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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">UNITED
      STATES</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SECURITIES
      AND EXCHANGE COMMISSION</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WASHINGTON,
      DC 20549</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">________________________</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">FORM
      8-K</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CURRENT
      REPORT</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to Section 13 or 15(d) of the</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Securities
      Exchange Act of 1934</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date
      of
      Report (Date of earliest event reported): </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>June
      30, 2006</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>GLIDER
      ENTERPRISES, INC.</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Exact
      name of registrant as specified in its charter)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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            </td>
            <td width="3%">&#160;</td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(State
                or other jurisdiction</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="30%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Commission</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="30%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(I.R.S.
                Employer</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
                incorporation)</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="30%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">File
                Number)</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="30%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Identification
                Number</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
            </td>
          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>7
      Deer
      Park Drive, Suite K, Monmouth Junction,&#160;New Jersey 08852</u></font></div>
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      of principal executive office)&#160;&#160;&#160; (Zip Code)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Registrant&#8217;s
      telephone number, including area code: </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>(732)
      329-8885</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions (see General Instruction A.2.below):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Written
                communications pursuant to Rule 425 under the Securities Act (17
                CFR
                230.425)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="5%">&#160;</td>
            <td align="left" valign="top" width="80%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[_]
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                material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12)</font></div>
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          </tr>
          <tr>
            <td align="left" valign="top" width="5%">&#160;</td>
            <td align="left" valign="top" width="80%">&#160;</td>
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          <tr>
            <td align="left" valign="top" width="5%">
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            <td align="left" valign="top" width="80%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
                communications pursuant to Rule 14d-2(b) under the Exchange
                Act</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                (17 CFR 240.14d-2(b))</font></div>
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          </tr>
          <tr>
            <td align="left" valign="top" width="5%">&#160;</td>
            <td align="left" valign="top" width="80%">&#160;</td>
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          <tr>
            <td align="left" valign="top" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[_]</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
                communications pursuant to Rule 13e-4(c) under the Exchange Act (17
                CFR
                240.13c-4(c))</font></div>
            </td>
          </tr>

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    <div>&#160;</div>
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    <div>&#160;</div>
    <div>
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        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
          1.01.&#160; </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Entry
          into a Material Definitive Agreement. </strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Merger</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      June
      30, 2006, Gilder Enterprises, Inc., a Nevada corporation (&#8220;Registrant&#8221;)
      completed the acquisition of MedaSorb Corporation, a Delaware corporation
      (&#8220;MedaSorb&#8221;), pursuant to an Agreement and Plan of Merger (the &#8220;Merger
      Agreement&#8221;) by and among the Registrant, MedaSorb Acquisition Inc., a Delaware
      corporation (&#8220;Acquisition Sub&#8221;) and MedaSorb. A copy of the Merger Agreement is
      filed as Exhibit 2.1 to this Current Report on Form 8-K.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      principal terms of the merger and a description of the business of MedaSorb
      is
      set forth below in Item 2.01.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Private
      Placement</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Immediately
      following the merger, we sold 5,25</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0,000
      shares of our Series A 10% Cumulative Convertible Preferred Stock, par value
      $.001 per share (&#8220;Series A Preferred Stock&#8221;), to three institutional investors
      pursuant to a Subscription Agreement filed as Exhibit 4.3 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      this
      Current Report on Form 8-K </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
      incorporated herein by reference,</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in a
      private offering exempt from registration pursuant to Section 4(2) and
      Regulation D (Rule 506) under the Securities Act of 1933, as amended (the
&#8220;Securities Act&#8221;). The 5,250,000 shares of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series
      A
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Preferred
      Stock are initially convertible into 4,200,000 shares</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      our
      common stock, par value $.001 per share (&#8220;Common Stock&#8221;).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Series A Preferred Stock has a stated value of $1.00 per share and was sold
      for
      a purchase price equal to the stated value. The Series A Preferred Stock is
      not
      redeemable at the holder&#8217;s option but may be redeemed by us at our option
      following the third anniversary of the issuance of the Series A Preferred Stock
      for 120% of the stated value thereof plus any accrued but unpaid dividends
      upon
      30 days' prior written notice (during which time the Series A Preferred Stock
      may be converted), provided a registration statement is effective under the
      Securities Act with respect to the shares of our Common Stock into which such
      Series A Preferred Stock is then convertible, and an event of default, as
      defined in the Certificate of Designations relating to the Series A Preferred
      Stock (the &#8220;Certificate of Designations&#8221;), is not then continuing. A copy of the
      Certificate of Designations is filed as Exhibit 4.1 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
      this
      Current Report on Form 8-K</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
      incorporated herein by reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Series A Preferred Stock has a dividend rate of 10% per annum, payable
      quarterly. The dividend rate increases to 20% per annum upon the occurrence
      of
      the events of default specified in the Certificate of Designations. Such
      dividends may be paid in cash or, provided no event of default is then
      continuing, with additional shares of Series A Preferred Stock valued at the
      stated value thereof. The Series A Preferred Stock is convertible into Common
      Stock at the conversion rate of one share of Common Stock for each $1.25 of
      stated value or accrued but unpaid dividends converted. </font></div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      conjunction with the issuance of the Series A Preferred Stock to the investors,
      we issued to them, for no additional consideration, five-year warrants (the
      &#8220;Warrants&#8221;) to purchase an aggregate of 2,100,000 shares of Common Stock at an
      exercise price of $2.00 per share. The form of the Warrants is filed as Exhibit
      4.2 to this Current Report on Form 8-K and incorporated herein by reference.
      The
      aggregate number of shares of Common Stock covered by the Warrants equals,
      at
      the date of issuance thereof, one-half the number of shares of Common Stock
      issuable upon the full conversion of the Series A Preferred Stock issued to
      the
      investors on such date. We have agreed to file a registration statement under
      the Securities Act covering the Common Stock issuable upon conversion of the
      Series A Preferred Stock and exercise of the Warrants within 120 days following
      closing of the private placement and to cause it to become effective within
      240
      days of such closing. We also granted the investors demand and piggyback
      registration rights with respect to such Common Stock. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Both
      the
      conversion price of the Series A Preferred Stock and the exercise price of
      the
      Warrants are subject to &#8220;full-ratchet&#8221; anti-dilution provisions, so that upon
      future issuances of our Common Stock or equivalents thereof, subject to
      specified customary exceptions, at a price below the conversion price of the
      Series A Preferred Stock and/or exercise price of the Warrants, such conversion
      price and/or exercise price will be reduced to such lower price. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the sale of the Series A Preferred Stock and Warrants to the
      investors, Margie Chassman, the beneficial holder of approximately 42% of our
      outstanding shares of Common Stock, agreed to pledge certain securities held
      by
      her to the investors, which such investors may sell to ensure they do not suffer
      a loss on their investment in the first year following the date of their
      investment. In consideration of her pledge to these investors, we agreed to
      pay
      Ms. Chassman (i) $525,000 in cash, and (ii) five-year warrants to purchase
      10%
      of the shares of Series A Preferred Stock and 10% of the Warrants sold to these
      investors for an exercise price equal to the price paid by the investors in
      the
      private placement for the Series A Preferred Stock and Warrants.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      anticipate that our other fees and expenses in connection with the sale of
      the
      Series A Preferred Stock and Warrants will amount to approximately
      $775,000.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Additionally,
      in connection with the merger, certain stockholders of ours, including our
      former principal stockholder, sold an aggregate of 3,617,500 shares of our
      common stock to several purchasers, and forfeited 4,105,000 shares of Common
      Stock, which we cancelled, so that prior to giving effect to the merger, we
      had
      outstanding 3,750,000 shares of Common Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">After
      giving effect to the merger, the surrender of shares described above and the
      sale of the Series A Preferred Stock and Warrants, we had issued and outstanding
      24,090,929 shares of Common Stock and convertible securities, options and
      warrants that may be converted into or exercised for 9,624,648 additional shares
      of Common Stock. In addition, the holders of 240,929 shares of Common Stock
      and
      warrants to purchase an additional 240,929 shares of Common Stock have the
      right
      to exchange such shares of Common Stock and warrants for approximately 800,000
      shares of Series A Preferred Stock and Warrants to purchase 400,000 shares
      of
      Common Stock at a price of $2.00 per share.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      securities we sold in the private placement have not be registered under the
      Securities Act, and may not be offered or sold in the United States absent
      registration or an applicable exemption from registration requirements under
      the
      Securities Act. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the closing of the private placement, we agreed to make a
      short-term advance to Ms. Chassman in the amount of $500,000 bearing interest
      at
      the rate of 6% per annum, the repayment of which may be offset against amounts
      owed by us to Ms. Chassman under the $1,000,000 advance previously made by
      her
      to MedaSorb. The short-term advance will be secured by a pledge of
      publicly-traded securities with a market value equal to $500,000.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Termination
      of Joint Venture</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      June
      30, 2006, we also terminated our joint venture agreement with 5G Wireless
      pursuant to a Termination and Release Agreement, and in connection therewith,
      we
      sold our 51% interest in Nex Connectivity Solutions, Inc. to Dennis Tan, a
      Singapore national for $18,000 (Canadian). Accordingly, we are no longer engaged
      in the business of providing Internet access to hotels or other
      properties.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      2.01.&#160; </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Completion
      of Acquisition or Disposition of Assets.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Principal
      Terms of the Reverse Merger</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to the Merger Agreement, on June 30, 2006, we completed the acquisition of
      MedaSorb through a reverse triangular merger in which Acquisition Sub, a wholly
      owned subsidiary of ours formed solely for the purpose of facilitating the
      merger, merged with&#160;MedaSorb.&#160; MedaSorb&#160;is now a wholly owned
      subsidiary of ours, and its business (which is described below) is now our
      only
      business. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the merger (i) the former stockholders of MedaSorb were issued
      an aggregate of 20,340,929 shares of Common Stock in exchange for the same
      number of shares of MedaSorb common stock previously held by such stockholders,
      (ii) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">outstanding
      warrants and options to purchase a total of 1,697,648 shares of the common
      stock
      of MedaSorb were cancelled in exchange for warrants and stock options to
      purchase the same number of shares of our Common Stock at the same exercise
      prices and otherwise on the same general terms as the MedaSorb options and
      warrants that were cancelled (the options issued to the employees, directors
      and
      consultants of MedaSorb being issued under our 2006 Long Term Incentive Plan),
      and (iii) certain providers of legal services to MedaSorb who previously had
      the
      right to be issued approximately 997,000</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      of
      MedaSorb common stock as payment toward accrued legal fees, became entitled
      to
      instead be issued the same number of shares of our Common Stock as payment
      toward such services. Immediately prior to the merger, after giving effect
      to
      the share cancellation transaction referred to above, we had outstanding
      3,750,000 shares of Common Stock and no warrants or options to purchase Common
      Stock.</font></div>
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    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Concurrently
      with the closing of the merger, Joseph G. Bowes, our sole director and officer
      prior to the merger, appointed Al Kraus, Joseph Rubin, Esq., and Kurt Katz
      to
      the Board of Directors, and then resigned from the Board and from his positions
      as an officer. In addition, at such time, Al Kraus was appointed our President
      and Chief Executive Officer, James Winchester, MD was appointed our Chief
      Medical Officer, Vincent Capponi was appointed our Chief Operating Officer
      and
      David Lamadrid was appointed our Chief Financial Officer. Additional information
      with respect to our new directors and officers is provided in Item 2.01 of
      this
      Current Report on Form 8-K.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
      accounting purposes, the merger is being accounted for as a reverse merger,
      since </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">we
      were a
      shell company prior to the merger, the former stockholders of MedaSorb now
      own a
      majority of the issued and outstanding shares of our Common Stock, and the
      directors and executive officers of MedaSorb became our directors and executive
      officers. Accordingly, MedaSorb is treated as the acquiror in the merger, which
      is treated as a recapitalization of MedaSorb, and the pre-merger financial
      statements of MedaSorb will now be deemed to be our historical financial
      statements. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the merger, we also changed our principal executive offices
      to
      those of MedaSorb, which are located at 7 Deer Park Drive, Suite K, Monmouth
      Junction, New Jersey 08852.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Form
      10-SB Disclosure - Description of MedaSorb</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prior
      to
      closing of the merger, Registrant was a &#8220;shell company&#8221; (as such term is defined
      in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, (the
&#8220;Exchange Act&#8221;). Accordingly, set forth below is the information that would be
      required if Registrant were filing a general form for registration of securities
      on Form 10-SB under the Exchange Act.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unless
      otherwise indicated or the context otherwise requires, all references below
      to
&#8220;we,&#8221; &#8220;us,&#8221; &#8220;MedaSorb&#8221; and the &#8220;Company&#8221; are to Registrant together with
      MedaSorb, its wholly-owned subsidiary.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>General</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are a
      medical device company that is currently in the development stage, headquartered
      in Monmouth Junction, New Jersey (near Princeton). We have developed and are
      preparing to commercialize a breakthrough blood purification technology that
      efficiently removes toxic compounds from circulating blood. Current
      state-of-the-art blood purification technology (such as dialysis) is incapable
      of effectively clearing these toxins. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      products, which have not yet been introduced to the market, are known medically
      as hemoperfusion devices, and incorporate our proprietary adsorbent polymer
      technology. We believe that there are many potential healthcare applications
      for
      our products, including: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Adjunctive
                treatment and/or prevention of sepsis (bacterial infection of the
                blood);</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">prevention
                of damage to organs donated for transplant prior to organ
                harvest;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">prevention
                of post-operative complications of cardiac surgery;
                and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">long-term
                treatment of chronic kidney
                failure.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Product
      Strategy</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb
      is developing two product lines, CytoSorb&#8482; and BetaSorb&#8482;, for use in acute and
      chronic treatments, respectively.&#160; CytoSorb&#8482; will initially be targeted for
      use as an adjunctive therapy&#160;in the&#160;acute treatment of the systemic
      inflammatory response syndrome (SIRS). BetaSorb&#8482; is intended to be used as a
      complement to dialysis in the treatment of&#160;chronic end stage&#160;renal
      disease (ESRD).&#160;&#160;We will first focus our efforts on commercializing
      CytoSorb&#8482;, which we believe will provide a relatively faster regulatory pathway
      to market. BetaSorb&#8482;&#8217;s potential for usage in chronic conditions such as ESRD is
      anticipated to have a longer and more complex regulatory pathway and will be
      pursued after commercialization of the CytoSorb&#8482; product. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      first
      indication for CytoSorb&#8482; will be in the treatment of sepsis,&#160;as an
      adjunctive therapy&#160;to&#160;the&#160;current standard of care.&#160;
Following the sepsis indication, we intend to continue our research in other
      acute conditions where CytoSorb&#8482; has indicated potential, such as for use in
      cardiopulmonary bypass surgery addressing post operative complications
      of&#160;inflammation, and organ donation from brain dead organ donors,
      addressing the so-called cytokine storm associated with the decrease
      of&#160;viable organs from donors. We are also exploring the potential benefits
      the CytoSorb&#8482; device may have in removing drugs from blood in situations such as
      patient overdoses.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      had
      initially identified end stage renal disease as the target market for our
      polymer-based adsorbent technology. End stage renal disease affects more than
      1.3 million people worldwide and is the single most common application of blood
      purification technology today, namely hemodialysis. Hemodialysis is a life
      saving intervention, but is not nearly as effective as a healthy kidney in
      removing toxins from the bloodstream. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
      the development of our end stage renal product (BetaSorb&#8482;), we identified
      several applications for our adsorbent technology in the treatment of critical
      care patients and recognized that our absorbent polymer represented
      a</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">platform
      of broad application in medicine, well beyond the treatment of patients
      suffering from renal disease. As a result, we shifted our priorities to pursue
      critical care applications (such as for the treatment of sepsis) for our
      technology. We believe that, compared with the chronic renal application for
      our
      technology, </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
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            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">we
                will able to obtain the necessary regulatory approvals in a shorter
                period
                of time, allowing us to bring our CytoSorb&#8482; product to market in a shorter
                time frame;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
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            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                production of CytoSorb&#8482; will entail a lower capital requirement for
                manufacturing and generate significantly higher gross margins; and
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                use of CytoSorb&#8482; in critical care applications will result in quicker
                reimbursement because the use of our products in these situations
                (generally on an in-patient basis) will generally not be subject
                to
                pre-approval, or require a separate decision, by Medicare or the
                relevant
                HMO or other providers of medical
                benefits.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">However,
      we continue to remain confident of the commercial potential of our BetaSorb&#8482;
device for chronic applications and will continue its development as a secondary
      product.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Corporate
      History</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb
      was organized as a Delaware limited liability company in August 1997 as Advanced
      Renal Technologies, LLC. MedaSorb changed its name to RenalTech International,
      LLC in November 1998, and to MedaSorb Technologies, LLC in October, 2003.
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      December 2005, MedaSorb converted from a limited liability company to a
      corporation, changing its name to MedaSorb Corporation.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb
      has engaged in research and development since its inception, and prior to the
      merger, we had raised approximately $53 million</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">from
      investors. These proceeds have been used to fund the development of multiple
      product applications and to conduct clinical trials. These funds have also
      been
      used to establish in-house manufacturing capacity to meet clinical testing
      needs, expand our intellectual property through additional patents and to
      develop extensive proprietary know-how with regard to our products.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gilder
      Enterprises, Inc., a Nevada corporation, was incorporated on April 25, 2002.
      Prior to the merger, through a 51% interest in Nex Connectivity Solutions under
      a joint venture arrangement with 5G Wireless Communications Pte. Ltd, the
      Registrant was engaged in the business of installing and operating computer
      networks that enabled business travelers to have high-speed access to the
      Internet. In connection with the merger, we terminated the joint venture
      arrangement and disposed of our interest in Nex Connectivity Solutions, which
      had generated minimal revenues and no profits. At the effective time of the
      merger, the Registrant fell within the definition of a &#8220;shell company&#8221; under the
      Exchange Act.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Technology,
      Products and Applications</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
      approximately the past half-century, the field of blood purification has been
      focused on hemodialysis, a mature, well accepted medical technique primarily
      used to sustain the lives of patients with permanent or temporary loss of kidney
      function. It is widely understood by the medical community that dialysis has
      inherent limitations in that its ability to remove toxic substances from blood
      drops precipitously as the size of toxins increases. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      hemocompatible adsorbent technology addresses this shortcoming by efficiently
      removing toxins largely untouched by dialysis. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      products are known in the medical field as hemoperfusion devices. During
      hemoperfusion, blood is removed from the body via a catheter or other blood
      access device, perfused through a filter medium where toxic compounds are
      removed, and returned to the body.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      believe that our polymer adsorbent technology represents an effective
      therapeutic approach to severe health complications caused or complicated by
      large toxins circulating in the blood. Our technology has many potential
      applications in the treatment of common, chronic and acute healthcare
      complications including the treatment and/or prevention of sepsis; drug
      detoxification; the treatment of chronic kidney failure; the treatment of organ
      dysfunction resulting from trauma and severe burns; the treatment of liver
      failure; the prevention of post-operative complications of cardiopulmonary
      bypass surgery; and the prevention of damage to organs donated by brain-dead
      donors prior to organ harvest. These applications vary by cause and complexity
      as well as by severity but share a common characteristic i.e. high
      concentrations of toxins in the circulating blood.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      products will be easy to use and will be able to be incorporated into existing
      extracorporeal blood handling equipment, including heart-lung bypass circuits
      and hemodialysis machines. They will require no additional, expensive equipment
      and require minimal training. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Markets,
      Size and Economic Potential</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Sepsis
      </u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      United States alone, there are more than one million new cases of sepsis
      annually; extrapolated to a global population, the worldwide incidence is
      several million cases per year. Severe trauma and community acquired pneumonia
      are often associated with sepsis.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sepsis
      patients are critically ill and suffer a very high mortality rate of between
      28%
      and 60%. Because they are so expensive to treat, we believe that efficacy rather
      than cost will be the determining factor in the adoption of CytoSorb&#8482; in the
      treatment of sepsis. Our current pricing model represents a fraction of what
      is
      currently spent on the treatment of a sepsis patient. Critical care specialists
      project that the average sepsis patient may require 10 CytoSorb&#8482; (single-use,
      disposable) devices during a treatment regimen, based on the median number
      of
      days for which patients typically require ventilator support. Assuming only
      2%
      of the sepsis patient population received CytoSorb&#8482; therapy, based on a pricing
      model of $500 per device and 10 devices per episode, the annual revenue
      potential is $100 million in the U.S. alone and $200 million
      worldwide.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Brain-Dead
      Organ Donors</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      are
      approximately 6,000 to 12,000 brain dead organ donors each year in the United
      States; worldwide, the number of these organ donors is estimated to be at least
      double the U.S. brain dead organ donor population. There is a severe shortage
      of
      donor organs. Currently, there are more than 85,000 individuals on transplant
      waiting lists in the United States. We expect that the use of our CytoSorb&#8482;
device in brain dead organ donors will increase the number of viable organs
      harvested from the donor pool and improve the survival of transplanted organs.
      At $500 per device, the worldwide revenue potential for this application is
      currently estimated at $12 million annually. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Cardiopulmonary
      Bypass Procedures</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      are
      approximately 400,000 cardiopulmonary bypass (CPB) and cardiac surgery
      procedures performed annually in the U.S. and more than 800,000 worldwide.
      Nearly a third of all patients suffer from post-operative complications of
      cardiopulmonary bypass surgery, including complications from infection,
      pneumonia, pulmonary, and neurological dysfunction. Extended surgery time leads
      to longer ICU recovery time and hospital stays, both leading to higher costs
      -
      approximately $35,000 per coronary artery bypass graft procedure. We believe
      that the use of CytoSorb&#8482; during and after the surgical procedure will prevent
      or mitigate post-operative complications for many CPB patients. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      anticipate that the CytoSorb&#8482; device, incorporated into the extracorporeal
      circuit used with the by-pass equipment during surgery, and/or employed
      post-operatively for a period of time, will mitigate inflammation and speed
      recovery. At $500 per CytoSorb&#8482; device and one device per procedure, and
      assuming 50% of the patient population receives CytoSorb&#8482; treatment, the annual
      revenue potential for this application is $100 million in the U.S. and $200
      million worldwide.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Chronic
      Kidney Failure</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      National Kidney Foundation estimates that more than 20 million Americans have
      chronic kidney disease. Left untreated, chronic kidney disease can ultimately
      lead to chronic kidney failure, which requires a kidney transplant or chronic
      dialysis (generally three times per week) to sustain life. There are
      approximately 300,000 patients in the United States currently receiving chronic
      dialysis and more than 1.3 million worldwide. Approximately 85% of patients
      with
      chronic kidney disease are treated with hemodialysis.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      BetaSorb&#8482; device has been designed for use in conjunction with standard
      dialysis. Standard dialysis care typically involves three sessions per week,
      averaging approximately 150 sessions per year. Assuming BetaSorb&#8482; use in each
      session, every 100,000 patients would require approximately 15 million devices
      annually.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      pricing model for the BetaSorb&#8482; device is based on a variety of cost/benefit
      assumptions. The current BetaSorb&#8482; end-user pricing model is $35 per device, or
      $5,250 per patient per year. Based on high-volume finished product cost
      assumptions and the terms of our existing marketing and distribution agreement
      with Fresenius Medical Care (which owns more than 1,600 dialysis clinics with
      over 130,000 patients), we estimate annual revenue potential for the application
      of our technology to chronic kidney failure at approximately $780 million in
      the
      U.S. and $2.5 billion worldwide. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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      </div>
      <div id="HDR">
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Other
      Applications</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Additional
      applications for the critical care market have been identified. These promising
      areas include:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Drug
                detoxification</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Liver
                failure</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Regional
                high-dose chemotherapy</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Acute
                Respiratory Distress Syndrome
                (ARDS)</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Severe
                Acute Respiratory Syndrome (SARS)</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Equine
                sepsis</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Bio-terrorism</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Products</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>
      (Currently in Development)</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>The
      CytoSorb&#8482; Device (Critical Care)</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>APPLICATION:
      Treatment and Prevention of Sepsis</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sepsis
      is
      defined by high levels of toxic compounds </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(&#8220;cytokines&#8221;)
      which are released into the blood stream as part of the body&#8217;s auto-immune
      response to severe infection or injury. These toxins cause severe inflammation
      and damage healthy tissues, which can lead to organ dysfunction and failure.
      Sepsis is very expensive to treat and has a high mortality rate.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Potential
      Benefits:</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      By
      preventing or reducing the accumulation of cytokines in the circulating blood,
      we believe our adsorbent blood purification technology will prevent or mitigate
      severe inflammation, organ dysfunction and failure in sepsis patients.
      Therapeutic goals as an adjunctive therapy include reduced ICU and total
      hospitalization time.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Background
      and Rationale for Efficacy:</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      We
      believe that the effective treatment of sepsis is the most valuable potential
      application for our technology. Sepsis carries mortality rate of between 28%
      and
      60%. Death can occur within hours or days, depending on many variables,
      including cause, severity, patient age and co-morbidities. Researchers estimate
      that there are approximately one million new cases of sepsis in the U.S. each
      year; extrapolated to a global population, this equates to several million
      new
      cases annually. In the U.S. alone, treatment of sepsis costs nearly $20 billion
      annually. According to the Centers for Disease Control, sepsis is the tenth
      leading cause of death in the U.S., as reported by (CDC). More than 1,000 people
      die each day from sepsis. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">An
      effective treatment for sepsis has been elusive. Pharmaceutical companies have
      been trying to develop drug therapies to treat the condition. With the exception
      of a single drug, Xigris&#174; from Eli Lilly, which demonstrated a small improvement
      in survival in a small segment of the patient population, to our knowledge,
      all
      other efforts to date have failed to significantly improve patient
      survival.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      technology presents a new therapeutic approach in the treatment of sepsis,
      and
      its potential efficacy is supported by scientific research. The potential
      benefits of blood purification in the treatment of sepsis patients are widely
      acknowledged by medical professionals and have been studied using dialysis
      and
      hemofiltration technology. These studies, while encouraging, demonstrated that
      dialysis alone produced only limited benefit to sepsis patients. The reason
      for
      this appears to be rooted in a primary limitation of dialysis technology itself:
      the inability of standard dialysis to effectively and efficiently remove larger
      toxins from circulating blood. Our CytoSorb&#8482; device efficiently removes these
      larger toxins. CytoSorb&#8217;s&#8482; toxin clearing ability and the ability to interact
      safely with blood (hemocompatibility) has been demonstrated clinically. Data
      collected during the &#8220;emergency and compassionate use&#8221; treatment of a single
      sepsis patient has been encouraging to us. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CytoSorb&#8482;
      has been designed to achieve broad-spectrum removal of both pro- and
      anti-inflammatory cytokines, preventing or reducing the accumulation of high
      concentrations in the bloodstream. This approach is intended to modulate the
      immune response without blocking or suppressing the function of any of its
      mediators. For this reason, researchers have referred to the approach reflected
      in our technology as &#8216;immunomodulatory&#8217; therapy. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Projected
      Timeline and Budget Requirements:</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Previous
      clinical studies in patients with chronic kidney failure have provided valuable
      data which underpin the development of the critical care applications for our
      technology. Our current device design has been extensively studied and shown
      to
      be efficacious in humans with kidney failure (in multiple treatment sessions
      lasting up to 4 hours, three times per week for up to 24 weeks in some
      patients). This same device design was tested on a single patient with bacterial
      sepsis, producing results that we found very encouraging and confirming to
      us
      that our device design is appropriate for a more extensive sepsis study. Our
      plans for the development of CytoSorb&#8482; to treat sepsis patients are summarized
      in the table below.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left">
      <table border="0" cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="23%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Task</strong></font></div>
            </td>
            <td align="left" valign="top" width="28%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Estimated
                Time Required</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Estimated
                </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Budget
                Requirements</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.
                Design pilot study</font></div>
            </td>
            <td align="left" valign="top" width="28%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4
                to 6 months</font></div>
            </td>
            <td align="left" valign="top" width="27%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(nominal)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.
                Conduct pilot study</font></div>
            </td>
            <td align="left" valign="top" width="28%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6
                to 9 months</font></div>
            </td>
            <td align="left" valign="top" width="27%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$1.2
                million</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.
                Design pivotal study</font></div>
            </td>
            <td align="left" valign="top" width="28%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Concurrent
                with item 2</font></div>
            </td>
            <td align="left" valign="top" width="27%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(nominal)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.
                Conduct pivotal study</font></div>
            </td>
            <td align="left" valign="top" width="28%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9
                to 12 months</font></div>
            </td>
            <td align="left" valign="top" width="27%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$1.8
                million</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Approval
                time following submission</font></div>
            </td>
            <td align="left" valign="top" width="28%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6
                to 9 months</font></div>
            </td>
            <td align="left" valign="top" width="27%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total</font></div>
            </td>
            <td align="justify" valign="top" width="28%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Approximately
                25 to 36 months</font></div>
            </td>
            <td align="left" valign="top" width="27%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$3.0
                million</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Because
      our technology pertains to a medical device, the regulatory pathway and approval
      process are faster and more straightforward than the process related to the
      approval of a drug. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>APPLICATION</em></font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman">:
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Prevention
      and treatment of organ dysfunction in brain-dead organ donors to increase the
      number and quality of viable organs harvested from donors</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Potential
      Benefits</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>:</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      By
      preventing or reducing high-levels of cytokines from accumulating in the
      bloodstream of a brain-dead organ donor, CytoSorb&#8482; aims to mitigate organ
      dysfunction and failure which results from severe inflammation following
      brain-death. The primary goals for this application are</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Improving
                the viability of organs which can be harvested from brain-dead organ
                donors, and </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">increasing
                the likelihood of organ survival following
                transplant.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Background
      and Rationale for Efficacy:</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      When
      brain death occurs, the body responds by generating large quantities of
      inflammatory cytokines. This process is similar to sepsis. A high percentage
      of
      donated organs are never transplanted due to this response, which damages
      healthy organs and prevents transplant. In addition, inflammation in the donor
      may damage organs that are harvested and reduce the probability of graft
      survival following transplant.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      is
      a shortage of donated organs worldwide, with approximately 85,000 people
      currently on the waiting list for organ transplants in the United States alone.
      Because there are an insufficient number of organs donated to satisfy demand,
      it
      is vital to maximize the number of viable organs donated, and optimize the
      probability of organ survival following transplant. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Projected
      Timeline and Budget Requirements:</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Studies
      are currently being conducted under a $1 million grant from the Health Resources
      and Services Administration (HRSA),</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">an
      agency
      of the U.S. Department of Health and Human Services, and extensive development
      work has already been completed. Researchers at the University of Pittsburgh
      Medical Center and the University of Texas, Houston Medical Center have made
      significant progress on the observational and dosing phases of the project.
      The
      observational portion of the study is ongoing, while the dosing study, involving
      eight non-viable donors, has been completed. These initial phases of the study
      are expected to be concluded in 2006. The next phase of this study, the
      treatment phase, will involve viable donors. In this phase of the
      project</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>,
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">viable
      donors will be treated and the survival and function of organs in transplant
      recipients will be tracked and measured. The treatment phase will be contingent
      upon further discussion with the FDA and HRSA regarding trial design, as well
      as
      obtaining additional funding.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>APPLICATION:
      Prevention and treatment of post-operative complications of cardiopulmonary
      bypass surgery</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Potential
      Benefits:</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      By
      preventing or reducing high levels of cytokines from accumulating in the blood
      system during and following cardiac surgery, we anticipate that post-operative
      complications of cardiopulmonary bypass surgery can be prevented or mitigated.
      The primary goals for this application are to </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">reduce
                ventilator and oxygen therapy requirements;
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">reduce
                length of stay in hospital intensive care units; and
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">reduce
                the total cost of patient care.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Background
      and Rationale for Efficacy:</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Due to
      the highly invasive nature of cardiopulmonary bypass surgery, high levels of
      cytokines are produced by the body, triggering severe inflammation. By
      preventing or reducing the accumulation of cytokines in a patient&#8217;s blood
      stream, we expect to prevent or mitigate post-operative complications caused
      by
      an excessive or protracted inflammatory response to the surgery. While not
      all
      patients undergoing cardiac surgery suffer these complications, it is impossible
      to predict before surgery which patients will be affected. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Projected
      Timeline:</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      We have
      completed an observational study of 32 patients to obtain information with
      respect to the onset and duration of cytokine release. We expect that this
      information will aid us in defining the appropriate time to apply the CytoSorb&#8482;
device to maximize therapeutic impact. We are not currently focusing our efforts
      on the commercialization of our technology for application to cardiac surgery.
      Upon successful commercialization of the sepsis application, we will pursue
      the
      use of our polymer absorbent technology for other critical care uses, such
      as
      cardiopulmonary bypass surgery. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>The
      BetaSorb&#8482; Device (Chronic Care)</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>APPLICATION:</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>
      Prevention and treatment of health complications caused by the accumulation
      of
      metabolic toxins in patients with chronic renal failure</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Potential
      Benefits:</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      By
      preventing or reducing high levels of metabolic waste products from accumulating
      in the blood and tissues of long-term dialysis patients, we anticipate that
      the
      health complications characteristic to these patients can be prevented or
      mitigated. The primary goals for this application are to </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">improve
                and maintain the general health of dialysis patients;
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">improve
                the quality of life of these
                patients</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">reduce
                the total cost of patient care; and
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">increase
                life expectancy.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Background
      and Rationale for Efficacy:</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Our
      BetaSorb&#8482; device is intended for use on patients suffering from chronic kidney
      failure, who rely on long-term dialysis therapy to sustain life. Due to the
      widely recognized inability of dialysis to remove larger proteins from blood,
      metabolic waste products, such as Beta-2 microglobulin, accumulate to toxic
      levels and are deposited in the joints and tissues of patients. Specific toxins
      known to accumulate in these patients have been linked to their severe health
      complications, increased healthcare costs, and reduced quality of life.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Researchers
      also believe that the accumulation of toxins may play an important role in
      the
      significantly reduced life expectancy experienced by dialysis patients. In
      the
      U.S., the average life expectancy of a dialysis patient is five years. Industry
      research has identified links between many of these toxins and poor patient
      outcomes. By routinely removing these toxins during dialysis and preventing
      or
      reducing their accumulation, we expect our BetaSorb&#8482; device to maintain or
      improve patient health in the long-term. We believe that by reducing the
      incidence of health complications, the annual cost of patient care will be
      reduced and life expectancy increased. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      poor
      health experienced by chronic dialysis patients is illustrated by the fact
      that
      in the U.S. alone, more than $20 billion is spent annually caring for this
      patient population. While the cost of providing dialysis therapy alone is
      approximately $23,000 per patient per year, the total cost of caring for a
      patient ranges from $60,000 to more than $120,000 annually due to various health
      complications associated with dialysis.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Projected
      Timeline:</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      We have
      collected a significant amount of empirical data for the development of this
      application. As the developer of this technology, we had to undertake extensive
      research, as no comparable technology was available for reference purposes.
      We
      have completed several pilot studies, and most recently a clinical pilot of
      six
      patients in California for up to 24 weeks in which our BetaSorb&#8482; device removed
      the targeted toxins as expected. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      discussed above, due to practical and economic considerations, we are now
      focusing our efforts and resources on commercializing our CytoSorb&#8482; device for
      critical care application. Following commercial introduction of the CytoSorb&#8482;
device, we expect to conduct additional clinical studies using the BetaSorb&#8482;
device in the treatment of end stage renal disease patients.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Commercial
      and Research Partners</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>University
      of Pittsburgh Medical Center</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">working
      with researchers at the University of Pittsburgh - Critical Care Medicine
      Department in the development of critical care applications for technology.
      Consisting of more than twenty physicians, as well as numerous full-time
      scientists, educators and administrative assistants, the Critical Care Medicine
      Department at the University of Pittsburgh is one of the largest organizations
      of its type in the world and has established an international reputation for
      excellence in clinical care, education, and research.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Researchers
      at UPMC have participated in nearly every major clinical trial of potential
      sepsis intervention during the past twenty years. Drs. Derek Angus and John
      Kellum were investigators for Ely Lilly</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8217;s
      sepsis
      drug, Xigris&#174;. Dr. Kellum, a member of the UPMC faculty since 1994, is our
      principal investigator for CytoSorb&#8482;. Dr. Kellum, together with several other
      researchers at UPMC, serve on our Critical Care Advisory Board. Dr. Kellum&#8217;s
      research interests span various aspects of Critical Care Medicine, but center
      on
      critical care nephrology (including acid-base, and renal replacement therapy),
      sepsis and multi-organ failure, and clinical epidemiology. He is Chairman of
      the
      Fellow Research Committee at the University of Pittsburgh Medical
      Center</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">has
      authored more than 70 publications and has received numerous research grants
      from foundations and industry. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Fresenius
      Medical Care</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      AG</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      entered into </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">an
      exclusive, long-term agreement with Fresenius Medical Care for the global
      marketing and distribution of our BetaSorb&#8482; device and any similar product we
      may develop for the treatment of renal disease. The agreement, which we entered
      into in 1999 is a profit sharing plan under which both we and Fresenius are
      incentivized to minimize costs and maximize the price to end-users. In
      particular, under the agreement, to the extent that sales of our products by
      Fresenius results in gross margins to Fresenius in excess of targeted levels,
      we
      would share with Fresenius a portion of the revenues attributable to such
      excess. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">With
      Fresenius as our exclusive distributor of our renal products, we believe that
      our agreement with Fresenius will maximize the potential for rapid product
      introduction and penetration of the chronic kidney failure market.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Today,
      Fresenius Medical Care is the world's largest, integrated provider of products
      and services for individuals with chronic kidney failure. Through its network
      of
      more than 1,600 dialysis clinics in North America, Europe, Latin America and
      Asia-Pacific, Fresenius Medical Care provides dialysis treatment to more than
      130,000 patients around the globe. Fresenius Medical Care is also the world's
      largest provider of dialysis products, such as hemodialysis machines, dialyzers
      and related disposable products.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Royalty
      Agreement</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      August
      2003, in order to induce Guillermina Vega Montiel, a principal stockholder
      of
      ours, to make an additional investment in MedaSorb, we granted Ms. Montiel
      a
      perpetual royalty equal to three percent of all gross revenues received by
      us
      from sales of CytoSorb</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>TM
      </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
      the
      applications of sepsis, cardiopulmonary bypass surgery, organ donor,
      chemotherapy and inflammation control application. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>P</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>roduct
      Payment &amp; Reimbursement</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>&#160;</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Critical
      Care Applications</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Payment
      for </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">our
      CytoSorb&#8482; device in the treatment and prevention of sepsis and other related
      acute care applications is anticipated to fall under the &#8220;diagnosis-related
      group&#8221; (DRG) in-patient reimbursement system, which is currently the predominant
      basis of hospital medical billing in the United States. Under this system,
      predetermined payment amounts are assigned to categories of medical patients
      with respect to their treatments at medical facilities based on the DRG that
      they fall within (which is a function of such characteristics as medical
      condition, age, sex, etc.) and the length of time spent by the patient at the
      facility. Reimbursement is not determined by the actual procedures used in
      the
      treatment of these patients, and a separate reimbursement decision would not
      be
      required to be made by Medicare, the HMO or other provider of medical benefits
      in connection with the actual method used to treat the patient.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
      <div id="HDR">
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Critical
      care applications such as those targeted by our CytoSorb&#8482; device involve a high
      mortality rate and extended hospitalization, coupled with extremely expensive
      ICU time. In view of these high costs and high mortality rates, we believe
      acceptance of our proprietary technology by critical care practitioners and
      hospital administrators will primarily depend on safety and efficacy factors
      rather than cost.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Chronic
      Renal Failure</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      U</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.S.,
      over
      80% of chronic dialysis patients are Medicare-eligible, regardless of age.
      Therefore, it is expected that Medicare will be the primary payer for the
      BetaSorb&#8482; device, either through the current &#8220;fee for service&#8221; mechanism or
      managed care programs. The large majority of costs not covered by federal
      programs are covered by the private insurance sector. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">While
      the
      fee-for-service composite rate system is currently the dominant payment
      mechanism, many industry participants believe that a managed care system will
      become the dominant payment mechanism. We believe that movement to a full or
      shared-risk managed care system would speed market acceptance of BetaSorb&#8482;
because, under such a system, providers will have a strong incentive to adopt
      technologies that lower overall treatment costs. Fresenius is a leading
      participant in the move to managed care and will play a leading role in the
      demonstration and introduction of our product to Medicare. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Competition</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Sepsis
      </u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      believe that our products represent a unique approach to disease states and
      health complications associated with sepsis, which is sometimes also referred
      to
      as systemic inflammatory response syndrome (SIRS). Researchers have explored
      the
      potential of using existing membrane-based dialysis technology to treat patients
      suffering from sepsis. These techniques are unable to effectively remove the
      larger toxins which leading researchers have shown to cause and complicate
      sepsis. The same experts believe that a blood purification technique that
      efficiently removes, or significantly reduces, the circulating concentrations
      of
      such toxins might represent a successful therapeutic option.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      CytoSorb&#8482; device is highly efficient in the removal of large toxins from
      circulating blood. Since the adsorbent device does not rely on fluid extraction
      for blood purification, it does not necessitate the use of replacement fluid.
      This represents a major advantage over any dialysis technique. A study conducted
      on a single patient with bacterial sepsis produced results that we believe
      demonstrate the ability of the CytoSorb&#8482; device to remove the toxins acting in
      sepsis. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Medical
      research during the past two decades has focused on drug interventions aimed
      at
      chemically blocking or suppressing the function of one or two inflammatory
      agents. In hindsight, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">some
      researchers now believe this approach has little chance of significantly
      improving patient outcomes because of the complex pathways and multiple chemical
      factors at play. Clinical studies of these drug therapies have been largely
      unsuccessful. An Ely Lilly drug, Xigris&#174;, cleared by the FDA in November 2001,
      is the first and only drug to be approved for the treatment of severe sepsis.
      Clinical studies demonstrated that use of Xigris&#174; resulted in a 6% reduction in
      the absolute risk of death, and a 13% risk reduction in the most severe sepsis
      patients. The drug remains controversial and is considered extremely expensive
      when compared to the percentage of patients who benefit. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">16</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">While
      studies of other potential sepsis drug therapies are in progress, we are not
      aware of any other broad-spectrum blood detoxification therapy under development
      for this application that could be considered directly competitive with our
      approach. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>C</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>ardiopulmonary
      Bypass Surgery</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
      not aware of any practical competitive approaches for removing cytokines in
      CPB
      patients. Alternative therapies such as &#8220;off-pump&#8221; surgeries are available but
&#8220;post-bypass&#8221; syndrome has not been shown to be reduced in this less invasive
      procedure. If successful, the CytoSorb&#8482; is expected to be useful in both on-pump
      and off-pump procedures. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Chronic
      Dialysis</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      know
      of no other device, medication or therapy considered directly competitive with
      our technology. Research and development in the field has focused primarily
      on
      improving existing dialysis technologies. The introduction of the high-flux
      dialyzer in the mid-1980s and the approval of Amgen&#8217;s Epogen&#8482;, a recombinant
      protein used to treat anemia, are the two most significant developments in
      the
      field over the last two decades. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Efforts
      to improve removal of larger toxins with enhanced dialyzer designs have achieved
      only marginal success. Many experts believe that dialyzer technology has reached
      its limit in this respect. A variation of high-flux hemodialysis, known as
      hemodiafiltration, has existed for many years. However, due to the complexity,
      cost and increased risks, this dialysis </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">technique
      has not gained significant acceptance worldwide. In addition, many larger toxins
      are not effectively filtered by hemodiafiltration, despite its more open pore
      structure. As a result, hemodiafiltration does not approach the quantity of
      toxins removed by the BetaSorb&#8482; device. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>T</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>reatment
      of Organ Dysfunction in Brain-Dead Organ Donors</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      are not
      aware of any directly competitive products to address the application of our
      technology for the mitigation of organ dysfunction and failure resulting from
      severe inflammation following brain-death.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Clinical
      Testing</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>&#160;</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      first
      clinical studies were conducted in patients with chronic renal failure. The
      health of these patients is challenged by high levels of toxins circulating
      in
      their blood but, unlike sepsis patients, they are not at imminent risk of death.
      The toxins involved in chronic renal failure are completely different from
      those
      involved in sepsis, eroding health gradually over time. The treatment of
      patients with chronic renal failure is a significant target market for us,
      although not the current focus of our efforts and resources. Our clinical
      testing and product development work in this application functioned as a low
      risk method of evaluating the safety of the technology in a clinical setting,
      with direct benefit to development of the critical care applications on which
      we
      are now focusing our efforts. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      believe that our device design, which has been tested in approximately 350
      sessions, combined with hemodialysis, has been identified as a suitable
      candidate to pilot in clinical studies in the treatment of sepsis. We used
      this
      design in our first clinical experience treating a septic patient, which has
      produced results that we have found encouraging and indicative of the efficacy
      of our technology in the treatment of sepsis. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Government
      Research Grants</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Three
      government research grants by the National Institutes of Health (NIH) and Health
      and Human Services (HHS) have been awarded to investigators to explore the
      use
      of our technology in sepsis and transplant organ preservation.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
      grant
      of $1</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">million
      was awarded to the University of Pittsburgh Medical Center in 2003. The project
      seeks to improve the quantity and viability of organs donated for transplant
      by
      using CytoSorb&#8482; to detoxify the donor&#8217;s blood. This clinical study is in
      progress.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      second grant, a $100,000 Phase I Small Business Technology Transfer grant from
      the National Institutes of Health, was directly awarded to us for the study
      of
      blood purification on survival time using a septic model.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Finally,
      University of Pittsburgh Medical Center was awarded a $7,000,000 grant from
      NIH
      entitled &#8220;Systems Engineering of a Pheresis Intervention for Sepsis
      (SEPsIS)</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      to study
      the use of our adsorbent polymer technology in the treatment of severe sepsis.
      These grants represent a substantial research cost savings to us and demonstrate
      the strong interest of the medical and scientific communities in our
      technology.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Regulation</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      medical devices that we manufacture are subject to regulation by numerous
      regulatory bodies, including the FDA and comparable international regulatory
      agencies. These agencies require manufacturers of medical devices to comply
      with
      applicable laws and regulations governing the development, testing,
      manufacturing, labeling, marketing and distribution of medical devices. Devices
      are generally subject to varying levels of regulatory control, the most
      comprehensive of which requires that a clinical evaluation program be conducted
      before a device receives approval for commercial distribution.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">18</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      U.S., permission to distribute a new device generally can be met in one of
      two
      ways. The first process requires that a pre-market notification (510(k)
      Submission) be made to the FDA to demonstrate that the device is as safe and
      effective as, or substantially equivalent to, a legally marketed device that
      is
      not subject to pre-market approval (PMA). A legally marketed device is a device
      that (i)&#160;was legally marketed prior to May&#160;28, 1976, (ii)&#160;has
      been reclassified from Class III to Class&#160;II or I, or (iii)&#160;has been
      found to be substantially equivalent to another legally marketed device
      following a 510(k) Submission. The legally marketed device to which equivalence
      is drawn is known as the &#8220;predicate&#8221; device. Applicants must submit descriptive
      data and, when necessary, performance data to establish that the device is
      substantially equivalent to a predicate device. In some instances, data from
      human clinical trials must also be submitted in support of a 510(k) Submission.
      If so, these data must be collected in a manner that conforms with specific
      requirements in accordance with federal regulations. The FDA must issue an
      order
      finding substantial equivalence before commercial distribution can occur.
      Changes to existing devices covered by a 510(k) Submission which do not
      significantly affect safety or effectiveness can generally be made by us without
      additional 510(k) Submissions. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      second process requires that an application for PMA be made to the FDA to
      demonstrate that the device is safe and effective for its intended use as
      manufactured. This approval process applies to certain Class&#160;III devices.
      In this case, two steps of FDA approval are generally required before marketing
      in the U.S. can begin. First, investigational device exemption (IDE) regulations
      must be complied with in connection with any human clinical investigation of
      the
      device in the U.S. Second, the FDA must review the PMA application which
      contains, among other things, clinical information acquired under the IDE.
      The
      FDA will approve the PMA application if it finds that there is a reasonable
      assurance that the device is safe and effective for its intended purpose.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      European Union, distributors of medical devices are required to comply with
      the
      Medical Devices Directive and obtain CE Mark certification in order to market
      medical devices. The CE Mark certification, granted following approval from
      an
      independent Notified Body, is an international symbol of adherence to quality
      assurance standards and compliance with applicable European Medical Devices
      Directives. Distributors of medical devices may also be required to comply
      with
      other foreign regulations such as Ministry of Health Labor and Welfare approval
      in Japan. The time required to obtain these foreign approvals to market our
      products may be longer or shorter than that required in the U.S., and
      requirements for those approvals may differ from those required by the FDA.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      United States, our CytoSorb&#8482; and BetaSorb&#8482; devices are classified as Class III
      (CFR 876.5870&#8212;Sorbent Hemoperfusion System) and will require 501(k) Submissions
      to the FDA. However, because the BetaSorb&#8482; device is intended for chronic use,
      the FDA may require pre-market approval (PMA), which we will submit if required.
      In the case of CytoSorb&#8482;, because the application is for acute care (short term,
      less than 30 days), management believes that FDA approval for this product
      may
      be obtained based solely on the 510(k) Submission accompanied with clinical
      data. In Europe, our devices are expected to be classified as class IIb, and
      will conform to the ISO 13485 Quality Standard in support of our planned
      applications to obtain CE Mark certification in Europe, and applicable approvals
      in Canada and Japan. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">19</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      process of obtaining clearance to market products is costly and time-consuming
      in virtually all of the major markets in which we expect to sell products and
      may delay the marketing and sale of our products. Countries around the world
      have recently adopted more stringent regulatory requirements which are expected
      to add to the delays and uncertainties associated with new product releases,
      as
      well as the clinical and regulatory costs of supporting those releases. No
      assurance can be given that any of our medical devices will be approved on
      a
      timely basis, if at all. In addition, regulations regarding the development,
      manufacture and sale of medical devices are subject to future change. We cannot
      predict what impact, if any, those changes might have on our business. Failure
      to comply with regulatory requirements could have a material adverse effect
      on
      our business, financial condition and results of operations. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Given
      adequate funding, we expect that it will take approximately six months to begin
      the treatment phase of a pilot clinical study on the efficacy of our products
      in
      the treatment of sepsis. The pilot phase is expected to span six to nine months,
      and an additional one year pivotal study would then be undertaken for the
      purpose of compiling sufficient data to support both the U.S. 510(k) Submission
      and the application to obtain CE Mark certification in Europe. In the U.S.,
      another six to nine months is anticipated for FDA review and approval of the
      510(k) submission. Concurrent with these activities, we plan to pursue CE Mark
      certification of our products. Upon successful completion of a &#8220;quality systems
      audit&#8221; in combination with clinical data and the assembly of a technical file,
      we anticipate that CytoSorb&#8482; device will receive CE Mark certification,
      all</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">owing
      it
      to be sold in Europe. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      FDA
      can ban certain medical devices, detain or seize adulterated or misbranded
      medical devices, order repair, replacement or refund of these devices and
      require notification of health professionals and others with regard to medical
      devices that present unreasonable risks of substantial harm to the public
      health. The FDA may also enjoin and restrain certain violations of the Food,
      Drug and Cosmetic Act and the Safe Medical Devices Act pertaining to medical
      devices, or initiate action for criminal prosecution of such violations.
      International sales of medical devices manufactured in the U.S. that are not
      approved by the FDA for use in the U.S., or are banned or deviate from lawful
      performance standards, are subject to FDA export requirements. Exported devices
      are subject to the regulatory requirements of each country to which the device
      is exported. Some countries do not have medical device regulations, but in
      most
      foreign countries medical devices are regulated. Frequently, regulatory approval
      may first be obtained in a foreign country prior to application in the U.S.
      to
      take advantage of differing regulatory requirements. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Sales
      and Marketing </em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      currently estimate, provided that we receive adequate funding to support our
      planned activities and that our products perform as expected in clinical
      studies, that we will obtain FDA approval of our CytoSorb&#8482; device in the
      treatment of sepsis in 25 to 36 months from funding. As we approach regulatory
      approval, we plan to initially build a sales organization of approximately
      15
      representatives in the U.S. In addition, we plan on pursuing localized
      distribution agreements in rural areas. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">20</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      also
      plan to initiate sales in several European countries which are known as early
      adopters of new medical device technology. These countries primarily include
      Italy, Germany and the United Kingdom. We plan to initially operate through
      local distributors in each European country where we launch sales operations.
      Only after establishment of a limited network of local distributors and actual
      generation of sales, will we formulate a broader distribution strategy on a
      global basis.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Intellectual
      Property and Patent Litigation </em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      medic</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">al
      device
      market in which we primarily participate is in large part technology driven.
      As
      a result, intellectual property rights, particularly patents and trade secrets,
      play a significant role in product development and differentiation. However,
      intellectual property litigation to defend or create market advantage is
      inherently complex, unpredictable and is expensive to pursue. Litigation often
      is not ultimately resolved until an appeal process is completed and appellate
      courts frequently overturn lower court patent decisions. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Moreover,
      competing parties frequently file multiple suits to leverage patent portfolios
      across product lines, technologies and geographies and to balance risk and
      exposure between the parties. In some cases, several competitors are parties
      in
      the same proceeding, or in a series of related proceedings, or litigate multiple
      features of a single class of devices. These forces frequently drive settlement
      not only of individual cases, but also of a series of pending and potentially
      related and unrelated cases. In addition, although monetary and injunctive
      relief is typically sought, remedies are generally not determined until the
      conclusion of the proceedings, and are frequently modified on appeal.
      Accordingly, the outcomes of individual cases are difficult to time, predict
      or
      quantify and are often dependent upon the outcomes of other cases in other
      forums, both domestic and international.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      rely
      on a combination of patents, trademarks, trade secrets and non-disclosure
      agreements to protect our intellectual property. We hold 21</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">U.S.
      patents, some of which have foreign counterparts, and additional patent
      applications pending worldwide that cover various aspects of our technology.
      There can be no assurance that pending patent applications will result in issued
      patents, that patents issued to us will not be challenged or circumvented by
      competitors, or that such patents will be found to be valid or sufficiently
      broad to protect our technology or to provide us with a competitive advantage.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      rely
      on non-disclosure and non-competition agreements with employees, consultants
      and
      other parties to protect, in part, trade secrets and other proprietary
      technology. There can be no assurance that these agreements will not be
      breached, that we will have adequate remedies for any breach, that others will
      not independently develop equivalent proprietary information or that third
      parties will not otherwise gain access to our trade secrets and proprietary
      knowledge. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">21</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      may
      find it necessary to initiate litigation to enforce our patent rights, to
      protect our trade secrets or know-how and to determine the scope and validity
      of
      the proprietary rights of others. Patent litigation can be costly and
      time-consuming, and there can be no assurance that our litigation expenses
      will
      not be significant in the future or that the outcome of litigation will be
      favorable to us. Accordingly, we may seek to settle some or all of our pending
      litigation described below. Settlement may include cross-licensing of the
      patents which are the subject of the litigation as well as our other
      intellectual property and may involve monetary payments to or from third
      parties. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Employees
      and Properties</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      currently have six</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">employees
      and operate a 6,575 sq. ft. facility near Princeton, New Jersey, housing
      research laboratories, clinical manufacturing operations and administrative
      offices, under a lease agreement which expires in February 2007. In the opinion
      of management, the leased properties are adequately insured, are in good
      condition and suitable for the conduct of our business. We also collaborate
      with
      numerous institutions, universities and commercial entities who conduct research
      and testing of our products at their facilities. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>L</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>egal
      Proceedings</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Purolite</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
      a
      period of time beginning in December 1998, Purolite engaged in efforts to
      develop and optimize the manufacturing process needed to produce our polymer
      products on a commercial scale. However, the parties eventually decided not
      to
      proceed. In January, 2003, Purolite commenced an action against us in United
      States District Court for the Eastern District of Pennsylvania</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">asserting
      that our adsorbent technology was developed in part using Purolite&#8217;s technology,
      that two of its employees should be included as co-inventors on some of our
      patents, and that Purolite was therefor a joint owner of the technology and
      had
      rights to the use of the technology. Purolite recently expanded its claims,
      alleging they are the sole owner of these patents, and that we misappropriated
      these patents from them. Purolite now seeks equitable relief declaring that
      it
      is the exclusive owner of our technology, as well as monetary
      damages.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      filed a motion for summary judgment, which is pending before the Court, and
      have
      also engaged in efforts to settle the case.&#160; In addition, the Court has
      ordered the matter to be mediated before a magistrate judge. Although there
      has
      been some progress in seeking a resolution of the litigation, to date no
      agreement has been reached, and there can be no assurance that the parties
      will
      be able to reach an accord. If the case is not settled, the Court will rule
      on
      our summary judgment motion.&#160; If the motion is denied, we expect that the
      matter will go to trial within a few months following the Court&#8217;s ruling on our
      summary judgment motion. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Former
      Employee</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      May
      2006, a former employee of ours initiated a legal action against us in the
      United States District Court for the Southern District of New York, seeking
      damages in an amount exceeding $245,500. The employee alleges that we are
      required to pay or reimburse him for (as applicable) credit card charges to
      his
      account made by another former employee of ours and a related party. The matter
      is currently under review by our legal counsel. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">22</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Dow
      Chemical</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Several
      years ago we engaged in discussions with the Dow Chemical Company, which had
      indicated a strong interest in being our polymer manufacturer. After a Dow
      representative on our Advisory Board resigned, Dow filed and received several
      patents naming our former Advisory Board member as an inventor. In management&#8217;s
      view the Dow patents improperly incorporate our technology and should not have
      been granted to Dow. The existence of these Dow patents could result in a
      potential dispute with Dow in the future and additional expenses for us.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RISKS
      FACTORS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><strong><em><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb
      currently has no commercial operations and there can be no assurance that it
      will be successful in developing commercial operations</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></em></strong></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are a
      development stage company and have been engaged primarily in research and
      development activities and have not generated any revenues to date. There can
      be
      no assurance that we will be able to successfully manage the transition to
      a
      commercial enterprise. Potential investors should be aware of the problems,
      delays, expenses and difficulties frequently encountered by an enterprise in
      the
      early stage of development, which include unanticipated problems relating to
      development of proposed products, testing, regulatory compliance, manufacturing,
      competition, marketing problems and additional costs and expenses that may
      exceed current estimates. Our proposed products will require significant
      additional research, development, testing and financing and we will need to
      overcome significant regulatory burdens prior to commercialization. There can
      be
      no assurance that after the expenditure of substantial funds and efforts, we
      will successfully develop and commercialize any products, generate any revenues
      or ever achieve and maintain a substantial level of sales of our products.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><strong><em><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb
      has a History of Losses and Expects to Incur Substantial Future Losses, and
      the
      Report of its </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Auditor
      on its Consolidated Financial Statements Expresses Substantial Doubt About
      its
      Ability to Continue as a Going Concern</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></em></strong></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb
      has experienced substantial operating losses since inception. As of March 31,
      2006, MedaSorb had an accumulated deficit of $59,994,884, which included losses
      from operations of $3,665,596 for the year ended December 31, 2005 and
      $1,015,377 for the three-month period ended March 31, 2006. Due to these losses,
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb&#8217;s
      audited consolidated financial statements have been prepared assuming MedaSorb
      will continue as a going concern, and the auditors&#8217; report on those financial
      statements </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">express
      substantial doubt about its ability to continue as a going concern. MedaSorb&#8217;s
      losses have resulted principally from costs incurred in the research and
      development of our polymer technology and general and administrative expenses.
      Because MedaSorb was a limited liability company until December 2005,
      substantially all of these losses were allocated to its members and will not
      be
      available for tax purposes to us in future periods. We intend to conduct
      significant additional research, development, and clinical testing activities
      which, together with expenses incurred for the establishment of manufacturing
      arrangements and a marketing and distribution presence and other general and
      administrative expenses, are expected to result in continuing operating losses
      for the foreseeable future. The amount of future losses and when, if ever,
      we
      will achieve profitability are uncertain. Our ability to achieve profitability
      will depend, among other things, on successfully completing the development
      of
      our technology and commercial products, obtaining the requisite regulatory
      approvals, establishing manufacturing and sales and marketing arrangements
      with
      third parties, and raising sufficient funds to finance our activities. No
      assurance can be given that our product development efforts will be successful,
      that required regulatory approvals will be obtained, that any of our products
      will be manufactured at a competitive cost and will be of acceptable quality,
      or
      that the we will be able to achieve profitability or that profitability, if
      achieved, can be sustained. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">23</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><strong><em><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      may have
      difficulty raising needed capital in the future because of our limited operating
      history and business risks associated with MedaSorb.</font></em></strong></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      generate no revenues from our proposed products or otherwise, and have expended
      and will continue to expend substantial funds in the research, development
      and
      clinical and pre-clinical testing of our polymer products. Following the merger,
      we completed a private placement of securities raising gross proceeds of $5.5
      million. We anticipate that the net proceeds of the private placement will
      fund
      our operations for the next 15 months, following which we will need additional
      financing. However, there can be no assurance that financing will be available
      on acceptable terms or at all. Our future capital requirements will depend
      upon
      many factors, including, but not limited to, continued progress in our research
      and development activities, costs and timing of conducting clinical trials
      and
      seeking regulatory approvals and patent prosecutions, competing technological
      and market developments, and our ability to establish collaborative
      relationships with third parties. If adequate funds are unavailable, we may
      have
      to delay, reduce the scope of or eliminate one or more of our research or
      development programs or product launches or marketing efforts or cease
      operations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        long-term capital requirements are expected to depend on many factors,
        including:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">continued
                progress and cost of our research and development
                programs;</font></div>
            </td>
          </tr>

