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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,
        D.C. 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"><strong>FORM
        8-K</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">CURRENT
        REPORT</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">PURSUANT
        TO SECTION 13 OR 15(d) OF</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">THE
        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="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">Date
        of
        report (date of earliest event reported): September 13, 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="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"><strong>ZIOPHARM
        Oncology, Inc.</strong></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>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
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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">Delaware</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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            <tr>
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                  or other jurisdiction of</font></div>
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              </td>
              <td valign="top" width="24%">
                <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
                  File Number)</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              </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">(IRS
                  Employer Identification No.)</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              </td>
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      <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="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>1180
        Avenue of the Americas, 19</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup><strong>th</strong></sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>
        Floor</strong></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"><strong>New
        York, NY 10036</strong></font></div>
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        of principal executive offices) (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"><strong>(646)
        214-0700</strong></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">(Registrant&#8217;s
        telephone number, including area code)</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="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"><strong>EasyWeb,
        Inc.</strong></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"><strong>6025
        S. Quebec Street, Suite 135</strong></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"><strong>Englewood,
        Colorado</strong></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">(Former
        name or former address, if changed since last 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">&#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">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:</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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font>
        Written communications
        pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</font></div>
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        Soliciting material
        pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</font></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"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font>
        Pre-commencement
        communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
        240.14d-2(b))</font></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"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font>
        Pre-commencement
        communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
        240.13e-4(c))</font></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"><strong>Item
        2.01. 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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Reverse
        Merger Transaction; Acquisition of ZIOPHARM, Inc.</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">Pursuant
        to an Agreement and Plan of Merger dated August 3, 2005 (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Merger
        Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
        by
        and among EasyWeb, Inc. (now known as ZIOPHARM Oncology,
        Inc.)(the&#160;&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Company</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
        ZIO
        Acquisition Corp., a Delaware corporation and wholly owned subsidiary of
        the
        Company, and ZIOPHARM, Inc., a Delaware corporation whose business is the
        development and commercialization of drugs for the treatment of cancer
        (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ZIOPHARM</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
        ZIO
        Acquisition Corp. merged with and into ZIOPHARM, with ZIOPHARM remaining
        as the
        surviving entity and a wholly owned operating subsidiary of the Company.
        This
        transaction is referred to throughout this report as the&#160;&#8220;Merger.&#8221; The
        Merger was effective as of September 13, 2005, upon the filing of a certificate
        of merger with the Delaware Secretary of State.</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">At
        the
        effective time of the Merger, the legal existence of ZIO Acquisition Corp.
        ceased and all of the 13,908,772 shares of ZIOPHARM capital stock that were
        outstanding immediately prior to the Merger were cancelled, with one share
        of
        ZIOPHARM common stock issued to the Company. Simultaneously, the former holders
        of ZIOPHARM capital stock received an aggregate of 6,967,941 shares of the
        Company&#8217;s common stock, representing approximately 97.3% of the Company&#8217;s common
        stock outstanding after the Merger. In addition, all securities convertible
        into
        and exercisable for shares of ZIOPHARM capital stock outstanding immediately
        prior to the Merger were cancelled, and the holders thereof received similar
        securities convertible into an aggregate of 1,366,846 shares of the Company&#8217;s
        common stock. </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">Prior
        to
        the Merger, the Company effected a 1-for-40 share combination (i.e., reverse
        stock split) of its capital stock. The share combination was approved by
        Company&#8217;s stockholders at a special stockholder meeting held on February 28,
        2005. As a result of the share combination, the Company had 189,922 shares
        of
        common stock outstanding immediately prior to 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Merger represents a change in control of the Company inasmuch as greater
        than
        50% of the issued and outstanding voting stock of Company on a post-Merger
        basis
        is now held by the former holders of ZIOPHARM capital stock. As of the date
        of
        this report, there were 7,157,863 shares of Company capital stock outstanding,
        all of which is 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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Merger Agreement was filed as Exhibit 10.1 to the Company&#8217;s Current Report on
        Form 8-K filed with the Securities and Exchange Commission on August 9, 2005,
        and is incorporated herein by reference. The foregoing description of the
        Merger
        Agreement and the transactions contemplated thereby do not purport to be
        complete and are qualified in their entireties by reference to the Merger
        Agreement.</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
        September 13, 2005, the Company&#8217;s board of directors approved a transaction
        pursuant to which ZIOPHARM merged with and into the Company, leaving the
        Company
        as the surviving corporation. In connection with this merger, the Company
        relinquished its corporate name and assumed in its place the name &#8220;ZIOPHARM
        Oncology, Inc.&#8221; The merger and name change became effective on September 14,
        2005, upon the filing of a certificate of ownership with the Delaware Secretary
        of State.</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">Unless
        otherwise provided in this report, all references in this report to
&#8220;we,&#8221;&#8220;us,&#8221;&#8220;our company,&#8221;&#8220;our,&#8221; or the &#8220;Company&#8221; refer to the combined ZIOPHARM
        Oncology, Inc. entity.</font></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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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Description
        of Business of ZIOPHARM Oncology, Inc.</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"><strong>General</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">ZIOPHARM
        Oncology, Inc. is a development-stage company that is seeking to develop
        and
        commercialize a diverse, risk-sensitive portfolio of in-licensed cancer drugs
        that address unmet medical needs. The Company&#8217;s management and advisors are
        focused on licensing proprietary drug candidate families that are related
        to
        cancer therapeutics on the market where the application of new biological
        understanding and the Company&#8217;s drug development expertise will lead to a lower
        risk for clinical development failure while expediting clinical registration.
        The Company expects to commercialize its products on its own in North America
        but recognizes that promising clinical trial results in cancers with a high
        incidence and prevalence might also be addressed in a commercial partnership
        with another company with the requisite financial resources. Currently, the
        Company is in U.S. Phase I studies for two product candidates known as ZIO-101
        and ZIO-201. The Company currently intends to continue with clinical development
        of ZIO-101 for advanced myeloma and ZIO-201 for advanced sarcoma. </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
        Company&#8217;s corporate office is located at 1180 Avenue of the Americas, 19th
        Floor, New York, NY 10036, with a telephone number of (646) 214-0700. The
        Company&#8217;s business and development operations are located in Charlestown,
        Massachusetts.</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>Cancer
        Overview </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">Cancer
        is
        a group of diseases characterized by either the runaway growth of cells or
        the
        failure of cells to die normally. Often, cancer cells spread to distant parts
        of
        the body, where they can form new tumors. Cancer can arise in any organ of
        the
        body and, according to the American Cancer Society, strikes one of every
        two
        American men and one of every three American women at some point in their
        lives.
</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">It
        is
        reported that there are more than 100 different varieties of cancer divided
        into
        six major categories. Carcinomas, the most common type of cancer, originate
        in
        tissues that cover a surface or line a cavity of the body. Sarcomas begin
        in
        tissue that connects, supports or surrounds other tissues and organs. Lymphomas
        are cancers of the lymph system, the circulatory system that bathes and cleanses
        the body&#8217;s cells. Leukemias involve blood-forming tissues and blood cells. As
        their name indicates, brain tumors are cancers that begin in the brain, and
        skin
        cancers, including dangerous melanomas, originate in the skin. Cancers are
        considered metastatic if they spread via the blood or lymphatic system to
        other
        parts of the body to form secondary tumors. </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">Cancer
        is
        caused by a series of mutations, or alterations, in genes that control cells&#8217;
        ability to grow and divide. Some mutations are inherited; others arise from
        environmental factors such as smoking or exposure to chemicals, radiation,
        or
        viruses that damage cells&#8217; DNA. The mutations cause cells to divide relentlessly
        or lose their normal ability to die. </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
        cost
        of cancer to the healthcare system is significant. The National Institute
        of
        Health estimates that the overall cost of cancer in 2003 was $189.5 billion.
        This cost includes an estimate of $64.2 billion in direct medical expenses,
        $16.3 billion in indirect morbidity costs, and $109 billion in indirect
        mortality costs.</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>Cancer
        Treatments</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">Major
        treatments for cancer include surgery, radiotherapy, and chemotherapy. There
        are
        many different drugs that are used to treat cancer, including cytotoxics
        or
        antineoplastics, hormones, and biologics. There are also many experimental
        treatments under investigation including radiation sensitizers, vaccines,
        gene
        therapy and immunotoxins. The Company believes cancer treatment represents
        a
        significant unmet medical need.</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" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Radiotherapy.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
          Also
          called radiation therapy, radiotherapy is the treatment of cancer and other
          diseases with ionizing radiation. Ionizing radiation deposits energy that
          injures or destroys cells in the area being treated - the target tissue
          - by
          damaging their genetic material, making it impossible for these cells to
          continue growing. Although radiation damages both cancer cells and normal
          cells,
          the latter are able to repair themselves and regain proper function.
          Radiotherapy may be used to treat localized solid tumors, such as cancers
          of the
          skin, tongue, larynx, brain, breast, or uterine cervix. It can also be
          used to
          treat leukemia and lymphoma.</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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Scientists
        are also looking for ways to increase the effectiveness of radiation therapy.
        Two types of investigational drugs are being studied for their effect on
        cells
        exposed to radiation. Radiosensitizers increase the damage done to tumor
        cells
        by radiation; and radioprotectors protect normal tissues from the effects
        of
        radiation.</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"><em>Cytotoxics.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cytotoxics
        are anticancer drugs that destroy cancer cells by stopping them from
        multiplying. Healthy cells can also be harmed with the use of cytotoxics,
        especially those that divide quickly. Harm to healthy cells is what causes
        side
        effects. These cells usually repair themselves after chemotherapy. Chemotherapy
        can be used for different purposes which include curing cancer (when the
        patient
        remains free of evidence of cancer cells), controlling cancer (by preventing
        the
        cancer from spreading), and to relieving symptoms of cancer (such as pain,
        helping patients live more comfortably).</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">Cytotoxic
        agents act primarily on macromolecular synthesis, repair or activity, which
        affects the production or function of DNA, RNA or protein. Although there
        are
        many cytotoxic agents, there is a considerable amount of overlap in their
        mechanisms of action. As such, the choice of a particular agent or group
        of
        agents is generally not a consequence of a prior prediction of antitumor
        activity by the drug, but instead the result of empirical clinical
        trials.</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"><em>Supportive
        Care.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        The
        treatment of a cancer may include the use of chemotherapy, radiation therapy,
        biologic response modifiers, surgery, or some combination of all of these
        or
        other therapeutic options. All of these treatment options are directed at
        killing or eradicating the cancer that exists in the patient&#8217;s body.
        Unfortunately, the delivery of many cancer therapies adversely affects the
        body&#8217;s normal organs. The undesired consequence of harming an organ not involved
        with cancer is referred to as a complication of treatment or a side
        effect.</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">Side
        effects, or complications, of treatment cause inconvenience, discomfort,
        and
        occasionally, may even be fatal. Additionally and perhaps more importantly,
        side
        effects may also prevent doctors from delivering the prescribed dose of therapy
        at the specific time and schedule of the treatment plan. Therefore, side
        effects
        not only cause discomfort, but may also limit a patient&#8217;s ability to achieve the
        best outcome from treatment by preventing the delivery of therapy at its
        optimal
        dose and 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">In
        addition to anemia, fatigue, hair-loss, reduction in blood platelets and
        white
        and red blood cells, and bone pain, one of the most common side effects of
        chemotherapy is nausea and vomiting. Several drugs have been developed to
        help
        prevent and control chemotherapy-induced nausea and vomiting, which have
        led to
        improvements in the management of symptoms associated with this cancer
        treatment, allowing for greater accuracy and consistency concerning the
        administration of cancer treatment. Nausea and vomiting induced by chemotherapy
        are treated by drugs such as 5HT3 receptor antagonists, like ondansetron,
        which
        is a selective blocking agent of the hormone serotonin.</font></div>
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          </div>
        </div>
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          </div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Product
          Candidates</strong></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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>ZIO-101</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"><em>General</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        ZIO-101
        is an organic arsenic compound covered by an issued U.S. patent and applications
        internationally. A form of commercially available inorganic arsenic (arsenic
        trioxide (Trisenox&#174;) or ATO) has been approved for the treatment of acute
        promyelogenous leukemia (APL), a precancerous condition, and has been studied
        for the treatment of various cancers. Nevertheless, ATO has been shown to
        be
        toxic to the heart and liver, limiting its use as an anti-cancer agent.
        Inorganic arsenic has also been shown to cause cancer of the skin and lung
        in
        humans. The toxicity of arsenic generally is correlated to its accumulation
        in
        organs and tissues. The Company&#8217;s preclinical studies demonstrated that ZIO-101
        (and organic arsenic in general) is considerably less toxic than inorganic
        arsenic, particularly with regard to heart toxicity. </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"><em>In
        vitro</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        testing
        of ZIO-101 using the National Cancer Institute&#8217;s human cancer cell panel
        detected activity against lung, colon, brain, melanoma, ovarian and kidney
        cancer. Moderate activity was detected against breast and prostate
        cancer.</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 to solid tumors, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>in
        vitro</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        testing
        in both the National Cancer Institute&#8217;s cancer cell panel and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>in
        vivo</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        testing
        in a leukemia animal model demonstrated substantial activity against
        hematological cancers (cancers of the blood and blood-forming tissues) such
        as
        leukemia, lymphoma, myelodysplastic syndromes and multiple myeloma. Leukemia
        is
        a cancer that begins in blood-forming tissue such as the bone marrow and
        causes
        large numbers of blood cells to be produced and enter the bloodstream. Lymphomas
        are cancers that begin in cells of the immune system. Myelodysplastic syndromes,
        also called preleukemia or smoldering leukemia, are diseases in which the
        bone
        marrow does not function normally.</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"><em>Clinical
        Lead Indications: Multiple Myeloma</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Multiple myeloma, a common hematological malignancy, is among a group of
        plasma
        cell cancers associated with the overproduction of monoclonal immunoglobulin
        (M-protein). Primary treatment for multiple myeloma is systemic chemotherapy.
        Approximately 15-20% of patients who have the disease are resistant to
        aggressive primary treatment. Even with prompt institution of systemic
        treatment, the drug-sensitive phase of the disease usually lasts only two
        to
        three years for most patients before resistance appears (although in a small
        patient population sensitivity to systemic therapy can last for five to ten
        years). The median survival of patients with progressive or resistant disease
        is
        three to four 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">The
        standard of care for progressive or resistant multiple myeloma may be in
        transition. Recent clinical trials offer evidence supporting the use of
        thalidomides and proteosome inhibitors, either alone or in combination with
        other agents. Unfortunately, neither treatment is universally effective,
        each
        can be quite toxic, and all patients who receive them will likely develop
        progressive disease. As a result, the Company expects that the medical community
        will continue to embrace new agents that provide incremental benefit to patients
        without undue toxicity. The Company is hopeful that the novel mechanism of
        action of ZIO-101, combined with its anticipated safety profile, will encourage
        its use in the treatment of advanced myeloma and possibly a variety of other
        tumors. Currently, the Company expects that advanced myeloma will be the
        indication for which it is most likely to seek initial regulatory approval
        for
        ZIO-101.</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"><em>Clinical
        Development Plan for ZIO-101</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        The
        Company has commenced two phase I clinical trials (hematological and solid
        tumor) at the University of Texas M.D. Anderson Cancer Center using ZIO-101
        in
        refractory disease. Phase I testing is primarily focused on assessing drug
        safety; however, one patient in the solid tumor trial has evidenced a response
        without toxicity (as reported by the investigator). The starting dose in
        both
        phase I trials was about 14 times the labeled dose of inorganic arsenic.
