.412% 78,802,129	0.000% 0	1.588% 1,271,454

The results on the votes of the proposals were as follows:

Proposal	Votes For	Votes Against	Abstention	Broker Non-Votes
Proposal 2	67.872% 7,081,730	30.930% 3,227,267	1.198% 125,013	69,639,573
Proposal 3	88.740% 9,259,102	9.807% 1,023,284	1.453% 151,626	69,639,571
Proposal 4	77.735% 8,110,892	17.900% 1,867,660	4.365% 455,460	69,639,571
Proposal 5	92.585% 74,135,923	7.153% 5,727,326	0.263% 210,334	0
Ratification of Danziger & Hochman, Chartered Accountants	98.799% 79,111,965	0.846% 677,192	0.355% 284,426	0

PART II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock has been listed on the NASDAQ Capital Market (formerly the NASDAQ SmallCap Market) since June 5, 2003. From May 5, 2000 to June 4, 2003, our common stock was listed on the NASDAQ National Market. From February 1998 to May 2000, the "bid" and "asked" prices for our common stock were quoted on the OTC Bulletin Board operated by the National Association of Securities Dealers. Prior to February 1998, there was no public market for our common stock.

The table below also sets forth the high and low closing "bid" prices for our common stock reported on the NASDAQ Capital Market for each fiscal quarter in the prior two years ended July 31, 2006. High and low closing "bid" prices, which represent prices between dealers, do not include retail mark-up, mark-down or commission and may not represent actual transactions.

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	Bid Prices
	High		Low
Fiscal 2005
First Quarter	$	1.25	$	0.80
Second Quarter	$	0.90	$	0.60
Third Quarter	$	0.89	$	0.52
Fourth Quarter	$	0.98	$	0.58
Fiscal 2006
First Quarter	$	1.51	$	0.53
Second Quarter	$	1.48	$	0.8
Third Quarter	$	5.02	$	1.15
Fourth Quarter	$	3.25	$	1.3

The closing “bid” price for our common stock reported on October 10, 2006 was $2.44.

At October 10, 2006, there were 2,083 holders of record of our common stock.

Effective as of August 1, 2006, NASDAQ began operating as a national securities exchange and is now known as The NASDAQ Stock Market LLC.

Dividends

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

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth information as of July 31, 2006 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:

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan Category	(a)		(b)		(c)
Equity compensation plans approved by security holders
2000 Stock Option Plan		100,000	$	4.26		1,900,000
2001 Stock Option Plan		8,329,597	$	1.11		1,042,331
2006 Stock Plan		0		0		9,245,000
Total		8,429,597	$	1.15		12,187,331
Equity compensation plans not approved by security holders		0		0		0
Total		8,429,597	$	1.15		12,187,331

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Sales of Unregistered Securities

In the fiscal year ended July 31, 2006 and the subsequent period, we sold common stock and other securities in transactions in reliance upon exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), as we have reported on Current Reports on Form 8-K and on Quarterly Reports on Form 10-Q filed during the period covered by this Annual Report on Form 10-K. In addition, subsequent to the quarter ended July 31, 2006, we sold securities in one transaction in reliance on an exemption from the registration requirements of the Securities Act as follows.

On September 8, 2006, our Board of Directors approved the issuance of up to 300,000 shares our restricted common stock (in equal monthly installments of 25,000 shares) in payment of services to be rendered by CEOcast, Inc., a consultant, pursuant to an agreement to provide us with investor relation services for the period August 22, 2006 to August 21, 2007. The sale of such shares is exempt from registration under the Securities Act in reliance upon Section 4(2) thereof. We believe that CEOcast, Inc. is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Securities Act. The certificates issued for the shares of common stock will be legended to indicate that they are restricted. The sales of such securities did not involve the use of underwriters, and no commissions were paid in connection therewith.

Issuer Purchases of Equity Securities

Neither we nor any affiliated purchaser (as defined in Section 240.10 b-18(a)(3) of the Exchange Act) purchased any of our equity securities during the fourth quarter of the fiscal year ending July 31, 2006.

Item 6. Selected Financial Data.

The following selected financial data are derived from and should be read in conjunction with our financial statements and related notes, which appear elsewhere in this Annual Report on Form 10-K. Our financial statements for the year end July 31, 2006 were audited by Danziger & Hochman, Chartered Accountants. Our financial statements for the years ended July 31, 2005, 2004 and 2003 were audited by BDO Dunwoody, LLP. Our financial statements for the year ended July 31, 2002 were audited by Deloitte & Touche LLP.

in thousands	2006			2005			2004			2003			2002
Operating Results:
Revenue	$	175		$	392		$	627			—			—
Net Loss		(67,967	)		(24,002	)		(18,363	)		(13,262	)		(13,693	)
Net Loss Available to Common Stockholders		(67,967	)		(24,002	)		(19,173	)		(14,026	)		(14,414	)
Cash Dividends per share					—			—			—			—
Loss per Common Share:
Basic and Diluted Net Loss Per Common Share		(.90	)		(.66	)		(.64	)		(.67	)		(.70	)
Financial Positions:
Total Assets	$	64,105		$	13,466		$	19,012		$	22,639		$	28,161
Long-Term Debt	$	3,036		$	3,288		$	2,225		$	1,895		$	663

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in thousands	2006		2005		2004		2003		2002
Convertible Debentures	$	161	$	1,315		—		—		—
Series A, Preferred Stock		—		—	$	14,310	$	13,501	$	12,736
Stockholder's Equity	$	55,464	$	6,127	$	530	$	5,857	$	12,863

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis by management provides information with respect to our financial condition and results of operations for the fiscal years ended July 31, 2004, 2005 and 2006. This discussion should be read in conjunction with the information in the consolidated financial statements and the notes pertaining thereto contained in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K for the year ended July 31, 2006 and the information discussed in Part I, Item 1A - Risk Factors.

Executive Summary

About the Company

We are engaged primarily in the research, development, and commercialization of drug delivery systems and technologies. Our primary focus at the present time is our proprietary technology for the administration of formulations of large molecule drugs to the oral (buccal) cavity using a hand-held aerosol applicator. Through our wholly-owned subsidiary, Antigen, we are expanding our focus to include immunomedicines. We operate in only one segment: the research, development and commercialization of drug delivery systems and technologies for metabolic and immunological diseases.

We are a development stage company and, from inception through the end of the 2006 fiscal year, had not received any revenues from operations other than the $1,000,000 upfront payment which we received from Eli Lilly and Company pursuant to a development and license agreement that we entered into in September 2000 and subsequently terminated as of June 2003. We have begun the regulatory approval process for three products, our oral insulin formulation, our oral morphine formulation and the Antigen HER-2/neu positive breast cancer vaccine. We have two products that are ready for commercial marketing and sale: our oral insulin formulation, Generex Oral-lyn™, which was approved for commercial marketing and sale in Ecuador; and our confectionary, Glucose RapidSpray™, which will be available for purchase in the United States.

Strategy

With the launch of commercial sales of our oral insulin product in Ecuador and our oral glucose product in independent pharmacies in the United States, we expect to receive revenues from product sales in the fiscal year ending July 31, 2007. We project that this revenue will not be sufficient for all of our cash needs during the year. In the past we were able to fund Antigen expenses with some revenue from research grants for Antigen's immunomedicine products. During the fiscal year ended July 31, 2006, we received a total of $175,000 in such research grants, and we have received a total of $1,194,296 in such research grants. We do not expect to receive such grants on a going forward basis.

We expect to satisfy the majority of our cash needs during the current year from previous capital raised through equity and debt financings with a limited group of investors. We believe that the terms of such financings were favorable to us. Through the financing transactions that we closed in our last two fiscal years, we believe that we have secured the funds necessary to continue with the commercialization of Generex Oral-lyn in Ecuador, to seek regulatory approval for this product in certain other Latin American countries and to pursue late-stage clinical trials of this product in Canada. We also project that we will have the funds to support further research and development and limited clinical testing of technology created by Antigen.

In fiscal 2007, we plan to continue with the commercialization of Generex Oral-lyn in Ecuador and efforts to obtain regulatory approval of this product in other Latin American countries and Canada. We anticipate being in a position to commence late-stage clinical trials of Generex Oral-lyn^TM in Canada by the spring of 2007. In anticipation of undertaking late-stage clinical trials in Canada, we have secured a manufacturer to produce clinical trial batches of Generex Oral-lyn. We face competition from other providers of alternate forms of insulin, including Pfizer which could capture a large portion of the market with its inhalable form of insulin, marketed as Exubera®, which is expected to be available in the U.S. beginning in September 2006. We believe that our buccal delivery technology offers several advantages over alternate forms of insulin.

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In fiscal 2007, we expect to continue collaborations to develop other products. We will continue joint development activities with Fertin Pharma A/S with respect to a metformin medicinal chewing gum for the treatment of Type-2 diabetes mellitus and obesity. We expect to continue clinical development of Antigen’s synthetic peptide vaccine designed to stimulate a potent and specific immune response against tumors expressing the HER-2/neu oncogene for patients with stage II HER-2/neu positive breast cancer. In addition, we expect to commence clinical trials in Greece in December 2006, using the same compound for patients with prostate cancer. The Physician’s IND application for the use of this vaccine for the treatment of HER-2/neu positive breast cancer was approved by the FDA in March 2006.

Accounting for Research and Development Projects

Our major research and development projects are the refinement of our platform buccal delivery technology, our buccal insulin project (Generex Oral-lyn™), our buccal morphine product and Antigen’s peptide immunotherapeutic vaccines.

During the last fiscal year, we expended resources on the clinical testing and commercialization, of our buccal insulin product, Generex Oral-lyn™. We filed a Clinical Trial Application with Health Canada for the commencement of late-stage trials for Generex Oral-lyn™, which application was approved by Health Canada in September, 2006. Late-stage trials involve testing our product with a large number of patients over a significant period of time. The completion of late-stage trials in Canada and eventually the United States may require significantly greater funds than we currently have on hand.

Generex Oral-lyn™ was approved for commercial sale by drug regulatory authorities in Ecuador in May 2005. Our South American joint venture partner, PharmaBrand S.A., handled the commercial launch of Generex Oral-lyn™ in Ecuador in June, 2006. During the last fiscal year, we and PharmaBrand have implemented education, marketing and training programs for physicians in Ecuador to support sales of Generex Oral-lyn™, which is available through physician referrals. In March 2006, we successfully completed of the delivery and installation of a turnkey filling operation at PharmaBrand facilities in Quito, Ecuador for the purposes of commercial supply and sales in that country and, as we procure the necessary registrations, in other South American countries. While we anticipate generating revenue from sales of Generex Oral-lyn™ in Ecuador in fiscal 2007, we do not expect that such revenues will be sufficient to sustain our research and development and regulatory activities in Latin America.

Although we initiated regulatory approval process for our morphine buccal product, we did not expend resources to further this product during our last fiscal year.

During the last fiscal year, we expended resources on research and development relating to Antigen’s peptide immunotherapeutic vaccines and related technologies. One Antigen vaccine is currently in Phase I clinical trials involving patients with HER-2/neu positive breast cancer.

Because of various uncertainties, we cannot predict the timing of completion and commercialization of our buccal insulin or buccal morphine products or Antigen’s peptide immunotherapeutic vaccines or related technologies. These uncertainties include the success of current studies, our ability to obtain the required financing and the time required to obtain regulatory approval even if our research and development efforts are completed and successful. For the same reasons, we cannot predict when any products may begin to produce net cash inflows.

Most of our buccal delivery research and development activities to date have involved developing our platform technology for use with insulin and morphine. Insubstantial amounts have been expended on projects with other drugs, and those projects involved a substantial amount of platform technology development. As a result, we have not made significant distinctions in the accounting for research and development expenses among products, as a significant portion of all research has involved improvements to the platform technology in connection with insulin, which may benefit all of our potential buccal products. During fiscal 2006, approximately 81% of our $6,191,528 in research expenses was attributable to insulin and platform technology development, and we did not have any research expenses related to morphine or other buccal projects. During fiscal 2005, approximately 84% of our $7,750,731 in research expenses was attributable to insulin and platform technology development. In fiscal 2005, we did not spend any money on morphine or fentanyl buccal projects.

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Approximately 19% or $1,155,331 of our research and development expenses for the fiscal year ended July 31, 2006 was related to Antigen's immunomedicine products compared to approximately 16% or $1,210,512 for the fiscal year ended July 31, 2005. Because these products are in a very early, pre-clinical stage of development, all of the expenses were accounted for as basic research and no distinctions were made as to particular products. Because of the early stage of development, we cannot predict the timing of completion of any products arising from this technology, or when products from this technology might begin producing revenues.

Results of Operations

Year Ended July 31, 2006 Compared to Year Ended July 31, 2005

We had a net loss of $67,967,204 for the year ended July 31, 2006 (fiscal 2006) compared to a net loss of $24,001,735 for the year ended July 31, 2005 (fiscal 2005). The main reason for the increase in net loss for the year is attributed to interest expense and loss on extinguishment of debt incurred in connection with convertible debentures entered during 2006 fiscal year. Our operation loss for the year increased slightly to $18,705,983 compared to $18,558,421 in operating loss for the fiscal year ended July 31, 2005. The increase in our fiscal 2006 operating loss resulted from an increase in general and administrative expenses (to $12,689,455 from $11,199,802), and a decrease in research and development expenses (to $6,191,528 from $7,750,731). Our revenue had decreased from $392,112 in fiscal 2005 to $175,000 in fiscal 2006.

The increase in general and administrative expenses for fiscal 2006 is due primarily to the increase of non cash compensation to financial consultants in fiscal 2006 compared to compensation paid in 2005 and an increase in executive compensation. Our consulting services, travel and advertising expenses also contributed to an increase in general and administrative expenses despite the decrease in office and general expenses.

The decrease in research and development expenses for fiscal 2006 reflects decreased level of research and development activities and fewer clinical trials of our oral insulin formulation despite the increase in the activities of Antigen.

Our interest expense in fiscal 2006 increased to $37,593,441 compared to interest expense of $4,300,512 in fiscal 2005 due to interest paid in connection with convertible debentures entered into during the current fiscal year. Our interest and miscellaneous income increased to $768,098 in fiscal 2006 compared to $93,213 in fiscal 2005 primarily due to substantially higher cash and short term investment balances during the current fiscal year. Our loss on extinguishment of debt, also incurred in connection with convertible debentures, was $12,550,565 in fiscal 2006 compared to $1,346,341 in fiscal 2005. We received a slightly higher income from rental operations (net of expense) of $114,687 in fiscal 2006 compared to $110,326 in fiscal 2005.

Results of Operations

Year Ended July 31, 2005 Compared to Year Ended July 31, 2004

We had a net loss of $24,001,735 for the year ended July 31, 2005 (fiscal 2005) compared to a net loss of $18,362,583 in the year ended July 31, 2004 (fiscal 2004). The net loss for fiscal 2005 and 2004 excludes $0 and $810,003, respectively, in non-cash stock dividend on preferred shares. The main reason for the increase in net loss for the year is attributed to interest expense and loss on extinguishment of debt incurred in connection with convertible debentures entered during 2005 fiscal year. Our operation loss for the year decreased to $18,558,421 compared to $18,565,341 in operating loss for the fiscal year ended July 31, 2004. The decrease in our fiscal 2005 operating loss resulted from a decrease in research and development expenses (to $7,750,731 from $8,522,984), despite an increase in general and administrative expenses (to $11,199,802 from $10,669,541). Our revenue had also decreased from $627,184 in 2004 to $392,112 in the fiscal year ended July 31, 2005.

The increase in general and administrative expenses for fiscal 2005 reflects the increase in legal, audit and accounting, financial and consulting services and executive compensation. The increase in general and administrative expenses was partially offset by a decrease in level of participation in industry shows and seminars, travel associated with shows and financing activities, as well as decreased advertising and fewer payments on termination agreements.

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The decrease in research and development expenses for fiscal 2005 reflects decreased level of research and development activities despite the increase in activities of Antigen. Numbers for fiscal 2004 also reflected bulk insulin purchases that were absent this year.

Our interest expense in fiscal 2005 increased to $4,300,512 compared to interest expense of $116,473 in fiscal 2004 due to interest paid in connection with convertible debentures entered into during the current fiscal year. Our interest and miscellaneous income decreased to $93,213 in 2005 compared to $245,671 l in fiscal 2004 primarily due to lower cash and short term investments balances during the current fiscal year. Our loss on extinguishment of debt, also incurred in connection with convertible debentures, was $1,346,341 in 2005 compared to $0 in fiscal 2004. We received higher income from rental operations (net of expense) of $110,326 in fiscal 2005 compared to $73,560 in fiscal 2004.

Developments

Products/R&D

In the first quarter of fiscal 2006, we initiated a scale-up commercial production run of several thousand canisters of Generex Oral-lyn™ at our pilot manufacturing facility in Toronto, Canada. We shipped the production run to PharmaBrand in Quito, Ecuador in support of the launch of commercial sales of Generex Oral-lyn™ in Ecuador.

In March 2006, we successfully completed of the delivery and installation of a turnkey Generex Oral-lyn™ filling operation at the facilities of PharmaBrand, S.A. in Quito, Ecuador for the purposes of commercial supply and sales in that country and, as we procure the necessary registrations, in other South American countries. The first commercial production run of Generex Oral-lyn™ in Ecuador was completed in May, 2006.

In May 2006, we established a collaborative alliance with Fertin Pharma A/S, a leading Danish manufacturer of medicinal chewing gum, for the development of a metformin medicinal chewing gum for the treatment of Type-2 diabetes mellitus and obesity. We expect to conduct a clinical study to establish the non-inferiority of the product prior to seeking regulatory approvals for the manufacturing, marketing, and sale of the product.

In June 2006, we entered into an agreement with Cardinal Health PTS, LLC pursuant to which Cardinal Health will manufacture of clinical trial batches of our oral insulin product, Generex Oral-lyn™. We executed a clinical supply agreement and a related quality agreement with Cardinal Health in September 2006.

In August 2006, we entered into an agreement with the Euroclinic, a private center in Athens, Greece, to commence clinical trials in patients with prostrate cancer of an immunotherapeutic vaccine being developed by our subsidiary, Antigen. We expect that these studies will be underway by December, 2006.

In August 2006, we introduced our new Glucose RapidSpray™ product which we anticipate will be available in independent retail pharmacies in the United States in October, 2006.

Financing

In fiscal 2006, we entered into financing transactions with the following accredited investors that were parties to the Securities Purchase Agreement that we entered into on November 10, 2004 (the “Securities Purchase Agreement”): Cranshire Capital, L.P. (“Cranshire”); Iroquois Capital, LP (“Iroquois”); Omicron Master Trust (“Omicron”); and Smithfield Fiduciary LLC (“Smithfield”).

On September 8, 2005, we and the investors entered into Amendment No. 2 to the Securities Purchase Agreement, pursuant to which the investors agreed to exercise the remaining $2,000,000 in principal amount of their original additional investment rights acquired under the Securities Purchase Agreement. In connection with their exercise, we issued the investors debentures in the aggregate amount of $2,000,000 with a conversion price of $0.60 (the “A2 AIR Debentures”), warrants to purchase an aggregate of 2,439,024 shares of our common stock at the exercise price of $0.82 per share (the “A2 AIR Warrants”) and additional investment rights (the “A2 Additional AIRS”). In connection with Amendment No. 2, we also issued to a placement agent 170,732 shares of our common stock in lieu of a cash fee and warrants exercisable into approximately 60,000 shares of our common stock at the same exercise price as the A2 AIR Warrants. Shares of common stock issued in connection with Amendment No. 2, including shares assumable upon conversion of debentures or exercise of warrants, were registered for resale on the Registration Statement that became effective November 3, 2005. Amendment No. 2 and the forms of the A2 AIR Debentures, the A2 AIR Warrants and the A2 Additional Airs are filed as Exhibits 4.1, 4.2, 4.3 and 4.4, respectively, to our Current Report on Form 8-K filed on September 9, 2005. The A2 AIR Debentures have since been fully converted into shares of our common stock. The A2 AIR Warrants were amended to accelerate the exercise periods and exercised in full on January 23, 2006 as described below.

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On October 20, 2005, we received aggregate proceeds of $1,492,000 in connection with Cranshire’s partial exercise of its outstanding warrant to purchase 1,219,512 shares of our common stock and Iroquois’ full exercise of its outstanding warrant to purchase 1,219,512 shares of our common stock. The warrants exercised by Cranshire and Iroquois were issued in connection with the previous purchase of our debentures pursuant to the Securities Purchase Agreement. In consideration of the exercise of these warrants, we issued a five-year warrant to purchase 304,878 shares of our common stock to Cranshire and a five-year warrant to purchase 609,756 shares of our common stock to Iroquois, in each case with an exercise price of $1.20 per share, both of which were amended and exercised on February 27, 2006 as described below. The inducement warrants issued to Cranshire and Iroquois on October 20, 2005 are filed as Exhibits 4.29 and 4.30, respectively, to our Report on Form 10-K filed on October 31, 2005.

On October 26, 2005, we and the holders of the warrants issued in connection with Amendment No. 1 to the Securities Purchase Agreement (the “A1 AIR Warrants”) agreed to accelerate the initial exercise dates of these warrants in consideration of their full and immediate exercise. We received aggregate proceeds of approximately $2,000,000 in connection with the investors’ exercise of the A1 AIR Warrants. In consideration of the investors’ exercise of the A1 AIR Warrants, we issued each of the investors a five-year warrant to purchase 304,878 shares of our common stock at $1.25 per share, each of which was amended and exercised on February 27, 2006 as described below. The form of the inducement warrant issued to each investor on October 27, 2005 is filed as Exhibit 4.5 to our Current Report on Form 8-K filed on October 31, 2005.

On October 27, 2005, we received aggregate proceeds of approximately $2,508,000 in connection with the exercise by Cranshire, Omicron and Smithfield of certain outstanding warrants previously issued pursuant to the Securities Purchase Agreement. In connection therewith, we issued to the three investors five-year warrants to purchase an aggregate of 1,529,268 shares of our common stock at $1.25 per share, which warrants were amended and exercised on February 27, 2006 as described below. The form the inducement warrant issued to Cranshire, Omicron and Smithfield on October 27, 2005 is filed as Exhibit 4.31 to our Report on Form 10-K filed on October 31, 2005.

On October 27, 2005, we and Omicron amended the additional investment right granted to Omicron on June 16, 2005 (the “A1 Additional AIR”) to accelerate the initial exercise date (defined as the 181st day following the date of issuance). In connection with Omicron’s exercise of its A1 Additional AIR, we received aggregate proceeds of $500,000. Through its exercise of its A1 Additional AIR, Omicron purchased (i) a debenture in the aggregate principal amount $500,000 with a conversion price of $0.82 (the “A1 Additional AIR Debenture”) and (ii) warrants to a number of shares of our common stock equal to 100% of the shares of common stock issuable upon the conversion in full of the A1 Additional AIR Debenture at an exercise price of $0.82 (the “A1 Additional AIR Warrants”).

On December 4, 2005, we and the investors entered into Amendment No. 3 to the Securities Purchase Agreement pursuant to which (i) the all of the investors except Omicron agreed to exercise an aggregate of $1,500,000 in principal amount of the A1 Additional AIRs (Omicron had previously exercised its A1 Additional AIR as described above), and (ii) all of the investors, including Omicron, agreed to exercise an aggregate of $2,000,000 in principal amount of the A2 Additional AIRs granted to them in connection with Amendment No. 2. In connection with Amendment No. 3, we and the investors, excluding Omicron, agreed to accelerate the initial exercise date of the A1 Additional AIRs. In addition, we and all four of the investors agreed to accelerate the initial exercise dates of the A2 Additional AIRs (the 181st day following the date of issuance) in consideration of their full and immediate exercise. In connection with the exercise of each A1 Additional AIR and each A2 Additional AIR on December 5, 2005, each investor purchased a $500,000 principal amount debenture with a conversion price of $0.82 (the “A1/A2 Additional AIR Debentures”) and a warrant entitling the investor to purchase a number of shares of our common stock equal to 100% of the shares of common stock issuable upon the conversion in full of the A1/A2 Additional AIR Debentures at an exercise price of $0.82 per share (the “A1/A2 Additional AIR Warrants”). Accordingly, we issued to the investors A1/A2 Additional AIR Debentures in the aggregate principal amount of $3,500,000 and A1/A2 Additional AIR Warrants to purchase an aggregate of 4,268,292 shares of our common stock, exercisable for five years commencing six months following the issuance thereof. We received proceeds of approximately $3,500,000 in connection with the investors’ exercise of their A1 Additional AIRs and their A2 Additional AIRS. The A1/A2 Additional AIR Debentures have since been fully converted into shares of our common stock. The A1/A2 Additional AIR Warrants were amended to abridge the exercise periods and exercised in full on January 23, 2006 as described below.

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In addition, in consideration of each investor’s exercise of its A1 Additional AIRs and its A2 Additional AIRs, including Omicron’s October 2005 exercise of its A1 Additional AIR, we granted to each investor an additional investment right (the “A3 Additional AIRs”) pursuant to which each investor had the right to purchase detachable units consisting of (a) debentures in principal amount of $1,000,000 with a conversion price of $1.25 per share (the “A3 Additional AIR Debentures”) and (b) warrants entitling the holder thereof to purchase a number of shares of our common stock equal to 100% of the shares of common stock issuable upon the conversion in full of the A3 Additional AIR Debentures at a $1.25 conversion price (subject to adjustment as set forth therein) (without regard to any restrictions on conversion therein contained) at an exercise price of $1.25 per share (the “A3 Additional AIR Warrants”).

In connection with the transactions contemplated by Amendment No. 3 and Omicron’s October 2005 exercise of its A1 Additional AIR, we paid to a placement agent 224,000 shares of our common stock in lieu of a $280,000 cash fee (7% of the gross proceeds received by us) and warrants exercisable into 105,000 shares of common stock at the same exercise price as the A1/A2 Additional AIR Warrants. Shares of common stock issued in connection with Amendment No. 3, including shares issuable upon conversion of debentures or exercise of warrants, were registered for resale on the Registration Statement that became effective February 1, 2006. Amendment No. 3 and the forms of the amendment to the A1/A2 Additional AIRs, the A1/A2 Additional AIR Debentures, the A1/A2 Additional AIR Warrants and the A3 Additional AIRS are filed as Exhibits 4.1, 4.2, 4.3, 4.4 and 4.5, respectively, to our Current Report on Form 8-K filed on December 5, 2005.

On January 19, 2006, we and the investors entered into Amendment No. 4 to the Securities Purchase Agreement, pursuant to which the investors exercised an aggregate of $4,000,000 in principal amount of the A3 Additional AIRs (being the full amount thereof) in consideration of the acceleration of the initial exercise dates thereof and reduction of the conversion price from $1.25 to $1.05. We received proceeds of approximately $4,000,000 in connection with the investors’ exercise of their A3 Additional AIRs. Accordingly, we issued to the investors A3 Additional AIR Debentures in the aggregate amount of $4,000,000 and A3 Additional AIR Warrants to purchase an aggregate of 3,809,524 shares of our common stock, exercisable for five years commencing six months following the issuance thereof. Under the terms of Amendment No. 4, the reduction in the conversion price of the A3 Additional AIR Debentures and the exercise price of the A3 Additional AIR Warrants did not trigger any anti-dilution adjustments to any outstanding securities held by the investors. The A3 Additional AIR Debentures have since been fully converted into shares of our common stock. The A3 Additional AIR Warrants were amended to abridge the exercise periods and exercised in full on February 27, 2006 as described below.

In consideration of each investor’s exercise of its A3 Additional AIR, we granted to each investor a further additional investment right (the “A4 Additional AIR”) pursuant to which each investor had the right to purchase detachable units consisting of (a) a debenture in principal amount of $1,000,000 with a conversion price of $1.25 (the “A4 Additional AIR Debenture”) and (b) a warrant entitling the holder thereof to purchase a number of shares of our common stock equal to 100% of the shares of common stock issuable upon the conversion in full of the A4 Additional AIR Debenture at a $1.25 conversion price (subject to adjustment as set forth therein) (without regard to any restrictions on conversion therein contained) at an exercise price of $1.25 per share (the “A4 Additional AIR Warrants”). Under the terms of Amendment No. 4, we also agreed to register for resale the securities issuable upon conversion/exercise of the A4 Additional AIR Debentures and the A4 Additional AIR Warrants. We agreed to register such securities on the Registration Statement contemplated by Amendment No. 3. The Registration Statement became effective on February 24, 2006.

In addition, in connection with the transactions contemplated by Amendment No. 4, we issued to a placement agent (i) 266,667 shares of common stock in lieu of a cash fee equal to 7% of the gross proceeds received by us and (ii) warrants exercisable into approximately 120,000 shares of common stock at the same exercise price as the A3 Additional AIR Warrants. These shares were registered for resale in the registration statement which became effective on February 24, 2006. Amendment No. 4 and the forms of the A3 Additional AIR Debentures, the A3 Additional AIR Warrants and the A4 Additional AIRS are filed as Exhibits 4.1, 4.2, 4.3 and 4.4, respectively, to our Current Report on Form 8-K filed on January 20, 2006.

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On January 23, 2006, we agreed with the investors to amend the terms of certain outstanding warrants to purchase common stock (the “January Exercised Warrants”) to accelerate their exercise dates to January 23, 2006. The January Exercised Warrants consisted of warrants for an aggregate of 2,439,024shares issued in connection with Amendment No. 2 (initially exercisable on March 8, 2006) and warrants for an aggregate of 4,878,048 shares issued in connection with Amendment No. 3 (initially exercisable beginning June 5, 2006). The investors agreed to immediately exercise 100% of these warrants (for aggregate gross proceeds to us of $6,000,000) in exchange for (i) the acceleration of the exercise period , and (ii) the issuance of additional warrants equal to 50% of the shares issuable upon exercise of the January Exercised Warrants (an aggregate of 3,658,536 shares) (the “January Inducement Warrants”). The January Inducement Warrants had an exercise price of $1.60 per share and were initially exercisable for a period of five years commencing six months from the date of issuance. The January Inducement Warrants were included in a Registration Statement declared effective February 24, 2006 and were amended to accelerate the exercise dates and exercised in full on June 1, 2006 as described below. The terms of the amendments to the January Exercised Warrants and the terms of the January Inducement Warrants are disclosed in their entirety in the text of the form of agreement to amend warrants between us and the investors dated January 23, 2006 and the form of warrant issued by us on January 23, 2006 filed as Exhibits 4.1 and 4.2, respectively, to our Current Report on Form 8-K filed on January 24, 2006.

On February 27, 2006, we and the investors agreed to amend the terms of certain outstanding warrants to purchase common stock issued in connection with the Securities Purchase Agreement, as amended, to accelerate the exercise dates to February 27, 2006 (the “February Exercised Warrants”) in consideration of the full and immediate exercise of such warrants. The February Exercised Warrants consisted of warrants issued: (i) to Omicron on July 22, 2005 for 243,902 shares of our common stock at $0.82 per share and then currently exercisable; (ii) to Cranshire on October 20, 2005 for 300,000 shares of our common stock at $1.20 per share (originally exercisable on April 20, 2006); (iii) to Iroquois on October 20, 2005 for 609,756 shares of our common stock at $1.20 per share (originally exercisable on April 20, 2006); (iv) to Cranshire on October 27, 2005 for 309,756 shares of our common stock at $1.25 per share (originally exercisable on April 27, 2006); (v) to Omicron and Smithfield on October 27, 2006 for 609,756 shares each of our common stock at $1.25 per share (originally exercisable on April 27, 2006); (vi) to each of the investors on October 27, 2005 for 304,878 shares each of our common stock at $1.25 per share (originally exercisable on April 27, 2006); (vii) to Cranshire on December 9, 2005 for 1,829,268 shares of our common stock at $1.25 per share (originally exercisable on June 9, 2006); and (viii) to each of the investors on January 20, 2006 for 952,381 shares each of our common stock at $1.05 per share (originally exercisable on July 20, 2006). We received aggregate gross proceeds of approximately $11,014,267 in connection with the investors’ exercise of the February Exercised Warrants. In consideration for such exercise, we issued to the investors additional warrants equal to 50% of the February Exercised Warrants (an aggregate of 4,770,617 shares) (the “February Inducement Warrants”). The February Inducement Warrants have an exercise price of $3.00 per share and will be exercisable for five years commencing on August 27, 2006. The terms of the warrant amendments are disclosed in their entirety in the text of the agreements to amend warrants between us and each investor filed as Exhibits 4.1, 4.2, 4.3 and 4.4 to our Current Report on Form 8-K filed on February 28, 2006. As of July 31, 2006, all of the February Inducement Warrants were outstanding. The form of the February Inducement Warrant issued to each investor is filed as Exhibit 4.26 to this Report on Form 10-K.

On February 28, 2006, we amended the terms of the A4 Additional AIRs to accelerate their initial exercise date in consideration of their full and immediate exercise. In connection with the exercise of each A4 Additional AIR, each investor purchased a $1,000,000 principal amount debenture with a conversion price of $1.25 (collectively, the “A4 Additional AIR Debentures”) and warrants (collectively, the “A4 Additional AIR Warrants”) entitling the investor to purchase a number of shares of our common stock equal to 100% of the shares of common stock issuable upon the conversion in full of the A4 Additional AIR Debenture at a conversion price of $1.25 (subject to adjustment as set forth therein) (without regard to any restrictions on conversion therein contained) at an exercise price of $1.25. Accordingly, we issued to the investors A4 Additional AIR Debentures in the aggregate amount of $4,000,000 and A4 Additional AIR Warrants to purchase an aggregate of 3,200,000 shares of our common stock, exercisable for five years commencing six months following the issuance thereof. We received proceeds of approximately $4,000,000 in connection with the investors’ exercise of their A4 Additional AIRs. At July 31, 2006 the balance of $769,231 was still outstanding on A4 Additional AIR Debenture. A portion of the A4 Additional AIR Warrants were amended to abridge the exercise periods and exercised on March 6, 2006 as described below. The terms of the amendments to the A4 Additional AIRs are disclosed in their entirety in the text of the agreements to amend additional investment right between us and each investor filed as Exhibits 4.1, 4.2, 4.3 and 4.4 to our Current Report on Form 8-K filed on March 1, 2006. The forms of the A4 Additional AIR Debentures and the A4 Additional AIR Warrants are filed as Exhibits 4.31 and 4.32, respectively, to this Report on Form 10-K.

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On March 6, 2006, we agreed with the investors to accelerate the exercise dates of the A4 Additional AIR Warrants with respect to fifty percent (50%) of the shares of our common stock issuable thereunder (an aggregate of 1,600,000 shares). The A4 Additional AIR Warrants were initially exercisable on August 31, 2006. We received aggregate gross proceeds of approximately $2,000,000 in connection with the exercise of the investors’ exercise of fifty percent (50%) of the A4 Additional AIR Warrants. In consideration of such exercise, we issued additional warrants equal to 50% of the exercised A4 Additional AIR Warrants (an aggregate of 800,000 shares) (the “March Inducement Warrants”). The March Inducement Warrants have an exercise price of $3.00 per share and will be exercisable for five years from September 6, 2006. The form of the amendment to the A4 Additional AIR Warrants and the March Inducement Warrant are filed as Exhibits 4.1 and 4.2, respectively, to our Current Report on Form 8-K filed on March 7, 2006. As of July 31, 2006, all March Inducement Warrants were outstanding.

On April 17, 2006, our Board of Directors ratified the issuance to Zapfe Holdings Inc. of an aggregate of 204,465 shares of common stock and a warrant to purchase 102,232 shares of our common stock at an exercise price of $1.25 per share. We issued the stock and warrant in consideration of an investment of CAD$300,000. The warrant is exercisable until January 13, 2011. The shares of common stock and the shares of common stock issuable upon exercise of the warrant were included on a Registration Statement declared effective by the SEC on February 27, 2006. The warrant issued to Zapfe Holdings, Inc. was filed as Exhibit 4.33 to our Report on Form 10-Q filed on June 14, 2006. As of July 31, 2006, the warrant issued to Zapfe Holdings remained outstanding.

On June 1, 2006, we entered into a Securities Purchase Agreement with Cranshire, Iroquois, Smithfield and a Rockmore Investment Master Fund (“Rockmore”). Each investor purchased 853,659 restricted shares of our common stock and warrants to purchase 640,245 shares of common stock at an exercise price of $2.45 per share. The purchase price for each Unit consisting of one share and a warrant to purchase three-quarters of one share of our common stock was $2.05. Consequently, each investor paid an aggregate of $1,750,000.95, and we received aggregate gross proceeds of $7.0 million. We also granted the investors certain participation rights pursuant to which, upon any financing at any time within the next twelve months, the investors will have the right to purchase up to 100% of such financing. The exercise price of the warrants is subject to certain anti-dilution adjustments upon issuance of securities at a price per share of common stock less than the then applicable exercise price or the market price of our common stock at that time. This transaction closed on June 2, 2006. The terms of the Securities Purchase Agreement dated June 1, 2006 and the related warrants are disclosed in their entirety in the text of the Securities Purchase Agreement and form of the related warrants filed as Exhibits 4.1 and 4.2, respectively, to our Current Report on Form 8-K filed on June 2, 2006.

On June 1, 2006, we agreed with the investors to amend the terms of outstanding warrants to purchase an aggregate of 4,364,190 shares of common stock (the "June Exercised Warrants") to accelerate their exercise periods to June 1, 2006 in exchange for the full and immediate exercise. The June Exercised Warrants included: (i) warrants to purchase an aggregate of 4,364,190 shares of our common stock with strike prices of $1.25 and $1.60 per share and exercise dates of August 28, 2006 and July 23, 2006; and (ii) warrants for 292,408 shares exercisable at $1.60 per share and warrants for 127,880 shares exercisable at $1.25 per share originally issued to Omicron which had been assigned to Rockmore. In connection with the investors’ exercise of the June Exercised Warrants, we received aggregate proceeds of approximately $6,517,945. On June 2, 2006, in consideration of the investors' exercise of the June Exercised Warrants, we issued to each investor additional warrants exercisable for a period of five years entitling the holder thereof to purchase a number of shares of common stock equal to 75% of the shares of common stock issuable upon the conversion in full (without regard to any restrictions on conversion therein contained) of the June Exercised Warrants (an aggregate of 3,273,144 shares of common stock) at an exercise price of $2.35 per share (the “June Inducement Warrants”). The terms of the warrant amendment and the June Inducement Warrant are filed as Exhibits 4.3 and 4.4, respectively, to our Current Report on Form 8-K filed on June 2, 2006.

In addition to the financing transactions described above, we received proceeds during fiscal 2006 from the exercise by Cranshire and Omicron of additional warrants issued to them in connection with the extension of the interest payment and maturity dates under their loans to us. The warrants and loans are described below under Financial Condition, Liquidity and Resources.

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Financial Condition, Liquidity and Resources

To date we have financed our development stage activities primarily through private placements of our common stock and securities convertible into our common stock.

During the fiscal year ended July 31, 2006, we engaged in several capital-raising transactions with certain of our stockholders. At July 31, 2006, we had cash and short-term investments of approximately $52.5 million, an increase of approximately $52 million from the balance as of the end of the prior fiscal year. The increase is attributable to the proceeds received in connection with warrant and additional investment right exercises and other sales of our common stock during the fiscal year ended July 31, 2006 as described below and above under the caption Developments - Financings.

At July 31, 2006, we had 6% secured convertible debentures outstanding in the aggregate principal amount of $769,231, which were issued in connection with the Securities Purchase Agreement and the amendments thereto. See the description of the “A4 Additional AIR Debentures” above under Developments - Financings for more information about the issuance of these debentures.

The outstanding debentures have a term of fifteen months and amortize over thirteen months in thirteen equal monthly installments beginning on the first day of the third month following their issuance (May 1, 2006). Interest on the principal amount outstanding accrues at a rate of 6% per annum. We may pay principal and accrued interest in cash or, at our option, in shares of our common stock. If the we elect to pay principal and interest in shares of our common stock, the value of each share of common stock will be equal to the lesser of (i) $1.25 and (ii) ninety percent (90%) of the average of the daily volume weighted average price for the common stock over the twenty trading day period immediately preceding the date of payment. At the option of the holder of each debenture, the principal amount outstanding under each such debenture is initially convertible into shares of our common stock at a conversion price of $1.25.

Upon the occurrence of an “Event of Default” with respect to each debenture, the full principal amount of each such debenture, together with interest and other amounts owing in respect thereof, may be accelerated at the holder’s option and payable in cash. The aggregate amount payable upon an Event of Default shall be equal to the “Mandatory Prepayment Amount.” The Mandatory Prepayment Amount for a debenture shall equal the sum of (i) the greater of: (A) 130% of the principal amount of the debentures to be prepaid, plus all accrued and unpaid interest thereon, or (B) the principal amount of the debentures to be prepaid, plus all other accrued and unpaid interest thereof, divided by the conversion price on (x) the date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory Prepayment Amount is paid in full, whichever is less, multiplied by the daily volume weighted average price of the common stock on (x) the date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory Prepayment Amount is paid in full, whichever is greater, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of such debentures. The interest rate on the debentures will accrue at the rate of 18% per annum, or such lower maximum amount of interest permitted to be charged under applicable law, beginning five days after the occurrence of any Event of Default that results in the acceleration of the debentures. A late fee of 18% per annum, or such lower maximum amount of interest permitted to be charged under applicable law, will accrue on a daily basis on all overdue accrued and unpaid interest under the debentures from the due date to the date of payment.

Since November 2004, we had issued an aggregate of 20,092,540 shares of common stock resulting from the conversion and repayment of an aggregate of $16,822,520 of debenture principal and accrued interest issued under the auspices of the Securities Purchase Agreement and amendments thereto. In connection with the Securities Purchase Agreement dated June 1, 2006, we issued an aggregate of 3,414,636 shares of our restricted common stock and warrants to purchase an aggregate of 2,560,980 shares of our common stock at an exercise price of $2.45 per share.

As of July 31, 2006, warrants issued under the auspices of the Securities Purchase Agreement dated November 10, 2004 and amendments thereto were exercised to purchase an aggregate of 34,285,904 shares of our common stock at varying exercise prices for an aggregate proceeds to us of $34,932,210.

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All of the shares issued upon the conversion and repayment of debentures and exercise of warrants have been registered with the SEC for resale by the investors.

At July 31 2006, the following warrants issued under the auspices of the Securities Purchase Agreement dated November 10, 2004 and amendments thereto and the Securities Purchase Agreement dated June 1, 2006 were outstanding:

Date Issued	Aggregate No. of Shares Unexercised	Exercise Price	Exercise Date	Expiration Date
January 26, 2006	622,226	$1.60	June 2, 2006	July 22, 2011
February 27, 2006	4,770,617	$3.00	August 27, 2006	August 27, 2011
February. 28, 2006	272,120	$1.25	August 31, 2006	August 31, 2011
March 1, 2006	800,000	$3.00	September 6, 2006	September 6, 2011
June 1, 2006	2,560,980	$2.45*	June 1, 2006	June 1, 2011
June 2, 2006	3,273,144	$2.35	June 2, 2006	June 2, 2011

*subject to anti-dilution adjustments upon issuance of securities at a price per share of common stock less than the then applicable exercise price or the market price of our common stock at that time, whichever is lower

In fiscal 2006, we also extinguished our debt under certain outstanding loans as follows.

On October 19, 2005, Cranshire converted outstanding principal and accrued interest in the aggregate amount of $528,082 due under the promissory note and agreement that we entered into on March 28, 2005 into 644,003 shares of our common stock. On October 27, 2005, Omicron converted outstanding principal and accrued interest in the aggregate amount of $105,644 due under the promissory note and agreement that we entered into on April 6, 2005 into 128,834 shares of common stock. Pursuant to the terms of the notes, the outstanding principal balances and any accrued but unpaid interest thereon was due and payable on May 15, 2005 to the extent that Cranshire and Omicron had not exercised their respective conversion rights under the notes. On April 28, 2005, as additional consideration for the loans from Cranshire and Omicron, we issued Cranshire a warrant to purchase an aggregate of 1,219,512 shares of our common stock at a per share price of $0.82 and issued Omicron a warrant to purchase an aggregate of 243,902 shares of our common stock at a per share price of $0.82.