      </table>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">progress
                with pre-clinical studies and clinical
                trials;</font></div>
            </td>
          </tr>

      </table>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                time and costs involved in obtaining regulatory
                clearance;</font></div>
            </td>
          </tr>

      </table>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">costs
                involved in preparing, filing, prosecuting, maintaining, defending
                and
                enforcing patent claims;</font></div>
            </td>
          </tr>

      </table>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">costs
                of developing sales, marketing and distribution
                channels;</font></div>
            </td>
          </tr>

      </table>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">market
                acceptance of our products; and</font></div>
            </td>
          </tr>

      </table>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">costs
                for training physicians and other health care
                personnel.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition, in the event that additional funds are obtained through arrangements
      with collaborative partners or other sources, we may have to relinquish economic
      and/or proprietary rights to some of our technologies or products under
      development that we would otherwise seek to develop or commercialize by ourself.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
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        </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em><strong>We
      depend upon key personnel who may terminate their employment with us at any
      time.</strong></em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      currently have only six employees. Our success will depend to a significant
      degree upon the continued services of key management and advisors of MedaSorb,
      including Al Kraus, Dr. James Winchester, David Lamadrid and Vincent
      Capponi</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      These
      individuals, other than Mr. Kraus, whose employment agreement terminates in
      July
      2008, do not have long-term employment agreements, and there can be no assurance
      that they will continue to provide services to us. In addition, our success
      will
      depend on our ability to attract and retain other highly skilled personnel.
      We
      may be unable to recruit such personnel on a timely basis, if at all. Management
      and other employees may voluntarily terminate their employment with us at any
      time. The loss of services of key personnel, or the inability to attract and
      retain additional qualified personnel, could result in delays in development
      or
      approval of our products, loss of sales and diversion of management
      resources.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><em><strong><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Acceptance
      of MedaSorb&#8217;s </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">medical
      devices in the marketplace is uncertain, and failure to achieve market
      acceptance will prevent or delay our ability to generate
      revenues.</font></strong></em></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      future financial performance will depend, at least in part, upon the
      introduction and customer acceptance of our polymer products. Even if approved
      for marketing by the necessary regulatory authorities, our products may not
      achieve market acceptance. The degree of market acceptance will depend upon
      a
      number of factors, including:</font><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          <tr valign="top" style="line-height: 1.25;">
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            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                receipt of regulatory clearance of marketing claims for the uses
                that we
                are developing;</font></div>
            </td>
          </tr>

      </table>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                receipt of regulatory clearance of marketing claims for the uses
                that we
                are developing;</font></div>
            </td>
          </tr>

      </table>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                establishment and demonstration of the advantages, safety and efficacy
                of
                the our polymer technology;</font></div>
            </td>
          </tr>

      </table>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">pricing
                and reimbursement policies of government and third-party payers such
                as
                insurance companies, health maintenance organizations and other health
                plan administrators;</font></div>
            </td>
          </tr>

      </table>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">our
                ability to attract corporate partners, including medical device companies,
                to assist in commercializing our products;
                and</font></div>
            </td>
          </tr>

      </table>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">our
                ability to market our products.</font></div>
            </td>
          </tr>