        The
        dose has been escalated to the next level in one trial, and to date has been
        well tolerated. </font></div>
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        </div>
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          </div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
          goal
          of the phase I trials are to determine dose-limiting toxicity and maximum
          tolerated dose. In addition, assessments of pharmacokinetic data will be
          obtained along with any indication of efficacy. The Company expects to
          follow
          these phase I trials with a phase I/II trial in advanced myeloma. The Company
          currently anticipates reporting some phase I/II trial results in the first
          half
          of 2006. A second phase II trial in myeloma is under consideration for
          initiation in early 2006. It is expected that a pivotal trial in multiple
          myeloma would begin in early 2007.</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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        solid
        tumor trial is seeking to confirm data collected during
        pre-clinical&#160;studies that indicated activity in a variety of solid
        tumors.
        We have elected to conduct a separate phase I clinical trial for solid cancers
        based on our belief that the maximum tolerated dose of ZIO-101 in patients
        with
        solid cancers may be substantially higher than patients with blood cancers.
        While the current focus for product registration is myeloma, these phase
        I study
        results will be instructive for further development plans in solid
        tumors.</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"><em>ZIO-201</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"><em>General</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        ZIO-201, or isophosphoramide mustard (IPM), is a proprietary stabilized
        metabolite of ifosfamide that is also related to cyclophosphamide. A patent
        application for pharmaceutical composition has been filed. Cyclophosphamide
        and
        ifosfamide are alkylating agents. Cyclophosphamide is the most widely used
        alkylating agent in cancer therapy and is used to treat breast cancer and
        non-Hodgkin&#8217;s lymphoma. Ifosfamide has been shown to be effective in high dose
        by itself, or in combination in treating sarcoma and lymphoma. Although
        ifosfamide-based treatment generally represents the standard of care for
        sarcoma, it is not licensed for this indication by the U.S. Food and Drug
        Administration (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">The
        Company&#8217;s pre-clinical studies have shown that, in animal and laboratory models,
        IPM evidences activity against leukemia and solid tumors. These studies also
        indicate that ZIO-201 has a better pharmacokinetic and safety profile than
        ifosfamide or cyclophosphamide, offering the possibility of safer and more
        efficacious therapy with ZIO-201.</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">Ifosfamide
        is metabolized to IPM. In addition to IPM, another metabolite of ifosfamide
        is
        acrolein, which is toxic to the kidneys and bladder. The presence of acrolein
        can mandate extensive in-hospital hydration and the administration of a
        protective agent called Mesna</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>&#174;</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        which
        is inconvenient and expensive. Chloroacetaldehyde is another metabolite of
        ifosfamide and is toxic to the central nervous system, causing &#8220;fuzzy brain&#8221;
        syndrome for which there is currently no protective measure. Similar toxicity
        concerns pertain to high-dose cyclophosphamide, which is widely used in bone
        marrow and blood cell transplantation. Because ZIO-201 is independently
        active&#8212;without acrolein or chloroacetaldehyde metabolites&#8212;the Company believes
        that the administration of ZIO-201&#160;may avoid the toxicities of ifosfamide
        and cyclophosphamide without compromising efficacy.</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 to anticipated lower toxicity, ZIO-201 may have other advantages
        over
        ifosfamide and cyclophosphamide. ZIO-201 likely cross-links DNA differently
        than
        ifosfamide or cyclophosphamide metabolites, resulting in a different activity
        profile. Moreover, in some instances ZIO-201 appears to show activity in
        ifosfamide- and/or cyclophosphamide-resistant cancer cells.</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"><em>Potential
        Lead Indications for ZIO-201: Sarcomas</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Sarcomas are cancers of the bone, cartilage, fat, muscle, blood vessels,
        or
        other connective or supportive tissue. Soft tissue sarcomas, the expected
        lead
        indication for ZIO-201, are relatively rare; there are 6,000 to 8,000 thousand
        new cases each year in adults in the United States. On the other hand, in
        children, soft tissue sarcomas account for approximately 10% of all childhood
        cancers. There are more than 50 histological or tissue types of soft tissue
        sarcomas. The prognosis for patients with adult soft tissue sarcomas depends
        on
        several factors, including the patient&#8217;s age, size of the primary tumor,
        histological grade, and stage of the tumor. Factors associated with a poorer
        prognosis include age greater than 60 years, tumors larger than five
        centimeters, and high-grade histology. While small, low-grade tumors are
        usually
        curable by surgery alone, higher-grade or larger sarcomas are associated
        with
        higher local treatment failure rates and increased metastatic potential.
        Ifosfamide-based chemotherapy is a frequent standard of care for the treatment
        of metastatic tumors. It may also used in the adjuvant setting for high-risk
        primary tumors.</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><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ZIO-201
          may be a useful agent that, either alone or in combination, can deliver
          therapeutic activity with fewer to no side effects of the type that have
          been
          associated with ifosfamide. In the United States, ifosfamide is regularly
          included in combination regimens for the treatment of sarcomas, testicular
          cancers, head and neck cancer and some types of non-Hodgkin&#8217;s lymphomas. The
          Company believes that ZIO-201 may be able to replace ifosfamide in any
          or all of
          these combination protocols.</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 id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Clinical
        Development Plan for ZIO-201</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        A phase
        I clinical trial is being conducted at two centers with the objective of
        establishing maximum tolerated dose. The current dose level in this phase
        I
        trial is believed to be comparable to a relatively high dose of ifosfamide.
        The
        drug is being administered without Mesna</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>&#174;</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Furthermore, one patient has evidence of stable disease. The Company intends
        to
        initiate a phase I/II trial in advanced sarcoma and expects early results
        in the
        first half of 2006. The Company is also planning&#160;to implement a high
        dose
        phase I study in sarcoma and is exploring a phase II study in pediatric sarcoma.
        These trials would support the design and implementation of a phase III
        registration study in early 2007.</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"><strong>Competition</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
        development and commercialization for new products to treat cancer is highly
        competitive, and there will be considerable competition from major
        pharmaceutical, biotechnology, and specialty cancer companies. Many of our
        competitors have substantially more resources than the Company, including
        both
        financial and technical. In addition, many of these companies have more
        experience than the Company in preclinical and clinical development,
        manufacturing, regulatory, and global commercialization. The Company is also
        competing with academic institutions, governmental agencies and private
        organizations that are conducting research in the field of cancer. Competition
        for highly qualified employees is intense. </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">There
        are
        a number of companies developing chemotherapies for cancer and in particular
        for
        multiple myeloma and sarcoma. Millennium Pharmaceuticals, Inc. and Celgene
        Corporation have marketed products to treat multiple myeloma, and many other
        product candidates are in clinical trials and preclinical research. There
        are a
        more limited number of competitors developing new approaches to treat sarcoma,
        Ariad Pharmaceuticals principal among 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>License
        Agreements and Intellectual Property</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
        Company&#8217;s goal is to obtain, maintain and enforce patent protection for our
        products, formulations, processes, methods and other proprietary technologies,
        to preserve our trade secrets, and to operate without infringing the proprietary
        rights of other parties, both in the United States and in other countries.
        Our
        policy is to actively seek the broadest possible intellectual property
        protection for our product candidates through a combination of contractual
        arrangements and patents, both in the United States and abroad.</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"><em>Patent
        and Technology License Agreement &#8212; University of Texas M. D. Anderson Cancer
        Center and the Texas A&amp;M University System</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        On
        August 24, 2004, the Company entered into a Patent and Technology License
        Agreement with The Board of Regents of the University of Texas System, acting
        on
        behalf of the University of Texas M. D. Anderson Cancer Center and the Texas
        A&amp;M University System (collectively, the &#8220;Licensors&#8221;). Under this agreement,
        the Company was granted an exclusive, worldwide license to rights (including
        rights to U.S. and foreign patent and patent applications and related
        improvements and know-how) for the manufacture and commercialization of two
        classes of organic arsenicals (water- and lipid-based) for human and animal
        use.
        The class of water-based organic arsenicals includes ZIO-101.</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">
            <hr style="COLOR: black" noshade size="2">
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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
        October 2004, we received a notice of allowance for U.S. Patent Application
        No.
        10/337969, entitled &#8220;S-dimethylarsino-thiosuccinic acid
        S-dimethylarsino-2-thiobenzoic acid S-(simethylarsino) glutathione as treatments
        for cancer.&#8221; The patent was granted on June 28, 2005. The patent application
        claims both therapeutic uses and pharmaceutical compositions containing a
        novel
        class of organic arsenicals, including ZIO-101, for the treatment of cancer.
        </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
        partial consideration for the license rights obtained by the Company, we
        paid
        the Licensors an upfront, nonrefundable $125,000 fee and issued 250,487 shares
        of our common stock to University of Texas M. D. Anderson Cancer Center and
        granted it an option to purchase an additional 50,222 shares of our common
        stock
        for approximately $0.002 per share (such share amounts and option exercise
        price
        have been adjusted to reflect to the Merger). The option will vest and become
        exercisable with respect to 50% of its shares upon completion of the dosing
        of
        the last patient for both the blood and solid tumor phase I trials for ZIO-101.
        Another 25% of the shares subject to the option will vest upon enrollment
        of the
        first patient in a multi-center pivotal clinical trial (i.e., a human clinical
        trial intended to provide the substantial evidence of efficacy necessary
        to
        support the filing of an approvable New Drug Application ("NDA") ) for ZIO-101,
        with the remaining 25% vesting upon the filing of an Investigational New
        Drug
        (&#8220;IND&#8221;) for ZIO-101. As additional consideration for the license, the Licensors
        are entitled to receive up to an aggregate of $4.85 million in cash payments,
        payable in varying amounts,&#160;upon the achievement of certain milestones,
        including a $100,000 that the Company paid upon the commencement of the phase
        I
        clinical trial for ZIO-101 in May 2005. The Licensors are entitled to receive
        royalty payments from sales of a licensed product (should such a product
        be
        approved for commercial sale), as well and a portion of any fees that we
        may
        receive from a sublicensee. Finally, the license agreement provides that
        the
        Company will enter into two separate sponsored research agreements with the
        Licensors, each of which will require that we make annual payments of $100,000
        for no less than two years. The Company will have the exclusive right to
        all
        intellectual property rights resulting from such research pursuant to the
        terms
        of the agreements. </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
        agreement also contains other provisions customary and common in similar
        agreements within the industry, such the Company&#8217;s right to sublicense our
        rights under the agreement. Nevertheless, if the Company sublicenses its
        rights
        prior to the commencement of a pivotal clinical trial (i.e., a human clinical
        trial intended to provide the substantial evidence of efficacy necessary
        to
        support the filing of an approvable NDA), the Licensors will generally be
        entitled to receive a share of the payments it receives in exchange for the
        sublicense (subject to certain exceptions).</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"><em>License
        Agreement with DEKK-TEC, Inc</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        On
        October 15, 2004, the Company entered into a license agreement with DEKK-TEC,
        Inc., pursuant to which the Company was granted an exclusive, worldwide license
        to the second of our lead product candidates, ZIO-201.</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
        consideration for the Company&#8217;s license rights, DEKK-TEC is entitled to
        receive&#160;cash payments in the aggregate amount of up to $3.90 million,
        which
        are payable in varying amounts upon the occurrence of certain milestone events.
        The&#160;majority of these&#160;milestone payments will be creditable
        against
        future royalty payments, as referenced below. We also issued DEKK-TEC an
        option
        to purchase up to 27,616 shares of our common stock for approximately $0.02
        per
        share (such share amount and option exercise price have been adjusted to
        reflect
        to the Merger), which option vested with respect to 6,904 post-Merger shares
        upon the execution of the license agreement. The option will vest with respect
        to the remaining shares upon certain milestone events culminating with final
        FDA
        approval of the first NDA submitted by us (or by our sublicensee) for ZIO-201.
        Finally, DEKK-TEC also is entitled to receive royalty payments on the sales
        of
        ZIO-201 should it be approved for commercial sale. The license agreement
        also
        contains other provisions customary and common in similar agreements within
        the
        industry.</font></div>
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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>
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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"><em>Option
        Agreement with Southern Research Institute (&#8220;SRI&#8221;)</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        On
        December 22, 2004, we entered into an Option Agreement with SRI, pursuant
        to
        which we were granted an exclusive option to obtain an exclusive license
        to
        SRI&#8217;s interest in certain intellectual property, including exclusive rights
        related to certain isophosphoramide mustard analogs. Also on December 22,
        2004,
        we entered into a Research Agreement with SRI pursuant to which we agreed
        to
        spend a sum not to exceed $200,000 between the execution of the agreement
        and
        December 21, 2006, including a $25,000 payment that we made simultaneously
        with
        the execution of the agreement, to fund research and development work by
        SRI in
        the field of isophosphoramide mustard analogs. Under the terms of the option
        agreement, our exclusive right to exercise the option will expire 60 days
        after
        the termination or expiration of the SRI&#8217;s research and development work in the
        field of isophosphoramide mustard analogs, and the delivery of the certain
        required reports.</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"><em>Other
        Intellectual Property Rights and Protection</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        The
        Company depends upon the skills, knowledge and experience of its scientific
        and
        technical personnel, as well as those of its advisors, consultants and other
        contractors, none of which is patentable. To help protect proprietary know-how,
        which is not patentable, and for inventions for which patents may be difficult
        to enforce, the Company currently relies, and in the future rely, on trade
        secret protection and confidentiality agreements to protect our interests.
        To
        this end, the Company generally requires employees, consultants, advisors
        and
        other contractors to enter into confidentiality agreements that prohibit
        the
        disclosure of confidential information and, where applicable, require disclosure
        and assignment to us of the ideas, developments, discoveries and inventions
        important to 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 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>Governmental
        Regulation</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
        research, development, testing, manufacture, labeling, promotion, advertising,
        distribution, and marketing, among other things, of our products are extensively
        regulated by governmental authorities in the United States and other countries.
        In the United States, the FDA regulates drugs under the Federal Food, Drug,
        and
        Cosmetic Act, or the &#8220;FDCA,&#8221; and its implementing regulations. Failure to comply
        with the applicable U.S. requirements may subject us to administrative or
        judicial sanctions, such as FDA refusal to approve pending New Drug
        Applications, warning letters, product recalls, product seizures, total or
        partial suspension of production or distribution, injunctions, and/or criminal
        prosecution.</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>
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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"><em>Drug
        Approval Process</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        None of
        our drugs may be marketed in the U.S. until the drug has received FDA approval.
        The steps required before a drug may be marketed in the U.S.
        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>
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            <tr valign="top" style="LINE-HEIGHT: 1.25">
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                <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">Preclinical
                  laboratory tests, animal studies, and formulation
                  studies;</font></div>
              </td>
            </tr>

        </table>
      </div>
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      <div>
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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">Submission
                  to the FDA of an IND for human clinical testing, which must become
                  effective before human clinical trials may
                  begin;</font></div>
              </td>
            </tr>

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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>
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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">Adequate
                  and well-controlled human clinical trials to establish the safety
                  and
                  efficacy of the drug for each
                  indication;</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">Submission
                  to the FDA of an NDA;</font></div>
              </td>
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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>
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            <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">Satisfactory
                  completion of an FDA inspection of the manufacturing facility or
                  facilities at which the drug is produced to assess compliance with
                  current
                  good manufacturing practices, or &#8220;cGMPs&#8221;;
                  and</font></div>
              </td>
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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>
        <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">FDA
                  review and approval of the NDA.</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">Preclinical
        tests include laboratory evaluation of product chemistry, toxicity, and
        formulation, as well as animal studies. The conduct of the preclinical tests
        and
        formulation of the compounds for testing must comply with federal regulations
        and requirements. The results of the preclinical tests, together with
        manufacturing information and analytical data, are submitted to the FDA as
        part
        of an IND, which must become effective before human clinical trials may begin.