We did not pay the outstanding principal balances originally due on May 15, 2005 under the notes. Interest on the outstanding principal balances under the notes began accruing before the maturity date at the rate of 10% per annum. On June 7 and July 22, 2005, Cranshire and Omicron agreed to extend the interest payment date and the maturity date of each of the notes, with the last extension to September 20, 2005. In consideration of each such extension, we issued Cranshire a warrant to purchase an aggregate of 1,219,512 shares of our common stock at a per share price of $0.82 and issued Omicron a warrant to purchase an aggregate of 243,902 shares of our common stock at a per share price of $0.82.

In October and November 2005, Cranshire exercised the outstanding warrants previously issued to it in connection with its note for aggregate proceeds to us of approximately $3,000,000. On December 9, 2005, in consideration thereof, we issued to Cranshire a five-year warrant to purchase an aggregate of 1,829,268 shares of our common stock at $1.25 per share. Cranshire exercised its warrant to purchase 1,829,268 shares of our common stock on February 27, 2006. In consideration of the exercise of this warrant, we issued Cranshire a warrant to purchase 914,634 shares of our common stock. We issued Cranshire additional warrants in consideration of its exercise of other outstanding warrants on February 27, 2006 as described above under Developments - Financings.

On February 27, 2006, Omicron exercised one of its warrants previously issued to it in connection with its note pursuant to which it purchased an aggregate of 243,902 shares of our common stock for $200,000. In consideration of such exercise, we issued to Omicron a five-year warrant to purchase an aggregate of 121,951 shares of our common stock at $3 per share. Prior thereto, Omicron had voluntarily exercised all of its other warrants previously issued to it in connection with its note for no additional consideration.

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On June 13, 2006, we filed a certificate of elimination with the Secretary of State of the State of Delaware to eliminate from our certificate of incorporation all references to our Series A Preferred Stock. Prior thereto, there were 1,512 shares of our preferred stock designated as Series A Preferred Stock in accordance with the certificate of designation relating thereto, but there were no outstanding shares of the Series A Preferred Stock. With the elimination of the Series A Preferred Stock, we will treat the shares of preferred stock previously designated as Series A Preferred Stock as authorized but unissued preferred stock that may be issued from time to time in one or more series with such designations, preferences, powers and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, as shall be stated in the resolutions adopted by our Board of Directors providing for the designation and creation of such series of preferred stock.

We restated our certificate of incorporation (the “Restated Certificate of Incorporation”) to reflect the certificate of elimination and the increase in the number of authorized shares of our common stock to (from 150,000,000 to 500,000,000 shares) as approved by our stockholders at our Annual Meeting held on May 30, 2006. We filed the Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on June 13, 2006, and it became effective as of that such date.

As of July 31, 2006, we believed that our anticipated cash position was sufficient to meet our working capital needs for the next 12 months based on the pace of our planned activities. Beyond that, we may require additional funds to support our working capital requirements or for other purposes. While we have generally been able to raise equity capital as required, our cash balances were very low during parts of 2005 and unforeseen problems with our clinical program or materially negative developments in general economic conditions could interfere with our ability to raise additional equity capital as needed, or materially adversely affect the terms upon which such capital is available. If we are unable to raise additional capital as needed, we could be required to "scale back" or otherwise revise our business plan. Any significant scale back of operations or modification of our business plan due to a lack of funding could be expected to affect our prospects materially and adversely.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States of America. It requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

We consider certain accounting policies related to impairment of long-lived assets, intangible assets and accrued liabilities to be critical to our business operations and the understanding of our results of operations:

Impairment of Long-Lived Assets. Management reviews for impairment whenever events or changes in circumstances indicate that the carrying amount of property and equipment may not be recoverable under the provisions of Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." If it is determined that an impairment loss has occurred based upon expected future cash flows, the loss is recognized in the Statement of Operations.

Intangible Assets. We have intangible assets related to patents. The determination of the related estimated useful lives and whether or not these assets are impaired involves significant judgments. In assessing the recoverability of these intangible assets, we use an estimate of undiscounted operating income and related cash flows over the remaining useful life, market conditions and other factors to determine the recoverability of the asset. If these estimates or their related assumptions change in the future, we may be required to record impairment charges against these assets.

Estimating accrued liabilities, specifically litigation accruals. Management's current estimated range of liabilities related to pending litigation is based on management's best estimate of future costs. While the final resolution of the litigation could result in amounts different than current accruals, and therefore have an impact on our consolidated financial results in a future reporting period, management believes the ultimate outcome will not have a significant effect on our consolidated results of operations, financial position or cash flows.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity capital expenditures or capital resources that is material to investors, and we do not have any non-consolidated special purpose entities.

Contractual Obligations

Payments Due by Period

Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Debt Obligations		3,805,394		1,197,290		1,385,850		1,222,254		0
Capital Lease Obligations		0		0		0		0		0
Operating Lease Obligations		85,179		36,069		47,780		1,330		0
Purchase Obligations		0		0		0		0		0
Other Long-Term Liabilities Reflected on the Registrant's Balance Sheet under GAAP		0		0		0		0		0
Total	$	3,890,573	$	1,233,359	$	1,433,630	$	1,223,584	$	0

Related Party Transactions

On May 3, 2001, we advanced $334,300 to each of three senior officers, who are also our stockholders, in exchange for promissory notes. These notes bore interest at 8.5% 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 our common stock owned by this related company. On June 3, 2002, our 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. Pursuant to a decision made by the Compensation Committee as of August 30, 2002, these loans were satisfied through the application of 592,716 shares 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.

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. With the exception of our arrangement with our management company described below, we do not foresee a need for, and therefore do not anticipate, any related party transactions in the current fiscal year.

On August 7, 2002, we purchased real estate with an aggregate purchase price of approximately $1.6 million from an unaffiliated party. In connection with that transaction, Angara Enterprises, Inc., a licensed real estate broker that is an affiliate of Anna Gluskin, our Chairman, President and Chief Executive Officer, received a commission from the proceeds of the sale to the seller in the amount of 3% of the purchase price, or $45,714. We believe that this is less than the aggregate commission which would have been payable if a commission had been negotiated with an unaffiliated broker on an arm's length basis.

On December 9, 2005, our Board of Directors also approved a one-time recompense payment in the aggregate amount of $1,000,000 for each of Ms. Gluskin and Ms. Rose Perri, our Chief Operating Officer, Chief Financial Officer, Treasurer and Secretary, in recognition of the company’s failure to remunerate each of Ms. Gluskin and Ms. Perri in each of the fiscal years ended July 31, 1998, 1999, 2000 and 2001 in a fair and reasonable manner commensurate with comparable industry standards and Ms. Gluskin’s and Ms. Perri’s duties, responsibilities and performance during such years. The payment of such amount to each of Ms. Gluskin and Ms. Perri will be made (a) in cash at such time or times and in such amounts as determined solely by Ms. Gluskin or Ms. Perri, as applicable, and/or (b) in shares of our common stock at such time or times as determined by Ms. Gluskin or Ms. Perri, as applicable, provided that the conversion price for any such shares shall be equal to the average closing price of our common stock on the NASDAQ Capital Market for the 20 successive trading days immediately preceding, but not including, December 9, 2005.

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On December 9, 2005, our Board of Directors also approved the grant to Ms. Perri of a right of first refusal in respect of any sale, transfer, assignment or other disposition of either or both real properties municipally known as 1740 Sismet Road, Mississauga, Ontario and 98 Stafford Drive, Brampton, Ontario (collectively, the “Properties”). We granted Ms. Perri this right in recognition of the fair market value transfer to us during the fiscal year ended July 31, 1998 by Ms. Perri (or parties related to her) of the Properties.

We utilize a management company to manage all of our real properties. The property management company is owned by Ms. Perri, Ms. Gluskin and the estate of Mark Perri, our former Chairman of the Board. In the fiscal years ended July 31, 2006 and 2005 we paid the management company approximately $46,113 and $44,024, respectively, in management fees.

New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment" ("SFAS 123(R)"), which requires all companies to measure compensation cost for all share-based payments (including employee stock options) at fair value and to recognize cost over the vesting period. In March 2005, the SEC released SEC Staff Accounting Bulletin No. 107, "Share-Based Payment" ("SAB 107"). SAB 107 provides the SEC staff position regarding the application of SFAS 123(R), including interpretive guidance related to the interaction between SFAS 123(R) and certain SEC rules and regulations, and provides the staff's views regarding the valuation of share-based payment arrangements for public companies. SAB 107 highlights the importance of disclosures made related to the accounting for share-based payment transactions. In April 2005, the SEC announced that companies may implement SFAS 123(R) at the beginning of their next fiscal year beginning after June 15, 2005, or December 15, 2005 for small business issuers. The Company implemented the provisions of SFAS 123(R) and SAB 107 in the first quarter of fiscal 2006 using the modified-prospective method, and it did not have a material impact on our financial position or cash flows. See Note 2 - "Stock Based Compensation" for further information and the required disclosures under SFAS 123(R) and SAB 107, including the impact of the implementation on our results of operations.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29." The statement addresses the measurement of exchanges of nonmonetary assets and eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of this statement did not have a significant impact on our consolidated results of operations or financial position.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” This statement replaces APB No. 20 and SFAS No. 3 and changes the requirements for the accounting for and reporting of a change in accounting principle. APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the accounting principle. SFAS No. 154 requires retrospective application to prior periods’ financial statements of voluntary changes in accounting principle. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We are currently evaluating the impact of adopting this statement.

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and 140,” to simplify and make more consistent the accounting for certain financial instruments. Specifically, SFAS No. 155 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to permit fair value remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, “Accounting for the Impairment or Disposal of Long-Lived Assets, “to allow a qualifying special-purpose entity (SPE) to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006, with earlier application allowed. We are currently evaluating the impact of adopting this statement.

41

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets,” to simplify accounting for separately recognized servicing assets and servicing liabilities. SFAS No. 156 amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” Additionally, SFAS No. 156 permits, but does not require, an entity to choose either the amortization method or the fair value measurement method for measuring each class of separately recognized servicing assets and servicing liabilities. SFAS No. 156 applies to all separately recognized servicing assets and servicing liabilities acquired or issued after the beginning of an entity’s fiscal year that begins after September 15, 2006, although early adoption is permitted. We are currently evaluating the impact of adopting this statement.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,”to eliminate the diversity in practice that exists due to the different definitions of fair value and the limited guidance for applying those definitions in GAAP that are dispersed among the many accounting pronouncements that require fair value measurements. SFAS No. 157 retains the exchange price notion in earlier definitions of fair value, but clarifies that the exchange price is the price in an orderly transaction between market participants to sell an asset or liability in the principal or most advantageous market for the asset or liability. Moreover, the SFAS states that the transaction is hypothetical at the measurement date, considered from the perspective of the market participant who holds the asset or liability. Consequently, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price), as opposed to the price that would be paid to acquire the asset or received to assume the liability at the measurement date (an entry price).

SFAS No. 157 also stipulates that, as a market-based measurement, fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability, and establishes a fair value hierarchy that distinguishes between (a) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (b) the reporting entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). Finally, SFAS No. 157 expands disclosures about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Entities are encouraged to combine the fair value information disclosed under SFAS No. 157 with the fair value information disclosed under other accounting pronouncements, including SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” where practicable. The guidance in this Statement applies for derivatives and other financial instruments measured at fair value under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” at initial recognition and in all subsequent periods.

SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, although earlier application is encouraged. Additionally, prospective application of the provisions of SFAS No. 157 is required as of the beginning of the fiscal year in which it is initially applied, except when certain circumstances require retrospective application. We are currently evaluating the impact of adopting this statement.

In July 2006, the FASB published FASB Interpretation No. 48 (FIN No. 48), “Accounting for Uncertainty in Income Taxes”, to address the noncomparability in reporting tax assets and liabilities resulting from a lack of specific guidance in SFAS No. 109, “Accounting for Income Taxes,” on the uncertainty in income taxes recognized in an enterprise’s financial statements.  FIN No. 48 will apply to fiscal years beginning after December 15, 2006, with earlier adoption permitted.  The Company does not expect that the adoption of FIN No. 48 will have a significant impact on the consolidated results of operations or financial position of the Company.

In September 2006, the FASB issued “Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106, and 132R)”, which will require employers to fully recognize the obligations associated with single-employer defined benefit pension, retiree healthcare and other postretirement plans in their financial statements. Under past accounting standards, the funded status of an employer’s postretirement benefit plan (i.e., the difference between the plan assets and obligations) was not always completely reported in the balance sheet. Past standards only required an employer to disclose the complete funded status of its plans in the notes to the financial statements. SFAS No. 158 applies to plan sponsors that are public and private companies and nongovernmental not-for-profit organizations. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006, for entities with publicly traded equity securities, and at the end of the fiscal year ending after June 15, 2007, for all other entities. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. We are currently evaluating the impact of adopting this statement.

42

Item. 7A.Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks associated with changes in the exchange rates between U.S. and Canadian currencies and with changes in the interest rates related to our fixed rate debt. We do not believe that any of these risks will have a material impact on our financial condition, results of operations and cash flows.

At the present time, we maintain our cash in short-term government or government guaranteed instruments, short-term commercial paper, interest bearing bank deposits or demand bank deposits which do not earn interest. A substantial majority of these instruments and deposits are denominated in U.S. dollars, with the exception of funds denominated in Canadian dollars on deposit in Canadian banks to meet short-term operating needs in Canada. At the present time, with the exception of professional fees and costs associated with the conduct of clinical trials in the United States and Europe, substantially all of our operating expense obligations are denominated in Canadian dollars. We do not presently employ any hedging or similar strategy intended to mitigate against losses that could be incurred as a result of fluctuations in the exchange rates between U.S. and Canadian currencies.

As of July 31, 2006, we have fixed rate debt totaling $3,036,163. This amount consists of the following:

Loan Amount	Interest Rate per Annum
426,725	6.82%
264,579	6.82%
645,897	7.60%
353,600	8.50%
206,210	10%
1,139,152	6.07%
3,036,163	Total

These debt instruments mature from August 2006 through June 2011. As our fixed rate debt instruments mature, we will likely refinance such debt at the existing market interest rates which may be more or less than interest rates on the maturing debt. Since this debt is fixed rate debt, if interest rates were to increase 100 basis points prior to maturity, there would be no impact on earnings or cash flows.

We have neither issued nor own any long-term debt instruments, or any other financial instruments, for trading purposes and as to which we would be subject to material market risks.

Item 8.Financial Statements and Supplementary Data.

43

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	PAGE
Report of Independent Registered Public Accounting Firms	45 - 47
Consolidated Balance Sheets July 31, 2006 and 2005	48
Consolidated Statements of Operations For the Years Ended July 31, 2006, 2005 and 2004 and Cumulative From Inception to July 31, 2006	49
Consolidated Statements of Changes in Stockholders’ Equity For the Period November 2, 1995 (Date of Inception) to July 31, 2006	50-66
Consolidated Statements of Cash Flows For the Years Ended July 31, 2006, 2005 and 2004 and Cumulative From Inception to July 31, 2006	67-68
Notes to Consolidated Financial Statements	69-102

44

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders of

Generex Biotechnology Corporation

(A Development Stage Company)

We have audited the accompanying consolidated balance sheet of Generex Biotechnology Corporation (a development stage company) as of July 31, 2006 and the related consolidated statement of operations, stockholders’ equity, and cash flows for the year ended July 31, 2006. We also have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that Generex Biotechnology Corporation maintained effective internal control over financial reporting as of July 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Generex Biotechnology Corporation’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on these financial statements, an opinion on management’s assessment, and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit. We did not audit the consolidated financial statements of Generex Biotechnology Corporation for the period from November 2, 1995 (date of inception) to July 31, 2005. These statements were audited by other auditors whose report has been furnished to us and our opinion, insofar as it relates to amounts for the period from November 2, 1995 (date of inception) to July 31, 2005, included in cumulative totals, is based solely upon the reports of other auditors.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

45

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Generex Biotechnology Corporation as of July 31, 2006, and the results of its operations and its cash flows for year ended July 31, 2006 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, management’s assessment that Generex Biotechnology Corporation maintained effective internal control over financial reporting as of July 31, 2006 is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Furthermore, in our opinion, Generex Biotechnology Corporation maintained, in all material respects, effective internal control over financial reporting as of July 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

As discussed in Note 2 to the consolidated financial statements, the Company adopted Statements of Financial Accounting Standards No. 123(R), “Share-Based Payments,” effective August 1, 2005.

Our audit was conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedule II has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements, and in our opinion, is fairly stated when considered in relation to the basic consolidated financial statements taken as a whole.

/s/ Danziger & Hochman

Toronto, Ontario

September 29, 2006

46

Report of Independent Registered Public Accounting Firm

We have audited the accompanying consolidated balance sheet of Generex Biotechnology Corporation (a development stage company) as of July 31, 2005 and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended July 31, 2005. We have also audited the Schedule II. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and Schedule II are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and Schedule II, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement and schedule presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Generex Biotechnology Corporation (a development stage company) at July 31, 2005 and the results of its operations and its cash flows for each of the two years in the period ended July 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, Schedule II presents fairly, in all material respects, the information set forth therein.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring net losses and negative cash flows from operations and has a working capital deficiency. These matters raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ BDO Dunwoody LLP

Toronto, Ontario

September 30, 2005

47

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

	July 31, 2006			July 31, 2005
ASSETS
Current Assets:
Cash and cash equivalents	$	38,208,493		$	586,530
Restricted cash		—			204,734
Short-term investments		14,372,653			—
Other current assets		237,752			165,586
Deferred debt issuance costs		—			337,798
Total Current Assets		52,818,898			1,294,648
Property and Equipment, Net		2,585,744			3,976,742
Assets Held for Investment, Net		3,602,773			2,371,749
Patents, Net		5,097,827			5,443,094
Due From Related Party		—			379,612
TOTAL ASSETS	$	64,105,242		$	13,465,845
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	5,444,790		$	2,410,846
Short-term advance		—			325,179
Current maturities of long-term debt		428,059			2,571,530
Convertible Debentures, Net of Debt Discount of $608,737 and
$2,108,459 at July 31, 2006 and 2005, respectively		160,494			1,314,926
Total Current Liabilities		6,033,343			6,622,481
Long-Term Debt, Net		2,608,105			716,361
Commitments and Contingencies
Stockholders’ Equity:
Special Voting Rights Preferred stock, $.001 par value;
authorized, issued and outstanding 1,000 shares at
July 31, 2006 and 2005		1			1
Common stock, $.001 par value; authorized 500,000,000 shares at
July 31, 2006 and 2005; 107,398,360 and 41,933,898 shares
issued and outstanding, respectively		107,397			41,935
Additional paid-in capital		243,097,627			126,044,326
Deficit accumulated during the development stage		(188,495,312	)		(120,528,108	)
Accumulated other comprehensive income		754,081			568,849
Total Stockholders’ Equity		55,463,794			6,127,003
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	64,105,242		$	13,465,845

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

48

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Years Ended July 31,									Cumulative From November 2, 1995 (Date of Inception) to July 31,
	2006			2005			2004			2006
Revenues	$	175,000		$	392,112		$	627,184		$	2,194,296
Operating Expenses:
Research and development		6,191,528			7,750,731			8,522,984			61,109,973
Research and development -
related party		—			—			—			220,218
General and administrative		12,689,455			11,199,802			10,669,541			78,140,569
General and administrative -
related party		—			—			—			314,328
Total Operating Expenses		18,880,983			18,950,533			19,192,525			139,785,088
Operating Loss		(18,705,983	)		(18,558,421	)		(18,565,341	)		(137,590,792	)
Other Income (Expense):
Miscellaneous income (expense)		500			70,345			(3,593	)		196,193
Income from Rental Operations, net		114,687			110,326			73,560			319,363
Interest income		767,598			22,868			249,264			4,162,078
Interest expense		(37,593,441	)		(4,300,512	)		(116,473	)		(42,428,376	)
Loss on extinguishment of debt		(12,550,565	)		(1,346,341	)		—			(13,896,906	)
Net Loss Before Undernoted		(67,967,204	)		(24,001,735	)		(18,362,583	)		(189,238,440	)
Minority Interest Share of Loss		—			—			—			3,038,185
Net Loss		(67,967,204	)		(24,001,735	)		(18,362,583	)		(186,200,255	)
Preferred Stock Dividend		—			—			810,003			2,295,057
Net Loss Available to Common
Shareholders	$	(67,967,204	)	$	(24,001,735	)	$	(19,172,586	)	$	(188,495,312	)
Basic and Diluted Net Loss Per
Common Share	$	(.90	)	$	(.66	)	$	(.64	)
Weighted Average Number of Shares
of Common Stock Outstanding		75,416,234			36,537,318			30,167,535

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

49

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2006

																		Deficit
	SVR															Notes		Accumulated			Accumulated
	Preferred				Common				Treasury				Additional			Receivable-		During the			Other			Total
	Stock				Stock				Stock				Paid-In			Common		Development			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Stock		Stage			Income (Loss)			Equity
Balance November 2, 1995
(Inception)		-	$	-		-	$	-		-	$	-	$	-		$	-	$	-		$	-		$	-
Issuance of common stock for cash, February 1996, $.0254		-		-		321,429		321		-		-		7,838			-		-			-			8,159
Issuance of common stock for cash, February 1996, $.0510		-		-		35,142		35		-		-		1,757			-		-			-			1,792
Issuance of common stock for cash, February 1996, $.5099		-		-		216,428		216		-		-		110,142			-		-			-			110,358
Issuance of common stock for cash, March 1996, $10.2428		-		-		2,500		3		-		-		25,604			-		-			-			25,607
Issuance of common stock for cash, April 1996, $.0516		-		-		489,850		490		-		-		24,773			-		-			-			25,263
Issuance of common stock for cash, May 1996, $.0512		-		-		115,571		116		-		-		5,796			-		-			-			5,912
Issuance of common stock for cash, May 1996, $.5115		-		-		428,072		428		-		-		218,534			-		-			-			218,962
Issuance of common stock for cash, May 1996, $10.2302		-		-		129,818		130		-		-		1,327,934					-			-			1,328,064
Issuance of common stock for cash, July 1996, $.0051		-		-		2,606,528		2,606		-		-		10,777					-			-			13,383
Issuance of common stock for cash, July 1996, $.0255		-		-		142,857		143		-		-		3,494			-		-			-			3,637
Issuance of common stock for cash, July 1996, $.0513		-		-		35,714		36		-		-		1,797			-		-			-			1,833
Issuance of common stock for cash, July 1996, $10.1847		-		-		63,855		64		-		-		650,282			-		-			-			650,346
Costs related to issuance of common stock		-		-		-		-		-		-		(10,252	)		-		-			-			(10,252	)
Founders Shares transferred for services rendered		-		-		-		-		-		-		330,025			-		-			-			330,025
Comprehensive Income (Loss):
Net loss		-		-		-		-		-		-		-			-		(693,448	)		-			(693,448	)
Other comprehensive income (loss)
Currency translation adjustment		-		-		-		-		-		-		-			-		-			(4,017	)		(4,017	)
Total Comprehensive Income (Loss)																			(693,448	)		(4,017	)		(697,465	)
Balance, July 31, 1996		-	$	-		4,587,764	$	4,588		-	$	-	$	2,708,501		$	-	$	(693,448	)	$	(4,017	)	$	2,015,624

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

50

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2006

																		Deficit
	SVR															Notes		Accumulated			Accumulated
	Preferred				Common				Treasury				Additional			Receivable-		During the			Other			Total
	Stock				Stock				Stock				Paid-In			Common		Development			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Stock		Stage			Income (Loss)			Equity
Balance, August 1, 1996		-	$	-		4,587,764	$	4,588		-	$	-	$	2,708,501		$	-	$	(693,448	)	$	(4,017	)	$	2,015,624
Issuance of common stock for cash, September 1996, $.0509		-		-		2,143		2		-		-		107			-		-			-			109
Issuance of common stock for cash, December 1996, $10.2421		-		-		1,429		1		-		-		14,635			-		-			-			14,636
Issuance of common stock for cash, January 1997, $.0518		-		-		1,466		1		-		-		75			-		-			-			76
Issuance of common stock for cash, March 1997, $10.0833		-		-		12		-		-		-		121			-		-			-			121
Issuance of common stock for cash, May 1997, $.0512		-		-		4,233		4		-		-		213			-		-			-			217
Issuance of common stock for cash, May 1997, $.5060		-		-		4,285,714		4,286		-		-		2,164,127			-		-			-			2,168,413
Costs related to issuance of common stock, May 1997		-		-		-		-		-		-		(108,421	)		-		-			-			(108,421	)
Issuance of common stock for cash, May 1997, $10.1194		-		-		18,214		18		-		-		184,297			-		-			-			184,315
Issuance of common stock for cash, June 1997, $.0504		-		-		10,714		11		-		-		529			-		-			-			540
Issuance of common stock for cash, June 1997, $.5047		-		-		32,143		32		-		-		16,190			-		-			-			16,222
Issuance of common stock for cash, June 1997, $8.9810		-		-		29,579		30		-		-		265,618			-		-			-			265,648
Issuance of common stock for cash, June 1997, $10.0978		-		-		714		1		-		-		7,209			-		-			-			7,210
Issuance of common stock for cash, July 1997, $10.1214		-		-		25,993		26		-		-		263,060			-		-			-			263,086
Costs related to issuance of common stock		-		-		-		-		-		-		(26,960	)		-		-			-			(26,960	)
Founders Shares transferred for services rendered		-		-		-		-		-		-		23,481			-		-			-			23,481
Comprehensive Income (Loss):
Net loss		-		-		-		-		-		-		-			-		(1,379,024	)		-			(1,379,024	)
Other comprehensive income (loss)
Currency translation adjustment		-		-		-		-		-		-		-			-		-			3,543			3,543
Total Comprehensive Income (Loss)																			(1,379,024	)		3,543			(1,375,481	)
Balance, July 31, 1997		-	$	-		9,000,118	$	9,000		-	$	-	$	5,512,782		$	-	$	(2,072,472	)	$	(474	)	$	3,448,836

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

51

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2006

																		Deficit
	SVR															Notes		Accumulated			Accumulated
	Preferred				Common				Treasury				Additional			Receivable-		During the			Other			Total
	Stock				Stock				Stock				Paid-In			Common		Development			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Stock		Stage			Income (Loss)			Equity
Balance, August 1, 1997		-	$	-		9,000,118	$	9,000		-	$	-	$	5,512,782		$	-	$	(2,072,472	)	$	(474	)	$	3,448,836
Issuance of warrants in exchange for services rendered, October 1997, $.50		-		-		-		-		-		-		234,000			-		-			-			234,000
Issuance of common stock in exchange for services rendered, December 1997, $0.05		-		-		234,000		234		-		-		10,698			-		-			-			10,932
Issuance of SVR Preferred Stock in exchange for services rendered, January 1998, $.001		1,000		1		-		-		-		-		99			-		-			-			100
Shares issued pursuant to the January 9, 1998 reverse merger between GBC-Delaware, Inc. and Generex Biotechnology Corporation		-		-		1,105,000		1,105		-		-		(1,105	)		-		-			-			-
Issuance of common stock for cash, March 1998, $2.50		-		-		70,753		71		-		-		176,812			-		-			-			176,883
Issuance of common stock for cash, April 1998, $2.50		-		-		60,000		60		-		-		149,940			-		-			-			150,000
Issuance of common stock in exchange for services rendered, April 1998, $2.50		-		-		38,172		38		-		-		95,392			-		-			-			95,430
Issuance of common stock for cash, May 1998, $2.50		-		-		756,500		757		-		-		1,890,493			-		-			-			1,891,250
Issuance of common stock in exchange for services rendered, May 1998, $2.50		-		-		162,000		162		-		-		404,838			-		-			-			405,000
Issuance of warrants in exchange for services rendered, May 1998, $.60		-		-		-		-		-		-		300,000			-		-			-			300,000
Issuance of common stock for cash, June 1998, $2.50		-		-		286,000		286		-		-		714,714			-		-			-			715,000
Exercise of warrants for cash, June 1998, $0.0667		-		-		234,000		234		-		-		15,374			-		-			-			15,608
Issuance of common stock in exchange for services rendered, June 1998, $2.50		-		-		24,729		24		-		-		61,799			-		-			-			61,823
Comprehensive Income (Loss):
Net loss		-		-		-		-		-		-		-			-		(4,663,604	)		-			(4,663,604	)
Other comprehensive income (loss)
Currency translation adjustment		-		-		-		-		-		-		-			-		-			(198,959	)		(198,959	)
Total Comprehensive Income (Loss)																			(4,663,604	)		(198,959	)		4,862,563
Balance, July 31, 1998		1,000	$	1		11,971,272	$	11,971		-	$	-	$	9,565,836		$	-	$	(6,736,076	)	$	(199,433	)	$	2,642,299

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

52

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2006

																				Deficit
	SVR																	Notes		Accumulated			Accumulated
	Preferred				Common						Treasury				Additional			Receivable -		During the			Other			Total
	Stock				Stock						Stock				Paid-In			Common		Development			Comprehensive			Stockholders’
	Shares		Amount		Shares			Amount			Shares		Amount		Capital			Stock		Stage			Income (Loss)			Equity
Balance, August 1, 1998		1,000	$	1		11,971,272		$	11,971			-	$	-	$	9,565,836		$	-	$	(6,736,076	)	$	(199,433	)	$	2,642,299
Issuance of common stock for cash, August 1998, $3.00		-		-		100,000			100			-		-		299,900			-		-			-			300,000
Issuance of common stock for cash, August 1998, $3.50		-		-		19,482			19			-		-		68,168			-		-			-			68,187
Redemption of common stock for cash, September 1998, $7.75		-		-		(15,357	)		(15	)		-		-		(119,051	)		-		-			-			(119,066	)
Issuance of common stock for cash, September - October 1998, $3.00		-		-		220,297			220			-		-		660,671			-		-			-			660,891
Issuance of common stock for cash, August - October 1998, $4.10		-		-		210,818			211			-		-		864,142			-		-			-			864,353
Issuance of common stock in exchange for services rendered, August - October 1998, $2.50		-		-		21,439			21			-		-		53,577			-		-			-			53,598
Issuance of common stock in exchange for services rendered, August - October 1998, $4.10		-		-		18,065			18			-		-		74,048			-		-			-			74,066
Issuance of common stock in exchange for services rendered, September 1998, $4.10		-		-		180,000			180			-		-		737,820			-		-			-			738,000
Issuance of warrants in exchange for services rendered, October 1998, $.26		-		-		-			-			-		-		2,064			-		-			-			2,064
Issuance of stock options in exchange for services rendered, November 1998, $1.85		-		-		-			-			-		-		92,500			-		-			-			92,500
Issuance of warrants in exchange for services rendered, November 1998, $1.64		-		-		-			-			-		-		246,000			-		-			-			246,000
Issuance of common stock for cash, November 1998 - January 1999, $3.50		-		-		180,000			180			-		-		629,820			-		-			-			630,000
Issuance of common stock for cash, November 1998 - January 1999, $4.00		-		-		275,000			275			-		-		1,099,725			-		-			-			1,100,000
Issuance of common stock for cash, November 1998 - January 1999, $4.10		-		-		96,852			97			-		-		397,003			-		-			-			397,100
Issuance of common stock in exchange for services rendered, November 1998 - January 1999, $4.10		-		-		28,718			29			-		-		117,715			-		-			-			117,744
Issuance of common stock for cash, November 1998 - January 1999, $5.00		-		-		20,000			20			-		-		99,980			-		-			-			100,000
Issuance of common stock for cash, November 1998 - January 1999, $5.50		-		-		15,000			15			-		-		82,485			-		-			-			82,500
Issuance of common stock in exchange for services rendered, January 1999, $5.00		-		-		392			-			-		-		1,960			-		-			-			1,960
Issuance of common stock for cash, February 1999, $5.00		-		-		6,000			6			-		-		29,994			-		-			-			30,000
Issuance of common stock in exchange for services rendered, February 1999, $6.00		-		-		5,000			5			-		-		29,995			-		-			-			30,000
Issuance of common stock for cash, March 1999, $6.00		-		-		11,000			11			-		-		65,989			-		-			-			66,000
Issuance of common stock for cash, April 1999, $5.50		-		-		363,637			364			-		-		1,999,640			-		-			-			2,000,004
Issuance of warrants in exchange for services rendered, April 1999, $3.21		-		-		-			-			-		-		160,500			-		-			-			160,500
Issuance of warrants in exchange for services rendered, April 1999, $3.17		-		-		-			-			-		-		317,000			-		-			-			317,000

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

53

Issuance of warrants in exchange for services rendered, April 1999, $2.89	-		-	-			-		-		-		144,500			-			-			-			144,500
Issuance of warrants in exchange for services rendered, April 1999, $3.27	-		-	-			-						184,310			-			-			-			184,310
Stock adjustment	-		-	714			1		-		-		(1	)		-			-			-			-
Issuance of common stock for cash, May 1999, $5.50	-		-	272,728			273		-		-		1,499,731			-			-			-			1,500,004
Issuance of common stock in exchange for services rendered, May - June 1999, $5.50	-		-	60,874			61		-		-		334,746			-									334,807
Exercise of warrants for cash, June 1999, $5.50	-		-	388,375			389		-				1,941,484			-			-			-			1,941,873
Exercise of warrants in exchange for note receivable, June 1999, $5.00	-		-	94,776			95		-		-		473,787			(473,882	)		-			-			-
Exercise of warrants in exchange for services rendered, June 1999, $5.00	-		-	13,396			13		-		-		66,967			-			-			-			66,980
Reduction of note receivable in exchange for services rendered	-		-	-			-		-		-		-			38,979			-			-			38,979
Shares tendered in conjunction with warrant exercise, June 1999, $7.8125	-		-	(323,920	)		(324	)	-		-		(2,530,301	)		-			-			-			(2,530,625	)
Exercise of warrants for shares tendered, June 1999, $5.00	-		-	506,125			506		-		-		2,530,119			-			-			-			2,530,625
Cost of warrants redeemed for cash	-		-	-			-		-				(3,769	)		-			-			-			(3,769	)
Cost related to warrant redemption, June 1999	-		-	-			-		-		-		(135,431	)		-			-			-			(135,431	)
Costs related to issuance of common stock	-		-	-			-		-		-		(1,179,895	)		-			-			-			(1,179,895	)
Comprehensive Income (Loss):
Net Loss	-		-	-			-		-		-		-			-			(6,239,602	)		-			(6,239,602	)
Other comprehensive income (loss):
Currency translation adjustment	-		-	-			-		-		-		-			-			-			1,393			1,393
Total Comprehensive Income (Loss)																			(6,239,602	)		1,393			(6,238,209	)
Balance, July 31, 1999	1,000	$	1	14,740,683		$	14,741		-	$	-	$	20,903,728		$	(434,903	)	$	(12,975,678	)	$	(198,040	)	$	7,309,849

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

54

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2006

																					Deficit
	SVR																	Notes			Accumulated			Accumulated
	Preferred				Common						Treasury				Additional			Receivable -			During the			Other			Total
	Stock				Stock						Stock				Paid-In			Common			Development			Comprehensive			Stockholders’
	Shares		Amount		Shares			Amount			Shares		Amount		Capital			Stock			Stage			Income (Loss)			Equity
Balance, August 1, 1999		1,000	$	1		14,740,683		$	14,741			-	$	-	$	20,903,728		$	(434,903	)	$	(12,975,678	)	$	(198,040	)	$	7,309,849
Adjustment for exercise of warrants recorded June 1999, $5.00		-		-		(2,300	)		(2	)		-		-		2			-			-			-			-
Issuance of common stock for cash, September 1999, $6.00		-		-		2,500			2			-		-		14,998			-			-			-			15,000
Issuance of common stock for cash pursuant to private placement, January 2000, $4.25		-		-		470,590			471			-		-		1,999,537			-			-			-			2,000,008
Financing costs associated with private placement, January, 2000		-		-		-			-			-		-		(220,192	)		-			-			-			(220,192	)
Issuance of stock in exchange for services rendered, January 2000, $5.00		-		-		8,100			8			-		-		40,492			-			-			-			40,500
Granting of stock options for services rendered, January 2000		-		-		-			-			-		-		568,850			-			-			-			568,850
Granting of warrants for services rendered, January 2000		-		-		-			-			-		-		355,500			-			-			-			355,500
Exercise of warrants for cash, February 2000, $5.50		-		-		2,000			2			-		-		10,998			-			-			-			11,000
Exercise of warrants for cash, March 2000, $5.50		-		-		29,091			29			-		-		159,972			-			-			-			160,001
Exercise of warrants for cash, March 2000, $6.00		-		-		2,000			2			-		-		11,998			-			-			-			12,000
Exercise of warrants for cash, March 2000, $7.50		-		-		8,000			8			-		-		59,992			-			-			-			60,000
Issuance of common stock for cash pursuant to private placement, June 2000, $6.00		-		-		1,041,669			1,042			-		-		6,248,972			-			-			-			6,250,014
Financing costs associated with private placement, June 2000		-		-		-			-			-		-		(385,607	)		-			-			-			(385,607	)
Issuance of common stock for services, June 2000, $6.00		-		-		4,300			4			-		-		25,796			-			-			-			25,800
Exercise of warrants for cash, July 2000, $6.00		-		-		3,000			3			-		-		17,997			-			-			-			18,000
Exercise of warrants for cash, July 2000, $7.50		-		-		16,700			17			-		-		125,233			-			-			-			125,250
Granting of stock options for services rendered, July 2000		-		-		-			-			-		-		496,800			-			-			-			496,800
Reduction of note receivable in exchange for services rendered		-		-		-			-			-		-		-			384,903			-			-			384,903
Accrued interest on note receivable		-		-		-			-			-		-		-			(4,118	)		-			-			(4,118	)
Comprehensive Income (Loss):
Net Loss		-		-		-			-			-		-		-			-			(8,841,047	)		-			(8,841,047	)
Other comprehensive income (loss):
Currency translation adjustment		-		-		-			-			-		-		-			-			-			32,514			32,514
Total Comprehensive Income (Loss)																						(8,841,047	)		32,514			(8,808,533	)
Balance, July 31, 2000		1,000	$	1		16,326,333		$	16,327			-	$	-	$	30,435,066		$	(54,118	)	$	(21,816,725	)	$	(165,526	)	$	8,415,025

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

55

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2006

																			Deficit
	SVR															Notes			Accumulated			Accumulated
	Preferred				Common				Treasury				Additional			Receivable -			During the			Other			Total
	Stock				Stock				Stock				Paid-In			Common			Development			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Stock			Stage			Income (Loss)			Equity
Balance, August 1, 2000		1,000	$	1		16,326,333	$	16,327		-	$	-	$	30,435,066		$	(54,118	)	$	(21,816,725	)	$	(165,526	)	$	8,415,025
Exercise of warrants for cash, August 2000, $6.00		-		-		2,000		2		-		-		11,998			-			-			-			12,000
Issuance of common stock for services rendered August 2000		-		-		35,000		35		-		-		411,215			-			-			-			411,250
Issuance of warrants in exchange for equity line agreement, August 2000		-		-		-		-		-		-		3,406,196			-			-			-			3,406,196
Exercise of warrants for cash, August 2000, $7.50		-		-		30,300		30		-		-		227,220			-			-			-			227,250
Exercise of warrants for cash, August 2000, $8.6625		-		-		30,000		30		-		-		259,845			-			-			-			259,875
Cashless exercise of warrants, August 2000		-		-		8,600		9		-		-		(9	)		-			-			-			-
Exercise of warrants for cash, August 2000, $10.00		-		-		10,000		10		-		-		99,990			-			-			-			100,000
Exercise of warrants for cash, September 2000, $8.6625		-		-		63,335		63		-		-		548,576			-			-			-			548,639
Exercise of warrants for cash, September 2000, $5.50		-		-		16,182		16		-		-		88,986			-			-			-			89,002
Exercise of warrants for cash, September 2000, $6.00		-		-		53,087		53		-		-		318,470			-			-			-			318,523
Exercise of warrants for cash, September 2000, $10.00		-		-		9,584		10		-		-		95,830			-			-			-			95,840
Exercise of warrants for cash, September 2000, $7.50		-		-		32,416		32		-		-		243,088			-			-			-			243,120
Issuance of common stock for cash pursuant to private placement, October 2000, $11.00		-		-		2,151,093		2,151		-		-		23,659,872			-			-			-			23,662,023
Exercise of warrants for cash, Oct. 2000, $6.00		-		-		1,000		1		-		-		5,999			-			-			-			6,000
Financing costs associated with private placement, October 2000		-		-		-		-		-		-		(1,956,340	)		-			-			-			(1,956,340	)
Exercise of warrants for cash, November - December 2000, $4.25		-		-		23,528		23		-		-		99,971			-			-			-			99,994
Cashless exercise of warrants, December 2000		-		-		3,118		3		-		-		(3	)		-			-			-			-
Exercise of warrants for cash, November - December 2000, $6.00		-		-		22,913		23		-		-		137,455			-			-			-			137,478
Exercise of warrants for cash, December 2000, $7.00		-		-		8,823		9		-		-		61,752			-			-			-			61,761
Issuance of common stock as employee compensation, December 2000		-		-		8,650		8		-		-		100,548			-			-			-			100,556
Exercise of warrants for cash, January 2001, $6.00		-		-		3,000		3		-		-		17,997			-			-			-			18,000
Issuance of common stock for cash pursuant to private placement, January 2001, $14.53		-		-		344,116		344		-		-		4,999,656			-			-			-			5,000,000
Financing costs associated with private placement, January 2001		-		-		-		-		-		-		(200,000	)		-			-			-			(200,000	)
Issuance of common stock pursuant to litigation settlement, January 2001		-		-		2,832		2		-		-		21,096			-			-			-			21,098
Granting of stock options in exchange for services rendered, January 2001		-		-		-		-		-		-		745,000			-			-			-			745,000
Granting of stock options in exchange for services rendered, February 2001		-		-		-		-		-		-		129,600			-			-			-			129,600
Exercise of stock options for cash, February 2001, $5.00		-		-		50,000		50		-		-		249,950			-			-			-			250,000
Exercise of warrants for cash, March 2001, $6.00		-		-		500		1		-		-		2,999			-			-			-			3,000
Exercise of stock options in exchange for note receivable, March 2001		-		-		50,000		50		-		-		249,950			(250,000	)		-			-			-
Issuance of common stock in exchange for services rendered, March 2001, $5.50		-		-		8,000		8		-		-		43,992			-			-			-			44,000
Granting of stock options in exchange for services rendered, May 2001		-		-		-		-		-		-		592,300			-			-			-			592,300
Exercise of stock options for cash, June 2001, $5.00		-		-		75,000		75		-		-		374,925			-			-			-			375,000

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

56

Exercise of stock options for cash, June 2001, $5.50	-		-	12,500		12	-		-		68,738			-			-			-			68,750
Exercise of warrants for cash, June 2001, $6.00	-		-	4,000		4	-		-		23,996			-			-			-			24,000
Exercise of stock options for cash, July 2001, $5.00	-		-	7,500		8	-		-		37,492			-			-			-			37,500
Exercise of stock options for cash, July 2001, $5.50	-		-	2,500		3	-		-		13,747			-			-			-			13,750
Exercise of warrants for cash, July 2001, $6.00	-		-	2,000		2	-		-		11,998			-			-			-			12,000
Issuance of common stock for cash pursuant to private placement, July 2001, $9.25	-		-	1,254,053		1,254	-		-		11,598,736			-			-			-			11,599,990
Financing costs associated with private placement, July 2001	-		-	-		-	-		-		(768,599	)		-			-			-			(768,599	)
Shares issued in exchange for services rendered, July 2001, $9.25	-		-	23,784		24	-		-		219,978			-			-			-			220,002
Shares issued for Anti-Dilution Provisions, July 2001	-		-	5,779		6	-		-		53,450			-			-			-			53,456
Issuance of warrants in exchange for services rendered, July 2001	-		-	-		-	-		-		19,134			-			-			-			19,134
Accrued interest on note receivable	-		-	-		-	-		-		-			(10,182	)		-			-			(10,182	)
Comprehensive Income (Loss):
Net Loss	-		-	-		-	-		-		-			-			(27,097,210	)		-			(27,097,210	)
Other comprehensive income (loss):
Currency translation adjustment	-		-	-		-	-		-		-			-			-			(81,341	)		(81,341	)
Total Comprehensive Income (Loss)																	(27,097,210	)		(81,341	)		(27,178,551	)
Balance at July 31, 2001	1,000	$	1	20,681,526	$	20,681	-	$	-	$	76,761,860		$	(314,300	)	$	(48,913,935	)	$	(246,867	)	$	27,307,440