      </table>
      <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Physicians,
      patients, payers or the medical community in general may be unwilling to accept,
      utilize or recommend any of our products. If we are unable to obtain regulatory
      approval or commercialize and market our products when planned, we may not
      achieve any market acceptance or generate revenue.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">25</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><strong><em><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      face
      litigation from third parties which claim that our products infringe on their
      intellectual property rights, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">or
      seek
      to challenge the validity of our patents.</font></em></strong></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      future success is also dependent on the strength of our intellectual property,
      trade secrets and know-how, which have been developed from years of research
      and
      development. In addition to the &#8220;Purolite&#8221; litigation discussed below, we may be
      exposed to additional future litigation by third parties seeking to challenge
      the validity of our </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">rights
      based on claims that our technologies, products or activities infringe the
      intellectual property rights of others or are invalid, or that we have
      misappropriated the trade secrets of others.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Since
      our
      inception, we have sought to contract with large, established manufacturers
      to
      supply commercial quantities of our adsorbent polymers. As a result, we have
      disclosed, under confidentiality agreements, various aspects of our technology
      with potential manufacturers. We believe that these disclosures, while necessary
      for our business, have resulted in the attempt by potential suppliers to assert
      ownership claims to our technology in an attempt to gain an advantage in
      negotiating manufacturing rights.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      previously engaged in discussions with the Brotech Corporation and its
      affiliate, Purolite International, Inc. (collectively &#8220;Purolite&#8221;), which had
      demonstrated a strong interest in being our polymer manufacturer. For a period
      of time beginning in December 1998, Purolite engaged in efforts to develop
      and
      optimize the manufacturing process needed to produce our polymer products on
      a
      commercial scale. However, the parties eventually decided not to proceed. In
      2003, Purolite filed a lawsuit against us asserting, among other things,
      co-ownership and co-inventorship of certain of our patents. Purolite recently
      expanded its claims alleging they are the sole owner of these patents, and
      that
      we misappropriated these patents from them. We believe these claims are without
      merit. In management&#8217;s view, the suit was initiated to pressure us to reach an
      exclusive manufacturing agreement. Several negotiation efforts have been made
      to
      settle the case without success. The discovery phase has been completed and
      we
      have made an application to the court to dismiss the action, which is currently
      pending before the court. If our application is not granted, we expect that
      the
      matter will be tried in early 2006.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Several
      years ago we engaged in discussions with the Dow Chemical Company, which had
      indicated a strong interest in being our polymer manufacturer. After a Dow
      representative on our Advisory Board resigned, Dow filed and received several
      patents naming our former Advisory Board member as an inventor. In management&#8217;s
      view the Dow patents improperly incorporate our technology and should not have
      been granted to Dow. The existence of these Dow patents could result in a
      potential dispute with Dow in the future and additional expenses for
      MedaSorb.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><em><strong><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      failure to obtain government approvals, including required FDA approvals, for
      our polymer products, or to comply with ongoing governmental regulations could
      prevent, delay or limit introduction or sale of our products and result in
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      failure to achieve revenues or maintain our
      operations.</font></strong></em></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      manufacturing and marketing of our products will be subject to extensive and
      rigorous government regulation in the United States, in various states and
      in
      foreign countries. In the United States and other countries, the process of
      obtaining and maintaining required regulatory approvals is lengthy, expensive,
      and uncertain. There can be no assurance that we will ever obtain the necessary
      approvals to sell our products. Even if we do ultimately receive FDA approval
      for any of our products, we will be subject to extensive ongoing regulation.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">26</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      products will be subject to regulation as medical devices under the Federal
      Food, Drug, and Cosmetic Act. In the United States, the FDA enforces, where
      applicable, development, clinical testing, labeling, manufacturing,
      registration, notification, clearance or approval, marketing, distribution,
      record keeping, and reporting requirements for medical devices. Different
      regulatory requirements may apply to our products depending on how they are
      categorized by the FDA under these laws. Current FDA regulations classify our
      CytoSorb&#8482; device (the first product we intend to seek FDA approval for) as a
      Class III device (CFR 876.5870&#8212;Sorbent Hemoperfusion System). We intend to
      submit a 510(k) pre-market notification to the FDA for approval to market this
      product. There can be no assurance, however, that the FDA will grant clearance
      to market CytoSorb&#8482; in a timely manner, if at all, or that the FDA will not
      require the submission of additional clinical data or a pre-market approval
      application ("PMA"), which is a lengthier process. There can be no assurance
      that the clinical trials we conduct will demonstrate sufficient safety and
      efficacy to obtain the required regulatory approvals for marketing, or that
      we
      will be able to comply with any additional FDA, state or foreign regulatory
      requirements. In addition, there can be no assurance that government regulations
      applicable to our products or the interpretation of those regulations will
      not
      change. We also are and will be subject to other Federal, state, and local
      laws,
      regulations and recommendations relating to laboratory and manufacturing
      practices as well as Medicare, Medicaid and anti-kickback laws. Non-compliance
      with applicable requirements can result in civil penalties, the recall,
      injunction or seizure of products, an inability to import products into the
      United States, the refusal by the government to approve or clear product
      approval applications, the withdrawal of previously approved product
      applications and criminal prosecution. The extent of potentially adverse
      government regulation that might arise from future legislation or administrative
      action cannot be predicted. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><em><strong><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Data
      obtained from clinical </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
      pre-clinical trials is susceptible to varying interpretations, which could
      delay, limit or prevent regulatory clearances.</font></strong></em></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      can
      be no assurance that we will successfully complete the clinical trials necessary
      to receive regulatory approvals. While tests conducted by us and others have
      produced results we believe to be </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">encouraging
      and indicative of the efficacy of our products and technology, data already
      obtained, or in the future obtained, from pre-clinical studies and clinical
      trials do not necessarily predict the results that will be obtained from later
      pre-clinical studies and clinical trials. Moreover, pre-clinical and clinical
      data is susceptible to varying interpretations, which could delay, limit or
      prevent regulatory approval. A number of companies in the medical device and
      pharmaceutical industries have suffered significant setbacks in advanced
      clinical trials, even after promising results in earlier trials. The failure
      to
      adequately demonstrate the safety and effectiveness of an intended product
      under
      development could delay or prevent regulatory clearance of the device, resulting
      in delays to commercialization, and could materially harm our business.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">27</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><strong><em><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">rely
      extensively on research and testing facilities at various universities and
      institutions, which could be adversely affect us should we lose access to those
      facilities.</font></em></strong></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Although
      we have our own research laboratories and clinical facilities, we collaborate
      with numerous institutions, universities and commercial entities to conduct
      research and testing of our products. We currently maintain a good working
      relationship with these parties. However, should the situation change, the
      cost
      and time to establish or locate alternative research and development could
      be
      substantial and delay gaining FDA approval and commercializing our
      products.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><strong><em><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
      will
      be exposed to product liability risks, and clinical and preclinical liability
      risks, which could place a substantial financial burden upon us should we be
      sued.</font></em></strong></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      business exposes us to potential product liability and other liability risks
      that are inherent in the testing, manufacturing and marketing of medical
      devices. We cannot be sure that claims will not be asserted against us. A
      successful liability claim or series of claims brought against us could have
      a
      material adverse effect on our business, financial condition and results of
      operations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      do not
      currently have any product liability insurance or other liability insurance
      relating to clinical trials or any products. We cannot give assurances that
      we
      will be able to obtain or maintain adequate product liability insurance on
      acceptable terms, if at all, or that such insurance will provide adequate
      coverage against potential liabilities. Claims or losses in excess of any
      product liability insurance coverage that we may obtain could have a material
      adverse effect on our business, financial condition and results of
      operations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><strong><em><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certain
      university and other relationships are important to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">our
      business and may potentially result in conflicts of
      interests.</font></em></strong></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dr.
      John
      Kellum and Dr. David </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Powner,
      among others, are critical care advisors and consultants of ours and are
      associated with University of Pittsburgh Medical Center and University of Texas,
      respectively. Their association with these institutions may currently or in
      the
      future involve conflicting interests in the event they or these institutions
      enter into consulting or other arrangements with competitors of
      ours.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><em><strong><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">limited
      manufacturing experience, and once our products are approved, we may not be
      able
      to manufacture sufficient quantities at an acceptable cost, or without
      shut-downs or delays.</font></strong></em></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      remain
      in the research and development and clinical and pre-clinical trial phase of
      product commercialization. Accordingly, once our products are approved for
      commercial sale, we will need to establish the capability to commercially
      manufacture our products in accordance with FDA and other regulatory
      requirements. We have limited experience in establishing, supervising and
      conducting commercial manufacturing. If we or the third-party manufacturers
      of
      our products fail to adequately establish, supervise and conduct all aspects
      of
      the manufacturing processes, we may not be able to commercialize our products.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><strong><em><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Due
      to
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">our
      limited marketing, sales and distribution experience, we may be unsuccessful
      in
      our efforts to sell our products.</font></em></strong></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      expect
      to enter into agreements with third parties for the commercial manufacture
      and
      distribution of our products. There can be no assurance that parties we may
      engage to market and distribute our products will:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
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        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="line-height: 1.25;">
              <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">satisfy
                    their financial or contractual obligations to
                    us;</font></div>
                </div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="line-height: 1.25;">
              <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">adequately
                    market our products; or</font></div>
                </div>
              </td>
            </tr>

        </table>
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        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="line-height: 1.25;">
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</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">not
                  offer, design, manufacture or promote competing
                  products.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
        for
        any reason any party engage is unable or chooses not to perform its obligations
        under our marketing and distribution agreement, we would experience delays
        in
        product sales and incur increased costs, which would harm our business and
        financial results.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em><strong>If
      we are unable to convince physicians and other health care providers as to
      the
      benefits of our products, we may incur delays or additional expense in our
      attempt to establish market acceptance.</strong></em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Broad
      use
      of our products may require physicians </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
      other
      health care providers to be informed about our products and their intended
      benefits. The time and cost of such an educational process may be substantial.
      Inability to successfully carry out this education process may adversely affect
      market acceptance of our products. We may be unable to educate physicians
      regarding our products in sufficient numbers or in a timely manner to achieve
      our marketing plans or to achieve product acceptance. Any delay in physician
      education may materially delay or reduce demand for our products. In addition,
      we may expend significant funds towards physician education before any
      acceptance or demand for our products is created, if at all.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><strong><em><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      market for </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">our
      products is rapidly changing and competitive, and new devices and drugs which
      may be developed by others could impair our ability to maintain and grow our
      business and remain competitive.</font></em></strong></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      medical device and pharmaceutical industries are subject to rapid and
      substantial technological change. Developments by others may render our
      technologies and products noncompetitive or obsolete. We also may be unable
      to
      keep pace with technological developments and other market factors.
      Technological competition from medical device, pharmaceutical and biotechnology
      companies, universities, governmental entities and others diversifying into
      the
      field is intense and is expected to increase. Many of these entities have
      significantly greater research and development capabilities and budgets than
      we
      do, as well as substantially more marketing, manufacturing, financial and
      managerial resources. These entities represent significant competition for
      us.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">29</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><em><strong><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      users
      of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">our
      products are unable to obtain adequate reimbursement from third-party payers,
      or
      if new restrictive legislation is adopted, market acceptance of our products
      may
      be limited and we may not achieve anticipated revenues.
</font></strong></em></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      continuing efforts of government and insurance companies, health maintenance
      organizations and other payers of healthcare costs to contain or reduce costs
      of
      health care may affect our future revenues and profitability, and the future
      revenues and profitability of our potential customers, suppliers and
      collaborative partners and the availability of capital. For example, in certain
      foreign markets, pricing or profitability of medical devices is subject to
      government control. In the United States, given recent federal and state
      government initiatives directed at lowering the total cost of health care,
      the
      U.S. Congress and state legislatures will likely continue to focus on health
      care reform, the cost of medical devices and on the reform of the Medicare
      and
      Medicaid systems. While we cannot predict whether any such legislative or
      regulatory proposals will be adopted, the announcement or adoption of these
      proposals could materially harm our business, financial condition and results
      of
      operations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      ability to commercialize our products will depend in part on the extent to
      which
      appropriate reimbursement levels for the cost of our products and related
      treatment are obtained by governmental authorities, private health insurers
      and
      other organizations, such as health maintenance organizations (&#8220;HMOs&#8221;).
      Third-party payers are increasingly challenging the prices charged for medical
      care. Also, the trend toward managed health care in the United States and the
      concurrent growth of organizations such as HMOs, which could control or
      significantly influence the purchase of health care services and medical
      devices, as well as legislative proposals to reform health care or reduce
      government insurance programs, may all result in lower prices for our products.
      The cost containment measures that health care payers and providers are
      instituting and the effect of any health care reform could materially harm
      our
      ability to operate profitably.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><strong><em><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Directors,
      executive officers and principal stockholders are expected to own a significant
      percentage of the shares of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Common
      Stock, which will limit your ability to influence corporate
      matters.</font></em></strong></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      d</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">irectors,
      executive officers and principal stockholders together beneficially own
      approximately 75% of our outstanding shares of Common Stock. Accordingly, these
      stockholders could have a significant influence over the outcome of any
      corporate transaction or other matter submitted to stockholders for approval,
      including mergers, consolidations and the sale of all or substantially all
      of
      our assets and also could prevent or cause a change in control. The interests
      of
      these stockholders may differ from the interests of our other stockholders.
      Third parties may be discouraged from making a tender offer or bid to acquire
      us
      because of this concentration of ownership. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em><strong>Our
      Series A Preferred Stock Provides for the Payment of Penalties;
      Dilution.</strong></em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Immediately
      following the merger, we issued 5,250,000 shares of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series
      A
      10% Cumulative Convertible Preferred Stock</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      with an
      aggregate stated value of $5,250,000, and we may issue additional shares of
      this
      series of preferred stock. The Certificate of Designation designating the Series
      A Preferred Stock provides that upon the following events, among others, the
      dividend rate with respect to the Series A Preferred Stock increases to 20%
      per
      annum, which dividends would then be required to be paid in cash:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                occurrence of &#8220;Non-Registration Events&#8221; including, the failure to cause a
                registration statement registering the shares of Common Stock underlying
                the Series A Preferred Stock and Warrants issued in connection therewith
                to be effective within 240 days following the closing of the private
                placement;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">an
                uncured breach by us of any material covenant, term or condition
                in the
                Certificate of Designation or any of the related transaction documents;
                and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">any
                money judgment or similar final process being filed against us for
                more
                than $100,000.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      registration rights provided for in the subscription agreement we entered into
      with the purchasers in this offering: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">require
                that we file a registration statement with the SEC on or before 120
                days
                from the closing to register the shares of Common Stock issuable
                upon
                conversion of the Series A Preferred Stock and exercise of the Warrants,
                and cause such registration statement to be effective within 240
                days
                following the closing; and</font></div>
            </td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">entitles
                each of these investors to liquidated damages in an amount equal
                to two
                percent (2%) of the purchase price of the Series A Preferred Stock
                if we
                fail to timely file that registration statement with, or have it
                declared
                effective by, the SEC.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Certificate of Designation, Subscription Agreement and related transaction
      documents also provide for various penalties and fees for breaches or failures
      to comply with provisions of those documents, such as the timely payment of
      dividends, delivery of stock certificates, and obtaining and maintaining an
      effective registration statement with respect to the shares of Common Stock
      underlying the Series A Preferred Stock and Warrants sold in the
      offering.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition, b</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">oth
      the
      conversion price of the Series A Preferred Stock and the exercise price of
      the
      Warrants are subject to &#8220;full-ratchet&#8221; anti-dilution provisions, so that upon
      future issuances of our Common Stock or equivalents thereof, subject to
      specified customary exceptions, at a price below the conversion price of the
      Series A Preferred Stock and/or exercise price of the Warrants, such conversion
      price and/or exercise price will be reduced to such lower price, further
      diluting holders of our Common Stock. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">31</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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      is no public market for our Common Stock.</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Although
      our shares of Common Stock are eligible for quotation on the OTC Bulletin Board
      under the symbol &#8220;GDRE,&#8221; there is currently no public market for the Common
      Stock and there can be no expectation or assurance that a trading market will
      develop or, if a market develops, that it will be active or sustained.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Future
      Sales of Common Stock Could Result in a Decline in Market
      Price.</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Following
      the completion of the merger, the holders </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3,750,000
      shares of Common Stock are able to sell such shares without registering them
      under the Securities Act. In addition, we are required to file a registration
      statement under the Securities Act covering the resale of the shares of Common
      Stock underlying the Series A Preferred Stock and Warrants sold in the offering,
      as well as the shares of Common Stock underlying the warrants we issued to
      Margie Chassman in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">consideration
      of her pledge of securities to investors in the offering as described
      above</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Sales
      of a significant number of shares of Common Stock in the public market could
      result in a decline in the market price of our Common Stock (to the extent
      a
      market develops for our Common Stock).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Penny
      Stock Regulations May Affect Your Ability To Sell Our Common
      Stock.</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
      the
      extent our Common Stock trades at a price below $5.00 per share, our Common
      Stock will be subject to Rule 15g-9 under the Exchange Act, which imposes
      additional sales practice requirements on broker dealers which sell these
      securities to persons other than established customers and accredited investors.
      Under these rules, broker-dealers who recommend penny stocks to persons other
      than established customers and "accredited investors" must make a special
      written suitability determination for the purchaser and receive the purchaser's
      written agreement to a transaction prior to sale. Unless an exception is
      available, the regulations require the delivery, prior to any transaction
      involving a penny stock, of a disclosure schedule explaining the penny stock
      market and the associated risks. The additional burdens imposed upon
      broker-dealers by these requirements could discourage broker-dealers from
      effecting transactions in our Common Stock and may make it more difficult for
      holders of our Common Stock to sell shares to third parties or to otherwise
      dispose of them. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Our
      Charter Documents and Nevada Law May Inhibit A Takeover That Stockholders May
      Consider Favorable.</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Provisions
      in our articles of incorporation and bylaws, and Nevada law, could delay or
      prevent a change of control or change in management that would provide
      stockholders with a premium to the market price of their Common Stock. The
      authorization of undesignated preferred stock, for example, gives our board
      the
      ability to issue preferred stock with voting or other rights or preferences
      that
      could impede the success of any attempt to effect a change in control of us,
      or
      otherwise adversely affect holders of Common Stock in relation to holders of
      preferred stock. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Once
      our Common Stock begins to trade, it may experienced price
      fluctuations.</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
      decrease in the market price of our Common Stock could result in substantial
      losses for investors. The market price of our Common Stock may be significantly
      affected by, among other things, one or more of the following
      factors:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">nnouncements
                or press releases relating to the medical device industry or to our
                own
                business or prospects; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">regulatory,
                legislative, or other developments affecting us or the medical device
                industry generally; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                dilutive effect of conversion of our Series A Preferred Stock and
                exercise
                of our warrants, or the issuance by us of additional shares of Common
                Stock or convertible securities, at below current market prices;
                and
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">general
                market conditions.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Compliance
      with changing corporate governance and public disclosure regulations may result
      in additional expense.</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Keeping
      abreast of, and in compliance with, changing laws, regulations and standards
      relating to corporate governance and public disclosure, including the
      Sarbanes-Oxley Act of 2002, new SEC regulations will require an increased amount
      of management attention and external resources. In addition, prior to the
      merger, our current management team was not subject to these laws and
      regulations, as MedaSorb was a private corporation. We intend to continue to
      invest all reasonably necessary resources to comply with evolving standards,
      which may result in increased general and administrative expense and a diversion
      of management time and attention from revenue-generating activities to
      compliance activities</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PLAN
      OF OPERATIONS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are a
      development stage company and expect to remain so for at least the next twelve
      months. We have not generated revenues to date and do not expect to do so until
      we commercialize and receive the necessary approvals to sell our proposed
      products. As discussed above, we are preparing to commercialize a blood
      purification technology that efficiently removes toxic compounds from
      circulating blood using our proprietary polymer-based adsorbent technology.
      We
      believe that our technology will support novel therapeutic approaches to
      critical health conditions, including sepsis, organ transplant, and
      post-operative complications of cardiopulmonary bypass surgery.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">33</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      near
      term goal is focused on conducting clinical trials of our CytoSorb&#8482; product in
      the treatment of sepsis. Over the next twelve months, provided that we have
      sufficient funds for our operations, we expect to design and conduct a pilot
      study of the use of our product on at least 10 sepsis patients. We believe
      that
      submission of data from this pilot study to the FDA will allow us to then
      conduct the pivotal study required for FDA approval of our CytoSorb&#8482; product for
      sepsis treatment.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      research and development costs for the years ended December 31, 2004 and 2005,
      were approximately $2,367,407 and $1,526,743, respectively. MedaSorb has
      experienced substantial operating losses since inception. As of March 31, 2006,
      MedaSorb had an accumulated deficit of $59,994,884, which included losses from
      operations of $3,665,596 for the year ended December 31, 2005 and $1,015,377
      for
      the three-month period ended March 31, 2006. These losses have resulted
      principally from costs incurred in the research and development of our polymer
      technology, and general and administrative expenses, which together were
      approximately $2,162,703 and $426,756 respectively, for the year ended December
      31, 2005 and the three months ended March 31, 2006. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Liquidity
      and Capital Resources</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Since
      its
      inception, the operations of MedaSorb have been financed through the private
      placement of its debt and equity securities. At December 31, 2005, MedaSorb
      had
      cash of approximately $707,000, an amount sufficient to fund its operations
      for
      approximately four months. Due to its losses and available cash at that time,
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb&#8217;s
      audited consolidated financial statements for its year ended December 31, 2005
      have been prepared assuming MedaSorb will continue as a going concern, and
      the
      auditors&#8217; report on those financial statements </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">expresses
      substantial doubt about </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb&#8217;s
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ability
      to continue as a going concern. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Immediately
      following the closing of the merger, we closed an offering of our securities
      that resulted in net proceeds to us of approximately $4.5 million, which are
      expected to be sufficient to fund our operations for the next 15 months,
      following which we will be required to raise additional capital. There can
      be no
      assurance that we will be successful in our capital raising efforts.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      October
      2005, MedaSorb entered into an Investment Agreement with Margie Chassman
      pursuant to which she advanced $1,000,000 to MedaSorb to provide it with
      operating capital. The advance bears interest at the rate of 6% per annum,
      and
      at Ms. Chassman&#8217;s option, will be repaid in cash or converted into securities in
      our next offering of securities no later than December 31, 2006. The advance
      is
      subject to earlier repayment in the event we complete an offering of our
      securities that generates gross proceeds of $5.5 million or more (including
      the
      offering we completed following the merger, but excluding proceeds received
      from
      certain existing stockholders of ours), in the amount that those proceeds exceed
      $5.5 million; provided, however, that in the event that less than $6.5 million
      of gross proceeds are raised in such an offering within 120 days from the date
      subscription materials are first circulated to potential investors, the balance
      of the advance from Ms. Chassman then outstanding will, at our option, be
      converted into the securities sold in that offering. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">34</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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      </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the closing of the private placement, we agreed to make a
      short-term advance to Ms. Chassman in the amount of $500,000 bearing interest
      at
      the rate of 6% per annum, the repayment of which may be offset against amounts
      owed by us to Ms. Chassman under the $1,000,000 advance previously made by
      her
      to MedaSorb. The short-term advance will be secured by a pledge of
      publicly-traded securities with a market value equal to $500,000.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following table sets forth information known to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">us
      with
      respect to the beneficial ownership of Common Stock held of record as of June
      30, 2006, by (1) all persons who are owners of 5% or more of our Common Stock,
      (2) each of our named executive officers (see &#8220;Summary Compensation Table&#8221;), (3)
      each director, and (4) all of our executive officers and directors as a
      group</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Each
      of
      the stockholders can be reached at our principal executive offices located
      at 7
      Deer Park Drive, Suite K, Monmouth Junction, New Jersey 08852. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left">
      <table border="0" bordercolor="#000000" cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="37%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td colspan="2" valign="top" width="37%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SHARES
                BENEFICIALLY OWNED</strong></font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup><strong>1</strong></sup></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="37%" style="border-bottom: medium none;">&#160;</td>
            <td valign="top" width="21%" style="border-bottom: medium none;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number</strong></font></div>
            </td>
            <td valign="top" width="16%" style="border-bottom: medium none;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Percent
                (%)</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="top" width="37%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Beneficial
                Owners of more than 5% of </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Common
                Stock (other than directors and executive officers)</em></font></div>
            </td>
            <td valign="top" width="21%" style="border-bottom: #ccffcc;">&#160;</td>
            <td valign="top" width="16%" style="border-bottom: #ccffcc;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="37%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Margie
                Chassman</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>(2)</sup></font></div>
            </td>
            <td align="right" valign="top" width="21%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 12.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7,995,000</font></div>
            </td>
            <td valign="top" width="16%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">33.1%</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="37%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Guillermina
                Montiel</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>(3)</sup></font></div>
            </td>
            <td align="right" valign="top" width="21%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 12.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5,052,456</font></div>
            </td>
            <td valign="top" width="16%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">20.3%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="37%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Margery
              Germain<sup>(4)</sup></font></td>
            <td align="right" valign="top" width="21%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">2,000,000&#160;&#160;&#160;&#160;&#160;&#160;
              </font></td>
            <td valign="top" width="16%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">8.3%</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="37%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Robert
                Shipley </font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>(5)</sup></font></div>
            </td>
            <td align="right" valign="top" width="21%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 12.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,248,372</font></div>
            </td>
            <td valign="top" width="16%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.0%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="37%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Directors
                and Executive Officers</em></font></div>
            </td>
            <td align="right" valign="top" width="21%" style="border-bottom: white;">&#160;</td>
            <td valign="top" width="16%" style="border-bottom: white;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="37%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Al
                Kraus</font></div>
            </td>
            <td align="right" valign="top" width="21%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 12.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,393,631</font></div>
            </td>
            <td valign="top" width="16%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.6%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="37%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">David
                Lamadrid </font></div>
            </td>
            <td align="right" valign="top" width="21%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 12.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">501,704</font></div>
            </td>
            <td valign="top" width="16%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.0%</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="37%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Vince
                Capponi </font></div>
            </td>
            <td align="right" valign="top" width="21%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 12.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">418,086</font></div>
            </td>
            <td valign="top" width="16%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.7%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="37%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Joseph
                Rubin<sup>(6)</sup></font></div>
            </td>
            <td align="right" valign="top" width="21%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 12.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">127,207</font></div>
            </td>
            <td valign="top" width="16%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="37%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">James
                Winchester</font></div>
            </td>
            <td align="right" valign="top" width="21%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 12.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">52,519</font></div>
            </td>
            <td valign="top" width="16%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="37%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Kurt
                Katz</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>(7)</sup></font></div>
            </td>
            <td align="right" valign="top" width="21%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 12.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">54,077</font></div>
            </td>
            <td valign="top" width="16%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="top" width="37%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: -27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>All
                directors and executive officers as a group (</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>six
                persons)</em></font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>(8)</sup></font></div>
            </td>
            <td align="right" valign="top" width="21%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 12.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,547,224</font></div>
            </td>
            <td valign="top" width="16%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.2%</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="line-height: 1.25;">
              <td style="width: 36pt;"><font size="2">*</font></td>
              <td align="left" style="width: 9pt;">&#160;</td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less
                  than 1%.</font><br></div>
              </td>
            </tr>

        </table>
      </div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div>
        <div>
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td align="left" valign="top" width="4%">&#160;</td>
                <td align="left" valign="top" width="75%">&#160;</td>
              </tr>
              <tr>
                <td align="left" valign="top" width="4%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1</font></div>
                </td>
                <td align="left" valign="top" width="75%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gives
                    effect to the shares of Common Stock issuable upon the exercise
                    of all
                    options exercisable within 60 days of June 30, 2006 and other
                    rights
                    beneficially owned by the indicated stockholders on that date.
                    Beneficial
                    ownership is determined in accordance with the rules of the Securities
                    and
                    Exchange Commission and includes voting and investment power
                    with respect
                    to shares. Unless otherwise indicated, the persons named in the
                    table have
                    sole voting and sole investment control with respect to all shares
                    beneficially owned. Percentage ownership is calculated based
                    on 24,090,929
                    shares of the Common Stock outstanding as of June&#160;30, 2006
                    immediately following the closing of the reverse merger.
                    </font></div>
                </td>
              </tr>

