Georgi Kamburov

Generex Biotechnology Corporation (OTCMKTS:GNBT) Continues To Recover

by Georgi Kamburov September 3, 2015

On August 24 the stock of Generex Biotechnology Corporation (OTCMKTS:GNBT, GNBT message board) dropped to a new 52-week low of $0.007. In less than four months the ticker had managed to wipe over 70% of its value. The chart performance was indeed disastrous but it seems that some investors were not ready to give up on the company and for the last couple of sessions GNBT has been forming an impressive reversal.

Yesterday the stock moved another 10% up closing at $0.014 per share. The 16.7 million shares that changed hands throughout the session represent the biggest daily volume seen by GNBT since April. So far the company has logged in five green sessions in a row. Well, on August 31 they did close completely flat but at least they didn't incur any losses. Can the positive performance be supported for much longer though?

The recent change in sentiment was caused by the last couple of PRs published by the company. GNBT released an update on the status of their buccal insulin formulation enhancement project for the company's Oral-lyn buccal insulin spray, a white paper about the same product was issued while yesterday they announced the formalization of a buccal cannabis co-development arrangement with CannScience Innovations Inc.

Despite the positive momentum generated by the PRs GNBT's stock remains extremely risky. The numerous red flags that surround the company are still as serious as ever - at the end of April its financial state was quite grim:

• $926 thousand cash
• $975 thousand total current assets
• $7.8 million total current liabilities
• ZERO revenues
• $1.39 million net loss

GNBT had a working capital deficit of approximately $6.9 million while the accumulated deficit had surpassed $371 million. On June 24 the company entered into a securities purchase agreement that boosted their cash reserves by $500 thousand but even with that sum the balance sheet remains depressing. Not to mention that in order to get the money GNBT issued 500 of a newly designated Series G Preferred Convertible Stock as well as warrants for the purchase of up to an aggregate of 100% of the shares of its common stock issuable upon conversion of the convertible preferred stock. The conversion price of the Series G shares and the exercise price of the warrants is $0.015. The August 4 Prospectus filing shows that over 350 million shares might be issued at the exact same price.

The potential dilution is massive and GNBT had to increase its authorized shares from 1.5 billion to 2.45 billion during the annual meeting that took place on August 19. During the meeting the stockholders of the company also approved a reverse split that should be implemented before December 31, 2016. The exact ratio of the split was not determined.

For now GNBT is sitting just below $0.015 but if the stock continue its surge the owners of the millions of warrants might become tempted to exercise them. The resulting dilution could have devastating consequences. Take into account the various risks and never put unaffordable sums of money on the line. 

Comments 0

Type the characters that you see in the box (5 characters).