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

57

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2006

	SVR																Notes			Accumulated			Accumulated
	Preferred				Common				Treasury						Additional		Receivable -			During the			Other			Total
	Stock				Stock				Stock						Paid-In		Common			Development			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Shares			Amount			Capital		Stock			Stage			Income (Loss)			Equity
Balance, August 1, 2001		1,000	$	1		20,681,526	$	20,681		-		$	-		$	76,761,860	$	(314,300	)	$	(48,913,935	)	$	(246,867	)	$	27,307,440
Exercise of stock options for cash,
August 2001, $5.50		-		-		5,000		5		-			-			27,495		-			-			-			27,500
Purchase of Treasury Stock for cash
October 2001, $3.915		-		-		-		-		(10,000	)		(39,150	)		-		-			-			-			(39,150	)
Issuance of stock options in exchange for services rendered, December 2001		-		-		-		-		-			-			25,000		-			-			-			25,000
Issuance of common stock as employee
compensation, January 2002		-		-		10,800		11		-			-			71,161		-			-			-			71,172
Preferred stock dividend paid January 2002		-		-		-		-		-			-			-		-			(720,900	)		-			(720,900	)
Purchase of Treasury Stock for cash
February 2002, $4.693		-		-		-		-		(31,400	)		(147,346	)		-		-			-			-			(147,346	)
Issuance of warrants in exchange for services rendered, March 2002		-		-		-		-		-			-			202,328		-			-			-			202,328
Purchase of Treasury Stock for cash
March 2002, $4.911		-		-		-		-		(7,700	)		(37,816	)		-		-			-			-			(37,816	)
Purchase of Treasury Stock for cash
April 2002, $4.025		-		-		-		-		(12,800	)		(54,516	)		-		-			-			-			(54,516	)
Issuance of stock options in exchange for services rendered, June 2002		-		-		-		-		-			-			132,387		-			-			-			132,387
Purchase of Treasury Stock for cash																					-
July 2002, $4.025		-		-		-		-		(34,600	)		(116,703	)		-		-			-			-			(116,703	)
Accrued interest on note receivable		-		-		-		-		-			-			-		(22,585	)		-			-			(22,585	)
Comprehensive Income (Loss):
Net Loss		-		-		-		-		-			-			-		-			(13,693,034	)		-			(13,693,034	)
Other comprehensive income (loss):
Currency translation adjustment		-		-		-		-		-			-			-		-			-			(71,185	)		(71,185	)
Total Comprehensive Income (Loss)																					(13,693,034	)		(71,185	)		(13,764,219	)
Balance at July 31, 2002		1,000	$	1		20,697,326	$	20,697		(96,500	)	$	(395,531	)	$	77,220,231	$	(336,885	)	$	(63,327,869	)	$	(318,052	)	$	12,862,592

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

58

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2006 

																					Deficit
	SVR																	Notes			Accumulated			Accumulated
	Preferred				Common				Treasury						Additional			Receivable -			During the			Other			Total
	Stock				Stock				Stock						Paid-In			Common			Development			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Shares			Amount			Capital			Stock			Stage			Income (Loss)			Equity
Balance, August 1, 2002		1,000	$	1		20,697,326	$	20,697		(96,500	)	$	(395,531	)	$	77,220,231		$	(336,885	)	$	(63,327,869	)	$	(318,052	)	$	12,862,592
Receipt of restricted shares of common stock as settlement for executive loan, September 2002, $1.90		-		-		-		-		(592,716	)		(1,126,157	)		-			-			-			-			(1,126,157	)
Purchase of Treasury Stock for cash October 2002, $1.5574		-		-		-		-		(40,000	)		(62,294	)		-			-			-			-			(62,294	)
Issuance of warrants in exchange for the services rendered, November 2002, $2.50		-		-		-		-		-			-			988,550			-			-			-			988,550
Issuance of stock options in exchange for services receivable, November 2002, $2.10		-		-		-		-		-			-			171,360			-			-			-			171,360
Issuance of common stock in exchange for services rendered, November 2002, $2.10		-		-		30,000		30		-			-			62,970			-			-			-			63,000
Issuance of common stock as employee compensation, January 2003, $2.10		-		-		9,750		10		-			-			20,465			-			-			-			20,475
Purchase of Treasury Stock for cash December 2002, $2.0034		-		-		-		-		(13,000	)		(26,044	)		-			-			-			-			(26,044	)
Preferred stock dividend paid January 2003		-		-		-		-		-			-			-			-			(764,154	)		-			(764,154	)
Issuance of common stock in exchange for services rendered, March 2003, $1.00		-		-		70,000		70		-			-			69,930			-			-			-			70,000
Issuance of common stock for cash pursuant to private placement, May 2003, $1.15		-		-		2,926,301		2,926		-			-			3,362,324			-			-			-			3,365,250
Financing costs associated with private placement, May 2003		-		-		-		-		-			-			(235,568	)		-			-			-			(235,568	)
Exercise of warrants for cash, May 2003, $1.50		-		-		35,000		35		-			-			52,465			-			-			-			52,500
Issuance of common stock for cash pursuant to private placement, June 2003, $1.50		-		-		666,667		667		-			-			999,333			-			-			-			1,000,000
Issuance of common stock as employee compensation, June 2003, $2.00		-		-		100		-		-			-			200			-			-			-			200
Exercise of warrants for cash, June 2003, $1.50		-		-		1,496,001		1,496		-			-			2,242,506			-			-			-			2,244,002
Cashless exercise of warrants, June 2003		-		-		16,379		16		-			-			(16	)		-			-			-			-
Exercise of stock options for cash, June 2003, $1.59		-		-		70,000		70		-			-			111,230			-			-			-			111,300
Accrued interest on note receivable		-		-		-		-		-			-			-			(23,113	)		-			-			(23,113	)
Comprehensive Income (Loss):
Net Loss		-		-		-		-		-			-			-			-			(13,261,764	)		-			(13,261,764	)
Other comprehensive income (loss)
Currency translation adjustment		-		-		-		-		-			-			-			-			-			406,830			406,830
Total Comprehensive Income (Loss)																						(13,261,764	)		406,830			(12,854,934	)
Balance at July 31, 2003		1,000	$	1		26,017,524	$	26,017		(742,216	)	$	(1,610,026	)	$	85,065,980		$	(359,998	)	$	(77,353,787	)	$	88,778		$	5,856,965

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

59

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2006 

																							Deficit
	SVR																			Notes			Accumulated			Accumulated
	Preferred				Common						Treasury						Additional			Receivable -			During the			Other		Total
	Stock				Stock						Stock						Paid-In			Common			Development			Comprehensive		Stockholders’
	Shares		Amount		Shares			Amount			Shares			Amount			Capital			Stock			Stage			Income (Loss)		Equity
Balance, August 1, 2003		1,000	$	1		26,017,524		$	26,017			(742,216	)	$	(1,610,026	)	$	85,065,980		$	(359,998	)	$	(77,353,787	)	$	88,778	$	5,856,965
Shares issued pursuant to acquisition of Antigen Express Inc., August 2003		-		-		2,779,974			2,780			-			-			4,639,777			-			-			-		4,642,557
Cost of stock options to be assumed in conjunction with merger		-		-		-			-			-			-			154,852			-			-			-		154,852
Exercise of stock options for cash, September 2003, $1.59		-		-		10,000			10			-			-			15,890			-			-			-		15,900
Exercise of stock options for cash, October 2003, $2.10		-		-		14,900			15			-			-			31,275			-			-			-		31,290
Exercise of stock options for cash, October 2003, $1.59		-		-		10,000			10			-			-			15,890			-			-			-		15,900
Exercise of stock options for cash, October 2003, $0.30		-		-		65,000			65			-			-			19,435			-			-			-		19,500
Exercise of stock options for cash, October 2003, $0.55		-		-		40,000			40			-			-			21,960			-			-			-		22,000
Issuance of common stock In exchange for services rendered, October 2003, $1.98		-		-		150,000			150			-			-			296,850			-			-			-		297,000
Issuance of common stock In exchange for services rendered, October 2003, $1.84		-		-		337,500			338			-			-			620,662			-			-			-		621,000
Issuance of warrants in exchange for the services rendered October 2003 (at $1.35)		-		-		-			-			-			-			27,000			-			-			-		27,000
Exercise of stock options for cash, November 2003, $2.10		-		-		10,500			10			-			-			22,040			-			-			-		22,050
Redemption of Treasury Stock, November 2003, $2.17		-		-		(742,216	)		(742	)		742,216			1,610,026			(1,609,284	)		-			-			-		-
Granting of stock options in exchange for services, November 2003 (at $1.71)		-		-		-			-			-			-			151,433			-			-			-		151,433
Issuance of common stock for cash pursuant to private placement, Jan 2004, $1.47		-		-		1,700,680			1,701			-			-			2,498,299			-			-			-		2,500,000
Issuance of common stock for cash pursuant to private placement, Jan 2004, $1.80		-		-		55,556			56			-			-			99,944			-			-			-		100,000
Issuance of common stock for cash pursuant to private placement, Jan 2004, $1.75		-		-		228,572			229			-			-			399,771			-			-			-		400,000
Financing costs associated with private placement, January 2004		-		-		-			-			-			-			(68,012	)		-			-			-		(68,012	)
Preferred Stock Dividend paid in January		-		-		-			-			-			-			-			-			(810,003	)		-		(810,003	)
Issuance of common stock for cash pursuant to private placement, Feb 2004, $1.60		-		-		93,750			94			-			-			149,906			-			-			-		150,000
Issuance of common stock for cash pursuant to private placement, Feb 2004, $1.66		-		-		68,675			69			-			-			113,932			-			-			-		114,001
Issuance of common stock for cash pursuant to private placement, Feb 2004, $1.50		-		-		666,667			667			-			-			999,334			-			-			-		1,000,001
Issuance of common stock as employee compensation, Feb 2004, $1.48		-		-		8,850			8			-			-			13,089			-			-			-		13,097
Issuance of common stock In exchange for services rendered, Feb 2004, $1.48		-		-		175,000			175			-			-			258,825			-			-			-		259,000
Issuance of common stock In exchange for services rendered, Feb 2004, $1.51		-		-		112,500			113			-			-			169,762			-			-			-		169,875
Issuance of common stock for cash pursuant to private placement, July 2004, $1.22		-		-		2,459,016			2,459			-			-			2,997,541			-			-			-		3,000,000
Financing costs associated with private placement, July 2004		-		-		-			-			-			-			(41,250	)		-			-			-		(41,250	)
Variable accounting non-cash compensation expense		-		-		-			-			-			-			45,390			-			-			-		45,390
Accrued interest on note receivable		-		-		-			-			-			-			-			(24,805	)		-			-		(24,805	)
Comprehensive Income (Loss):
Net Loss		-		-		-			-			-			-			-			-			(18,362,583	)		-		(18,362,583	)
Other comprehensive income (loss)
Currency translation adjustment		-		-		-			-			-			-			-			-			-			207,593		207,593
Total Comprehensive Income (Loss)																								(18,362,583	)		207,593		(18,154,990	)
Balance at July 31, 2004		1,000	$	1		34,262,448		$	34,264			-		$	-		$	97,110,291		$	(384,803	)	$	(96,526,373	)	$	296,371	$	529,751

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

60

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2006 

																					Deficit
	SVR																	Notes			Accumulated			Accumulated
	Preferred				Common						Treasury				Additional			Receivable-			During the			Other		Total
	Stock				Stock						Stock				Paid-In			Common			Development			Comprehensive		Stockholders’
	Shares		Amount		Shares			Amount			Shares		Amount		Capital			Stock			Stage			Income (Loss)		Equity
Balance, August 1, 2004		1,000	$	1		34,262,448		$	34,264			-	$	-	$	97,110,291		$	(384,803	)	$	(96,526,373	)	$	296,371	$	529,751
Issuance of common stock In exchange for services rendered, Aug 2004, $1.09		-		-		620,000			620			-		-		675,180			-			-			-		675,800
Issuance of warrants in exchange for services rendered Aug 2004, $1.08		-		-		-			-			-		-		415,000			-			-			-		415,000
Granting of stock options in exchange for services, Oct 2004, $0.94		-		-		-			-			-		-		75,600			-			-			-		75,600
Cancellation of common stock for non-performance of services, Oct 2004, $0.94		-		-		(75,000	)		(75	)		-		-		(137,925	)		-			-			-		(138,000	)
Issance of warrants in conjunction with financing, Nov 2004, $0.91		-		-		-			-			-		-		89,900			-			-			-		89,900
Issance of warrants in conjunction with convertible debtentures, $4,000,000, Nov 2004 $0.91		-		-		-			-			-		-		1,722,222			-			-			-		1,722,222
Value of beneficial conversion feature on convertible debtentures, $4,000,000, Nov 2004 $0.91		-		-		-			-			-		-		1,722,222			-			-			-		1,722,222
Issuance of common stock In exchange for services rendered, Dec 2004, $0.71		-		-		48,000			48			-		-		34,032			-			-			-		34,080
Conversion of Series A Preferred Stock, Dec 2004 $25.77		-		-		534,085			534			-		-		14,309,523			-			-			-		14,310,057
Issuance of common stock In exchange for services rendered, Jan 2005, $0.85		-		-		18,000			18			-		-		15,282			-			-			-		15,300
Issuance of common stock In exchange for services rendered, Jan 2005, $0.75		-		-		40,000			40			-		-		29,960			-			-			-		30,000
Issuance of common stock In exchange for services rendered, Feb 2005, $0.69		-		-		18,000			18			-		-		12,402			-			-			-		12,420
Issuance of common stock as repayment of principal and interest due, $4,000,000, Feb 2005		-		-		250,910			251			-		-		181,262			-			-			-		181,513
Issuance of common stock In exchange for services rendered, Feb 2005, $0.68		-		-		50,000			50			-		-		33,950			-			-			-		34,000
Issuance of common stock as repayment of principal and interest due, $4,000,000, Mar 2005		-		-		265,228			265			-		-		162,197			-			-			-		162,462
Issuance of common stock as repayment of principal and interest due, $4,000,000, Apr 2005		-		-		314,732			315			-		-		162,275			-			-			-		162,590
Issuance of common stock in connection with conversion of $143,500 of $4,000,000 debenture, Apr 2005		-		-		175,316			175			-		-		143,584			-			-			-		143,759
Issuance of common stock as employee compensation, Apr 2005, $0.56		-		-		8,800			9			-		-		4,919			-			-			-		4,928
Issance of warrants in conjunction with convertible debtentures, $500,000, Apr 2005, $0.82		-		-		-			-			-		-		245,521			-			-			-		245,521
Value of beneficial conversion feature on convertible debtentures, $500,000, Apr 2005, $0.82		-		-		-			-			-		-		86,984			-			-			-		86,984
Issance of warrants in conjunction with convertible debtentures, $100,000, Apr 2005, $0.82		-		-		-			-			-		-		49,104			-			-			-		49,104
Value of beneficial conversion feature on convertible debtentures, $100,000, Apr 2005, $0.82		-		-		-			-			-		-		17,397			-			-			-		17,397
Issuance of warrants in exchange for services rendered Apr 2005, $0.82		-		-		-			-			-		-		40,000			-			-			-		40,000
Issuance of common stock In exchange for services rendered, Apr 2005, $0.82		-		-		350,000			350			-		-		286,650			-			-			-		287,000

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

61

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2006 

Issuance of common stock in satisfaction of accounts payable, Apr 2005, $0.82	-		-	950,927		951	-		-		778,809		-			-			-		779,760
Granting of stock options in exchange for outstanding liabilities, Apr 2005, $0.001	-		-	-		-	-		-		1,332,052		-			-			-		1,332,052
Issuance of common stock as repayment of principal and interest due, $4,000,000, May 2005	-		-	482,071		482	-		-		321,877		-			-			-		322,359
Issuance of common stock in connection with conversion of $300,000 of $4,000,000 debenture, May 2005	-		-	365,914		366	-		-		299,683		-			-			-		300,049
Issuance of common stock in connection with conversion of $244,000 of $4,000,000 debenture, May 2005	-		-	297,659		298	-		-		243,783		-			-			-		244,081
Issuance of common stock in connection with conversion of $410,000 of $4,000,000 debenture, May 2005	-		-	500,000		500	-		-		409,500		-			-			-		410,000
Issuance of warrants in conjunction with 1st extension of due date of $600,000 convertible debentures, May 2005, $0.82	-		-	-		-	-		-		717,073		-			-			-		717,073
Issuance of common stock as repayment of principal and interest due, $4,000,000, June 2005	-		-	311,307		311	-		-		244,644		-			-			-		244,955
Issance of common stock in conjunction with financing, $2,000,000, June 2005, $0.82	-		-	170,732		171	-		-		139,829		-			-			-		140,000
Issance of warrants in conjunction with financing, $2,000,000, June 2005, $0.82	-		-	-		-	-		-		20,300		-			-			-		20,300
Issance of warrants in conjunction with convertible debentures, $2,000,000, June 2005, $0.82	-		-	-		-	-		-		828,571		-			-			-		828,571
Value of beneficial conversion feature on convertible debtentures, $2,000,000, June 2005, $0.82	-		-	-		-	-		-		1,171,429		-			-			-		1,171,429
Issuance of common stock in connection with conversion of $100,000 of $2,000,000 debenture, June 2005	-		-	166,667		167	-		-		99,833		-			-			-		100,000
Issuance of common stock in connection with conversion of $190,000 of $2,000,000 debenture, June 2005	-		-	316,927		317	-		-		189,839		-			-			-		190,156
Issuance of common stock In exchange for services rendered, June 2005, $0.60	-		-	63,207		63	-		-		37,861		-			-			-		37,924
Issuance of common stock in satisfaction of accounts payable, June 2005, $0.82	-		-	90,319		90	-		-		73,971		-			-			-		74,061
Issuance of common stock in connection with conversion of $17,000 of $2,000,000 debenture, July 2005	-		-	28,398		28	-		-		17,011		-			-			-		17,039
Issuance of common stock in connection with conversion of $75,000 of $2,000,000 debenture, July 2005	-		-	125,000		125	-		-		75,035		-			-			-		75,160
Issuance of warrants in conjunction with 2nd extension of due date of $600,000 convertible debentures, July 2005, $0.82	-		-	-		-	-		-		629,268		-			-			-		629,268
Issuance of common stock as repayment of principal and interest due, $4,000,000, July 2005	-		-	364,123		364	-		-		237,586		-			-			-		237,950
Issuance of common stock in satisfaction of accounts payable, July 2005, $0.82	-		-	820,128		820	-		-		671,685		-			-			-		672,505
Granting of stock options in exchange for services, July 2004, $0.63	-		-	-		-	-		-		17,155		-			-			-		17,155
Accrued interest on note receivable	-		-	-		-	-		-		-		(6,300	)		-			-		(6,300	)
Write-off of uncollectible notes receivable - common stock	-		-	-		-	-		-		-		391,103			-			-		391,103
Variable accounting non-cash compensation expense	-		-	-		-	-		-		-		-			-			-		-
Comprehensive Income (Loss):
Net Loss	-		-	-		-	-		-		-		-			(24,001,735	)		-		(24,001,735	)
Other comprehensive income (loss)
Currency translation adjustment	-		-	-		-	-		-		-		-			-			272,478		272,478
Total Comprehensive Income (Loss)																(24,001,735	)		272,478		(23,729,257	)
Balance at July 31, 2005	1,000	$	1	41,933,898	$	41,935	-	$	-	$	126,044,326	$	-		$	(120,528,108	)	$	568,849	$	6,127,003

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

62

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD NOVEMBER 2, 1995 (DATE OF INCEPTION) TO JULY 31, 2006

																	Deficit
	SVR														Notes		Accumulated			Accumulated
	Preferred				Common				Treasury				Additional		Receivable -		During the			Other		Total
	Stock				Stock				Stock				Paid-In		Common		Development			Comprehensive		Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Stock		Stage			Income (Loss)		Equity
Balance, August 1, 2005		1,000	$	1		41,933,898	$	41,935		-	$	-	$	126,044,326	$	-	$	(120,528,108	)	$	568,849	$	6,127,003
Issuance of common stock as repayment of monthly amortization payments due, $4,000,000, August 2005		-		-		429,041		429		-		-		282,738		-		-			-		283,167
Issuance of common stock in exchange for the services rendered August 2005 (at $0.61)		-		-		19,500		19		-		-		11,877		-		-			-		11,896
Issuance of common stock in exchange for the services rendered August 2005 (at $0.59)		-		-		246,429		246		-		-		145,147		-		-			-		145,393
Issuance of common stock as repayment of monthly amortization payments due, $4,000,000, September 2005		-		-		388,730		389		-		-		267,835		-		-			-		268,224
Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, September 2005		-		-		322,373		322		-		-		222,115		-		-			-		222,437
Issuance of common stock in connection with conversion of $504,538 of $2,000,000 debenture, September 2005		-		-		841,309		841		-		-		503,945		-		-			-		504,786
Issuance of common stock in connection with conversion of $286,538 of $2,000,000 debenture, September 2005		-		-		477,962		478		-		-		286,299		-		-			-		286,777
Issuance of common stock in connection with conversion of $457,200 of 2nd $2,000,000 debenture, September 2005		-		-		762,000		762		-		-		456,739		-		-			-		457,501
Issuance of common stock in satisfaction of accounts payable, September 2005, $0.81		-		-		162,933		163		-		-		113,442		-		-			-		113,605
Issuance of common stock in connection with conversion of $211,538 of $2,000,000 debenture, September 2005		-		-		353,665		354		-		-		211,845		-		-			-		212,199
Issuance of common stock in connection with conversion of $150,000 of 2nd $2,000,000 debenture, September 2005		-		-		250,000		250		-		-		149,750		-		-			-		150,000
Issuance of common stock in connection with conversion of $457,317 of 2nd $2,000,000 debenture, September 2005		-		-		762,195		762		-		-		458,209		-		-			-		458,971
Issuance of common stock in conjunction with financing, 2nd $2,000,000, September 2005, $0.82		-		-		170,732		171		-		-		139,829		-		-			-		140,000
Issuance of warrants in conjunction with financing, 2nd $2,000,000, September 2005, $0.82		-		-		-		-		-		-		30,600		-		-			-		30,600
Issuance of warrants in conjunction with convertible debentures, 2nd $2,000,000, September 2005 (at $0.82)		-		-		-		-		-		-		785,185		-		-			-		785,185
Value of Beneficial Conversion Feature on Convertible Debentures, 2nd $2,000,000, September 2005 (at $0.82)		-		-		-		-		-		-		1,185,185		-		-			-		1,185,185
Issuance of common stock as repayment of monthly amortization payments due, $4,000,000, October 2005		-		-		243,836		244		-		-		163,126		-		-			-		163,370
Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, October 2005		-		-		67,949		68		-		-		45,458		-		-			-		45,526
Issuance of common stock in connection with conversion of $307,317 of 2nd $2,000,000 debenture, October 2005		-		-		512,195		512		-		-		306,805		-		-			-		307,317
Issuance of common stock in connection with conversion of $300,000 of $2,000,000 debenture, October 2005		-		-		501,397		501		-		-		300,337		-		-			-		300,838
Issuance of common stock in connection with conversion of $500,000 of $500,000 debenture, October 2005		-		-		644,003		644		-		-		527,438		-		-			-		528,082
Issuance of common stock in connection with conversion of $113,077 of $2,000,000 debenture, October 2005		-		-		189,019		189		-		-		113,222		-		-			-		113,411
Issuance of common stock in connection with conversion of $297,692 of $4,000,000 debenture, October 2005		-		-		364,113		364		-		-		298,209		-		-			-		298,573
Exercise of stock warrants for cash, October 2005, $0.82		-		-		8,404,876		8,405		-		-		6,883,593		-		-			-		6,891,998
Exercise of stock options for cash, October 2005, $0.63		-		-		101,500		101		-		-		63,844		-		-			-		63,945

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

63

Exercise of stock options for cash, October 2005, $0.94	-	-	40,000	40	-	-	37,560	-	-	-	37,600
Issuance of common stock in connection with conversion of $100,000 of $100,000 debenture, October 2005	-	-	128,834	129	-	-	105,515	-	-	-	105,644
Issuance of warrants in conjunction with financing, $500,000, October 2005, $0.82	-	-	-	-	-	-	14,250	-	-	-	14,250
Issuance of warrants in conjunction with convertible debentures, $500,000, October 2005, $0.82	-	-	-	-	-	-	270,950	-	-	-	270,950
Issuance of warrants as exersise inducement Oct 2005, $1.20	-	-	-	-	-	-	573,146	-	-	-	573,146
Issuance of warrants as exersise inducement Oct 2005, $1.25	-	-	-	-	-	-	2,501,390	-	-	-	2,501,390
Value of Beneficial Conversion Feature on Convertible Debentures, $500,000, October 2005 (at $0.82)	-	-	-	-	-	-	229,050	-	-	-	229,050
Issuance of common stock as repayment of monthly amortization payments due, $4,000,000, Nov 2005, $1.17	-	-	108,006	108	-	-	126,259	-	-	-	126,367
Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, Nov 2005, $1.17	-	-	16,753	17	-	-	19,584	-	-	-	19,601
Exercise of stock options for cash, November 2005, $0.94	-	-	100,000	100	-	-	93,900	-	-	-	94,000
Exercise of stock options for cash, November 2005, $0.63	-	-	1,500	2	-	-	944	-	-	-	946
Exercise of stock warrants for cash, November 2005, $0.82	-	-	3,058,536	3,058	-	-	2,504,942	-	-	-	2,508,000
Issuance of common stock in exchange for the services rendered November 2005, $0.97	-	-	64,287	64	-	-	62,294	-	-	-	62,358
Issuance of common stock in connection with conversion of $42,800 of 2nd $2,000,000 debenture, Nov 2005, $1.23	-	-	72,058	72	-	-	88,559	-	-	-	88,631
Issuance of common stock in exchange for the services rendered August 2005, $0.97	-	-	19,500	19	-	-	18,897	-	-	-	18,916
Issuance of common stock in connection with conversion of $230,769 of $4,000,000 debenture, November 2005,$0.97	-	-	282,721	283	-	-	273,957	-	-	-	274,240
Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, Dec 2005, $0.98	-	-	212,750	213	-	-	208,282	-	-	-	208,495
Issuance of common stock in connection with conversion of $1,451,000 of $3,500,000 debenture, Dec 2005, $0.93	-	-	1,770,223	1,770	-	-	1,644,537	-	-	-	1,646,307
Issuance of common stock in connection with conversion of $4,221 of 2nd $2,000,000 debenture, Dec 2005, $0.85	-	-	7,042	7	-	-	5,979	-	-	-	5,986
Issuance of common stock in conjunction with financing, $3,500,000, December 2005, $0.95	-	-	224,000	224	-	-	212,576	-	-	-	212,800
Issuance of warrants in conjunction with financing, $3,500,000, December 2005, $0.82	-	-	-	-	-	-	76,650	-	-	-	76,650
Issuance of warrants in conjunction with convertible debentures, $3,500,000, December 2005, $0.82	-	-	-	-	-	-	1,648,387	-	-	-	1,648,387
Value of Beneficial Conversion Feature on Convertible Debentures, $3,500,000, December 2005,$0.82	-	-	-	-	-	-	1,851,613	-	-	-	1,851,613
Issuance of warrants as exersise inducement Dec 2005, $1.25	-	-	-	-	-	-	1,115,853	-	-	-	1,115,853
Issuance of common stock in connection with conversion of $82,000 of $3,500,000 debenture, December 2005, $0.84	-	-	100,000	100	-	-	83,900	-	-	-	84,000
Issuance of common stock as repayment of monthly amortization payments due, 2nd $2,000,000, Jan 2006, $0.81	-	-	75,149	75	-	-	60,796	-	-	-	60,871
Issuance of common stock as repayment of monthly amortization payments due, $500,000, Jan 2006, $0.81	-	-	53,612	54	-	-	43,372	-	-	-	43,426
Issuance of common stock in connection with conversion of $617,000 of $3,500,000 debenture, January 2005, $0.94	-	-	757,630	758	-	-	711,415	-	-	-	712,173
Issuance of common stock in conjunction with financing, $4,000,000, January 2006, $1.00	-	-	266,667	267	-	-	266,400	-	-	-	266,667
Issuance of warrants in conjunction with financing, $4,000,000, January 2006, $1.05	-	-	-	-	-	-	88,800	-	-	-	88,800
Issuance of warrants in conjunction with convertible debentures, 4,000,000, January 2006, $1.05	-	-	-	-	-	-	1,653,631	-	-	-	1,653,631
Value of Beneficial Conversion Feature on Convertible Debentures, 4,000,000, January 2006, $1.05	-	-	-	-	-	-	1,463,155	-	-	-	1,463,155
Exercise of stock warrants for cash, January 2006, $0.82	-	-	7,317,072	7,317	-	-	5,992,682	-	-	-	5,999,999
Issuance of warrants as exersise inducement Jan 2006, $1.60	-	-	-	-	-	-	3,109,756	-	-	-	3,109,756
Exercise of stock options for cash, January 2006, $0.63	-	-	10,000	10	-	-	6,290	-	-	-	6,300
Issuance of common stock in connection with conversion of $850,000 of $3,500,000 debenture, January 2006, $1.06	-	-	1,045,779	1,046	-	-	1,107,480	-	-	-	1,108,526
Issuance of common stock as repayment of monthly amortization payments due, $500,000, Feb 2006, $1.23	-	-	49,812	50	-	-	61,219	-	-	-	61,269

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

64

Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, Feb 2006, $1.23	-	-	67,746	68	-	-	83,260		-	-	-	83,328
Issuance of common stock as employee compensation, December 2005, $0.90	-	-	140,115	140	-	-	125,964		-	-	-	126,104
Exercise of stock warrants for cash, February 2006, $0.82	-	-	303,902	304	-	-	248,896		-	-	-	249,200
Issuance of common stock in exchange for the services rendered February 2006, $1.53	-	-	50,000	50	-	-	76,450		-	-	-	76,500
Exercise of stock options for cash, February 2006, $0.94	-	-	80,000	80	-	-	75,120		-	-	-	75,200
Exercise of stock options for cash, February 2006, $1.59	-	-	80,000	80	-	-	127,120		-	-	-	127,200
Exercise of stock options for cash, February 2006, $1.38	-	-	20,000	20	-	-	27,580		-	-	-	27,600
Exercise of stock warrants for cash, February 2006, $1.05	-	-	3,809,524	3,810	-	-	3,996,191		-	-	-	4,000,001
Exercise of stock warrants for cash, February 2006, $1.20	-	-	909,756	910	-	-	1,090,797		-	-	-	1,091,707
Exercise of stock warrants for cash, February 2006, $1.25	-	-	4,578,048	4,578	-	-	5,717,982		-	-	-	5,722,560
Exercise of stock warrants for cash, February 2006, $1.72	-	-	34,782	35	-	-	59,790		-	-	-	59,825
Issuance of common stock in connection with conversion of $950,000 of Jan $4,000,000 debenture, Feb 2006, $2.38	-	-	904,762	905	-	-	2,152,429		-	-	-	2,153,334
Issuance of warrants in conjunction with convertible debentures, 4,000,000, February 2006, $1.05	-	-	-	-	-	-	2,374,507		-	-	-	2,374,507
Value of Beneficial Conversion Feature on Convertible Debentures, 4,000,000, February 2006, $1.05	-	-	-	-	-	-	1,625,493		-	-	-	1,625,493
Issuance of warrants as exersise inducement Feb 2006, $3.00	-	-	-	-	-	-	8,294,141		-	-	-	8,294,141
Issuance of common stock in connection with conversion of $1,550,000 of Jan $4,000,000 debenture, Mar 2006, $2.21	-	-	1,485,349	1,485	-	-	3,281,136		-	-	-	3,282,621
Exercise of stock warrants for cash, March 2006, $1.72	-	-	347,913	348	-	-	598,062		-	-	-	598,410
Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, Mar 2006, $2.31	-	-	67,094	67	-	-	154,920		-	-	-	154,987
Issuance of common stock as repayment of monthly amortization payments due, $500,000, March 2006, $2.31	-	-	49,312	49	-	-	113,861		-	-	-	113,910
Issuance of common stock as repayment of monthly amortization payments due, $3,500,000, Mar 2006, $2.31	-	-	55,644	56	-	-	128,482		-	-	-	128,538
Issuance of common stock in exchange for the services rendered March 2006, $2.31	-	-	50,000	50	-	-	115,450		-	-	-	115,500
Exercise of stock options for cash, March 2006, $0.94	-	-	300,222	300	-	-	281,909		-	-	-	282,209
Issuance of common stock in connection with conversion of $2,350,000 of Feb $4,000,000 debenture, Mar 2006, $2.31	-	-	1,880,000	1,880	-	-	4,340,920		-	-	-	4,342,800
Exercise of stock options for cash, March 2006, $1.47	-	-	274,500	274	-	-	403,241		-	-	-	403,515
Exercise of stock warrants for cash, March 2006, $1.25	-	-	1,600,000	1,600	-	-	1,998,400		-	-	-	2,000,000
Exercise of stock warrants for cash, March 2006, $0.91	-	-	60,000	60	-	-	54,540		-	-	-	54,600
Exercise of stock options for cash, March 2006, $1.59	-	-	263,700	264	-	-	419,019		-	-	-	419,283
Issuance of common stock in connection with conversion of $500,000 of Feb $4,000,000 debenture, Mar 2006, $2.20	-	-	400,592	401	-	-	880,902		-	-	-	881,303
Exercise of stock warrants for cash, March 2006, $0.82	-	-	48,000	48	-	-	39,312		-	-	-	39,360
Exercise of stock warrants for cash, March 2006, $1.05	-	-	46,000	46	-	-	48,254		-	-	-	48,300
Issuance of common stock in connection with conversion of $200,000 of Jan $4,000,000 debenture, March 2006, $2.31	-	-	192,136	192	-	-	443,642		-	-	-	443,834
Exercise of stock options for cash, March 2006, $1.71	-	-	180,000	180	-	-	307,620		-	-	-	307,800
Issuance of common stock in connection with conversion of $384,615 of $500,000 debenture, March 2006, $3.33	-	-	470,450	470	-	-	1,566,129		-	-	-	1,566,599
Exercise of stock warrants for cash, March 2006, $1.68	-	-	1,639,344	1,639	-	-	2,752,459		-	-	-	2,754,098
Cashless exercise of stock warrants, March 2006, $2.50	-	-	8,179	8	-	-	(8	)	-	-	-	-
Exercise of stock warrants for cash, March 2006, $1.25	-	-	68,000	68	-	-	84,932		-	-	-	85,000
Exercise of stock options for cash, March 2006, $2.10	-	-	175,000	175	-	-	367,325		-	-	-	367,500
Exercise of stock options for cash, March 2006, $1.10	-	-	150,000	150	-	-	164,850		-	-	-	165,000
Exercise of stock options for cash, March 2006, $1.52	-	-	150,000	150	-	-	227,850		-	-	-	228,000
Exercise of stock options for cash, March 2006, $2.19	-	-	150,000	150	-	-	328,350		-	-	-	328,500
Exercise of stock warrants for cash, March 2006, $2.15	-	-	2,000	2	-	-	4,298		-	-	-	4,300
Exercise of stock warrants for cash, March 2006, $1.88	-	-	31,000	31	-	-	58,249		-	-	-	58,280
Exercise of stock warrants for cash, March 2006, $2.02	-	-	23,438	23	-	-	47,322		-	-	-	47,345
Exercise of stock options for cash, March 2006, $0.63	-	-	120,750	121	-	-	75,952		-	-	-	76,073
Exercise of stock warrants for cash, March 2006, $1.86	-	-	170,068	170	-	-	316,156		-	-	-	316,326

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

65

Issuance of common stock in exchange for the services rendered March 2006, $2.96	-		-	25,000		25		-		-		73,975		-		-			-		74,000
Issuance of common stock in satisfaction of accounts payable March 2006, $3.20	-		-	2,390		2		-		-		7,646		-		-			-		7,648
Issuance of warrants as exersise inducement Mar 2006, $3.00	-		-	-		-		-		-		1,293,953		-		-			-		1,293,953
Issuance of common stock as repayment of monthly amortization payments due, $2,000,000, April 2006, $2.70	-		-	67,083		67		-		-		181,057		-		-			-		181,124
Issuance of common stock as repayment of monthly amortization payments due, $3,500,000, April 2006, $2.70	-		-	49,812		50		-		-		134,443		-		-			-		134,493
Issuance of common stock as repayment of monthly amortization payments due, Jan $4,000,000, Apr 2006, $2.70	-		-	167,144		167		-		-		451,122		-		-			-		451,289
Exercise of stock warrants for cash, April 2006, $1.88	-		-	29,000		29		-		-		54,491		-		-			-		54,520
Exercise of stock options for cash, April 2006, $1.47	-		-	95,500		95		-		-		140,290		-		-			-		140,385
Issuance of common stock in connection with conversion of $307,692 of 2nd $2,000,000 debenture, April 2006, $2.63	-		-	513,158		513		-		-		1,349,092		-		-			-		1,349,605
Issuance of common stock in connection with conversion of $423,077 of $3,500,000 debenture, April 2005, $2.63	-		-	516,291		516		-		-		1,357,329		-		-			-		1,357,845
Issuance of common stock in connection with conversion of $923,077 of Jan $4,000,000 debenture, April 2006, $2.63	-		-	879,699		880		-		-		2,312,729		-		-			-		2,313,609
Exercise of stock options for cash, April 2006, $0.94	-		-	25,000		25		-		-		23,475		-		-			-		23,500
Exercise of stock warrants for cash, April 2006, $0.82	-		-	132,000		132		-		-		108,108		-		-			-		108,240
Exercise of stock warrants for cash, April 2006, $0.91	-		-	60,000		60		-		-		54,540		-		-			-		54,600
Exercise of stock warrants for cash, April 2006, $1.05	-		-	69,000		69		-		-		72,381		-		-			-		72,450
Issuance of common stock in satisfaction of deposit April 2006, $1.25	-		-	204,465		204		-		-		255,377		-		-			-		255,581
Issuance of common stock in exchange for the services rendered April 2006, $2.67	-		-	38,400		38		-		-		102,490		-		-			-		102,528
Issuance of warrants in exchange for the services rendered April 2006, $2.66	-		-	-		-		-		-		137,200		-		-			-		137,200
Issuance of common stock as repayment of monthly amortization payments due, Jan $4,000,000, May 2006, $3.10	-		-	74,322		74		-		-		230,324		-		-			-		230,398
Issuance of common stock as repayment of monthly amortization payments due, Feb $4,000,000, May 2006, $3.10	-		-	172,713		173		-		-		535,238		-		-			-		535,411
Exercise of stock options for cash, May 2006, $2.10	-		-	25,000		25		-		-		52,475		-		-			-		52,500
Exercise of stock options for cash, May 2006, $1.47	-		-	10,000		10		-		-		14,690		-		-			-		14,700
Issuance of warrants in exchange for the services rendered May 2006, $1.91	-		-	-		-		-		-		35,250		-		-			-		35,250
Issuance of common stock as employee compensation May 2006, $1.88	-		-	755,000		755		-		-		1,418,645		-		-			-		1,419,400
Issuance of common stock in exchange for the services rendered May 2006, $1.85	-		-	3,784		4		-		-		6,997		-		-			-		7,001
Issuance of common stock in exchange for the services rendered May 2006, $1.88	-		-	38,000		38		-		-		71,402		-		-			-		71,440
Issuance of common stock as repayment of monthly amortization payments due, Jan $4,000,000, Jun 2006, $1.96	-		-	73,979		74		-		-		144,925		-		-			-		144,999
Issuance of common stock as repayment of monthly amortization payments due, Feb $4,000,000, Jun 2006, $1.96	-		-	83,911		84		-		-		164,382		-		-			-		164,466
Exercise of stock warrants for cash, June 2006, $1.25	-		-	1,327,880		1,328		-		-		1,658,522		-		-			-		1,659,850
Exercise of stock warrants for cash, June 2006, $1.60	-		-	3,036,310		3,036		-		-		4,855,060		-		-			-		4,858,096
Issuance of warrants as exersise inducement June 2006, $2.35	-		-	-		-		-		-		4,549,670		-		-			-		4,549,670
Issuance of common stock for cash pursuant to private placement, June 2006, $2.05	-		-	3,414,636		3,415		-		-		6,996,589		-		-			-		7,000,004
Issuance of common stock in exchange for the services rendered June 2006, $1.85	-		-	3,784		4		-		-		6,997		-		-			-		7,001
Issuance of common stock as repayment of monthly amortization payments due, Jan $4,000,000, July 2006, $1.75	-		-	66,264		66		-		-		115,896		-		-			-		115,962
Issuance of common stock as repayment of monthly amortization payments due, Feb $4,000,000, July 2006, $1.75	-		-	64,923		65		-		-		113,550		-		-			-		113,615
Issuance of common stock in exchange for the services rendered July 2006, $1.40	-		-	5,000		5		-		-		6,995		-		-			-		7,000
Comprehensive Income (Loss):
Net Loss	-		-	-		-		-		-		-		-		(67,967,204	)		-		(67,967,204	)
Other comprehensive income (loss)
Currency translation adjustment	-		-	-		-		-		-		-		-		-			185,232		185,232
Total Comprehensive Income (Loss)																(67,967,204	)		185,232		(67,781,972	)
Balance at July 31, 2006	1,000	$	1	107,398,360	$	107,397	$	-	$	-	$	243,097,627	$	-	$	(188,495,312	)	$	754,081	$	55,463,794

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

66

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

										Cumulative From
										November 2, 1995
										(Date of Inception)
	For the Year Ended July 31,									to July 31,
	2006			2005			2004			2006
Cash Flows From Operating Activities:
Net loss	$	(67,967,204	)	$	(24,001,735	)	$	(18,362,583	)	$	(186,200,255	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,134,676			1,103,948			1,014,572			4,715,856
Minority interest share of loss		—			—			—			(3,038,185	)
Reduction of notes receivable - common stock in exchange for services rendered		—			—			—			423,882
Write-off of uncollectible notes receivable - common stock		—			391,103			—			391,103
Write-off of deferred offering costs		—			—			—			3,406,196
Write-off of abandoned patents		73,699			66,952			—			149,785
Loss on disposal of property and equipment		911			—			—			911
Loss on extinguishment of debt		12,550,565			1,346,341			—			13,896,906
Common stock issued as employee compensation		1,545,504			—			—			1,545,504
Common stock issued for services rendered		515,039			1,131,452			1,359,973			5,301,303
Amortization of prepaid services in conjunction with common stock issuance		138,375			—			—			138,375
Non-cash compensation expense		—			—			45,390			45,390
Stock options and warrants issued for services rendered		172,450			547,755			178,433			7,006,323
Issuance of warrants as additional exercise right inducement		21,437,909			—			—			21,437,909
Preferred stock issued for services rendered		—			—			—			100
Treasury stock redeemed for non-performance of services		—			(138,000	)		—			(138,000	)
Amortization of deferred debt issuance costs and loan origination fees		1,234,772			248,107			—			1,482,879
Amortization of discount on convertible debentures		14,586,879			3,734,811			—			18,321,690
Common stock issued as interest payment on convertible debentures		191,747			76,996			—			268,743
Interest on short-term advance		13,524			—			—			22,190
Founders’ shares transferred for services rendered		—			—			—			353,506
Fees in connection with short-term refinancing of long-term debt		7,974			105,300			—			113,274
Changes in operating assets and liabilities (excluding the effects of acquisition):
Miscellaneous receivables		—			—			—			43,812
Other current assets		9,596			731,656			(538,795	)		(102,645	)
Accounts payable and accrued expenses		3,780,168			3,255,169			421,052			9,645,919
Other, net		—			—			—			110,317
Net Cash Used in Operating Activities		(10,573,416	)		(11,400,145	)		(15,881,958	)		(100,657,212	)
Cash Flows From Investing Activities:
Purchase of property and equipment		(149,991	)		(63,735	)		(646,383	)		(4,442,707	)
Costs incurred for patents		(114,010	)		(193,429	)		(285,350	)		(1,608,996	)
Change in restricted cash		216,868			19,333			(7,246	)		45,872
Proceeds from maturity of short term investments		8,600,000			—			7,000,854			135,287,046
Purchases of short-term investments		(22,972,653	)		—			(4,638,783	)		(149,659,699	)
Cash received in conjunction with merger		—			—			82,232			82,232
Advances to Antigen Express, Inc.		—			—			(32,000	)		(32,000	)
Increase in officers’ loans receivable		—			—			—			(1,126,157	)
Change in deposits		(29,639	)		395,889			(395,889	)		(506,833	)
Change in notes receivable - common stock		—			(6,300	)		(24,805	)		(91,103	)
Change in due from related parties		—			—			32,807			(2,222,390	)
Other, net		—			—			—			89,683
Net Cash Provided by (Used in) Investing Activities		(14,449,425	)		151,758			1,085,437			(24,185,052	)

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

67

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

											Cumulative From
											November 2, 1995
											(Date of Inception)
		For the Year Ended July 31,									to July 31,
		2006			2005			2004			2006
Cash Flows From Financing Activities:
Proceeds from short-term advance		—			325,179			—			325,179
Repayment of short-term advance		(347,369	)		—			—			(347,369	)
Proceeds from issuance of long-term debt		35,461			815,832			161,167			2,005,609
Repayment of long-term debt		(572,280	)		(98,447	)		(73,140	)		(1,779,218	)
Change in due to related parties		—			—			—			154,541
Proceeds from exercise of warrants		39,337,065			—			—			43,890,049
Proceeds from exercise of stock options		3,241,755			—			126,640			4,252,195
Proceeds from minority interest investment		—			—			—			3,038,185
Proceeds from issuance of preferred stock		—			—			—			12,015,000
Proceeds from issuance of convertible debentures, net		13,955,000			6,299,930			—			20,254,930
Repayments of convertible debentures		—			(461,358	)		—			(461,358	)
Purchase of treasury stock		—			—			—			(483,869	)
Proceeds from issuance of common stock, net		7,000,004			—			7,154,739			80,283,719
Purchase and retirement of common stock		—			—			—			(119,066	)
Net Cash Provided by Financing Activities		62,649,636			6,881,136			7,369,406			163,028,527
Effect of Exchange Rates on Cash		(4,832	)		3,362			20,956			22,230
Net Increase (Decrease) in Cash and Cash Equivalents		37,621,963			(4,363,889	)		(7,406,159	)		38,208,493
Cash and Cash Equivalents, Beginning of Period		586,530			4,950,419			12,356,578			—
Cash and Cash Equivalents, End of Period	$	38,208,493		$	586,530		$	4,950,419		$	38,208,493

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

68

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and Business:

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

The Company’s subsidiary, Antigen Express, Inc. (Antigen), is engaged in research and development of technologies and immunomedicines for the treatment of malignant, infectious, autoimmune and allergic diseases.  The Company’s immunomedicine products work by stimulating the immune system to either attack offending agents (i.e., cancer cells, bacteria, and viruses) or to stop attacking benign elements (i.e., self proteins and allergens). The immunomedicine products are based on two platform technologies that were discovered by an executive officer of Antigen, the Ii-Key hybrid peptides and Ii-Suppression. These technologies are expected to greatly boost immune cell responses which diagnose and treat the ailments and conditions.