          </table>
        </div>
        <div>&#160;</div>
      </div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">35</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div id="HDR">&#160;</div>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Margie
                Chassman is married to David Blech. Mr. Blech disclaims beneficial
                ownership of these shares. Since 1980 Mr. Blech has been a founder
                of
                companies and venture capital investor in the biotechnology sector.
                His
                initial venture investment, Genetic Systems Corporation, which he
                helped
                found and served as treasurer and a member of the board of directors,
                was
                sold to Bristol Myers in 1986 for $294 million of Bristol Myers stock.
                Other companies he helped found include DNA Plant Technology, Celgene
                Corporation, Neurogen Corporation, Icos Corporation, Incyte
                Pharmaceuticals, Alexion Pharmaceuticals and Neurocrine Biosciences.
                He
                was also instrumental in the turnaround of Liposome Technology, Inc.
                and
                Biotech General Corporation. In 1990 Mr. Blech founded D. Blech &amp;
                Company, which, until it ceased doing business in September 1994,
                was a
                registered broker-dealer involved in underwriting biotechnology issues.
                In
                May 1998, David Blech pled guilty to two counts of criminal securities
                fraud, and, in September 1999, he was sentenced by the U.S. District
                Court
                for the Southern District of New York to five years&#8217; probation, which was
                completed in September 2004. Mr. Blech also settled administrative
                charges
                by the Commission in December 2000 arising out of the collapse in
                1994 of
                D. Blech &amp; Co., of which Mr. Blech was President and sole stockholder.
                The settlement prohibits Mr. Blech from engaging in future violations
                of
                the federal securities laws and from association with any broker-dealer.
                In addition, the District Business Conduct Committee for District
                No.10 of
                NASD Regulation, Inc. reached a decision, dated December 3, 1996,
                in a
                matter styled District Business Conduct Committee for District No.
                10 v.
                David Blech, regarding the alleged failure of Mr. Blech to respond
                to
                requests by the staff of the National Association of Securities Dealers,
                Inc. (&#8220;NASD&#8221;) for documents and information in connection with seven
                customer complaints against various registered representatives of
                D. Blech
                &amp; Co. The decision found that Mr. Blech failed to respond to such
                requests in violation of NASD rules and that Mr. Blech should, therefore,
                be censured, fined $20,000 and barred from associating with any member
                firm in any capacity. Furthermore, Mr. Blech was discharged in bankruptcy
                in the United States Bankruptcy Court for the Southern District of
                New
                York in March 2000.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                58,472 shares issuable upon exercise of stock options. </font></div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="4%">&#160;</td>
            <td align="justify" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4</font></div>
            </td>
            <td align="left" valign="top" width="75%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
              1,700,000 shares of Common Stock held directly by Ms. Germain and 300,000
              shares of Common Stock held by her minor children.</font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5</font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                621,727 shares issuable upon exercise of stock options and
                warrants.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                58,598 shares issuable upon exercise of stock options and
                warrants.</font></div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="4%">&#160;</td>
            <td align="justify" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="4%">
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            </td>
            <td align="justify" valign="top" width="75%">
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                51,817 shares issuable upon exercise of stock options.</font></div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="4%">&#160;</td>
            <td align="justify" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                110,415 shares issuable upon exercise of stock options and
                warrants.</font></div>
            </td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>DIRECTORS
      AND EXECUTIVE OFFICERS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following table sets forth the names of our directors and executive officers,
      their ages and the positions they hold. Each such person became an officer
      and/or director of the Registrant immediately after the closing of the merger
      and held the same positions set forth below with MedaSorb prior to the merger.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">36</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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      <div id="HDR">
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
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            </td>
            <td align="left" valign="top" width="7%" style="border-bottom: medium none;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Age</u></strong></font></div>
            </td>
            <td align="left" valign="top" width="50%" style="border-bottom: medium none;">
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            </td>
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            <td align="left" valign="top" width="7%">&#160;</td>
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                Kraus</font></div>
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                and Chief Executive Officer, Director</font></div>
            </td>
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            <td align="left" valign="top" width="7%">&#160;</td>
            <td align="left" valign="top" width="50%">&#160;</td>
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            <td align="left" valign="top" width="23%">
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                Winchester, MD</font></div>
            </td>
            <td align="left" valign="top" width="7%">
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            </td>
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                Medical Officer</font></div>
            </td>
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            <td align="left" valign="top" width="23%">&#160;</td>
            <td align="left" valign="top" width="7%">&#160;</td>
            <td align="left" valign="top" width="50%">&#160;</td>
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            <td align="left" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Vincent
                Capponi</font></div>
            </td>
            <td align="left" valign="top" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">48</font></div>
            </td>
            <td align="left" valign="top" width="50%">
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                Operating Officer </font></div>
            </td>
          </tr>
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            <td align="left" valign="top" width="23%">&#160;</td>
            <td align="left" valign="top" width="7%">&#160;</td>
            <td align="left" valign="top" width="50%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="23%">&#160;</td>
            <td align="left" valign="top" width="7%">&#160;</td>
            <td align="left" valign="top" width="50%">&#160;</td>
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            <td align="left" valign="top" width="23%">
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                Lamadrid</font></div>
            </td>
            <td align="left" valign="top" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">35</font></div>
            </td>
            <td align="left" valign="top" width="50%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                Financial Officer </font></div>
            </td>
          </tr>
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            <td align="left" valign="top" width="23%">&#160;</td>
            <td align="left" valign="top" width="7%">&#160;</td>
            <td align="left" valign="top" width="50%">&#160;</td>
          </tr>
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            <td align="left" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Joseph
                Rubin, Esq. </font></div>
            </td>
            <td align="left" valign="top" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">67</font></div>
            </td>
            <td align="left" valign="top" width="50%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director</font></div>
            </td>
          </tr>
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            <td align="left" valign="top" width="23%">&#160;</td>
            <td align="left" valign="top" width="7%">&#160;</td>
            <td align="left" valign="top" width="50%">&#160;</td>
          </tr>
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            <td align="left" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Kurt
                Katz</font></div>
            </td>
            <td align="left" valign="top" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">73</font></div>
            </td>
            <td align="left" valign="top" width="50%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: -180pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Al
      Kraus. </em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Kraus
      has more than twenty-five years&#8217; experience managing companies in the dialysis,
      medical device products, personal computer and custom software industries.
      He
      was the President and Chief Executive Officer of MedaSorb since 2003. Prior
      to
      joining us, from 2001 to 2003, Mr. Kraus was President and CEO of NovoVascular
      Inc., an early stage company developing coated stent technology. From 1996
      to
      1998, Mr. Kraus was President and CEO of Althin Healthcare and from 1998 to
      2000, of Althin Medical Inc., a manufacturer of products for the treatment
      of
      end stage renal disease. While CEO of Althin, he provided strategic direction
      and management for operations throughout the Americas. From 1979 to 1985, Mr.
      Kraus was U.S. Subsidiary Manager and Chief Operating Officer of Gambro Inc.,
      a
      leading medical technology and healthcare company. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Kraus
      was the Chief Operating Officer of Gambro when it went public in the United
      States in an offering led by Morgan Stanley.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>James
      Winchester, M.D.</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Prior to
      joining MedaSorb in 2000, Dr. Winchester was Professor of Medicine and Director
      of Dialysis Programs at Georgetown University School of Medicine for more than
      25 years. Dr. Winchester is also the Chief of the Nephrology Division at Beth
      Israel Medical Center, a position he has held since July 2004. He has published
      more than 200 articles in scientific and medical journals, and has co-authored
      eight books in the fields of renal replacement therapy and clinical poisoning
      management. Dr. Winchester is editor-in chief of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Replacement
      of Renal Function</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      the
      most widely used textbook for nephrology fellows. Dr. Winchester has published
      more articles on hemoperfusion than any other nephrologist in the world. He
      is
      widely recognized as one of the world&#8217;s leading experts in hemoperfusion and
      toxicology, and is a former member of the Scientific Advisory Board for Total
      Renal Care (Davita). Dr. Winchester received his medical degree from the
      University of Glasgow and is a Fellow of the Royal College of Physicians and
      Surgeons of Glasgow</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      and a
      Fellow of the American College of Physicians.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Vincent
      Capponi</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Mr.
      Capponi joined MedaSorb as Vice President of Operations in 2002 and became
      its
      Chief Operating Officer in July 2005. He has more than 20 years of management
      experience in medical device, pharmaceutical and imaging equipment at companies
      including Upjohn, Sims Deltec and Sabratek. Prior to joining MedaSorb in 2002,
      Mr. Capponi held several senior management positions at Sabratek and its
      diagnostics division GDS. Mr. Capponi was interim president of GDS diagnostics
      in 2001. From 1998 to 2000 Mr. Capponi was Senior Vice President and Chief
      Operating Officer for Sabratek and Vice President Operations from 1996 to 1998.
      He received his MS in Chemistry and his BS in Chemistry and Microbiology from
      Bowling Green State University.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">37</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>David
      Lamadrid</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Lamadrid, has been with MedaSorb since 2000. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">He
      has
      over 13 years of business experience in finance and operations. Prior to joining
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
      2000,
      Mr. Lamadrid was a financial analyst at Chase Manhattan Bank working in the
      Middle Market Banking Group. Mr. Lamadrid received his MBA from New York
      University, a BS in Finance from St. John&#8217;s University, and an AAS in Accounting
      from S.U.N.Y. Rockland. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Joseph
      Rubin, Esq.</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Rubin
      became a director of MedaSorb in 1997. Mr. Rubin is a founder and Senior Partner
      of Rubin, Bailin, and Ortoli, LLP an international and domestic corporate and
      commercial law firm in New York City, where he has practiced law since January
      2000. Mr. Rubin also teaches at the Columbia University School of International
      and Public Affairs, where he is also Executive Director of the International
      Technical Assistance Program for Public Affairs (ITAP). Mr. Rubin was Adjunct
      Professor at the Columbia University Graduate School of Business from 1973
      to
      1994, and taught at Columbia Law School in 1996. Mr. Rubin received his law
      degree from Harvard Law School, and his B.A., MIA, and M.Phil degrees in
      political science and international relations from Columbia
      University.</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Kurt
      Katz, M.Ch.E. </em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Katz
      became a director of MedaSorb in 1997. Since retiring from Peabody International
      Corporation in 1986, Mr. Katz has pursued various business interests. He is
      currently the Chairman of Polymeric Resources Corporation, a polymer company
      engaged in the manufacture of nylon and compounding. Mr. Katz served as
      President and Chief Operating Officer of Peabody, which specializes in energy
      and environmental products. Mr. Katz served as Executive Vice President and
      Chief Operating Officer of Peabody from 1981 to 1983, and was a Director from
      1977 to 1985. Prior to joining Peabody in 1973, Mr. Katz held a variety of
      management positions with Westinghouse Electric Corporation, where he served
      for
      18 years and was directly involved in the launching of new products, divisions
      and subsidiaries. </font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Katz
      has a B.S. and M.S. in chemical engineering, and an MBA.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Audit
      Committee Financial Expert</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Board
      of Directors does not have an Audit Committee, and therefor does not have an
      &#8220;audit committee financial expert,&#8221; as such term is defined in Item 401(e) of
      Regulation S-B.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">38</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      paid Al Kraus, our Chief Executive Officer, and each of our other most highly
      compensated executive officers during the years ended December 31, 2005, 2004
      and 2003. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Summary
      Compensation Table</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="justify" valign="top" width="20%">
            </td>
            <td width="3%">&#160;</td>
            <td align="justify" valign="top" width="6%">
            </td>
            <td width="3%">&#160;</td>
            <td colspan="3" valign="top" width="20%" style="border-bottom: black thin solid;">
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                Compensation</strong></font></div>
            </td>
            <td colspan="3" valign="top" width="34%" style="border-bottom: black thin solid;">
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                Compensation </strong></font></div>
            </td>
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          <tr>
            <td align="left" valign="top" width="20%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Name
                and Principal Positions</strong></font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="6%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Year</strong></font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="9%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Salary
                ($)</strong></font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="9%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Bonus
                </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>($)</strong></font></div>
            </td>
            <td align="left" valign="top" width="14%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Stock
                Awards*</strong></font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="16%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 17.65pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Securities
                Underlying Options</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="20%">&#160;</td>
            <td width="3%">&#160;</td>
            <td valign="top" width="6%">&#160;</td>
            <td width="3%">&#160;</td>
            <td valign="top" width="9%">&#160;</td>
            <td width="3%">&#160;</td>
            <td valign="top" width="9%">&#160;</td>
            <td align="left" valign="top" width="14%">&#160;</td>
            <td width="3%">&#160;</td>
            <td valign="top" width="16%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 3.85pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Al
                Kraus</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Chief
                Executive Officer</em></font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">200</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2003</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">173,899</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">152,301</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">73,710</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">150</font></div>
            </td>
            <td valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,090,680
                </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">164,665</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">138,286</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>__</sup></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>__</sup></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>__</sup></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="20%">&#160;</td>
            <td width="3%">&#160;</td>
            <td valign="top" width="6%">&#160;</td>
            <td width="3%">&#160;</td>
            <td colspan="3" valign="top" width="20%">&#160;</td>
            <td valign="top" width="14%">&#160;</td>
            <td width="3%">&#160;</td>
            <td valign="top" width="16%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Vincent
                Capponi,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Chief
                Operating Officer</em></font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">200</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2003</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">152,504</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">133,987</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">195,501</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">150</font></div>
            </td>
            <td valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">374,383</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15,070</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7,535</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>__</sup></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>__</sup></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>__</sup></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">David
                Lamadrid,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Chief
                Financial Officer</em></font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">200</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2003</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">119,257</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100,203</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">115,742</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">150</font></div>
            </td>
            <td valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">450,155</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">22,605</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15,070</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>__</sup></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>__</sup></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>__</sup></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dr.
                James Winchester </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Chief
                Medical Officer</em></font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">200</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2003</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">116,541</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">143,319</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">233,422</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">150</font></div>
            </td>
            <td valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>__</sup></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">16,954</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7,535</font></div>
            </td>
            <td width="3%">&#160;</td>
            <td valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>__</sup></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>__</sup></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>__</sup></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*
      These
      officers were originally issued &#8220;Management Units&#8221; of MedaSorb Technologies,
      LLC, a limited liability company. The Management Units were ultimately converted
      into the number of shares of our Common Stock indicated in the table above
      following MedaSorb&#8217;s conversion to a corporation and reverse merger with
      Registrant.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>O</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>ption
      Grants in Last Fiscal Year</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
      options were granted to any of the individuals named in the Summary Compensation
      Table during 2005. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Aggregated
      Option Exercises in Fiscal 2005 and FY-End Option Values</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">None
      of
      the individuals named in the Summary Compensation Table held any options to
      purchase our Common Stock or the common stock of MedaSorb as of December 31,
      2005.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Director
      Compensation</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      directors do not receive any cash compensation for their service on the Board
      of
      Directors, but from time to time are granted options for their services. In
      January 2006, each of our non-employee</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">directors
      was granted an option to purchase 10,000 shares of MedaSorb common stock at
      an
      exercise price of $1.25, and in June 2006, our non-employee</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">directors
      were granted options to purchase an aggregate of 62,536 shares of MedaSorb
      common stock at an exercise price of $1.25. These options became options to
      purchase the same number of shares of our Common Stock at the same exercise
      price following the merger. Our directors are reimbursed for actual
      out-of-pocket expenses incurred by them in connection with their attendance
      at
      meetings of the Board of Directors.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Employment
      Agreements</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Agreement
      with Chief Executive Officer</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb
      entered into an Employment Agreement, dated as of July 18, 2003, with Al Kraus,
      our Chief Executive Officer. The Employment Agreement provides for an initial
      five-year term of employment as our Chief Executive Officer. Under the terms
      of
      the Employment Agreement, Mr. Kraus receives an annual base salary of $200,000.
      Under the Employment Agreement, Mr. Kraus was also granted an option to purchase
      5% of the outstanding equity interests of MedaSorb (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">which
      was
      then a limited liability company) on a fully-diluted basis, and will be issued
      additional options so that Mr. Kraus continues to hold options to purchase
      5% of
      our outstanding equity on a fully diluted basis until such time as an aggregate
      of $20 million of financing has been received by MedaSorb (including Registrant)
      following the commencement of his employment. In 2005, MedaSorb&#8217;s board approved
      the issuance to Mr. Kraus of &#8220;Management Units&#8221; of the limited liability company
      in lieu of the options he was then entitled to under the Employment Agreement.
      As a result of the conversion of MedaSorb to a corporation and the merger,
      the
      Management Units issued under the Employment Agreement were exchanged for
      1,393,631 shares of Common Stock. Mr. Kraus will continue to be issued options
      to purchase Common Stock pursuant to his Employment Agreement so that the
      combined total of his common stock and common stock issuable upon exercise
      of
      his options equals 5% of the Company&#8217;s outstanding common stock on a fully
      diluted basis, until such time as an aggregate of $20 million of financing
      has
      been received by us following the commencement of his employment.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      event that Mr. Kraus&#8217;s employment is terminated as a result of his death, his
      heirs will be entitled to 120-days of salary. In the event Mr. Kraus is
      terminated for &#8220;justifiable cause&#8221; we will pay him his accrued and unpaid base
      salary through the date of termination. If Mr. Kraus&#8217;s employment is terminated
      without cause or in the event of a Change of Control, he will be entitled to
      one-year&#8217;s base salary payable monthly over a period of one year. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Kraus
      is prohibited under the Employment Agreement from disclosing any of our
      confidential information (as defined in the agreement) during the term of his
      employment and any time thereafter and, following the termination of the
      agreement with us, from competing with us and directly or indirectly soliciting
      any of our customers or suppliers for a period of one year, and from soliciting
      our employees for a period of three years. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Agreement
      with Chief Operating Officer</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb
      entered into an Employment Agreement, dated as of July 1, 2005, with Vincent
      Capponi, our Chief Operating Officer. The Employment Agreement provides for
      an
      initial term of one-year, with automatic annual renewal unless either party
      provides notice to the other within 120 days prior to the end of the year of
      its
      intention not to renew. Under the terms of the Employment Agreement, Mr. Capponi
      receives an annual base salary of $181,886. Under the Employment Agreement,
      Mr.
      Capponi was also granted Management Units equal to 1.5% of the outstanding
      equity interests of MedaSorb (which was then a limited liability company) on
      a
      fully-diluted basis, and was entitled to receive additional Management Units
      so
      that Mr. Capponi continued to hold Management Units equal to 1.5% of the
      outstanding equity of MedaSorb on a fully diluted basis until December 31,
      2005.
      As a result of the conversion of MedaSorb to a corporation and the merger,
      these
      Management Units were exchanged for 418,086 shares of our Common
      Stock</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      event that Mr. Capponi&#8217;s employment is terminated as a result of his death, his
      heirs will be entitled to 120-days of salary. In the event Mr. Capponi is
      terminated for &#8220;justifiable cause&#8221; we will pay him his accrued and unpaid base
      salary through the date of termination. If Mr. Capponi&#8217;s employment is
      terminated without cause or in the event of Change of Control, he will be
      entitled to one-year&#8217;s base salary payable monthly for a period of one year.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Capponi is prohibited under the Employment Agreement from disclosing any of
      our
      confidential information (as defined in the agreement) during the term of his
      employment and any time thereafter, and following the termination of the
      agreement with us, from competing with us and directly or indirectly soliciting
      any of our customers or suppliers for a period of one year, and from soliciting
      our employees for a period of three years. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Agreement
      with Chief Financial Officer</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb
      entered into an Employment Agreement, dated as of July 1, 2005, with David
      Lamadrid, our Chief Financial Officer. The Employment Agreement provides for
      an
      initial term of one-year, with automatic annual renewal unless either party
      provides notice to the other within 120 days prior to the end of the year of
      its
      intention not to renew. Under the terms of the Employment Agreement, Mr.
      Lamadrid receives an annual base salary of $135,629. Under the Employment
      Agreement, Mr. Lamadrid was also granted Management Units equal to 1.8% of
      the
      outstanding equity interests of MedaSorb (which was then a limited liability
      company) on a fully-diluted basis, and was entitled to receive additional
      Management Units so that Mr. Lamadrid continued to hold Management Units equal
      to 1.8% of the outstanding equity of MedaSorb on a fully diluted basis until
      December 31, 2005. As a result of the conversion of MedaSorb to a corporation
      and the merger, these Management Units were exchanged for 501,704 shares of
      our
      Common Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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      </div>
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      event that Mr. Lamadrid&#8217;s employment is terminated as a result of his death, his
      heirs will be entitled to 120-days of salary. In the event Mr. Lamadrid is
      terminated for &#8220;justifiable cause&#8221; we will pay him his accrued and unpaid base
      salary through the date of termination. If Mr. Lamadrid&#8217;s employment is
      terminated without cause or in the event of Change of Control, he will be
      entitled to one-year&#8217;s base salary payable monthly for a period of one year.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Lamadrid is prohibited under the Employment Agreement from disclosing any of
      our
      confidential information (as defined in the agreement) during the term of his
      employment and any time thereafter, and following the termination of the
      agreement with us, from competing with us and directly or indirectly soliciting
      any of our customers or suppliers for a period of one year, and from soliciting
      our employees for a period of three years.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Agreement
      with Chief Medical Officer</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">MedaSorb
      entered into an Employment Agreement, dated as of July 1, 2004, with Dr. James
      Winchester, our Chief Medical Officer. The Employment Agreement provides for
      an
      initial term of one-year, with automatic annual renewal unless either party
      provides notice to the other within 90 days prior to the end of the year of
      its
      intention not to renew. Under the terms of the Employment Agreement, Dr.
      Winchester receives an annual base salary of $120,000. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dr.
      Winchester is prohibited under his Employment Agreement from disclosing any
      of
      our confidential information (as defined in the agreement) during the term
      of
      his employment and any time thereafter, and following the termination of this
      agreement with us, from competing with us and directly or indirectly soliciting
      any of our customers, suppliers or employees for a period of one year.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
      the period of March 2004 to February 2005, Al Kraus, Vincent Capponi, David
      Lamadrid and Dr. James Winchester agreed to forego salary in the amounts of
      $66,667, $60,000, $45,000, and $32,772 respectively. These amounts will be
      paid
      to these individuals at such time as we generate gross proceeds from the sale
      of
      our securities of $5,000,000, including sales we effected upon completion of
      the
      merger.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      October
      2005, MedaSorb entered into an Investment Agreement with Margie Chassman
      pursuant to which she advanced $1,000,000 to MedaSorb to provide it with
      operating capital. The advance bears interest at the rate of 6% per annum,
      and
      at Ms. Chassman&#8217;s option, will be repaid in cash or converted into securities in
      our next offering of securities no later than December 31, 2006. The advance
      is
      subject to earlier repayment in the event we complete an offering of our
      securities that generates gross proceeds of $5.5 million or more (including
      the
      offering we completed following the merger, but excluding proceeds received
      from
      certain existing stockholders of ours), in the amount that those proceeds exceed
      $5.5 million; provided, however, that in the event that less than $6.5 million
      of gross proceeds are raised in such an offering within 120 days from the date
      subscription materials are first circulated to potential investors, the balance
      of the advance from Ms. Chassman then outstanding will, at our option, be
      converted into the securities sold in that offering. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
      <div id="HDR">
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        </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      consideration for funding the $1 million advance, Ms. Chassman and her designees
      were</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">issued
      an
      aggregate of 10 million shares of Common Stock. These shares of Common Stock
      are
      subject to a 12-month lock-up agreement and a voting agreement entitling
      MedaSorb to voting rights with respect to such shares until the earlier to
      occur
      of a transfer of those shares to an unrelated third party or the expiration
      of
      two years.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the closing of the private placement, we agreed to make a
      short-term advance to Ms. Chassman in the amount of $500,000 bearing interest
      at
      the rate of 6% per annum, the repayment of which may be offset against amounts
      owed by us to Ms. Chassman under the $1,000,000 advance previously made by
      her
      to MedaSorb. The short-term advance will be secured by a pledge of
      publicly-traded securities with a market value equal to $500,000.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the sale of the Series A Preferred Stock and Warrants to the
      investors, Margie Chassman agreed to pledge certain securities held by her
      to
      the investors, which such investors may sell to ensure they do not suffer a
      loss
      on their investment in the first year following the date of their investment.
      In
      consideration of her pledge to these investors, we agreed to pay Ms. Chassman
      (i) $525,000 in cash, and (ii) five-year warrants to purchase 10% of the shares
      of Series A Preferred Stock and 10% of the Warrants sold to these investors
      for
      an exercise price equal to the price paid by the investors in the private
      placement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      August
      2003, in order to induce Guillermina Vega Montiel, a principal stockholder
      of
      ours, to make an additional investment in MedaSorb, we granted Ms. Montiel
      a
      perpetual royalty equal to three percent of all gross revenues received by
      us
      from sales of CytoSorb</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>TM
      </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
      the
      applications of sepsis, cardiopulmonary bypass surgery, organ donor,
      chemotherapy and inflammation control application. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Joseph
      Rubin</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      is a
      director of ours and performs legal services from time to time. At December
      31,
      2005, we owed Mr. Rubin&#8217;s firm approximately $173,000 in respect of legal
      services provided by his firm to MedaSorb</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>DESCRIPTION
      OF SECURITIES</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      total
      authorized capital stock consists of 100,000,000 shares of Common Stock, par
      value $.001 per share and 100,000,000 shares of preferred stock, par value
      $.001
      per share. After the closing of the reverse merger and the closing of the
      private placement completed on the same date, 24,090,929 shares of Common Stock
      were issued and outstanding, and 8,000,000 shares of preferred stock had been
      designated as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series
      A
      10% Cumulative Convertible Preferred Stock</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      of
      which 5,250,000 shares were issued and outstanding.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">43</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following description of our capital stock does not purport to be complete
      and
      is subject to and qualified by our Articles of Incorporation and By-laws, and
      by
      the provisions of applicable Nevada law. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Common
      Stock</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Holders
      of our Common Stock are entitled to receive dividends out of assets legally
      available therefore at such times and in such amounts as the Board of Directors
      from time to time may determine. Holders of our Common Stock are entitled to
      one
      vote for each share held on all matters submitted to a vote of the stockholders.
      Cumulative voting with respect to the election of directors is not permitted
      by
      our Articles of Incorporation. Our Common Stock is not entitled to preemptive
      rights and is not subject to conversion or redemption. Upon our liquidation,
      dissolution or winding-up, the assets legally available for distribution to
      stockholders are distributable ratably among the holders of the Common Stock
      after payment of liquidation preferences, if any, on any outstanding stock
      having prior rights on such distributions and payment of other claims of
      creditors. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Preferred
      Stock</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      Articles of Incorporation authorizes the issuance of shares of preferred stock
      in one or more series. Our Board of Directors has the authority, without any
      vote or action by the stockholders, to create one or more series of preferred
      stock up to the limit of our authorized but unissued shares of preferred stock
      and to fix the number of shares constituting such series and the designation
      of
      such series, the voting powers (if any) of the shares of such series and the
      relative participating, option or other special rights (if any), and any
      qualifications, preferences, limitations or restrictions pertaining to such
      series which may be fixed by the Board of Directors pursuant to a resolution
      or
      resolutions providing for the issuance of such series adopted by the Board
      of
      Directors. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      provisions of a particular series of authorized preferred stock, as designated
      by the Board of Directors, may include restrictions on the payment of dividends
      on Common Stock. Such provisions may also include restrictions on our ability
      to
      purchase shares of Common Stock or to purchase or redeem shares of a particular
      series of authorized preferred stock. Depending upon the voting rights granted
      to any series of authorized preferred stock, issuance thereof could result
      in a
      reduction in the voting power of the holders of Common Stock. In the event
      of
      our dissolution, liquidation or winding up, the holders of the preferred stock
      will receive, in priority over the holders of Common Stock, a liquidation
      preference established by the Board of Directors, together with accumulated
      and
      unpaid dividends. Depending upon the consideration paid for authorized preferred
      stock, the liquidation preference of authorized preferred stock and other
      matters, the issuance of authorized preferred stock could result in a reduction
      in the assets available for distribution to the holders of Common Stock in
      the
      event of our liquidation.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">44</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Series
      A 10% Cumulative Convertible Preferred Stock</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      designated 8,000,000 shares of our preferred stock as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series
      A
      10% Cumulative Convertible Preferred Stock</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (&#8220;Series
      A Preferred Stock&#8221;), of which 5,250,000 shares were issued in an offering that
      we closed immediately following the consummation of the merger. Each share
      of
      Series A Preferred Stock has a stated value of $1.00, is convertible at the
      holder&#8217;s option into that number of shares of our Common Stock equal to the
      stated value of such share of Series A Preferred Stock divided by an initial
      conversion price of $1.25. Upon the occurrence of a stock split, stock dividend,
      combination of our Common Stock into a smaller number of shares, issuance of
      any
      of our shares or other securities by reclassification of our Common Stock,
      merger or sale of substantially all of our assets, the conversion rate will
      be
      adjusted so that the conversion rights of the Series A Preferred Stock
      stockholders will be equivalent to the conversion rights of the Series A
      Preferred Stock stockholders prior to such event. In addition, in the event
      we
      sell shares of our Common Stock (or the equivalent thereof) following the
      issuance of shares of Series A Preferred Stock at a price of less than $1.25
      per
      share, the conversion price of the shares of Series A Preferred Stock will
      be
      reduced to such lower price.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Series A Preferred Stock bears a dividend of 10% per annum payable quarterly,
      commencing September 30, 2006, at our election in cash or additional shares
      of
      our Series A Preferred Stock valued at the stated value thereof; provided,
      however, that we must pay the dividend in cash if an &#8220;Event of Default&#8221; as
      defined in the Certificate of Designation designating the Series A Preferred
      Stock has occurred and is then continuing. In addition, upon an Event of
      Default, the dividend rate increases to 20% per annum. An Event of Default
      includes, but is not limited to, the following:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                occurrence of &#8220;Non-Registration Events&#8221; including, the failure to cause a
                registration statement registering the shares of Common Stock underlying
                the Series A Preferred Stock and Warrants issued in connection therewith
                to be effective within 240 days following the closing of the private
                placement;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">an
                uncured breach by us of any material covenant, term or condition
                in the
                Certificate of Designation or any of the related transaction documents;
                and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">any
                money judgment or similar final process being filed against us for
                more
                than $100,000.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      event of our dissolution, liquidation or winding up, the holders of the Series
      A
      Preferred Stock will receive, in priority over the holders of Common Stock,
      a
      liquidation preference equal to the stated value of such shares plus accrued
      dividends thereon. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">45</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Series A Preferred Stock </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">is
      not
      redeemable at the option of the holder but may be redeemed by us at our option
      following the third anniversary of the issuance of the Series A Preferred Stock
      for 120% of the stated value thereof plus any accrued but unpaid dividends
      upon
      30 days' prior written notice, during which time the Series A Preferred Stock
      may be converted, provided a registration statement is effective under the
      Securities Act with respect to the Common Stock into which such Preferred is
      convertible and an Event of Default is not then continuing.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Holders
      of Series A Preferred Stock do not have the right to vote on matters submitted
      to the holder of our Common Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      registration rights provided for in the subscription agreement we entered into
      with the purchasers of the Series A Preferred Stock: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">require
                that we file a registration statement with the SEC on or before 120
                days
                from the closing to register the shares of Common Stock issuable
                upon
                conversion of the Series A Preferred Stock and exercise of the Warrants,
                and cause such registration statement to be effective within 240
                days
                following the closing; and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">entitles
                each of these investors to liquidated damages in an amount equal
                to two
                percent (2%) of the purchase price of the Series A Preferred Stock
                if we
                fail to timely file that registration statement with, or have it
                declared
                effective by, the SEC.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      transaction documents we entered into with the purchasers of the Series A
      Preferred Stock also provide for various penalties and fees for breaches or
      failures to comply with provisions of those documents, such as the timely
      payment of dividends, delivery of stock certificates, and obtaining and
      maintaining an effective registration statement with respect to the shares
      of
      Common Stock underlying the Series A Preferred Stock and warrants sold in the
      offering.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition, both the conversion price of the Series A Preferred Stock and the
      exercise price of the Warrants are subject to &#8220;full-ratchet&#8221; anti-dilution
      provisions, so that upon future issuances of our Common Stock or equivalents
      thereof, subject to specified customary exceptions, at a price below the
      conversion price of the Series A Preferred Stock and/or exercise price of the
      Warrants, such conversion price and/or exercise price will be reduced to such
      lower price, further diluting holders of our Common Stock. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Market
      for Registrant&#8217;s Common Equity and Related Stockholder
      Matters</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      Common Stock is quoted on the OTC Bulletin Board under the symbol &#8220;GDRE&#8221;, but to
      date, no trades in our Common Stock have been reported. Immediately following
      the closing of the merger, but before giving effect to the private placement,
      there were outstanding options and warrants to purchase an aggregate of
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,697,648</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shares
      of our Common Stock, and certain providers of legal services had the right
      to
      acquire approximately 997,000 shares of our Common Stock. Of the 24,090,929
      shares of our Common Stock outstanding immediately following the merger
      3,750,000 shares were eligible for resale under Rule 144 under the Securities
      Act. In addition, we are obligated to file a registration statement under the
      Securities Act registering the resale of the 7,260,000 shares of Common Stock
      underlying the shares of Series A Preferred Stock and Warrants we issued in
      the
      offering that closed immediately following the merger.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">46</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      number of holders of record for our </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Common
      Stock immediately after giving effect to the merger was approximately
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">415</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      not paid any dividends on our </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Common
      Stock since our inception and do not intend to pay any cash dividends to our
      stockholders in the foreseeable future. In addition, the terms of our Series
      A
      Preferred Stock prohibit the payment of dividends on our Common
      Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      Compensation Plan Information</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following table summarizes outstanding options as of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">June&#160;30,
      2006, after giving effect to the merger.&#160; The Registrant had no options
      outstanding prior to the merger, and all of the options below were issued in
      connection with the merger to former option holders of MedaSorb.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div align="left">
      <table border="0" cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="bottom" width="21%">&#160;</td>
            <td valign="bottom" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number
                of securities to be issued upon exercise of outstanding
                options</strong></font></div>
            </td>
            <td valign="bottom" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Weighted-average
                exercise price of outstanding options</strong></font></div>
            </td>
            <td valign="bottom" width="27%">
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                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in first
                column)</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="21%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Equity
                compensation plans approved by stockholders`</font></div>
            </td>
            <td valign="bottom" width="22%">
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            </td>
            <td valign="bottom" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">n/a</font></div>
            </td>
            <td valign="bottom" width="27%">
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            </td>
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            <td valign="top" width="22%">&#160;</td>
            <td valign="top" width="18%">&#160;</td>
            <td valign="top" width="27%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="21%">
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                compensation plans not approved by stockholders</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
            </td>
            <td valign="bottom" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">594,003</font></div>
            </td>
            <td align="left" valign="bottom" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$23.88</font></div>
            </td>
            <td valign="bottom" width="27%">
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            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="21%">&#160;</td>
            <td valign="top" width="22%">&#160;</td>
            <td align="left" valign="top" width="18%">&#160;</td>
            <td valign="top" width="27%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="justify" valign="top" width="21%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total</font></div>
            </td>
            <td valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">594,003</font></div>
            </td>
            <td align="left" valign="top" width="18%">
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            </td>
            <td valign="top" width="27%">
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            </td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font></div>
            </td>
            <td align="left" valign="top" width="71%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Represents
                options that may be issued under our 2003 Stock Option
                Plan.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="6%">&#160;</td>
            <td align="left" valign="top" width="71%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font></div>
            </td>
            <td align="left" valign="top" width="71%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Represents
                options that may be issued under our 2006 Long-Term Incentive Plan.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Changes
      in and Disagreements with Accountants</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective
      on the closing of the merger, our Board of Directors dismissed BDO Dunwoody
      LLP
      as our independent accountants and engaged WithumSmith+Brown, MedaSorb&#8217;s
      accountants prior to the merger.&#160; For further information on the change in
      our accountants, see item 4.01 of this Current Report on Form 8-K.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">47</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Recent
      Sales of Unregistered Securities</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the Merger, we issued </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">20,340,929
      shares of our Common Stock to the former stockholders of MedaSorb in exchange
      for all the issued and outstanding shares of MedaSorb Common Stock, and issued
      stock options and warrants to purchase a total of 1,697,648 shares of our Common
      Stock in exchange for the cancellation of all outstanding warrants and stock
      options of MedaSorb, with the warrants and options issued by us having the
      same
      exercise prices and other terms as the cancelled warrants and stock options
      to
      purchase MedaSorb Common Stock. The shares of Common Stock issued in the merger
      were issued in reliance on the exemption from registration afforded by
      Regulation D (Rule 506) under the Securities Act and corresponding provisions
      of
      state securities laws, which exempts transactions by an issuer not involving
      any
      public offering. Accordingly, all of such shares are &#8220;restricted securities&#8221; and
      may not be offered or sold in the United States absent registration or an
      applicable exemption from registration requirements under the Securities Act.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition, immediately following the merger, we sold 5</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,250,000
      shares of our Series A Preferred Stock to four institutional investors
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
      a
      private offering exempt from registration pursuant to Section 4(2) and
      Regulation D (Rule 506) under the Securities Act. The shares of Series A
      Preferred Stock we issued are initially convertible into 4,200,000 shares of
      our
      Common Stock. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      conjunction with the issuance of the Series A Preferred Stock to the investors,
      we issued to them, for no additional consideration, five-year Warrants to
      purchase an aggregate of 2,100,000 shares of Common Stock at the exercise price
      of $2.00 per share, subject to adjustment in certain cases as set forth in
      the
      Warrants. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      also
      granted these purchasers registration rights with respect to the Common Stock
      issuable upon conversion of the Series A Preferred Stock and exercise of the
      Warrants issued in the private placement. The rights, preferences and other
      terms of the Series A Preferred Stock and the private placement of these
      securities are described further above under &#8220;Series A Preferred Stock&#8221;.
      Additional information with respect to this offering is provided above in Item
      1.01 of this Current Report on Form 8-K.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Indemnification
      of Officers and Directors</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Articles
      of Incorporation eliminates the personal liability of directors to us and our
      stockholders for monetary damages for breach of fiduciary duty as a director
      to
      the fullest extent permitted by Nevada law. Additionally, we have included
      in
      our By-laws provisions to indemnify our directors, officers, employees and
      agents and to purchase insurance with respect to liability arising out of the
      performance of their duties as directors, officers, employees and agents as
      permitted by Nevada General Corporation Law. The effect of the foregoing is
      to
      require us, to the extent permitted by law, to indemnify our officers,
      directors, employees and agents for any claims arising against such person
      in
      their official capacities, if such person acted in good faith and in a manner
      that he reasonably believed to be in or not opposed to our best interests,
      and,
      with respect to any criminal action or proceeding, had no reasonable cause
      to
      believe that his conduct was unlawful. Insofar as indemnification for
      liabilities arising under the Securities Act may be permitted to directors,
      officers and controlling persons of the company pursuant to the foregoing,
      or
      otherwise, the company has been advised that the opinion of the Securities
      and
      Exchange Commission such indemnification is against public policy as expressed
      in the Securities Act and is, therefore, unenforceable.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">48</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      3.02. Unregistered Sales of Equity Securities.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Reference
      is made to the disclosure made under Items 1.01 and 2.01 of this Current Report
      on Form 8-K, which is incorporated herein by reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ITEM
      4.01. Changes in Registrant&#8217;s Certifying Accountant</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Immediately
      following the closing of the merger, our Board of Directors dismissed BDO
      Dunwoody LLP as our independent accountants and engaged WithumSmith+Brown,
      the
      accountants of MedaSorb prior to the merger, as our new independent accountants.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      audit
      reports of BDO Dunwoody on the financial statements of Gilder Enterprises,
      Inc.
      as of May 31, 2005 and 2004 and for the years then ended did not contain any
      adverse opinion or disclaimer of opinion, nor were such reports qualified or
      modified as to uncertainty, audit scope or accounting principles, except that
      such reports were prepared assuming &#8220;the Company will continue as a going
      concern&#8221; and stated that &#8220;as discussed in Note 1 to the consolidated financial
      statements, the Company had accumulated operating losses of $169,199 since
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      inception and has a working capital deficit of $67,768. These condition raise
      substantial doubt about the Company&#8217;s ability to continue as a going
      concern.&#160; Management&#8217;s plan in regard to these matters are described in
      Note 1.&#160; These consolidated financial statements do not include any
      adjustments that might result from the outcome of this
      uncertainty&#8221;.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
      the two most recent fiscal years of Gilder Enterprises, Inc. and the subsequent
      interim period through February 28, 2006, there were no disagreements between
      Gilder Enterprises, Inc. and BDO Dunwoody as to any matter of accounting
      principles or practices, financial statement disclosure, or auditing scope
      or
      procedure, which disagreements, if not resolved to the satisfaction of BDO
      Dunwoody, would have caused BDO Dunwoody to make reference in their reports
      on
      the financial statements for such years to the subject matter of the
      disagreement.</font></div>
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      5.01. Changes in Control of Registrant</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      described in more detail under Item 2.01 of this Current Report on Form 8-K,
      which is incorporated herein by reference, as a result of the merger, a change
      in control of the Registrant has occurred.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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      5.02 Departure of Directors or Principal Officers; Election of Directors;
      Appointment of Principal Officers.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Concurrently
      with the closing of the merger, Joseph G. Bowes, who was our sole director
      and
      officer prior to the merger, appointed Al Kraus, Joseph Rubin, Esq., and Kurt
      Katz to the Board of Directors, and then resigned from the Board and from his
      positions as an officer. In addition, at such time, Al Kraus was appointed
      Registrant&#8217;s President and Chief Executive Officer, James Winchester, MD was
      appointed Registrant&#8217;s Chief Medical Officer, Vincent Capponi was appointed
      Registrant&#8217;s Chief Operating Officer and David Lamadrid was appointed our Chief
      Financial Officer. </font></div>
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      certain biographical and other information regarding the newly appointed
      officers and directors, see the disclosure under the heading &#8220;Directors and
      Executive Officers&#8221; under Item 2.01 of this Current Report on Form 8-K, which is
      incorporated herein by reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
      Year</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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      reverse merger accounting dictates that the historical financial statements
      of
      MedaSorb are now our financial statements, we will not file a transition report.
      Exhibit 99.1 to this Current Report on Form 8-K includes MedaSorb&#8217;s annual
      financial statements for the years ended December 31, 2005 and 2004. Our next
      Annual Report on Form 10-KSB will cover the complete 12-month period ended
      December 31, 2006</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item&#160;5.06.
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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      is made to the disclosure set forth under Item&#160;2.01 of this Current Report
      on Form&#160;8-K, which disclosure is incorporated herein by
      reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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      9.01. Financial Statements and Exhibits.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      Financial Statements of business acquired.</font></div>
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      financial statements of MedaSorb (formerly MedaSorb Technologies, LLC) for
      the
      fiscal years ended December 31, 2004 and 2005 are filed as Exhibit 99.1 to
      this
      Current Report on Form 8-K and unaudited financial statements of MedaSorb for
      the interim period ended March 31, 2006 are filed as Exhibit 99.2 to this
      Current Report on Form 8-K.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)
      Pro
      Forma Financial Information.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pro
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      financial statements for the Registrant reflecting the merger are filed as
      Exhibit 99.3 to this Current Report on Form 8-K.</font></div>
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                2.1 </font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Agreement
                and Plan of Merger, dated as of June&#160;29, 2006, by and among Gilder
                Enterprises, Inc., MedaSorb Corporation and MedaSorb Acquisition
                Inc.</font></div>
            </td>
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            <td align="left" valign="top" width="75%">&#160;</td>
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            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                3.1 </font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Articles
                of Incorporation of Gilder Enterprises, Inc. (filed as Exhibit 3.1
                to
                Registrant&#8217;s Registration Statement on Form SB-2 filed on March 29, 2004,
                and incorporated herein by reference).</font></div>
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            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                3.2 </font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By-Laws
                of Gilder Enterprises, Inc. (filed as Exhibit 3.2 to Registrant&#8217;s
                Registration Statement on Form SB-2 filed on March 29, 2004, and
                incorporated herein by reference).</font></div>
            </td>
          </tr>
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            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
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            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                4.1 </font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certificate
                To Set Forth Designations, Voting Powers, Preferences, Limitations,
                Restrictions, And Relative Rights Of Series A 10% Cumulative Convertible
                Preferred Stock, $.001 Par Value Per Share</font></div>
            </td>
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            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
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            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                4.2 </font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Warrant issued to purchasers of Series A Preferred Stock, dated
                June
                __, 2006.</font></div>
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            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
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                4.3 </font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subscription
                Agreement, dated as of June&#160;30, 2006, by and among Gilder
                Enterprises, Inc. and the purchasers party thereto. </font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
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            <td align="left" valign="top" width="8%">
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                10.1 </font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employment
                Agreement, dated as of July 18, 2003, between Al Kraus and MedaSorb
                Technologies, LLC. </font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
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            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                10.2 </font></div>
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            <td align="left" valign="top" width="75%">
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                Agreement, dated as of July 1, 2005, between Vincent Capponi and
                MedaSorb
                Technologies, LLC.</font></div>
            </td>
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          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
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            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                10.3 </font></div>
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                Agreement, dated as of July 1, 2005, between David Lamadrid and MedaSorb
                Technologies, LLC.</font></div>
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          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
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            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                10.4 </font></div>
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            <td align="left" valign="top" width="75%">
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                Agreement, dated as of July 1, 2004, between Dr. James Winchester
                and
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            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                10.5 </font></div>
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            <td align="left" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gilder
                Enterprises, Inc. 2006 Long Term Incentive Plan.</font></div>
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          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
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                99.1 </font></div>
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            <td align="left" valign="top" width="75%">
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                financial statements of MedaSorb for the fiscal years ended December
                31,
                2004 and 2005.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                99.2 </font></div>
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            <td align="left" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unaudited
                financial statements of MedaSorb for the three month interim period
                ended
                March 31, 2006. </font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
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                forma financial statements of the Registrant reflecting the
                merger.</font></div>
            </td>
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    <div>&#160;</div>
    <div>&#160;</div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">51</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
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    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>SIGNATURES</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date:
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">July&#160;6,
      2006</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <table align="center" bgcolor="#ffffff" border="0" cellpadding="0" cellspacing="0" width="100%">