        An IND will automatically become effective 30 days after receipt by the FDA,
        unless before that time the FDA raises concerns or questions about issues
        such
        as the conduct of the trials as outlined in the IND. In such a case, the
        IND
        sponsor and the FDA must resolve any outstanding FDA concerns or questions
        before clinical trials can proceed. The Company cannot be sure that submission
        of an IND will result in the FDA allowing clinical trials to begin.</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">Clinical
        trials involve the administration of the investigational drug to human subjects
        under the supervision of qualified investigators. Clinical trials are conducted
        under protocols detailing the objectives of the study, the parameters to
        be used
        in monitoring safety, and the effectiveness criteria to be evaluated. Each
        protocol must be submitted to the FDA as part of the IND.</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">Clinical
        trials typically are conducted in three sequential phases, but the phases
        may
        overlap. The study protocol and informed consent information for study subjects
        in clinical trials must also be approved by an Institutional Review Board
        for
        each institution where the trials will be conducted. Study subjects must
        sign an
        informed consent form before participating in a clinical trial. Phase I usually
        involves the initial introduction of the investigational drug into people
        to
        evaluate its short-term safety, dosage tolerance, metabolism, pharmacokinetics
        and pharmacologic actions, and, if possible, to gain an early indication
        of its
        effectiveness. Phase II usually involves trials in a limited patient population
        to (i) evaluate dosage tolerance and appropriate dosage; (ii) identify possible
        adverse effects and safety risks; and (iii) evaluate preliminarily the efficacy
        of the drug for specific indications. Phase III trials usually further evaluate
        clinical efficacy and test further for safety by using the drug in its final
        form in an expanded patient population. There can be no assurance that phase
        I,
        phase II, or phase III testing will be completed successfully within any
        specified period of time, if at all. Furthermore, a company or the FDA may
        suspend clinical trials at any time on various grounds, including a finding
        that
        the subjects or patients are being exposed to an unacceptable health
        risk.</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
        FDCA
        permits FDA and the IND sponsor to agree in writing on the design and size
        of
        clinical studies intended to form the primary basis of an effectiveness claim
        in
        an NDA application. This process is known as Special Protocol Assessment.
        These
        agreements may not be changed after the clinical studies begin, except in
        limited circumstances.</font></div>
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          </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">9</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
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          </div>
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        <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">Assuming
        successful completion of the required clinical testing, the results of the
        preclinical studies and of the clinical studies, together with other detailed
        information, including information on the manufacture and composition of
        the
        drug, are submitted to the FDA in the form of an NDA requesting approval
        to
        market the product for one or more indications. The testing and approval
        process
        requires substantial time, effort, and financial resources. The agencies
        review
        the application and may deem it to be inadequate to support the registration,
        and companies cannot be sure that any approval will be granted on a timely
        basis, if at all. The FDA may also refer the application to the appropriate
        advisory committee, typically a panel of clinicians, for review, evaluation
        and
        a recommendation as to whether the application should be approved. The FDA
        is
        not bound by the recommendations of the advisory committee.</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
        has various programs, including fast track, priority review, and accelerated
        approval, that are intended to expedite or simplify the process for reviewing
        drugs, and/or provide for approval on the basis surrogate endpoints. Generally,
        drugs that may be eligible for one or more of these programs are those for
        serious or life-threatening conditions, those with the potential to address
        unmet medical needs, and those that provide meaningful benefit over existing
        treatments. A company cannot be sure that any of its drugs will qualify for
        any
        of these programs, or that, if a drug does qualify, that the review time
        will be
        reduced.</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">Section
        505(b)(2) of the FDCA allows the FDA to approve a follow-on drug on the basis
        of
        data in the scientific literature or a prior FDA approval of an NDA for a
        related drug. This procedure potentially makes it easier for generic drug
        manufacturers to obtain rapid approval of new forms of drugs based on
        proprietary data of the original drug manufacturer.</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">Before
        approving an NDA, the FDA usually will inspect the facility or the facilities
        at
        which the drug is manufactured and will not approve the product unless cGMP
        compliance is satisfactory. If the FDA evaluates the NDA and the manufacturing
        facilities as acceptable, the FDA may issue an approval letter, or in some
        cases, an approvable letter followed by an approval letter. Both letters
        usually
        contain a number of conditions that must be met in order to secure final
        approval of the NDA. When and if those conditions have been met to the FDA&#8217;s
        satisfaction, the FDA will issue an approval letter. The approval letter
        authorizes commercial marketing of the drug for specific indications. As
        a
        condition of NDA approval, the FDA may require post-marketing testing and
        surveillance to monitor the drug&#8217;s safety or efficacy, or impose other
        conditions.</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
        approval, certain changes to the approved product, such as adding new
        indications, making certain manufacturing changes, or making certain additional
        labeling claims, are subject to further FDA review and approval. Before a
        company can market products for additional indications, it must obtain
        additional approvals from FDA. Obtaining approval for a new indication generally
        requires that additional clinical studies be conducted. A company cannot
        be sure
        that any additional approval for new indications for any product candidate
        will
        be approved on a timely basis, or 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Post-Approval
        Requirements</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Often
        times, even after a drug has been approved by the FDA for sale, the FDA may
        require that certain post-approval requirements be satisfied, including the
        conduct of additional clinical studies. If such post-approval conditions
        are not
        satisfied, the FDA may withdraw its approval of the drug. In addition, holders
        of an approved NDA are required to: (i) report certain adverse reactions
        to the
        FDA, (ii) comply with certain requirements concerning advertising and
        promotional labeling for their products, and (iii) continue to have quality
        control and manufacturing procedures conform to cGMP after approval. The
        FDA
        periodically inspects the sponsor&#8217;s records related to safety reporting and/or
        manufacturing facilities; this latter effort includes assessment of compliance
        with cGMP. Accordingly, manufacturers must continue to expend time, money,
        and
        effort in the area of production and quality control to maintain cGMP
        compliance. We intend to use third party manufacturers to produce our products
        in clinical and commercial quantities, and future FDA inspections may identify
        compliance issues at the facilities of our contract manufacturers that may
        disrupt production or distribution, or require substantial resources to correct.
        In addition, discovery of problems with a product after approval may result
        in
        restrictions on a product, manufacturer, or holder of an approved NDA, including
        withdrawal of the product from the 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 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: 8pt; 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"><em>Employees.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
        of the
        date of this current report, the Company had 11 employees, all of which are
        full-time employees. The Company intends to hire an additional 3 to 4 employees
        prior to the end of 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"><strong><em>Description
        of Property</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
        Company&#8217;s corporate office is located at 1180 Avenue of the Americas, 19th
        Floor, New York, NY 10036. The New York office space is subject to a five-year
        lease agreement that expires in June 2010. Under the terms of the lease,
        the
        Company leases approximately 2,580 square feet and is required to make monthly
        rental payments of approximately $10,100 until December 31, 2007, with such
        payment increasing to approximately $11,000 thereafter through the remainder
        of
        the term of the lease. The Company&#8217;s business and development operations are
        located as 197 Eighth Street, Suite 300, Charlestown, Massachusetts 02129.
        The
        Charlestown office space is subject to a five-year lease agreement that expires
        in October 2009. Under the terms of the lease, the Company leases approximately
        2,800 square feet and is required to make monthly rental payments that range
        from $4,200 during the first year of the lease to $4,900 during the last
        year of
        the lease. The Company is presently intending to expand its commercial space
        in
        Charlestown, Massachusetts by approximately 1,000 square feet. </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>Legal
        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">The
        Company is not currently involved in any material legal
        proceedings.</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>Cautionary
        Note Regarding Forward-Looking Statements</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">This
        report contains certain statements that are &#8220;forward-looking statements&#8221; under
        Section 27A of the Securities Act and Section 21E of the Securities Exchange
        Act
        of 1934, as amended, and includes, among other things, discussions of our
        business strategies, future operations and capital resources. Words such
        as, but
        not limited to, &#8220;may,&#8221;&#8220;likely,&#8221;&#8220;anticipate,&#8221;&#8220;expect&#8221; and &#8220;believes&#8221; indicate
        forward-looking 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">Forward-looking
        statements are included in the section of this report entitled &#8220;Description of
        Business of ZIOPHARM Oncology, Inc.&#8221; Although we believe that the expectations
        reflected in such forward-looking statements are generally reasonable, we
        cannot
        assure you that such expectations will ultimately prove to be correct.
        Generally, these statements relate to our business plans and strategies,
        projected or anticipated benefits or other consequences of market conditions
        and
        opportunities, business plans or strategies, projections involving anticipated
        sales and revenues, expenses, projected future earnings and other aspects
        of
        operational results. All Phases of our operations are subject to a number
        of
        uncertainties, risks and other influences, most of which are outside our
        control, and any one or combination of which could materially and adversely
        affect the results of our operations, and also, could affect whether any
        such
        forward-looking statements contained herein ultimately prove to be accurate.
        Important factors that could cause actual results to differ materially from
        our
        current expectations are summarized in the section captioned &#8220;Risk Factors&#8221;
        immediately following.</font></div>
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        <div id="FTR">
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        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">11</font></div>
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          </div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Risk
          Factors</em></strong></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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        purchase of shares of our common stock is very speculative and involves a
        very
        high degree of risk. An investment in the Company is suitable only for the
        persons who can afford the loss of their entire investment. Accordingly,
        investors should carefully consider the following risk factors, as well as
        other
        information set forth herein, in making an investment decision with respect
        to
        our securities.</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"><em>We
        currently have no product revenues and will need to raise additional capital
        to
        operate our business</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        To
        date, we have generated no product revenues. Until and unless we receive
        approval from the U.S. Food and Drug Administration and/or other regulatory
        authorities for our product candidates, we cannot sell our drugs and will
        not
        have product revenues. Currently, our only product candidates are
        ZIO-101(organic arsenic) and ZIO-201 (isophosphoramide mustard), and they
        are
        not approved by the FDA for sale.</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
        will
        need to seek additional sources of financing which may not be available on
        favorable terms, if at all. Currently, we expect that we will have sufficient
        cash to fund our operations into the second quarter of 2006. However, changes
        may occur that would consume our existing capital prior to that time, including
        the progress of our research and development efforts, changes in governmental
        regulation and acquisitions of additional product candidates. If we do not
        succeed in raising additional funds on acceptable terms, we may be unable
        to
        complete planned preclinical and clinical trials or obtain approval of any
        product candidates from the FDA and other regulatory authorities. In addition,
        we could be forced to discontinue product development, reduce or forego sales
        and marketing efforts or forego attractive business opportunities. Any
        additional sources of financing will likely involve the issuance of our equity
        securities, which will have a dilutive effect on our existing
        stockholders.</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"><em>We
        are not currently profitable and may never become profitable</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        We have
        a history of losses and expect to incur substantial losses and negative
        operating cash flow for the foreseeable future, and we may never achieve
        or
        maintain profitability. Even if we succeed in developing and commercializing
        one
        or more product candidates, we expect to incur substantial losses for the
        foreseeable future and may never become profitable. We expect also to continue
        to incur significant operating and capital expenditures and anticipate that
        our
        expenses will increase substantially in the foreseeable future as
        we:</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">Continue
                  to undertake preclinical development and clinical trials for product
                  candidates;</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">Scale
                  up the formulation and manufacturing of our product candidates;
                  </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">Seek
                  regulatory approvals for product
                  candidates;</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">Implement
                  additional internal systems and infrastructure;
                  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">Hire
                  additional 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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        also
        expect to experience negative cash flow for the foreseeable future as we
        fund
        our operating losses and capital expenditures. This may result in a negative
        impact on the value 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: 8pt; 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
        have a limited operating history upon which to base an investment
        decision</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Prior
        to the Merger, ZIOPHARM was a development-stage company that was incorporated
        in
        September 2003. To date, we have not demonstrated an ability to perform the
        functions necessary for the successful commercialization of any product
        candidates. The successful commercialization of any product candidates will
        require us to perform a variety of functions, including:</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">Continuing
                  to undertake preclinical development and clinical
                  trials;</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">Participating
                  in regulatory approval processes;</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">Formulating
                  and manufacturing products; 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">Conducting
                  sales and marketing activities.</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">Our
        operations have been limited to organizing and staffing our company, acquiring,
        developing and securing our proprietary product candidates, undertaking
        preclinical trials and clinical trials of our product candidates ZIO-101
        and
        ZIO-201, and manufacturing ZIO-101 and ZIO- 201. These operations provide
        a
        limited basis for you to assess our ability to commercialize our product
        candidates and the advisability of investing in our securities.</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"><em>We
        may not obtain the necessary U.S. or worldwide regulatory approvals to
        commercialize any product candidate</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        We may
        not be able to obtain the approvals necessary to commercialize our product
        candidates, ZIO-101 and ZIO-201, or any product candidate that we may acquire
        or
        develop in the future for commercial sale. We will need FDA approval to
        commercialize our product candidates in the U.S. and approvals from regulatory
        authorities in foreign jurisdictions equivalent to the FDA to commercialize
        our
        product candidates in those jurisdictions. In order to obtain FDA approval
        of
        any product candidate, we must submit to the FDA a New Drug Application,
        or
&#8220;NDA,&#8221; demonstrating that the product candidate is safe for humans and effective
        for its intended use. This demonstration requires significant research and
        animal tests, which are referred to as pre-clinical studies, as well as human
        tests, which are referred to as clinical trials. Satisfaction of the FDA&#8217;s
        regulatory requirements typically takes many years, depending upon the type,
        complexity and novelty of the product candidate, and will require substantial
        resources for research, development and testing. We cannot predict whether
        our
        research, development, and clinical approaches will result in drugs that
        the FDA
        considers safe for humans and effective for their intended uses. The FDA
        has
        substantial discretion in the drug approval process and may require us to
        conduct additional pre-clinical and clinical testing or to perform
        post-marketing studies. The approval process may also be delayed by changes
        in
        government regulation, future legislation or administrative action or changes
        in
        FDA policy that occur prior to or during our regulatory review. Delays in
        obtaining regulatory approvals may:</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">Delay
                  commercialization of, and our ability to derive product revenues
                  from, our
                  product candidates;</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">Impose
                  costly procedures on us; 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">Diminish
                  any competitive advantages that we may otherwise
                  enjoy.</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">Even
        if
        we comply with all FDA requests, the FDA may ultimately reject one or more
        of
        our NDAs. We cannot be sure that we will ever obtain regulatory clearance
        for
        our product candidates, ZIO-101 and ZIO-201. Failure to obtain FDA approval
        of
        our product candidates will severely undermine our business by leaving us
        without a saleable product, and therefore without any potential revenue source,
        until another product candidate can be developed. There is no guarantee that
        we
        will ever be able to develop or acquire another product candidate.</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: 8pt; 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">In
        foreign jurisdictions, we similarly must receive approval from applicable
        regulatory authorities before we can commercialize any drugs. Foreign regulatory
        approval processes generally include all of the risks associated with the
        FDA
        approval procedures described above.</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"><em>Our
        product candidates are in early stages of clinical trials, and we cannot
        be
        certain when we will be able to file an NDA with the FDA</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Our
        product candidates, ZIO-101 and ZIO-201, are in early stages of development
        and
        require extensive clinical testing. In April 2005 we initiated two ZIO-101
        phase
        I clinical trials; one in hematological cancers and the other in solid tumors.