During the year ended July 31, 2005, the Company acquired the minority interest in Generex (Bermuda), Ltd., making it a wholly-owned subsidiary of the Company (see Note 20).

The Company is a development stage company, which has a limited history of operations and has not generated any revenues from operations prior to the acquisition of Antigen (see Note 3) with the exception of the $1 million received in conjunction with the execution of a development agreement. Subsequent to the acquisition of Antigen, the Company has grant revenue from government agencies related to Antigen’s operations. During the year ended July 31, 2005, the Company received $50,000 in conjunction with the execution of a licensing agreement (see Note 10). The Company has no products approved for commercial sale at the present time with the exception of its oral insulin formulation which was approved for commercial sale in Ecuador in early May 2005; however, the Company has not made any sales during the years ended July 31, 2006, 2005 and 2004. The Company’s product candidates are in research or early stages of pre-clinical and clinical development. There can be no assurance that the Company will be successful in obtaining regulatory clearance for the sale of existing or any future products or that any of the Company’s products will be commercially viable.

Note 2 - Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained. For those consolidated subsidiaries where the Company ownership is less than 100 percent, the outside stockholders’ interests are shown as minority interests. Effective December 17, 2004, the Company’s ownership in all consolidated subsidiaries is 100 percent (see Note 20). All significant intercompany transactions and balances have been eliminated.

Development Stage Corporation

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

Cash and Cash Equivalents

The Company considersall highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

69

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Short-Term Investments

Short-term investments consist primarily of short-term U.S. term deposits with original maturities of between three to twelve months. These short-term notes are classified as held to maturity and are valued at amortized cost. At July 31, 2006, the cost of the investments approximated market value.

Property and Equipment

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

Property Held for Investment

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

Patents

Capitalized patent costs represent legal costs incurred to establish patents and a portion of the acquisition price attributed to patents paid upon the acquisition of Antigen in August 2003.  When patents reach a mature stage any associated legal costs are comprised mostly of maintenance fees and costs of national applications and are expensed as incurred.  Capitalized patent costs are amortized on a straight line method over the related patent term.  As patents are abandoned, the net book value of the patent is written off.

Impairment or Disposal of Long-Lived Assets

The Company assesses the impairment of patents under SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” whenever events or changes in circumstances indicate that the carrying value may not be recoverable. For long-lived assets to be held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable and exceeds its fair value. The carrying amount of the long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result form the use and eventual disposal of the asset.

Convertible Debentures

In accordance with Emerging Issues Task Force Issue 98-5, Accounting for Convertible Securities with a Beneficial Conversion Features or Contingently Adjustable Conversion Ratios ("EITF 98-5"), the Company recognized an imbedded beneficial conversion feature present in the Convertible Notes. The Company allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The debt discount attributed to the beneficial conversion feature is amortized over the convertible debenture's maturity period as interest expense using the effective yield method.

70

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Convertible Debentures (Continued)

In accordance with Emerging Issues Task Force Issue 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments ("EITF 00-27"), the Company recognized the value attributable to the warrants to additional paid-in capital and a discount against the convertible debentures. The Company valued the warrants in accordance with EITF 00-27 using the Black-Scholes pricing model. The debt discount attributed to the value of the warrants issued is amortized over the convertible debenture’s maturity period as interest expense using the effective yield method.

Revenue Recognition

Revenue is derived principally from grants provided by government agencies. The Company recognizes revenue from restricted grants in the period which the Company has incurred the expenditures in compliance with the specific restrictions.

Included in miscellaneous income are fees received under licensing agreements. Nonrefundable fees received under licensing agreements are recognized as revenue when received if the Company has no continuing obligations to the other party.

Rental income is recognized as revenue in the period lease payments are due.

Research and Development Costs

Expenditures for research and development are expensed as incurred and include, among other costs, those related to the production of experimental drugs, including payroll costs, and amounts incurred for conducting clinical trials. Amounts expected to be received from governments under research and development tax credit arrangements are offset against current income tax expense.

Income Taxes

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

Stock-Based Compensation

Prior to August 1, 2005, the Company accounted for the share-based compensation granted under its stock incentive plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations ("APB 25"). In accordance with APB 25, the Company used the intrinsic-value method of accounting for stock option awards to employees and accordingly did not recognize compensation expense for its stock option awards to employees in its consolidated statement of operations prior to August 1, 2005, as all option exercise prices were equal to the fair market value of the Company stock on the date the options were granted. Effective August 1, 2005, the Company implemented the fair value recognition provisions of Financial Accounting Standards Board (FASB) Statement No. 123 (revised 2004) ("SFAS 123 (R)"), "Share Based Payment," which is a revision of SFAS No. 123, "Accounting for Stock Based Compensation," and Securities and Exchange Commission Staff Accounting Bulletin 107 (“SAB 107”) for all share-based compensation that was not vested as of July 31, 2005.

71

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Stock-Based Compensation (Continued)

Prior to August 1, 2005, in connection with the termination of certain employees, the Company repriced 1,240,000 options. The repriced options were accounted for under variable accounting and compensation cost was recognized for the difference between the exercise price and the market price of the common shares until such options were exercised, expired or forfeited. During the years ended July 31, 2005 and 2004, the Company recognized $-0- and $45,390 of compensation expense in connection with these options, respectively.

The following table illustrates the pro forma effect on net income and earnings per share for the years ended July 31, 2005 and 2004, assuming the Company had applied the fair value recognition provisions of SFAS 123(R) to all previously granted share-based awards after giving consideration to potential forfeitures during such periods.

	For the Years Ended July 31,
	2005			2004
Net Loss Available to Common
Stockholders, as Reported	$	(24,001,735	)	$	(19,172,586	)
Add: Total Stock-Based Employee
Compensation Expense Included
In Reported Net Loss		—			(45,930	)
Deduct: Total Stock-Based Employee
Compensation Expense Determined
Under Fair Value Based Method		2,199,300			1,786,920
Pro Forma Net Loss Available
to Common Stockholders	$	(26,201,035	)	$	(20,913,576	)
Loss Per Share:
Basic and diluted, as reported	$	(0.66	)	$	(0.64	)
Basic and diluted, pro forma	$	(0.72	)	$	(0.69	)

The fair value of each option granted is estimated on grant date using the Black-Scholes option pricing model which takes into account as of the grant date the exercise price and expected life of the option, the current price of the underlying stock and its expected volatility, expected dividends on the stock and the risk-free interest rate for the term of the option. The following is the average of the data used to calculate the fair value:

	Risk-Free			Expected		Expected		Expected
	Interest Rate			Life (Years)		Volatility		Dividends
July 31, 2005		2.32	%		5.00		1.0215		—
July 31, 2004		1.00	%		5.01		1.0604		—

The weighted average fair value of the Company’s stock options calculated using the Black-Scholes option-pricing model for options granted during the years ended July 31, 2005 and 2004 was $0.59 and $1.24 per share, respectively.

72

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Stock-Based Compensation (Continued)

A summary of option activity under the Plans as of July 31, 2006 and changes during the year then ended is presented below:

			Weighted		Weighted
	Number of		Average		Average		Aggregate
	Stock		Exercise		Remaining		Intrinsic
	Options		Price		Life (Years)		Value
Outstanding - August 1, 2005		11,607,269	$	1.51
Granted		—		—
Cancelled		755,000		5.97
Exercised		2,422,672		1.37
Outstanding - July 31, 2006		8,429,597	$	1.15		2.76	$	5,401,738
Exercisable - July 31, 2006		8,429,597	$	1.15		2.76	$	5,401,738

	For the Year Ended July 31,
	2006		2005		2004
Weighted Average Grant Date Fair Value
of Options Granted	$	—	$	0.59	$	1.24
Aggregate Intrinsic Value of Options
Exercised	$	3,499,814	$	—	$	38,326
Cash Received for Exercise of Stock Options	$	3,241,755	$	—	$	126,640

In the event the Company utilizes equity instruments to acquire goods or services in share-based payment transactions, the fair value of the equity instrument is recorded in the statement of operations, in the underlying expense, and stockholders’ equity.

The implementation of the provisions of SFAS 123(R) and SAB 107 during the year ended July 31, 2006 did not have a material impact on the Company’s cash flow from operations or cash flow from financing activities.

Net Loss Per Common Share

Basic EPS is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. The computation of Diluted EPS does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings. Refer to Note 17 for methodology for determining net loss per share.

Comprehensive Loss

Other comprehensive income (loss), which includes only foreign currency translation adjustments, is shown in the Statement of Changes in Stockholders’ Equity.

73

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Concentration of Credit Risk

The Company maintains cash balances, at times, with financial institutions in excess of amounts insured by the Canada Deposit Insurance Corporation and the Federal Deposit Insurance Corporation. Management monitors the soundness of these institutions and considers the Company’s risk negligible.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Foreign Currency Translation

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

Financial Instruments

The carrying values cash and cash equivalents, short-term investments, other current assets, accounts payable and accrued expenses approximate their fair values due to their short-term nature. Due from related party approximated its fair value as it was due on demand. Long-term debt and convertible debentures approximates their fair value based upon the borrowing rates available for the nature of the underlying debt.

The Company follows the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” This statement requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting.

Effects of Recent Accounting Pronouncements

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment" ("SFAS 123(R)"), which requires all companies to measure compensation cost for all share-based payments (including employee stock options) at fair value and to recognize cost over the vesting period. In March 2005, the SEC released SEC Staff Accounting Bulletin No. 107, "Share-Based Payment" ("SAB 107"). SAB 107 provides the SEC staff position regarding the application of SFAS 123(R), including interpretive guidance related to the interaction between SFAS 123(R) and certain SEC rules and regulations, and provides the staff's views regarding the valuation of share-based payment arrangements for public companies. SAB 107 highlights the importance of disclosures made related to the accounting for share-based payment transactions. In April 2005, the SEC announced that companies may implement SFAS 123(R) at the beginning of their next fiscal year beginning after June 15, 2005, or December 15, 2005 for small business issuers. The Company implemented the provisions of SFAS 123(R) and SAB 107 in the first quarter of fiscal 2006 using the modified-prospective method, and it did not have a material impact on our financial position or cash flows. See Note 2 - "Stock Based Compensation" for further information and the required disclosures under SFAS 123(R) and SAB 107, including the impact of the implementation on our results of operations.

74

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Effects of Recent Accounting Pronouncements (Continued)

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29." The statement addresses the measurement of exchanges of nonmonetary assets and eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of this statement did not have a significant impact on the consolidated results of operations or financial position of the Company.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” This statement replaces APB No. 20 and SFAS No. 3 and changes the requirements for the accounting and reporting of a change in accounting principle. APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the accounting principle. SFAS No. 154 requires retrospective application to prior periods’ financial statements of voluntary changes in accounting principle. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company does not expect that the adoption of SFAS No. 154 will have a significant impact on the consolidated results of operations or financial position of the Company.

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and 140,” to simplify and make more consistent the accounting for certain financial instruments. Specifically, SFAS No. 155 amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, to permit fair value remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, Accounting for the Impairment or Disposal of Long-Lived Assets, to allow a qualifying special-purpose entity (SPE) to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006, with earlier application allowed. The Company does not expect that the adoption of SFAS No. 155 will have a significant impact on the consolidated results of operations or financial position of the Company.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets”, to simplify accounting for separately recognized servicing assets and servicing liabilities. SFAS No. 156 amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Additionally, SFAS No. 156 permits, but does not require, an entity to choose either the amortization method or the fair value measurement method for measuring each class of separately recognized servicing assets and servicing liabilities. SFAS No. 156 applies to all separately recognized servicing assets and servicing liabilities acquired of issued after the beginning of an entity’s fiscal year that begins after September 15, 2006, although early adoption is permitted. The Company does not expect that the adoption of SFAS No. 156 will have a significant impact on the consolidated results of operations or financial position of the Company.

75

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Effects of Recent Accounting Pronouncements (Continued)

In July 2006, FASB has published FASB Interpretation No. 48 (FIN No. 48), “Accounting for Uncertainty in Income Taxes”, to address the noncomparability in reporting tax assets and liabilities resulting from a lack of specific guidance in SFAS No. 109, “Accounting for Income Taxes”, on the uncertainty in income taxes recognized in an enterprise’s financial statements.  FIN No. 48 will apply to fiscal years beginning after December 15, 2006, with earlier adoption permitted.  The Company does not expect that the adoption of FIN No. 48 will have a significant impact on the consolidated results of operations or financial position of the Company.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” to eliminate the diversity in practice that exists due to the different definitions of fair value and the limited guidance for applying those definitions in GAAP that are dispersed among the many accounting pronouncements that require fair value measurements. SFAS No. 157 retains the exchange price notion in earlier definitions of fair value, but clarifies that the exchange price is the price in an orderly transaction between market participants to sell an asset or liability in the principal or most advantageous market for the asset or liability. Moreover, the SFAS states that the transaction is hypothetical at the measurement date, considered from the perspective of the market participant who holds the asset or liability. Consequently, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price), as opposed to the price that would be paid to acquire the asset or received to assume the liability at the measurement date (an entry price).

SFAS No. 157 also stipulates that, as a market-based measurement, fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability, and establishes a fair value hierarchy that distinguishes between (a) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (b) the reporting entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). Finally, SFAS No. 157 expands disclosures about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Entities are encouraged to combine the fair value information disclosed under SFAS No. 157 with the fair value information disclosed under other accounting pronouncements, including SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” where practicable. The guidance in this Statement applies for derivatives and other financial instruments measured at fair value under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” at initial recognition and in all subsequent periods.

SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, although earlier application is encouraged. Additionally, prospective application of the provisions of SFAS No. 157 is required as of the beginning of the fiscal year in which it is initially applied, except when certain circumstances require retrospective application. The Company is currently evaluating the impact of this statement on its results of operations or financial position of the Company.

76

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Effects of Recent Accounting Pronouncements (Continued)

In September 2006, the FASB issued “Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106, and 132R)”, which will require employers to fully recognize the obligations associated with single-employer defined benefit pension, retiree healthcare and other postretirement plans in their financial statements. Under past accounting standards, the funded status of an employer’s postretirement benefit plan (i.e., the difference between the plan assets and obligations) was not always completely reported in the balance sheet. Past standards only required an employer to disclose the complete funded status of its plans in the notes to the financial statements. SFAS No. 158 applies to plan sponsors that are public and private companies and nongovernmental not-for-profit organizations. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006, for entities with publicly traded equity securities, and at the end of the fiscal year ending after June 15, 2007, for all other entities. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The Company does not expect that the adoption of SFAS No. 158 will have a significant impact on the consolidated results of operations or financial position of the Company.

Note 3 - Acquisitions:

On August 8, 2003, the Company acquired all of the outstanding capital stock of Antigen Express, Inc. pursuant to an Agreement and Plan of Merger (“Merger Agreement”) and Antigen became a wholly-owned subsidiary of the Company.

Antigen's facilities and headquarters are located in Worcester, Massachusetts. Antigen is engaged in research and development efforts focused on the development of immunomedicines for the treatment of malignant, infectious, autoimmune and allergic diseases.

The acquisition of Antigen brought two additional platform technologies to the Company. The immunomedicines based on these technologies allow for specific modulation of the immune system to allow for activation and re-activation against cancer and infectious agents and de-activation in the case of if allergy and autoimmune disease. The delivery technologies currently possessed by the Company, when used with Antigen’s active immunotherapies may provide for breakthrough therapeutics.

The Merger Agreement provided that each holder of Antigen common stock and each holder of each of the four outstanding series of Antigen preferred stock received shares of the Company’s common stock, par value $0.001 per share, for each share of Antigen common stock or preferred stock held by such holder. The Merger Agreement established exchange rates for the conversion of Antigen common and the various series of preferred stock into the Company’s common stock. An aggregate of 2,779,974 shares of the Company’s common stock was issued to the former Antigen stockholders in connection with the Merger. These shares were valued based upon the average trading price as quoted on the NASDAQ for the five days prior and subsequent to the announcement of the acquisition for a total of $4,645,059 or $1.6709 per share. In addition, pursuant to the Merger Agreement, the Company assumed Antigen common stock purchase options with a fair value of $152,300 which was included in the purchase price. The option holders received 105,000 shares of the Company’s common stock.

77

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 - Acquisitions (Continued):

In conjunction with this acquisition, the Company recorded approximately $4,878,012 of intangible assets, consisting of granted patents and pending patent applications, which are being amortized on a straight-line basis over their estimated useful lives which range from ten to twenty years. The following table summarizes the fair value of the assets acquired and liabilities assumed in the acquisition:

Current assets	$	100,558
Property and equipment		10,026
Patents		4,878,012
Total assets acquired	$	4,988,596
Current liabilities		191,187
Net assets acquired	$	4,797,409

The results of operations of Antigen have been included in the consolidated financial statements since the date of acquisition.

The following unaudited pro forma financial information assumes that the acquisition consummated in 2004 had occurred as of the beginning of each period:

	July 31,
	2004
Total Revenue	$	627,184
Net Loss Available to Common Stockholders	$	19,172,586
Basic and Diluted Net Loss per Common Share	$	(0.64	)

Note 4 - Property and Equipment:

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

	July 31,
	2006		2005
Land	$	201,075	$	367,478
Buildings and Improvements		1,274,448		2,325,813
Furniture and Fixtures		91,151		87,524
Office Equipment		151,684		141,209
Lab Equipment		4,046,520		3,763,869
Total Property and Equipment		5,764,878		6,685,893
Less Accumulated Depreciation		3,179,134		2,709,151
Property and Equipment, Net	$	2,585,744	$	3,976,742

Depreciation expense amounted to $605,657, $631,134 and $575,709 for the years ended July 31, 2006, 2005 and 2004, respectively.

78

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4 - Property and Equipment (Continued):

On August 1, 2005, the Company reclassified certain land and building and building improvements classified as property and equipment to property held for investment. At July 31, 2005, the aggregate cost and related accumulated depreciation reclassified was as follows:

Land	$	181,507
Buildings and Improvements		1,147,093
Total Property and Equipment Reclassified		1,328,600
Less Accumulated Depreciation		255,851
Property and Equipment, Net Reclassified	$	1,072,749

Such reclassification had no effect on the consolidated statements of activities as previously reported.

Note 5 - Property Held for Investment, Net:

The costs and accumulated depreciation of assets held for investment are summarized as follows:

	July 31,
	2006		2005
Assets Held For Investment	$	4,227,871	$	2,581,703
Less: Accumulated Depreciation		625,098		209,954
Assets Held For Investment, Net	$	3,602,773	$	2,371,749

Depreciation expense amounted to $125,366, $73,077 and $59,715 for the years ended July 31, 2006, 2005 and 2004, respectively.

The Company’s intent is to hold this property for investment purposes and collect rental income. Included in income from rental operations, net is $464,150, $315,514 and $237,040 of rental income and $349,463, $205,188 and $163,480 of rental expenses, including interest charges of $121,834, $75,531 and $49,693, for the years ended July 31, 2006, 2005 and 2004, respectively.

On August 1, 2005, the Company reclassified certain land and building and building improvements classified as property and equipment to property held for investment (see Note 5).

79

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Patents:

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

	July 31,
	2006		2005
Patents	$	6,380,006	$	6,338,104
Less: Accumulated Amortization		1,282,179		895,010
Patents, Net	$	5,097,827	$	5,443,094
Weighted Average Life		13.7 years		15.1 years

Amortization expense amounted to $403,654, $399,737 and $377,719 for the years ended July 31, 2006, 2005 and 2004, respectively. Amortization expense is expected to be approximately $403,000 per year for the years ended July 31, 2007 through 2011. During the years ended July 31, 2006, 2005 and 2004, the Company wrote off approximately $74,000, $67,000 and $-0- of net book value of patents to general and administrative expenses, respectively.

Note 7 - Income Taxes:

The Company has incurred losses since inception, which have generated net operating loss carryforwards. The net operating loss carryforwards arise from both United States and Canadian sources. Pretax losses arising from domestic operations (United States) were $64,252,188, $20,937,976 and $15,357,321 for the years ended July 31, 2006, 2005 and 2004, respectively. Pretax losses arising from foreign operations (Canada and Bermuda) were $3,715,016, $3,063,759 and $3,815,265 for the years ended July 31, 2006, 2005 and 2004, respectively. As of July 31, 2006, the Company has net operating loss carryforwards in Generex Biotechnology Corporation of approximately $110,137,748, which expire in 2014 through 2026, and in Generex Pharmaceuticals Inc. of approximately $28,696,311, which expire in 2007 through 2012. These loss carryforwards are subject to limitation in future years should certain ownership changes occur.

For the years ended July 31, 2006, and 2005, the Company’s effective tax rate differs from the federal statutory rate principally due to net operating losses and other temporary differences for which no benefit was recorded.

Deferred income taxes consist of the following:

	July 31,
	2006			2005
Deferred Tax Assets:
Net operating loss carryforwards	$	47,811,943		$	32,989,041
Other timing difference		2,660,938			3,567,485
Total Deferred Tax Assets		50,472,881			36,556,526
Valuation Allowance		(48,991,563	)		(34,950,200	)
Deferred Tax Liabilities
Intangible assets		(1,347,468	)		(1,449,881	)
Other timing difference		(133,850	)		(156,445	)
Total Deferred Tax Liabilities		(1,481,318	)		(1,606,326	)
Net Deferred Income Taxes	$	—		$	—

80

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7 - Income Taxes (Continued):

A reconciliation of the United States Federal Statutory rate to the Company’s effective tax rate for the years ended July 31, 2006, 2005 and 2004 is as follows:

	2006			2005			2004
Federal statutory rate		(34.0	)%		(34.0	)%		(34.0	)%
Increase (decrease) in income taxes resulting from:
Imputed interest income on intercompany receivables
from foreign subsidiaries		—			—			1.6
Nondeductible items		7.0			3.0			1.8
Other		6.0			—			—
Change in valuation allowance		21.0			31.0			30.6
Effective tax rate		—	%		—	%		—	%

Note 8 - Accounts Payable and Accrued Expenses:

Accounts payable and accrued expenses consist of the following:

	July 31,
	2006		2005
Accounts Payable	$	624,543	$	641,784
Research and Development		696,769		338,693
Accrued Legal and Settlements		210,672		618,710
Termination Agreements and Severance Pay		176,800		265,720
Audit and Accounting		202,679		274,627
Executive Compensation		2,121,389		271,312
Financial Services		1,411,938		—
Total	$	5,444,790	$	2,410,846

Note 9 - Short-Term Advance:

On March 30, 2005, the Company entered into an agreement with an affiliated party to provide the Company with approximately $325,200 in funding. The funds were designated to assist the Company in satisfying its obligations under the terms of the first $4,000,000 convertible debenture agreements. The Company was obligated to repay the advance, without interest, in three equal installments on October 1, 2005, November 1, 2005 and December 1, 2005. Upon failure to repay any installment when due, all amounts become payable on demand and interest on such unpaid amounts will accrue interest at the rate of 8 percent per annum. The Company did not make the required installments, therefore, has accrued interest in the amount of $22,190. During March 2006, the Company has repaid the short-term advance together with accrued interest in the amount of $347,369.

81

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Commitments and Contingent Liabilities:

Consulting Services

The Company’s Consulting Agreement with its Vice President of Research and Development (the V.P.), as amended and supplemented, would continue through July 31, 2010 subject to termination without cause by the V.P. or the Company at any time after January 31, 2003 upon 12 months prior written notice would. The Consulting Agreement provided for an annual base compensation of $250,000 per year (starting August 1, 2000), subject to annual increases. In addition, the Consulting Agreement provided for certain bonus compensation to be paid to the V.P. for achievement of certain milestones under the Company’s development agreements with pharmaceutical companies. The Consulting Agreement also provided for the V.P. to be granted options to purchase 150,000 shares of common stock for 10 fiscal years, starting with the 2001 fiscal year. The options were required to be granted under option plans approved by the Company’s stockholders.

On August 26, 2004, the Vice President of Research and Development resigned from his position as an officer of the Company and gave notice of termination to the Company. The Consulting Agreement between the V.P. and the Company terminated effective August 25, 2005.

Leases

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

Aggregate minimum annual lease commitments of the Company under non-cancelable operating leases as of July 31, 2006 are as follows:

Year	Amount
2007	$	36,069
2008		24,582
2009		23,198
2010		1,330
2011 and thereafter		—
Total Minimum Lease Payments	$	85,179

Lease expense amounted to $38,741, $37,400 and $40,239 for the years ended July 31, 2006, 2005 and 2004, respectively.

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

82

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Commitments and Contingent Liabilities (Continued):

Rental Operations

The Company sub-leases a portion of the floor that it owns in an office building located in Toronto, Canada. The following represents the approximate minimum amount of sublease income under current lease agreements to be received in years ending after July 31, 2006:

Year	Amount
2007	$	22,379
2008		6,774
2009		6,774
2010		2,823
Thereafter		—
Total	$	38,750

Property Held for Investment

The Company leases two commercial buildings located in Brampton and Mississauga, Canada, and units of property that it owns located in Toronto, Canada. The following represents the approximate minimum amount in lease income under current lease agreements to be received in years ending after July 31, 2006:

Year	Amount
2007	$	289,418
2008		180,184
2009		60,465
2010		3,551
Thereafter		—
Total	$	533,618

Supply Agreements

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

On November 5, 2003, the Company entered into a Bulk Supply Agreement with a pharmaceutical company for the sale of human insulin crystals to the Company over a three year period. The Bulk Supply Agreement established purchase prices, minimum purchase requirements, maximum amounts which may be purchased in each year and a non-refundable prepayment of $1,500,000 to be applied against amounts due for purchases. The prepayment was expensed as purchases were made. As of July 31, 2006 and 2005, $-0-, is included in other current assets.

The Company has a supply agreement with Cardinal Health Pharmaceutical Development whereby the Company will perform a technical transfer for the production of Oral-lyn™ drug product for use in the Company’s Phase III clinical trials and/or studies. The anticipated project timeline is seven months and billed over the term of the project. Either party may terminate the agreement, or any portion thereof, by providing forty-five days written notice.

83

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Commitments and Contingent Liabilities (Continued):

Pending Litigation

On October 2, 1998, Sands Brothers & Co. Ltd. (“Sands”), a New York City-based investment banking and brokerage firm, initiated an arbitration proceeding against the Company under the rules of the New York Stock Exchange in respect of an alleged contractual relationship between Sands and the Company.

On August 17, 2004, following various arbitration and court proceedings in the case, the Arbitration Panel of the New York Stock Exchange issued a final award in the case, awarding Sands $150,000 in damages.  A motion to confirm this award was granted on February 1, 2005.  In September 2005 Sands filed a motion seeking leave from the New York Court of Appeals to appeal certain prior orders of the Appellate Division in the case. On January 10, 2006 the New York Court of Appeals denied the motion. In March, 2006 the Company paid $150,000 plus $10,541 in interest to Sands in satisfaction of the judgment.

In February 2001, a former business associate of the former Vice President of Research and Development (VP), and an entity called Centrum Technologies Inc. (“CTI”) commenced an action in the Ontario Superior Court of Justice against the Company and the VP seeking, among other things, damages for alleged breaches of contract and tortious acts related to a business relationship between this former associate and the VP that ceased in July 1996. The plaintiffs’ statement of claim also seeks to enjoin the use, if any, by the Company of three patents allegedly owned by the company called CTI. On July 20, 2001, the Company filed a preliminary motion to dismiss the action of CTI as a nonexistent entity or, alternatively, to stay such action on the grounds of want of authority of such entity to commence the action. The plaintiffs brought a cross motion to amend the statement of claim to substitute Centrum Biotechnologies, Inc. (“CBI”) for CTI. CBI is a corporation of which 50 percent of the shares are owned by the former business associate and the remaining 50 percent are owned by the Company. Consequently, the shareholders of CBI are in a deadlock. The court granted the Company’s motion to dismiss the action of CTI and denied the plaintiffs’ cross motion without prejudice to the former business associate to seek leave to bring a derivative action in the name of or on behalf of CBI. The former business associate subsequently filed an application with the Ontario Superior Court of Justice for an order granting him leave to file an action in the name of and on behalf of CBI against the VP and the Company. The Company opposed the application. In September 2003, the Ontario Superior Court of Justice granted the request and issued an order giving the former business associate leave to file an action in the name of and on behalf of CBI against the VP and the Company. A statement of claim was served in July 2004. The Company is not able to predict the ultimate outcome of this legal proceeding at the present time or to estimate an amount or range of potential loss, if any, from this legal proceeding.

84

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Commitments and Contingent Liabilities (Continued):

Pending Litigation (Continued)

In February 2005, a consultant commenced an action in the Ontario Superior Court of Justice against the Company seeking approximately $600,000 in damages for alleged contract breaches in respect of unpaid remuneration and other compensation allegedly owed to him. In March 2006 the litigation was settled, without any economic payment by the Company, and the action was dismissed, on consent, without costs.

The Company is involved in certain other legal proceedings in addition to those specifically described herein. Subject to the uncertainty inherent in all litigation, the Company does not believe at the present time that the resolution of any of these legal proceedings is likely to have a material adverse effect on the Company’s financial position, operations or cash flows.

With respect to all litigation, as additional information concerning the estimates used by the Company becomes known, the Company reassesses its position both with respect to accrued liabilities and other potential exposures.

Employment Agreements

As of July 31, 2006, the Company has an employment agreement with an executive expiring March 2008, whereby the Company is required to pay an annual base salary of $250,000. In the event the agreement is terminated, by reason other than cause, death, voluntary retirement or disability, the Company is required to pay the employee in one lump sum twelve months base salary and the average annual bonus.

As of July 31, 2006, the Company has an employment agreement with an executive expiring March 2008, whereby the Company is required to pay an annual base salary of $200,000. In the event the agreement is terminated, by reason other than cause, death, voluntary retirement or disability, the Company is required to pay the employee in one lump sum twelve months base salary and the average annual bonus.

As of July 31, 2006, the Company has employment agreements with its President, Chief Executive Officer and its Chief Operating Officer, Chief Financial Officer expiring December 2010, whereby the Company is required to pay an annual base salary of $425,000 and $325,000, respectively, and bonuses at the discretion of the Compensation Committee of the Board of Directors. The agreements require six months notice of non-renewal, otherwise, the agreements will become one of indefinite term requiring six months notice of termination. In the event either agreement is terminated, by reason other than cause, death or disability, voluntary termination, or expiration of the term, the Company may be required to pay the executive the greater of five times base salary at date of termination or $5,000,000 in a combination of cash and common stock of the Company and provide benefits for a period of twelve months following the date of termination. As of July 31, 2006, the terms of the agreements have been approved by the Board of Directors, however, the agreements in their final form have not been signed.

As of July 31, 2006, the Company has three at will employment agreements with Antigen employees requiring the Company to pay an annual aggregate salary of $296,500 to the three employees. In the event any agreement is terminated by reason other than death, disability, a voluntary termination not for good reason (as defined in the agreement) or a termination for cause, the Company is required to pay the employee severance in accordance with the terms of the individual employment agreement.

85

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Commitments and Contingent Liabilities (Continued):

License Agreements (Continued)

On June 15, 2005 the Company entered into a five-year product licensing and distribution agreement with MedGen Corp. (MedGen) for assistance in the application to the Lebanese Ministry of Public Health seeking approval for the commercial sale of Oral-lyn™. The agreement also sets forth terms including product registration, manufacturing marketing and promotion, selling price and payment and minimum purchase obligations.

In conjunction with the execution of this license agreement, MedGen is obligated to pay the Company a license fee of $500,000, to be received as follows: (i) non-refundable $50,000 fee payable upon execution of the agreement, (ii) $200,000 on or before July 25, 2005 (which was subsequently postponed until November 2005), and (iii) $250,000 on or before the date of certain milestones as stated in the agreement. During the fiscal year end July 31, 2005 the Company received $50,000 under this agreement, which is included in miscellaneous income as all necessary requirements have been satisfied.

Termination Agreements

On March 9, 2004, the Company entered into a Memorandum of Agreement as a result of the termination of one of its employees whereby the Company has committed to pay approximately $508,300 ($575,000 Canadian dollars), the unpaid portion of approximately $176,000 ($200,000 Canadian dollars) is included in accounts payable and accrued expenses at July 31, 2006, and issue options to purchase 450,000 shares of common stock at an exercise price of $1.47.

On December 17, 2004, the Company and Elan International Services, Ltd. (EIS) agreed to terminate their joint venture through Generex (Bermuda) Ltd. EIS has agreed to transfer all shares of capital stock or Generex (Bermuda) owned by it to the Company (see Note 20).

Collaboration Agreements

The Company has a research and development agreement with Fertin Pharma A/S (Fertin) whereby the Parties have established collaboration for the development of a metformin medicinal chewing gum for the treatment of Type-2 diabetes mellitus and obesity. The agreement includes certain milestone payments required of the Company upon Fertin’s completion of various development phases. The Company is required to pay all development costs related to the development of the product together with royalty payments amounting to five percent of the sale or licensing of the products. In lieu of receiving reimbursement for development costs, Fertin, at its discretion and upon written notice, may elect to receive royalty payments amounting to twenty-five percent of the sale or licensing of the products. The agreement shall remain in effect ten years from the date of market introduction and commercial sale. Either party may terminate the agreement by providing sixty days written notice.

86

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11 - Related Party Transactions:

The amount due from a related party at July 31, exclusive of the officers’ loans receivable, is as follows:

	EBI, Inc.
Beginning Balance, August 1, 2004	$	349,294
Effect of Foreign Currency Translation Adjustments		30,318
Ending Balance, July 31, 2005		379,612
Effect of Foreign Current Transaction Adjustment		36,216
Offset of receivable against liability		(415,828	)
Ending Balance, July 31, 2006	$	—

This amount, which was due from EBI, Inc., is a shareholder of the Company and is controlled by the estate of the Company’s former Chairman of the Board. During April 2006, the Company and EBI, Inc. have agreed to offset the amount due to the Company in exchange for executive compensation due to the sole beneficiary of the estate of the Company’s former Chairman of the Board.

The Company estimates the following additional amounts would have been recorded if such transaction was consummated under arms-length agreements:

	For the Years Ended July 31,
		2006		2005		2004
Interest Income	$	14,288	$	15,854	$	19,012

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

During the years ended July 31, 2006, 2005 and 2004, the Company’s three senior officers, who are also shareholders of the Company, were compensated indirectly by the Company through management services contracts between the Company and management firms of which they are owners. The amounts paid to these management firms amounted to $847,354, $183,319, and $927,523 for the years ended July 31, 2006, 2005 and 2004, respectively.

See Note 10 for a discussion of the consulting agreement with the Company’s Vice President of Research and Development.

The Company utilizes a management company to manage all of its real estate properties. The property management company is owned by two of the Company’s senior officers and the estate of the Company’s former Chairman of the Board. For the years ended July 31, 2006, 2005 and 2004, the Company has paid the management company $46,113, $44,024 and $40,180, respectively, in management fees.

87

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12 - Long-Term Debt:

Long-term debt consists of the following:

	July 31,
	2006		2005
Mortgage payable - interest at 4.924 percent per annum, monthly principal and interest payments of $1,655, final payment due June 2011, secured by real property located at 98 Stafford Drive, Brampton, ON	$	264,579	$	252,830
Mortgage payable - interest at 16.5 percent per annum, monthly principal payments of $8,176 plus interest, final payment due May 2006		—		310,688
Mortgage payable - interest at 4.913 percent per annum, monthly principal and interest payments of $2,667, final payment due June 2011, secured by real property located at 1740 Sismet Road, Mississauga, ON		426,725		407,790
Mortgage payable - interest at 7.6 percent per annum, monthly payments of principal and interest of $6,038, final payment due May 2010, secured by first mortgage over real property located at 17 Carlaw Avenue and 33 Harbour Square, Toronto, Canada		645,898		612,524
Mortgage payable - interest at 10 percent per annum, monthly payments of principal and interest of $2,617, final payment due November 2008, secured by real property located at 11 Carlaw Avenue, Toronto, Canada		206,209		197,353
Mortgage payable - interest at 8.5 percent per annum, monthly payments of interest only of $2,316, principal payment due August 2006, secured by real property located at 11 Carlaw Avenue, Toronto, Canada (see Note 22)		353,600		327,040
Demand Term Loan payable - interest at 5.8 percent per annum, monthly principal and interest payments of $5,451, final payment due November 2005		—		790,337
Mortgage payable - interest at 6.07 percent per annum, monthly interest payments of $9,315, principal due March 2009, secured by secondary rights to real property located at 11 Carlaw Avenue, Toronto, Canada		1,139,153		408,800
Total Debt		3,036,164		3,307,362
Less Loan Origination Fees, Net		—		19,471
Total Debt, Net of Loan Origination Fees		3,036,164		3,287,891
Less Current Maturities of Long-Term Debt		428,059		2,571,530
Total Long-Term Debt	$	2,608,105	$	716,361

88

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12 - Long-Term Debt (Continued):

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

Year	Amount
2007	$	428,059
2008		79,774
2009		1,306,075
2010		614,805
2011		607,451
Thereafter		—
Total	$	3,036,164

Note 13 - Convertible Debentures:

During the years ended July 31, 2006 and 2005, the Company entered into with convertible promissory notes (“convertible debentures”) with accredited investors. The convertible debentures were convertible into shares of the Company's common stock at a price as stipulated in each agreement, required the issuance of warrants to the investor in conjunction with the transaction in accordance with the warrant terms in the individual debenture agreement and 100% additional investment right (with the exception of the 1^st $500,000, $100,000 and 3^rd $4,000,000 debentures) exercisable for up to twelve months following the effective date of the registration statement with respect to the transaction.

The convertible debentures are accounted for in accordance with EITF 98-5 and 00-27. (see Note 2) The following summarizes the significant terms and accounting for each convertible debenture entered into by the Company.