          <tr valign="top" bgcolor="#ffffff">
            <td width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
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            <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: "><u>GILDER
              ENTERPRISES, INC.</u></font></td>
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            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
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            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">By:&#160;&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">/s/&#160;Al
              Kraus<font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt" size="3">&#160;</font></font></td>
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              <div><font size="2">Al Kraus, </font></div>
              <div><font size="2">President and Chief Executive Officer</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 252pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">52</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
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      INDEX</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">

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            <td align="left" valign="top" width="8%"><u><font size="2">No.</font></u></td>
            <td align="left" valign="top" width="75%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Description</u></font></td>
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          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
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                2.1 </font></div>
            </td>
            <td align="left" valign="top" width="75%">
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                and Plan of Merger, dated as of June 29, 2006, by and among Gilder
                Enterprises, Inc., MedaSorb Corporation and MedaSorb Acquisition
                Inc.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
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                3.1 </font></div>
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            <td align="left" valign="top" width="75%">
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                of Incorporation of Gilder Enterprises, Inc. (filed as Exhibit 3.1
                to
                Registrant&#8217;s Registration Statement on Form SB-2 filed on March 29, 2004,
                and incorporated herein by reference).</font></div>
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          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
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                3.2 </font></div>
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            <td align="left" valign="top" width="75%">
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                of Gilder Enterprises, Inc. (filed as Exhibit 3.2 to Registrant&#8217;s
                Registration Statement on Form SB-2 filed on March 29, 2004, and
                incorporated herein by reference).</font></div>
            </td>
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          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                4.1 </font></div>
            </td>
            <td align="left" valign="top" width="75%">
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                To Set Forth Designations, Voting Powers, Preferences, Limitations,
                Restrictions, And Relative Rights Of Series A 10% Cumulative Convertible
                Preferred Stock, $.001 Par Value Per Share</font></div>
            </td>
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          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                4.2 </font></div>
            </td>
            <td align="left" valign="top" width="75%">
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                of Warrant issued to purchasers of Series A Preferred Stock, dated
                June
                __, 2006.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                4.3 </font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subscription
                Agreement, dated as of June 30, 2006, by and among Gilder Enterprises,
                Inc. and the purchasers party thereto. </font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
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                10.1 </font></div>
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            <td align="left" valign="top" width="75%">
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                Agreement, dated as of July 18, 2003, between Al Kraus and MedaSorb
                Technologies, LLC. </font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                10.2 </font></div>
            </td>
            <td align="left" valign="top" width="75%">
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                Agreement, dated as of July 1, 2005, between Vincent Capponi and
                MedaSorb
                Technologies, LLC.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                10.3 </font></div>
            </td>
            <td align="left" valign="top" width="75%">
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                Agreement, dated as of July 1, 2005, between David Lamadrid and MedaSorb
                Technologies, LLC.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
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                10.4 </font></div>
            </td>
            <td align="left" valign="top" width="75%">
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                Agreement, dated as of July 1, 2004, between Dr. James Winchester
                and
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            </td>
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          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
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                10.5 </font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gilder
                Enterprises, Inc. 2006 Long Term Incentive Plan.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
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                99.1 </font></div>
            </td>
            <td align="left" valign="top" width="75%">
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                financial statements of MedaSorb for the fiscal years ended December
                31,
                2004 and 2005.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                99.2 </font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unaudited
                financial statements of MedaSorb for the three month interim period
                ended
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            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">&#160;</td>
            <td align="left" valign="top" width="75%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                99.3 </font></div>
            </td>
            <td align="left" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pro
                forma financial statements of the Registrant reflecting the
                merger.</font></div>
            </td>
          </tr>