        A
        phase I trial for ZIO-201 in up to 25 patients has been initiated, in which
        10
        patients already have been treated with ZIO-201. Notwithstanding our current
        clinical trial plans for each of our existing product candidates, we may
        not be
        able to commence additional trials or see results from these trials within
        our
        anticipated timelines. As such, we cannot predict with any certainty if or
        when
        we might submit an NDA for regulatory approval of our product candidates
        or
        whether such an NDA will be accepted.</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"><em>Clinical
        trials are very expensive, time-consuming and difficult to design and
        implement</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Human
        clinical trials are very expensive and difficult to design and implement,
        in
        part because they are subject to rigorous regulatory requirements. The clinical
        trial process is also time consuming. We estimate that clinical trials of
        our
        product candidates will take at least several years to complete. Furthermore,
        failure can occur at any stage of the trials, and we could encounter problems
        that cause us to abandon or repeat clinical trials. The commencement and
        completion of clinical trials may be delayed by several 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>
      <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">Unforeseen
                  safety issues;</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">Determination
                  of dosing issues;</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">Lack
                  of effectiveness during clinical
                  trials;</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">Slower
                  than expected rates of patient
                  recruitment;</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">Inability
                  to monitor patients adequately during or after treatment;
                  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">Inability
                  or unwillingness of medical investigators to follow our clinical
                  protocols.</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">We
        are
        hopeful that we may be able to obtain &#8220;Fast Track&#8221; status from the FDA for one
        or more of our product candidates. Fast Track status means that the FDA will
        perform an expedited review of our data upon the completion of clinical trials,
        which will thereby decrease the amount of time it will take a product candidate
        that has achieved such designation to reach the commercial market. However,
        there is no guarantee that any of our product candidates will be granted
        Fast
        Track status by the FDA or that, even if such product candidate is granted
        such
        status, the product candidate&#8217;s clinical development and regulatory approval
        process will not be delayed or will be successful.</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, we or the FDA may suspend our clinical trials at any time if it
        appears that we are exposing participants to unacceptable health risks or
        if the
        FDA finds deficiencies in our IND submission or in the conduct of these trials.
        Therefore, we cannot predict with any certainty the schedule for future clinical
        trials.</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"><em>The
        results of our clinical trials may not support our product candidate
        claims</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Even if
        our clinical trials are completed as planned, we cannot be certain that their
        results will support approval of our product candidates. Success in pre-clinical
        testing and early clinical trials does not ensure that later clinical trials
        will be successful, and we cannot be sure that the results of later clinical
        trials will replicate the results of prior clinical trials and pre-clinical
        testing. The clinical trial process may fail to demonstrate that our product
        candidates are safe for humans and effective for indicated uses. This failure
        would cause us to abandon a product candidate and may delay development of
        other
        product candidates. Any delay in, or termination of, our clinical trials
        will
        delay the filing of our NDAs with the FDA and, ultimately, our ability to
        commercialize our product candidates and generate product revenues. In addition,
        our clinical trials involve small patient populations. Because of small sample
        size, the results of these clinical trials may not be indicative of future
        results. </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: 8pt; 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Physicians
        and patients may not accept and use our drugs</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Even if
        the FDA approves our product candidates, physicians and patients may not
        accept
        and use them. Acceptance and use of our products will depend upon a number
        of
        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>
      <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">Perceptions
                  by members of the health care community, including physicians,
                  regarding
                  the safety and effectiveness of our
                  drugs;</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">Cost-effectiveness
                  of our products relative to 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">&#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">Availability
                  of reimbursement for our products from government or other healthcare
                  payers; 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">Effectiveness
                  of marketing and distribution efforts by us and our licensees and
                  distributors, if any.</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">Because
        we expect sales of our current product candidates, if approved, to generate
        substantially all of our product revenues for the foreseeable future, the
        failure of a drug to find market acceptance would harm our business and could
        require us to seek additional financing in order to fund the development
        of
        future product candidates.</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"><em>Our
        drug-development program materially depends upon third-party researchers
        who are
        outside our control</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        We
        materially rely upon independent investigators and collaborators, such as
        universities and medical institutions, to conduct our preclinical and clinical
        trials under agreements with us. These collaborators are not our employees
        and
        we cannot control the amount or timing of resources that they devote to our
        programs. These investigators may not assign as great a priority to our programs
        or pursue them as diligently as we would if we were undertaking such programs
        ourselves. If outside collaborators fail to devote sufficient time and resources
        to our drug development programs, or if their performance is substandard,
        the
        approval of our FDA applications, if any, and our introduction of new drugs,
        if
        any, will be delayed. These collaborators may also have relationships with
        other
        commercial entities, some of whom may compete with us. If our collaborators
        assist our competitors to our detriment, our competitive position would be
        harmed.</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"><em>We
        rely exclusively on third parties to formulate and manufacture our product
        candidates</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        We do
        not have experience in drug formulation or manufacturing and do not intend
        to
        establish our own manufacturing facilities. We lack the resources and expertise
        to formulate or manufacture our own product candidates. We currently are
        contracting for the commercial scale manufacture of our product candidates.
        We
        intend to contract with one or more manufacturers to manufacture, supply,
        store
        and distribute drug supplies for our clinical trials. If a product candidate
        we
        develop or acquire in the future receives FDA approval, we will rely on one
        or
        more third-party contractors to manufacture our drugs. Our anticipated future
        reliance on a limited number of third-party manufacturers exposes us to the
        following risks:</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: 8pt; FONT-FAMILY: Times New Roman">15</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">We
                  may be unable to identify manufacturers on acceptable terms or
                  at all
                  because the number of potential manufacturers is limited and the
                  FDA must
                  approve any replacement contractor. This approval would require
                  new
                  testing and compliance inspections. In addition, a new manufacturer
                  would
                  have to be educated in, or develop substantially equivalent processes
                  for,
                  production of our products after receipt of FDA approval, if
                  any.</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">Our
                  third-party manufacturers might be unable to formulate and manufacture
                  our
                  drugs in the volume and of the quality required to meet our clinical
                  needs
                  and commercial needs, if any.</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">Our
                  future contract manufacturers may not perform as agreed or may
                  not remain
                  in the contract manufacturing business for the time required to
                  supply our
                  clinical trials or to successfully produce, store and distribute
                  our
                  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">&#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
                  manufacturers are subject to ongoing periodic unannounced inspection
                  by
                  the FDA, the DEA, and corresponding state agencies to ensure strict
                  compliance with good manufacturing practices and other government
                  regulations and corresponding foreign standards. We do not have
                  control
                  over third-party manufacturers&#8217; compliance with these regulations and
                  standards.</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">If
                  any third-party manufacturer makes improvements in the manufacturing
                  process for our products, we may not own, or may have to share,
                  the
                  intellectual property rights to the
                  innovation.</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">Each
        of
        these risks could delay our clinical trials, the approval, if any, of our
        product candidates by the FDA or the commercialization of our product candidates
        or result in higher costs or deprive us of potential product
        revenues.</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"><em>We
        do
        not have experience selling, marketing or distributing products and no internal
        capability to do so</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        We
        currently have no marketing, sales or distribution capabilities. If and when
        we
        become reasonably certain that we will be able to commercialize our current
        or
        future products, we anticipate allocating resources to the marketing, sales
        and
        distribution of our proposed products in North America However, we cannot
        assure
        that we will be able to market, sell and distribute our products successfully.
        Our future success also may depend, in part, on our ability to enter into
        and
        maintain collaborative relationships for such capabilities, the collaborator&#8217;s
        strategic interest in the products under development and such collaborator&#8217;s
        ability to successfully market and sell any such products. Although we intend
        to
        pursue collaborative arrangements regarding the sale and marketing of our
        products, there can be no assurance that we will be able to establish or
        maintain our own sales operations or affect collaborative arrangements, or
        that
        if we are able to do so, our collaborators will have effective sales forces.
        There can also be no assurance that we will be able to establish or maintain
        relationships with third party collaborators or develop in-house sales and
        distribution capabilities. To the extent that we depend on third parties
        for
        marketing and distribution, any revenues we receive will depend upon the
        efforts
        of such third parties, and there can be no assurance that such efforts will
        be
        successful. In addition, there can also be no assurance that we will be able
        to
        market and sell our products in the United States or overseas.</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"><em>If
        we
        cannot compete successfully for market share against other drug companies,
        we
        may not achieve sufficient product revenues and our business will
        suffer</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        The
        market for our product candidates, ZIO-101 and ZIO-201, is characterized
        by
        intense competition and rapid technological advances. If a product candidate
        receives FDA approval, it will compete with a number of existing and future
        drugs and therapies developed, manufactured and marketed by others. Existing
        or
        future competing products may provide greater therapeutic convenience or
        clinical or other benefits for a specific indication than our products, or
        may
        offer comparable performance at a lower cost. If our products fail to capture
        and maintain market share, we may not achieve sufficient product revenues
        and
        our business will suffer.</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: 8pt; FONT-FAMILY: Times New Roman">16</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
        will
        compete against fully integrated pharmaceutical companies and smaller companies
        that are collaborating with larger pharmaceutical companies, academic
        institutions, government agencies and other public and private research
        organizations. Many of these competitors have products already approved or
        in
        development. In addition, many of these competitors, either alone or together
        with their collaborative partners, operate larger research and development
        programs or have substantially greater financial resources than we do, as
        well
        as significantly greater experience in:</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">Developing
                  drugs;</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">Undertaking
                  pre-clinical testing and human clinical
                  trials;</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">Obtaining
                  FDA and other regulatory approvals of
                  drugs;</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">Formulating
                  and manufacturing drugs; 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">Launching,
                  marketing and selling drugs.</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"><em>If
        we
        fail to adequately protect or enforce our intellectual property rights or
        secure
        rights to patents of others, the value of our intellectual property rights
        would
        diminish</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Our
        success, competitive position and future revenues will depend in part on
        our
        ability and the abilities of our licensors to obtain and maintain patent
        protection for our products, methods, processes and other technologies, to
        preserve our trade secrets, to prevent third parties from infringing on our
        proprietary rights and to operate without infringing the proprietary rights
        of
        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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
        date,
        we have exclusive rights to certain U.S. and foreign intellectual property.
        We
        anticipate filing additional patent applications both in the U.S. and in
        other
        countries, as appropriate. However, we cannot predict:</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">The
                  degree and range of protection any patents will afford us against
                  competitors, including whether third parties will find ways to
                  invalidate
                  or otherwise circumvent our
                  patents;</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">If
                  and when patents will issue;</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">Whether
                  or not others will obtain patents claiming aspects similar to those
                  covered by our patents and patent applications;
                  or</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">Whether
                  we will need to initiate litigation or administrative proceedings
                  which
                  may be costly whether we win or
                  lose.</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">Our
        success also depends upon the skills, knowledge and experience of our scientific
        and technical personnel, our consultants and advisors as well as our licensors
        and contractors. To help protect our proprietary know-how and our inventions
        for
        which patents may be unobtainable or difficult to obtain, we rely on trade
        secret protection and confidentiality agreements. To this end, it is our
        policy
        generally to require our employees, consultants, advisors and contractors
        to
        enter into agreements which prohibit the disclosure of confidential information
        and, where applicable, require disclosure and assignment to us of the ideas,
        developments, discoveries and inventions important to our business. These
        agreements may not provide adequate protection for our trade secrets, know-how
        or other proprietary information in the event of any unauthorized use or
        disclosure or the lawful development by others of such information. If any
        of
        our trade secrets, know-how or other proprietary information is disclosed,
        the
        value of our trade secrets, know-how and other proprietary rights would be
        significantly impaired and our business and competitive position would
        suffer.</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: 8pt; FONT-FAMILY: Times New Roman">17</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"><em>If
        we
        infringe the rights of third parties we could be prevented from selling
        products, forced to pay damages, and defend against litigation</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        If our
        products, methods, processes or other technologies infringe the proprietary
        rights of other parties, we could incur substantial costs and we may have
        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">Obtain
                  licenses, which may not be available on commercially reasonable
                  terms, if
                  at all;</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">Abandon
                  an infringing drug candidate;</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">Redesign
                  our products or processes to avoid
                  infringement;</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">Stop
                  using the subject matter claimed in the patents held by
                  others;</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">Pay
                  damages; or</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">Defend
                  litigation or administrative proceedings which may be costly whether
                  we
                  win or lose, and which could result in a substantial diversion
                  of our
                  valuable management resources.</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"><em>Our
        ability to generate product revenues will be diminished if our drugs sell
        for
        inadequate prices or patients are unable to obtain adequate levels of
        reimbursement</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Our
        ability to commercialize our drugs, alone or with collaborators, will depend
        in
        part on the extent to which reimbursement will be available from:</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">Government
                  and health administration
                  authorities;</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">Private
                  health maintenance organizations and health insurers;
                  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">Other
                  healthcare payers.</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">Significant
        uncertainty exists as to the reimbursement status of newly approved healthcare
        products. Healthcare payers, including Medicare, are challenging the prices
        charged for medical products and services. Government and other healthcare
        payers increasingly attempt to contain healthcare costs by limiting both
        coverage and the level of reimbursement for drugs. Even if our product
        candidates are approved by the FDA, insurance coverage may not be available,
        and
        reimbursement levels may be inadequate, to cover our drugs. If government
        and
        other healthcare payers do not provide adequate coverage and reimbursement
        levels for our products, once approved, market acceptance of such products
        could
        be reduced.</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"><em>We
        may not be able to successfully manage our growth</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Our
        success will depend upon the expansion of our operations and the effective
        management of our growth, which will place a significant strain on our
        management and on our administrative, operational and financial resources.
        To
        manage this growth, we must expand our facilities, augment our operational,
        financial and management systems and hire and train additional qualified
        personnel. If we are unable to manage our growth effectively, our business
        may
        be harmed.</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 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: 8pt; 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"><em>Our
        business will subject us to the risk of liability claims associated with
        the use
        of hazardous materials and chemicals</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Our
        contract research and development activities may involve the controlled use
        of
        hazardous materials and chemicals. Although we believe that our safety
        procedures for using, storing, handling and disposing of these materials
        comply
        with federal, state and local laws and regulations, we cannot completely
        eliminate the risk of accidental injury or contamination from these materials.
        In the event of such an accident, we could be held liable for any resulting
        damages and any liability could have a materially adverse effect on our
        business, financial condition and results of operations. In addition, the
        federal, state and local laws and regulations governing the use, manufacture,
        storage, handling and disposal of hazardous or radioactive materials and
        waste
        products may require our contractors to incur substantial compliance costs
        that
        could materially adversely affect 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"><em>We
        rely on key executive officers and scientific and medical advisors, and their
        knowledge of our business and technical expertise would be difficult to
        replace</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        We are
        highly dependent on our principal scientific, regulatory and medical advisors.