89

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13 - Convertible Debentures (Continued):

	Debenture
	1st $4,000,000			1st $500,000			$100,000
Date Issued		12/2004			3/2005			4/2005
Promissory Note Amount	$	1,000,000		$	500,000		$	100,000
# of Promissory Notes		4			1			1
Terms		(A	)		(E	)		(E	)
Conversion Price	$	0.82		$	0.82		$	0.82
Gross Proceeds	$	4,000,000		$	500,000		$	100,000
Issuance Costs Paid in Cash	$	300,070		$	—		$	—
Issuance Costs Paid in Common Stock	$	—		$	—		$	—
Shares of Common Stock		—			—			—
Issuance Costs Paid in Warrants		145,000			—			—
Warrant Exercise Price	$	0.91			n/a			n/a
Warrant Fair Value (WFV)	$	89,900			n/a			n/a
Black Scholes Model Assumptions		(B1	)		n/a			n/a
Total Issuance Costs (C)	$	389,970		$	—		$	—
Amortization of Issuance Costs as
Non-cash Interest Expense	$	389,970		$	—		$	—
Net Cash Proceeds	$	3,699,930		$	500,000		$	100,000
Warrants Issued to Investor		4,878,048			1,219,512			243,902
Warrant Exercise Price	$	0.91		$	0.82		$	0.82
Warrant Fair Value (WFV)	$	1,722,222		$	245,521		$	49,104
Black Scholes Model Assumptions		(B1	)		(B2	)		(B2	)
Beneficial Conversion Feature (BCF)	$	1,722,222		$	86,984		$	17,397
Amortization of WFV and BCF as
Non-cash Interest Expense	$	3,444,444		$	332,505		$	66,501
Principal and Interest Converted	$	1,628,292		$	528,082		$	105,644
Loss on Extinguishment (D)	$	42,409		$	—		$	—
Shares Issued Upon Conversion		1,985,249			644,003			128,834
Principal and Interest Repayments
in Shares of Common Stock	$	2,005,500		$	—		$	—
Loss on Extinguishment (D)	$	147,457		$	—		$	—
Shares Issued for Principal and
Interest Repayments		3,158,344			—			—
Principal and Interest Repayments
in Cash	$	506,564		$	—		$	—
Warrant Issued to Investor for 1st
Extension of Maturity Date (F)		n/a			1,219,512			243,902
Warrant Exercise Price		n/a		$	0.82		$	0.82
Warrant Fair Value (WFV)		n/a		$	597,561		$	119,512
Black Scholes Model Assumptions		n/a			(B2	)		(B2	)
Warrant Issued to Investor for 2nd
Extension of Maturity Date (F)		n/a			1,219,512			243,902
Warrant Exercise Price		n/a		$	0.82		$	0.82
Warrant Fair Value (WFV)		n/a		$	524,390		$	104,878
Black Scholes Model Assumptions		n/a			(B7	)		(B7	)

90

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13 - Convertible Debentures (Continued):

Debenture
1st 2,000,000	2nd 2,000,000	2nd $500,000

Date Issued		6/2005			9/2005			10/2005
Promissory Note Amount	$	500,000		$	500,000		$	500,000
# of Promissory Notes		4			4			1
Terms		(A	)		(A	)		(A	)
Conversion Price	$	0.60		$	0.60			0.82
Gross Proceeds	$	2,000,000		$	2,000,000		$	500,000
Issuance Costs Paid in Cash	$	—		$	15,000		$	—
Issuance Costs Paid in Common Stock	$	140,000		$	140,000		$	33,250
Shares of Common Stock		170,732			170,732			35,000
Issuance Costs Paid in Warrants		35,000			60,000			15,000
Warrant Exercise Price	$	0.82		$	0.82		$	0.82
Warrant Fair Value (WFV)	$	20,300		$	30,600		$	14,250
Black Scholes Model Assumptions		(B3	)		(B4	)		(B4	)
Total Issuance Costs (C)	$	160,300		$	185,600		$	47,500
Amortization of Issuance Costs as
Non-cash Interest Expense	$	160,300		$	185,600		$	47,500
Net Cash Proceeds	$	2,000,000		$	1,985,000		$	500,000
Warrants Issued to Investor		2,439,024			2,439,024			609,756
Warrant Exercise Price	$	0.82		$	0.82		$	0.82
Warrant Fair Value (WFV)	$	828,571		$	785,185		$	270,950
Black Scholes Model Assumptions		(B3	)		(B4	)		(B4	)
Beneficial Conversion Feature (BCF)	$	1,171,429		$	1,185,185		$	229,050
Amortization of WFV and BCF as
Non-cash Interest Expense	$	2,000,000		$	1,970,370		$	500,000
Principal and Interest Converted	$	1,800,206		$	1,729,144		$	385,769
Loss on Extinguishment (D)	$	—		$	1,088,868		$	1,180,830
Shares Issued Upon Conversion		3,000,344			2,878,648			470,450
Principal and Interest Repayments
in Shares of Common Stock	$	225,322		$	293,893		$	125,244
Loss on Extinguishment (D)	$	62,242		$	394,912		$	93,361
Shares Issued for Principal and
Interest Repayments		407,075			489,822			152,736
Principal and Interest Repayments
in Cash	$	—		$	—		$	—

91

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13 - Convertible Debentures (Continued):

	Debenture
	$3,500,000			2nd $4,000,000			3rd $4,000,000
Date Issued		12/2005			1/2006			2/2006
Promissory Note Amount	$	1,000,000		$	1,000,000		$	1,000,000
# of Promissory Notes		3.5			4			4
Terms		(A	)		(A	)		(A	)
Conversion Price	$	0.82		$	1.05		$	1.25
Gross Proceeds	$	3,500,000		$	4,000,000		$	4,000,000
Issuance Costs Paid in Cash	$	15,000		$	15,000		$	—
Issuance Costs Paid in Common
Stock	$	179,550		$	266,400		$	—
Shares of Common Stock		189,000			266,667			—
Issuance Costs Paid in Warrants		105,000			120,000			—
Warrant Exercise Price	$	0.82		$	1.05			n/a
Warrant Fair Value (WFV)	$	76,650		$	88,800			n/a
Black Scholes Model Assumptions		(B5	)		(B6	)		n/a
Total Issuance Costs (C)	$	271,200		$	370,200		$	—
Amortization of Issuance Costs as
Non-cash Interest Expense	$	271,200		$	370,200		$	—
Net Cash Proceeds	$	3,485,000		$	3,985,000		$	4,000,000
Warrants Issued to Investor		4,268,292			3,809,524			3,200,000
Warrant Exercise Price	$	0.82		$	1.05		$	1.25
Warrant Fair Value (WFV)	$	1,648,387		$	1,653,631		$	2,374,507
Black Scholes Model Assumptions		(B5	)		(B6	)		(B7	)
Beneficial Conversion Feature (BCF)	$	1,851,613		$	1,463,155		$	1,625,493
Amortization of WFV and BCF as
Non-cash Interest Expense	$	3,500,000		$	3,116,786		$	3,391,263
Principal and Interest Converted	$	3,435,735		$	3,635,041		$	2,850,739
Loss on Extinguishment (D)	$	1,473,115		$	4,558,356		$	2,373,363
Shares Issued Upon Conversion		4,189,923			3,461,946			2,280,592
Principal and Interest Repayments
in Shares of Common Stock	$	86,475		$	398,578		$	380,769
Loss on Extinguishment (D)	$	176,556		$	541,854		$	411,557
Shares Issued for Principal and
Interest Repayments		105,456			381,709			321,547
Principal and Interest Repayments
in Cash	$	—		$	—		$	—

As of July 31, 2006, the $160,494 net outstanding balance of convertible debentures is comprised of $796,231 of debt net of unamortized debt discount of $608,737 related to the 3^rd $4,000,000 convertible debentures. All other convertible debentures have either been repaid or converted to shares of common stock and the related debt discounts have been fully amortized.

As of July 31, 2005, amounts outstanding related to the $1,314,926 net outstanding balance of convertible debentures is comprised of $3,423,385 of debt net of unamortized debt discount of $2,108,459 related to the 1^st $4,000,000, 1^st $500,000, $100,000 and 1^st $2,000,000 convertible debentures.

92

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13 - Convertible Debentures (Continued):

(A)   The notes carry a 6% coupon and a 15-month term and amortization in 13 equal assignments commencing in the third month of the term. The principal and interest payments are payable in cash or, at the Company's option, the lesser of registered stock valued at a 10% discount to the average of the 20-day VWAP as of the payment date or predetermined conversion price, subject to certain conditions.

Black Scholes pricing model assumptions:

	Risk Free			Expected
	Interest Rate			Volatility		Life (Years)
(B1)		1.79	%		1.0463		5.50
(B2)		2.78	%		1.0054		5.50
(B3)		3.02	%		0.9775		5.50
(B4)		3.76	%		0.9232		5.50
(B5)		4.02	%		0.9288		5.50
(B6)		4.23	%		0.9210		5.50
(B7)		4.49	%		0.9380		5.50

(C)   The issuance cost is amortized over the life of the debt as a deferred debt issuance cost.

(D)   Loss on extinguishment represents the difference between the quoted market price of the Company's common stock and lower of predetermined conversion price or the 10% discount to the average of the 20-day VWAP.

(E)   The notes carry a 10% coupon and a 1 ½ month term. The principal and interest payments are payable in cash or, at the Holder's option, in common stock at a per share price equal to $0.82.

(F)   The Company extended the maturity date of the convertible debenture from May to July and later to September 2005. In consideration for the holder’s agreement to extend the maturity date, the Company issued the holder additional warrants. In accordance with EITF 98-5, the fair value of the warrants was determined to be the reacquisition price on the debt extinguishment date and was recorded as a loss on extinguishment.

Note 14 - Series A Preferred Stock:

During 2001, the Company issued 1,000 shares of Series A Preferred Stock (Series A) with a par value of $.001 per share. The holder had the right at any time after January 16, 2004 to convert Series A shares into shares of common stock of the Company as well as option to exchange the shares of the Company’s Series A Preferred stock for shares of the Company’s convertible preferred shares of Generex (Bermuda), Ltd. (See Note 20 for discussions of Generex (Bermuda), Ltd.) Holders of Series A shares were not entitled to vote. In addition, the holders of Series A shares were entitled to receive a dividend per share equal to the dividend declared and paid on shares of the Company’s common stock as and when dividends are declared and paid on the Company’s common stock, and were also entitled to receive a mandatory annual dividend equal to 6 percent per year on the original issue price of $12,015 per share.

On January 15, 2004, 2003 and 2002, the Company paid a 6 percent stock dividend on the Company’s Series A Preferred Stock of $810,003, $764,154 and $720,900, respectively. The dividend was paid in shares of Series A Preferred Stock, and resulted in a charge to accumulated deficit

93

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 14 - Series A Preferred Stock (Continued):

In December 2004, the holder of the Series A Preferred Stock sold its holdings to a third party. In conjunction with sale, all of the Company’s outstanding Series A Preferred Stock was automatically converted to common stock. As a result, the buyer received 534,085 shares of common stock and the Company no longer has any outstanding shares of Series A Preferred Stock (see Note 20).

Note 15 - Stockholders’ Equity:

Warrants

As of July 31, 2006, the Company has the following warrants to purchase common stock outstanding:

Number of Shares To be Purchased	Warrant Exercise Price Per Share		Warrant Expiration Date
50,000	$	12.99		March 18, 2007
886,824	$	1.72		May 27, 2007
5,000	$	2.50		November 29, 2007
30,000	$	3.00		November 29, 2007
500,000	$	2.50		January 15, 2008
255,102	$	1.86		January 9, 2009
57,143	$	2.20		January 9, 2009
13,889	$	2.25		January 9, 2009
166,667	$	1.89		February 13, 2009
17,169	$	2.10		February 13, 2009
327,869	$	1.68		July 12, 2009
500,000	$	1.09		August 10, 2009
100,000	$	0.82		April 27, 2010
102,232	$	1.25		April 17, 2011
70,000	$	2.66		April 17, 2011
25,000	$	1.91		May 29, 2011
3,273,144	$	2.35		May 31, 2011
2,560,980	$	2.45		May 31, 2011
5,000	$	1.05		July 19, 2011
622,226	$	1.60		July 22, 2011
4,770,617	$	3.00		August 26, 2011
272,120	$	1.25		August 27, 2011
800,000	$	3.00		September 2, 2011
15,410,982				Total

94

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15 - Stockholders’ Equity (Continued):

Notes Receivable - Common Stock

Notes receivable - common stock consist of two separate promissory notes. The first promissory note was issued in conjunction with the redemption of Series A Redeemable Common Stock Purchase Warrants in June 1999, and was for $50,000. This note was originally due on December 1, 1999. After multiple extensions, the note together with accrued interest at 7 percent per annum, was due July 31, 2004. In January 2005, the Company deemed this note as uncollectible and, therefore, has taken a charge to general and administrative expenses for the outstanding principal and accrued interest in the amount of $72,107.

The second promissory note was issued in conjunction with the exercise of 50,000 Common Stock Options in March 2001, and was for $250,000. This note was originally due on March 15, 2002. After multiple extensions, the note together with accrued interest at 7 percent per annum was due March 15, 2004. In January 2005, the Company deemed this note as uncollectible and, therefore, has taken a charge to general and administrative expenses for the outstanding principal and accrued interest in the amount of $318,996.

Preferred Stock

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

Special Voting Rights Preferred Stock

In 1997, the Company issued 1,000 shares of Special Voting Rights Preferred Stock (SVR Shares) with a par value of $.001. The Company has the right at any time after December 31, 2000, upon written notice to all holders of preferred shares, to redeem SVR Shares at $.10 per share. Holders of SVR Shares are not entitled to vote, except as specifically required by applicable law or in the event of change in control, as defined. In addition, holders of SVR Shares are entitled to receive a dividend per share equal to the dividend declared and paid on shares of the Company’s common stock as and when dividends are declared and paid on the Company’s common stock.

Note 16 - Stock Based Compensation:

Stock Option Plans

As of July 31, 2006, the Company had two stockholder-approved stock incentive plans under which options exercisable for shares of common stock have been or may be granted to employees, directors, consultants and advisors. A total of 2,000,000 shares of common stock are reserved for issuance under the 2000 Stock Option Plan (the 2000 Plan) and a total of 12,000,000 shares of common stock are reserved for issuance under the 2001 Stock Option Plan (the 2001 Plan). There were 1,900,000 and 1,042,331 shares of common stock reserved for future awards under the 2000 Plan and 2001 Plan, respectively, as of July 31, 2006.

95

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 16 - Stock Based Compensation:

Stock Option Plans (Continued)

The 2000 and 2001 Plans (the Plans) are administered by the Compensation Committee (the Committee). The Committee is authorized to select from among eligible employees, directors, advisors and consultants those individuals to whom options are to be granted and to determine the number of shares to be subject to, and the terms and conditions of the options. The Committee is also authorized to prescribe, amend and rescind terms relating to options granted under the Plans. Generally, the interpretation and construction of any provision of the Plans or any options granted hereunder is within the discretion of the Committee.

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

Effective August 1, 2005, the Company implemented the fair value recognition provisions of SFAS 123(R) and SAB 107 for all share-based compensation. Share-based employee compensation for the year ended July 31, 2006 in the amount of $-0- (net of related tax), is included in the net loss of $67,967,204.

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

	Options		Weighted Average Exercise Price Per Share
Outstanding - August 1, 2003		6,595,159	$	4.38
Granted		1,846,000	$	1.63
Canceled		1,181,600	$	5.61
Exercised		45,400	$	1.88
Outstanding - July 31, 2004		7,214,159	$	3.49
Granted		6,046,110	$	0.50
Canceled		1,653,000	$	6.49
Exercised		—	$	—
Outstanding - July 31, 2005		11,607,269	$	1.51
Granted		—	$	—
Canceled		755,000	$	5.97
Exercised		2,422,672	$	1.37
Outstanding - July 31, 2006		8,429,597	$	1.15

96

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 16 - Stock Based Compensation (Continued):

Stock Option Plans (Continued)

The summary of the status of the Company’s non-vested stock options as of July 31, 2006, as changed during the year then ended, is as follows:

	Options			Weighted Average Grant Date  Fair Value
Non-vested Stock Options, August 1, 2005		628,000		$	0.72
Granted		—		$	—
Canceled		—		$	—
Vested		(628,000	)	$	0.72
Non-vested Stock Options, July 31, 2006		—		$	—

The following table summarizes information on stock options outstanding at July 31, 2006:

	Options Outstanding						Options Exercisable
Range of Exercise Price	Number Outstanding at July 31, 2006		Weighted Average Remaining Life (Years)		Weighted Average Exercise Price		Number Exercisable at July 31, 2006		Weighted Average Exercise Price
$0.001		2,239,610		3.68	$	0.001		2,239,610	$	0.001
$0.56 - $0.94		2,807,528		3.40	$	0.76		2,807,528	$	0.76
$1.00 - $2.19		3,132,300		1.72	$	1.80		3,132,300	$	1.80
$5.15 - $6.54		60,159		0.48	$	5.33		60,159	$	5.33
$7.50 - $8.70		190,000		0.29	$	8.45		190,000	$	8.45

Options typically vest over a period of two years and have a contractual life of five years.

Options exercisable at July 31 are as follows:

Year	Number of Options		Weighted Average Exercise Price
2004		6,654,659	$	3.65
2005		10,979,269	$	1.54
2006		8,429,597	$	1.15

During the year ended July 31, 2005 the Company issued 2,239,610 options at an exercise price of $0.001 as settlement for outstanding executive compensation. Accordingly, the Company has included a charge for the fair value of these options in the amount of $1,332,052 in the statement of operations. No gain or loss was recorded as a result of this transaction.

97

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 16 - Stock Based Compensation (Continued):

Equity Instruments Issued for Services Rendered

During the years ended July 31, 2006, 2005 and 2004, the Company issued stock options, warrants and shares of common stock in exchange for services rendered to the Company. The fair value of each stock option and warrant was valued using the Black Scholes pricing model which takes into account as of the grant date the exercise price and expected life of the stock option or warrant, the current price of the underlying stock and its expected volatility, expected dividends on the stock and the risk free interest rate for the term of the stock option or warrant. Shares of common stock are valued at the quoted market price on the date of grant. The fair value of each grant was charged to the related expense in the statement of operations for the services received.

Note 17 - Net Loss Per Share:

Basic EPS and Diluted EPS for the years ended July 31, 2006 and 2005 have been computed by dividing the net loss available to common stockholders for each respective period by the weighted average shares outstanding during that period. All outstanding warrants, options and shares to be issued upon conversion of the outstanding convertible debentures, representing approximately 24,455,964 and 35,291,316 incremental shares, have been excluded from the 2006 and 2005 computation of Diluted EPS as they are antidilutive due to the losses generated.

Basic EPS and Diluted EPS for the years ended July 31, 2004 have been computed by dividing the net loss available to common stockholders for each respective period by the weighted average shares outstanding during that period. All outstanding warrants, options and shares to be issued upon conversion of Series A Preferred stock, representing approximately 15,058,348 incremental shares, have been excluded from the 2004 computation of Diluted EPS as they are antidilutive due to the losses generated.

Note 18 - Supplemental Disclosure of Cash Flow Information:

	For the Years Ended July 31,
	2006		2005		2004
Cash paid during the year for:
Interest	$	273,097	$	184,655	$	166,166
Income taxes	$	—	$	—	$	—

98

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 18 - Supplemental Disclosure of Cash Flow Information (Continued):

Disclosure of non-cash investing and financing activities:

Year Ended July 31, 2006
Value of common stock issued in conjunction with capitalized services upon issuance of convertible debentures	$	619,467
Value of warrants issued in conjunction with capitalized services upon issuance of convertible debentures	$	210,300
Costs paid from proceeds in conjunction with capitalized services upon issuance of convertible debentures	$	45,000
Value of warrants issued in conjunction with issuance of convertible debentures and related beneficial conversion feature	$	13,087,156
Satisfaction of accounts payable through the issuance of common stock	$	391,147
Principal repayment of convertible debentures through the issuance of common stock	$	2,102,689
Issuance of common stock in conjunction with convertible debenture conversion	$	14,551,466
Increase in other current assets for the prepayment of services through the issuance of common stock	$	184,500
Satisfaction of due from related party through reduction of accrued executive compensation	$	415,828
Repayment of long-term debt through the issuance of long-term debtupon refinancing	$	1,082,443
Year Ended July 31, 2005
Costs associated with convertible debentures paid from proceeds	$	300,070
Value of common stock issued in conjunction with capitalized services upon issuance of convertible debentures	$	140,000
Value of warrants issued in conjunction with capitalized services upon issuance of convertible debentures	$	110,200
Sale of Series A Preferred Stock and mandatorily converted to common shares	$	14,310,057
Value of warrants issued in conjunction with issuance of convertible debentures and related beneficial conversion feature	$	5,843,450
Satisfaction of accounts payable through the issuance of common stock	$	1,526,326
Principal repayment of convertible debentures through the issuance of common stock	$	1,235,577
Issuance of common stock in conjunction with convertible debenture conversions	$	1,479,500
Issuance of below market stock options in satisfaction of accounts payable and accrued expenses	$	1,332,052
Costs paid from proceeds of issuance of long-term debt	$	54,466
Repayment of long-term debt through the issuance of long-term debt upon refinancing	$	323,301

99

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 18 - Supplemental Disclosure of Cash Flow Information (Continued):

Year Ended July 31, 2004
Issuance of Series A Preferred Stock as preferred stock dividend	$	810,003
Application of deposit to advances to Antigen Express, Inc.	$	25,000
Acquisition of Antigen Express, Inc through the issuance of common stock and the assumption of stock options	$	4,797,409
Retirement of treasury stock	$	1,610,026
Purchase of assets held for investment in exchange for long-term debt	$	138,001

Note 19 - Segment Information:

The Company follows SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (SFAS No. 131). SFAS No. 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS No. 131 also establishes standards for related disclosures about products and services, geographic areas, and major customers.

SFAS No. 131 uses a management approach for determining segments. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company’s reportable segments. The Company’s management reporting structure provides for only one segment.

The regions in which the Company had identifiable assets and revenues are presented in the following table. Identifiable assets are those that can be directly associated with a geographic area.

	2006		2005		2004
Identifiable Assets
Canada	$	59,583,574	$	8,722,630	$	14,006,834
United States		4,521,668		4,743,215		5,005,156
Total	$	64,105,242	$	13,465,845	$	19,011,990
Revenue
Canada	$	—	$	—	$	—
United States		175,000		392,112		627,184
Total	$	175,000	$	392,112	$	627,184

Note 20 - Collaborative Agreements:

The Company has a research and development agreement with Fertin Pharma A/S (Fertin) whereby the Parties have established collaboration for the development of a metformin medicinal chewing gum for the treatment of Type-2 diabetes mellitus and obesity. (See Note 10)

The Company has a collaboration agreement with Stallergenes, S.A., a European firm in immunological treatments and asthma. Through the collaboration the parties agreed to pursue the design and test of li-key/allergen epitope hybid pepticles to create a novel approach for the control of both dangerous forms of asthma and functionally disabling allergic reactions.

100

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 20 - Collaborative Agreements (Continued):

The Company had a joint venture with Elan International Services, Ltd. (“EIS”), a wholly owned subsidiary of Elan Corporation, plc (EIS and Elan Corporation, plc being collectively referred to as “Elan”). The parties conducted the joint venture through Generex (Bermuda), Ltd. (Generex Bermuda), a Bermuda limited liability company.

The Company applied the $12,015,000 that it received from Elan for the shares of the Company’s Series A Preferred Stock (see Note 14) to form Generex Bermuda. The Company’s interest in this company consisted of 6,000 shares of Generex Bermuda common stock and 3,612 shares of convertible preferred stock, representing an 80.1 percent equity ownership interest in Generex Bermuda. At the same time, Elan remitted $2,985,000 to purchase 2,388 shares of Generex Bermuda convertible preferred stock, representing a 19.9 percent equity ownership interest in Generex Bermuda. The Series A Preferred stock had an exchange feature which allowed Elan to acquire an additional 30.1 percent equity ownership interest in Generex Bermuda. As of July 31, 2006, 2005 and 2004, the minority interest has been reduced to $-0- due to their share of Generex Bermuda’s net loss.

On December 17, 2004, the Company entered into a Termination Agreement with Elan. In connection with negotiating the Termination Agreement, Elan approached the Company for consent to transfer the Series A Preferred Stock by way of an auction process. The Company responded to Elan request by delivering a proposal letter describing the terms and conditions pursuant to which the Company would consent to the transfer of the Series A Preferred Stock (the Proposal). The Proposal required that (i) the auction process conclude no later than December 15, 2004 and the Elan’s disposition of the shares conclude no later than December 31, 2004 (the Closing Date), (ii) the buyer immediately convert the preferred stock at the voluntary conversion price of $25.77 (calculated pursuant to the terms of the certificate of designation for the preferred stock resulting in the issuance of 534,085 shares of common stock), (iii) Elan’s registration rights may not be transferred, and (iv) for a period of two (2) years after the Closing Date, the purchaser of the Series A Preferred Stock may not transfer the shares of common stock issuable upon conversion thereof of the Company shall have the right to redeem the shares of common stock at a per share price of 150 percent of the average closing price of the common stock on the Nasdaq SmallCap Market for the twenty (20) days immediately preceding the Closing Date.

Subsequently, the purchaser of the Series A Preferred Stock converted all outstanding shares into 534,085 shares of common stock of the Company and, the Company no longer has any outstanding shares of Series A Preferred Stock. (See Note 14)

101

GENEREX BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 21 - Quarterly Information (Unaudited):

The following schedule sets forth certain unaudited financial data for the preceding eight quarters ending July 31, 2006. In our opinion, the unaudited information set forth below has been prepared on the same basis as the audited information and includes all adjustments necessary to present fairly the information set forth herein. The operating results for the quarter are not indicative of results for any future period.

	Q1			Q2			Q3			Q4
Fiscal Year July 31, 2006:
Contract research revenue	$	43,750		$	43,750		$	43,750		$	43,750
Operating loss	$	(2,107,485	)	$	(5,184,252	)	$	(3,890,499	)	$	(7,523,747	)
Net loss	$	(9,003,218	)	$	(14,400,597	)	$	(31,773,494	)	$	(12,789,895	)
Net loss available to common stockholders	$	(9,003,218	)	$	(14,400,597	)	$	(31,773,494	)	$	(12,789,895	)
Net loss per share	$	(.20	)	$	(.22	)	$	(.36	)	$	(.12	)
Fiscal Year July 31, 2005:
Contract research revenue	$	142,750		$	76,750		$	43,750		$	128,862
Operating loss	$	(6,674,618	)	$	(5,555,641	)	$	(3,324,521	)	$	(3,003,641	)
Net loss	$	(6,658,028	)	$	(6,298,182	)	$	(4,696,670	)	$	(6,348,855	)
Net loss available to common stockholders	$	(6,658,028	)	$	(6,298,182	)	$	(4,696,670	)	$	(6,348,855	)
Net loss per share	$	(.19	)	$	(.18	)	$	(.13	)	$	(.16	)

Note 22 - Subsequent Events:

In August 2006, the Company entered into a consulting agreement to render investor relations services for a one year period in exchange for 300,000 shares of the Company’s restricted common stock.

In September 2006, the Company was named defendant in a matter of an arbitration whereby the plaintiff seeks payment pursuant to an exclusive finder’s agreement.

In September 2006, the Company issued 100,000 shares of common stock to employees as compensation with a fair value of $183,000.

102

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

None.

Item 9A.Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Prior to the filing of this Report on Form 10-K, an evaluation was performed under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Report on Form 10-K, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to the Company’s management, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes during the fiscal quarter ended July 31, 2006 in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, those controls.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Generex Biotechnology Corporation (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the Company; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of July 31, 2006. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on management’s assessment and those criteria, management has concluded that the Company’s internal control over financial reporting was effective as of July 31, 2006.

The Company’s independent registered public accounting firm, Danziger & Hochman, Chartered Accountants, has issued an audit report on management’s assessment and the effectiveness of the Company’s internal control over financial reporting, which is included in Part II,Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K ..

103

Item 9B.Other Information.

Reference is made to the disclosure set forth under the caption Sales of Unregistered Securities in Item 5 of this Annual Report on Form 10-K, which is incorporated by reference herein.

PART III

Item 10. Directors and Executive Officers of the Registrant.

The information required by this Item is incorporated by reference from the Proxy Statement, or an amendment to this Annual Report on Form 10-K, to be filed with the Commission not later than 120 days after the end of the fiscal year to which this report relates.

Information with respect to our Executive Officers appears in Part I of this report.

Item 11. Executive Compensation.

The information required by this Item is incorporated by reference from the Proxy Statement, or an amendment to this Annual Report on Form 10-K, to be filed with the Commission not later than 120 days after the end of the fiscal year to which this report relates.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item is incorporated by reference from the Proxy Statement, or an amendment to this Annual Report on Form 10-K, to be filed with the Commission not later than 120 days after the end of the fiscal year to which this report relates.

Item 13. Certain Relationships and Related Transactions.

The information required by this Item is incorporated by reference from the Proxy Statement, or an amendment to this Annual Report on Form 10-K, to be filed with the Commission not later than 120 days after the end of the fiscal year to which this report relates.

Item 14. Principal Accounting Fees and Services.

The information required by this Item is incorporated by reference from the Proxy Statement, or an amendment to this Annual Report on Form 10-K, to be filed with the Commission not later than 120 days after the end of the fiscal year to which this report relates.

104

PART IV

Item. 15Exhibits and Financial Statements and Schedules.

(a)1.Financial Statements - See Part II - Item 8. Financial Statements and Supplementary Data hereof on page 44.

The financial statements include the following:

Consolidated Balance Sheets as of July 31, 2006 and 2005

Consolidated Statements of Operations for the Year Ended July 31, 2006, 2005 and 2004 and Cumulative from Inception to July 31, 2006

Consolidated Statements of Changes in Stockholders’ Equity for the Period November 2, 1995 (Date of Inception) to July 31, 2006

Consolidated Statements of Cash Flows for the Years Ended July 31, 2006, 2005 and 2004 and Cumulative from Inception to July 31, 2006

2.Financial Statement Schedule and Auditor’s Report

Schedule I - Condensed financial information of registrant

This schedule is not applicable.

Schedule II - Valuation and qualifying accounts

See Schedule II on page 111.

3.Exhibits

Exhibit Number	Description of Exhibit(1)
2	Agreement and Plan of Merger among Generex Biotechnology Corporation, Antigen Express, Inc. and AGEXP Acquisition Inc. (incorporated by reference to Exhibit 2.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on August 15, 2003)
3(i)	Restated Certificate of Incorporation of Generex Biotechnology Corporation (incorporated by reference to Exhibit 3(II) to Generex Biotechnology Corporation’s Report on Form 10-Q filed on June 19, 2006)
3(ii)	Bylaws of Generex Biotechnology Corporation (incorporated by reference to Exhibit 3.2 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 (File No. 333-82667) filed on July 12, 1999)
4.1	Form of common stock certificate (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 (File No. 333-82667) filed on July 12, 1999)
4.2	Warrant issued to Elliott International, L.P. and Elliott Associates, L.P., dated July 5, 2001 (incorporated by reference to Exhibit 9 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 17, 2001)
4.3.1	Form of Securities Purchase Agreement entered into with Cranshire Capital, L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore Capital, Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard Todd Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13, 2003)
4.3.2	Form of Registration Rights Agreement entered into with Cranshire Capital, L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore Capital, Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard Todd Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13, 2003)

105

Exhibit Number
Description of Exhibit⁽¹⁾

4.3.3	Form of Warrant granted to Cranshire Capital, L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore Capital, Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard Todd Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13, 2003)
4.4.1	Form of Securities Purchase Agreement entered into with Cranshire Capital, L.P. dated June 6, 2003 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13, 2003)
4.4.2	Form of Registration Rights Agreement entered into with Cranshire Capital, L.P. dated June 6, 2003 (incorporated by reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13, 2003)
4.4.3	Form of Warrant granted to Cranshire Capital, L.P. dated June 6, 2003 (incorporated by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13, 2003)
4.4.4	Form of replacement Warrant issued to warrant holders exercising at reduced exercise price in May and June 2003 (incorporated by reference to Exhibit 4.13.7 to Generex Biotechnology Corporation’s Report on Form 10-K for the period ended July 31, 2003 filed on October 29, 2003)
4.5.1	Securities Purchase Agreement, dated December 19, 2003, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K/A filed on March 24, 2004)
4.5.2	Registration Rights Agreement, dated December 19, 2003, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K/A filed on March 24, 2004)
4.5.3	Form of Warrant issued in connection with Exhibit 4.5.1 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K/A filed on March 24, 2004)
4.5.4	Form of Additional Investment Right issued in connection with Exhibit 4.5.1 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K/A filed on March 24, 2004)

106

Exhibit Number	Description of Exhibit(1)
4.6.1	Securities Purchase Agreement, dated January 7, 2004, by and between Generex Biotechnology Corporation and ICN Capital Limited (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.6.2	Registration Rights Agreement, dated January 7, 2004, by and between Generex Biotechnology Corporation and ICN Capital Limited (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.6.3	Warrant issued in connection with Exhibit 4.6.1 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.6.4	Additional Investment Right issued in connection with Exhibit 4.6.1 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.7.1	Securities Purchase Agreement, dated January 9, 2004, by and between Generex Biotechnology Corporation and Vertical Ventures, LLC (incorporated by reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.7.2	Registration Rights Agreement, dated January 9, 2004, by and between Generex Biotechnology Corporation and Vertical Ventures, LLC (incorporated by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.7.3	Warrant issued in connection with Exhibit 4.7.1 (incorporated by reference to Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.7.4	Additional Investment Right issued in connection with Exhibit 4.7.1 (incorporated by reference to Exhibit 4.8 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.8.1	Securities Purchase Agreement, dated February 6, 2004, by and between Generex Biotechnology Corporation and Alexandra Global Master Fund, Ltd. (incorporated by reference to Exhibit 4.9 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.8.2	Registration Rights Agreement, dated February 6, 2004, by and between Generex Biotechnology Corporation and Alexandra Global Master Fund, Ltd. (incorporated by reference to Exhibit 4.10 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.8.3	Warrant issued in connection with Exhibit 4.8.1 (incorporated by reference to Exhibit 4.11 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.8.4	Additional Investment Right issued in connection with Exhibit 4.8.1 (incorporated by reference to Exhibit 4.12 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)

107

Exhibit Number	Description of Exhibit(1)
4.8.5	Escrow Agreement, dated February 26, 2004, by and among Generex Biotechnology Corporation, Eckert Seamans Cherin & Mellott, LLC and Alexandra Global Master Fund, Ltd. (incorporated by reference to Exhibit 4.13 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.9.1	Securities Purchase Agreement, dated February 11, 2004, by and between Generex Biotechnology Corporation and Michael Sourlis (incorporated by reference to Exhibit 4.14 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.9.2	Registration Rights Agreement, dated February 11, 2004, by and between Generex Biotechnology Corporation and Michael Sourlis (incorporated by reference to Exhibit 4.15 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.9.4	Additional Investment Right issued in connection with Exhibit 4.9.1 (incorporated by reference to Exhibit 4.17 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.10.1	Securities Purchase Agreement, dated February 13, 2004, by and between Generex Biotechnology Corporation and Zapfe Holdings, Inc. (incorporated by reference to Exhibit 4.18 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.10.2	Registration Rights Agreement, dated February 13, 2004, by and between Generex Biotechnology Corporation and Zapfe Holdings, Inc. (incorporated by reference to Exhibit 4.19 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.10.3	Warrant issued in connection with Exhibit 4.10.1 (incorporated by reference to Exhibit 4.20 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.10.4	Additional Investment Right issued in connection with Exhibit 4.10.1 (incorporated by reference to Exhibit 4.21 Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.11.1	Securities Purchase Agreement, dated June 23, 2004, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14, 2004)
4.11.2	Registration Rights Agreement, dated June 23, 2004, by and among Generex Biotechnology Corporation and the investors (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14, 2004)
4.11.3	Form of Warrant issued in connection with Exhibit 4.11.1 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14, 2004)
4.11.4	Form of Additional Investment Right issued in connection Exhibit 4.11.1 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14, 2004)

108

Exhibit Number	Description of Exhibit(1)
4.12.1	Securities Purchase Agreement, dated November 10, 2004, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.12.2	Form of 6% Secured Convertible Debenture issued in connection with Exhibit 4.12.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.12.3	Registration Rights Agreement, dated November 10, 2004, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.12.4	Form of Additional Investment Right issued in connection with Exhibit 4.12.1 (incorporated by reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.12.5	Custodial and Security Agreement, dated November 10, 2004, by and among Generex Biotechnology Corporation, Feldman Weinstein LLP, as custodian, and the investors named therein (incorporated by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.12.6	Form of Voting Agreement entered into in connection with Exhibit 4.12.1 (incorporated by reference to Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.13	Termination Agreement, dated December 17, 2004, by and among Generex Biotechnology Corporation and Elan Corporation plc and Elan International Services, Ltd. (incorporated by reference to Exhibit 4.19 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)
4.14	Warrant issued to The Aethena Group, LLC on April 28, 2005 (incorporated by reference to Exhibit 4.20 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)
4.15.1	Amendment No. 1 to Securities Purchase Agreement and Registration Rights Agreement entered into by and between Generex Biotechnology Corporation and the Purchasers listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 17, 2005)
4.15.2	Form of AIR Debenture issued in connection with Exhibit 4.15.1 (incorporated by reference to Exhibit 4.25.2 to Generex Biotechnology Corporation’s Report on Form 10-K filed on October 31, 2005)
4.15.3	Form of AIR Warrant issued in connection with Exhibit 4.15.1 (incorporated by reference to Exhibit 4.25.3 to Generex Biotechnology Corporation’s Report on Form 10-K filed on October 31, 2005)

109

Exhibit Number	Description of Exhibit(1)
4.15.4	Form of Additional AIR issued in connection with Exhibit 4.15.1 (incorporated by reference to Exhibit 4.25.4 to Generex Biotechnology Corporation’s Report on Form 10-K filed on October 31, 2005)
4.16.1	Amendment No. 2 to Securities Purchase Agreement and Registration Rights Agreement entered into by and between Generex Biotechnology Corporation and the Purchasers listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on September 9, 2005)
4.16.2	Form of AIR Debenture issued in connection with Exhibit 4.16.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on September 9, 2005)
4.16.3	Form of AIR Warrant issued in connection with Exhibit 4.16.1 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on September 9, 2005)
4.16.4	Form of Additional AIR issued in connection with Exhibit 4.16.1 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on September 9, 2005).
4.17	Form of Warrant issued by Generex Biotechnology Corporation on October 27, 2005 (incorporated by reference to Exhibit 4.31 to Generex Biotechnology Corporation’s Report on Form 10-K filed on October 31, 2005).
4.18.1	Amendment to the Additional Investment Right issued by Generex Biotechnology Corporation to Omicron Master Trust on June 17, 2005 (incorporated by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on Form 8-K filed on October 31, 2005)
4.18.2	Additional AIR Debenture issued by Generex Biotechnology Corporation to Omicron Master Trust on October 27, 2005 issued in connection with Exhibit 4.18.1 (incorporated by reference to Exhibit 4.37 to Generex Biotechnology Corporation’s Report on Form 10-Q filed on December 15, 2005)
4.18.3	Additional AIR Warrant issued by Generex Biotechnology Corporation to Omicron Master Trust on October 27, 2005 issued in connection with Exhibit 4.18.1 (incorporated by reference to Exhibit 4.38 to Generex Biotechnology Corporation’s Report on Form 10-Q filed on December 15, 2005)
4.19.1	Amendment No. 3 to Securities Purchase Agreement and Registration Rights Agreement entered into by and among Generex Biotechnology Corporation and the Purchasers listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 5, 2005)
4.19.2	Form of AIR Debentures issued in connection with Exhibit 4.19.1 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 5, 2005)
4.19.3	Form of AIR Warrants issued in connection with Exhibit 4.19.1 (incorporated by reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 5, 2005)
4.19.4	Form of Additional AIRs issued in connection with Exhibit 4.19.1 (incorporated by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 5, 2005)
4.20	Form of Amendment to the Additional Investment Right issued by Generex Biotechnology Corporation on June 17, 2005 in connection with the First AIR Exercise (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 5, 2005)

110

Exhibit Number	Description of Exhibit(1)
4.21	Form of Amendment to the Additional Investment Right issued by Generex Biotechnology Corporation on September 8, 2005 in connection with the Second AIR Exercise (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 5, 2005)
4.22	Form of Warrant issued by Generex Biotechnology Corporation on January 23, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on January 24, 2006)
4.23	Agreement to amend Warrants between Generex Biotechnology Corporation and Cranshire Capital L.P. dated February 27, 2006 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 28, 2006).
4.24	Agreement to amend Warrants between Generex Biotechnology Corporation and Omicron Master Trust dated February 27, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 28, 2006).
4.24	Agreement to amend Warrants between Generex Biotechnology Corporation and Iroquois Capital L.P. dated February 27, 2006 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 28, 2006).
4.25	Agreement to amend Warrants between Generex Biotechnology Corporation and Smithfield Fiduciary LLC dated February 27, 2006 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 28, 2006).
4.26	Form of Warrant issued by Generex Biotechnology Corporation on February 27, 2006
4.27	Agreement to Amend Additional Investment Right between Generex Biotechnology Corporation and Cranshire Capital, L.P. dated February 28, 2006 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2006).
4.28	Agreement to Amend Additional Investment Right between Generex Biotechnology Corporation and Omicron Master Trust dated February 28, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2006).
4.29	Agreement to Amend Additional Investment Right between Generex Biotechnology Corporation and Iroquois Capital LP dated February 28, 2006 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2006).
4.30	Agreement to Amend Additional Investment Right between Generex Biotechnology Corporation and Smithfield Fiduciary LLC dated February 28, 2006 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2006).
4.31	Form of Additional AIR Debenture issued by Generex Biotechnology Corporation on February 28, 2006
4.32	Form of Additional AIR Warrant issued by Generex Biotechnology Corporation on February 28, 2006
4.33	Form of Agreement to Amend Warrants between Generex Biotechnology Corporation and the Investors dated March 6, 2006 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 7, 2006).

111

Exhibit Number	Description of Exhibit(1)
4.34	Form of Warrant issued by Generex Biotechnology Corporation on March 6, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 7, 2006)
4.35	Warrant issued by Generex Biotechnology Corporation on April 17, 2006 to Zapfe Holdings, Inc. (incorporated by reference to Exhibit 4.33 to Generex Biotechnology Corporation’s Report on Form 10-Q filed on June 14, 2006)
4.36	Form of Warrant issued by Generex Biotechnology Corporation on April 17, 2006 to certain employees (incorporated by reference to Exhibit 4.34 to Generex Biotechnology Corporation’s Report on Form 10-Q filed on June 14, 2006).
4.37	Securities Purchase Agreement entered into by and between Generex Biotechnology Corporation and four Investors on June 1, 2006 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2, 2006)
4.38	Form of Warrant issued by Generex Biotechnology Corporation on June 1, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2, 2006)
4.39	Form of Amendment to Outstanding Warrants (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2, 2006)
4.40	Form of Warrant issued by Generex Biotechnology Corporation on June 1, 2006 in connection with Exhibit 4.39 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2, 2006)
9	Form of Voting Agreement entered into in connection with Exhibit 4.12.1 (incorporated by reference to Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
10.1	Stock Option Agreement by and between Generex Biotechnology Corporation and Mindy J. Allport-Settle to purchase 100,000 shares of Common Stock at the exercise price of $0.56 per share (incorporated by reference to Exhibit 10.2 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.2	Stock Option Agreement by and between Generex Biotechnology Corporation and Peter G. Amanatides to purchase 100,000 shares of Common Stock at the exercise price of $0.56 per share (incorporated by reference to Exhibit 10.3 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.3	Stock Option Agreement by and between Generex Biotechnology Corporation and John P. Barratt to purchase 100,000 shares of Common Stock at the exercise price of $0.56 per share (incorporated by reference to Exhibit 10.4 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.4	Stock Option Agreement by and between Generex Biotechnology Corporation and Brian T. McGee to purchase 100,000 shares of Common Stock at the exercise price of $0.56 per share (incorporated by reference to Exhibit 10.5 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*

112

Exhibit Number	Description of Exhibit(1)
10.5	Stock Option Agreement by and between Generex Biotechnology Corporation and John P. Barratt to purchase 35,714 shares of Common Stock at the exercise price of $0.001 per share (incorporated by reference to Exhibit 10.6 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.6	Stock Option Agreement by and between Generex Biotechnology Corporation and Brian T. McGee to purchase 35,714 shares of Common Stock at the exercise price of $0.001 per share (incorporated by reference to Exhibit 10.7 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.7	Stock Option Agreement by and between Generex Biotechnology Corporation and Gerald Bernstein, M.D. to purchase 100,000 shares of Common Stock at the exercise price of $0.61 per share (incorporated by reference to Exhibit 10.8 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.8	Stock Option Agreement by and between Generex Biotechnology Corporation and Mark Fletcher to purchase 250,000 shares of Common Stock at the exercise price of $0.61 per share (incorporated by reference to Exhibit 10.9 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.9	Stock Option Agreement by and between Generex Biotechnology Corporation and Anna E. Gluskin to purchase 250,000 shares of Common Stock at the exercise price of $0.61 per share (incorporated by reference to Exhibit 10.10 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.10	Stock Option Agreement by and between Generex Biotechnology Corporation and Rose C. Perri to purchase 250,000 shares of Common Stock at the exercise price of $0.61 per share (incorporated by reference to Exhibit 10.11 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.11	Stock Option Agreement by and between Generex Biotechnology Corporation and Mark A. Fletcher to purchase 470,726 shares of Common Stock at the exercise price of $0.001 per share (incorporated by reference to Exhibit 10.12 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.12	Stock Option Agreement by and between Generex Biotechnology Corporation and Anna E. Gluskin to purchase 1,120,704 shares of Common Stock at the exercise price of $0.001 per share (incorporated by reference to Exhibit 10.13 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.13	Stock Option Agreement by and between Generex Biotechnology Corporation and Rose C. Perri to purchase 576,752 shares of Common Stock at the exercise price of $0.001 per share (incorporated by reference to Exhibit 10.14 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*

113

Exhibit Number	Description of Exhibit(1)
10.14	Employment Agreement by and between Generex Biotechnology Corporation and Gerald Bernstein M.D. (incorporated by reference to Exhibit 10.16 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.15	1998 Stock Option Plan (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 (File No. 333-82667) filed on July 12, 1999)*
10.16	2000 Stock Option Plan (incorporated by reference to Exhibit 4.3.2 to Generex Biotechnology Corporation’s Annual Report on Form 10-K filed on October 30, 2000)*
10.17	Amended 2001 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 15, 2003)*
10.18	2006 Stock Plan (incorporated by reference to Annex A to Generex Biotechnology Corporation’s Proxy Statement for the Annual Meeting of Stockholders held on May 30, 2006)*
10.19	Memorandum of Agreement dated January 7, 1998 between Generex Pharmaceuticals, Inc., GHI Inc., Generex Biotechnology Corporation, Dr. Pankaj Modi and Galaxy Technology, Canada and Consulting Agreement between Generex Pharmaceuticals, Inc. and Pankaj Modi dated October 1, 1996 (incorporated by reference to Exhibit 10.1.1 to Generex Biotechnology Corporation’s Registration Statement on Form 10 filed on December 14, 1998, as amended February 24, 1999)*
10.20	Assignment and Assumption Agreement between Generex Pharmaceuticals, Inc. and Pankaj Modi dated October 1, 1996 (incorporated by reference to Exhibit 10.12 to Generex Biotechnology Corporation’s Registration Statement on Form 10/A filed on February 24, 1999)*
10.21	Supplemental Agreement dated December 31, 2000 between Generex Pharmaceuticals, Inc., Generex Biotechnology Corporation and Dr. Pankaj Modi (incorporated by reference to Exhibit 10.1.4 to Generex Biotechnology Corporation’s Annual Report on Form 10-K filed on October 29, 2001)*
10.22	Amended and Restated License Agreement dated January 15, 2002 between Generex Biotechnology Corporation and Generex (Bermuda) Ltd. (incorporated by reference to Exhibit 10.3 to Generex Biotechnology Corporation’s Current Report on Form 8-K/A filed on September 9, 2003)
10.23	Stockholders Agreement among Generex Biotechnology Corporation and the former holders of capital stock of Antigen Express, Inc. (incorporated by reference to Exhibit 10.4 to Generex Biotechnology Corporation’s Annual Report on Form 10-K filed on October 29, 2003)
10.24	Form of Warrant issued by Generex Biotechnology Corporation on April 17, 2006 to certain employees (incorporated by reference to Exhibit 4.34 to Generex Biotechnology Corporation’s Report on Form 10-Q filed on June 14, 2006)*
10.25	Quotation for Contract Manufacturing of Oral-lyn™ entered into between Generex Biotechnology Corporation and Cardinal Health PTS, LLC on June 20, 2006 (subject to confidential treatment)

114

Exhibit Number	Description of Exhibit(1)
10.26	Quotation Amendment for Contract Manufacturing of Oral-lyn™ entered into between Generex Biotechnology Corporation and Cardinal Health PTS, LLC on August 18, 2006 (subject to confidential treatment)
10.27	Clinical Supply Agreement entered into between Generex Biotechnology Corporation and Cardinal Health PTS, LLC on September 6, 2006 (subject to confidential treatment)
21	Subsidiaries of the Registrant
23.1	Consent of Danziger & Hochman, Chartered Accountants, independent registered public accounting firm
23.2	Consent of BDO Consent of BDO Dunwoody, LLP, independent registered public accounting firm
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Management contract or management compensatory plan or arrangement.