      </table>
    </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">53</font></div>
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Unassociated Document
UNITED
      STATES
SECURITIES
      AND EXCHANGE COMMISSION
WASHINGTON,
      DC 20549
________________________
FORM
      8-K
CURRENT
      REPORT
Pursuant
      to Section 13 or 15(d) of the
Securities
      Exchange Act of 1934
Date
      of
      Report (Date of earliest event reported):
June
      30, 2006
GLIDER
      ENTERPRISES, INC.
(Exact
      name of registrant as specified in its charter)
Nevada
000-51038
98-0373793
(State
                or other jurisdiction
(Commission
(I.R.S.
                Employer
of
                incorporation)
File
                Number)
Identification
                Number
)
7
      Deer
      Park Drive, Suite K, Monmouth Junction, New Jersey 08852
(Address
      of principal executive office)    (Zip Code)
Registrant's
      telephone number, including area code:
(732)
      329-8885
Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions (see General Instruction A.2.below):
[_]
Written
                communications pursuant to Rule 425 under the Securities Act (17
                CFR
                230.425)
[_]
Soliciting
                material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12)
[_]
Pre-commencement
                communications pursuant to Rule 14d-2(b) under the Exchange
                Act
(17 CFR 240.14d-2(b))
[_]
Pre-commencement
                communications pursuant to Rule 13e-4(c) under the Exchange Act (17
                CFR
                240.13c-4(c))
Item
          1.01.
Entry
          into a Material Definitive Agreement.
Merger
On
      June
      30, 2006, Gilder Enterprises, Inc., a Nevada corporation ("Registrant")
      completed the acquisition of MedaSorb Corporation, a Delaware corporation
      ("MedaSorb"), pursuant to an Agreement and Plan of Merger (the "Merger
      Agreement") by and among the Registrant, MedaSorb Acquisition Inc., a Delaware
      corporation ("Acquisition Sub") and MedaSorb. A copy of the Merger Agreement is
      filed as Exhibit 2.1 to this Current Report on Form 8-K.
The
      principal terms of the merger and a description of the business of MedaSorb
      is
      set forth below in Item 2.01.
Private
      Placement
Immediately
      following the merger, we sold 5,25
0,000
      shares of our Series A 10% Cumulative Convertible Preferred Stock, par value
      $.001 per share ("Series A Preferred Stock"), to three institutional investors
      pursuant to a Subscription Agreement filed as Exhibit 4.3
to
      this
      Current Report on Form 8-K
and
      incorporated herein by reference,
in a
      private offering exempt from registration pursuant to Section 4(2) and
      Regulation D (Rule 506) under the Securities Act of 1933, as amended (the
"Securities Act"). The 5,250,000 shares of
Series
      A
Preferred
      Stock are initially convertible into 4,200,000 shares
our
      common stock, par value $.001 per share ("Common Stock").
The
      Series A Preferred Stock has a stated value of $1.00 per share and was sold
      for
      a purchase price equal to the stated value. The Series A Preferred Stock is
      not
      redeemable at the holder's option but may be redeemed by us at our option
      following the third anniversary of the issuance of the Series A Preferred Stock
      for 120% of the stated value thereof plus any accrued but unpaid dividends
      upon
      30 days' prior written notice (during which time the Series A Preferred Stock
      may be converted), provided a registration statement is effective under the
      Securities Act with respect to the shares of our Common Stock into which such
      Series A Preferred Stock is then convertible, and an event of default, as
      defined in the Certificate of Designations relating to the Series A Preferred
      Stock (the "Certificate of Designations"), is not then continuing. A copy of the
      Certificate of Designations is filed as Exhibit 4.1
to
      this
      Current Report on Form 8-K
and
      incorporated herein by reference.
The
      Series A Preferred Stock has a dividend rate of 10% per annum, payable
      quarterly. The dividend rate increases to 20% per annum upon the occurrence
      of
      the events of default specified in the Certificate of Designations. Such
      dividends may be paid in cash or, provided no event of default is then
      continuing, with additional shares of Series A Preferred Stock valued at the
      stated value thereof. The Series A Preferred Stock is convertible into Common
      Stock at the conversion rate of one share of Common Stock for each $1.25 of
      stated value or accrued but unpaid dividends converted.
2
In
      conjunction with the issuance of the Series A Preferred Stock to the investors,
      we issued to them, for no additional consideration, five-year warrants (the
      "Warrants") to purchase an aggregate of 2,100,000 shares of Common Stock at an
      exercise price of $2.00 per share. The form of the Warrants is filed as Exhibit
      4.2 to this Current Report on Form 8-K and incorporated herein by reference.
      The
      aggregate number of shares of Common Stock covered by the Warrants equals,
      at
      the date of issuance thereof, one-half the number of shares of Common Stock
      issuable upon the full conversion of the Series A Preferred Stock issued to
      the
      investors on such date. We have agreed to file a registration statement under
      the Securities Act covering the Common Stock issuable upon conversion of the
      Series A Preferred Stock and exercise of the Warrants within 120 days following
      closing of the private placement and to cause it to become effective within
      240
      days of such closing. We also granted the investors demand and piggyback
      registration rights with respect to such Common Stock.
Both
      the
      conversion price of the Series A Preferred Stock and the exercise price of
      the
      Warrants are subject to "full-ratchet" anti-dilution provisions, so that upon
      future issuances of our Common Stock or equivalents thereof, subject to
      specified customary exceptions, at a price below the conversion price of the
      Series A Preferred Stock and/or exercise price of the Warrants, such conversion
      price and/or exercise price will be reduced to such lower price.
In
      connection with the sale of the Series A Preferred Stock and Warrants to the
      investors, Margie Chassman, the beneficial holder of approximately 42% of our
      outstanding shares of Common Stock, agreed to pledge certain securities held
      by
      her to the investors, which such investors may sell to ensure they do not suffer
      a loss on their investment in the first year following the date of their
      investment. In consideration of her pledge to these investors, we agreed to
      pay
      Ms. Chassman (i) $525,000 in cash, and (ii) five-year warrants to purchase
      10%
      of the shares of Series A Preferred Stock and 10% of the Warrants sold to these
      investors for an exercise price equal to the price paid by the investors in
      the
      private placement for the Series A Preferred Stock and Warrants.
We
      anticipate that our other fees and expenses in connection with the sale of
      the
      Series A Preferred Stock and Warrants will amount to approximately
      $775,000.
Additionally,
      in connection with the merger, certain stockholders of ours, including our
      former principal stockholder, sold an aggregate of 3,617,500 shares of our
      common stock to several purchasers, and forfeited 4,105,000 shares of Common
      Stock, which we cancelled, so that prior to giving effect to the merger, we
      had
      outstanding 3,750,000 shares of Common Stock.
After
      giving effect to the merger, the surrender of shares described above and the
      sale of the Series A Preferred Stock and Warrants, we had issued and outstanding
      24,090,929 shares of Common Stock and convertible securities, options and
      warrants that may be converted into or exercised for 9,624,648 additional shares
      of Common Stock. In addition, the holders of 240,929 shares of Common Stock
      and
      warrants to purchase an additional 240,929 shares of Common Stock have the
      right
      to exchange such shares of Common Stock and warrants for approximately 800,000
      shares of Series A Preferred Stock and Warrants to purchase 400,000 shares
      of
      Common Stock at a price of $2.00 per share.
3
The
      securities we sold in the private placement have not be registered under the
      Securities Act, and may not be offered or sold in the United States absent
      registration or an applicable exemption from registration requirements under
      the
      Securities Act.
In
      connection with the closing of the private placement, we agreed to make a
      short-term advance to Ms. Chassman in the amount of $500,000 bearing interest
      at
      the rate of 6% per annum, the repayment of which may be offset against amounts
      owed by us to Ms. Chassman under the $1,000,000 advance previously made by
      her
      to MedaSorb. The short-term advance will be secured by a pledge of
      publicly-traded securities with a market value equal to $500,000.
Termination
      of Joint Venture
On
      June
      30, 2006, we also terminated our joint venture agreement with 5G Wireless
      pursuant to a Termination and Release Agreement, and in connection therewith,
      we
      sold our 51% interest in Nex Connectivity Solutions, Inc. to Dennis Tan, a
      Singapore national for $18,000 (Canadian). Accordingly, we are no longer engaged
      in the business of providing Internet access to hotels or other
      properties.
Item
      2.01.
Completion
      of Acquisition or Disposition of Assets.
Principal
      Terms of the Reverse Merger
Pursuant
      to the Merger Agreement, on June 30, 2006, we completed the acquisition of
      MedaSorb through a reverse triangular merger in which Acquisition Sub, a wholly
      owned subsidiary of ours formed solely for the purpose of facilitating the
      merger, merged with MedaSorb.  MedaSorb is now a wholly owned
      subsidiary of ours, and its business (which is described below) is now our
      only
      business.
In
      connection with the merger (i) the former stockholders of MedaSorb were issued
      an aggregate of 20,340,929 shares of Common Stock in exchange for the same
      number of shares of MedaSorb common stock previously held by such stockholders,
      (ii)
outstanding
      warrants and options to purchase a total of 1,697,648 shares of the common
      stock
      of MedaSorb were cancelled in exchange for warrants and stock options to
      purchase the same number of shares of our Common Stock at the same exercise
      prices and otherwise on the same general terms as the MedaSorb options and
      warrants that were cancelled (the options issued to the employees, directors
      and
      consultants of MedaSorb being issued under our 2006 Long Term Incentive Plan),
      and (iii) certain providers of legal services to MedaSorb who previously had
      the
      right to be issued approximately 997,000
shares
      of
      MedaSorb common stock as payment toward accrued legal fees, became entitled
      to
      instead be issued the same number of shares of our Common Stock as payment
      toward such services. Immediately prior to the merger, after giving effect
      to
      the share cancellation transaction referred to above, we had outstanding
      3,750,000 shares of Common Stock and no warrants or options to purchase Common
      Stock.
4
Concurrently
      with the closing of the merger, Joseph G. Bowes, our sole director and officer
      prior to the merger, appointed Al Kraus, Joseph Rubin, Esq., and Kurt Katz
      to
      the Board of Directors, and then resigned from the Board and from his positions
      as an officer. In addition, at such time, Al Kraus was appointed our President
      and Chief Executive Officer, James Winchester, MD was appointed our Chief
      Medical Officer, Vincent Capponi was appointed our Chief Operating Officer
      and
      David Lamadrid was appointed our Chief Financial Officer. Additional information
      with respect to our new directors and officers is provided in Item 2.01 of
      this
      Current Report on Form 8-K.
For
      accounting purposes, the merger is being accounted for as a reverse merger,
      since
we
      were a
      shell company prior to the merger, the former stockholders of MedaSorb now
      own a
      majority of the issued and outstanding shares of our Common Stock, and the
      directors and executive officers of MedaSorb became our directors and executive
      officers. Accordingly, MedaSorb is treated as the acquiror in the merger, which
      is treated as a recapitalization of MedaSorb, and the pre-merger financial
      statements of MedaSorb will now be deemed to be our historical financial
      statements.
In
      connection with the merger, we also changed our principal executive offices
      to
      those of MedaSorb, which are located at 7 Deer Park Drive, Suite K, Monmouth
      Junction, New Jersey 08852.
Form
      10-SB Disclosure - Description of MedaSorb
Prior
      to
      closing of the merger, Registrant was a "shell company" (as such term is defined
      in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act"). Accordingly, set forth below is the information that would be
      required if Registrant were filing a general form for registration of securities
      on Form 10-SB under the Exchange Act.
Unless
      otherwise indicated or the context otherwise requires, all references below
      to
"we," "us," "MedaSorb" and the "Company" are to Registrant together with
      MedaSorb, its wholly-owned subsidiary.
General
We
      are a
      medical device company that is currently in the development stage, headquartered
      in Monmouth Junction, New Jersey (near Princeton). We have developed and are
      preparing to commercialize a breakthrough blood purification technology that
      efficiently removes toxic compounds from circulating blood. Current
      state-of-the-art blood purification technology (such as dialysis) is incapable
      of effectively clearing these toxins.
Our
      products, which have not yet been introduced to the market, are known medically
      as hemoperfusion devices, and incorporate our proprietary adsorbent polymer
      technology. We believe that there are many potential healthcare applications
      for
      our products, including:
5
·
Adjunctive
                treatment and/or prevention of sepsis (bacterial infection of the
                blood);
·
prevention
                of damage to organs donated for transplant prior to organ
                harvest;
·
prevention
                of post-operative complications of cardiac surgery;
                and
·
long-term
                treatment of chronic kidney
                failure.
Product
      Strategy
MedaSorb
      is developing two product lines, CytoSorb™ and BetaSorb™, for use in acute and
      chronic treatments, respectively.  CytoSorb™ will initially be targeted for
      use as an adjunctive therapy in the acute treatment of the systemic
      inflammatory response syndrome (SIRS). BetaSorb™ is intended to be used as a
      complement to dialysis in the treatment of chronic end stage renal
      disease (ESRD).  We will first focus our efforts on commercializing
      CytoSorb™, which we believe will provide a relatively faster regulatory pathway
      to market. BetaSorb™'s potential for usage in chronic conditions such as ESRD is
      anticipated to have a longer and more complex regulatory pathway and will be
      pursued after commercialization of the CytoSorb™ product.
The
      first
      indication for CytoSorb™ will be in the treatment of sepsis, as an
      adjunctive therapy to the current standard of care. 
Following the sepsis indication, we intend to continue our research in other
      acute conditions where CytoSorb™ has indicated potential, such as for use in
      cardiopulmonary bypass surgery addressing post operative complications
      of inflammation, and organ donation from brain dead organ donors,
      addressing the so-called cytokine storm associated with the decrease
      of viable organs from donors. We are also exploring the potential benefits
      the CytoSorb™ device may have in removing drugs from blood in situations such as
      patient overdoses.
We
      had
      initially identified end stage renal disease as the target market for our
      polymer-based adsorbent technology. End stage renal disease affects more than
      1.3 million people worldwide and is the single most common application of blood
      purification technology today, namely hemodialysis. Hemodialysis is a life
      saving intervention, but is not nearly as effective as a healthy kidney in
      removing toxins from the bloodstream.
During
      the development of our end stage renal product (BetaSorb™), we identified
      several applications for our adsorbent technology in the treatment of critical
      care patients and recognized that our absorbent polymer represented
      a
platform
      of broad application in medicine, well beyond the treatment of patients
      suffering from renal disease. As a result, we shifted our priorities to pursue
      critical care applications (such as for the treatment of sepsis) for our
      technology. We believe that, compared with the chronic renal application for
      our
      technology,
·
we
                will able to obtain the necessary regulatory approvals in a shorter
                period
                of time, allowing us to bring our CytoSorb™ product to market in a shorter
                time frame;
6
·
the
                production of CytoSorb™ will entail a lower capital requirement for
                manufacturing and generate significantly higher gross margins; and
·
the
                use of CytoSorb™ in critical care applications will result in quicker
                reimbursement because the use of our products in these situations
                (generally on an in-patient basis) will generally not be subject
                to
                pre-approval, or require a separate decision, by Medicare or the
                relevant
                HMO or other providers of medical
                benefits.
However,
      we continue to remain confident of the commercial potential of our BetaSorb™
device for chronic applications and will continue its development as a secondary
      product.
Corporate
      History
MedaSorb
      was organized as a Delaware limited liability company in August 1997 as Advanced
      Renal Technologies, LLC. MedaSorb changed its name to RenalTech International,
      LLC in November 1998, and to MedaSorb Technologies, LLC in October, 2003.
In
      December 2005, MedaSorb converted from a limited liability company to a
      corporation, changing its name to MedaSorb Corporation.
MedaSorb
      has engaged in research and development since its inception, and prior to the
      merger, we had raised approximately $53 million
from
      investors. These proceeds have been used to fund the development of multiple
      product applications and to conduct clinical trials. These funds have also
      been
      used to establish in-house manufacturing capacity to meet clinical testing
      needs, expand our intellectual property through additional patents and to
      develop extensive proprietary know-how with regard to our products.
Gilder
      Enterprises, Inc., a Nevada corporation, was incorporated on April 25, 2002.
      Prior to the merger, through a 51% interest in Nex Connectivity Solutions under
      a joint venture arrangement with 5G Wireless Communications Pte. Ltd, the
      Registrant was engaged in the business of installing and operating computer
      networks that enabled business travelers to have high-speed access to the
      Internet. In connection with the merger, we terminated the joint venture
      arrangement and disposed of our interest in Nex Connectivity Solutions, which
      had generated minimal revenues and no profits. At the effective time of the
      merger, the Registrant fell within the definition of a "shell company" under the
      Exchange Act.
Technology,
      Products and Applications
For
      approximately the past half-century, the field of blood purification has been
      focused on hemodialysis, a mature, well accepted medical technique primarily
      used to sustain the lives of patients with permanent or temporary loss of kidney
      function. It is widely understood by the medical community that dialysis has
      inherent limitations in that its ability to remove toxic substances from blood
      drops precipitously as the size of toxins increases.
Our
      hemocompatible adsorbent technology addresses this shortcoming by efficiently
      removing toxins largely untouched by dialysis.
7
Our
      products are known in the medical field as hemoperfusion devices. During
      hemoperfusion, blood is removed from the body via a catheter or other blood
      access device, perfused through a filter medium where toxic compounds are
      removed, and returned to the body.
We
      believe that our polymer adsorbent technology represents an effective
      therapeutic approach to severe health complications caused or complicated by
      large toxins circulating in the blood. Our technology has many potential
      applications in the treatment of common, chronic and acute healthcare
      complications including the treatment and/or prevention of sepsis; drug
      detoxification; the treatment of chronic kidney failure; the treatment of organ
      dysfunction resulting from trauma and severe burns; the treatment of liver
      failure; the prevention of post-operative complications of cardiopulmonary
      bypass surgery; and the prevention of damage to organs donated by brain-dead
      donors prior to organ harvest. These applications vary by cause and complexity
      as well as by severity but share a common characteristic i.e. high
      concentrations of toxins in the circulating blood.
Our
      products will be easy to use and will be able to be incorporated into existing
      extracorporeal blood handling equipment, including heart-lung bypass circuits
      and hemodialysis machines. They will require no additional, expensive equipment
      and require minimal training.
Markets,
      Size and Economic Potential
Sepsis
In
      the
      United States alone, there are more than one million new cases of sepsis
      annually; extrapolated to a global population, the worldwide incidence is
      several million cases per year. Severe trauma and community acquired pneumonia
      are often associated with sepsis.
Sepsis
      patients are critically ill and suffer a very high mortality rate of between
      28%
      and 60%. Because they are so expensive to treat, we believe that efficacy rather
      than cost will be the determining factor in the adoption of CytoSorb™ in the
      treatment of sepsis. Our current pricing model represents a fraction of what
      is
      currently spent on the treatment of a sepsis patient. Critical care specialists
      project that the average sepsis patient may require 10 CytoSorb™ (single-use,
      disposable) devices during a treatment regimen, based on the median number
      of
      days for which patients typically require ventilator support. Assuming only
      2%
      of the sepsis patient population received CytoSorb™ therapy, based on a pricing
      model of $500 per device and 10 devices per episode, the annual revenue
      potential is $100 million in the U.S. alone and $200 million
      worldwide.
Brain-Dead
      Organ Donors
There
      are
      approximately 6,000 to 12,000 brain dead organ donors each year in the United
      States; worldwide, the number of these organ donors is estimated to be at least
      double the U.S. brain dead organ donor population. There is a severe shortage
      of
      donor organs. Currently, there are more than 85,000 individuals on transplant
      waiting lists in the United States. We expect that the use of our CytoSorb™
device in brain dead organ donors will increase the number of viable organs
      harvested from the donor pool and improve the survival of transplanted organs.
      At $500 per device, the worldwide revenue potential for this application is
      currently estimated at $12 million annually.
8
Cardiopulmonary
      Bypass Procedures
There
      are
      approximately 400,000 cardiopulmonary bypass (CPB) and cardiac surgery
      procedures performed annually in the U.S. and more than 800,000 worldwide.
      Nearly a third of all patients suffer from post-operative complications of
      cardiopulmonary bypass surgery, including complications from infection,
      pneumonia, pulmonary, and neurological dysfunction. Extended surgery time leads
      to longer ICU recovery time and hospital stays, both leading to higher costs
      -
      approximately $35,000 per coronary artery bypass graft procedure. We believe
      that the use of CytoSorb™ during and after the surgical procedure will prevent
      or mitigate post-operative complications for many CPB patients.
We
      anticipate that the CytoSorb™ device, incorporated into the extracorporeal
      circuit used with the by-pass equipment during surgery, and/or employed
      post-operatively for a period of time, will mitigate inflammation and speed
      recovery. At $500 per CytoSorb™ device and one device per procedure, and
      assuming 50% of the patient population receives CytoSorb™ treatment, the annual
      revenue potential for this application is $100 million in the U.S. and $200
      million worldwide.
Chronic
      Kidney Failure
The
      National Kidney Foundation estimates that more than 20 million Americans have
      chronic kidney disease. Left untreated, chronic kidney disease can ultimately
      lead to chronic kidney failure, which requires a kidney transplant or chronic
      dialysis (generally three times per week) to sustain life. There are
      approximately 300,000 patients in the United States currently receiving chronic
      dialysis and more than 1.3 million worldwide. Approximately 85% of patients
      with
      chronic kidney disease are treated with hemodialysis.
Our
      BetaSorb™ device has been designed for use in conjunction with standard
      dialysis. Standard dialysis care typically involves three sessions per week,
      averaging approximately 150 sessions per year. Assuming BetaSorb™ use in each
      session, every 100,000 patients would require approximately 15 million devices
      annually.
Our
      pricing model for the BetaSorb™ device is based on a variety of cost/benefit
      assumptions. The current BetaSorb™ end-user pricing model is $35 per device, or
      $5,250 per patient per year. Based on high-volume finished product cost
      assumptions and the terms of our existing marketing and distribution agreement
      with Fresenius Medical Care (which owns more than 1,600 dialysis clinics with
      over 130,000 patients), we estimate annual revenue potential for the application
      of our technology to chronic kidney failure at approximately $780 million in
      the
      U.S. and $2.5 billion worldwide.
9
Other
      Applications
Additional
      applications for the critical care market have been identified. These promising
      areas include:
·
Drug
                detoxification
·
Liver
                failure
·
Regional
                high-dose chemotherapy
·
Acute
                Respiratory Distress Syndrome
                (ARDS)
·
Severe
                Acute Respiratory Syndrome (SARS)
·
Equine
                sepsis
·
Bio-terrorism
Products
(Currently in Development)
The
      CytoSorb™ Device (Critical Care)
APPLICATION:
      Treatment and Prevention of Sepsis
Sepsis
      is
      defined by high levels of toxic compounds
("cytokines")
      which are released into the blood stream as part of the body's auto-immune
      response to severe infection or injury. These toxins cause severe inflammation
      and damage healthy tissues, which can lead to organ dysfunction and failure.
      Sepsis is very expensive to treat and has a high mortality rate.
Potential
      Benefits:
By
      preventing or reducing the accumulation of cytokines in the circulating blood,
      we believe our adsorbent blood purification technology will prevent or mitigate
      severe inflammation, organ dysfunction and failure in sepsis patients.
      Therapeutic goals as an adjunctive therapy include reduced ICU and total
      hospitalization time.
Background
      and Rationale for Efficacy:
We
      believe that the effective treatment of sepsis is the most valuable potential
      application for our technology. Sepsis carries mortality rate of between 28%
      and
      60%. Death can occur within hours or days, depending on many variables,
      including cause, severity, patient age and co-morbidities. Researchers estimate
      that there are approximately one million new cases of sepsis in the U.S. each
      year; extrapolated to a global population, this equates to several million
      new
      cases annually. In the U.S. alone, treatment of sepsis costs nearly $20 billion
      annually. According to the Centers for Disease Control, sepsis is the tenth
      leading cause of death in the U.S., as reported by (CDC). More than 1,000 people
      die each day from sepsis.
An
      effective treatment for sepsis has been elusive. Pharmaceutical companies have
      been trying to develop drug therapies to treat the condition. With the exception
      of a single drug, Xigris® from Eli Lilly, which demonstrated a small improvement
      in survival in a small segment of the patient population, to our knowledge,
      all
      other efforts to date have failed to significantly improve patient
      survival.
10
Our
      technology presents a new therapeutic approach in the treatment of sepsis,
      and
      its potential efficacy is supported by scientific research. The potential
      benefits of blood purification in the treatment of sepsis patients are widely
      acknowledged by medical professionals and have been studied using dialysis
      and
      hemofiltration technology. These studies, while encouraging, demonstrated that
      dialysis alone produced only limited benefit to sepsis patients. The reason
      for
      this appears to be rooted in a primary limitation of dialysis technology itself:
      the inability of standard dialysis to effectively and efficiently remove larger
      toxins from circulating blood. Our CytoSorb™ device efficiently removes these
      larger toxins. CytoSorb's™ toxin clearing ability and the ability to interact
      safely with blood (hemocompatibility) has been demonstrated clinically. Data
      collected during the "emergency and compassionate use" treatment of a single
      sepsis patient has been encouraging to us.
CytoSorb™
      has been designed to achieve broad-spectrum removal of both pro- and
      anti-inflammatory cytokines, preventing or reducing the accumulation of high
      concentrations in the bloodstream. This approach is intended to modulate the
      immune response without blocking or suppressing the function of any of its
      mediators. For this reason, researchers have referred to the approach reflected
      in our technology as 'immunomodulatory' therapy.
Projected
      Timeline and Budget Requirements:
Previous
      clinical studies in patients with chronic kidney failure have provided valuable
      data which underpin the development of the critical care applications for our
      technology. Our current device design has been extensively studied and shown
      to
      be efficacious in humans with kidney failure (in multiple treatment sessions
      lasting up to 4 hours, three times per week for up to 24 weeks in some
      patients). This same device design was tested on a single patient with bacterial
      sepsis, producing results that we found very encouraging and confirming to
      us
      that our device design is appropriate for a more extensive sepsis study. Our
      plans for the development of CytoSorb™ to treat sepsis patients are summarized
      in the table below.
Task
Estimated
                Time Required
Estimated
Budget
                Requirements
1.
                Design pilot study
4
                to 6 months
(nominal)
2.
                Conduct pilot study
6
                to 9 months
$1.2
                million
3.
                Design pivotal study
Concurrent
                with item 2
(nominal)
4.
                Conduct pivotal study
9
                to 12 months
$1.8
                million
5.
Approval
                time following submission
6
                to 9 months
Total
Approximately
                25 to 36 months
$3.0
                million
Because
      our technology pertains to a medical device, the regulatory pathway and approval
      process are faster and more straightforward than the process related to the
      approval of a drug.
11
APPLICATION
:
Prevention
      and treatment of organ dysfunction in brain-dead organ donors to increase the
      number and quality of viable organs harvested from donors
Potential
      Benefits
:
By
      preventing or reducing high-levels of cytokines from accumulating in the
      bloodstream of a brain-dead organ donor, CytoSorb™ aims to mitigate organ
      dysfunction and failure which results from severe inflammation following
      brain-death. The primary goals for this application are
·
Improving
                the viability of organs which can be harvested from brain-dead organ
                donors, and
·
increasing
                the likelihood of organ survival following
                transplant.
Background
      and Rationale for Efficacy:
When
      brain death occurs, the body responds by generating large quantities of
      inflammatory cytokines. This process is similar to sepsis. A high percentage
      of
      donated organs are never transplanted due to this response, which damages
      healthy organs and prevents transplant. In addition, inflammation in the donor
      may damage organs that are harvested and reduce the probability of graft
      survival following transplant.
There
      is
      a shortage of donated organs worldwide, with approximately 85,000 people
      currently on the waiting list for organ transplants in the United States alone.
      Because there are an insufficient number of organs donated to satisfy demand,
      it
      is vital to maximize the number of viable organs donated, and optimize the
      probability of organ survival following transplant.
Projected
      Timeline and Budget Requirements:
Studies
      are currently being conducted under a $1 million grant from the Health Resources
      and Services Administration (HRSA),
an
      agency
      of the U.S. Department of Health and Human Services, and extensive development
      work has already been completed. Researchers at the University of Pittsburgh
      Medical Center and the University of Texas, Houston Medical Center have made
      significant progress on the observational and dosing phases of the project.
      The
      observational portion of the study is ongoing, while the dosing study, involving
      eight non-viable donors, has been completed. These initial phases of the study
      are expected to be concluded in 2006. The next phase of this study, the
      treatment phase, will involve viable donors. In this phase of the
      project
,
viable
      donors will be treated and the survival and function of organs in transplant
      recipients will be tracked and measured. The treatment phase will be contingent
      upon further discussion with the FDA and HRSA regarding trial design, as well
      as
      obtaining additional funding.
APPLICATION:
      Prevention and treatment of post-operative complications of cardiopulmonary
      bypass surgery
Potential
      Benefits:
By
      preventing or reducing high levels of cytokines from accumulating in the blood
      system during and following cardiac surgery, we anticipate that post-operative
      complications of cardiopulmonary bypass surgery can be prevented or mitigated.
      The primary goals for this application are to
·
reduce
                ventilator and oxygen therapy requirements;
·
reduce
                length of stay in hospital intensive care units; and
12
·
reduce
                the total cost of patient care.
Background
      and Rationale for Efficacy:
Due to
      the highly invasive nature of cardiopulmonary bypass surgery, high levels of
      cytokines are produced by the body, triggering severe inflammation. By
      preventing or reducing the accumulation of cytokines in a patient's blood
      stream, we expect to prevent or mitigate post-operative complications caused
      by
      an excessive or protracted inflammatory response to the surgery. While not
      all
      patients undergoing cardiac surgery suffer these complications, it is impossible
      to predict before surgery which patients will be affected.
Projected
      Timeline:
We have
      completed an observational study of 32 patients to obtain information with
      respect to the onset and duration of cytokine release. We expect that this
      information will aid us in defining the appropriate time to apply the CytoSorb™
device to maximize therapeutic impact. We are not currently focusing our efforts
      on the commercialization of our technology for application to cardiac surgery.
      Upon successful commercialization of the sepsis application, we will pursue
      the
      use of our polymer absorbent technology for other critical care uses, such
      as
      cardiopulmonary bypass surgery.
The
      BetaSorb™ Device (Chronic Care)
APPLICATION:
Prevention and treatment of health complications caused by the accumulation
      of
      metabolic toxins in patients with chronic renal failure
Potential
      Benefits:
By
      preventing or reducing high levels of metabolic waste products from accumulating
      in the blood and tissues of long-term dialysis patients, we anticipate that
      the
      health complications characteristic to these patients can be prevented or
      mitigated. The primary goals for this application are to
·
improve
                and maintain the general health of dialysis patients;
·
improve
                the quality of life of these
                patients
·
reduce
                the total cost of patient care; and
·
increase
                life expectancy.
Background
      and Rationale for Efficacy:
Our
      BetaSorb™ device is intended for use on patients suffering from chronic kidney
      failure, who rely on long-term dialysis therapy to sustain life. Due to the
      widely recognized inability of dialysis to remove larger proteins from blood,
      metabolic waste products, such as Beta-2 microglobulin, accumulate to toxic
      levels and are deposited in the joints and tissues of patients. Specific toxins
      known to accumulate in these patients have been linked to their severe health
      complications, increased healthcare costs, and reduced quality of life.
Researchers
      also believe that the accumulation of toxins may play an important role in
      the
      significantly reduced life expectancy experienced by dialysis patients. In
      the
      U.S., the average life expectancy of a dialysis patient is five years. Industry
      research has identified links between many of these toxins and poor patient
      outcomes. By routinely removing these toxins during dialysis and preventing
      or
      reducing their accumulation, we expect our BetaSorb™ device to maintain or
      improve patient health in the long-term. We believe that by reducing the
      incidence of health complications, the annual cost of patient care will be
      reduced and life expectancy increased.
13
The
      poor
      health experienced by chronic dialysis patients is illustrated by the fact
      that
      in the U.S. alone, more than $20 billion is spent annually caring for this
      patient population. While the cost of providing dialysis therapy alone is
      approximately $23,000 per patient per year, the total cost of caring for a
      patient ranges from $60,000 to more than $120,000 annually due to various health
      complications associated with dialysis.
Projected
      Timeline:
We have
      collected a significant amount of empirical data for the development of this
      application. As the developer of this technology, we had to undertake extensive
      research, as no comparable technology was available for reference purposes.
      We
      have completed several pilot studies, and most recently a clinical pilot of
      six
      patients in California for up to 24 weeks in which our BetaSorb™ device removed
      the targeted toxins as expected.
As
      discussed above, due to practical and economic considerations, we are now
      focusing our efforts and resources on commercializing our CytoSorb™ device for
      critical care application. Following commercial introduction of the CytoSorb™
device, we expect to conduct additional clinical studies using the BetaSorb™
device in the treatment of end stage renal disease patients.
Commercial
      and Research Partners
University
      of Pittsburgh Medical Center
We
      are
working
      with researchers at the University of Pittsburgh - Critical Care Medicine
      Department in the development of critical care applications for technology.
      Consisting of more than twenty physicians, as well as numerous full-time
      scientists, educators and administrative assistants, the Critical Care Medicine
      Department at the University of Pittsburgh is one of the largest organizations
      of its type in the world and has established an international reputation for
      excellence in clinical care, education, and research.
Researchers
      at UPMC have participated in nearly every major clinical trial of potential
      sepsis intervention during the past twenty years. Drs. Derek Angus and John
      Kellum were investigators for Ely Lilly
's
      sepsis
      drug, Xigris®. Dr. Kellum, a member of the UPMC faculty since 1994, is our
      principal investigator for CytoSorb™. Dr. Kellum, together with several other
      researchers at UPMC, serve on our Critical Care Advisory Board. Dr. Kellum's
      research interests span various aspects of Critical Care Medicine, but center
      on
      critical care nephrology (including acid-base, and renal replacement therapy),
      sepsis and multi-organ failure, and clinical epidemiology. He is Chairman of
      the
      Fellow Research Committee at the University of Pittsburgh Medical
      Center
and
has
      authored more than 70 publications and has received numerous research grants
      from foundations and industry.
14
Fresenius
      Medical Care
AG
We
      have
      entered into
an
      exclusive, long-term agreement with Fresenius Medical Care for the global
      marketing and distribution of our BetaSorb™ device and any similar product we
      may develop for the treatment of renal disease. The agreement, which we entered
      into in 1999 is a profit sharing plan under which both we and Fresenius are
      incentivized to minimize costs and maximize the price to end-users. In
      particular, under the agreement, to the extent that sales of our products by
      Fresenius results in gross margins to Fresenius in excess of targeted levels,
      we
      would share with Fresenius a portion of the revenues attributable to such
      excess.
With
      Fresenius as our exclusive distributor of our renal products, we believe that
      our agreement with Fresenius will maximize the potential for rapid product
      introduction and penetration of the chronic kidney failure market.
Today,
      Fresenius Medical Care is the world's largest, integrated provider of products
      and services for individuals with chronic kidney failure. Through its network
      of
      more than 1,600 dialysis clinics in North America, Europe, Latin America and
      Asia-Pacific, Fresenius Medical Care provides dialysis treatment to more than
      130,000 patients around the globe. Fresenius Medical Care is also the world's
      largest provider of dialysis products, such as hemodialysis machines, dialyzers
      and related disposable products.
Royalty
      Agreement
In
      August
      2003, in order to induce Guillermina Vega Montiel, a principal stockholder
      of
      ours, to make an additional investment in MedaSorb, we granted Ms. Montiel
      a
      perpetual royalty equal to three percent of all gross revenues received by
      us
      from sales of CytoSorb
TM
in
      the
      applications of sepsis, cardiopulmonary bypass surgery, organ donor,
      chemotherapy and inflammation control application.
P
roduct
      Payment & Reimbursement
Critical
      Care Applications
Payment
      for
our
      CytoSorb™ device in the treatment and prevention of sepsis and other related
      acute care applications is anticipated to fall under the "diagnosis-related
      group" (DRG) in-patient reimbursement system, which is currently the predominant
      basis of hospital medical billing in the United States. Under this system,
      predetermined payment amounts are assigned to categories of medical patients
      with respect to their treatments at medical facilities based on the DRG that
      they fall within (which is a function of such characteristics as medical
      condition, age, sex, etc.) and the length of time spent by the patient at the
      facility. Reimbursement is not determined by the actual procedures used in
      the
      treatment of these patients, and a separate reimbursement decision would not
      be
      required to be made by Medicare, the HMO or other provider of medical benefits
      in connection with the actual method used to treat the patient.
15
Critical
      care applications such as those targeted by our CytoSorb™ device involve a high
      mortality rate and extended hospitalization, coupled with extremely expensive
      ICU time. In view of these high costs and high mortality rates, we believe
      acceptance of our proprietary technology by critical care practitioners and
      hospital administrators will primarily depend on safety and efficacy factors
      rather than cost.
Chronic
      Renal Failure
In
      the
      U
.S.,
      over
      80% of chronic dialysis patients are Medicare-eligible, regardless of age.
      Therefore, it is expected that Medicare will be the primary payer for the
      BetaSorb™ device, either through the current "fee for service" mechanism or
      managed care programs. The large majority of costs not covered by federal
      programs are covered by the private insurance sector.
While
      the
      fee-for-service composite rate system is currently the dominant payment
      mechanism, many industry participants believe that a managed care system will
      become the dominant payment mechanism. We believe that movement to a full or
      shared-risk managed care system would speed market acceptance of BetaSorb™
because, under such a system, providers will have a strong incentive to adopt
      technologies that lower overall treatment costs. Fresenius is a leading
      participant in the move to managed care and will play a leading role in the
      demonstration and introduction of our product to Medicare.
Competition
Sepsis
We
      believe that our products represent a unique approach to disease states and
      health complications associated with sepsis, which is sometimes also referred
      to
      as systemic inflammatory response syndrome (SIRS). Researchers have explored
      the
      potential of using existing membrane-based dialysis technology to treat patients
      suffering from sepsis. These techniques are unable to effectively remove the
      larger toxins which leading researchers have shown to cause and complicate
      sepsis. The same experts believe that a blood purification technique that
      efficiently removes, or significantly reduces, the circulating concentrations
      of
      such toxins might represent a successful therapeutic option.
The
      CytoSorb™ device is highly efficient in the removal of large toxins from
      circulating blood. Since the adsorbent device does not rely on fluid extraction
      for blood purification, it does not necessitate the use of replacement fluid.
      This represents a major advantage over any dialysis technique. A study conducted
      on a single patient with bacterial sepsis produced results that we believe
      demonstrate the ability of the CytoSorb™ device to remove the toxins acting in
      sepsis.
Medical
      research during the past two decades has focused on drug interventions aimed
      at
      chemically blocking or suppressing the function of one or two inflammatory
      agents. In hindsight,
some
      researchers now believe this approach has little chance of significantly
      improving patient outcomes because of the complex pathways and multiple chemical
      factors at play. Clinical studies of these drug therapies have been largely
      unsuccessful. An Ely Lilly drug, Xigris®, cleared by the FDA in November 2001,
      is the first and only drug to be approved for the treatment of severe sepsis.
      Clinical studies demonstrated that use of Xigris® resulted in a 6% reduction in
      the absolute risk of death, and a 13% risk reduction in the most severe sepsis
      patients. The drug remains controversial and is considered extremely expensive
      when compared to the percentage of patients who benefit.
16
While
      studies of other potential sepsis drug therapies are in progress, we are not
      aware of any other broad-spectrum blood detoxification therapy under development
      for this application that could be considered directly competitive with our
      approach.
C
ardiopulmonary
      Bypass Surgery
We
      are
      not aware of any practical competitive approaches for removing cytokines in
      CPB
      patients. Alternative therapies such as "off-pump" surgeries are available but
"post-bypass" syndrome has not been shown to be reduced in this less invasive
      procedure. If successful, the CytoSorb™ is expected to be useful in both on-pump
      and off-pump procedures.
Chronic
      Dialysis
We
      know
      of no other device, medication or therapy considered directly competitive with
      our technology. Research and development in the field has focused primarily
      on
      improving existing dialysis technologies. The introduction of the high-flux
      dialyzer in the mid-1980s and the approval of Amgen's Epogen™, a recombinant
      protein used to treat anemia, are the two most significant developments in
      the
      field over the last two decades.
Efforts
      to improve removal of larger toxins with enhanced dialyzer designs have achieved
      only marginal success. Many experts believe that dialyzer technology has reached
      its limit in this respect. A variation of high-flux hemodialysis, known as
      hemodiafiltration, has existed for many years. However, due to the complexity,
      cost and increased risks, this dialysis
technique
      has not gained significant acceptance worldwide. In addition, many larger toxins
      are not effectively filtered by hemodiafiltration, despite its more open pore
      structure. As a result, hemodiafiltration does not approach the quantity of
      toxins removed by the BetaSorb™ device.
T
reatment
      of Organ Dysfunction in Brain-Dead Organ Donors
We
are not
      aware of any directly competitive products to address the application of our
      technology for the mitigation of organ dysfunction and failure resulting from
      severe inflammation following brain-death.
Clinical
      Testing
Our
      first
      clinical studies were conducted in patients with chronic renal failure. The
      health of these patients is challenged by high levels of toxins circulating
      in
      their blood but, unlike sepsis patients, they are not at imminent risk of death.
      The toxins involved in chronic renal failure are completely different from
      those
      involved in sepsis, eroding health gradually over time. The treatment of
      patients with chronic renal failure is a significant target market for us,
      although not the current focus of our efforts and resources. Our clinical
      testing and product development work in this application functioned as a low
      risk method of evaluating the safety of the technology in a clinical setting,
      with direct benefit to development of the critical care applications on which
      we
      are now focusing our efforts.
17
We
      believe that our device design, which has been tested in approximately 350
      sessions, combined with hemodialysis, has been identified as a suitable
      candidate to pilot in clinical studies in the treatment of sepsis. We used
      this
      design in our first clinical experience treating a septic patient, which has
      produced results that we have found encouraging and indicative of the efficacy
      of our technology in the treatment of sepsis.
Government
      Research Grants
Three
      government research grants by the National Institutes of Health (NIH) and Health
      and Human Services (HHS) have been awarded to investigators to explore the
      use
      of our technology in sepsis and transplant organ preservation.
A
      grant
      of $1
million
      was awarded to the University of Pittsburgh Medical Center in 2003. The project
      seeks to improve the quantity and viability of organs donated for transplant
      by
      using CytoSorb™ to detoxify the donor's blood. This clinical study is in
      progress.
The
      second grant, a $100,000 Phase I Small Business Technology Transfer grant from
      the National Institutes of Health, was directly awarded to us for the study
      of
      blood purification on survival time using a septic model.
Finally,
      University of Pittsburgh Medical Center was awarded a $7,000,000 grant from
      NIH
      entitled "Systems Engineering of a Pheresis Intervention for Sepsis
      (SEPsIS)
"
to study
      the use of our adsorbent polymer technology in the treatment of severe sepsis.
      These grants represent a substantial research cost savings to us and demonstrate
      the strong interest of the medical and scientific communities in our
      technology.
Regulation
The
      medical devices that we manufacture are subject to regulation by numerous
      regulatory bodies, including the FDA and comparable international regulatory
      agencies. These agencies require manufacturers of medical devices to comply
      with
      applicable laws and regulations governing the development, testing,
      manufacturing, labeling, marketing and distribution of medical devices. Devices
      are generally subject to varying levels of regulatory control, the most
      comprehensive of which requires that a clinical evaluation program be conducted
      before a device receives approval for commercial distribution.