        We do not have &#8220;key person&#8221; life insurance policies on any of our officers. The
        loss of the technical knowledge and management and industry expertise of
        any of
        our key personnel could result in delays in product development, loss of
        customers and sales and diversion of management resources, which could adversely
        affect our operating results.</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"><em>If
        we
        are unable to hire additional qualified personnel, our ability to grow our
        business may be harmed</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        We will
        need to hire additional qualified personnel with expertise in pre-clinical
        testing, clinical research and testing, government regulation, formulation
        and
        manufacturing, as well as sales and marketing. We compete for qualified
        individuals with numerous biopharmaceutical companies, universities and other
        research institutions. Competition for such individuals is intense, and we
        cannot be certain that our search for such personnel will be successful.
        Attracting and retaining qualified personnel will be critical to our
        success.</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"><em>We
        may incur substantial liabilities and may be required to limit commercialization
        of our products in response to product-liability lawsuits</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        The
        testing and marketing of medical products entail an inherent risk of product
        liability. If we cannot successfully defend ourselves against product-liability
        claims, we may incur substantial liabilities or be required to limit
        commercialization of our products. Our inability to obtain sufficient
        product-liability insurance at an acceptable cost to protect against potential
        product liability claims could prevent or inhibit the commercialization of
        pharmaceutical products we develop, alone or with collaborators. We currently
        carry clinical trial insurance and product-liability insurance. </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 id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>There
        are certain interlocking relationships among us and certain affiliates of
        Paramount, which may present potential conflicts of interest</em></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">Lindsay
        A. Rosenwald, M.D., who may be deemed to beneficially own approximately 20.13%
        of our common stock, is Chairman and Chief Executive Officer of Paramount
        BioCapital, Inc., an investment banking firm that served as placement agent
        in
        connection with a private placement of ZIOPHARM&#8217;s Series A Convertible Preferred
        Stock that terminated in May 2005. Paramount also served as a finder in
        connection with the Company&#8217;s option agreement with Southern Research Institute.
        The Company paid fees and issued securities to Paramount or its designees
        in
        connection with these transactions and Paramount currently has a right of
        first
        refusal to act as the placement agent for the private sale of our securities
        until May 31, 2008. Dr. Michael Weiser and Timothy McInerney, each of whom
        is a
        member of the Company&#8217;s board of directors, are also full-time </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">employee</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">s</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        of
        Paramount. See &#8220;Certain Transactions and Relationships - ZIOPHARM Transactions
        and Relationship.&#8221;</font></div>
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        </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">19</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">Paramount,
        Dr. Rosenwald, Dr. Weiser,&#160;and&#160;Mr. McInerney&#160;are
        not&#160;obligated pursuant to any agreement or understanding with us to
        make
        any additional products or technologies available to us, nor can there be
        any
        assurance that any biomedical or pharmaceutical products or technologies
        identified in the future by such parties will be made available to us. In
        addition, certain of our current officers and directors, as well as officers
        or
        directors that may be hereafter appointed, may from time to time serve as
        officers or directors of other biopharmaceutical or biotechnology companies.
        There can be no assurance that such other companies will not have interests
        in
        conflict with our own. </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"><em>Because
        we became public by means of a reverse merger, we may not be able to attract
        the
        attention of major brokerage firms</em></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">Additional
        risks may exist as a result of our becoming a public reporting company through
        a
&#8220;reverse merger.&#8221; Security analysts of major brokerage firms may not provide
        coverage of the Company. B</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ecause
        we
        became public through a reverse merger,</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        there is
        no incentive to brokerage firms to recommend the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">purchase</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        of our
        common stock. No assurance can be given that brokerage firms will want to
        provide analyst coverage of our Company in the future.</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"><em>We
        are subject to Sarbanes-Oxley and the reporting requirements of federal
        securities laws, which can be expensive</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        As a
        public reporting company, we are subject to the Sarbanes-Oxley Act of 2002,
        as
        well as the information and reporting requirements of the Securities Exchange
        Act of 1934, as amended, and other federal securities laws. The costs of
        compliance with the Sarbanes-Oxley Act and of preparing and filing annual
        and
        quarterly reports, proxy statements and other information with the SEC, and
        furnishing audited reports to stockholders, will cause our expenses to be
        higher
        than they would be if ZIOPHARM had remained privately held and did not
        consummate 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
        common stock trades only in an illiquid trading market</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Trading
        of our common stock is conducted on the over-the-counter bulletin board.
        This
        has an adverse effect on the liquidity of our common stock, not only in terms
        of
        the number of shares that can be bought and sold at a given price, but also
        through delays in the timing of transactions and reduction in security analysts&#8217;
        and the media&#8217;s coverage of our Company and its common stock. This may result in
        lower prices for our common stock than might otherwise be obtained and could
        also result in a larger spread between the bid and asked prices 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>There
        is not now, and there may not ever be an active market for shares of our
        common
        stock</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        In
        general, there has been very little trading activity in shares of the Company&#8217;s
        common stock. The small trading volume will likely make it difficult for
        our
        stockholders to sell their shares as and when they choose. Furthermore, small
        trading volumes generally depress market prices. As a result, you may not
        always
        be able to resell shares of our common stock publicly at the time and prices
        that you feel are fair or appropriate.</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"><em>Because
        it is a &#8220;penny stock,&#8221; you may have difficulty selling shares of our common
        stock</em></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"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        common stock is a &#8220;penny stock&#8221; and is therefore subject to the requirements of
        Rule 15g-9 under the Securities and Exchange Act of 1934. Under this rule,
        broker-dealers who sell penny stocks must provide purchasers of these stocks
        with a standardized risk- disclosure document prepared by the Securities
        and
        Exchange Commission. Under applicable regulations, our common stock will
        generally remain a &#8220;penny stock&#8221; until and for such time as its per-share price
        is $5.00 or more (as determined in accordance with SEC regulations), or until
        we
        meet certain net asset or revenue thresholds. These thresholds include the
        possession of net tangible assets (i.e., total assets less intangible assets
        and
        liabilities) in excess of $2,000,000 in the event we have been operating
        for at
        least three years or $5,000,000 in the event we have been operating for fewer
        than three years, and the recognition of average revenues equal to at least
        $6,000,000 for each of the last three years. We do not anticipate meeting
        any of
        the foregoing thresholds in the foreseeable future.</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: 8pt; FONT-FAMILY: Times New Roman">20</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">The
        penny
        stock rules severely limit the liquidity of securities in the secondary market,
        and many brokers choose not to participate in penny-stock transactions. As
        a
        result, there is generally less trading in penny stocks. If you become a
        holder
        of our common stock, you may not always be able to resell shares of our common
        stock publicly at the time and prices that you feel are fair or
        appropriate.</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"><em>We
        have never paid dividends and do not intend to do so for the foreseeable
        future</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        We have
        never paid dividends on our capital stock and we do not anticipate that we
        will
        pay any dividends for the foreseeable future. Accordingly, any return on
        an
        investment in our Company will be realized, if at all, only when you sell
        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">
        <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: 8pt; 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: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Management&#8217;s
        Discussion and Analysis or Plan of Operation</em></strong></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">ZIOPHARM
        Oncology Inc. (the &#8220;Company&#8221;) is a development-stage company that is seeking to
        develop and commercialize a diverse, risk-sensitive portfolio of in-licensed
        cancer drugs that address unmet medical needs. The Company&#8217;s management and
        advisors are focused on licensing proprietary drug candidate families that
        are
        related to cancer therapeutics on the market where the application of new
        biological understanding and the Company&#8217;s drug development expertise will lead
        to a lower risk for clinical development failure while expediting clinical
        registration. The Company expects to commercialize its products on its own
        in
        North America but recognizes that promising clinical trial results in cancers
        with a high incidence and prevalence might also be addressed in a commercial
        partnership with another company with the requisite financial resources.
        Currently, the Company is in U.S. phase I studies for two product candidates
        known as ZIO-101 and ZIO-201. The Company currently intends to continue with
        clinical development of ZIO-101 for advanced multiple myeloma and ZIO-201
        for
        advanced sarcoma. </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
        Company&#8217;s corporate office is located at 1180 Avenue of the Americas, 19th
        Floor, New York, NY 10036 with a telephone number of (646) 214-0700. The
        Company&#8217;s business and development operations are located in Charlestown,
        Massachusetts.</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>Plan
        of Operation</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
        plan
        of operation for the twelve month period commencing on September 13, 2005,
        the
        date of this report, is to continue implementing our business strategy,
        including the clinical development of our two lead product candidates, ZIO-101
        and ZIO-201. We also intend to expand our drug candidate portfolio by seeking
        additional drug candidates through in-licensing arrangements. We expect our
        principal expenditures during the next 12 months to 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>
        <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: 54pt">
                </td>
                <td align="left" style="WIDTH: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol">&#183;</font></td>
                <td align="left">
                  <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Fees
                    and milestone payments required under the license agreements
                    relating to
                    our existing product candidates;
</font></div>
                </td>
              </tr>

          </table>
        </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>
        <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: 54pt">
              </td>
              <td align="left" style="WIDTH: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol">&#183;</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Clinical
                  trial expenses, including the costs incurred with respect to the
                  conduct
                  of clinical trials in the United States for ZIO-101 and ZIO-201
                  and
                  preclinical costs associated with back-up candidates ZIO-102 and
                  ZIO-202;</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="justify">&#160;</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: 54pt">
              </td>
              <td align="left" style="WIDTH: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol">&#183;</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Costs
                  related to the scale-up and manufacture of ZIO-101 and ZIO-201;
                  </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>
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            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 54pt">
              </td>
              <td align="left" style="WIDTH: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol">&#183;</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Rent
                  for our facilities; 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 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: 54pt">
              </td>
              <td align="left" style="WIDTH: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol">&#183;</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">General
                  corporate and working capital, including general and administrative
                  expenses.</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">As
        part
        of our plan for additional employees, we anticipate hiring at least 3&#160;to
        4
        additional full-time employees in medical, regulatory and administrative
        support. In addition, we intend to use senior advisors, consultants, clinical
        research organizations and third parties to perform certain aspects of product
        development, manufacturing, clinical and preclinical development, and regulatory
        and quality assurance functions. </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">At
        our
        current and desired pace of clinical development of our two product candidates,
        over the next 12 months we expect to spend approximately $4.6 million&#160;on
        clinical trials (including milestone payments that we expect to be triggered
        under the license agreements relating to our product candidates), approximately
        $3.7 million&#160;on manufacturing costs, $215,000 on facilities rent,
        and
        approximately $6.8 million&#160;on general corporate and working capital.
        </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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        believe we currently have sufficient capital to fund development and
        commercialization activities of ZIO-101 and ZIO-201 into the second quarter
        of
        2006. Because our business does not generate any cash flow, however, we will
        need to raise additional capital to continue development of the product
        candidates beyond that time. We expect to raise such additional capital by
        either borrowing money or by selling shares of our capital stock. To the
        extent
        additional capital is not available when we need it, we may be forced to
        abandon
        our development and commercialization efforts, which would have a material
        adverse effect on the prospects of our business. Further, our assumptions
        relating the expected costs of development and commercialization and timeframe
        for completion are dependent on numerous factors other than available financing,
        including significant unforeseen delays in the clinical trial and regulatory
        approval process, which could be extremely costly. In addition, our estimates
        assume that we will be able to enroll a sufficient number of patients in
        each
        clinical trial.</font></div>
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        Candidate Development and Clinical Trials</em></strong></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">ZIO-101,
        organic arsenic, is being developed presently to treat advanced myeloma.
        As
        follow-on to the ongoing phase I trials, a phase I/II trial in advanced multiple
        myeloma is in the advanced planning stage. With the completion of this trial
        in
        2006, the Company expects to initiate a registration trial in advanced multiple
        myeloma. The Company will continue to explore the use of ZIO-101 in solid
        tumors
        as well as a phase II trial in advanced multiple myeloma using a different
        dosing regimen. Preclinical development will continue with a back-up compound
        designated as ZIO-102. Additional compounds are being synthesized under our
        agreement with the University of Texas M.D. Anderson Cancer Center and the
        Texas
        A&amp;M University System. Technology transfer and scale-up for the commercial
        manufacture of the active pharmaceutical ingredient, its lyophilization,
        and
        final product specification will continue through the period leading to the
        expected registration trial in early 2007. </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">ZIO-201,
        stabilized isophosphoramide mustard, is being developed presently to treat
        advanced sarcoma. As follow-on to the ongoing phase I trial, a phase I/II
        trial
        or a phase II trial in advanced sarcoma is in the advanced planning stage.
        With
        the completion of this trial in 2006, the Company expects to initiate a
        registration trial in advanced sarcoma in early 2007. The Company will explore
        the potential to test ZIO-201 in pediatric sarcoma in a phase II trial.
        Preclinical development will continue with back-up analogues, one of which
        we
        would expect to be designated ZIO-202. Technology transfer and scale-up for
        the
        commercial manufacture of the active pharmaceutical ingredient, its
        lyophilization, and final product specification will continue through the
        period
        leading to the expected registration trial in early 2007. </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">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Off-Balance
        Sheet Arrangements </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
        Company has no off-balance sheet arrangements.</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: 8pt; FONT-FAMILY: Times New Roman">23</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>
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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><em>Security
        Ownership of Certain Beneficial Owners and Management</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
        following table summarizes certain information regarding the beneficial
        ownership (as such term is defined in Rule 13d-3 under the Securities Exchange
        Act of 1934) of the Company&#8217;s outstanding common stock as of September 13, 2005
        (after giving effect to the Merger) by (i) each person known by the Company
        to
        be the beneficial owner of more than 5% of the Company&#8217;s outstanding common
        stock, (ii) each director of the Company, (iii) each of the Company&#8217;s named
        executive officers (as defined in Item 402(a)(3) of Regulation S-B under
        the
        Securities Act of 1933), and (iv) all executive officers and directors as
        a
        group. Except as indicated in the footnotes below, the security and stockholders
        listed below possess sole voting and investment power with respect to their
        shares. &#160;Except as otherwise indicated, the address of the security
        and
        stockholders listed below is 1180 Avenue of the Americas, 19</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Floor,
        New York, NY 10036.</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="center">
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            <tr>
              <td align="left" valign="bottom" width="37%">
                <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 Address of Beneficial Owner</strong></font></div>
              </td>
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              <td align="left" valign="bottom" 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="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Shares
                  of</strong></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"><strong>Common
                  Stock</strong></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"><strong>Beneficially
                  Owned (#)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup><strong>(1)</strong></sup></font></div>
              </td>
              <td width="1%">&#160;</td>
              <td 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="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Percentage
                  of </strong></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"><strong>Common
                  Stock</strong></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"><strong>Beneficially
                  Owned (%)</strong></font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="37%">
                <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.
                  Jonathan Lewis </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(2)</sup></font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="23%">
                <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">136,868</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="20%">
                <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">1.88%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="37%">
                <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">Richard
                  Bagley </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(3)</sup></font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="23%">
                <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">80,428</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="20%">
                <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">1.11%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="37%">
                <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
                  Peter Gale </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(4)</sup></font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="23%">
                <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">8,371</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="20%">
                <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="#ffffff">
              <td align="left" valign="bottom" width="37%">
                <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">Murray
                  Brennan</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="23%">
                <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">0</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="20%">
                <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="bottom" width="37%">
                <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
                  Cannon</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="23%">
                <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">0</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="20%">
                <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="#ffffff">
              <td align="left" valign="bottom" width="37%">
                <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">Hon.