(1) In the case of incorporation by reference to documents filed by the Registrant under the Exchange Act, the Registrant’s file number under the Exchange Act is 000-25169.

115

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 16th day of October 2006.

GENEREX BIOTECHNOLOGY CORPORATION
By:	/s/ Anna E. Gluskin
	Name:Anna E. Gluskin
	Title: Chief Executive Officer and 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/ Anna E. Gluskin Anna E. Gluskin	President, Chief Executive Officer and Director (Principal Executive Officer)	October 16, 2006
/s/ Rose C. Perri Rose C. Perri	Chief Operating Officer, Chief Financial Officer, Treasurer, Secretary and Director (Principal Financial and Accounting Officer)	October 16, 2006
/s/ Gerald Bernstein, M.D. Gerald Bernstein, M.D.	Vice President Medical Affairs and Director	October 16, 2006
/s/ Mindy J. Allport-Settle Mindy J. Allport-Settle	Director	October 16, 2006
/s/ Brian T. McGee Brian T. McGee	Director	October 16, 2006
/s/ John P. Barratt John P. Barratt	Director	October 16, 2006
/s/ Peter G. Amanatides Peter G. Amanatides	Director	October 16, 2006
/s/ David Wires David Wires	Director	October 16, 2006
/s/ Slava Jarnitskii Slava Jarnitskii	Controller	October 16, 2006

116

Schedule II

SCHEDULE II

	Balance at		Additions						Balance
	Beginning		Charged		Other				at End of
	Of Period		to Expenses		Additions		Deductions		Period
Year Ended July 31, 2004 Valuation Allowance on Deferred Tax Asset	$	19,755,648		—		—	$	7,687,609	$	27,443,257
Year Ended July 31, 2005 Valuation Allowance on Deferred Tax Asset	$	27,443,257		—		—		7,506,943	$	34,950,200
Year Ended July 31, 2006 Valuation Allowance on Deferred Tax Asset	$	34,950,200		—		—		14,041,363	$	48,991,563

117

EXHIBIT INDEX

Exhibit Number	Description of Exhibit(1)
2	Agreement and Plan of Merger among Generex Biotechnology Corporation, Antigen Express, Inc. and AGEXP Acquisition Inc. (incorporated by reference to Exhibit 2.1 to Generex Biotechnology Corporation’s Current Report on Form 8-K filed on August 15, 2003)
3(i)	Restated Certificate of Incorporation of Generex Biotechnology Corporation (incorporated by reference to Exhibit 3(II) to Generex Biotechnology Corporation’s Report on Form 10-Q filed on June 19, 2006)
3(ii)	Bylaws of Generex Biotechnology Corporation (incorporated by reference to Exhibit 3.2 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 (File No. 333-82667) filed on July 12, 1999)
4.1	Form of common stock certificate (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 (File No. 333-82667) filed on July 12, 1999)
4.2	Warrant issued to Elliott International, L.P. and Elliott Associates, L.P., dated July 5, 2001 (incorporated by reference to Exhibit 9 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 17, 2001)
4.3.1	Form of Securities Purchase Agreement entered into with Cranshire Capital, L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore Capital, Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard Todd Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13, 2003)
4.3.2	Form of Registration Rights Agreement entered into with Cranshire Capital, L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore Capital, Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard Todd Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13, 2003)
4.3.3	Form of Warrant granted to Cranshire Capital, L.P.; Gryphon Partners, L.P.; Langley Partners, L.P.; Lakeshore Capital, Ltd.; LH Financial; Omicron Capital; Photon Fund, Ltd.; Howard Todd Horberg and Vertical Ventures, LLC dated May 29, 2003 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13, 2003)
4.4.1	Form of Securities Purchase Agreement entered into with Cranshire Capital, L.P. dated June 6, 2003 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13, 2003)

118

Exhibit Number   Description of Exhibit⁽¹⁾

4.4.2	Form of Registration Rights Agreement entered into with Cranshire Capital, L.P. dated June 6, 2003 (incorporated by reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13, 2003)
4.4.3	Form of Warrant granted to Cranshire Capital, L.P. dated June 6, 2003 (incorporated by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on Form 10-Q/A for the quarter ended April 30, 2003 filed on August 13, 2003)
4.4.4	Form of replacement Warrant issued to warrant holders exercising at reduced exercise price in May and June 2003 (incorporated by reference to Exhibit 4.13.7 to Generex Biotechnology Corporation’s Report on Form 10-K for the period ended July 31, 2003 filed on October 29, 2003)
4.5.1	Securities Purchase Agreement, dated December 19, 2003, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K/A filed on March 24, 2004)
4.5.2	Registration Rights Agreement, dated December 19, 2003, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K/A filed on March 24, 2004)
4.5.3	Form of Warrant issued in connection with Exhibit 4.5.1 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K/A filed on March 24, 2004)
4.5.4	Form of Additional Investment Right issued in connection with Exhibit 4.5.1 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K/A filed on March 24, 2004)
4.6.1	Securities Purchase Agreement, dated January 7, 2004, by and between Generex Biotechnology Corporation and ICN Capital Limited (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.6.2	Registration Rights Agreement, dated January 7, 2004, by and between Generex Biotechnology Corporation and ICN Capital Limited (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.6.3	Warrant issued in connection with Exhibit 4.6.1 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.6.4	Additional Investment Right issued in connection with Exhibit 4.6.1 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.7.1	Securities Purchase Agreement, dated January 9, 2004, by and between Generex Biotechnology Corporation and Vertical Ventures, LLC (incorporated by reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)

119

Exhibit Number   Description of Exhibit⁽¹⁾

4.7.2	Registration Rights Agreement, dated January 9, 2004, by and between Generex Biotechnology Corporation and Vertical Ventures, LLC (incorporated by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.7.3	Warrant issued in connection with Exhibit 4.7.1 (incorporated by reference to Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.7.4	Additional Investment Right issued in connection with Exhibit 4.7.1 (incorporated by reference to Exhibit 4.8 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.8.1	Securities Purchase Agreement, dated February 6, 2004, by and between Generex Biotechnology Corporation and Alexandra Global Master Fund, Ltd. (incorporated by reference to Exhibit 4.9 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.8.2	Registration Rights Agreement, dated February 6, 2004, by and between Generex Biotechnology Corporation and Alexandra Global Master Fund, Ltd. (incorporated by reference to Exhibit 4.10 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.8.3	Warrant issued in connection with Exhibit 4.8.1 (incorporated by reference to Exhibit 4.11 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.8.4	Additional Investment Right issued in connection with Exhibit 4.8.1 (incorporated by reference to Exhibit 4.12 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.8.5	Escrow Agreement, dated February 26, 2004, by and among Generex Biotechnology Corporation, Eckert Seamans Cherin & Mellott, LLC and Alexandra Global Master Fund, Ltd. (incorporated by reference to Exhibit 4.13 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.9.1	Securities Purchase Agreement, dated February 11, 2004, by and between Generex Biotechnology Corporation and Michael Sourlis (incorporated by reference to Exhibit 4.14 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.9.2	Registration Rights Agreement, dated February 11, 2004, by and between Generex Biotechnology Corporation and Michael Sourlis (incorporated by reference to Exhibit 4.15 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.9.4	Additional Investment Right issued in connection with Exhibit 4.9.1 (incorporated by reference to Exhibit 4.17 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.10.1	Securities Purchase Agreement, dated February 13, 2004, by and between Generex Biotechnology Corporation and Zapfe Holdings, Inc. (incorporated by reference to Exhibit 4.18 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)

120

Exhibit Number   Description of Exhibit⁽¹⁾

4.10.2	Registration Rights Agreement, dated February 13, 2004, by and between Generex Biotechnology Corporation and Zapfe Holdings, Inc. (incorporated by reference to Exhibit 4.19 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.10.3	Warrant issued in connection with Exhibit 4.10.1 (incorporated by reference to Exhibit 4.20 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.10.4	Additional Investment Right issued in connection with Exhibit 4.10.1 (incorporated by reference to Exhibit 4.21 Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2004)
4.11.1	Securities Purchase Agreement, dated June 23, 2004, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14, 2004)
4.11.2	Registration Rights Agreement, dated June 23, 2004, by and among Generex Biotechnology Corporation and the investors (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14, 2004)
4.11.3	Form of Warrant issued in connection with Exhibit 4.11.1 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14, 2004)
4.11.4	Form of Additional Investment Right issued in connection Exhibit 4.11.1 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on July 14, 2004)
4.12.1	Securities Purchase Agreement, dated November 10, 2004, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.12.2	Form of 6% Secured Convertible Debenture issued in connection with Exhibit 4.12.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.12.3	Registration Rights Agreement, dated November 10, 2004, by and among Generex Biotechnology Corporation and the investors named therein (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.12.4	Form of Additional Investment Right issued in connection with Exhibit 4.12.1 (incorporated by reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.12.5	Custodial and Security Agreement, dated November 10, 2004, by and among Generex Biotechnology Corporation, Feldman Weinstein LLP, as custodian, and the investors named therein (incorporated by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)

121

Exhibit Number   Description of Exhibit⁽¹⁾

4.12.6	Form of Voting Agreement entered into in connection with Exhibit 4.12.1 (incorporated by reference to Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
4.13	Termination Agreement, dated December 17, 2004, by and among Generex Biotechnology Corporation and Elan Corporation plc and Elan International Services, Ltd. (incorporated by reference to Exhibit 4.19 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)
4.14	Warrant issued to The Aethena Group, LLC on April 28, 2005 (incorporated by reference to Exhibit 4.20 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)
4.15.1	Amendment No. 1 to Securities Purchase Agreement and Registration Rights Agreement entered into by and between Generex Biotechnology Corporation and the Purchasers listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 17, 2005)
4.15.2	Form of AIR Debenture issued in connection with Exhibit 4.15.1 (incorporated by reference to Exhibit 4.25.2 to Generex Biotechnology Corporation’s Report on Form 10-K filed on October 31, 2005)
4.15.3	Form of AIR Warrant issued in connection with Exhibit 4.15.1 (incorporated by reference to Exhibit 4.25.3 to Generex Biotechnology Corporation’s Report on Form 10-K filed on October 31, 2005)
4.15.4	Form of Additional AIR issued in connection with Exhibit 4.15.1 (incorporated by reference to Exhibit 4.25.4 to Generex Biotechnology Corporation’s Report on Form 10-K filed on October 31, 2005)
4.16.1	Amendment No. 2 to Securities Purchase Agreement and Registration Rights Agreement entered into by and between Generex Biotechnology Corporation and the Purchasers listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on September 9, 2005)
4.16.2	Form of AIR Debenture issued in connection with Exhibit 4.16.1 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on September 9, 2005)
4.16.3	Form of AIR Warrant issued in connection with Exhibit 4.16.1 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on September 9, 2005)
4.16.4	Form of Additional AIR issued in connection with Exhibit 4.16.1 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on September 9, 2005).
4.17	Form of Warrant issued by Generex Biotechnology Corporation on October 27, 2005 (incorporated by reference to Exhibit 4.31 to Generex Biotechnology Corporation’s Report on Form 10-K filed on October 31, 2005).

122

Exhibit Number   Description of Exhibit⁽¹⁾

4.18.1	Amendment to the Additional Investment Right issued by Generex Biotechnology Corporation to Omicron Master Trust on June 17, 2005 (incorporated by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on Form 8-K filed on October 31, 2005)
4.18.2	Additional AIR Debenture issued by Generex Biotechnology Corporation to Omicron Master Trust on October 27, 2005 issued in connection with Exhibit 4.18.1 (incorporated by reference to Exhibit 4.37 to Generex Biotechnology Corporation’s Report on Form 10-Q filed on December 15, 2005)
4.18.3	Additional AIR Warrant issued by Generex Biotechnology Corporation to Omicron Master Trust on October 27, 2005 issued in connection with Exhibit 4.18.1 (incorporated by reference to Exhibit 4.38 to Generex Biotechnology Corporation’s Report on Form 10-Q filed on December 15, 2005)
4.19.1	Amendment No. 3 to Securities Purchase Agreement and Registration Rights Agreement entered into by and among Generex Biotechnology Corporation and the Purchasers listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 5, 2005)
4.19.2	Form of AIR Debentures issued in connection with Exhibit 4.19.1 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 5, 2005)
4.19.3	Form of AIR Warrants issued in connection with Exhibit 4.19.1 (incorporated by reference to Exhibit 4.5 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 5, 2005)
4.19.4	Form of Additional AIRs issued in connection with Exhibit 4.19.1 (incorporated by reference to Exhibit 4.6 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 5, 2005)
4.20	Form of Amendment to the Additional Investment Right issued by Generex Biotechnology Corporation on June 17, 2005 in connection with the First AIR Exercise (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 5, 2005)
4.21	Form of Amendment to the Additional Investment Right issued by Generex Biotechnology Corporation on September 8, 2005 in connection with the Second AIR Exercise (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on December 5, 2005)
4.22	Form of Warrant issued by Generex Biotechnology Corporation on January 23, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on January 24, 2006)
4.23	Agreement to amend Warrants between Generex Biotechnology Corporation and Cranshire Capital L.P. dated February 27, 2006 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 28, 2006).
4.24	Agreement to amend Warrants between Generex Biotechnology Corporation and Omicron Master Trust dated February 27, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 28, 2006).

4.24 Agreement to amend Warrants between Generex Biotechnology Corporation and Iroquois Capital L.P. dated February 27, 2006 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 28, 2006).

123

Exhibit Number   Description of Exhibit⁽¹⁾

4.25	Agreement to amend Warrants between Generex Biotechnology Corporation and Smithfield Fiduciary LLC dated February 27, 2006 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on February 28, 2006).
4.26	Form of Warrant issued by Generex Biotechnology Corporation on February 27, 2006
4.27	Agreement to Amend Additional Investment Right between Generex Biotechnology Corporation and Cranshire Capital, L.P. dated February 28, 2006 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2006).
4.28	Agreement to Amend Additional Investment Right between Generex Biotechnology Corporation and Omicron Master Trust dated February 28, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2006).
4.29	Agreement to Amend Additional Investment Right between Generex Biotechnology Corporation and Iroquois Capital LP dated February 28, 2006 (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2006).
4.30	Agreement to Amend Additional Investment Right between Generex Biotechnology Corporation and Smithfield Fiduciary LLC dated February 28, 2006 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 1, 2006).
4.31	Form of Additional AIR Debenture issued by Generex Biotechnology Corporation on February 28, 2006
4.32	Form of Additional AIR Warrant issued by Generex Biotechnology Corporation on February 28, 2006
4.33	Form of Agreement to Amend Warrants between Generex Biotechnology Corporation and the Investors dated March 6, 2006 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 7, 2006).
4.34	Form of Warrant issued by Generex Biotechnology Corporation on March 6, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on March 7, 2006)
4.35	Warrant issued by Generex Biotechnology Corporation on April 17, 2006 to Zapfe Holdings, Inc. (incorporated by reference to Exhibit 4.33 to Generex Biotechnology Corporation’s Report on Form 10-Q filed on June 14, 2006)
4.36	Form of Warrant issued by Generex Biotechnology Corporation on April 17, 2006 to certain employees (incorporated by reference to Exhibit 4.34 to Generex Biotechnology Corporation’s Report on Form 10-Q filed on June 14, 2006).
4.37	Securities Purchase Agreement entered into by and between Generex Biotechnology Corporation and four Investors on June 1, 2006 (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2, 2006)
4.38	Form of Warrant issued by Generex Biotechnology Corporation on June 1, 2006 (incorporated by reference to Exhibit 4.2 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2, 2006)
4.39	Form of Amendment to Outstanding Warrants (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2, 2006)

124

Exhibit Number   Description of Exhibit⁽¹⁾

4.40	Form of Warrant issued by Generex Biotechnology Corporation on June 1, 2006 in connection with Exhibit 4.39 (incorporated by reference to Exhibit 4.4 to Generex Biotechnology Corporation’s Report on Form 8-K filed on June 2, 2006)
9	Form of Voting Agreement entered into in connection with Exhibit 4.12.1 (incorporated by reference to Exhibit 4.7 to Generex Biotechnology Corporation’s Report on Form 8-K filed on November 12, 2004)
10.1	Stock Option Agreement by and between Generex Biotechnology Corporation and Mindy J. Allport-Settle to purchase 100,000 shares of Common Stock at the exercise price of $0.56 per share (incorporated by reference to Exhibit 10.2 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.2	Stock Option Agreement by and between Generex Biotechnology Corporation and Peter G. Amanatides to purchase 100,000 shares of Common Stock at the exercise price of $0.56 per share (incorporated by reference to Exhibit 10.3 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.3	Stock Option Agreement by and between Generex Biotechnology Corporation and John P. Barratt to purchase 100,000 shares of Common Stock at the exercise price of $0.56 per share (incorporated by reference to Exhibit 10.4 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.4	Stock Option Agreement by and between Generex Biotechnology Corporation and Brian T. McGee to purchase 100,000 shares of Common Stock at the exercise price of $0.56 per share (incorporated by reference to Exhibit 10.5 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.5	Stock Option Agreement by and between Generex Biotechnology Corporation and John P. Barratt to purchase 35,714 shares of Common Stock at the exercise price of $0.001 per share (incorporated by reference to Exhibit 10.6 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.6	Stock Option Agreement by and between Generex Biotechnology Corporation and Brian T. McGee to purchase 35,714 shares of Common Stock at the exercise price of $0.001 per share (incorporated by reference to Exhibit 10.7 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.7	Stock Option Agreement by and between Generex Biotechnology Corporation and Gerald Bernstein, M.D. to purchase 100,000 shares of Common Stock at the exercise price of $0.61 per share (incorporated by reference to Exhibit 10.8 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.8	Stock Option Agreement by and between Generex Biotechnology Corporation and Mark Fletcher to purchase 250,000 shares of Common Stock at the exercise price of $0.61 per share (incorporated by reference to Exhibit 10.9 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*

125

Exhibit Number   Description of Exhibit⁽¹⁾

10.9	Stock Option Agreement by and between Generex Biotechnology Corporation and Anna E. Gluskin to purchase 250,000 shares of Common Stock at the exercise price of $0.61 per share (incorporated by reference to Exhibit 10.10 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.10	Stock Option Agreement by and between Generex Biotechnology Corporation and Rose C. Perri to purchase 250,000 shares of Common Stock at the exercise price of $0.61 per share (incorporated by reference to Exhibit 10.11 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.11	Stock Option Agreement by and between Generex Biotechnology Corporation and Mark A. Fletcher to purchase 470,726 shares of Common Stock at the exercise price of $0.001 per share (incorporated by reference to Exhibit 10.12 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.12	Stock Option Agreement by and between Generex Biotechnology Corporation and Anna E. Gluskin to purchase 1,120,704 shares of Common Stock at the exercise price of $0.001 per share (incorporated by reference to Exhibit 10.13 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.13	Stock Option Agreement by and between Generex Biotechnology Corporation and Rose C. Perri to purchase 576,752 shares of Common Stock at the exercise price of $0.001 per share (incorporated by reference to Exhibit 10.14 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.14	Employment Agreement by and between Generex Biotechnology Corporation and Gerald Bernstein M.D. (incorporated by reference to Exhibit 10.16 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on June 14, 2005)*
10.15	1998 Stock Option Plan (incorporated by reference to Exhibit 4.3 to Generex Biotechnology Corporation’s Registration Statement on Form S-1 (File No. 333-82667) filed on July 12, 1999)*
10.16	2000 Stock Option Plan (incorporated by reference to Exhibit 4.3.2 to Generex Biotechnology Corporation’s Annual Report on Form 10-K filed on October 30, 2000)*
10.17	Amended 2001 Stock Option Plan (incorporated by reference to Exhibit 4.1 to Generex Biotechnology Corporation’s Quarterly Report on Form 10-Q filed on December 15, 2003)*
10.18	2006 Stock Plan (incorporated by reference to Annex A to Generex Biotechnology Corporation’s Proxy Statement for the Annual Meeting of Stockholders held on May 30, 2006)*
10.19	Memorandum of Agreement dated January 7, 1998 between Generex Pharmaceuticals, Inc., GHI Inc., Generex Biotechnology Corporation, Dr. Pankaj Modi and Galaxy Technology, Canada and Consulting Agreement between Generex Pharmaceuticals, Inc. and Pankaj Modi dated October 1, 1996 (incorporated by reference to Exhibit 10.1.1 to Generex Biotechnology Corporation’s Registration Statement on Form 10 filed on December 14, 1998, as amended February 24, 1999)*

126

Exhibit Number   Description of Exhibit⁽¹⁾

10.20	Assignment and Assumption Agreement between Generex Pharmaceuticals, Inc. and Pankaj Modi dated October 1, 1996 (incorporated by reference to Exhibit 10.12 to Generex Biotechnology Corporation’s Registration Statement on Form 10/A filed on February 24, 1999)*
10.21	Supplemental Agreement dated December 31, 2000 between Generex Pharmaceuticals, Inc., Generex Biotechnology Corporation and Dr. Pankaj Modi (incorporated by reference to Exhibit 10.1.4 to Generex Biotechnology Corporation’s Annual Report on Form 10-K filed on October 29, 2001)*
10.22	Amended and Restated License Agreement dated January 15, 2002 between Generex Biotechnology Corporation and Generex (Bermuda) Ltd. (incorporated by reference to Exhibit 10.3 to Generex Biotechnology Corporation’s Current Report on Form 8-K/A filed on September 9, 2003)
10.23	Stockholders Agreement among Generex Biotechnology Corporation and the former holders of capital stock of Antigen Express, Inc. (incorporated by reference to Exhibit 10.4 to Generex Biotechnology Corporation’s Annual Report on Form 10-K filed on October 29, 2003)
10.24	Form of Warrant issued by Generex Biotechnology Corporation on April 17, 2006 to certain employees (incorporated by reference to Exhibit 4.34 to Generex Biotechnology Corporation’s Report on Form 10-Q filed on June 14, 2006)*
10.25	Quotation for Contract Manufacturing of Oral-lyn™ entered into between Generex Biotechnology Corporation and Cardinal Health PTS, LLC on June 20, 2006 (subject to confidential treatment)
10.26	Quotation Amendment for Contract Manufacturing of Oral-lyn™ entered into between Generex Biotechnology Corporation and Cardinal Health PTS, LLC on August 18, 2006 (subject to confidential treatment)
10.27	Clinical Supply Agreement entered into between Generex Biotechnology Corporation and Cardinal Health PTS, LLC on September 6, 2006 (subject to confidential treatment)
21	Subsidiaries of the Registrant
23.1	Consent of Danziger & Hochman, Chartered Accountants, independent registered public accounting firm
23.2	Consent of BDO Consent of BDO Dunwoody, LLP, independent registered public accounting firm
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Management contract or management compensatory plan or arrangement.
(1)	In the case of incorporation by reference to documents filed by the Registrant under the Exchange Act, the Registrant’s file number under the Exchange Act is 000-25169.

127

EX-4.26

Exhibit 4.26

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT

To Purchase n Shares of Common Stock of

GENEREX BIOTECHNOLOGY CORPORATION

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, n (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the 181^st day after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the fifth (5^th) anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Generex Biotechnology Corporation, a Delaware corporation (the “Company”), up to n shares (the “Warrant Shares”) of Common Stock, par value $0.001 per share, of the Company (the “Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

Section 1.Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated November 10, 2004, as amended, among the Company and the purchasers signatory thereto.

Section 2.Exercise.

a)Exercise of Warrant. Subject to the terms hereof, exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company); provided, however, within 5 Trading Days of the date said Notice of Exercise is delivered to the Company, the Holder shall have surrendered this Warrant to the Company and the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased in cash or by wire transfer of immediately available funds.

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b)Exercise Price. The exercise price of the Common Stock under this Warrant shall be $3.00, subject to adjustment hereunder (the “Exercise Price”).

c)Cashless Exercise. If at any time after one year from the date of issuance of this Warrant there is no effective Registration Statement registering the resale of the Warrant Shares by the Holder, then this Warrant may also be exercised at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = the VWAP on the Trading Day immediately preceding the date of such election;

(B) = the Exercise Price of this Warrant, as adjusted; and

(X) = the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

d)Exercise Limitations. The Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2(c) or otherwise, to the extent that after giving effect to such issuance after exercise, the Holder (together with the Holder’s affiliates), as set forth on the applicable Notice of Exercise, would beneficially own in excess of 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to such issuance.  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Debentures or Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act, it being acknowledged by Holder that the Company is not representing to Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(d) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder) and of which a portion of this Warrant is exercisable shall be in the sole discretion of such Holder, and the submission of a Notice of Exercise shall be deemed to be such Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. For purposes of this Section 2(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Company’s Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of the Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.

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e)Mechanics of Exercise.

i.Authorization of Warrant Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

ii.Delivery of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within 3 Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”). This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vii) prior to the issuance of such shares, have been paid.

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iii.Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

iv.Rescission Rights. If the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 2(e)(iv) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise; provided that if as a result of the limitations set forth in Section 2(d) hereof, such failure by the Company is for a portion of the Warrant Shares for which a Notice of Exercise has been delivered, the Holder shall be permitted to rescind solely that portion not so exercised.

v.Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Company. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

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vi.No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.

vii.Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

viii.Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

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Section 3.CertainAdjustments.

a)Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Warrant), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b)Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall offer, sell, grant any option to purchase or offer, sell or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price), then, the Exercise Price shall be reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. Notwithstanding the foregoing, no adjustment will be made hereunder in respect of (i) an Exempt Issuance other than an Exempt Issuance that involves an MFN Transaction or a Variable Rate Transaction for which the adjustment provisions of Section 3(b) shall be applicable or (ii) issuances of up to, in the aggregate, the first 1,500,000 shares of Common Stock or Common Stock Equivalents (subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement) to consultants of the Company in any 12 month period pursuant to a resolution duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose.

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c)Pro Rata Distributions. If the Company, at any time prior to the Termination Date, shall distribute to all holders of Common Stock (and not to Holders of the Warrants) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 3(b)), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

d)Fundamental Transaction. If, at any time while this Warrant is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise absent such Fundamental Transaction, at the option of the Holder, (a) upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Alternate Consideration receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event or (b) if the Company is acquired in an all cash transaction, cash equal to the value of this Warrant as determined in accordance with the Black-Scholes option pricing formula (the “Alternate Consideration”). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 3(d) and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

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e)Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. The number of shares of Common Stock outstanding at any given time shall not includes shares of Common Stock owned or held by or for the account of the Company, and the description of any such shares of Common Stock shall be considered on issue or sale of Common Stock. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

f)Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

g)Notice to Holders.

i.Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to this Section 3, the Company shall promptly mail to each Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Company issues a variable rate security, despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised in the case of a Variable Rate Transaction (as defined in the Purchase Agreement), or the lowest possible adjustment price in the case of an MFN Transaction (as defined in the Purchase Agreement.

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ii.Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last addresses as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the 20-day period commencing the date of such notice to the effective date of the event triggering such notice.

Section 4.Transfer of Warrant.

a)Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Sections 5(a) and 4(d) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

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b)New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

c)Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

d)Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a qualified institutional buyer as defined in Rule 144A(a) under the Securities Act.

Section 5.Miscellaneous.

a)Title to Warrant. Prior to the Termination Date and subject to compliance with applicable laws and Section 4 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company.

b)No Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price (or by means of a cashless exercise), the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

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c)Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

d)Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

e)Authorized Shares.

The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

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Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

f)Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

g)Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

h)Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

i)Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

j)Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

k)Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

l)Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

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m)Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

n)Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

o)Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated: February 27, 2006

GENEREX BIOTECHNOLOGY CORPORATION
By:
	Name: Mark A. Fletcher
	Title: Executive Vice-President, General Counsel

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NOTICE OF EXERCISE

BY n

OF $3.00 WARRANT DATED FEB 27 06

TO:GENEREX BIOTECHNOLOGY CORPORATION

(1)The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2)Payment shall take the form of (check applicable box):

o in lawful money of the United States; or

o the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3)Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

The Warrant Shares shall be delivered to the following:

_______________________________

_______________________________

_______________________________

(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity: ________________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Dated: ______________, _______

Holder’s Signature:	_____________________________
Holder’s Address:	_____________________________
	_____________________________

Signature Guaranteed: ___________________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EX-4.31

Exhibit 4.31

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: February 28, 2006

Original Conversion Price (subject to adjustment herein): $1.25

$1,000,000

6% SECURED CONVERTIBLE DEBENTURE

DUE MAY 28, 2007

THIS DEBENTURE of Generex Biotechnology Company, a Delaware corporation, having a principal place of business at 33 Harbour Square, Suite 202, Toronto, Ontario Canada M5J2G2 (the “Company”), is designated as its 6% Convertible Debenture, due May 28, 2007 (the “Debenture”).

FOR VALUE RECEIVED, the Company promises to pay to n or its registered assigns (the “Holder”), the principal sum of $1,000,000 on May 28, 2007 or such earlier date as the Debentures are required or permitted to be repaid as provided hereunder (the “Maturity Date”), and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions hereof. This Debenture is subject to the following additional provisions:

Section 1.Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined herein have the meanings given to such terms in the Purchase Agreement Amendments, or if not found therein, the Purchase Agreement and (b) the following terms shall have the following meanings:

“Alternate Consideration” shall have the meaning set forth in Section 5(d).

“Base Conversion Price” shall have the meaning set forth in Section 5(b).

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“Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

“Buy-In” shall have the meaning set forth in Section 4(d)(v).

“Change of Control Transaction” means the occurrence after the date hereof of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 33% of the voting securities of the Company, or (ii) a replacement at one time or within a three year period of more than one-half of the members of the Company’s board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), or (iii) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i) or (ii).

“Common Stock” means the common stock, par value $0.001 per share, of the Company and stock of any other class into which such shares may hereafter have been reclassified or changed.

“Conversion Date” shall have the meaning set forth in Section 4(a).

“Conversion Price” shall have the meaning set forth in Section 4(b).

“Conversion Shares” means the shares of Common Stock issuable upon conversion of Debentures or as payment of interest in accordance with the terms.

“Debenture Register” shall have the meaning set forth in Section 2(c).

“Dilutive Issuance” shall have the meaning set forth in Section 5(b).

“Dilutive Issuance Notice” shall have the meaning set forth in Section 5(b).

“Effectiveness Period” shall have the meaning given to such term in the Registration Rights Agreement and the Purchase Agreement Amendments.

“Equity Conditions” shall mean, during the period in question, (i) the Company shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notice of Conversions, if any, (ii) all liquidated damages and other amounts owing in respect of the Debentures shall have been paid; (iii) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares issuable pursuant to the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future), (iv) the Common Stock is trading on the Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed for trading on a Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (v) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares issuable pursuant to the Transaction Documents, (vi) there is then existing no Event of Default or event which, with the passage of time or the giving of notice, would constitute an Event of Default, (vii) all of the shares issued or issuable pursuant to the transaction proposed would not violate the limitations set forth in Section 4(c), (viii) no public announcement of a pending or proposed Fundamental Transaction, Change of Control Transaction or acquisition transaction has occurred that has not been consummated, and (ix) the Holder is not then in possession of what could be deemed material, non-public information, in the reasonable determination of the Holder.

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“Event of Default” shall have the meaning set forth in Section 8.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fundamental Transaction” shall have the meaning set forth in Section 5(d).

“Interest Conversion Rate” means the lesser of (a) the Conversion Price and (b) 90% of the average of the 20 VWAPs immediately prior to the applicable Interest Payment Date.

“Interest Payment Date” shall have the meaning set forth in Section 2(a).

“Late Fees” shall have the meaning set forth in Section 2(d).

“Mandatory Prepayment Amount” for any Debentures shall equal the sum of (i) the greater of: (A) 130% of the principal amount of Debentures to be prepaid, plus all accrued and unpaid interest thereon, or (B) the principal amount of Debentures to be prepaid, plus all other accrued and unpaid interest hereon, divided by the Conversion Price on (x) the date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory Prepayment Amount is paid in full, whichever is less, multiplied by the VWAP on (x) the date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory Prepayment Amount is paid in full, whichever is greater, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of such Debentures.

“Monthly Redemption” shall mean the redemption of this Debenture pursuant to Section 6(a) hereof.

“Monthly Redemption Amount” shall mean, as to a Monthly Redemption, $76,923.08¹, or such lesser principal amount of this Debenture then outstanding.

¹ the original principal amount of this Debenture divided by 13.

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“Monthly Redemption Date” means the first Trading Day of every month, commencing on May 1, 2006 and ending on the date when there is no principal amount of this Debenture outstanding.

“New York Courts” shall have the meaning set forth in Section 9(d).

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

“Original Issue Date” shall mean February 28, 2006 regardless of the number of transfers of the Debenture and regardless of the number of instruments which may be issued to evidence the Debenture.

“Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

“Purchase Agreement” means the Securities Purchase Agreement, dated as of November 10, 2004, to which the Company and the original Holder are parties, as amended, modified or supplemented from time to time in accordance with its terms.

“Purchase Agreement Amendments” means, collectively, Amendment No. 1 to the Securities Purchase Agreement and Registration Rights Agreement dated June 17, 2005, Amendment No. 2 to the Securities Purchase Agreement and Registration Rights Agreement dated September 8, 2005, Amendment No. 3 to the Securities Purchase Agreement and Registration Rights Agreement dated December 4, 2005, and Amendment No. 4 to the Securities Purchase Agreement and Registration Rights Agreement dated January 19, 2006 to which, in each case, the Company and the original Holder are parties, as amended, modified or supplemented from time to time in accordance with their terms.

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, to which the Company and the original Holder are parties, as amended, modified or supplemented from time to time in accordance with its terms.

“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement, covering among other things the resale of the Conversion Shares and naming the Holder as a “selling stockholder” thereunder.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Subsidiary” shall have the meaning given to such term in the Purchase Agreement.

“Trading Day” means a day on which the Common Stock is traded on a Trading Market.

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“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq Capital Market, the American Stock Exchange, the New York Stock Exchange or the Nasdaq National Market.

“Transaction Documents” shall have the meaning set forth in the Purchase Agreement.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b)  if the Common Stock is not then listed or quoted on a Trading Market and if prices for the Common Stock are then quoted on the OTC Bulletin Board, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders and reasonably acceptable to the Company.

Section 2.Interest.

a)Payment of Interest in Cash or Kind. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of 6% per annum, payable quarterly on March 31, June 30, September 30 and December 31, beginning on the first such date after the Original Issue Date and on each Conversion Date (as to that principal amount then being converted) and on the Maturity Date (except that, if any such date is not a Business Day, then such payment shall be due on the next succeeding Business Day) (each such date, an “Interest Payment Date”), in cash or shares of Common Stock in an amount equal to the amount of interest then due and owing divided by the Interest Conversion Rate, or a combination thereof; provided, however, payment in shares of Common Stock may only occur if during the 20 Trading Days immediately prior to the applicable Interest Payment Date all of the Equity Conditions have been met and the Company shall have given the Holder notice in accordance with the notice requirements set forth below.

b)Company’s Election to Pay Interest in Kind. Subject to the terms and conditions herein, the decision whether to pay interest hereunder in shares of Common Stock or cash shall be at the discretion of the Company. Not less than 20 Trading Days prior to each Interest Payment Date, the Company shall provide the Holder with written notice of its election to pay interest hereunder either in cash or shares of Common Stock (the Company may indicate in such notice that the election contained in such notice shall continue for later periods until revised). Within 20 Trading Days prior to an Interest Payment Date, the Company’s election (whether specific to an Interest Payment Date or continuous) shall be irrevocable as to such Interest Payment Date. Subject to the aforementioned conditions, failure to timely provide such written notice shall be deemed an election by the Company to pay the interest on such Interest Payment Date in cash.

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c)Interest Calculations. Interest shall be calculated on the basis of a 360-day year and shall accrue daily commencing on the Original Issue Date until payment in full of the principal sum, together with all accrued and unpaid interest and other amounts which may become due hereunder, has been made. Payment of interest in shares of Common Stock shall otherwise occur pursuant to Section 4(d)(ii) and only for purposes of the payment of interest in shares, the Interest Payment Date shall be deemed the Conversion Date. Interest shall cease to accrue with respect to any principal amount converted, provided that the Company in fact delivers the Conversion Shares within the time period required by Section 4(d)(ii). Interest hereunder will be paid to the Person in whose name this Debenture is registered on the records of the Company regarding registration and transfers of Debentures (the “Debenture Register”). Except as otherwise provided herein, if at any time the Company pays interest partially in cash and partially in shares of Common Stock, then such payment shall be distributed ratably among the Holders based upon the principal amount of Debentures held by each Holder.

d)Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at the rate of 18% per annum (or such lower maximum amount of interest permitted to be charged under applicable law) (“Late Fees”) which will accrue daily, from the date such interest is due hereunder through and including the date of payment. Notwithstanding anything to the contrary contained herein, if on any Interest Payment Date the Company has elected to pay interest in Common Stock and is not able to pay accrued interest in the form of Common Stock because it does not then satisfy the conditions for payment in the form of Common Stock set forth above, then, at the option of the Holder, the Company, in lieu of delivering either shares of Common Stock pursuant to this Section 2 or paying the regularly scheduled cash interest payment, shall deliver, within three Trading Days of each applicable Interest Payment Date, an amount in cash equal to the product of the number of shares of Common Stock otherwise deliverable to the Holder in connection with the payment of interest due on such Interest Payment Date and the highest VWAP during the period commencing on the Interest Payment Date and ending on the Trading Day prior to the date such payment is made.

e)Prepayment. Except as otherwise set forth in this Debenture, the Company may not prepay any portion of the principal amount of this Debenture without the prior written consent of the Holder.

Section 3.Registration of Transfers and Exchanges.

a)Different Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration of transfer or exchange.

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b)Investment Representations. This Debenture has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.

c)Reliance on Debenture Register. Prior to due presentment to the Company for transfer of this Debenture, the Company and any agent of the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

Section 4.Conversion.

a)Voluntary Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall be convertible into shares of Common Stock at the option of the Holder, in whole or in part at any time and from time to time (subject to the limitations on conversion set forth in Section 4(c) hereof). The Holder shall effect conversions by delivering to the Company the form of Notice of Conversion attached hereto as Annex A (a “Notice of Conversion”), specifying therein the principal amount of Debentures to be converted and the date on which such conversion is to be effected (a “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is provided hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender Debentures to the Company unless the entire principal amount of this Debenture plus all accrued and unpaid interest thereon has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount converted and the date of such conversions. The Company shall deliver any objection to any Notice of Conversion within 2 Business Days of receipt of such notice. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof.

b)Conversion Price. The conversion price in effect on any Conversion Date shall be equal to $1.25 (subject to adjustment herein) (the “Conversion Price”).

c)Holder’s Restriction on Conversion. The Company shall not effect any conversion of this Debenture, and the Holder shall not have the right to convert any portion of this Debenture, pursuant to Section 4(a) or otherwise, to the extent that after giving effect to such conversion, the Holder (together with the Holder’s affiliates), as set forth on the applicable Notice of Conversion, would beneficially own in excess of 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to such conversion.  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Debenture with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Debenture beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Debentures or the Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 4(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. To the extent that the limitation contained in this section applies, the determination of whether this Debenture is convertible (in relation to other securities owned by the Holder) and of which a portion of this Debenture is convertible shall be in the sole discretion of such Holder. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. For purposes of this Section 4(c), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Company’s Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of the Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Debenture, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.

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d)   Mechanics of Conversion

i.Conversion Shares Issuable Upon Conversion of Principal Amount. The number of shares of Common Stock issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be converted by (y) the Conversion Price.

ii.Delivery of Certificate Upon Conversion. Not later than three Trading Days after any Conversion Date, the Company will deliver to the Holder (A) a certificate or certificates representing the Conversion Shares which shall be free of restrictive legends and trading restrictions (other than those required by the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of Debentures (including, if so timely elected by the Company, shares of Common Stock representing the payment of accrued interest) and (B) a bank check in the amount of accrued and unpaid interest (if the Company is required to pay accrued interest in cash). The Company shall, if available and if allowed under applicable securities laws, use its commercially reasonable efforts to deliver any certificate or certificates required to be delivered by the Company under this Section electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions.