18
In
      the
      U.S., permission to distribute a new device generally can be met in one of
      two
      ways. The first process requires that a pre-market notification (510(k)
      Submission) be made to the FDA to demonstrate that the device is as safe and
      effective as, or substantially equivalent to, a legally marketed device that
      is
      not subject to pre-market approval (PMA). A legally marketed device is a device
      that (i) was legally marketed prior to May 28, 1976, (ii) has
      been reclassified from Class III to Class II or I, or (iii) has been
      found to be substantially equivalent to another legally marketed device
      following a 510(k) Submission. The legally marketed device to which equivalence
      is drawn is known as the "predicate" device. Applicants must submit descriptive
      data and, when necessary, performance data to establish that the device is
      substantially equivalent to a predicate device. In some instances, data from
      human clinical trials must also be submitted in support of a 510(k) Submission.
      If so, these data must be collected in a manner that conforms with specific
      requirements in accordance with federal regulations. The FDA must issue an
      order
      finding substantial equivalence before commercial distribution can occur.
      Changes to existing devices covered by a 510(k) Submission which do not
      significantly affect safety or effectiveness can generally be made by us without
      additional 510(k) Submissions.
The
      second process requires that an application for PMA be made to the FDA to
      demonstrate that the device is safe and effective for its intended use as
      manufactured. This approval process applies to certain Class III devices.
      In this case, two steps of FDA approval are generally required before marketing
      in the U.S. can begin. First, investigational device exemption (IDE) regulations
      must be complied with in connection with any human clinical investigation of
      the
      device in the U.S. Second, the FDA must review the PMA application which
      contains, among other things, clinical information acquired under the IDE.
      The
      FDA will approve the PMA application if it finds that there is a reasonable
      assurance that the device is safe and effective for its intended purpose.
In
      the
      European Union, distributors of medical devices are required to comply with
      the
      Medical Devices Directive and obtain CE Mark certification in order to market
      medical devices. The CE Mark certification, granted following approval from
      an
      independent Notified Body, is an international symbol of adherence to quality
      assurance standards and compliance with applicable European Medical Devices
      Directives. Distributors of medical devices may also be required to comply
      with
      other foreign regulations such as Ministry of Health Labor and Welfare approval
      in Japan. The time required to obtain these foreign approvals to market our
      products may be longer or shorter than that required in the U.S., and
      requirements for those approvals may differ from those required by the FDA.
In
      the
      United States, our CytoSorb™ and BetaSorb™ devices are classified as Class III
      (CFR 876.5870—Sorbent Hemoperfusion System) and will require 501(k) Submissions
      to the FDA. However, because the BetaSorb™ device is intended for chronic use,
      the FDA may require pre-market approval (PMA), which we will submit if required.
      In the case of CytoSorb™, because the application is for acute care (short term,
      less than 30 days), management believes that FDA approval for this product
      may
      be obtained based solely on the 510(k) Submission accompanied with clinical
      data. In Europe, our devices are expected to be classified as class IIb, and
      will conform to the ISO 13485 Quality Standard in support of our planned
      applications to obtain CE Mark certification in Europe, and applicable approvals
      in Canada and Japan.
19
The
      process of obtaining clearance to market products is costly and time-consuming
      in virtually all of the major markets in which we expect to sell products and
      may delay the marketing and sale of our products. Countries around the world
      have recently adopted more stringent regulatory requirements which are expected
      to add to the delays and uncertainties associated with new product releases,
      as
      well as the clinical and regulatory costs of supporting those releases. No
      assurance can be given that any of our medical devices will be approved on
      a
      timely basis, if at all. In addition, regulations regarding the development,
      manufacture and sale of medical devices are subject to future change. We cannot
      predict what impact, if any, those changes might have on our business. Failure
      to comply with regulatory requirements could have a material adverse effect
      on
      our business, financial condition and results of operations.
Given
      adequate funding, we expect that it will take approximately six months to begin
      the treatment phase of a pilot clinical study on the efficacy of our products
      in
      the treatment of sepsis. The pilot phase is expected to span six to nine months,
      and an additional one year pivotal study would then be undertaken for the
      purpose of compiling sufficient data to support both the U.S. 510(k) Submission
      and the application to obtain CE Mark certification in Europe. In the U.S.,
      another six to nine months is anticipated for FDA review and approval of the
      510(k) submission. Concurrent with these activities, we plan to pursue CE Mark
      certification of our products. Upon successful completion of a "quality systems
      audit" in combination with clinical data and the assembly of a technical file,
      we anticipate that CytoSorb™ device will receive CE Mark certification,
      all
owing
      it
      to be sold in Europe.
The
      FDA
      can ban certain medical devices, detain or seize adulterated or misbranded
      medical devices, order repair, replacement or refund of these devices and
      require notification of health professionals and others with regard to medical
      devices that present unreasonable risks of substantial harm to the public
      health. The FDA may also enjoin and restrain certain violations of the Food,
      Drug and Cosmetic Act and the Safe Medical Devices Act pertaining to medical
      devices, or initiate action for criminal prosecution of such violations.
      International sales of medical devices manufactured in the U.S. that are not
      approved by the FDA for use in the U.S., or are banned or deviate from lawful
      performance standards, are subject to FDA export requirements. Exported devices
      are subject to the regulatory requirements of each country to which the device
      is exported. Some countries do not have medical device regulations, but in
      most
      foreign countries medical devices are regulated. Frequently, regulatory approval
      may first be obtained in a foreign country prior to application in the U.S.
      to
      take advantage of differing regulatory requirements.
Sales
      and Marketing
We
      currently estimate, provided that we receive adequate funding to support our
      planned activities and that our products perform as expected in clinical
      studies, that we will obtain FDA approval of our CytoSorb™ device in the
      treatment of sepsis in 25 to 36 months from funding. As we approach regulatory
      approval, we plan to initially build a sales organization of approximately
      15
      representatives in the U.S. In addition, we plan on pursuing localized
      distribution agreements in rural areas.
20
We
      also
      plan to initiate sales in several European countries which are known as early
      adopters of new medical device technology. These countries primarily include
      Italy, Germany and the United Kingdom. We plan to initially operate through
      local distributors in each European country where we launch sales operations.
      Only after establishment of a limited network of local distributors and actual
      generation of sales, will we formulate a broader distribution strategy on a
      global basis.
Intellectual
      Property and Patent Litigation
The
      medic
al
      device
      market in which we primarily participate is in large part technology driven.
      As
      a result, intellectual property rights, particularly patents and trade secrets,
      play a significant role in product development and differentiation. However,
      intellectual property litigation to defend or create market advantage is
      inherently complex, unpredictable and is expensive to pursue. Litigation often
      is not ultimately resolved until an appeal process is completed and appellate
      courts frequently overturn lower court patent decisions.
Moreover,
      competing parties frequently file multiple suits to leverage patent portfolios
      across product lines, technologies and geographies and to balance risk and
      exposure between the parties. In some cases, several competitors are parties
      in
      the same proceeding, or in a series of related proceedings, or litigate multiple
      features of a single class of devices. These forces frequently drive settlement
      not only of individual cases, but also of a series of pending and potentially
      related and unrelated cases. In addition, although monetary and injunctive
      relief is typically sought, remedies are generally not determined until the
      conclusion of the proceedings, and are frequently modified on appeal.
      Accordingly, the outcomes of individual cases are difficult to time, predict
      or
      quantify and are often dependent upon the outcomes of other cases in other
      forums, both domestic and international.
We
      rely
      on a combination of patents, trademarks, trade secrets and non-disclosure
      agreements to protect our intellectual property. We hold 21
U.S.
      patents, some of which have foreign counterparts, and additional patent
      applications pending worldwide that cover various aspects of our technology.
      There can be no assurance that pending patent applications will result in issued
      patents, that patents issued to us will not be challenged or circumvented by
      competitors, or that such patents will be found to be valid or sufficiently
      broad to protect our technology or to provide us with a competitive advantage.
We
      rely
      on non-disclosure and non-competition agreements with employees, consultants
      and
      other parties to protect, in part, trade secrets and other proprietary
      technology. There can be no assurance that these agreements will not be
      breached, that we will have adequate remedies for any breach, that others will
      not independently develop equivalent proprietary information or that third
      parties will not otherwise gain access to our trade secrets and proprietary
      knowledge.
21
We
      may
      find it necessary to initiate litigation to enforce our patent rights, to
      protect our trade secrets or know-how and to determine the scope and validity
      of
      the proprietary rights of others. Patent litigation can be costly and
      time-consuming, and there can be no assurance that our litigation expenses
      will
      not be significant in the future or that the outcome of litigation will be
      favorable to us. Accordingly, we may seek to settle some or all of our pending
      litigation described below. Settlement may include cross-licensing of the
      patents which are the subject of the litigation as well as our other
      intellectual property and may involve monetary payments to or from third
      parties.
Employees
      and Properties
We
      currently have six
employees
      and operate a 6,575 sq. ft. facility near Princeton, New Jersey, housing
      research laboratories, clinical manufacturing operations and administrative
      offices, under a lease agreement which expires in February 2007. In the opinion
      of management, the leased properties are adequately insured, are in good
      condition and suitable for the conduct of our business. We also collaborate
      with
      numerous institutions, universities and commercial entities who conduct research
      and testing of our products at their facilities.
L
egal
      Proceedings
Purolite
For
      a
      period of time beginning in December 1998, Purolite engaged in efforts to
      develop and optimize the manufacturing process needed to produce our polymer
      products on a commercial scale. However, the parties eventually decided not
      to
      proceed. In January, 2003, Purolite commenced an action against us in United
      States District Court for the Eastern District of Pennsylvania
asserting
      that our adsorbent technology was developed in part using Purolite's technology,
      that two of its employees should be included as co-inventors on some of our
      patents, and that Purolite was therefor a joint owner of the technology and
      had
      rights to the use of the technology. Purolite recently expanded its claims,
      alleging they are the sole owner of these patents, and that we misappropriated
      these patents from them. Purolite now seeks equitable relief declaring that
      it
      is the exclusive owner of our technology, as well as monetary
      damages.
We
      have
      filed a motion for summary judgment, which is pending before the Court, and
      have
      also engaged in efforts to settle the case.  In addition, the Court has
      ordered the matter to be mediated before a magistrate judge. Although there
      has
      been some progress in seeking a resolution of the litigation, to date no
      agreement has been reached, and there can be no assurance that the parties
      will
      be able to reach an accord. If the case is not settled, the Court will rule
      on
      our summary judgment motion.  If the motion is denied, we expect that the
      matter will go to trial within a few months following the Court's ruling on our
      summary judgment motion.
Former
      Employee
In
      May
      2006, a former employee of ours initiated a legal action against us in the
      United States District Court for the Southern District of New York, seeking
      damages in an amount exceeding $245,500. The employee alleges that we are
      required to pay or reimburse him for (as applicable) credit card charges to
      his
      account made by another former employee of ours and a related party. The matter
      is currently under review by our legal counsel.
22
Dow
      Chemical
Several
      years ago we engaged in discussions with the Dow Chemical Company, which had
      indicated a strong interest in being our polymer manufacturer. After a Dow
      representative on our Advisory Board resigned, Dow filed and received several
      patents naming our former Advisory Board member as an inventor. In management's
      view the Dow patents improperly incorporate our technology and should not have
      been granted to Dow. The existence of these Dow patents could result in a
      potential dispute with Dow in the future and additional expenses for us.
RISKS
      FACTORS
MedaSorb
      currently has no commercial operations and there can be no assurance that it
      will be successful in developing commercial operations
.
We
      are a
      development stage company and have been engaged primarily in research and
      development activities and have not generated any revenues to date. There can
      be
      no assurance that we will be able to successfully manage the transition to
      a
      commercial enterprise. Potential investors should be aware of the problems,
      delays, expenses and difficulties frequently encountered by an enterprise in
      the
      early stage of development, which include unanticipated problems relating to
      development of proposed products, testing, regulatory compliance, manufacturing,
      competition, marketing problems and additional costs and expenses that may
      exceed current estimates. Our proposed products will require significant
      additional research, development, testing and financing and we will need to
      overcome significant regulatory burdens prior to commercialization. There can
      be
      no assurance that after the expenditure of substantial funds and efforts, we
      will successfully develop and commercialize any products, generate any revenues
      or ever achieve and maintain a substantial level of sales of our products.
MedaSorb
      has a History of Losses and Expects to Incur Substantial Future Losses, and
      the
      Report of its
Auditor
      on its Consolidated Financial Statements Expresses Substantial Doubt About
      its
      Ability to Continue as a Going Concern
.
MedaSorb
      has experienced substantial operating losses since inception. As of March 31,
      2006, MedaSorb had an accumulated deficit of $59,994,884, which included losses
      from operations of $3,665,596 for the year ended December 31, 2005 and
      $1,015,377 for the three-month period ended March 31, 2006. Due to these losses,
MedaSorb's
      audited consolidated financial statements have been prepared assuming MedaSorb
      will continue as a going concern, and the auditors' report on those financial
      statements
express
      substantial doubt about its ability to continue as a going concern. MedaSorb's
      losses have resulted principally from costs incurred in the research and
      development of our polymer technology and general and administrative expenses.
      Because MedaSorb was a limited liability company until December 2005,
      substantially all of these losses were allocated to its members and will not
      be
      available for tax purposes to us in future periods. We intend to conduct
      significant additional research, development, and clinical testing activities
      which, together with expenses incurred for the establishment of manufacturing
      arrangements and a marketing and distribution presence and other general and
      administrative expenses, are expected to result in continuing operating losses
      for the foreseeable future. The amount of future losses and when, if ever,
      we
      will achieve profitability are uncertain. Our ability to achieve profitability
      will depend, among other things, on successfully completing the development
      of
      our technology and commercial products, obtaining the requisite regulatory
      approvals, establishing manufacturing and sales and marketing arrangements
      with
      third parties, and raising sufficient funds to finance our activities. No
      assurance can be given that our product development efforts will be successful,
      that required regulatory approvals will be obtained, that any of our products
      will be manufactured at a competitive cost and will be of acceptable quality,
      or
      that the we will be able to achieve profitability or that profitability, if
      achieved, can be sustained.
23
We
may have
      difficulty raising needed capital in the future because of our limited operating
      history and business risks associated with MedaSorb.
We
      generate no revenues from our proposed products or otherwise, and have expended
      and will continue to expend substantial funds in the research, development
      and
      clinical and pre-clinical testing of our polymer products. Following the merger,
      we completed a private placement of securities raising gross proceeds of $5.5
      million. We anticipate that the net proceeds of the private placement will
      fund
      our operations for the next 15 months, following which we will need additional
      financing. However, there can be no assurance that financing will be available
      on acceptable terms or at all. Our future capital requirements will depend
      upon
      many factors, including, but not limited to, continued progress in our research
      and development activities, costs and timing of conducting clinical trials
      and
      seeking regulatory approvals and patent prosecutions, competing technological
      and market developments, and our ability to establish collaborative
      relationships with third parties. If adequate funds are unavailable, we may
      have
      to delay, reduce the scope of or eliminate one or more of our research or
      development programs or product launches or marketing efforts or cease
      operations.
Our
        long-term capital requirements are expected to depend on many factors,
        including:
·
continued
                progress and cost of our research and development
                programs;
·
progress
                with pre-clinical studies and clinical
                trials;
·
the
                time and costs involved in obtaining regulatory
                clearance;
·
costs
                involved in preparing, filing, prosecuting, maintaining, defending
                and
                enforcing patent claims;
·
costs
                of developing sales, marketing and distribution
                channels;
·
market
                acceptance of our products; and
·
costs
                for training physicians and other health care
                personnel.
In
      addition, in the event that additional funds are obtained through arrangements
      with collaborative partners or other sources, we may have to relinquish economic
      and/or proprietary rights to some of our technologies or products under
      development that we would otherwise seek to develop or commercialize by ourself.
24
We
      depend upon key personnel who may terminate their employment with us at any
      time.
We
      currently have only six employees. Our success will depend to a significant
      degree upon the continued services of key management and advisors of MedaSorb,
      including Al Kraus, Dr. James Winchester, David Lamadrid and Vincent
      Capponi
.
      These
      individuals, other than Mr. Kraus, whose employment agreement terminates in
      July
      2008, do not have long-term employment agreements, and there can be no assurance
      that they will continue to provide services to us. In addition, our success
      will
      depend on our ability to attract and retain other highly skilled personnel.
      We
      may be unable to recruit such personnel on a timely basis, if at all. Management
      and other employees may voluntarily terminate their employment with us at any
      time. The loss of services of key personnel, or the inability to attract and
      retain additional qualified personnel, could result in delays in development
      or
      approval of our products, loss of sales and diversion of management
      resources.
Acceptance
      of MedaSorb's
medical
      devices in the marketplace is uncertain, and failure to achieve market
      acceptance will prevent or delay our ability to generate
      revenues.
Our
      future financial performance will depend, at least in part, upon the
      introduction and customer acceptance of our polymer products. Even if approved
      for marketing by the necessary regulatory authorities, our products may not
      achieve market acceptance. The degree of market acceptance will depend upon
      a
      number of factors, including:
·
the
                receipt of regulatory clearance of marketing claims for the uses
                that we
                are developing;
·
the
                receipt of regulatory clearance of marketing claims for the uses
                that we
                are developing;
·
the
                establishment and demonstration of the advantages, safety and efficacy
                of
                the our polymer technology;
·
pricing
                and reimbursement policies of government and third-party payers such
                as
                insurance companies, health maintenance organizations and other health
                plan administrators;
·
our
                ability to attract corporate partners, including medical device companies,
                to assist in commercializing our products;
                and
·
our
                ability to market our products.
Physicians,
      patients, payers or the medical community in general may be unwilling to accept,
      utilize or recommend any of our products. If we are unable to obtain regulatory
      approval or commercialize and market our products when planned, we may not
      achieve any market acceptance or generate revenue.
25
We
      face
      litigation from third parties which claim that our products infringe on their
      intellectual property rights,
or
      seek
      to challenge the validity of our patents.
Our
      future success is also dependent on the strength of our intellectual property,
      trade secrets and know-how, which have been developed from years of research
      and
      development. In addition to the "Purolite" litigation discussed below, we may be
      exposed to additional future litigation by third parties seeking to challenge
      the validity of our
rights
      based on claims that our technologies, products or activities infringe the
      intellectual property rights of others or are invalid, or that we have
      misappropriated the trade secrets of others.
Since
      our
      inception, we have sought to contract with large, established manufacturers
      to
      supply commercial quantities of our adsorbent polymers. As a result, we have
      disclosed, under confidentiality agreements, various aspects of our technology
      with potential manufacturers. We believe that these disclosures, while necessary
      for our business, have resulted in the attempt by potential suppliers to assert
      ownership claims to our technology in an attempt to gain an advantage in
      negotiating manufacturing rights.
We
      have
      previously engaged in discussions with the Brotech Corporation and its
      affiliate, Purolite International, Inc. (collectively "Purolite"), which had
      demonstrated a strong interest in being our polymer manufacturer. For a period
      of time beginning in December 1998, Purolite engaged in efforts to develop
      and
      optimize the manufacturing process needed to produce our polymer products on
      a
      commercial scale. However, the parties eventually decided not to proceed. In
      2003, Purolite filed a lawsuit against us asserting, among other things,
      co-ownership and co-inventorship of certain of our patents. Purolite recently
      expanded its claims alleging they are the sole owner of these patents, and
      that
      we misappropriated these patents from them. We believe these claims are without
      merit. In management's view, the suit was initiated to pressure us to reach an
      exclusive manufacturing agreement. Several negotiation efforts have been made
      to
      settle the case without success. The discovery phase has been completed and
      we
      have made an application to the court to dismiss the action, which is currently
      pending before the court. If our application is not granted, we expect that
      the
      matter will be tried in early 2006.
Several
      years ago we engaged in discussions with the Dow Chemical Company, which had
      indicated a strong interest in being our polymer manufacturer. After a Dow
      representative on our Advisory Board resigned, Dow filed and received several
      patents naming our former Advisory Board member as an inventor. In management's
      view the Dow patents improperly incorporate our technology and should not have
      been granted to Dow. The existence of these Dow patents could result in a
      potential dispute with Dow in the future and additional expenses for
      MedaSorb.
The
      failure to obtain government approvals, including required FDA approvals, for
      our polymer products, or to comply with ongoing governmental regulations could
      prevent, delay or limit introduction or sale of our products and result in
the
      failure to achieve revenues or maintain our
      operations.
The
      manufacturing and marketing of our products will be subject to extensive and
      rigorous government regulation in the United States, in various states and
      in
      foreign countries. In the United States and other countries, the process of
      obtaining and maintaining required regulatory approvals is lengthy, expensive,
      and uncertain. There can be no assurance that we will ever obtain the necessary
      approvals to sell our products. Even if we do ultimately receive FDA approval
      for any of our products, we will be subject to extensive ongoing regulation.
26
Our
      products will be subject to regulation as medical devices under the Federal
      Food, Drug, and Cosmetic Act. In the United States, the FDA enforces, where
      applicable, development, clinical testing, labeling, manufacturing,
      registration, notification, clearance or approval, marketing, distribution,
      record keeping, and reporting requirements for medical devices. Different
      regulatory requirements may apply to our products depending on how they are
      categorized by the FDA under these laws. Current FDA regulations classify our
      CytoSorb™ device (the first product we intend to seek FDA approval for) as a
      Class III device (CFR 876.5870—Sorbent Hemoperfusion System). We intend to
      submit a 510(k) pre-market notification to the FDA for approval to market this
      product. There can be no assurance, however, that the FDA will grant clearance
      to market CytoSorb™ in a timely manner, if at all, or that the FDA will not
      require the submission of additional clinical data or a pre-market approval
      application ("PMA"), which is a lengthier process. There can be no assurance
      that the clinical trials we conduct will demonstrate sufficient safety and
      efficacy to obtain the required regulatory approvals for marketing, or that
      we
      will be able to comply with any additional FDA, state or foreign regulatory
      requirements. In addition, there can be no assurance that government regulations
      applicable to our products or the interpretation of those regulations will
      not
      change. We also are and will be subject to other Federal, state, and local
      laws,
      regulations and recommendations relating to laboratory and manufacturing
      practices as well as Medicare, Medicaid and anti-kickback laws. Non-compliance
      with applicable requirements can result in civil penalties, the recall,
      injunction or seizure of products, an inability to import products into the
      United States, the refusal by the government to approve or clear product
      approval applications, the withdrawal of previously approved product
      applications and criminal prosecution. The extent of potentially adverse
      government regulation that might arise from future legislation or administrative
      action cannot be predicted.
Data
      obtained from clinical
and
      pre-clinical trials is susceptible to varying interpretations, which could
      delay, limit or prevent regulatory clearances.
There
      can
      be no assurance that we will successfully complete the clinical trials necessary
      to receive regulatory approvals. While tests conducted by us and others have
      produced results we believe to be
encouraging
      and indicative of the efficacy of our products and technology, data already
      obtained, or in the future obtained, from pre-clinical studies and clinical
      trials do not necessarily predict the results that will be obtained from later
      pre-clinical studies and clinical trials. Moreover, pre-clinical and clinical
      data is susceptible to varying interpretations, which could delay, limit or
      prevent regulatory approval. A number of companies in the medical device and
      pharmaceutical industries have suffered significant setbacks in advanced
      clinical trials, even after promising results in earlier trials. The failure
      to
      adequately demonstrate the safety and effectiveness of an intended product
      under
      development could delay or prevent regulatory clearance of the device, resulting
      in delays to commercialization, and could materially harm our business.
27
We
rely
      extensively on research and testing facilities at various universities and
      institutions, which could be adversely affect us should we lose access to those
      facilities.
Although
      we have our own research laboratories and clinical facilities, we collaborate
      with numerous institutions, universities and commercial entities to conduct
      research and testing of our products. We currently maintain a good working
      relationship with these parties. However, should the situation change, the
      cost
      and time to establish or locate alternative research and development could
      be
      substantial and delay gaining FDA approval and commercializing our
      products.
We
      are
and
      will
      be exposed to product liability risks, and clinical and preclinical liability
      risks, which could place a substantial financial burden upon us should we be
      sued.
Our
      business exposes us to potential product liability and other liability risks
      that are inherent in the testing, manufacturing and marketing of medical
      devices. We cannot be sure that claims will not be asserted against us. A
      successful liability claim or series of claims brought against us could have
      a
      material adverse effect on our business, financial condition and results of
      operations.
We
      do not
      currently have any product liability insurance or other liability insurance
      relating to clinical trials or any products. We cannot give assurances that
      we
      will be able to obtain or maintain adequate product liability insurance on
      acceptable terms, if at all, or that such insurance will provide adequate
      coverage against potential liabilities. Claims or losses in excess of any
      product liability insurance coverage that we may obtain could have a material
      adverse effect on our business, financial condition and results of
      operations.
Certain
      university and other relationships are important to
our
      business and may potentially result in conflicts of
      interests.
Dr.
      John
      Kellum and Dr. David
Powner,
      among others, are critical care advisors and consultants of ours and are
      associated with University of Pittsburgh Medical Center and University of Texas,
      respectively. Their association with these institutions may currently or in
      the
      future involve conflicting interests in the event they or these institutions
      enter into consulting or other arrangements with competitors of
      ours.
We
      have
limited
      manufacturing experience, and once our products are approved, we may not be
      able
      to manufacture sufficient quantities at an acceptable cost, or without
      shut-downs or delays.
We
      remain
      in the research and development and clinical and pre-clinical trial phase of
      product commercialization. Accordingly, once our products are approved for
      commercial sale, we will need to establish the capability to commercially
      manufacture our products in accordance with FDA and other regulatory
      requirements. We have limited experience in establishing, supervising and
      conducting commercial manufacturing. If we or the third-party manufacturers
      of
      our products fail to adequately establish, supervise and conduct all aspects
      of
      the manufacturing processes, we may not be able to commercialize our products.
28
Due
      to
our
      limited marketing, sales and distribution experience, we may be unsuccessful
      in
      our efforts to sell our products.
We
      expect
      to enter into agreements with third parties for the commercial manufacture
      and
      distribution of our products. There can be no assurance that parties we may
      engage to market and distribute our products will:
·
satisfy
                    their financial or contractual obligations to
                    us;
·
adequately
                    market our products; or
·
not
                  offer, design, manufacture or promote competing
                  products.
If
        for
        any reason any party engage is unable or chooses not to perform its obligations
        under our marketing and distribution agreement, we would experience delays
        in
        product sales and incur increased costs, which would harm our business and
        financial results.
If
      we are unable to convince physicians and other health care providers as to
      the
      benefits of our products, we may incur delays or additional expense in our
      attempt to establish market acceptance.
Broad
      use
      of our products may require physicians
and
      other
      health care providers to be informed about our products and their intended
      benefits. The time and cost of such an educational process may be substantial.
      Inability to successfully carry out this education process may adversely affect
      market acceptance of our products. We may be unable to educate physicians
      regarding our products in sufficient numbers or in a timely manner to achieve
      our marketing plans or to achieve product acceptance. Any delay in physician
      education may materially delay or reduce demand for our products. In addition,
      we may expend significant funds towards physician education before any
      acceptance or demand for our products is created, if at all.
The
      market for
our
      products is rapidly changing and competitive, and new devices and drugs which
      may be developed by others could impair our ability to maintain and grow our
      business and remain competitive.
The
      medical device and pharmaceutical industries are subject to rapid and
      substantial technological change. Developments by others may render our
      technologies and products noncompetitive or obsolete. We also may be unable
      to
      keep pace with technological developments and other market factors.
      Technological competition from medical device, pharmaceutical and biotechnology
      companies, universities, governmental entities and others diversifying into
      the
      field is intense and is expected to increase. Many of these entities have
      significantly greater research and development capabilities and budgets than
      we
      do, as well as substantially more marketing, manufacturing, financial and
      managerial resources. These entities represent significant competition for
      us.
29
If
      users
      of
our
      products are unable to obtain adequate reimbursement from third-party payers,
      or
      if new restrictive legislation is adopted, market acceptance of our products
      may
      be limited and we may not achieve anticipated revenues.
The
      continuing efforts of government and insurance companies, health maintenance
      organizations and other payers of healthcare costs to contain or reduce costs
      of
      health care may affect our future revenues and profitability, and the future
      revenues and profitability of our potential customers, suppliers and
      collaborative partners and the availability of capital. For example, in certain
      foreign markets, pricing or profitability of medical devices is subject to
      government control. In the United States, given recent federal and state
      government initiatives directed at lowering the total cost of health care,
      the
      U.S. Congress and state legislatures will likely continue to focus on health
      care reform, the cost of medical devices and on the reform of the Medicare
      and
      Medicaid systems. While we cannot predict whether any such legislative or
      regulatory proposals will be adopted, the announcement or adoption of these
      proposals could materially harm our business, financial condition and results
      of
      operations.
Our
      ability to commercialize our products will depend in part on the extent to
      which
      appropriate reimbursement levels for the cost of our products and related
      treatment are obtained by governmental authorities, private health insurers
      and
      other organizations, such as health maintenance organizations ("HMOs").
      Third-party payers are increasingly challenging the prices charged for medical
      care. Also, the trend toward managed health care in the United States and the
      concurrent growth of organizations such as HMOs, which could control or
      significantly influence the purchase of health care services and medical
      devices, as well as legislative proposals to reform health care or reduce
      government insurance programs, may all result in lower prices for our products.
      The cost containment measures that health care payers and providers are
      instituting and the effect of any health care reform could materially harm
      our
      ability to operate profitably.
Directors,
      executive officers and principal stockholders are expected to own a significant
      percentage of the shares of
Common
      Stock, which will limit your ability to influence corporate
      matters.
Our
      d
irectors,
      executive officers and principal stockholders together beneficially own
      approximately 75% of our outstanding shares of Common Stock. Accordingly, these
      stockholders could have a significant influence over the outcome of any
      corporate transaction or other matter submitted to stockholders for approval,
      including mergers, consolidations and the sale of all or substantially all
      of
      our assets and also could prevent or cause a change in control. The interests
      of
      these stockholders may differ from the interests of our other stockholders.
      Third parties may be discouraged from making a tender offer or bid to acquire
      us
      because of this concentration of ownership.
Our
      Series A Preferred Stock Provides for the Payment of Penalties;
      Dilution.
Immediately
      following the merger, we issued 5,250,000 shares of
Series
      A
      10% Cumulative Convertible Preferred Stock
with an
      aggregate stated value of $5,250,000, and we may issue additional shares of
      this
      series of preferred stock. The Certificate of Designation designating the Series
      A Preferred Stock provides that upon the following events, among others, the
      dividend rate with respect to the Series A Preferred Stock increases to 20%
      per
      annum, which dividends would then be required to be paid in cash:
30
·
the
                occurrence of "Non-Registration Events" including, the failure to cause a
                registration statement registering the shares of Common Stock underlying
                the Series A Preferred Stock and Warrants issued in connection therewith
                to be effective within 240 days following the closing of the private
                placement;
·
an
                uncured breach by us of any material covenant, term or condition
                in the
                Certificate of Designation or any of the related transaction documents;
                and
·
any
                money judgment or similar final process being filed against us for
                more
                than $100,000.
The
      registration rights provided for in the subscription agreement we entered into
      with the purchasers in this offering:
·
require
                that we file a registration statement with the SEC on or before 120
                days
                from the closing to register the shares of Common Stock issuable
                upon
                conversion of the Series A Preferred Stock and exercise of the Warrants,
                and cause such registration statement to be effective within 240
                days
                following the closing; and
·
entitles
                each of these investors to liquidated damages in an amount equal
                to two
                percent (2%) of the purchase price of the Series A Preferred Stock
                if we
                fail to timely file that registration statement with, or have it
                declared
                effective by, the SEC.
The
      Certificate of Designation, Subscription Agreement and related transaction
      documents also provide for various penalties and fees for breaches or failures
      to comply with provisions of those documents, such as the timely payment of
      dividends, delivery of stock certificates, and obtaining and maintaining an
      effective registration statement with respect to the shares of Common Stock
      underlying the Series A Preferred Stock and Warrants sold in the
      offering.
In
      addition, b
oth
      the
      conversion price of the Series A Preferred Stock and the exercise price of
      the
      Warrants are subject to "full-ratchet" anti-dilution provisions, so that upon
      future issuances of our Common Stock or equivalents thereof, subject to
      specified customary exceptions, at a price below the conversion price of the
      Series A Preferred Stock and/or exercise price of the Warrants, such conversion
      price and/or exercise price will be reduced to such lower price, further
      diluting holders of our Common Stock.
31
There
      is no public market for our Common Stock.
Although
      our shares of Common Stock are eligible for quotation on the OTC Bulletin Board
      under the symbol "GDRE," there is currently no public market for the Common
      Stock and there can be no expectation or assurance that a trading market will
      develop or, if a market develops, that it will be active or sustained.
Future
      Sales of Common Stock Could Result in a Decline in Market
      Price.
Following
      the completion of the merger, the holders
3,750,000
      shares of Common Stock are able to sell such shares without registering them
      under the Securities Act. In addition, we are required to file a registration
      statement under the Securities Act covering the resale of the shares of Common
      Stock underlying the Series A Preferred Stock and Warrants sold in the offering,
      as well as the shares of Common Stock underlying the warrants we issued to
      Margie Chassman in
consideration
      of her pledge of securities to investors in the offering as described
      above
.
      Sales
      of a significant number of shares of Common Stock in the public market could
      result in a decline in the market price of our Common Stock (to the extent
      a
      market develops for our Common Stock).
Penny
      Stock Regulations May Affect Your Ability To Sell Our Common
      Stock.
To
      the
      extent our Common Stock trades at a price below $5.00 per share, our Common
      Stock will be subject to Rule 15g-9 under the Exchange Act, which imposes
      additional sales practice requirements on broker dealers which sell these
      securities to persons other than established customers and accredited investors.
      Under these rules, broker-dealers who recommend penny stocks to persons other
      than established customers and "accredited investors" must make a special
      written suitability determination for the purchaser and receive the purchaser's
      written agreement to a transaction prior to sale. Unless an exception is
      available, the regulations require the delivery, prior to any transaction
      involving a penny stock, of a disclosure schedule explaining the penny stock
      market and the associated risks. The additional burdens imposed upon
      broker-dealers by these requirements could discourage broker-dealers from
      effecting transactions in our Common Stock and may make it more difficult for
      holders of our Common Stock to sell shares to third parties or to otherwise
      dispose of them.
Our
      Charter Documents and Nevada Law May Inhibit A Takeover That Stockholders May
      Consider Favorable.
Provisions
      in our articles of incorporation and bylaws, and Nevada law, could delay or
      prevent a change of control or change in management that would provide
      stockholders with a premium to the market price of their Common Stock. The
      authorization of undesignated preferred stock, for example, gives our board
      the
      ability to issue preferred stock with voting or other rights or preferences
      that
      could impede the success of any attempt to effect a change in control of us,
      or
      otherwise adversely affect holders of Common Stock in relation to holders of
      preferred stock.
32
Once
      our Common Stock begins to trade, it may experienced price
      fluctuations.
A
      decrease in the market price of our Common Stock could result in substantial
      losses for investors. The market price of our Common Stock may be significantly
      affected by, among other things, one or more of the following
      factors:
·
nnouncements
                or press releases relating to the medical device industry or to our
                own
                business or prospects;
·
regulatory,
                legislative, or other developments affecting us or the medical device
                industry generally;
·
the
                dilutive effect of conversion of our Series A Preferred Stock and
                exercise
                of our warrants, or the issuance by us of additional shares of Common
                Stock or convertible securities, at below current market prices;
                and
·
general
                market conditions.
Compliance
      with changing corporate governance and public disclosure regulations may result
      in additional expense.
Keeping
      abreast of, and in compliance with, changing laws, regulations and standards
      relating to corporate governance and public disclosure, including the
      Sarbanes-Oxley Act of 2002, new SEC regulations will require an increased amount
      of management attention and external resources. In addition, prior to the
      merger, our current management team was not subject to these laws and
      regulations, as MedaSorb was a private corporation. We intend to continue to
      invest all reasonably necessary resources to comply with evolving standards,
      which may result in increased general and administrative expense and a diversion
      of management time and attention from revenue-generating activities to
      compliance activities
.
PLAN
      OF OPERATIONS
We
      are a
      development stage company and expect to remain so for at least the next twelve
      months. We have not generated revenues to date and do not expect to do so until
      we commercialize and receive the necessary approvals to sell our proposed
      products. As discussed above, we are preparing to commercialize a blood
      purification technology that efficiently removes toxic compounds from
      circulating blood using our proprietary polymer-based adsorbent technology.
      We
      believe that our technology will support novel therapeutic approaches to
      critical health conditions, including sepsis, organ transplant, and
      post-operative complications of cardiopulmonary bypass surgery.
33
Our
      near
      term goal is focused on conducting clinical trials of our CytoSorb™ product in
      the treatment of sepsis. Over the next twelve months, provided that we have
      sufficient funds for our operations, we expect to design and conduct a pilot
      study of the use of our product on at least 10 sepsis patients. We believe
      that
      submission of data from this pilot study to the FDA will allow us to then
      conduct the pivotal study required for FDA approval of our CytoSorb™ product for
      sepsis treatment.
Our
      research and development costs for the years ended December 31, 2004 and 2005,
      were approximately $2,367,407 and $1,526,743, respectively. MedaSorb has
      experienced substantial operating losses since inception. As of March 31, 2006,
      MedaSorb had an accumulated deficit of $59,994,884, which included losses from
      operations of $3,665,596 for the year ended December 31, 2005 and $1,015,377
      for
      the three-month period ended March 31, 2006. These losses have resulted
      principally from costs incurred in the research and development of our polymer
      technology, and general and administrative expenses, which together were
      approximately $2,162,703 and $426,756 respectively, for the year ended December
      31, 2005 and the three months ended March 31, 2006.
Liquidity
      and Capital Resources
Since
      its
      inception, the operations of MedaSorb have been financed through the private
      placement of its debt and equity securities. At December 31, 2005, MedaSorb
      had
      cash of approximately $707,000, an amount sufficient to fund its operations
      for
      approximately four months. Due to its losses and available cash at that time,
MedaSorb's
      audited consolidated financial statements for its year ended December 31, 2005
      have been prepared assuming MedaSorb will continue as a going concern, and
      the
      auditors' report on those financial statements
expresses
      substantial doubt about
MedaSorb's
ability
      to continue as a going concern.
Immediately
      following the closing of the merger, we closed an offering of our securities
      that resulted in net proceeds to us of approximately $4.5 million, which are
      expected to be sufficient to fund our operations for the next 15 months,
      following which we will be required to raise additional capital. There can
      be no
      assurance that we will be successful in our capital raising efforts.
In
October
      2005, MedaSorb entered into an Investment Agreement with Margie Chassman
      pursuant to which she advanced $1,000,000 to MedaSorb to provide it with
      operating capital. The advance bears interest at the rate of 6% per annum,
      and
      at Ms. Chassman's option, will be repaid in cash or converted into securities in
      our next offering of securities no later than December 31, 2006. The advance
      is
      subject to earlier repayment in the event we complete an offering of our
      securities that generates gross proceeds of $5.5 million or more (including
      the
      offering we completed following the merger, but excluding proceeds received
      from
      certain existing stockholders of ours), in the amount that those proceeds exceed
      $5.5 million; provided, however, that in the event that less than $6.5 million
      of gross proceeds are raised in such an offering within 120 days from the date
      subscription materials are first circulated to potential investors, the balance
      of the advance from Ms. Chassman then outstanding will, at our option, be
      converted into the securities sold in that offering.
34
In
      connection with the closing of the private placement, we agreed to make a