                  Wyche Fowler</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="23%">
                <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">0</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="20%">
                <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="bottom" width="37%">
                <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">Gary
                  Fragin</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="23%">
                <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">0</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="20%">
                <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="#ffffff">
              <td align="left" valign="bottom" width="37%">
                <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">Timothy
                  McInerney </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(5)</sup></font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="23%">
                <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">79,972</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="20%">
                <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">1.11%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="37%">
                <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">Michael
                  Weiser </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(6)</sup></font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="23%">
                <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">119,011</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="bottom" width="20%">
                <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">1.65%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="37%">
                <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">All
                  executive officers and directors</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">as
                  a group </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(7)</sup></font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="top" width="23%">
                <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">424,650</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="top" width="20%">
                <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">5.71%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="37%">
                <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">Mibars,
                  LLC</font></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: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">365
                  West End Avenue</font></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: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">New
                  York, NY 10024</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="top" width="23%">
                <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">1,214,456</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="top" width="20%">
                <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">16.97%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="37%">
                <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">Lindsay
                  A. Rosenwald </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(8)</sup></font></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: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">787
                  Seventh Avenue, 48th Floor</font></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: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">New
                  York, NY 10019</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="top" width="23%">
                <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">1,498,087
                  </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(8)</sup></font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="top" width="20%">
                <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">20.13%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="37%">
                <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">Atlas
                  Equity I, Ltd.</font></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: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">181
                  W. Madison, Suite 3600</font></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: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chicago,
                  IL 60602</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="top" width="23%">
                <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">695,797</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="top" width="20%">
                <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">9.72%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="37%">
                <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">Lester
                  E. Lipschutz</font></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: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1650
                  Arch Street, 22</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>nd</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                  Floor</font></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: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Philadelphia,
                  PA 19103</font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="top" width="23%">
                <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">463,864
                  </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(9)</sup></font></div>
              </td>
              <td width="1%">&#160;</td>
              <td valign="top" width="20%">
                <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">6.48%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="37%">&#160;</td>
              <td width="1%">&#160;</td>
              <td valign="top" width="23%">&#160;</td>
              <td width="1%">&#160;</td>
              <td valign="top" width="20%">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="37%">
                <hr style="COLOR: #000000" align="left" noshade size="1" width="35%"><font size="2">*
                Less than 1%</font>&#160;</td>
              <td width="1%">&#160;</td>
              <td valign="top" width="23%">&#160;</td>
              <td width="1%">&#160;</td>
              <td valign="top" width="20%">&#160;</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>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
                <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">(1)</font></div>
              </td>
              <td>
                <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">Beneficial
                  ownership is determined in accordance with SEC rules, beneficial
                  ownership
                  includes any shares as to which the security or stockholder has
                  sole or
                  shared voting power or investment power, and also any shares which
                  the
                  security or stockholder has the right to acquire within 60 days
                  of the
                  date hereof, whether through the exercise or conversion of any
                  stock
                  option, convertible security, warrant or other right. The indication
                  herein that shares are beneficially owned is not an admission on
                  the part
                  of the security or stockholder that he, she or it is a direct or
                  indirect
                  beneficial owner of those shares.</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: 8pt; FONT-FAMILY: Times New Roman">24</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 align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
                <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">(2)</font></div>
              </td>
              <td>
                <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">Includes
                  136,868 shares issuable upon the exercise of stock options that
                  are
                  currently exercisable or will become exercisable within the next
                  60
                  days.</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 align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
                <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">(3)</font></div>
              </td>
              <td>
                <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">Includes
                  80,428 shares issuable upon the exercise of stock options that
                  are
                  currently exercisable or will become exercisable within the next
                  60
                  days.</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 align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
                <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">(4)</font></div>
              </td>
              <td>
                <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">Includes
                  8,371 shares issuable upon the exercise of stock options that are
                  currently exercisable or will become exercisable within the next
                  60
                  days.</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 align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
                <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">(5)</font></div>
              </td>
              <td>
                <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">Includes
                  20,767 shares issuable upon the exercise of warrants that are currently
                  exercisable or will become exercisable within the next 60
                  days.</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 align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
                <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">(6)</font></div>
              </td>
              <td>
                <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">Includes
                  35,566 shares issuable upon the exercise of warrants that are currently
                  exercisable or will become exercisable within the next 60
                  days.</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 align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
                <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">(7)</font></div>
              </td>
              <td>
                <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">Includes
                  282,000 shares issuable upon the exercise of convertible securities
                  that
                  are currently exercisable or will become exercisable within the
                  next 60
                  days.</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 align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
                <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">(8)</font></div>
              </td>
              <td>
                <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">Excludes
                  463,864 shares held by certain trusts for the benefit of Dr. Rosenwald
                  and
                  his family for which Dr. Rosenwald disclaims beneficial ownership.
                  Includes 221,011 shares issuable upon the exercise of warrants
                  granted to
                  Dr. Rosenwald and 62,621 shares issuable upon the exercise of warrants
                  granted to Paramount BioCapital Investments, LLC, of which Dr.
                  Rosenwald
                  is the managing member, both such warrants are currently exercisable
                  or
                  will become exercisable within the next 60 days. Also includes
                  737,777
                  shares that Dr. Rosenwald has the right to acquire from existing
                  stockholders under certain circumstances pursuant to the terms
                  of pledge
                  agreements between Dr. Rosenwald and such
                  stockholders.</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 align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
                <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">(9)</font></div>
              </td>
              <td>
                <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">Includes
                  463,864 shares held by separate trusts for the benefit of Dr. Rosenwald
                  or
                  his family with respect to which Mr. Lipschutz is either trustee
                  or
                  investment manager and has investment and voting power. Dr. Rosenwald
                  disclaims beneficial ownership of these shares.
</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">&#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: 8pt; 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"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Management
        and Certain Security Holders</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">At
        the
        effective time of the Merger, the Company&#8217;s board of directors was reconstituted
        by the appointment of Jonathan Lewis, Richard Bagley, Murray Brennan, James
        Cannon, Senator Wyche Fowler, Jr., Gary S. Fragin, Timothy McInerney and
        Michael
        Weiser as directors (all of whom were directors of ZIOPHARM immediately prior
        to
        the Merger), and the resignations of David C. Olson and David Floor from
        their
        roles as directors of the Company. The Company&#8217;s executive management team was
        also reconstituted and David C. Olson resigned from his positions as the
        Company&#8217;s President, Treasurer and Secretary. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        following table sets forth the name and position of each of the Company&#8217;s
        directors and executive officers after 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 align="center">
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr bgcolor="#ffffff">
              <td align="justify" valign="top" width="33%" style="BORDER-BOTTOM: black thin solid">
                <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>Name</strong></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="7%" 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>Age</strong></font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="justify" valign="top" width="39%" style="BORDER-BOTTOM: black thin solid">
                <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>Positions</strong></font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="justify" valign="top" width="33%">
                <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">Jonathan
                  Lewis, M.D., Ph.D.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="7%">
                <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">47</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="justify" valign="top" width="39%">
                <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">Director
                  &amp; Chief Executive Officer</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="justify" valign="top" width="33%">
                <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">Richard
                  Bagley</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="7%">
                <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">62</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="justify" valign="top" width="39%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director,
                  President, Chief Operating Officer &amp; Treasurer</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="justify" valign="top" width="33%">
                <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">Robert
                  Peter Gale, M.D., Ph.D, DSc.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="7%">
                <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">59</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="justify" valign="top" width="39%">
                <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">Chief
                  Scientific Officer, Head of Research</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="justify" valign="top" width="33%">
                <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">Murray
                  Brennan, M.D.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="7%">
                <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">65</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="justify" valign="top" width="39%">
                <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">Director</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="justify" valign="top" width="33%">
                <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">James
                  Cannon</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="7%">
                <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">67</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="justify" valign="top" width="39%">
                <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">Director</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="justify" valign="top" width="33%">
                <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">Senator
                  Wyche Fowler, Jr., JD.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="7%">
                <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">64</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="justify" valign="top" width="39%">
                <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">Director</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="justify" valign="top" width="33%">
                <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">Gary
                  S. Fragin</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="7%">
                <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">59</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="justify" valign="top" width="39%">
                <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">Director</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="justify" valign="top" width="33%">
                <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">Timothy
                  McInerney</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="7%">
                <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">44</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="justify" valign="top" width="39%">
                <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">Director</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="justify" valign="top" width="33%">
                <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">Michael
                  Weiser, M.D., Ph.D.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td valign="top" width="7%">
                <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">43</font></div>
              </td>
              <td width="2%">&#160;</td>
              <td align="justify" valign="top" width="39%">
                <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">Director</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"><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
        biographies of the directors and executive officers listed above are set
        forth
        below, all of whom began serving the Company in their respective positions
        as of
        the effective time 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Jonathan
        Lewis</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        47, is
        our Chief Executive Officer and a director, and has served as Chief Executive
        Officer and a director of ZIOPHARM since January 2004. From July 1994 until
        June
        2001, Dr. Lewis served as Professor of Surgery and Medicine at Memorial
        Sloan-Kettering Cancer Center and he served as Chief Medical Officer and
        Chairman of the Medical Board at Antigenics, Inc. from June 2000 until November
        2003. He serves as a director on the Board of POPPA (the Police Organization
        Providing Peer Assistance) of the New York Police Department
        (NYPD).</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"><em>Richard
        Bagley</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        62,
        serves as our President, Chief Operating Officer and Treasurer and a director
        of
        the Company, and has served</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">ZIOPHARM
        in those capacities since July 2004. Prior to that, he served as a consultant
        to
        ZIOPHARM while serving as a senior advisor to The University of Texas M.D.
        Anderson Cancer Center. Mr. Bagley served in several capacities at Squibb
        Corporation from 1985-1990, including as President of E. R. Squibb &amp; Sons,
        U.S. in 1988 and 1989. He served as Director, Chief Executive Officer and
        President of ImmuLogic Pharmaceutical Corporation from 1990 to 1994, as
        Director, Chief Executive Officer and Chairman of ProScript, Inc. from 1994
        to
        1998, as Director, President and Chief Executive Officer of AltaRex Corp.
        from
        1998 to May 2003, and thereafter as a part time consultant and advisor in
        life
        sciences until joining ZIOPHARM full time. Mr. Bagley initiated a career
        in
        pharmaceuticals in 1968 with Smith Kline and French Laboratories, leaving
        in
        1985 after serving as President of the consumer products division</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"><em>Robert
        Peter Gale</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        59, is
        our Chief Scientific Officer and Head of Research and has served ZIOPHARM
        in
        that capacity since January 2004. Dr. Gale is also on the medical staff of
        UCLA
        School of Medicine in the Department of Medicine, Division of Hematology
        and
        Oncology and is Visiting Professor of Hematology at Imperial College of Science,
        Technology and Medicine, Hammersmith Hospital, London. Dr. Gale served as
        Senior
        Vice President for Medical Affairs at Antigenics, Inc. from April 2001 until
        May
        2002 and as a consultant to that company from May 2002 through May
        2004</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 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: 8pt; 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"><em>Murray
        Brennan</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        65, is
        a director of the Company and has served as a member of ZIOPHARM&#8217;s board of
        directors since December 22, 2004. Dr. Brennan has been Chairman of Memorial
        Sloan-Kettering Cancer Center&#8217;s Department of Surgery since 1985, and is a
        former </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Vice
        President of the American College of Surgeons, a position he held from 2004
        to
        2005. Dr. Brennan is also a member of the National Academy of
        Sciences.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        He
        served as director of the American Board of Surgery from 1984 to 1990,
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chairman
        of the American College of Surgeons&#8217; Commission on Cancer from 1992 to 1994,
        President of the Society of Surgical Oncology from 1995 to 1996, and President
        of the American Surgical Association from 2002 to 2003.</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"><em>James
        Cannon</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        67, is
        a director of the Company and has served as a member of ZIOPHARM&#8217;s board of
        directors since December 22, 2004. Mr. Cannon is </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Vice
        Chairman, Chief Financial Officer and a member of the board of directors
        of BBDO
        Worldwide. Mr. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cannon
        joined BBDO in 1967, was appointed Chief Financial Officer of the agency
        in
        1984, and was elected to its board of directors in 1985. In 1986,
        Mr.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Cannon
        was appointed </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Comptroller</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        and a
        member of the board of directors of Omnicom, a company affiliated with BBDO
        Worldwide, and served in those capacities through May 2002. In 1987, Mr.
        Cannon
        also served as Director of Financial Operations of the Omnicom Group from
        1987
        to 1989, when he rejoined BBDO Worldwide as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Executive
        Vice President and Chief Financial Officer. Mr. Cannon was appointed Vice
        Chairman of BBDO Worldwide in 1990.</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"><em>Senator
        Wyche Fowler, Jr.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        64, is
        a director of the Company and has served as a member of ZIOPHARM&#8217;s board of
        directors since December 22, 2004. Senator Fowler has been engaged in an
        international business and law practice since May 2001, and has served as
        chairman of the board of the Middle East Institute, a non-profit foundation
        in
        Washington, DC, since September 2001. Senator Fowler served as U.S. Senator
        from
        Georgia from January 1987 to January 1993, and had previously served in the
        U.S.
        House of Representatives from 1977 until his senatorial election. During
        his
        time in the U.S. Senate, Senator Fowler served as a member of the Senate
        Appropriations, Budget, Energy and Agriculture Committees. While in the U.S.
        House of Representatives, he was a member of the House Ways and Means and
        Foreign Affairs Committees, as well as the Select Committee on Intelligence.
        President Clinton appointed Senator Fowler as Ambassador to the Kingdom of
        Saudi
        Arabia in 1996, where he served through 2001. Senator Fowler is a member
        of the
        board of directors of Brandywine Realty Trust, a real estate investment trust
        traded on the New York Stock Exchange</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"><em>Gary
        S. Fragin</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        59, is
        a director of the Company and has served as a member of ZIOPHARM&#8217;s board of
        directors since December 22, 2004. Mr. Fragin is currently managing partner
        of
        Osborn Partners, LP and managing partner of Fragin Asset Management, LP,
        positions. Mr. Fragin was the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">General
        Partner and Chief Administrative/Operating Officer of Steinhardt Organization,
        prior to which he was a partner, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director
        of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Trading</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        and
        member of the Management Committee and Executive Committee at Oppenheimer
        and
        Co.</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"><em>Timothy
        McInerney</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        44, is
        a director of the Company and has served on ZIOPHARM&#8217;s board of directors since
        July 20, 2005. Since 1992, Mr. McInerney has been a Managing Director of
        Paramount BioCapital, Inc. where he oversees the overall distribution of
        Paramount&#8217;s private equity product. Prior to 1992, Mr. McInerney was a research
        analyst focusing on the biotechnology industry at Ladenburg, Thalman &amp; Co.