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iii.Failure to Deliver Certificates. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the third Trading Day after a Conversion Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the certificates representing the principal amount of Debentures tendered for conversion; provided that if as a result of the limitations set forth in Section 4(c) hereof, such failure by the Company is for a portion of the Securities for which a Notice of Conversion has been delivered, the Holder shall be permitted to rescind solely that portion not so converted.

iv.Obligation Absolute; Partial Liquidated Damages. Subject to the limitations set forth in Section 4(c) hereof, if the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(d)(ii) by the third Trading Day after the Conversion Date, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $1000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day after 5 Trading Days after such damages begin to accrue) for each Trading Day after such third Trading Day until such certificates are delivered. The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Debenture in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event a Holder of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or any one associated or affiliated with the Holder of has been engaged in any violation of law, agreement or for any other reason, unless, an injunction from a court, on notice, restraining and or enjoining conversion of all or part of this Debenture shall have been sought and obtained and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the principal amount of this Debenture outstanding, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of an injunction precluding the same, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 8 herein for the Company’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holders from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

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v.Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder, if the Company fails for any reason, other than as a result of the limitations set forth in Section 4(c) hereof, to deliver to the Holder such certificate or certificates pursuant to Section 4(d)(ii) by the third Trading Day after the Conversion Date, and if after such third Trading Day the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which the Holder anticipated receiving upon such conversion (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue multiplied by (2) the actual sale price of the Common Stock at the time of the sale (including brokerage commissions, if any) giving rise to such purchase obligation and (B) at the option of the Holder, either reissue Debentures in principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements under Section 4(d)(ii). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of Debentures with respect to which the actual sale price of the Conversion Shares at the time of the sale (including brokerage commissions, if any) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In. Notwithstanding anything contained herein to the contrary, if a Holder requires the Company to make payment in respect of a Buy-In for the failure to timely deliver certificates hereunder and the Company timely pays in full such payment, the Company shall not be required to pay such Holder liquidated damages under Section 4(d)(iv) in respect of the certificates resulting in such Buy-In.

vi.Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of the Debentures and payment of interest on the Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the outstanding principal amount of the Debentures and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and, if the Registration Statement is then effective under the Securities Act, registered for public sale in accordance with such Registration Statement.

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vii.Fractional Shares. Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the VWAP at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

viii.Transfer Taxes. The issuance of certificates for shares of the Common Stock on conversion of the Debentures shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such Debentures so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

Section 5.Certain Adjustments.

a)Stock Dividends and Stock Splits. If the Company, at any time while the Debentures are outstanding: (A) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Debenture, including as interest thereon), (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

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b)Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while Debentures are outstanding, shall offer, sell, grant any option to purchase or offer, sell or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than the Business Day following the issuance of any Common Stock or Common Stock Equivalents subject to this section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion. Notwithstanding the foregoing, no adjustment will be made hereunder in respect of (i) an Exempt Issuance other than an Exempt Issuance that involves an MFN Transaction or a Variable Rate Transaction for which the adjustment provisions of Section 5 shall be applicable, or (ii) issuances of up to, in the aggregate, the first 1,500,000 shares of Common Stock or Common Stock Equivalents (subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement) to consultants of the Company in any 12 month period pursuant to any resolution duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose.

c)Pro Rata Distributions. If the Company, at any time while Debentures are outstanding, shall distribute to all holders of Common Stock (and not to Holders) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price shall be determined by multiplying such Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

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d)Fundamental Transaction. If, at any time while this Debenture is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “Alternate Consideration”). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new debenture consistent with the foregoing provisions and evidencing the Holder’s right to convert such debenture into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that this Debenture (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

e)Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. The number of shares of Common Stock outstanding at any given time shall not include shares of Common Stock owned or held by or for the account of the Company, and the description of any such shares of Common Stock shall be considered on issue or sale of Common Stock. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

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f)Notice to Holders.

i.Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any of this Section 5, the Company shall promptly mail to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Company issues a variable rate security, despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised in the case of a Variable Rate Transaction (as defined in the Purchase Agreement), or the lowest possible adjustment price in the case of an MFN Transaction (as defined in the Purchase Agreement).

ii.Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of the Debentures, and shall cause to be mailed to the Holders at their last addresses as they shall appear upon the stock books of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. Holders are entitled to convert Debentures during the 20-day period commencing the date of such notice to the effective date of the event triggering such notice.

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Section 6. Monthly Redemptions.

a)Monthly Redemption. On each Monthly Redemption Date, the Company shall redeem the Monthly Redemption Amount plus accrued but unpaid interest, the sum of all liquidated damages and any other amounts then owing to the Holder in respect of this Debenture. The Monthly Redemption Amount due on each Monthly Redemption Date shall, except as provided in this Section, be paid in cash. As to any Monthly Redemption and upon 20 Trading Days’ prior written irrevocable notice, in lieu of a cash redemption payment the Company may elect to pay 100% of a Monthly Redemption in Conversion Shares based on a conversion price equal to the lesser of (i) 90% of the average of the 20 VWAPs immediately prior to the applicable Monthly Redemption Date (subject to adjustment for any stock dividend, stock split, stock combination or other similar event affecting the Common Stock during such 20 Trading Day period), and (ii) the Conversion Price. The Holders may convert, pursuant to Section 4(a), any principal amount of this Debenture subject to a Monthly Redemption at any time prior to the date that the Monthly Redemption Amount and all amounts owing thereon are due and paid in full. Unless otherwise directed by the Holder in the applicable Notice of Conversion, any portion of this Debenture converted during any 20 day period until the date the Monthly Redemption Amount is paid shall be first applied to the principal amount of Debenture subject to the Monthly Redemption and such Holder’s cash payment of the Monthly Redemption Amount on such Monthly Redemption Date shall be reduced accordingly. The Company covenants and agrees that it will honor all Notice of Conversions tendered up until such amounts are paid in full.

b)Redemption Procedure. The payment of cash and/or issuance of Common Stock, as the case may be, pursuant to a Monthly Redemption shall be made on the Monthly Redemption Date. If any portion of the cash payment for a Monthly Redemption shall not be paid by the Company by the respective due date, interest shall accrue thereon at the rate of 18% per annum (or the maximum rate permitted by applicable law, whichever is less) until the payment of the Monthly Redemption Amount plus all amounts owing thereon is paid in full. Alternatively, if any portion of the Monthly Redemption Amount remains unpaid after such date, the Holders subject to such redemption may elect, by written notice to the Company given at any time thereafter, to invalidate ab initio such redemption, notwithstanding anything herein contained to the contrary. Notwithstanding anything to the contrary in this Section 6, the Company’s determination to redeem in cash or shares of Common Stock shall be applied ratably among the Holders of Debentures based upon the principal amount of Debentures initially purchased by each Holder, adjusted upward ratably in the event all of the principal amount of any Holder are no longer outstanding. The Holder may elect to convert the outstanding principal amount of this Debenture pursuant to Section 4 prior to actual payment in cash for any redemption under this Section 6 by fax delivery of a Notice of Conversion to the Company.

Section 7.Negative Covenants. So long as any portion of this Debenture is outstanding, the Company will not and will not permit any of its Subsidiaries to directly or indirectly:

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a)enter into, create, incur, assume or suffer to exist any indebtedness or liens of any kind, on or with respect to any of its property or assets (including, without limitation, in respect to any of the Secured Proceeds as that terms is defined in the Custodial Agreement) now owned or hereafter acquired or any interest therein or any income or profits therefrom that is senior to, or paripassu with, in any respect, the Company’s obligations under the Debentures;

b)amend its certificate of incorporation, bylaws or to the charter documents so as to adversely affect any rights of the Holder;

c)other than redemption payments with respect to the Company's Special Voting Rights Preferred Stock not to exceed $5,000 in the aggregate and repurchases of the Company's Series A Convertible Preferred Stock to the extent that the cash payments in respect of any such repurchases does not exceed, in the aggregate, $50,000, repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or other equity or debt securities other than as to the Conversion Shares to the extent permitted or required under the Transaction Documents or as otherwise permitted by the Transaction Documents; or

d)enter into any agreement with respect to any of the foregoing.

Section 8.Events of Default.

a)“Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

i.any default in the payment of (A) the principal amount of any Debenture, or (B) interest (including Late Fees) on, or liquidated damages in respect of, any Debenture, in each case free of any claim of subordination, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured, within 3 Trading Days;

ii.the Company shall fail to observe or perform any other covenant or agreement contained in this Debenture or any of the other Transaction Documents (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion which breach is addressed in clause (xii) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of such default sent by the Holder or by any other Holder and (B)10 Trading Days after the Company shall become or should have become aware of such failure;

iii.a default or event of default (subject to any grace or cure period provided for in the applicable agreement, document or instrument) shall occur under (A) any of the Transaction Documents other than the Debentures, or (B) any other material agreement, lease, document or instrument to which the Company or any Subsidiary is bound;

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iv.any representation or warranty made herein, in any other Transaction Documents, in any written statement pursuant hereto or thereto, or in any other report, financial statement or certificate made or delivered to the Holder or any other holder of Debentures shall be untrue or incorrect in any material respect as of the date when made or deemed made;

v.(i) the Company or any of its Subsidiaries shall commence, or there shall be commenced against the Company or any such Subsidiary, a case under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any Subsidiary commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any Subsidiary thereof or (ii) there is commenced against the Company or any Subsidiary thereof any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 60 days; or (iii) the Company or any Subsidiary thereof is adjudicated by a court of competent jurisdiction insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or (iv) the Company or any Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 60 days; or (v) the Company or any Subsidiary thereof makes a general assignment for the benefit of creditors; or (vi) the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or (vii) the Company or any Subsidiary thereof shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (viii) the Company or any Subsidiary thereof shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or (ix) any corporate or other action is taken by the Company or any Subsidiary thereof for the purpose of effecting any of the foregoing;

vi.the Company or any Subsidiary shall default in any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company in an amount exceeding $150,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

vii.the Common Stock shall not be eligible for quotation on or quoted for trading on a Trading Market and shall not again be eligible for and quoted or listed for trading thereon within five Trading Days;

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viii.the Company shall be a party to any Change of Control Transaction or Fundamental Transaction, shall agree to sell or dispose of all or in excess of 33% of its assets in one or more transactions (whether or not such sale would constitute a Change of Control Transaction) or shall redeem or repurchase more than a de minimis number of its outstanding shares of Common Stock or other equity securities of the Company (other than redemption payments with respect to the Company's Special Voting Rights Preferred Stock not to exceed $5,000 in the aggregate during the term of this Debenture);

ix.a Registration Statement shall not have been declared effective by the Commission on or prior to the 180^thcalendar day after the Closing Date;

x.if, during the Effectiveness Period (as defined in the Registration Rights Agreement), the effectiveness of the Registration Statement lapses for any reason or the Holder shall not be permitted to resell Registrable Securities (as defined in the Registration Rights Agreement) under the Registration Statement, in either case, for more than 30 consecutive Trading Days or 60 non-consecutive Trading Days during any 12 month period; provided, however, that in the event that the Company is negotiating a merger, consolidation, acquisition or sale of all or substantially all of its assets or a similar transaction and in the written opinion of counsel to the Company, the Registration Statement, would be required to be amended to include information concerning such transactions or the parties thereto that is not available or may not be publicly disclosed at the time, the Company shall be permitted an additional 10 consecutive Trading during any 12 month period relating to such an event;

xi.an Event (as defined in the Registration Rights Agreement) shall not have been cured to the satisfaction of the Holder prior to the expiration of thirty days from the Event Date (as defined in the Registration Rights Agreement) relating thereto (other than an Event resulting from a failure of an Registration Statement to be declared effective by the Commission on or prior to the Effectiveness Date (as defined in the Registration Rights Agreement), which shall be covered by Section 8(a)(ix);

xii.the Company shall fail for any reason, other than as a result of the limitations set forth in Section 4(c) hereof, to deliver certificates to a Holder prior to the fifth Trading Day after a Conversion Date pursuant to and in accordance with Section 4(d) or the Company shall provide notice to the Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversions of any Debentures in accordance with the terms hereof;

xiii.the Company shall fail for any reason to pay in full the amount of cash due pursuant to a Buy-In within 5 Trading Days after notice therefor is delivered hereunder or shall fail to pay all amounts owed on account of an Event of Default within five days of the date due;

xiv.any Person shall breach the agreements delivered to the initial Holders pursuant to Section 2.2(a)(iv) of the Purchase Agreement.

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b)Remedies Upon Event of Default. If any Event of Default occurs, the full principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become, at the Holder’s election, immediately due and payable in cash. The aggregate amount payable upon an Event of Default shall be equal to the Mandatory Prepayment Amount. Commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, the interest rate on this Debenture shall accrue at the rate of 18% per annum, or such lower maximum amount of interest permitted to be charged under applicable law. All Debentures for which the full Mandatory Prepayment Amount hereunder shall have been paid in accordance herewith shall promptly be surrendered to or as directed by the Company. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a Debenture holder until such time, if any, as the full payment under this Section shall have been received by it. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 9.Miscellaneous.

a)Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, facsimile number 416-364-9363, Attn: Anna E. Gluskin, President, or such other address or facsimile number as the Company may specify for such purposes by notice to the Holders delivered in accordance with this Section. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile telephone number or address of such Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 5:00 p.m. (New York City time), (ii) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 5:00 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

b)Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, interest and liquidated damages (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of the Company and, pursuant to the Cusotdial Agreement dated the date hereof by and between the Company and the Purchasers (as defined therein), is secured by a first priority security interest in certain Secured Proceeds (as defined in the Custodial Agreement) for the benefit of the Holder. This Debenture ranks paripassu with all other Debentures now or hereafter issued under the terms set forth herein.

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c)Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company.

d)Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Debenture and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Debenture or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Debenture, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

e)Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver must be in writing.

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f)Severability. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Debenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

g)Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

h)Headings. The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit or affect any of the provisions hereof.

IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above indicated.

GENEREX BIOTECHNOLOGY CORPORTION
By:
	Name: Mark A. Fletcher
	Title: Executive Vice-President, General Counsel

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ANNEX A

NOTICE OF CONVERSION

DEBENTURE ISSUED FEB 28 06, DUE MAY 28 06

The undersigned hereby elects to convert principal under the 6% Convertible Debenture of Generex Biotechnology Company, a Delaware corporation (the “Company”), due on May 28, 2007, into shares of common stock, par value $0.001 per share (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts determined in accordance with Section 13(d) of the Exchange Act, specified under Section 4 of this Debenture.

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:

Date to Effect Conversion:

Principal Amount of Debentures to be Converted:

Payment of Interest in Common Stock __ yes __ no

If yes, $_____ of Interest Accrued on Account of Conversion at Issue.

Is conversion to be applied against next Monthly Redemption Payment and if so, what portion?  (note failure to answer deemed entire portion to be applied) $_________

Number of shares of Common Stock to be issued:

Signature:

Name:

Address:

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Schedule 1

CONVERSION SCHEDULE

The 6% Convertible Debentures due on May 28, 2007, in the aggregate principal amount of $____________ issued by Generex Biotechnology Company. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Debenture.

Dated:

  Date of Conversion (or for first entry, Original Issue Date)   Amount of Conversion Aggregate Principal Amount Remaining Subsequent to Conversion (or original Principal Amount)   Company Attest

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EX-4.32

Exhibit 4.32

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT

To Purchase 800,000 Shares of Common Stock of

GENEREX BIOTECHNOLOGY CORPORATION

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, n (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the 181^st day after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the fifth anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Generex Biotechnology Corporation, a Delaware corporation (the “Company”), up to 800,000 shares (the “Warrant Shares”) of Common Stock, par value $0.001 per share, of the Company (the “Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

Section 1.Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in Amendment No. 4 to Securities Purchase Agreement and Registration Rights Agreement datedJanuary 19, 2006 (the “Purchase Agreement Amendment”), and if not found therein, that certain Securities Purchase Agreement (the “Purchase Agreement”), dated November 10, 2004, among the Company and the purchasers signatory thereto.

Section 2.Exercise.

a)Exercise of Warrant. Subject to the terms hereof, exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company); provided, however, within 5 Trading Days of the date said Notice of Exercise is delivered to the Company, the Holder shall have surrendered this Warrant to the Company and the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased in cash or by wire transfer of immediately available funds.

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b)Exercise Price. The exercise price of the Common Stock under this Warrant shall be $1.25, subject to adjustment hereunder (the “Exercise Price”).

c)Cashless Exercise. If at any time after one year from the date of issuance of this Warrant there is no effective Registration Statement registering the resale of the Warrant Shares by the Holder, then this Warrant may also be exercised at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = the VWAP on the Trading Day immediately preceding the date of such election;

(B) = the Exercise Price of this Warrant, as adjusted; and

(X) = the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

d)Exercise Limitations. The Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2(c) or otherwise, to the extent that after giving effect to such issuance after exercise, the Holder (together with the Holder’s affiliates), as set forth on the applicable Notice of Exercise, would beneficially own in excess of 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to such issuance.  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Debentures or Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act, it being acknowledged by Holder that the Company is not representing to Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(d) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder) and of which a portion of this Warrant is exercisable shall be in the sole discretion of such Holder, and the submission of a Notice of Exercise shall be deemed to be such Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. For purposes of this Section 2(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Company’s Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of the Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.

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e)Mechanics of Exercise.

i.Authorization of Warrant Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

ii.Delivery of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within 3 Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”). This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vii) prior to the issuance of such shares, have been paid.

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iii.Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

iv.Rescission Rights. If the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 2(e)(iv) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise; provided that if as a result of the limitations set forth in Section 2(d) hereof, such failure by the Company is for a portion of the Warrant Shares for which a Notice of Exercise has been delivered, the Holder shall be permitted to rescind solely that portion not so exercised.

v.Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Company. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

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vi.No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.

vii.Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

viii.Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

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Section 3.CertainAdjustments.

a)Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Warrant), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b)Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall offer, sell, grant any option to purchase or offer, sell or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price), then, the Exercise Price shall be reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. Notwithstanding the foregoing, no adjustment will be made hereunder in respect of (i) an Exempt Issuance other than an Exempt Issuance that involves an MFN Transaction or a Variable Rate Transaction for which the adjustment provisions of Section 3(b) shall be applicable or (ii) issuances of up to, in the aggregate, the first 1,500,000 shares of Common Stock or Common Stock Equivalents (subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement) to consultants of the Company in any 12 month period pursuant to any resolution duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose.

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c)Pro Rata Distributions. If the Company, at any time prior to the Termination Date, shall distribute to all holders of Common Stock (and not to Holders of the Warrants) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 3(b)), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

d)Fundamental Transaction. If, at any time while this Warrant is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise absent such Fundamental Transaction, at the option of the Holder, (a) upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Alternate Consideration receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event or (b) if the Company is acquired in an all cash transaction, cash equal to the value of this Warrant as determined in accordance with the Black-Scholes option pricing formula (the “Alternate Consideration”). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 3(d) and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

7

e)Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. The number of shares of Common Stock outstanding at any given time shall not includes shares of Common Stock owned or held by or for the account of the Company, and the description of any such shares of Common Stock shall be considered on issue or sale of Common Stock. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

f)Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

g)Notice to Holders.

i.Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to this Section 3, the Company shall promptly mail to each Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Company issues a variable rate security, despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised in the case of a Variable Rate Transaction (as defined in the Purchase Agreement), or the lowest possible adjustment price in the case of an MFN Transaction (as defined in the Purchase Agreement.

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ii.Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last addresses as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the 20-day period commencing the date of such notice to the effective date of the event triggering such notice.

Section 4.Transfer of Warrant.

a)Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Sections 5(a) and 4(d) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

9

b)New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

c)Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

d)Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a qualified institutional buyer as defined in Rule 144A(a) under the Securities Act.

Section 5.Miscellaneous.

a)Title to Warrant. Prior to the Termination Date and subject to compliance with applicable laws and Section 4 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company.

b)No Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price (or by means of a cashless exercise), the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

10

c)Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

d)Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

e)Authorized Shares.

The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

11

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

f)Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

g)Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

h)Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

i)Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

j)Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

k)Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

12

l)Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

m)Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

n)Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

o)Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated: February 28, 2006

GENEREX BIOTECHNOLOGY CORPORATION
By:
	Name: Mark A. Fletcher Title: Executive Vice-President, General Counsel

13

NOTICE OF EXERCISE

BY CRANSHIRE CAPITAL, L.P.

RE WARRANT DATED FEB 28 06

TO:GENEREX BIOTECHNOLOGY CORPORATION

(1)The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2)Payment shall take the form of (check applicable box):

o in lawful money of the United States; or

o the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3)Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

The Warrant Shares shall be delivered to the following:

_______________________________

_______________________________

_______________________________

(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity: ________________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Dated: ______________, _______

Holder’s Signature:_____________________________

Holder’s Address:_____________________________

 _____________________________

Signature Guaranteed: ___________________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EX-10.25

Exhibit 10.25

REDACTED - AS FILED

THE MARKED PORTIONS OF THIS AMENDMENT HAVE BEEN OMITTED

AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO

A REQUEST FOR CONFIDENTIAL TREATMENT

Quotation

Contract Manufacturing of Ora-lyn™

QTE-GFV-0001.01

June 5, 2006

Confidential for Generex Biotechnology Corporation
Customer Contact: Rose C. Perri Suite 202 33 Harbour Square Toronto, ON M5J 2G2 Phone: 416-364-2551, ext 234
Account Manager: Tom Clark Phone: 919-465-8319	Contract Manager: Wally Heritage Phone: 919-465-8284

BioPharmaceutical Product Development

Pharmaceutical Product Development

Clinical Packaging Services

Analytical Chemistry and Microbiology Services

Scientific and Regulatory Consulting

Pulmonary and Nasal Product Development

Clinical and Small Scale Commercial Manufacturing

CONFIDENTIAL

QTE-GFV-0001.01 Page 2

Executive Summary

Cardinal Health, Pharmaceutical Development (Cardinal Health) will perform a technical transfer for the production of Oral-lyn™ for Generex Biotechnology Corporation (Generex). Following the technical transfer, Cardinal Health will produce Phase III clinical supplies of the Oral-lyn drug product. The estimated cost for the technical transfer and Phase III clinical batch production is $[REDACTED] overaperiodofapproximately [REDACTED]. If the three process qualification batches are used as the Phase III clinical supplies, the total estimated cost will be $[REDACTED].

Section 1.Version History

Table 1:Revisions

Version	Date Issued	Reason(s)
00	May 11, 2006	New Issue
01	June 5, 2006	1.Reduced the total number of clinical supplies needed to [REDACTED] (Table 4) 2.Reduced the amount of in-process testing required per batch. (Tables 2 and 4) 3.Removed full raw materials release and included release by Identification and Certificates of Analysis. (Table 4) 4.Removed finished product full release testing from the scope of work. (Tables 2 and 4) 5.Included invoicing schedule. (Table 11)

Section 2.Scope of Work

Cardinal Health will perform a technical transfer for the production of Oral-lyn drug product for Generex. The technical transfer will include the transfer of analytical methods, the production of an engineering batch, and then production of three process qualification batches. If appropriate, all three process qualification batches will serve as Phase III clinical trial materials. Otherwise, Cardinal Health will produce additional batches for Phase III clinical supplies to support Generex’s clinical studies. All activities will be conducted according to cGMPs.

2.1.Safety

2.1.1.Cardinal Health’s Responsibilities

Cardinal Health will assess all vendor and Generex MSDSs and all handling data for the samples/materials associated with this project. When samples/materials are categorized as a Controlled Drug Substance (CDS) and/or Class 4 and above, the samples/materials will require special handling precautions and procedures.

If categorized as a CDS, Cardinal Health will invoice Generex a CDS Handling Surcharge for all project activities. If categorized as a Class 4 or above, Cardinal Health will invoice Generex for compound specific monitoring, supplies, or equipment purchased specifically for this project to ensure safe handling of Generex‘s samples and materials. It is not anticipated that Generex’s product will be categorized as a CDS or Class 4 compound.

160 Magellan Lab Court • Morrisville, NC 27560 • PO Box 13341 • RTP, NC 27709

Direct: (919) 481-4855 • Facsimile: (919) 481-4908 • www.cardinal.com/pts

QTE-GFV-0001.01 CONFIDENTIAL Page 3

2.1.2.Generex’s Responsibilities

Generex will provide an MSDS and all sample/material handling data for the samples/materials associated with this project. If samples/materials have any special handling considerations, Generex will notify Cardinal Health prior to the initiation of the project.

2.2.Methods/Documentation

Table 2:Methods for Reference

		Replicates per Analysis
Reference	Method	In-process Testing	Batch Release
GNX-001	Physical Appearance of Oral-lyn Bulk Drug Product	1	-
GNX-003	pH Test For Bulk	1	-
GNX-005	HPLC Potency and Identity Determination for Insulin in Bulk Product	1	1
GNX-017	Leak Rate/Net Content (Aerosol Finished Product)	-	10
GNX-020	High Molecular Weight Protein (HMWP) Content of Oral-lyn Drug Substance and Drug Product by Size Exclusion HPLC (Oral-lyn Bulk Drug Product)	1	-
GNX-024	Fill Weight Finish Product	-	3
USP <61> & <1227>	Microbial Limits	1	1
SOP-MC-019-002	Cleaning Verification	-	-

2.2.1.Cardinal Health’s Responsibilities

Cardinal Health will review all project-related documentation and methods received from Generex associated with this project.

2.2.2.Generex’s Responsibilities

Generex will provide all available project-related documentation and methods to be used for this project.

160 Magellan Lab Court • Morrisville, NC 27560 • PO Box 13341 • RTP, NC 27709

Direct: (919) 481-4855 • Facsimile: (919) 481-4908 • www.cardinal.com/pts

QTE-GFV-0001.01 CONFIDENTIAL Page 4

2.3.Sample/Materials

Table 3:Raw Materials

Raw Material	Supplier
[REDACTED]	[REDACTED]
[REDACTED]	[REDACTED]
[REDACTED]	[REDACTED]
[REDACTED]	[REDACTED]
[REDACTED]	[REDACTED]
[REDACTED]	[REDACTED]
[REDACTED]	[REDACTED]
[REDACTED]	[REDACTED]
[REDACTED]	[REDACTED]
[REDACTED]	[REDACTED]
[REDACTED]	[REDACTED]
[REDACTED]	[REDACTED]

2.3.1.Cardinal Health’s Responsibilities

Cardinal Health will, as necessary, log in all samples/materials according to current Standard Operating Procedures. Upon issuance of the final report or Certificate of Analysis, samples/materials will be stored in quarantine at Cardinal Health for a period of 30 days. After the 30-day quarantine, samples/materials will be disposed of at Cardinal Health unless notified otherwise by Generex.

2.3.2.Generex’s Responsibilities

If available, Generex will provide all samples/materials necessary to perform this project. The samples/materials should arrive at Cardinal Health with all proper documentation. If samples/materials are not available, Generex will request Cardinal Health to purchase all necessary samples/materials needed to perform this project. If return shipment is requested, Generex will notify Cardinal Health prior to the disposition of samples/materials.

160 Magellan Lab Court • Morrisville, NC 27560 • PO Box 13341 • RTP, NC 27709

Direct: (919) 481-4855 • Facsimile: (919) 481-4908 • www.cardinal.com/pts

QTE-GFV-0001.01 CONFIDENTIAL Page 5

Section 3.Project Activities

3.1.Cardinal Health’s Responsibilities

Cardinal Health will transfer analytical methods in-house from Generex, produce engineering and process qualification batches, and produce clinical supplies as indicated in Table 4.

Table 4:Project Activities and Costs

Study Phase	Activities
Project Related Activities	Cardinal Health will carry out project related activities that include initial project discussions with Generex, project team selection, agreement to and approval of project activities, and program management activities.
Analytical Methods Transfer	Transfer of Generex’s analytical methods listed in Table 21.
Raw Materials Release	Cardinal Health will release the raw materials listed in Table 3 for use with the engineering, process qualification, and clinical batches. It is assumed that Generex will perform full release of all raw materials and Cardinal Health will release raw materials based on Identification and Certificates of Analysis.2
Engineering Batch	-Preparation of product inventory specifications -Preparation of batch records -Production of one [REDACTED]-canister placebo batch -Production of one [REDACTED]-canister active batch -Process evaluation analysis consisting of: ●   In-process and finished product analysis by the methods listed in Table 2 ●   Check weighing ●   Automatic valve function (spray testing) -Cleaning verification

¹ It is assumed that analytical methods are validated to a level sufficient for Phase III activities. Cardinal Health requests that a report detailing the validation of the all methodology be provided prior to transfer activities.

² It is assumed that Cardinal Health will perform Identification and CoA release testing once for the engineering batches, once for the three process qualification batches, and once for the Phase III clinical supply batches.

160 Magellan Lab Court • Morrisville, NC 27560 • PO Box 13341 • RTP, NC 27709

Direct: (919) 481-4855 • Facsimile: (919) 481-4908 • www.cardinal.com/pts

QTE-GFV-0001.01 CONFIDENTIAL Page 6

Table: 4 Project Activities and Costs (continued)

Study Phase	Activities
Process Qualification	Production of process qualification batches will consist of the following activities for each of the three batches: -Pre-production activities ●Preparation of product specifications ●Preparation of batch records -Production activities ●Filling up to [REDACTED] canisters with the Oral-lyn drug product ●In-process control analysis (post-production analysis) of bulk and finished drug product ●Release of finished drug product per methods listed in Table 2 -Cleaning verification after the manufacture of each batch It is proposed that if the production and release analysis of the process qualification batches is acceptable, the process qualification batches may serve as clinical supplies. If process qualification batches are to be used as clinical supplies, the following additional activities will be performed: -Bulk packaging and labeling1,2 -Shipment of samples to a clinical packaging and services facility3
Clinical Supplies Production	If necessary (based on the use of Process Qualification batches as clinical supplies) Cardinal Health will produce up to three batches of the Oral-lyn drug product for use in clinical studies. Activities will include: -Pre-production activities ●Receipt and release of API, valves, canisters, and actuators1 ●Preparation of batch records -Production activities ●Filling up to [REDACTED] canisters per batch with the Oral-lyn drug product ●In-process control analysis (post-production analysis) of bulk drug product and finished product ●Release of finished drug product per methods listed in Table 2 -Bulk packaging and labeling1,2 -Shipment of samples to a clinical packaging and services facility (e.g. Cardinal Health’s Clinical Packaging Services facility in Philadelphia4) The costs associated with stability studies (storage and analysis) to support Phase III clinical studies are not included in this quotation. Cardinal Health has the experience, capabilities, and facilities to provide stability study services if requested by Generex.

¹ The costs associated with long-term storage of bulk product is not included in this quotation.

² The costs associated with assembly of the canisters into actuators and dust caps is not included in this quotation. It is assumed that assembly will occur at the clinical packaging and labeling facility.

³ The costs associated with shipment to the clinical packaging and labeling facility is not included in this quotation but will be invoiced to Generex at cost. Packaging and labeling of clinical supplies is not included in this quotation.

⁴ The costs associated with shipment to the clinical packaging and labeling facility is not included in this quotation but will be invoiced to Generex at cost. Packaging and labeling of clinical supplies is not included in this quotation.

160 Magellan Lab Court • Morrisville, NC 27560 • PO Box 13341 • RTP, NC 27709

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QTE-GFV-0001.01 CONFIDENTIAL Page 7

3.2.Generex’s Responsibilities

Generex will sign the protocol and provide a technical contact that will be available for technical discussions and to make decisions that are needed in reference to this project. Generex will not use any samples/materials shipped from Cardinal Health for this project in a manner that is inconsistent with the scope of this project.

Section 4.Specifications

4.1.Cardinal Health’s Responsibilities

Cardinal Health will document the specifications, if applicable, in the protocol.

4.2.Generex’s Responsibilities

Generex will provide all specifications necessary to perform this project.

Section 5.Scheduling/Deliverables

5.1.Scheduling

Cardinal Health must receive a signed Quotation with a Purchase Order number, a signed protocol, all samples/materials, and must have on file a signed and effective terms and conditions and Quality Agreement (if applicable) in order for this project to be scheduled. Once scheduled, Cardinal Health will notify Generex of the anticipated start and completion date of the project activities.

Rush services are available at Generex’s request. If rush services are requested, additional costs will be incurred, ranging from [REDACTED] to [REDACTED]% of the project cost and depending upon the lead-time provided and Generex-requested turnaround time.

A proposed timeline based on the clinical supplies requirements and raw materials constraints as anticipated at the time of quotation issuance is included in Table 5.

160 Magellan Lab Court • Morrisville, NC 27560 • PO Box 13341 • RTP, NC 27709

Direct: (919) 481-4855 • Facsimile: (919) 481-4908 • www.cardinal.com/pts

QTE-GFV-0001.01 CONFIDENTIAL Page 8

Table 5:Anticipated Project Timelines

[REDACTED]

160 Magellan Lab Court • Morrisville, NC 27560 • PO Box 13341 • RTP, NC 27709

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QTE-GFV-0001.01 CONFIDENTIAL Page 9

5.2.Communication

In order to establish a collaborative relationship between Generex and Cardinal Health, Cardinal Health will appoint a project management representative to serve as a point of contact for Generex and to oversee progress on this project. Upon initiation of the project, Cardinal Health and Generex will establish a communication plan to include primary points of contact for both Cardinal Health and Generex. In addition, Cardinal Health and Generex will establish project meeting schedule(s), with scope, frequencies and durations to be mutually agreed upon by both parties.

5.3.Deliverables

Table 6:Tasks/Deliverables

Task	Deliverable
Technical Transfer	Analytical method transfer activities -Analytical methods transfer report Pre-production activities -Product inventory specifications -Master batch records Engineering Batch -Production batch records -[REDACTED] placebo canisters -[REDACTED] active canisters Process Qualification -Production batch records -[REDACTED] canisters per process qualification batch (three batches total) -Process qualification report Technical transfer report
Phase III Clinical Supply Production	-Production batch records -[REDACTED] canisters per Phase III clinical batch (3 total batches for a total of [REDACTED] canisters) -Certificates of Analysis for each batch -Bulk packaged and labeled supplies shipped to Cardinal Health’s clinical packaging and labeling facility in Philadelphia, PA

160 Magellan Lab Court • Morrisville, NC 27560 • PO Box 13341 • RTP, NC 27709

Direct: (919) 481-4855 • Facsimile: (919) 481-4908 • www.cardinal.com/pts

QTE-GFV-0001.01 CONFIDENTIAL Page 10

Section 6.Cost Proposal

6.1Project Cost

Table 7:Project Related Activities Costs¹

Activity	Estimated Cost ($)
Project Related Activities	[REDACTED]

Table 8:Technical Transfer Costs

Technical Transfer Activity	Cost ($)
Analytical Methods Transfer	REDACTED
Engineering Batch Production and Evaluation of One Active and One Placebo Batch	[REDACTED]
Process Qualification (Three Batches of [REDACTED])	[REDACTED]
Total Technical Transfer Cost	[REDACTED]

Table 9:Phase III Clinical Supply Production Costs

Activity	Cost ($)
Production of Clinical Supplies	[REDACTED]/batch of [REDACTED] units ($[REDACTED] per canister)
Total Clinical Supplies Production Costs for Three Batches	[REDACTED]

Table 10:Total Project Costs

Activity	Cost ($)
Project Related Activities	[REDACTED]
Technical Transfer	[REDACTED]
Phase III Clinical Supply Production	[REDACTED]
Total Project Costs	[REDACTED]2

¹ Project Related Activities, as detailed in Section 3.1, will be performed over the course of the program and will include frequent communications with Generex during technical transfer activities and project management of the technical transfer and subsequent Phase III batch productions.

² The total project cost, excluding project related activities, will be $[REDACTED] if all three Process Qualification batches are used for Phase III clinical supplies and no additional batches are produced. Project related activities will be invoiced as accrued.

160 Magellan Lab Court • Morrisville, NC 27560 • PO Box 13341 • RTP, NC 27709

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QTE-GFV-0001.01 CONFIDENTIAL Page 11

6.2Additional Fees

If copies of raw data are requested in the course of an active project, Generex will be invoiced at $[REDACTED]/hour for time required to generate and compile the data.

All requested samples/materials purchased by Cardinal Health for this project will be invoiced to Generex, at cost.

Non-standard or special instrumentation or equipment required solely for Generex’s project will be invoiced to Generex following Generex approval.

6.2.Revisions to Pricing

Cardinal Health reserves the right to revise quoted costs for any project as a result of initial scope change, revisions in protocols, modifications of test methods, final review of test methods, undocumented requirements, retesting or resynthesis, or any unforeseen difficulty in executing the project. The additional work will be performed based on written agreement from Generex and will be documented on a Cardinal Health Quotation Amendment Request (QAR).

All required investigational work (such as OOS investigations, troubleshooting chromatographic methods, etc.) may be conducted without prior approval from Generex, for up to [REDACTED] scientist hours per occurrence. If the additional work requires going beyond [REDACTED] hours, Generex will be contacted prior to continuation. All investigational retesting performed that is not directly due to a Cardinal Health error will be invoiced to Generex.

160 Magellan Lab Court • Morrisville, NC 27560 • PO Box 13341 • RTP, NC 27709

Direct: (919) 481-4855 • Facsimile: (919) 481-4908 • www.cardinal.com/pts

QTE-GFV-0001.01 CONFIDENTIAL Page 12

Section 7.Invoicing and Payment Terms

7.1.Invoicing

Cardinal Health will [REDACTED]. Cardinal Health will issue invoices as detailed below. Costs for activities, not including any pass-through costs, will not exceed those listed in Section 6 without Generex’s approval.

Table 11:Invoicing Schedule

Activity	Invoice Schedule/Amount
Quotation Acceptance by Generex	$[REDACTED] (deposit to be made by Generex)1
Project Related Activities	Invoiced monthly as accrued
Analytical Method Transfer	Invoiced monthly until completion
Engineering Batch Production and Evaluation	Invoiced monthly until completion
Process Qualification	Invoiced upon batch completion [REDACTED]2
Production of Clinical Supplies	Invoiced upon batch completion [REDACTED]2
Generex’s Regulatory Submission to the Canadian Agency	Invoiced upon submission [REDACTED]

7.2.Payment Terms

Payments toward all invoices are due within [REDACTED] days of receipt of invoice and are non-refundable. Any applicable wire transfer fee must be included in the payment issued to Cardinal Health. Remit all payments to:

Cardinal Health, Pharmaceutical Development, RTP

4673 Collections Center Drive

Chicago, IL 60693

Section 8.Additional Project Terms

8.1.Termination / Cancellation

Either party may terminate the Project or any portion thereof at any time by providing [REDACTED] days written notice. In the event of a termination by Generex, Cardinal Health will promptly scale down the affected portion of the Project to avoid (or minimize, where non-cancellable) any further related expenses. On the effective date of termination, Generex will make payment to Cardinal Health in an amount equal to the costs incurred by Cardinal Health for all work performed prior to the effective date, any costs necessary to scale-down the Project, any non-cancellable commitments made by Cardinal Health prior to notice of termination, and any cancellation fees pursuant to the details below. Additionally, Cardinal Health will invoice Generex the cost of any sample/materials, reference materials, equipment, and supplies purchased by Cardinal Health specifically for this project.

¹The $[REDACTED] deposit will be applied to the final invoice for Process Qualification activities (or Clinical Supplies production if performed).

² Batch completion will be marked by release of materials to Generex for analysis.

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QTE-GFV-0001.01 CONFIDENTIAL Page 13

In addition to costs already incurred, Cardinal Health reserves the right to invoice Project Cancellation fees according to the following calendar day schedule: Batch Cancellation notice of 20 to 29 days – [REDACTED]% of cost for Batch Manufacture, 10 to 19 days – [REDACTED]% of cost for Batch Manufacture, 4 to 9 days – [REDACTED]% of cost for Batch Manufacture and 0 to 3 days – [REDACTED]% of cost of Batch Manufacture.

8.2.Project Notes and Assumptions

Generex acknowledges that the results of experimental/development work and the outcome of prevalidated manufacturing are not predictable and agrees that Generex shall pay for all work conducted and for all product batches produced in accordance within this quotation regardless of outcome.

Costs assume that raw material vendors will not be qualified by Cardinal Health. Qualification of vendors may represent a potential opportunity for cost savings and may be discussed with Generex in greater detail, if requested.

It is assumed that a single cleaning verification will be performed after the production of each two-batch campaign.

Costs assumes high yields (>[REDACTED]%).

160 Magellan Lab Court • Morrisville, NC 27560 • PO Box 13341 • RTP, NC 27709

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QTE-GFV-0001.01 CONFIDENTIAL Page 14

8.3.Standard Terms and Conditions

All work performed under this quotation is subject to the Master Development and Clinical Services Agreement, pending negotiation, between Cardinal Health and Generex.

Section 9.Project Approval and Authorization

By signing below, Generex Biotechnology Corporation agrees to the project details as set forth in this Quotation.

Generex Biotechnology Corporation	Cardinal Health PTS, LLC
/s/ Rose C. Perri	/s/ Troy M. Young
Signature	Signature
Rose C. Perri	Troy M. Young
Printed Name	Printed Name
Chief Operating Officer	Director, Business Services
Title	Title
June 20, 2006	6/5/2006
Date	Date
PO Number

Please sign and return a copy of the Quotation Approval Page via fax to Wally Heritage at

(919) 481-4908 or email at wally.heritage@cardinal.com.

160 Magellan Lab Court • Morrisville, NC 27560 • PO Box 13341 • RTP, NC 27709

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EX-10.26

REDACTED - AS FILED Exhibit 10.26

THE MARKED PORTIONS OF THIS QUOTATION AMENDMENT HAVE BEEN OMITTED

AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO

A REQUEST FOR CONFIDENTIAL TREATMENT

CONFIDENTIAL

Quotation Amendment for

Contract Manufacturing of Ora-lyn™

Prepared for Rose C. Perri, Generex Biotechnology Corporation

Section 1.	Amendment Number	QAR-01
Section 2.	Product	Ora-lyn
Section 3.	Original Quotation Number	QTE-GFV-0001.01
Section 4.	Original Estimated Total Project Cost	[REDACTED]
Section 5.	Additional Estimated Project Cost

Table 1:QAR Version History

QAR Number	Additional Cost ($)
01	[REDACTED]
Revised Total Estimated Project Cost	[REDACTED]

Section 6.Reasons for Amendment

1) Reference to Standard Terms and Conditions

In order to expedite the project initiation, the project related activities and analytical methods transfer will be performed subject to the Standard Terms and Conditions (STC), effective June 20, 2006, between Cardinal Health and Generex Biotechnology Corporation. All other activities (Engineering Batch Production and Evaluation, Process Qualification, and Production of Clinical Supplies) will be performed per the Master Development and Clinical Services Agreement (MDCSA), pending negotiation, as specified in the original quotation. Should the MDCSA become fully executed prior to the completion of the project related activities and analytical methods transfer, the MDCSA will become the applicable legal agreement and will supercede the STC.

2) Full Release Testing

Generex Biotechnology Corporation has requested that Cardinal Health include full release testing of clinical batches of the Ora-lyn drug product produced at Cardinal Health’s RTP, NC facility. The original quotation included reduced release testing by “Identification by HPLC” (GNX-005), “Leak Rate/Net Content” (GNX-017), and “Fill Weight Finished Product” (GNX-024), “Microbial Limits” (USP <61>). Additional activities to be included are:

–   Cardinal Health will transfer in-house Generex’s Particle Size Distribution by Cascade Impaction method (assumed to be performed using an eight-stage cascade impactor)

–   It is assumed that the transfers included in the original quotation for GNX-005 and GNX-020 bulk product methodology will be sufficient for the transfer of GNX-006 and GNX-021 finished product methodology.

–   Full release analyses will be performed as listed in Table 2.

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QAR-01 for QTE-GFV-0001.01 CONFIDENTIAL Page 2 

Table 2:Full Release Methods for Reference

Reference	Method	Replicates per Batch Release
GNX-002	Physical Appearance of Finished Product (Oral-lyn)	[REDACTED]
GNX-004	pH of Finished Product for Aerosol can	[REDACTED]
GNX-006	HPLC Potency and Identity Determination for Insulin in Buccal Formulations (Finished Product Oral-lyn by Un-Crimped Method)	[REDACTED]
GNX-017	Leak Rate/Net Content (Aerosol Finished Product)	[REDACTED]
GNX-021	High Molecular Weight Protein (HMWP) Content of Insulin Drug Substance and Drug Product by Size Exclusion HPLC (Oral-lyn Finished Product)	[REDACTED]
GNX-022	HPLC Assay (Potency) and Identity Determination for Insulin in Buccal Formulations (Finished Product Oral-lyn by Actuation Method)1	[REDACTED]
GNX-024	Fill Weight Finish Product	[REDACTED]
TBD	Particle Size Distribution by Cascade Impaction	[REDACTED]
USP <61> & <1227>	Microbial Limits	[REDACTED]

¹ It is assumed that this HPLC Assay method will be used as the dose content analytical method.