      short-term advance to Ms. Chassman in the amount of $500,000 bearing interest
      at
      the rate of 6% per annum, the repayment of which may be offset against amounts
      owed by us to Ms. Chassman under the $1,000,000 advance previously made by
      her
      to MedaSorb. The short-term advance will be secured by a pledge of
      publicly-traded securities with a market value equal to $500,000.
SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
      following table sets forth information known to
us
      with
      respect to the beneficial ownership of Common Stock held of record as of June
      30, 2006, by (1) all persons who are owners of 5% or more of our Common Stock,
      (2) each of our named executive officers (see "Summary Compensation Table"), (3)
      each director, and (4) all of our executive officers and directors as a
      group
.
Each
      of
      the stockholders can be reached at our principal executive offices located
      at 7
      Deer Park Drive, Suite K, Monmouth Junction, New Jersey 08852.
SHARES
                BENEFICIALLY OWNED
1
Number
Percent
                (%)
Beneficial
                Owners of more than 5% of
Common
                Stock (other than directors and executive officers)
Margie
                Chassman
(2)
7,995,000
33.1%
Guillermina
                Montiel
(3)
5,052,456
20.3%
Margery
              Germain
(4)
2,000,000
8.3%
Robert
                Shipley
(5)
1,248,372
5.0%
Directors
                and Executive Officers
Al
                Kraus
1,393,631
5.6%
David
                Lamadrid
501,704
2.0%
Vince
                Capponi
418,086
1.7%
Joseph
                Rubin
(6)
127,207
*
James
                Winchester
52,519
*
Kurt
                Katz
(7)
54,077
*
All
                directors and executive officers as a group (
six
                persons)
(8)
2,547,224
10.2%
*
Less
                  than 1%.
1
Gives
                    effect to the shares of Common Stock issuable upon the exercise
                    of all
                    options exercisable within 60 days of June 30, 2006 and other
                    rights
                    beneficially owned by the indicated stockholders on that date.
                    Beneficial
                    ownership is determined in accordance with the rules of the Securities
                    and
                    Exchange Commission and includes voting and investment power
                    with respect
                    to shares. Unless otherwise indicated, the persons named in the
                    table have
                    sole voting and sole investment control with respect to all shares
                    beneficially owned. Percentage ownership is calculated based
                    on 24,090,929
                    shares of the Common Stock outstanding as of June 30, 2006
                    immediately following the closing of the reverse merger.
35
2
Margie
                Chassman is married to David Blech. Mr. Blech disclaims beneficial
                ownership of these shares. Since 1980 Mr. Blech has been a founder
                of
                companies and venture capital investor in the biotechnology sector.
                His
                initial venture investment, Genetic Systems Corporation, which he
                helped
                found and served as treasurer and a member of the board of directors,
                was
                sold to Bristol Myers in 1986 for $294 million of Bristol Myers stock.
                Other companies he helped found include DNA Plant Technology, Celgene
                Corporation, Neurogen Corporation, Icos Corporation, Incyte
                Pharmaceuticals, Alexion Pharmaceuticals and Neurocrine Biosciences.
                He
                was also instrumental in the turnaround of Liposome Technology, Inc.
                and
                Biotech General Corporation. In 1990 Mr. Blech founded D. Blech &
                Company, which, until it ceased doing business in September 1994,
                was a
                registered broker-dealer involved in underwriting biotechnology issues.
                In
                May 1998, David Blech pled guilty to two counts of criminal securities
                fraud, and, in September 1999, he was sentenced by the U.S. District
                Court
                for the Southern District of New York to five years' probation, which was
                completed in September 2004. Mr. Blech also settled administrative
                charges
                by the Commission in December 2000 arising out of the collapse in
                1994 of
                D. Blech & Co., of which Mr. Blech was President and sole stockholder.
                The settlement prohibits Mr. Blech from engaging in future violations
                of
                the federal securities laws and from association with any broker-dealer.
                In addition, the District Business Conduct Committee for District
                No.10 of
                NASD Regulation, Inc. reached a decision, dated December 3, 1996,
                in a
                matter styled District Business Conduct Committee for District No.
                10 v.
                David Blech, regarding the alleged failure of Mr. Blech to respond
                to
                requests by the staff of the National Association of Securities Dealers,
                Inc. ("NASD") for documents and information in connection with seven
                customer complaints against various registered representatives of
                D. Blech
                & Co. The decision found that Mr. Blech failed to respond to such
                requests in violation of NASD rules and that Mr. Blech should, therefore,
                be censured, fined $20,000 and barred from associating with any member
                firm in any capacity. Furthermore, Mr. Blech was discharged in bankruptcy
                in the United States Bankruptcy Court for the Southern District of
                New
                York in March 2000.
3
Includes
                58,472 shares issuable upon exercise of stock options.
4
Includes
              1,700,000 shares of Common Stock held directly by Ms. Germain and 300,000
              shares of Common Stock held by her minor children.
5
Includes
                621,727 shares issuable upon exercise of stock options and
                warrants.
6
Includes
                58,598 shares issuable upon exercise of stock options and
                warrants.
7
Includes
                51,817 shares issuable upon exercise of stock options.
8
Includes
                110,415 shares issuable upon exercise of stock options and
                warrants.
DIRECTORS
      AND EXECUTIVE OFFICERS
The
      following table sets forth the names of our directors and executive officers,
      their ages and the positions they hold. Each such person became an officer
      and/or director of the Registrant immediately after the closing of the merger
      and held the same positions set forth below with MedaSorb prior to the merger.
36
Name
Age
Position
Al
                Kraus
61
President
                and Chief Executive Officer, Director
James
                Winchester, MD
62
Chief
                Medical Officer
Vincent
                Capponi
48
Chief
                Operating Officer
David
                Lamadrid
35
Chief
                Financial Officer
Joseph
                Rubin, Esq.
67
Director
Kurt
                Katz
73
Director
Al
      Kraus.
Mr.
      Kraus
      has more than twenty-five years' experience managing companies in the dialysis,
      medical device products, personal computer and custom software industries.
      He
      was the President and Chief Executive Officer of MedaSorb since 2003. Prior
      to
      joining us, from 2001 to 2003, Mr. Kraus was President and CEO of NovoVascular
      Inc., an early stage company developing coated stent technology. From 1996
      to
      1998, Mr. Kraus was President and CEO of Althin Healthcare and from 1998 to
      2000, of Althin Medical Inc., a manufacturer of products for the treatment
      of
      end stage renal disease. While CEO of Althin, he provided strategic direction
      and management for operations throughout the Americas. From 1979 to 1985, Mr.
      Kraus was U.S. Subsidiary Manager and Chief Operating Officer of Gambro Inc.,
      a
      leading medical technology and healthcare company.
Mr.
      Kraus
      was the Chief Operating Officer of Gambro when it went public in the United
      States in an offering led by Morgan Stanley.
James
      Winchester, M.D.
Prior to
      joining MedaSorb in 2000, Dr. Winchester was Professor of Medicine and Director
      of Dialysis Programs at Georgetown University School of Medicine for more than
      25 years. Dr. Winchester is also the Chief of the Nephrology Division at Beth
      Israel Medical Center, a position he has held since July 2004. He has published
      more than 200 articles in scientific and medical journals, and has co-authored
      eight books in the fields of renal replacement therapy and clinical poisoning
      management. Dr. Winchester is editor-in chief of
Replacement
      of Renal Function
,
      the
      most widely used textbook for nephrology fellows. Dr. Winchester has published
      more articles on hemoperfusion than any other nephrologist in the world. He
      is
      widely recognized as one of the world's leading experts in hemoperfusion and
      toxicology, and is a former member of the Scientific Advisory Board for Total
      Renal Care (Davita). Dr. Winchester received his medical degree from the
      University of Glasgow and is a Fellow of the Royal College of Physicians and
      Surgeons of Glasgow
,
      and a
      Fellow of the American College of Physicians.
Vincent
      Capponi
.
      Mr.
      Capponi joined MedaSorb as Vice President of Operations in 2002 and became
      its
      Chief Operating Officer in July 2005. He has more than 20 years of management
      experience in medical device, pharmaceutical and imaging equipment at companies
      including Upjohn, Sims Deltec and Sabratek. Prior to joining MedaSorb in 2002,
      Mr. Capponi held several senior management positions at Sabratek and its
      diagnostics division GDS. Mr. Capponi was interim president of GDS diagnostics
      in 2001. From 1998 to 2000 Mr. Capponi was Senior Vice President and Chief
      Operating Officer for Sabratek and Vice President Operations from 1996 to 1998.
      He received his MS in Chemistry and his BS in Chemistry and Microbiology from
      Bowling Green State University.
37
David
      Lamadrid
.
Mr.
      Lamadrid, has been with MedaSorb since 2000.
He
      has
      over 13 years of business experience in finance and operations. Prior to joining
MedaSorb
in
      2000,
      Mr. Lamadrid was a financial analyst at Chase Manhattan Bank working in the
      Middle Market Banking Group. Mr. Lamadrid received his MBA from New York
      University, a BS in Finance from St. John's University, and an AAS in Accounting
      from S.U.N.Y. Rockland.
Joseph
      Rubin, Esq.
Mr.
      Rubin
      became a director of MedaSorb in 1997. Mr. Rubin is a founder and Senior Partner
      of Rubin, Bailin, and Ortoli, LLP an international and domestic corporate and
      commercial law firm in New York City, where he has practiced law since January
      2000. Mr. Rubin also teaches at the Columbia University School of International
      and Public Affairs, where he is also Executive Director of the International
      Technical Assistance Program for Public Affairs (ITAP). Mr. Rubin was Adjunct
      Professor at the Columbia University Graduate School of Business from 1973
      to
      1994, and taught at Columbia Law School in 1996. Mr. Rubin received his law
      degree from Harvard Law School, and his B.A., MIA, and M.Phil degrees in
      political science and international relations from Columbia
      University.
Kurt
      Katz, M.Ch.E.
Mr.
      Katz
      became a director of MedaSorb in 1997. Since retiring from Peabody International
      Corporation in 1986, Mr. Katz has pursued various business interests. He is
      currently the Chairman of Polymeric Resources Corporation, a polymer company
      engaged in the manufacture of nylon and compounding. Mr. Katz served as
      President and Chief Operating Officer of Peabody, which specializes in energy
      and environmental products. Mr. Katz served as Executive Vice President and
      Chief Operating Officer of Peabody from 1981 to 1983, and was a Director from
      1977 to 1985. Prior to joining Peabody in 1973, Mr. Katz held a variety of
      management positions with Westinghouse Electric Corporation, where he served
      for
      18 years and was directly involved in the launching of new products, divisions
      and subsidiaries.
.
Mr.
      Katz
      has a B.S. and M.S. in chemical engineering, and an MBA.
Audit
      Committee Financial Expert
The
      Board
      of Directors does not have an Audit Committee, and therefor does not have an
      "audit committee financial expert," as such term is defined in Item 401(e) of
      Regulation S-B.
38
Executive
      Compensation
The
      following table sets forth for the periods indicated the compensation MedaSorb
      paid Al Kraus, our Chief Executive Officer, and each of our other most highly
      compensated executive officers during the years ended December 31, 2005, 2004
      and 2003.
Summary
      Compensation Table
Annual
                Compensation
Long-Term
                Compensation
Name
                and Principal Positions
Year
Salary
                ($)
Bonus
($)
Stock
                Awards*
Securities
                Underlying Options
Al
                Kraus
Chief
                Executive Officer
200
5
2004
2003
173,899
152,301
73,710
150
1,090,680
164,665
138,286
__
__
__
Vincent
                Capponi,
Chief
                Operating Officer
200
5
2004
2003
152,504
133,987
195,501
150
374,383
15,070
7,535
__
__
__
David
                Lamadrid,
Chief
                Financial Officer
200
5
2004
2003
119,257
100,203
115,742
150
450,155
22,605
15,070
__
__
__
Dr.
                James Winchester
Chief
                Medical Officer
200
5
2004
2003
116,541
143,319
233,422
150
__
16,954
7,535
__
__
__
*
      These
      officers were originally issued "Management Units" of MedaSorb Technologies,
      LLC, a limited liability company. The Management Units were ultimately converted
      into the number of shares of our Common Stock indicated in the table above
      following MedaSorb's conversion to a corporation and reverse merger with
      Registrant.
O
ption
      Grants in Last Fiscal Year
No
      options were granted to any of the individuals named in the Summary Compensation
      Table during 2005.
Aggregated
      Option Exercises in Fiscal 2005 and FY-End Option Values
None
      of
      the individuals named in the Summary Compensation Table held any options to
      purchase our Common Stock or the common stock of MedaSorb as of December 31,
      2005.
39
Director
      Compensation
Our
      directors do not receive any cash compensation for their service on the Board
      of
      Directors, but from time to time are granted options for their services. In
      January 2006, each of our non-employee
directors
      was granted an option to purchase 10,000 shares of MedaSorb common stock at
      an
      exercise price of $1.25, and in June 2006, our non-employee
directors
      were granted options to purchase an aggregate of 62,536 shares of MedaSorb
      common stock at an exercise price of $1.25. These options became options to
      purchase the same number of shares of our Common Stock at the same exercise
      price following the merger. Our directors are reimbursed for actual
      out-of-pocket expenses incurred by them in connection with their attendance
      at
      meetings of the Board of Directors.
Employment
      Agreements
Agreement
      with Chief Executive Officer
MedaSorb
      entered into an Employment Agreement, dated as of July 18, 2003, with Al Kraus,
      our Chief Executive Officer. The Employment Agreement provides for an initial
      five-year term of employment as our Chief Executive Officer. Under the terms
      of
      the Employment Agreement, Mr. Kraus receives an annual base salary of $200,000.
      Under the Employment Agreement, Mr. Kraus was also granted an option to purchase
      5% of the outstanding equity interests of MedaSorb (
which
      was
      then a limited liability company) on a fully-diluted basis, and will be issued
      additional options so that Mr. Kraus continues to hold options to purchase
      5% of
      our outstanding equity on a fully diluted basis until such time as an aggregate
      of $20 million of financing has been received by MedaSorb (including Registrant)
      following the commencement of his employment. In 2005, MedaSorb's board approved
      the issuance to Mr. Kraus of "Management Units" of the limited liability company
      in lieu of the options he was then entitled to under the Employment Agreement.
      As a result of the conversion of MedaSorb to a corporation and the merger,
      the
      Management Units issued under the Employment Agreement were exchanged for
      1,393,631 shares of Common Stock. Mr. Kraus will continue to be issued options
      to purchase Common Stock pursuant to his Employment Agreement so that the
      combined total of his common stock and common stock issuable upon exercise
      of
      his options equals 5% of the Company's outstanding common stock on a fully
      diluted basis, until such time as an aggregate of $20 million of financing
      has
      been received by us following the commencement of his employment.
In
      the
      event that Mr. Kraus's employment is terminated as a result of his death, his
      heirs will be entitled to 120-days of salary. In the event Mr. Kraus is
      terminated for "justifiable cause" we will pay him his accrued and unpaid base
      salary through the date of termination. If Mr. Kraus's employment is terminated
      without cause or in the event of a Change of Control, he will be entitled to
      one-year's base salary payable monthly over a period of one year.
40
Mr.
      Kraus
      is prohibited under the Employment Agreement from disclosing any of our
      confidential information (as defined in the agreement) during the term of his
      employment and any time thereafter and, following the termination of the
      agreement with us, from competing with us and directly or indirectly soliciting
      any of our customers or suppliers for a period of one year, and from soliciting
      our employees for a period of three years.
Agreement
      with Chief Operating Officer
MedaSorb
      entered into an Employment Agreement, dated as of July 1, 2005, with Vincent
      Capponi, our Chief Operating Officer. The Employment Agreement provides for
      an
      initial term of one-year, with automatic annual renewal unless either party
      provides notice to the other within 120 days prior to the end of the year of
      its
      intention not to renew. Under the terms of the Employment Agreement, Mr. Capponi
      receives an annual base salary of $181,886. Under the Employment Agreement,
      Mr.
      Capponi was also granted Management Units equal to 1.5% of the outstanding
      equity interests of MedaSorb (which was then a limited liability company) on
      a
      fully-diluted basis, and was entitled to receive additional Management Units
      so
      that Mr. Capponi continued to hold Management Units equal to 1.5% of the
      outstanding equity of MedaSorb on a fully diluted basis until December 31,
      2005.
      As a result of the conversion of MedaSorb to a corporation and the merger,
      these
      Management Units were exchanged for 418,086 shares of our Common
      Stock
In
      the
      event that Mr. Capponi's employment is terminated as a result of his death, his
      heirs will be entitled to 120-days of salary. In the event Mr. Capponi is
      terminated for "justifiable cause" we will pay him his accrued and unpaid base
      salary through the date of termination. If Mr. Capponi's employment is
      terminated without cause or in the event of Change of Control, he will be
      entitled to one-year's base salary payable monthly for a period of one year.
Mr.
      Capponi is prohibited under the Employment Agreement from disclosing any of
      our
      confidential information (as defined in the agreement) during the term of his
      employment and any time thereafter, and following the termination of the
      agreement with us, from competing with us and directly or indirectly soliciting
      any of our customers or suppliers for a period of one year, and from soliciting
      our employees for a period of three years.
Agreement
      with Chief Financial Officer
MedaSorb
      entered into an Employment Agreement, dated as of July 1, 2005, with David
      Lamadrid, our Chief Financial Officer. The Employment Agreement provides for
      an
      initial term of one-year, with automatic annual renewal unless either party
      provides notice to the other within 120 days prior to the end of the year of
      its
      intention not to renew. Under the terms of the Employment Agreement, Mr.
      Lamadrid receives an annual base salary of $135,629. Under the Employment
      Agreement, Mr. Lamadrid was also granted Management Units equal to 1.8% of
      the
      outstanding equity interests of MedaSorb (which was then a limited liability
      company) on a fully-diluted basis, and was entitled to receive additional
      Management Units so that Mr. Lamadrid continued to hold Management Units equal
      to 1.8% of the outstanding equity of MedaSorb on a fully diluted basis until
      December 31, 2005. As a result of the conversion of MedaSorb to a corporation
      and the merger, these Management Units were exchanged for 501,704 shares of
      our
      Common Stock.
41
In
      the
      event that Mr. Lamadrid's employment is terminated as a result of his death, his
      heirs will be entitled to 120-days of salary. In the event Mr. Lamadrid is
      terminated for "justifiable cause" we will pay him his accrued and unpaid base
      salary through the date of termination. If Mr. Lamadrid's employment is
      terminated without cause or in the event of Change of Control, he will be
      entitled to one-year's base salary payable monthly for a period of one year.
Mr.
      Lamadrid is prohibited under the Employment Agreement from disclosing any of
      our
      confidential information (as defined in the agreement) during the term of his
      employment and any time thereafter, and following the termination of the
      agreement with us, from competing with us and directly or indirectly soliciting
      any of our customers or suppliers for a period of one year, and from soliciting
      our employees for a period of three years.
Agreement
      with Chief Medical Officer
MedaSorb
      entered into an Employment Agreement, dated as of July 1, 2004, with Dr. James
      Winchester, our Chief Medical Officer. The Employment Agreement provides for
      an
      initial term of one-year, with automatic annual renewal unless either party
      provides notice to the other within 90 days prior to the end of the year of
      its
      intention not to renew. Under the terms of the Employment Agreement, Dr.
      Winchester receives an annual base salary of $120,000.
Dr.
      Winchester is prohibited under his Employment Agreement from disclosing any
      of
      our confidential information (as defined in the agreement) during the term
      of
      his employment and any time thereafter, and following the termination of this
      agreement with us, from competing with us and directly or indirectly soliciting
      any of our customers, suppliers or employees for a period of one year.
During
      the period of March 2004 to February 2005, Al Kraus, Vincent Capponi, David
      Lamadrid and Dr. James Winchester agreed to forego salary in the amounts of
      $66,667, $60,000, $45,000, and $32,772 respectively. These amounts will be
      paid
      to these individuals at such time as we generate gross proceeds from the sale
      of
      our securities of $5,000,000, including sales we effected upon completion of
      the
      merger.
CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS
In
October
      2005, MedaSorb entered into an Investment Agreement with Margie Chassman
      pursuant to which she advanced $1,000,000 to MedaSorb to provide it with
      operating capital. The advance bears interest at the rate of 6% per annum,
      and
      at Ms. Chassman's option, will be repaid in cash or converted into securities in
      our next offering of securities no later than December 31, 2006. The advance
      is
      subject to earlier repayment in the event we complete an offering of our
      securities that generates gross proceeds of $5.5 million or more (including
      the
      offering we completed following the merger, but excluding proceeds received
      from
      certain existing stockholders of ours), in the amount that those proceeds exceed
      $5.5 million; provided, however, that in the event that less than $6.5 million
      of gross proceeds are raised in such an offering within 120 days from the date
      subscription materials are first circulated to potential investors, the balance
      of the advance from Ms. Chassman then outstanding will, at our option, be
      converted into the securities sold in that offering.
42
In
      consideration for funding the $1 million advance, Ms. Chassman and her designees
      were
issued
      an
      aggregate of 10 million shares of Common Stock. These shares of Common Stock
      are
      subject to a 12-month lock-up agreement and a voting agreement entitling
      MedaSorb to voting rights with respect to such shares until the earlier to
      occur
      of a transfer of those shares to an unrelated third party or the expiration
      of
      two years.
In
      connection with the closing of the private placement, we agreed to make a
      short-term advance to Ms. Chassman in the amount of $500,000 bearing interest
      at
      the rate of 6% per annum, the repayment of which may be offset against amounts
      owed by us to Ms. Chassman under the $1,000,000 advance previously made by
      her
      to MedaSorb. The short-term advance will be secured by a pledge of
      publicly-traded securities with a market value equal to $500,000.
In
      connection with the sale of the Series A Preferred Stock and Warrants to the
      investors, Margie Chassman agreed to pledge certain securities held by her
      to
      the investors, which such investors may sell to ensure they do not suffer a
      loss
      on their investment in the first year following the date of their investment.
      In
      consideration of her pledge to these investors, we agreed to pay Ms. Chassman
      (i) $525,000 in cash, and (ii) five-year warrants to purchase 10% of the shares
      of Series A Preferred Stock and 10% of the Warrants sold to these investors
      for
      an exercise price equal to the price paid by the investors in the private
      placement.
In
      August
      2003, in order to induce Guillermina Vega Montiel, a principal stockholder
      of
      ours, to make an additional investment in MedaSorb, we granted Ms. Montiel
      a
      perpetual royalty equal to three percent of all gross revenues received by
      us
      from sales of CytoSorb
TM
in
      the
      applications of sepsis, cardiopulmonary bypass surgery, organ donor,
      chemotherapy and inflammation control application.
Joseph
      Rubin
is a
      director of ours and performs legal services from time to time. At December
      31,
      2005, we owed Mr. Rubin's firm approximately $173,000 in respect of legal
      services provided by his firm to MedaSorb
DESCRIPTION
      OF SECURITIES
Our
      total
      authorized capital stock consists of 100,000,000 shares of Common Stock, par
      value $.001 per share and 100,000,000 shares of preferred stock, par value
      $.001
      per share. After the closing of the reverse merger and the closing of the
      private placement completed on the same date, 24,090,929 shares of Common Stock
      were issued and outstanding, and 8,000,000 shares of preferred stock had been
      designated as
Series
      A
      10% Cumulative Convertible Preferred Stock
,
      of
      which 5,250,000 shares were issued and outstanding.
43
The
      following description of our capital stock does not purport to be complete
      and
      is subject to and qualified by our Articles of Incorporation and By-laws, and
      by
      the provisions of applicable Nevada law.
Common
      Stock
Holders
      of our Common Stock are entitled to receive dividends out of assets legally
      available therefore at such times and in such amounts as the Board of Directors
      from time to time may determine. Holders of our Common Stock are entitled to
      one
      vote for each share held on all matters submitted to a vote of the stockholders.
      Cumulative voting with respect to the election of directors is not permitted
      by
      our Articles of Incorporation. Our Common Stock is not entitled to preemptive
      rights and is not subject to conversion or redemption. Upon our liquidation,
      dissolution or winding-up, the assets legally available for distribution to
      stockholders are distributable ratably among the holders of the Common Stock
      after payment of liquidation preferences, if any, on any outstanding stock
      having prior rights on such distributions and payment of other claims of
      creditors.
Preferred
      Stock
Our
      Articles of Incorporation authorizes the issuance of shares of preferred stock
      in one or more series. Our Board of Directors has the authority, without any
      vote or action by the stockholders, to create one or more series of preferred
      stock up to the limit of our authorized but unissued shares of preferred stock
      and to fix the number of shares constituting such series and the designation
      of
      such series, the voting powers (if any) of the shares of such series and the
      relative participating, option or other special rights (if any), and any
      qualifications, preferences, limitations or restrictions pertaining to such
      series which may be fixed by the Board of Directors pursuant to a resolution
      or
      resolutions providing for the issuance of such series adopted by the Board
      of
      Directors.
The
      provisions of a particular series of authorized preferred stock, as designated
      by the Board of Directors, may include restrictions on the payment of dividends
      on Common Stock. Such provisions may also include restrictions on our ability
      to
      purchase shares of Common Stock or to purchase or redeem shares of a particular
      series of authorized preferred stock. Depending upon the voting rights granted
      to any series of authorized preferred stock, issuance thereof could result
      in a
      reduction in the voting power of the holders of Common Stock. In the event
      of
      our dissolution, liquidation or winding up, the holders of the preferred stock
      will receive, in priority over the holders of Common Stock, a liquidation
      preference established by the Board of Directors, together with accumulated
      and
      unpaid dividends. Depending upon the consideration paid for authorized preferred
      stock, the liquidation preference of authorized preferred stock and other
      matters, the issuance of authorized preferred stock could result in a reduction
      in the assets available for distribution to the holders of Common Stock in
      the
      event of our liquidation.
44
Series
      A 10% Cumulative Convertible Preferred Stock
We
      have
      designated 8,000,000 shares of our preferred stock as
Series
      A
      10% Cumulative Convertible Preferred Stock
("Series
      A Preferred Stock"), of which 5,250,000 shares were issued in an offering that
      we closed immediately following the consummation of the merger. Each share
      of
      Series A Preferred Stock has a stated value of $1.00, is convertible at the
      holder's option into that number of shares of our Common Stock equal to the
      stated value of such share of Series A Preferred Stock divided by an initial
      conversion price of $1.25. Upon the occurrence of a stock split, stock dividend,
      combination of our Common Stock into a smaller number of shares, issuance of
      any
      of our shares or other securities by reclassification of our Common Stock,
      merger or sale of substantially all of our assets, the conversion rate will
      be
      adjusted so that the conversion rights of the Series A Preferred Stock
      stockholders will be equivalent to the conversion rights of the Series A
      Preferred Stock stockholders prior to such event. In addition, in the event
      we
      sell shares of our Common Stock (or the equivalent thereof) following the
      issuance of shares of Series A Preferred Stock at a price of less than $1.25
      per
      share, the conversion price of the shares of Series A Preferred Stock will
      be
      reduced to such lower price.
The
      Series A Preferred Stock bears a dividend of 10% per annum payable quarterly,
      commencing September 30, 2006, at our election in cash or additional shares
      of
      our Series A Preferred Stock valued at the stated value thereof; provided,
      however, that we must pay the dividend in cash if an "Event of Default" as
      defined in the Certificate of Designation designating the Series A Preferred
      Stock has occurred and is then continuing. In addition, upon an Event of
      Default, the dividend rate increases to 20% per annum. An Event of Default
      includes, but is not limited to, the following:
·
the
                occurrence of "Non-Registration Events" including, the failure to cause a
                registration statement registering the shares of Common Stock underlying
                the Series A Preferred Stock and Warrants issued in connection therewith
                to be effective within 240 days following the closing of the private
                placement;
·
an
                uncured breach by us of any material covenant, term or condition
                in the
                Certificate of Designation or any of the related transaction documents;
                and
·
any
                money judgment or similar final process being filed against us for
                more
                than $100,000.
In
      the
      event of our dissolution, liquidation or winding up, the holders of the Series
      A
      Preferred Stock will receive, in priority over the holders of Common Stock,
      a
      liquidation preference equal to the stated value of such shares plus accrued
      dividends thereon.
45
The
      Series A Preferred Stock
is
      not
      redeemable at the option of the holder but may be redeemed by us at our option
      following the third anniversary of the issuance of the Series A Preferred Stock
      for 120% of the stated value thereof plus any accrued but unpaid dividends
      upon
      30 days' prior written notice, during which time the Series A Preferred Stock
      may be converted, provided a registration statement is effective under the
      Securities Act with respect to the Common Stock into which such Preferred is
      convertible and an Event of Default is not then continuing.
Holders
      of Series A Preferred Stock do not have the right to vote on matters submitted
      to the holder of our Common Stock.
The
      registration rights provided for in the subscription agreement we entered into
      with the purchasers of the Series A Preferred Stock:
·
require
                that we file a registration statement with the SEC on or before 120
                days
                from the closing to register the shares of Common Stock issuable
                upon
                conversion of the Series A Preferred Stock and exercise of the Warrants,
                and cause such registration statement to be effective within 240
                days
                following the closing; and
·
entitles
                each of these investors to liquidated damages in an amount equal
                to two
                percent (2%) of the purchase price of the Series A Preferred Stock
                if we
                fail to timely file that registration statement with, or have it
                declared
                effective by, the SEC.
The
      transaction documents we entered into with the purchasers of the Series A
      Preferred Stock also provide for various penalties and fees for breaches or
      failures to comply with provisions of those documents, such as the timely
      payment of dividends, delivery of stock certificates, and obtaining and
      maintaining an effective registration statement with respect to the shares
      of
      Common Stock underlying the Series A Preferred Stock and warrants sold in the
      offering.
In
      addition, both the conversion price of the Series A Preferred Stock and the
      exercise price of the Warrants are subject to "full-ratchet" anti-dilution
      provisions, so that upon future issuances of our Common Stock or equivalents
      thereof, subject to specified customary exceptions, at a price below the
      conversion price of the Series A Preferred Stock and/or exercise price of the
      Warrants, such conversion price and/or exercise price will be reduced to such
      lower price, further diluting holders of our Common Stock.
Market
      for Registrant's Common Equity and Related Stockholder
      Matters
Our
      Common Stock is quoted on the OTC Bulletin Board under the symbol "GDRE", but to
      date, no trades in our Common Stock have been reported. Immediately following
      the closing of the merger, but before giving effect to the private placement,
      there were outstanding options and warrants to purchase an aggregate of
1,697,648
shares
      of our Common Stock, and certain providers of legal services had the right
      to
      acquire approximately 997,000 shares of our Common Stock. Of the 24,090,929
      shares of our Common Stock outstanding immediately following the merger
      3,750,000 shares were eligible for resale under Rule 144 under the Securities
      Act. In addition, we are obligated to file a registration statement under the
      Securities Act registering the resale of the 7,260,000 shares of Common Stock
      underlying the shares of Series A Preferred Stock and Warrants we issued in
      the
      offering that closed immediately following the merger.
46
The
      number of holders of record for our
Common
      Stock immediately after giving effect to the merger was approximately
415
.
We
      have
      not paid any dividends on our
Common
      Stock since our inception and do not intend to pay any cash dividends to our
      stockholders in the foreseeable future. In addition, the terms of our Series
      A
      Preferred Stock prohibit the payment of dividends on our Common
      Stock.
Equity
      Compensation Plan Information
The
      following table summarizes outstanding options as of
June 30,
      2006, after giving effect to the merger.  The Registrant had no options
      outstanding prior to the merger, and all of the options below were issued in
      connection with the merger to former option holders of MedaSorb.
Number
                of securities to be issued upon exercise of outstanding
                options
Weighted-average
                exercise price of outstanding options
Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in first
                column)
Equity
                compensation plans approved by stockholders`
0
n/a
400,000(1)
Equity
                compensation plans not approved by stockholders
594,003
$23.88
2,298,300(2)
Total
594,003
$23.88
2,698,300
1.
Represents
                options that may be issued under our 2003 Stock Option
                Plan.
2.
Represents
                options that may be issued under our 2006 Long-Term Incentive Plan.
Changes
      in and Disagreements with Accountants
.
Effective
      on the closing of the merger, our Board of Directors dismissed BDO Dunwoody
      LLP
      as our independent accountants and engaged WithumSmith+Brown, MedaSorb's
      accountants prior to the merger.  For further information on the change in
      our accountants, see item 4.01 of this Current Report on Form 8-K.
47
Recent
      Sales of Unregistered Securities
In
      connection with the Merger, we issued
20,340,929
      shares of our Common Stock to the former stockholders of MedaSorb in exchange
      for all the issued and outstanding shares of MedaSorb Common Stock, and issued
      stock options and warrants to purchase a total of 1,697,648 shares of our Common
      Stock in exchange for the cancellation of all outstanding warrants and stock
      options of MedaSorb, with the warrants and options issued by us having the
      same
      exercise prices and other terms as the cancelled warrants and stock options
      to
      purchase MedaSorb Common Stock. The shares of Common Stock issued in the merger
      were issued in reliance on the exemption from registration afforded by
      Regulation D (Rule 506) under the Securities Act and corresponding provisions
      of
      state securities laws, which exempts transactions by an issuer not involving
      any
      public offering. Accordingly, all of such shares are "restricted securities" and
      may not be offered or sold in the United States absent registration or an
      applicable exemption from registration requirements under the Securities Act.
In
      addition, immediately following the merger, we sold 5
,250,000
      shares of our Series A Preferred Stock to four institutional investors
in
      a
      private offering exempt from registration pursuant to Section 4(2) and
      Regulation D (Rule 506) under the Securities Act. The shares of Series A
      Preferred Stock we issued are initially convertible into 4,200,000 shares of
      our
      Common Stock.
In
      conjunction with the issuance of the Series A Preferred Stock to the investors,
      we issued to them, for no additional consideration, five-year Warrants to
      purchase an aggregate of 2,100,000 shares of Common Stock at the exercise price
      of $2.00 per share, subject to adjustment in certain cases as set forth in
      the
      Warrants.
We
      also
      granted these purchasers registration rights with respect to the Common Stock
      issuable upon conversion of the Series A Preferred Stock and exercise of the
      Warrants issued in the private placement. The rights, preferences and other
      terms of the Series A Preferred Stock and the private placement of these
      securities are described further above under "Series A Preferred Stock".
      Additional information with respect to this offering is provided above in Item
      1.01 of this Current Report on Form 8-K.
Indemnification
      of Officers and Directors
Our
Articles
      of Incorporation eliminates the personal liability of directors to us and our
      stockholders for monetary damages for breach of fiduciary duty as a director
      to
      the fullest extent permitted by Nevada law. Additionally, we have included
      in
      our By-laws provisions to indemnify our directors, officers, employees and
      agents and to purchase insurance with respect to liability arising out of the
      performance of their duties as directors, officers, employees and agents as
      permitted by Nevada General Corporation Law. The effect of the foregoing is
      to
      require us, to the extent permitted by law, to indemnify our officers,
      directors, employees and agents for any claims arising against such person
      in
      their official capacities, if such person acted in good faith and in a manner
      that he reasonably believed to be in or not opposed to our best interests,
      and,
      with respect to any criminal action or proceeding, had no reasonable cause
      to
      believe that his conduct was unlawful. Insofar as indemnification for
      liabilities arising under the Securities Act may be permitted to directors,
      officers and controlling persons of the company pursuant to the foregoing,
      or
      otherwise, the company has been advised that the opinion of the Securities
      and
      Exchange Commission such indemnification is against public policy as expressed
      in the Securities Act and is, therefore, unenforceable.
48
Item
      3.02. Unregistered Sales of Equity Securities.
Reference
      is made to the disclosure made under Items 1.01 and 2.01 of this Current Report
      on Form 8-K, which is incorporated herein by reference.
ITEM
      4.01. Changes in Registrant's Certifying Accountant
Immediately
      following the closing of the merger, our Board of Directors dismissed BDO
      Dunwoody LLP as our independent accountants and engaged WithumSmith+Brown,
      the
      accountants of MedaSorb prior to the merger, as our new independent accountants.
The
      audit
      reports of BDO Dunwoody on the financial statements of Gilder Enterprises,
      Inc.
      as of May 31, 2005 and 2004 and for the years then ended did not contain any
      adverse opinion or disclaimer of opinion, nor were such reports qualified or
      modified as to uncertainty, audit scope or accounting principles, except that
      such reports were prepared assuming "the Company will continue as a going
      concern" and stated that "as discussed in Note 1 to the consolidated financial
      statements, the Company had accumulated operating losses of $169,199 since
      its
      inception and has a working capital deficit of $67,768. These condition raise
      substantial doubt about the Company's ability to continue as a going
      concern.  Management's plan in regard to these matters are described in
      Note 1.  These consolidated financial statements do not include any
      adjustments that might result from the outcome of this
      uncertainty".
During
      the two most recent fiscal years of Gilder Enterprises, Inc. and the subsequent
      interim period through February 28, 2006, there were no disagreements between
      Gilder Enterprises, Inc. and BDO Dunwoody as to any matter of accounting
      principles or practices, financial statement disclosure, or auditing scope
      or
      procedure, which disagreements, if not resolved to the satisfaction of BDO
      Dunwoody, would have caused BDO Dunwoody to make reference in their reports
      on
      the financial statements for such years to the subject matter of the
      disagreement.
Item
      5.01. Changes in Control of Registrant
As
      described in more detail under Item 2.01 of this Current Report on Form 8-K,
      which is incorporated herein by reference, as a result of the merger, a change
      in control of the Registrant has occurred.
Item
      5.02 Departure of Directors or Principal Officers; Election of Directors;
      Appointment of Principal Officers.
Concurrently
      with the closing of the merger, Joseph G. Bowes, who was our sole director
      and
      officer prior to the merger, appointed Al Kraus, Joseph Rubin, Esq., and Kurt
      Katz to the Board of Directors, and then resigned from the Board and from his
      positions as an officer. In addition, at such time, Al Kraus was appointed
      Registrant's President and Chief Executive Officer, James Winchester, MD was
      appointed Registrant's Chief Medical Officer, Vincent Capponi was appointed
      Registrant's Chief Operating Officer and David Lamadrid was appointed our Chief
      Financial Officer.
49
For
      certain biographical and other information regarding the newly appointed
      officers and directors, see the disclosure under the heading "Directors and
      Executive Officers" under Item 2.01 of this Current Report on Form 8-K, which is
      incorporated herein by reference.
Item
      5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
      Year
As
      a
      result of the merger, our fiscal year was changed to a calendar year. Because
      reverse merger accounting dictates that the historical financial statements
      of
      MedaSorb are now our financial statements, we will not file a transition report.
      Exhibit 99.1 to this Current Report on Form 8-K includes MedaSorb's annual
      financial statements for the years ended December 31, 2005 and 2004. Our next
      Annual Report on Form 10-KSB will cover the complete 12-month period ended
      December 31, 2006
.
Item 5.06.
      Change in Shell Company Status
Reference
      is made to the disclosure set forth under Item 2.01 of this Current Report
      on Form 8-K, which disclosure is incorporated herein by
      reference.
Item
      9.01. Financial Statements and Exhibits.
(a)
      Financial Statements of business acquired.
Audited
      financial statements of MedaSorb (formerly MedaSorb Technologies, LLC) for
      the
      fiscal years ended December 31, 2004 and 2005 are filed as Exhibit 99.1 to
      this
      Current Report on Form 8-K and unaudited financial statements of MedaSorb for
      the interim period ended March 31, 2006 are filed as Exhibit 99.2 to this
      Current Report on Form 8-K.
(b)
      Pro
      Forma Financial Information.
Pro
      forma
      financial statements for the Registrant reflecting the merger are filed as
      Exhibit 99.3 to this Current Report on Form 8-K.
50
(d)
Exhibits.
Exhibit
                2.1
Agreement
                and Plan of Merger, dated as of June 29, 2006, by and among Gilder
                Enterprises, Inc., MedaSorb Corporation and MedaSorb Acquisition
                Inc.
Exhibit
                3.1
Articles
                of Incorporation of Gilder Enterprises, Inc. (filed as Exhibit 3.1
                to
                Registrant's Registration Statement on Form SB-2 filed on March 29, 2004,
                and incorporated herein by reference).
Exhibit
                3.2
By-Laws
                of Gilder Enterprises, Inc. (filed as Exhibit 3.2 to Registrant's
                Registration Statement on Form SB-2 filed on March 29, 2004, and
                incorporated herein by reference).
Exhibit
                4.1
Certificate
                To Set Forth Designations, Voting Powers, Preferences, Limitations,
                Restrictions, And Relative Rights Of Series A 10% Cumulative Convertible
                Preferred Stock, $.001 Par Value Per Share
Exhibit
                4.2
Form
                of Warrant issued to purchasers of Series A Preferred Stock, dated
                June
                __, 2006.
Exhibit
                4.3
Subscription
                Agreement, dated as of June 30, 2006, by and among Gilder
                Enterprises, Inc. and the purchasers party thereto.
Exhibit
                10.1
Employment
                Agreement, dated as of July 18, 2003, between Al Kraus and MedaSorb
                Technologies, LLC.
Exhibit
                10.2
Employment
                Agreement, dated as of July 1, 2005, between Vincent Capponi and
                MedaSorb
                Technologies, LLC.
Exhibit
                10.3
Employment
                Agreement, dated as of July 1, 2005, between David Lamadrid and MedaSorb
                Technologies, LLC.
Exhibit
                10.4
Employment
                Agreement, dated as of July 1, 2004, between Dr. James Winchester
                and
                MedaSorb Technologies, LLC.
Exhibit
                10.5
Gilder
                Enterprises, Inc. 2006 Long Term Incentive Plan.
Exhibit
                99.1
Audited
                financial statements of MedaSorb for the fiscal years ended December
                31,
                2004 and 2005.
Exhibit
                99.2
Unaudited
                financial statements of MedaSorb for the three month interim period
                ended
                March 31, 2006.
Exhibit
                99.3
Pro
                forma financial statements of the Registrant reflecting the
                merger.
51
SIGNATURES
Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.
Date:
July 6,
      2006
GILDER
              ENTERPRISES, INC.
By:
/s/ Al
              Kraus
Al Kraus,
President and Chief Executive Officer
52
EXHIBIT
      INDEX
No.
Description
Exhibit
                2.1
Agreement
                and Plan of Merger, dated as of June 29, 2006, by and among Gilder
                Enterprises, Inc., MedaSorb Corporation and MedaSorb Acquisition
                Inc.
Exhibit
                3.1
Articles
                of Incorporation of Gilder Enterprises, Inc. (filed as Exhibit 3.1
                to
                Registrant's Registration Statement on Form SB-2 filed on March 29, 2004,
                and incorporated herein by reference).
Exhibit
                3.2
By-Laws
                of Gilder Enterprises, Inc. (filed as Exhibit 3.2 to Registrant's
                Registration Statement on Form SB-2 filed on March 29, 2004, and
                incorporated herein by reference).
Exhibit
                4.1
Certificate
                To Set Forth Designations, Voting Powers, Preferences, Limitations,
                Restrictions, And Relative Rights Of Series A 10% Cumulative Convertible
                Preferred Stock, $.001 Par Value Per Share
Exhibit
                4.2
Form
                of Warrant issued to purchasers of Series A Preferred Stock, dated
                June
                __, 2006.
Exhibit
                4.3
Subscription
                Agreement, dated as of June 30, 2006, by and among Gilder Enterprises,
                Inc. and the purchasers party thereto.
Exhibit
                10.1
Employment
                Agreement, dated as of July 18, 2003, between Al Kraus and MedaSorb
                Technologies, LLC.
Exhibit
                10.2
Employment
                Agreement, dated as of July 1, 2005, between Vincent Capponi and
                MedaSorb
                Technologies, LLC.
Exhibit
                10.3
Employment
                Agreement, dated as of July 1, 2005, between David Lamadrid and MedaSorb
                Technologies, LLC.
Exhibit
                10.4
Employment
                Agreement, dated as of July 1, 2004, between Dr. James Winchester
                and
                MedaSorb Technologies, LLC.
Exhibit
                10.5
Gilder
                Enterprises, Inc. 2006 Long Term Incentive Plan.
Exhibit
                99.1
Audited
                financial statements of MedaSorb for the fiscal years ended December
                31,
                2004 and 2005.
Exhibit
                99.2
Unaudited
                financial statements of MedaSorb for the three month interim period
                ended
                March 31, 2006.
Exhibit
                99.3
Pro
                forma financial statements of the Registrant reflecting the
                merger.
53