        Prior to that, Mr. McInerney held equity sales positions at Bear, Stearns
&amp;
        Co. and Shearson Lehman Brothers, Inc. Mr. McInerney also has worked in sales
        and marketing for Bristol-Myers Squibb</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 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: 8pt; 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Michael
        Weiser</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        43, is
        a director of the Company and has served on ZIOPHARM&#8217;s board of directors since
        ZIOPHARM&#8217;s inception. Dr. Weiser is the Director of Research of Paramount
        BioCapital. In addition to serving on the boards of directors of several
        privately-held companies, Dr. Weiser currently serves on the board of directors
        of Manhattan Pharmaceuticals, Inc., VioQuest Pharmaceuticals, Inc., Hana
        BioSciences, Inc. and Chelsea Therapeutics, Inc., all publicly-traded
        biotechnology companies</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"><strong><em>Audit
        Committee</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">Immediately
        following the Merger, the Company formed an audit committee of the board
        of
        directors. The current members of the audit committee are Mr. James Cannon,
        who
        serves as the committee&#8217;s Chairman, and Messrs. Fragin and Bagley. The audit
        committee assists the board of directors in fulfilling its responsibilities
        of
        ensuring that management is maintaining an adequate system of internal controls
        such that there is reasonable assurance that assets are safeguarded and that
        financial reports are properly prepared; that there is consistent application
        of
        generally accepted accounting principles; and that there is compliance with
        management&#8217;s policies and procedures. In performing these functions, the audit
        committee will meet periodically with the independent auditors and management
        to
        review their work and confirm that they are properly discharging their
        respective responsibilities. In addition, the audit committee recommends
        the
        independent auditors for appointment by the board of directors. Prior to
        the
        Merger, the Company did not have an audit committee. Two members of the audit
        committee, Messrs. Cannon and Fragin, are independent, as independence is
        defined in Rule 4200(a)(15) of the Nasdaq listing standards and Rule 10A-3
        under
        the 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: 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 has determined that each of the audit committee members is able
        to
        read and understand fundamental financial statements. In addition, the board
        of
        directors has determined that at least one member of the audit committee,
        Mr.
        James Cannon, is an &#8220;audit committee financial expert&#8221; as that term is defined
        in Item 401(e)(2) of Regulation S-B promulgated under the Securities and
        Exchange Act of 1934. Mr. Cannon&#8217;s relevant experience includes his current
        service as the Chief Financial Officer of BBDO Worldwide, a position he has
        held
        for the past 20 years, and his past service as director of financial operations
        of the Omnicom Group.</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: 8pt; FONT-FAMILY: Times New Roman">28</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><em>Executive
        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"><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 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 sets forth the cash and non-cash compensation awarded to
        or
        earned by (i) each individual serving as chief executive officer of ZIOPHARM
        during the fiscal year ended December 31, 2004; and (ii) each other individual
        that served as an executive officer of ZIOPHARM at the conclusion of the
        fiscal
        year ended December 31, 2004 and who received in excess of $100,000 in the
        form
        of salary and bonus during such fiscal year (collectively, the &#8220;named
        executives&#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>
        <div>
          <div>
            <table cellpadding="0" cellspacing="0" width="100%">

                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="26%" bgcolor="#ffffff" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                  <td colspan="5" valign="bottom" width="41%" bgcolor="#ffffff" style="BORDER-BOTTOM: #000000 thin solid">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;&#160;<font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Annual
                      Compensation</strong></font></div>
                  </td>
                  <td valign="bottom" width="13%" bgcolor="#ffffff" style="BORDER-BOTTOM: #000000 thin solid">&#160;

                    <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>Long-Term</strong></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"><strong>Compensation</strong></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"><strong>Awards</strong></font></div>
                  </td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="26%" bgcolor="#ffffff" style="BORDER-BOTTOM: #000000 thin solid">&#160;

                    <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 Position</strong></font></div>
                  </td>
                  <td valign="bottom" width="6%" bgcolor="#ffffff" style="BORDER-BOTTOM: #000000 thin solid">&#160;

                    <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>Yea</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>r</strong></font></div>
                  </td>
                  <td valign="bottom" width="10%" bgcolor="#ffffff" style="BORDER-BOTTOM: #000000 thin solid">&#160;

                    <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 valign="bottom" width="10%" bgcolor="#ffffff" style="BORDER-BOTTOM: #000000 thin solid">&#160;

                    <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
                      ($)</strong></font></div>
                  </td>
                  <td colspan="2" valign="bottom" width="15%" bgcolor="#ffffff" style="BORDER-BOTTOM: #000000 thin solid">
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Other
                      Annual </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Compensation
                      ($)</strong></font></div>
                  </td>
                  <td valign="bottom" width="13%" bgcolor="#ffffff" style="BORDER-BOTTOM: #000000 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>Securities
                      Underlying </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Options
                      (#)</strong></font></div>
                  </td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="top" width="26%">
                    <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.
                      Jonathan Lewis,</font></div>
                  </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">2004</font></div>
                  </td>
                  <td valign="top" width="10%">
                    <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">344,167</font></div>
                  </td>
                  <td valign="top" width="10%">
                    <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">500,000</font></div>
                  </td>
                  <td colspan="2" valign="top" width="15%">
                    <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">9,099</font></div>
                  </td>
                  <td valign="top" width="13%">
                    <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">268,653</font></div>
                  </td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="top" width="26%">
                    <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: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                      Executive Officer </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(1)</sup></font>&#160;</div>
                  </td>
                  <td valign="top" width="6%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td colspan="2" valign="top" width="15%">&#160;</td>
                  <td valign="top" width="13%">&#160;</td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td align="left" valign="top" width="26%">&#160;</td>
                  <td valign="top" width="6%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td colspan="2" valign="top" width="15%">&#160;</td>
                  <td valign="top" width="13%">&#160;</td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="top" width="26%">
                    <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">Richard
                      Bagley,</font></div>
                  </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">2004</font></div>
                  </td>
                  <td valign="top" width="10%">
                    <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">43,750</font></div>
                  </td>
                  <td valign="top" width="10%">
                    <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">75,000</font></div>
                  </td>
                  <td colspan="2" valign="top" width="15%">
                    <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">4,057</font></div>
                  </td>
                  <td valign="top" width="13%">
                    <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">150,668</font></div>
                  </td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="top" width="26%">
                    <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: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">President,
                      Chief Operating </font></div>
                  </td>
                  <td valign="top" width="6%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td colspan="2" valign="top" width="15%">&#160;</td>
                  <td valign="top" width="13%">&#160;</td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="top" width="26%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Officer
                      and Treasurer </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(2)</sup></font>&#160;</div>
                  </td>
                  <td valign="top" width="6%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td colspan="2" valign="top" width="15%">&#160;</td>
                  <td valign="top" width="13%">&#160;</td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td align="left" valign="top" width="26%">&#160;</td>
                  <td valign="top" width="6%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td colspan="2" valign="top" width="15%">&#160;</td>
                  <td valign="top" width="13%">&#160;</td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="top" width="26%"><font size="2">Dr.
                    Robert Peter
                    Gale,</font>&#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">2004</font>&#160;</div>
                  </td>
                  <td valign="top" width="10%">
                    <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">239,583</font>&#160;</div>
                  </td>
                  <td valign="top" width="10%">
                    <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">150,000</font>&#160;</div>
                  </td>
                  <td colspan="2" valign="top" width="15%">
                    <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">2,543</font>&#160;</div>
                  </td>
                  <td valign="top" width="13%">
                    <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">25,110</font>&#160;</div>
                  </td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="top" width="26%">
                    <div style="MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font size="2">Chief
                      Scientific Officer,</font>&#160;</div>
                  </td>
                  <td valign="top" width="6%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td colspan="2" valign="top" width="15%">&#160;</td>
                  <td valign="top" width="13%">&#160;</td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="top" width="26%">
                    <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: 27pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Head
                      of Research </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(3)</sup></font>&#160;</div>
                  </td>
                  <td valign="top" width="6%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td colspan="2" valign="top" width="15%">&#160;</td>
                  <td valign="top" width="13%">&#160;</td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td align="left" valign="top" width="26%">&#160;&#160;</td>
                  <td valign="top" width="6%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td valign="top" width="10%">&#160;</td>
                  <td colspan="2" valign="top" width="15%">&#160;</td>
                  <td valign="top" width="13%">&#160;</td>
                </tr>

            </table>
          </div>
        </div>
      </div>
      <div>
        <hr style="COLOR: #000000" align="left" noshade size="1" width="20%">
      </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 align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dr.
                  Lewis became the Chief Executive Officer of the Company effective
                  as of
                  the Merger. Dr. Lewis received a sign-on bonus of $250,000 paid
                  on
                  February 23, 2004 and a guaranteed bonus of $250,000 that was paid
                  on
                  April 22, 2005. </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 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 align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
                  Bagley became the President, Chief Operating Officer and Treasurer
                  of the
                  Company effective as of the Merger. Mr. Bagley received a sign-on
                  bonus of
                  $50,000 on July 15, 2004 and was due $25,000, a portion of his
                  guaranteed
                  bonus, as of December 31, 2004.</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 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 align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(3)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
                  Gale became the Company&#8217;s Chief Scientific Officer, Head of Research
                  effective as of the Merger. Mr. Gale received a guaranteed bonus
                  of
                  $150,000 on April 16, 2005.</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"><em>Stock
        Options</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">Upon
        the
        Merger, the Company assumed ZIOPHARM&#8217;s 2003 Stock Option Plan as the Company&#8217;s
        Stock Option Plan.&#160;This plan has 1,252,436 shares authorized for issuance,
        of which 847,469 shares are subject to options currently outstanding.&#160;Prior
        to the Merger, the Company had an Incentive Stock Option Plan of EasyWeb,
        Inc.
        under which 175,000 shares of common stock were reserved for issuance. That
        stock option plan was terminated effective as 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 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: 8pt; 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Option
        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">The
        following table sets forth the information concerning individual grants of
        stock
        options to the named executives made during the fiscal year ended December
        31,
        2004 by ZIOPHARM. All share numbers and dollar amounts are set forth on a
        post-Merger 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>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="43%" 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</strong></font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td colspan="2" valign="bottom" width="12%" 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>Number
                  of Securities Underlying</strong></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"><strong>Options</strong></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"><strong>Granted
                  (#)</strong></font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td colspan="2" valign="bottom" width="12%" 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>Percent
                  of Total Options</strong></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"><strong>Granted
                  to Employees In</strong></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"><strong>Fiscal
                  Year</strong></font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td colspan="2" valign="bottom" width="12%" 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>Exercise
                  of</strong></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"><strong>Base
                  Price</strong></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"><strong>($/share)</strong></font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td colspan="2" valign="bottom" width="11%" 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>Expiration</strong></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"><strong>Date(s)</strong></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" 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">Dr.
                  Jonathan Lewis </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(1)</sup></font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">25,674</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.2</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0.08</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1/8/14</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff">
                <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.
                  Jonathan Lewis </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(1)</sup></font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">242,979</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">48.9</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0.08</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1/27/14</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" 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">Richard
                  Bagley </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(2)</sup></font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">150,668</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">30.4</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.70</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7/1/14</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff">
                <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.
                  Robert Peter Gale</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,567</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0.5</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0.44</font></div>
              </td>
              <td align="left" valign="top" width="2%" style="BORDER-BOTTOM: #ffffff">
                <div>&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1/15/14</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dr.
                Robert Peter Gale</font></td>
              <td width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
              <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
              <td align="right" valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;22,543</font></td>
              <td align="left" valign="bottom" width="2%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.5</font></td>
              <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%&#160;</font></td>
              <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font>&#160;</td>
              <td align="right" valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0.44</font>&#160;</td>
              <td align="left" valign="top" width="2%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1/27/14</font></td>
              <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
      <div>
        <hr style="COLOR: #000000" align="left" noshade size="1" width="20%">
        &#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
                <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">(1)</font></div>
              </td>
              <td>
                <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">The
                  number of securities underlying options is subject to an anti-dilution
                  provision pursuant to which Dr. Lewis is entitled to purchase no
                  less than
                  5% of the Company&#8217;s common stock until such time as the Company has raised
                  $25 million in financing.</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 align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
                <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">(2)</font></div>
              </td>
              <td>
                <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">The
                  number of securities underlying options is subject to an anti-dilution
                  provision pursuant to which Mr. Bagley is entitled to purchase
                  no less
                  than 3% of the Company&#8217;s common stock until such time as the Company has
                  raised $25 million in financing.</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"><em>Aggregated
        Option Exercises and Fiscal Year-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">&#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 sets forth the total amount of shares acquired by the named
        executives upon exercises of stock options during fiscal year 2004, the
        aggregate dollar value realized upon such exercise, the total number of
        securities underlying unexercised options held at the conclusion of fiscal
        year
        2004 (separately identifying then-exercisable and unexercisable options),
        and
        the aggregate dollar value of in-the-money, unexercised options held at the
        conclusion of fiscal year 2004 (separately identifying then-exercisable and
        unexercisable options). All share numbers and dollar amounts are set forth
        on a
        post-Merger 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>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: black thin solid">
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                  Acquired</strong></font></div>
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                  Realized ($)</strong></font></div>
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                  (#)</strong></font></div>
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                  /</strong></font></div>
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Options
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                  ($)</strong></font></div>
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              <td align="left" valign="bottom" width="43%" 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">Dr.
                  Jonathan Lewis</font></div>
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              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
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              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
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                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
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              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
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              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0
                  /
                  268,653</font></div>
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              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">
                <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(1)</sup></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0
                  /
                  558,798</font></div>
              </td>
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              <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff">
                <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">Richard
                  Bagley</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0
                  /
                  150,668</font></div>
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              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0
                  /
                  69,307</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
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              <td align="left" valign="bottom" width="43%" 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">Dr.
                  Robert Peter Gale</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0
                  /
                  25,110</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">
                <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(3)</sup></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0
                  /
                  43,189</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
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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>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
                <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">(1)</font></div>
              </td>
              <td>
                <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">Value
                  of unexercised in-the-money options on December 31, 2004 is based
                  on a
                  value of ZIOPHARM, Inc. stock equal to $2.16 per share, as determined
                  by
                  the ZIOPHARM, Inc. Board of Directors at such time. As of December
                  31,
                  2004, no trades of the Company&#8217;s common stock had been conducted on the
                  Over-the-Counter Bulletin Board. </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">&#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: 8pt; FONT-FAMILY: Times New Roman">30</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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Employment
        and Change-in-Control Agreements</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">On
        December 9, 2004, the Company entered into an employment agreement with David
        C.
        Olson. Under the terms of the agreement, we agreed to pay Mr. Olson a one-time
        fee of $100,000 if and when we completed a merger, acquisition, or related
        transaction. In connection with the Merger, Mr. Olson agreed to reduce this
        amount to the extent that the unconsolidated liabilities of the Company
        immediately following the Merger exceeded $425,000. On December 10, 2004,
        the
        Company entered into a management consulting services agreement with David
        Floor. Under the terms of the agreement, we agreed to pay Mr. Floor a one-time
        fee of $10,000 plus expenses, upon the closing of any transaction leaving
        the
        Company with a positive business direction and available finances. In connection
        with the Merger, we paid Messrs. Olson and Floor $57,500 and $100,000,
        respectively, under the terms of their agreements with us. Each such agreement
        was terminated in its entirety in connection with 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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        January 8, 2004, the Company entered into a three-year employment agreement
        with
        Dr. Jonathan Lewis. Under the agreement, Dr. Lewis receives an annual base
        salary of $350,000 and a guaranteed annual bonus of $250,000. In addition,
        Dr.
        Lewis is eligible to receive an annual discretionary bonus of up to 100%
        of his
        base salary, as determined by the Company&#8217;s board of directors. The Company also
        paid Dr. Lewis a one-time bonus of $250,000 upon execution of his employment
        agreement. Depending upon the events surrounding a possible termination of
        Dr.
        Lewis&#8217; employment, he may continue to receive his base salary and, in certain
        circumstances, his guaranteed bonus for one year following such termination.