Table 3:Amended Cost Detail

Analysis	Cost ($)
Method Transfer	[REDACTED]
Batch Release (Per the methods listed in Table 2)	[REDACTED] per batch of [REDACTED] Units1 ([REDACTED] per unit)

¹ With full batch release, the total clinical supplies production cost for three batches is $[REDACTED], or $[REDACTED] above the $[REDACTED] cost quoted for reduced release testing in the original quotation.

Section 7.Comments

This QAR, revised to include method transfer and full release testing activities, supercedes the “00” version issued June 21, 2006.

Section 8.Approvals

Generex Biotechnology Corporation	Cardinal Health PTS, LLC
/s/ Rose C. Perri Signature	/s/ Annette Shanley Signature
Rose C. Perri Printed Name	Annette Shanley Printed Name
Chief Operating Officer Title	Manager, Contract Management Title
_______________ Date	_______________ Date

Contract Management: Project Coordination: Date: CAH Reference: Wally Heritage David Shirley August 17, 2006 QAR-GFV-0001.01

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EX-10.27

Exhibit 10.27

REDACTED - AS FILED

THE MARKED PORTIONS OF THIS CLINICAL SUPPLY AGREEMENT HAVE BEEN OMITTED

AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO

A REQUEST FOR CONFIDENTIAL TREATMENT

CARDINAL HEALTH

CLINICAL SUPPLY AGREEMENT

This Clinical Supply Agreement (“Agreement”) is made as of this ___day of September, 2006 (“Effective Date”), by and between Generex Biotechnology Corporation, a Delaware corporation, with a place of business at 33 Harbour Square, Toronto, ON, Canada M5J 2G2 (hereinafter “Client”) and Cardinal Health PTS, LLC, a Delaware limited liability company, with a place of business at 160 Cardinal Health Way, Morrisville, NC 27560 (hereinafter “Cardinal Health”).

RECITALS

A.Client is a pharmaceutical company that develops pharmaceutical products; and

B. Cardinal Health provides a complete range of analytical, development and clinical services to the pharmaceutical industry; and

C. Client and Cardinal Health desire to enter into this Agreement to provide the terms and conditions upon which Client may engage Cardinal Health to provide services as defined in individual Project Plans (as defined below) specifying the details of the services and the related terms and conditions.

THEREFORE, in consideration of the mutual covenants, terms and conditions set forth below, the parties agree as follows:

ARTICLE 1

DEFINITIONS

The following terms have the following meanings in this Agreement:

1.1“Affiliate(s)” means any corporation, firm, partnership or other entity that controls, is controlled by or is under common control with a party. For purposes of this definition, “control” shall mean the ownership of at least fifty percent (50%) of the voting share capital of such entity or any other comparable equity or ownership interest.

1.2“API” means the active pharmaceutical ingredient used in the performance of a Project as defined in the Project Plan.

1.3“Applicable Laws” means all laws, ordinances, rules and regulations within the Territory applicable to the Processing of the Product or any aspect thereof and the obligations of Cardinal Health or Client, as the context requires under this Agreement, including, without limitation, (A) all applicable federal, state and local laws and regulations of each Territory; (B) the U.S. Federal Food, Drug and Cosmetic Act, and (C) the Good Manufacturing Practices (“GMPs”), Good Laboratory Practices (“GLPs”) or Good Clinical Practices (“GCPs”) promulgated by the Regulatory Authorities, as amended from time to time, as applicable to the Project.

1.4“Cardinal Health Inventions” has the meaning set forth in Article 7.3.

1.5“Change Order” means an amendment to a Project Plan agreed to by the parties in writing in accordance with the terms set forth in Article 2.2.

1.6“Client Inventions” has the meaning set forth in Article 7.2.

1.7“Client-Supplied Materials” means any API or other materials provided by Client to Cardinal Health.

1.8“Confidential Information” has the meaning set forth in Article 6.2.

1.9“Dispute” means any dispute, controversy or disagreement between the parties in connection with this Agreement.

1.10“Facility” means the Cardinal Health facility defined in the applicable Project Plan

1.11“Initial Term” has the meaning set forth in Article 12.1.

1.12“Intellectual Property” means all intellectual property (whether or not patented), including without limitation, patents, patent applications, know-how, trade secrets, copyrights, trademarks, designs, concepts, technical information, manuals, standard operating procedures, instructions or specifications.

1.13“Product” means the product or material that is the subject of the services to be provided pursuant to a Project Plan.

1.14“Project Plan” means a separate quotation or project plan agreed to by the parties in writing substantially in the form set out in Attachment A and specifically incorporating by reference this Agreement. A Project Plan shall define the scope of the services to be performed by Cardinal Health and the responsibilities of the parties with respect to such services.

1.15“Regulatory Authority” means any governmental regulatory authority within a Territory involved in regulating any aspect of the development, manufacture, market approval, sale, distribution, packaging or use of the Product.

1.16“Services” means all work performed by Cardinal Health for Client pursuant to a Project Plan.

1.17“Specifications” means all written specifications agreed to by the parties in the Project Plan, and applicable master batch records, protocols, or standard operating procedures.

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1.18“Territory” means the United States of America, Canada, the European Union and any other country which the Parties agree in writing to add to this definition of Territory in an amendment to this Agreement.

ARTICLE 2

SCOPE

2.1Definition of Scope. Cardinal Health will perform the services in accordance with the specific terms set forth in a Project Plan. Each Project Plan shall clearly define the Project, the Product, and the responsibilities of the parties with respect to such Project. Each Project Plan will include, as appropriate, the scope of work, pricing and payment schedule. Each Project Plan shall be subject to all of the terms and conditions of this Agreement, in addition to the specific details set forth in the Project Plan. To the extent any terms or conditions of a Project Plan conflict with the terms and conditions of this Agreement, the terms and conditions of this Agreement shall control, except to the extent that the applicable Project Plan expressly and specifically states an intent to supersede this Agreement on a specific matter. Unless specifically agreed to by the parties, this Agreement shall not apply to softgel, Zydis, inhalationor other proprietary drug delivery proprietary technologies owned or licensed by Cardinal Health. This Agreement shall supersede the terms of any purchase order, acknowledgement or delivery document.

2.2Amendments to Scope/Change Orders. Any material change in the details of a Project Plan or the assumptions upon which the Project Plan is based (including, but not limited to, changes in an agreed starting date for a Project or suspension of the Project by Client) may require changes in the pricing and/or time lines, and shall require a written amendment to the Project Plan (a “Change Order”). Each Change Order shall detail the requested changes to the applicable task, responsibility, duty, pricing, time line or other matter. The Change Order will become effective upon the execution of the Change Order by both parties, and Cardinal Health will be given a reasonable period of time within which to implement the changes. Both parties agree to act in good faith and promptly when considering a Change Order requested by the other party. Without limiting the foregoing, Client agrees that it will not unreasonably withhold approval of a Change Order if the proposed changes in pricing or time lines result from, among other appropriate reasons, forces outside the reasonable control of Cardinal Health or changes in the assumptions upon which the initial pricing or time lines were based. Cardinal Health reserves the right to postpone effecting material changes in the Project’s scope until such time as the parties agree to and execute the corresponding Change Order. Notwithstanding the foregoing, the original Project Plan shall remain in full force and effect and actively performed by Cardinal Health until implementation of any Change Order.

ARTICLE 3

PRICING AND PAYMENT TERMS

3.1Price and Price Changes.

A.Price. Client shall pay for the services as provided in this Agreement and all Project Plans.

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B.Price Changes. Cardinal Health may revise the prices provided in a Project Plan if (1) the parties agree to materially revise a technical test protocol, (2) any information relating to a Project which is provided by Client is materially inaccurate or materially incomplete, (3) Client materially revises Cardinal Health’s responsibilities, the Specifications, applicable test methods, final review of test methods, procedures, assumptions, development processes, test methods or analytical requirements, (4) Client requests a materially different report format, (5) Client requests material revisions to laboratory reports, (6) Client requests copies of laboratory records (excluding a single copy of batch records which will be provided for each batch manufactured hereunder), or (7) unforeseen circumstances materially affect the work required to complete the Project.

C.Retesting. All retesting performed that is not directly due to a Cardinal Health error will be billed to the Client. All required investigational studies or additional Client requests not outlined in the Project Plan will be invoiced for the cost of performance at the current standard hourly rate, plus any associated fees. If, as the outcome of an investigation, causality is not determined for retesting, Cardinal Health and Client will share equally the additional expenditures required to determine causality

D.Out Of Specification Investigations and Reporting. Cardinal Health reserves the right to expend up to 16 hours per occurrence to complete all required investigational work (such as OOS investigations, trouble shooting chromatographic methods, etc.) without prior approval from the Client. If the additional work requires going beyond 16 hours, the Client will be contacted prior to continuation. The additional work will be performed based on written agreement from the Client and will be documented on a Cardinal Health Quotation Amendment Request (QAR).

E.Cancellations and Postponements by Client.

If Client cancels or materially postpone a scheduled batch manufacture as outlined in the Project Plan with less than thirty (30) days notice, Client shall pay an accommodation fee as follows:

Notification prior to Date of Compounding	Fee (% of Total Batch Cost)
20 - 29 days	[REDACTED]
10 - 19 days	[REDACTED]
4 - 9 days	[REDACTED]
0 - 3 days	[REDACTED]

If Client cancels any portion of a Project outlined in the Project Plan which is not batch manufacture or packaging, Client shall pay all costs for materials purchased and all services rendered by Cardinal Health prior to termination, plus: (1) [REDACTED] of the total quoted value of the services set forth in the Project Plan, if the project is cancelled after signing the Project Plan, but prior to commencement of the Project work, (2) [REDACTED] of the Project Plan value if cancelled after the Project work has commenced, and (3) the [REDACTED] Project Plan value if cancelled after more than fifty percent of the Project work has been completed. If Client signs a Project Plan and the Project is delayed by more than ninety (90) days at Client’s request, Cardinal Health, at its option, may consider the Project cancelled and will charge Client the applicable charges.

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F. Postponements by Cardinal Health.

If Cardinal Health materially postpones a scheduled batch manufacture as outlined in the Project Plan due to an inability to provide the facilities necessary for manufacture for reasons other than Force Majeure for a period of greater than five business days from scheduled date, then Cardinal Health shall reduce the batch manufacture cost by a percentage as follows:

Period of postponement	Reduction in Batch Cost
6 - 10 days	[REDACTED]
11 - 20 days	[REDACTED]
21 - 30 days	[REDACTED]
Over 30 days	[REDACTED]

Notwithstanding the foregoing, both parties will attempt to accommodate batch manufacture material postponements of less than five business days.

3.2  Invoicing.Cardinal Health shall invoice Client as follows:

A.For lot manufacture and/or packaging, upon the earliest to occur of the following: (1) release of a Product lot by Cardinal Health’s Quality Department, whether or not Client has approved such release; (2) shipment of the Product by Cardinal Health; or (3) if a third party is to perform finished product testing, then 35 days following shipment of Product samples to a third party testing agency, but only if such testing agency has not yet delivered its test results for such Product and Cardinal Health has performed all of its responsibilities except for those responsibilities which incorporate test results from the third party testing agency,

B.For any project that can be completed within 30 days (other than lot manufacture), Cardinal Health shall invoice Client upon completion of the project; or

C.For any project that cannot be completed within 30 days (other than lot manufacture), Cardinal Health shall invoice Client on a monthly basis.

3.3Payment Terms.In the event payment is not received by Cardinal Health on or before the [REDACTED] day after the date of the invoice, then Cardinal Health may, in addition to any other remedies available at equity or in law, at its option elect to do any one or more of the following remedies: (i) charge a late payment fee on such unpaid amount equal to one percent (1%) per month until paid in full; (ii) suspend any further deliveries hereunder until such invoice is paid in full; or (iii) terminate the Agreement pursuant to Section 12.3.

3.4Advance Payment. If at any time, in Cardinal Health’s sole discretion exercised in a reasonable and objective manner, Client’s credit is materially impaired, Cardinal Health shall have the right to require payment in advance before making any further shipment of the Product. If Client shall fail, within a reasonable time, to make such payment in advance, or if Client shall fail to make payment when due, Cardinal Health shall have the right, at its option, to suspend any further deliveries hereunder until such default is corrected, without thereby releasing Client from its obligations under this Agreement.

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3.5Taxes. All taxes, duties and other amounts assessed (excluding tax based on net income and franchise taxes) on the services, components, API or the Product prior to or upon sale to Client and on any Client owned tooling and equipment are the responsibility of Client, and Client shall reimburse Cardinal Health for any such taxes, duties or other expenses paid by Cardinal Health.

3.6Shipments. All product, raw materials, components and Batch Documentation shipped by Cardinal Health are shipped EXW, Facility.

ARTICLE 4

CLINICAL MANUFACTURING AND PACKAGING

4.1Applicability of Terms. The terms set forth in this Article shall apply only in the event that Cardinal Health is providing pre-commercial manufacturing and/or packaging services pursuant to this Agreement.

4.2Non-Conforming Product. Subject to Section 4.4, Client shall notify Cardinal Health within thirty (30) days following delivery of Product to Client if Client has determined that such Product does not conform to Specifications and shall provide Cardinal Health a sample of such non-conforming Product. If the batch is non-conforming, Client shall not be responsible to pay for such batch, and Cardinal Health shall, at Client’s option, either (A) reperform the Services at Client’s expense, or (B) credit any payments made by Client for such batch. THE OBLIGATIONS OF CARDINAL HEALTH UNDER THE PRECEDING SENTENCE SHALL BE CLIENT’S SOLE AND EXCLUSIVE REMEDY UNDER THIS AGREEMENT FOR PRODUCT THAT HAS NOT BEEN RELEASED. If Cardinal Health does not agree with Client’s determination that such Product fails to meet the Specifications, then after reasonable efforts to resolve the disagreement, either party may submit a sample of such Product to a mutually agreed upon independent and appropriately qualified third party laboratory to determine whether the Product meets the Specifications. The independent party’s results shall be final and binding. Unless otherwise agreed to by the parties in writing, the costs associated with such testing and review shall be borne by the non-prevailing party.

4.3Supply of Client-Supplied Material for Defective Product. In the event Cardinal Health re-performs the Services pursuant to Article 4.2, above, Client shall supply, at Client’s sole cost, sufficient quantities of the Client-Supplied Materials for Cardinal Health to complete such replacement.

4.4Development/Initial Batches. Each batch of Product manufactured under this Agreement will be considered to be a “Development Batch” until Cardinal Health has manufactured three consecutive batches of Product that meet the applicable Specifications. The term “Development Batch” shall include without limitation any batch manufactured following (i) a change in Specifications, or (ii) a scale-up in the manufacturing process to produce greater quantities of Product, until Cardinal Health has manufactured three consecutive batches of Product meeting the new Specifications. Client shall be responsible for the cost of each Development Batch that fails to meet the Specifications unless Cardinal Health was negligent in the manufacture of the out of Specification batch.. Cardinal Health and Client shall cooperate in good faith to resolve any problems causing the out-of-Specification batch.

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4.5Unlabeled Product. If Cardinal Health is to provide Client with Product that is not labeled, Client represents and warrants that it will comply with all applicable regulations, including without limitation 21 CFR § 201.150.

4.6Failure to Take Delivery. If Client fails to take delivery on any scheduled delivery date, Client shall be invoiced for the stored Product and invoiced on a monthly basis thereafter for reasonable administration and storage costs. Any such Product shall be stored by Cardinal Health in accordance with the Specifications. For each such batch of undelivered Product, Client agrees that: (A) Client has made a fixed commitment to purchase such Product, (B) title and risk of ownership for such Product passes to Client, (C) such Product shall be on a bill and hold basis for legitimate business purposes, (D) if no delivery date is determined at the time of billing, Cardinal Health shall have the right to ship the Product to Client within four (4) months after billing, and (E) Client will be responsible for any decrease in market value of such Product that relates to factors and circumstances outside of Cardinal Health’s control. Within five (5) days following a written request from Cardinal Health, Client shall provide Cardinal Health with a letter confirming items (A) through (E) of this Article for each Batch of undelivered Product.

ARTICLE 5

REGULATORY

5.1Audit. Prior to the commencement of the Services, and subject to Cardinal Health’s obligations of confidentiality to third parties, Client shall be permitted to conduct an audit of those portions of the Facility where Services will be conducted. Once annually during the Term of this Agreement, and subject to Cardinal Health’s obligations of confidentiality to third parties, Cardinal Health will permit Client to conduct an audit of those portions of the Facility where Services are being conducted upon reasonable advance notice during regular business hours. Upon agreement of the parties, Client may conduct additional audits, provided that Client shall reimburse Cardinal Health for reasonable time and reasonable expenses incurred by Cardinal Health in connection with such audit. Any and all cited observations from any Client audit shall be addressed by Cardinal Health in a timely manner.

5.2Observation. Client may have up to two (2) representatives at the Facilities to observe the Services provided that Client provides Cardinal Health at least ten (10) days’ advance written notice of the attendance of such Client representatives. Such representatives shall comply with Cardinal Health’s reasonable rules and regulations. Client shall indemnify and hold harmless Cardinal Health for any action or activity of such representatives while on Cardinal Health’s premises.

5.3Regulatory Inspections. Each party shall: (1) notify the other party promptly of any inspection or inquiry by any Regulatory Authority concerning any Project or Product of Client; and (2) forward to the other party copies of any correspondence from any Regulatory Authority relating to such a Project or Product, including, but not limited to, Form FD-483 notices, FDA refusal to file, rejection or warning letters. Where reasonably practicable, each party will be given the opportunity to have a representative present during an inspection by a Regulatory Authority. Each party acknowledges that it may not direct the manner in which the other party fulfills its obligations to permit inspection by a Regulatory Authority.

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5.4Record Retention. Unless the parties otherwise agree in writing, Cardinal Health will retain batch, laboratory and other technical records for the minimum period required by applicable laws, rules, regulations and guidelines. Should any such records be scheduled for destruction, Cardinal Health shall provide 30 days’ advance written notice to Client, where disposition change may be permitted; Client may request in writing the following: “Return Records to Client”.

5.5Quality Agreement. Any quality agreement executed by the parties related to the Services shall in no way determine liability or financial responsibility of the parties for the responsibilities set forth therein. In the event of a conflict between the terms of this Agreement and the quality agreement, this Agreement shall control.

5.6Regulatory Compliance. Client shall be solely responsible for all permits and licenses required by any Regulatory Authority with respect to the Product and the Services under this Agreement, including any product licenses, applications and amendments in connection therewith. Cardinal Health will be responsible to maintain all permits and licenses required by any Regulatory Authority with respect to the Facility. During the Term, Cardinal Health will assist Client with all regulatory matters relating to Services under this Agreement, at Client’s request and at Client’s expense. Each party intends and commits to cooperate to satisfy all Applicable Laws relating to Services under this Agreement.

ARTICLE 6

CONFIDENTIALITY AND NON-USE

6.1Mutual Obligation. Cardinal Health and Client agree that they will neither use the other party’s Confidential Information except in the performance of this Agreement nor disclose the other party’s Confidential Information (defined below) to any third party without the prior written consent of the other party except as required by law, regulation or court or administrative order; provided, however, that prior to making any such legally required disclosure, the party making such disclosure shall give the other party as much prior notice of the requirement for and contents of such disclosure as is practicable under the circumstances. Notwithstanding the foregoing, each party may disclose the other party’s Confidential Information to any of its Affiliates that (A) need to know such Confidential Information for the purpose of performing under this Agreement, (B) are advised of the contents of this Article, and (C) agree to be bound by the terms of this Article.

6.2Definition. As used in this Agreement, the term “Confidential Information” includes all such information furnished by Cardinal Health or Client, or any of their respective representatives or Affiliates, to the other or its representatives or Affiliates, whether furnished before, on or after the date of this Agreement and furnished in any form, including but not limited to written, verbal, visual, electronic or in any other media or manner. Confidential Information includes all proprietary technologies, know-how, trade secrets, discoveries, inventions and any other Intellectual Property (whether or not patented), analyses, compilations, business or technical information and other materials prepared by either party, or any of their respective representatives, containing or based in whole or in part on any such information furnished by the other party or its representatives. Confidential Information also includes the existence of this Agreement and its terms.

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6.3Exclusions. Notwithstanding Section 6.2, Confidential Information does not include information that (A) is or becomes generally available to the public or within the industry to which such information relates other than as a result of a breach of this Agreement, or (B) is already known by the receiving party at the time of disclosure as evidenced by the receiving party’s written records, or (C) becomes available to the receiving party on a non-confidential basis from a source that is entitled to disclose it on a non-confidential basis, or (D) was or is independently developed by or for the receiving party without reference to the Confidential Information, as evidenced by the receiving party’s written records.

6.4No Implied License. The receiving party will obtain no right of any kind or license under any patent application or patent by reason of this Agreement. All Confidential Information will remain the sole property of the party disclosing such information or data.

6.5Return of Confidential Information. Upon termination of this Agreement, the receiving party shall, upon request, promptly return within thirty (30) days all such information, including any copies thereof, and cease its use or, at the request of the disclosing party, shall promptly destroy the same and certify such destruction to the disclosing party; except for a single copy thereof, which may be retained for the sole purpose of determining the scope of the obligations incurred under this Agreement.

6.6Survival.The obligations of this Article 6 will terminate five (5) years from the expiration or termination of this Agreement.

ARTICLE 7

INTELLECTUAL PROPERTY

7.1Ownership of Existing Technologies. All rights to and interests in Client’s Intellectual Property and Client’s Confidential Information shall remain vested solely in Client and no right or interest therein is transferred or granted to Cardinal Health under this Agreement except for use in performing Services hereunder or as expressly set forth herein. All rights to and interests in Cardinal Health’s Intellectual Property and Cardinal Health’s Confidential Information shall remain vested solely in Cardinal Health and no right or interest therein is transferred or granted to Client under this Agreement except for use in performing services hereunder or as expressly set forth herein.

7.2Client Inventions. Subject to the limitations of Sections 7.1 and 7.3, Client shall own all data, work product, results, reports, inventions, developments, technologies and information, whether or not patentable, that are generated by Cardinal Health in connection with the performance of any Project and arise from, are based upon, or relate to Cardinal Health’s use of Client’s Confidential Information (“Client Inventions”); provided however, that Client Inventions shall not include any Process Invention. As used herein, “Process Invention” means any discovery, development, technology or information, including, without limitation, any manufacturing, packaging or analytical process or methodology, developed by Cardinal Health, whether or not patentable, that does not relate exclusively to the use of Client’s patent-protected Product and/or patent-protected API. Client will be responsible for obtaining patent protection on inventions relating to the Client Inventions at its own cost. Cardinal Health agrees to execute all documents necessary to perfect title in any Client Inventions in Client.

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7.3Cardinal Health Inventions. Subject to the limitations of Sections 7.1 and 7.2, Cardinal Health shall own Process Inventions and all inventions, developments, technologies and information, whether or not patentable that arise from, are based upon, or relate to the Process Inventions or Cardinal Health’s Confidential Information or Intellectual Property, provided that no such invention or development shall exclusively relate to any Client’s Confidential Information (“Cardinal Health Inventions”). Cardinal Health will be responsible for obtaining patent protection on Cardinal Health Inventions at its own cost. Client agrees to execute all documents necessary to perfect title in any Cardinal Health Inventions in Cardinal Health. Cardinal Health hereby grants to Client a non-exclusive, royalty free license to use the Process Inventions solely in connection with the Product that is the subject of the Project in which such Process Invention was developed solely during the Term.

ARTICLE 8

REPRESENTATIONS AND WARRANTIES

8.1Cardinal Health. Cardinal Health represents and warrants to Client that, unless otherwise agreed to by the parties in the Project Plan, Cardinal Health will perform each Project Plan in accordance with (A) the Specifications, (B) the quality agreement, as indicated in the “Responsibility Delegation checklist”, and (C) all Applicable Laws.

8.2Client. Client represents and warrants to Cardinal Health that:

A.The Client-Supplied Materials will comply with all applicable Specifications and will have been produced in compliance with the Applicable Laws and the applicable Project Plan;

B.It has all necessary authority and all right, title and interest in and to any Intellectual Property related to each Product or that is otherwise provided by Client under this Agreement;

C.It has provided all safe handling instructions, health and environmental information and material safety data sheets applicable to the Product or to and any Client-Supplied Materials, except as disclosed to Cardinal Health in writing by Client in sufficient time for review and training by Cardinal Health prior to delivery;

D.All Product delivered to Client by Cardinal Health will be held, used and/or disposed of by Client in accordance with all Applicable Laws;

E.Client will comply with all Applicable Laws applicable to Client’s performance under this Agreement and its use of any materials or Products provided by Cardinal Health under this Agreement or any Project Plan; and

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F.Unless otherwise agreed by the parties in writing or in the Project Plan, Client has (1) provided complete and accurate scientific data regarding each Project and Client’s requirements for each Project, including without limitation test methods and development, formulation, fill and finish of the Product if applicable, (2) provided Cardinal Health with complete and accurate information necessary to develop the scope of work, and estimated or fixed costs for the Projects, (3) reviewed and approved all Specifications, (4) if applicable, reviewed and approved all in-process and finished Product test results to ensure conformity of such results with the Specifications, regardless of which party is responsible for finished Product release, and (5) if applicable, prepared all submissions to Regulatory Authorities.

8.3Mutual.Each party hereby represents and warrants to the other party that:

A.Existence and Power. Such party (1) is duly organized, validly existing and in good standing under the laws of the state in which it is organized, (2) has the power and authority and the legal right to own and operate its property and assets, and to carry on its business as it is now being conducted, and (3) is in compliance with all requirements of Applicable Laws, except to the extent that any noncompliance would not materially adversely affect such party's ability to perform its obligations under this Agreement;

B.Authorization and Enforcement of Obligations. Such party (1) has the power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder and (2) has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder.

C.Execution and Delivery. This Agreement has been duly executed and delivered on behalf of such party, and constitutes a legal, valid, binding obligation, enforceable against such party in accordance with its terms;

D.No Consents. All necessary consents, approvals and authorizations of all Regulatory Authorities and other persons required to be obtained by such party in connection with the Agreement have been obtained; and

E.No Conflict. The execution and delivery of this Agreement and the performance of such party's obligations hereunder (1) do not conflict with or violate any requirement of Applicable Laws; and (2) do not materially conflict with, or constitute a material default or require any consent under, any contractual obligation of such party.

8.4Limitations. THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE 8 ARE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES MADE BY EACH PARTY TO THE OTHER AND NEITHER PARTY MAKES ANY OTHER REPRESENTATIONS, WARRANTIES OR GUARANTEES OF ANY KIND WHATSOEVER, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.

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ARTICLE 9

INDEMNIFICATION

9.1Indemnification by Cardinal Health. Cardinal Health shall indemnify and hold harmless Client, its Affiliates, and their respective directors, officers, employees and agents (“Client Indemnitees”) from and against any and all suits, claims, losses, demands, liabilities, damages, costs and expenses (including reasonable attorneys’ fees) in connection with any suit, demand or action by any third party (“Losses”) arising out of or resulting from (A) any breach of its representations, warranties or obligations set forth in this Agreement or (B) any negligence or willful misconduct by Cardinal Health, except to the extent that any of the foregoing arises out of or results from any Client Indemnitee’s negligence, willful misconduct or breach of this Agreement.

9.2Indemnification by Client. Client shall indemnify and hold harmless Cardinal Health, its Affiliates, and their respective directors, officers, employees and agents (“Cardinal Health Indemnitees”) from and against all Losses arising out of or resulting from (A) any breach of its representations, warranties or obligations set forth in this Agreement; (B) any manufacture, sale, promotion, distribution, use of or exposure to the Product or any Client-Supplied Materials, including, without limitation, product liability or strict liability; (C) Client’s exercise of control over the Project to the extent that Client's instructions or directions violate Applicable Law; (D) the conduct of any clinical trials relating to any material or Product which is the subject of this Agreement or any Project Plan; (E) any actual or alleged infringement or violation of any patent, trade secret, copyright, trademark or other proprietary rights provided by Client; or (F) any negligence or willful misconduct by Client, except to the extent that any of the foregoing arises out of or results from any Cardinal Health Indemnitee’s negligence, willful misconduct or breach of this Agreement.

9.3Indemnification Procedures. All indemnification obligations in this Agreement are conditioned upon the party seeking indemnification: (A) promptly notifying the indemnifying party of any claim or liability of which the party seeking indemnification becomes aware (including a copy of any related complaint, summons, notice or other instrument); provided, however, that failure to provide such notice within a reasonable period of time shall not relieve the indemnifying party of any of its obligations hereunder except to the extent the indemnifying party is prejudiced by such failure; (B) cooperating with the indemnifying party in the defense of any such claim or liability (at the indemnifying party's expense); and (C) not compromising or settling any claim or liability without prior written consent of the indemnifying party.

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ARTICLE 10

LIMITATIONS OF LIABILITY

10.1CARDINAL HEALTH’S LIABILITY UNDER THIS AGREEMENT FOR ANY AND ALL CLAIMS FOR LOST, DAMAGED OR DESTROYED API OR CLIENT-SUPPLIED MATERIALS WHETHER OR NOT SUCH API OR CLIENT-SUPPLIED MATERIALS ARE INCORPORATED INTO FINISHED PRODUCT SHALL NOT EXCEED [REDACTED] PER PROJECT PLAN EXCEPT FOR LOSSES RESULTING FROM BATCH MANUFACTURE, IN WHICH CASE CARDINAL HEALTH’S LIABILITY SHALL NOT EXCEED [REDACTED] PER BATCH

10.2CARDINAL HEALTH’S TOTAL LIABILITY, WHETHER IN CONTRACT OR TORT, INCLUDING WITHOUT LIMITATION ANY OF CARDINAL HEALTH’S INDEMNITY OR OTHER FINANCIAL OBLIGATIONS UNDER ARTICLE 9, SHALL IN NO EVENT EXCEED, THE TOTAL FEES PAID BY CLIENT TO CARDINAL HEALTH UNDER THE APPLICABLE PROJECT PLAN GIVING RISE TO THE CLAIM.

NOTWITHSTANDING THE FOREGOING, THE TOTAL LIABILITY AMOUNT CALCULATED IN SHALL BE REDUCED BY ANY COSTS OR EXPENSES INCURRED BY CARDINAL HEALTH TO PROCURE COMPARATOR PRODUCT.

10.3NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF PERFORMANCE UNDER THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, LOSS OF REVENUES, PROFITS OR DATA, WHETHER IN CONTRACT OR TORT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

ARTICLE 11

INSURANCE

11.1.Cardinal Health. Cardinal Health shall, at its own cost and expense, obtain and maintain in full force and effect the following insurance during the term of this Agreement:

(A)   Commercial General Liability insurance with a per-occurrence limit of not less than $1,000,000;

(B)   Products and Completed Operations Liability Insurance with a per-occurrence limit of not less than $5,000,000;

(C)   Workers’ Compensation and Employer’s Liability Insurance with statutory limits for Workers’ Compensation and Employer’s Liability insurance limits of not less than $1,000,000 per accident; and

(D)   Professional Services Errors & Omissions Liability Insurance with per claim and aggregate limits of not less than $1,000,000.

The parties hereby acknowledge and agree that Cardinal Health may self-insure all or any portion of the above-required insurance. In the event that any of the required policies of insurance are written on a claims made basis, then such policies shall be maintained during the entire term of this Agreement and for a period of not less than three (3) years following the termination or expiration of this Agreement. Cardinal Health shall obtain a waiver from any insurance carrier with whom Cardinal Health carries Workers’ Compensation insurance releasing its subrogation rights against Client. Cardinal Health shall furnish certificates of insurance evidencing the required insurance policies to Client as soon as practicable after the effective date of the Agreement and within thirty (30) days after renewal of such policies. Each insurance policy that is required under this Agreement shall be obtained from an insurance carrier with an A.M. Best rating of at least A- VII.

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11.2.Client Insurance. Client shall, at its own cost and expense, obtain and maintain in full force and effect the following insurance during the term of this Agreement:

(A)   Commercial General Liability Insurance with a per occurrence limit of not less than $1,000,000;

(B)   Products and Completed Operations Liability Insurance with a per occurrence limit of not less than $10,000,000;

(C)   Workers’ Compensation and Employer’s Liability Insurance with statutory limits for Workers’ Compensation and Employer’s Liability insurance limits of not less than $1,000,000 per accident; and

(D)   All Risk Property Insurance, including transit coverage, in an amount equal to full replacement value covering Client’s property while it is at Cardinal Health’s facilities or in transit to, from or between Cardinal Health’s facilities.

The parties hereby acknowledge and agree that Client may self-insure all or any portion of the above-required insurance. Client shall maintain levels of insurance or self insurance sufficient to meet its obligations under this Agreement. In the event that any of the required policies of insurance are written on a claims made basis, then such policies shall be maintained during the entire term of this Agreement and for a period of not less than three (3) years following the termination or expiration of this Agreement. Client shall obtain a waiver from any insurance carrier with whom Client carries Property Insurance releasing its subrogation rights against Cardinal Health. Client shall not seek reimbursement for any property claim or portion thereof that is not fully recovered from Client’s Property Insurance policy. Client shall obtain a waiver from any insurance carrier with whom Client carries Workers’ Compensation insurance releasing its subrogation rights against Cardinal Health. Cardinal Health, Inc. and its subsidiaries and affiliates shall be named as additional insureds under the Products and Completed Operations Liability insurance policies with respect to the products and completed operations outlined in this Agreement. Client shall furnish certificates of insurance evidencing the required insurance policies and additional insured status to Cardinal Health as soon as practicable after the effective date of the Agreement and within thirty (30) days after renewal of such policies. Each insurance policy that is required under this Agreement shall be obtained from an insurance carrier with an A.M. Best rating of at least A- VII.

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ARTICLE 12

TERM AND TERMINATION

12.1Term.The term of this Agreement shall commence as of the date set forth above and shall continue until either party terminates this Agreement as set forth in Section 12.2 or 12.3 (“Term”).

12.2Termination. Client may terminate this Agreement or any Project Plan without cause at any time during the Term of the Agreement on [REDACTED] days’ prior written notice to the other party

12.3Immediate Termination. Either party shall have the right to immediately terminate this Agreement if (A) the other party files a petition in bankruptcy, or enters into an agreement with its creditors, or applies for or consents to the appointment of a receiver or trustee, or makes an assignment for the benefit of creditors, or suffers or permits the entry of any order adjudicating it to be bankrupt or insolvent and such order is not discharged within thirty (30) days; or (B) if the other party materially breaches any of the provisions of this Agreement, and such breach is not cured or corrective actions started within thirty (30) days after the giving of written notice; provided, however, that in the case of a failure of Client to make payments in accordance with the terms of this Agreement, Cardinal Health may terminate this Agreement if such payment breach is not cured within thirty (30) days of receipt notice from Cardinal Health.

12.4Effect of Termination. Expiration or termination of this Agreement shall be without prejudice to any rights or obligations that accrued to the benefit of either party prior to such expiration or termination. In the event that this Agreement or any Project Plan is terminated, otherwise than by Client pursuant to Section 12.3, Client shall pay Cardinal Health for all Services performed in accordance with the applicable Project Plan up to the date of termination plus any applicable cancellation fees, and will reimburse Cardinal Health for all costs and expenses incurred, and all non-cancelable commitments made, in the performance of Services pursuant to an approved Project Plan. In the event that this Agreement or any Project Plan is terminated, all non-fabricated materials and semi-finished and finished Products shall be returned to Client at Client’s expense, except in the event that termination is due to breach by Cardinal Health, in which case materials and Products shall be returned to Client at Cardinal Health’s expense.

ARTICLE 13

NOTICE

All notices and other communications hereunder shall be in writing and shall be deemed given: (A) when delivered personally; (B) when delivered by facsimile transmission (receipt verified); (C) when received or refused, if mailed by registered or certified mail (return receipt requested), postage prepaid; or (D) when delivered if sent by express courier service, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice; provided, that notices of a change of address shall be effective only upon receipt thereof):

To Client: Generex Biotechnology Corporation

        Attn: Rose Perri, Chief Operating Officer

                          33 Harbour Square, Suite 202

        Toronto, Ontario, Canada M5J 2G2

To Cardinal Health:                         Cardinal Health PTS, LLC

        Attn: Manager, Contract Management

        160 Cardinal Health Way

        Morrisville, NC 27560

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With a copy to:         Cardinal Health, Inc.

        7000 Cardinal Place

        Dublin, Ohio 43017

        Attn: Associate General Counsel, 

        Pharmaceutical Technologies and Services

        Facsimile: (614) 757-5051

ARTICLE 14

MISCELLANEOUS

14.1Entire Agreement; Amendments. This Agreement, the attachments, Project Plans and any amendments thereto constitute the entire understanding between the parties and supersede any contracts, agreements or understanding (oral or written) of the parties with respect to the subject matter hereof. No term of this Agreement may be amended except upon written agreement of both parties, unless otherwise provided in this Agreement.

14.2Captions.The captions in this Agreement are for convenience only and are not to be interpreted or construed as a substantive part of this Agreement

14.3Further Assurances.The parties agree to execute, acknowledge and deliver such further instruments and to take all such other incidental acts as may be reasonably necessary or appropriate to carry out the purpose and intent of this Agreement.

14.4No Waiver.Failure by either party to insist upon strict compliance with any term of this Agreement in any one or more instances will not be deemed to be a waiver of its rights to insist upon such strict compliance with respect to any subsequent failure.

14.5Severability. If any term of this Agreement is declared invalid or unenforceable by a court or other body of competent jurisdiction, the remaining terms of this Agreement will continue in full force and effect.

14.6Independent Contractors. The relationship of the parties is that of independent contractors, and neither party will incur any debts or make any commitments for the other party except to the extent expressly provided in this Agreement. Nothing in this Agreement is intended to create or will be construed as creating between the parties the relationship of joint ventures, co-partners, employer/employee or principal and agent.

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14.7Successors and Assigns. This Agreement will be binding upon and inure to the benefit of the parties, their successors and permitted assigns. Neither party may assign this Agreement, in whole or in part, without the prior written consent of the other party, except that either party may, without the other party's consent, assign this Agreement to an Affiliate or to a successor to substantially all of the business or assets of the assigning company.

14.8Governing Law. This Agreement shall be governed by and construed under the laws of the State of Ohio, excluding its conflicts of law provisions. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement.

14.9Alternative Dispute Resolution. If any Dispute arises between the parties, such Dispute shall be presented to the respective presidents or senior executives of Cardinal Health and Client for their consideration and resolution. If such parties cannot reach a resolution of the Dispute, then such Dispute shall be resolved by binding alternative dispute resolution in accordance with the then existing commercial arbitration rules of CPR, The International Institute for Conflict Prevention & Resolution, 575 Lexington Avenue, 21^st Floor, New York, NY 10022. Arbitration shall be conducted in New York, NY.

14.10Prevailing Party. In any dispute resolution proceeding between the parties in connection with this Agreement, the prevailing party will be entitled to its reasonable attorney's fees and costs in such proceeding.

14.11Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. Any photocopy, facsimile or electronic reproduction of the executed Agreement shall constitute an original.

14.12Publicity. Neither party will make any press release or other public disclosure regarding this Agreement or the transactions contemplated hereby without the other party's express prior written consent, except as required under Applicable Laws or by any governmental agency, in which case the party required to make the press release or public disclosure shall use commercially reasonable efforts to obtain the approval of the other party as to the form, nature and extent of the press release or public disclosure prior to issuing the press release or making the public disclosure. Cardinal Health hereby acknowledges and agrees that Client will be obligated to issue a press release and file a Form 8-K Current Report in respect of this Agreement in accordance with Applicable Laws, and such press release and public disclosure shall accord with the provisions of this Section.

14.13Setoff.Without limiting Cardinal Health’s rights under law or in equity, Cardinal Health and its Affiliates, parent or related entities, collectively or individually, may exercise a right of set-off against any and all amounts due to Cardinal Health from Client. For purposes of this Article, Cardinal Health, its Affiliates, parent or related entities shall be deemed to be a single creditor.

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14.14Survival. The rights and obligations of the parties shall continue under Articles 6 (Confidentiality), 7 (Intellectual Property), 9 (Indemnification), 10 (Limitations of Liability), 11 (Insurance), to the extent expressly stated therein, 13 (Notice), 14 (Miscellaneous) and Section 12.4 (Effect of Termination), notwithstanding expiration or termination of this Agreement.

14.15Force Majeure. Except as to payments required under this Agreement, neither party shall be liable in damages for, nor shall this Agreement be terminable or cancelable by reason of, any delay or default in such party’s performance hereunder if such default or delay is caused by events beyond such party’s reasonable control including, but not limited to, acts of God, regulation or law or other action or failure to act of any government or agency thereof, war or insurrection, civil commotion, destruction of production facilities or materials by earthquake, fire, flood or storm, labor disturbances, epidemic, or failure of suppliers, public utilities or common carriers; provided however, that the party seeking relief hereunder shall immediately notify the other party of such cause(s) beyond such party’s reasonable control. The party that may invoke this section shall use all reasonable endeavors to reinstate its ongoing obligations to the other. If the cause(s) shall continue unabated for one hundred eighty (180) days, then both parties shall meet to discuss and negotiate in good faith what modifications to this Agreement should result from this force majeure.

IN WITNESS WHEREOF, the parties have caused their duly authorized representative to execute this Agreement effective as of the date first written above.

CARDINAL HEALTH PTS, LLC	GENEREX BIOTECHNOLOGY CORPORATION
By:  /s/ Shailesh Maingi	By: /s/ Anna E. Gluskin
Name: Shailesh Maingi	Name: Anna E. Gluskin
Its: VP, Business Division	Its:President, Chief Executive Officer

 

By: /s/ Rose C. Perri

Name:Rose C. Perri

Its:Chief Operating Officer

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ATTACHMENT A

PROJECT PLAN

Scope of Work

Activities/Specifications

Scheduling/Deliverables

Cost Proposal

Invoicing and Payment Terms

Additional Project Terms

Project Approval Authorization

All work performed under this Project Plan is subject to the terms and conditions of the Clinical Supply Agreement between Client and Cardinal Health dated June __, 2006.

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EX-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
Generex Pharmaceuticals (USA) LLC.	North Carolina, USA

All subsidiaries are 100% owned.

All subsidiaries conduct business only under their respective corporate names.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements of Generex Biotechnology Corporation on Forms S-3 (File No. 333-67118, 333-106519, 333-110493, 333-112891, 333-117822, 333-121309, 333-126624, 333-128328, 333-131430, and 333-135284) and Forms S-8 (File No. 333-55072, 333-66654, and 333-88026) of our report dated September 29, 2006 relating to the consolidated financial statements, management’s assessment of the effectiveness of internal control over financial reporting, the effectiveness of internal control over financial reporting and Schedule II included in the Annual Report of Generex Biotechnology Corporation on Form 10-K for the year ended July 31, 2006.

/s/ Danziger & Hochman

Toronto, Ontario

October 16, 2006

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Forms S-3 (No. 333-67118, 333-106519, 333-110493, 333-112891, 333-117822, 333-121309, 333-126624, 333-128328, 333-131430, and 333-135284) and Forms S-8 (No. 333-55072, 333-66654, and 333-88026) of Generex Biotechnology Corporation, of our report dated September 30, 2005, relating to the consolidated financial statements and Schedule II, which appears in this Annual Report on Form 10-K. Our report contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.

/s/ BDO Dunwoody LLP

Toronto, Ontario

October 16, 2006

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Anna E. Gluskin, certify that:

1.	I have reviewed this 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	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
d)	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: October 16, 2006	By:	/s/ Anna E. Gluskin
		Anna E. Gluskin, Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Rose C. Perri, certify that:

1.	I have reviewed this 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	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
d)	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: October 16, 2006	By:	/s/ Rose C. Perri
		Rose C. Perri, Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-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 Financial Officer of the Company, each hereby certifies that, to the best of her knowledge:

1. The Company's Annual Report on Form 10-K for the period ended July 31, 2006, 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: October 16, 2006	By:	/s/ Anna E. Gluskin
		Anna E. Gluskin, Chief Executive Officer (Principal Executive Officer)

DATE: October 16, 2006	By:	/s/ Rose C. Perri
		Rose C. Perri, Chief Financial Officer (Principal Financial and Accounting Officer)