        In
        addition, the vesting of Dr. Lewis&#8217; stock options may accelerate in whole or in
        part upon such termination. Dr. Lewis has agreed not to compete with ZIOPHARM
        during the term of the employment agreement and for a one-year period
        thereafter, provided that we continue to pay his base salary and guaranteed
        bonus for that one-year period.</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 terms of his employment agreement, the Company has granted Dr. Lewis
        options to purchase up to 410,603 shares of common stock at $0.08 per share
        (adjusted to give effect to the Merger). The options vest in three equal
        annual
        installments, the first of which vested on January 8, 2005, with the remaining
        installments vesting on January 8, 2006 and January 8, 2007. The option is
        subject to anti-dilution protection from the issuance of equity securities
        in
        financing transactions to the extent that Dr. Lewis will maintain potential
        equity ownership of at least 5% of the Company until such time as the Company
        has received $25 million in gross proceeds from such transactions. The options
        are governed by the Company&#8217;s 2003 Stock Option Plan.</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
        July
        21, 2004, the Company entered into a three-year employment agreement with
        Mr.
        Richard Bagley. Under the agreement, Mr. Bagley receives an annual base salary
        of $250,000 and a guaranteed annual bonus of $50,000. In addition, Mr. Bagley
        is
        eligible to receive an annual discretionary bonus, as determined by the
        Company&#8217;s board of directors. The Company also paid Mr. Bagley a one-time bonus
        of $50,000 upon execution of his employment agreement. Depending upon the
        events
        surrounding a possible termination of Mr. Bagley&#8217;s employment, he may continue
        to receive his base salary and, in certain circumstances, his guaranteed
        bonus
        for one year following such termination. In addition, the vesting of Mr.
        Bagley&#8217;s stock options may accelerate in whole or in part upon such termination.
        Mr. Bagley has agreed not to compete with the Company during the term of
        the
        employment agreement and for a one-year period thereafter, provided that
        we
        continue to pay his base salary for that one-year period.</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 terms of his employment agreement, the Company granted Mr. Bagley
        options
        to purchase up to 241,282 shares common stock at $1.70 per share (adjusted
        to
        give effect to the Merger). The options vest in three equal annual installments,
        the first of which vested on July 1, 2005, with the remaining installments
        vesting on July 1, 2006 and July 1, 2007. The option is subject to certain
        anti-dilution protections from the issuance of equity securities in financing
        transactions so that Mr. Bagley will maintain potential equity ownership
        of at
        least 3% of the Company until such time as the Company has received $25 million
        in gross proceeds from such transactions. The options are governed by the
        Company&#8217;s 2003 Stock Option Plan.</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: 8pt; FONT-FAMILY: Times New Roman">31</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">On
        January 14, 2004, the Company entered into a three-year employment agreement
        with Dr. Robert Peter Gale. Under the agreement, Dr. Gale receives an annual
        base salary of $250,000 and a guaranteed annual bonus of $150,000. In addition,
        Dr. Gale is eligible to receive an annual discretionary bonus, as determined
        by
        the Company&#8217;s board of directors. Depending upon the events surrounding a
        termination of Dr. Gale&#8217;s employment, he may continue to receive his base salary
        and, in certain circumstances, his guaranteed bonus for one year following
        such
        termination. In addition, the vesting of Dr. Gale&#8217;s stock options may accelerate
        in whole or in part upon such termination. Dr. Gale has agreed not to compete
        with the Company during the term of the employment agreement and for one-year
        following the expiration of his employment agreement.</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 terms of his employment agreement, the Company granted Dr. Gale options
        to purchase up to 25,110 shares of common stock at $0.44 per share, respectively
        (adjusted to give effect to the Merger). The options vest in three equal
        annual
        installments, the first of which vested on January 15, 2005, with the remaining
        installments vesting on January 15, 2006 and January 15, 2007. The options
        are
        governed by the Company&#8217;s 2003 Stock Option Plan.</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"><em>Compensation
        of Directors</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">Prior
        to
        the Merger, our directors received no compensation pursuant to any standard
        arrangement for their services as directors. Nevertheless, during the year
        ended
        December 31, 2004, we issued Mr. David Floor 5,000 shares of our common stock
        (adjusted to reflect to the 1-for-40 share combination effected immediately
        prior to the Merger) in exchange for directors fees.</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">Effective
        as of the Merger, the Company&#8217;s Board of Directors schedules monthly telephonic
        board meetings and quarterly in-person meetings held at the Company&#8217;s principal
        corporate office. Each director receives quarterly compensation of $3,000
        in
        arrears. The non-management members of the Board also receive stock options
        as
        granted from time to time and as recommended by the compensation committee.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#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">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
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          </div>
        </div>
        <div><font size="2">Certain Transactions and Relationships</font></div>
        <div>&#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"><em>Pre-Merger
        Company Transactions and Relationships</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">Because
        of their management positions, organizational efforts and/or percentage share
        ownership in EasyWeb, Messrs. Olson and Zappa may be deemed to be &#8220;promoters&#8221; of
        the Company, as those terms are defined in the Securities Act of 1933 and
        the
        applicable Rules and Regulations under the Securities Act of 1933. Because
        of
        the above-described relationships, transactions between and among EasyWeb
        and
        Messrs. Olson and Zappa, such as the sale of our common stock to each of
        them as
        described herein, should not be considered to have occurred at
        arm's-length.</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"><em>Common
        Stock Transactions</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">During
        July 2005, the Company sold 333,333 shares of its common stock to David Floor
        for $10,000, or $.03 per share.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">In
        August
        and December 2004, David Olson loaned us a total of $1,300 for working capital.
        During May 2005, Mr. Olson advanced us an additional $788. The loans carried
        no
        interest rate and were due on demand. On June 28, 2005, we issued Mr. Olson
        69,600 shares of common stock as full repayment of the amounts stated above.
        The
        shares were valued at $.03 per share, or $2,088, based on contemporaneous
        common
        stock sales to unrelated third parties. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">On
        May
        13, 2004, the Company issued 400,000 shares of common stock to Summit Financial
        Relations, Inc. (&#8220;Summit&#8221;) valued at $10,000, at $.025 per share as repayment
        for expenses paid on behalf of the Company. The shares were valued based
        on
        contemporaneous sales to unrelated third party investors. David Olson, our
        President, Treasurer and one of our directors is also Summit&#8217;s President,
        director and sole stockholder. The shares were issued pursuant to the exemption
        from the registration requirements of the Securities Act provided by Section
        4(2) of the Act for transactions by an issuer not involving a public offering.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">During
        May 2004, the Company issued 200,000 shares of common stock to Thomas Olson,
        the
        brother of David Olson, in exchange for corporate governance services. The
        shares were valued based on contemporaneous sales to unrelated third party
        investors, at $.025 per share. The Company recorded stock-based compensation
        of
        $5,000 related to the transaction. The shares were issued pursuant to the
        exemption from the registration requirements of the Securities Act provided
        by
        Section 4(2) of the Act for transactions by an issuer not involving a public
        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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
        May 2004, the Company issued 200,000 shares of common stock to David Floor
        in
        exchange for director fees. The shares were valued based on contemporaneous
        sales to unrelated third party investors, at $.025 per share. The Company
        recorded stock-based compensation of $5,000 related to the transaction. The
        shares were issued pursuant to the exemption from the registration requirements
        of the Securities Act provided by Section 4(2) of the Act for transactions
        by an
        issuer not involving a public 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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
        December 31, 2004, the Company owed Summit $12,268 for professional fees
        and
        other administrative expenses paid on our behalf. David Olson, our President,
        Treasurer and one of our directors, is also Summit&#8217;s President, director and
        sole shareholder. During the six months ended June 30, 2005, Summit paid
        an
        additional $1,007 in expenses on our behalf. On February 4, 2005, the Company
        repaid Summit $7,000 and on June 28, 2005 the Company issued Summit 209,180
        shares of common stock as full repayment of all amounts stated above. The
        shares
        issued to Summit were valued at $.03 per share, or $6,275, based on
        contemporaneous common stock sales to unrelated 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 id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">33</font></div>
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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">During
        January 2002, we sold 33,333 and 16,667 shares of our common stock to David
        Olson and Barbara Petrinsky, respectively, at $.03 per share (gross proceeds
        totaling $1,500). At the time of issuance, both Mr. Olson and Ms. Petrinsky
        were
        officers of EasyWeb. In addition to the 50,000 shares sold to Mr. Olson and
        Ms.
        Petrinsky, we sold 500,000 shares of our common stock to unrelated third
        parties
        for gross proceeds totaling $15,000, or $.03 per share. The shares were issued
        pursuant to the exemption from the registration requirements of the Securities
        Act provided by Section 4(2) of the Act for transactions by an issuer not
        involving a public 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"><em>Office
        Space and Administrative Support</em></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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Summit
        has contributed the use of office space and administrative support (including
        reception, secretarial and bookkeeping services) to us for the years ended
        December 31, 2004 and 2003. David Olson, our President, Treasurer and one
        of our
        directors, is also the President, director and sole stockholder of
        Summit.</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
        office space and administrative support contributed by Summit has a fair
        market
        value of approximately $500 and $1,000 per month, respectively. We have
        recognized expenses for rent and administrative support based on fair market
        value. Any period in which the amount paid to Summit for office space and
        administrative support was below the fair market value, the remaining balance
        was considered contributed by Summit and recorded as a credit to additional
        paid-in capital in our financial statements. During the years ended December
        31,
        2004 and 2003, we did not pay Summit for office space and we paid Summit
        $173
        and $510, respectively, for administrative support. Accordingly, Summit
        contributed the remaining fair values for the use of the office space and
        administrative support. Contributed office space totaled $6,000 and $6,000,
        and
        contributed administrative support totaled $11,827 and $11,490 for the years
        ended December 31, 2004 and 2003, respectively.</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"><em>Related
        Party Liabilities</em></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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        August
        and December 2004, Mr. Olson loaned us a total of $1,300 for working capital.
        The loans carried no interest rate and were due on demand. </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">At
        December 31, 2003, the Company owed Summit $18,111 for professional fees
        and
        other administrative expenses it paid on our behalf. During the year ended
        December 31, 2004, Summit paid expenses totaling $4,187 on our behalf. A
        portion
        of the May 13, 2004 issuance of 400,000 restricted common described above
        under
&#8220;Certain Relationships and Related Transactions</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"><em>Common
        Stock Transactions</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
        was
        used to repay Summit for these fees. As of December 31, 2004, we owed Summit
        $12,298. </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">We
        owed
        Barbara Petrinsky, our former Secretary and Treasurer, $10,000 for the work
        she
        performed over the previous five years to keep our books and records, assist
        in
        all of our filings with regulatory authorities, states and the Internal Revenue
        Service, among others. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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">All
        of
        the above referenced liabilities were satisfied in their entirety immediately
        follwing the Merger.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; 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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Consulting
        Agreement with Summit Financial</em></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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        December 10, 2004, we entered into a consulting services fee agreement whereby
        Summit provides certain services to us including, but not limited to
        consultation related to mergers and acquisitions, reorganizations and
        divestitures. Pursuant to the agreement, Summit has lent us funds and helped
        us
        raise funds at no extra cost. Under the terms of the agreement, we agreed
        to pay
        Summit a one-time fee of $120,000 on the date of closing of any transaction
        that
        leaves us with a positive business directive and available finances,
        non-detrimental to our survival. In connection with the Merger, Summit agreed
        to
        reduce this amount to the extent that the unconsolidated liabilities of the
        Company immediately following the Merger exceeded $425,000. Upon the Merger,
        the
        Company paid $106,697.90 to Summit and terminated the agreement in its entirety.
        </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"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">34</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">Under
        the
        terms of the Merger Agreement, the consolidated EasyWeb entity will pay our
        identified liabilities that are then due. A portion of such liabilities will
        be
        payable to David Olson under his employment agreement and to Summit under
        its
        consulting services fee agreement. However, Mr. Olson and Summit have agreed
        to
        reduce the amount of the payments to which they are otherwise entitled to
        the
        extent that our unconsolidated liabilities immediately following the Merger
        exceed $425,000.</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"><em>ZIOPHARM
        Transactions and Relationships</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="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        connection with a private placement of its Series A Convertible Preferred
        Stock
        that terminated in May 2005, ZIOPHARM and Paramount BioCapital, Inc.
        (&#8220;Paramount&#8221;) entered into an introduction agreement in January 2005. Upon the
        Merger, we succeeded to ZIOPHARM&#8217;s rights and obligation under such agreement.
        Pursuant to the introduction agreement, ZIOPHARM agreed to compensate Paramount
        or its designees for their services through the payment of (a) cash commissions
        equal to 7% of the gross proceeds from the offering, and (b) warrants to
        acquire
        an aggregate of 837,956 share of ZIOPHARM&#8217;s Series A Convertible Preferred Stock
        a per share exercise price of $2.38. Upon the Merger, this warrant was exchanged
        for a warrant to purchase an aggregate of 419,772 shares of our common stock
        at
        a per share exercise price of $4.75. Cash commissions will also be payable
        by us
        if we sell additional of our securities, prior to May 31, 2006, to investors
        introduced to ZIOPHARM by the Paramount. Pursuant to the introduction agreement,
        Paramount has the right of first refusal to act as the placement agent for
        the
        private sale of our securities until May 31, 2008. </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="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        connection with ZIOPHARM&#8217;s December 22, 2004 Option Agreement with Southern
        Research Institute (&#8220;SRI&#8221;), ZIOPHARM entered into an Finders Agreement dated
        December 23, 2004 with Paramount, pursuant to which ZIOPHARM agreed to
        compensate Paramount for services in connection with the ZIOPHARM&#8217;s introduction
        to SRI through the payment of (a) a cash fee of $60,000 and (b) a warrant
        to
        purchase 125,000 shares of ZIOPHARM&#8217;s common stock at a price of $2.38 per
        share. Upon the Merger, this warrant was exchanged for a warrant to purchase
        an
        aggregate of 62,621 shares of our common stock at a per share exercise price
        of
        $4.75.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Lindsay
        A. Rosenwald, M.D., who may be deemed to beneficially own approximately 20.13%
        of our common stock, is Chairman and Chief Executive Officer of Paramount
        and
        its affiliates. Dr. Michael Weiser and Timothy McInerney, each of whom is
        a
        member of ZIOPHARM&#8217;s Board of Directors, are also full-time </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">employees</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        of
        Paramount.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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          </div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Description
        of Securities</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        authorized capital stock consists of 280,000,000 shares of common
        stock,&#160;$.001 value per share. All shares of common stock have equal
        voting
        rights and are entitled to one vote per share on all matters to be voted
        upon by
        our stockholders. The shares of common stock have no preemptive, subscription,
        conversion or redemption rights and may be issued only as fully-paid and
        non-assessable shares. Cumulative voting in the election of directors is
        not
        permitted. In the event of our liquidation, each holder of our common stock
        is
        entitled to receive a proportionate share of our assets available for
        distribution to stockholders after the payment of liabilities. All shares
        of our
        common stock issued and outstanding are fully-paid and
        non-assessable.</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">Holders
        of our common stock are entitled to share </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>pro
        rata</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        in
        dividends and distributions with respect to the common stock when, as and
        if
        declared by our board of directors out of funds legally available therefor.
        We
        have not paid any dividends on our common stock and intend to retain earnings,
        if any, to finance the development and expansion of our business. Future
        dividend policy is subject to the discretion of our board of directors and
        will
        depend upon a number of factors, including future earnings, capital requirements
        and our financial condition.</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
        transfer agent and registrar for our common stock is American Stock Transfer
        and
        Trust, 6201 15th Avenue, Brooklyn, New York, 11219. As of the date of this
        report, we had 7,157,863 shares of common stock outstanding held by 305 holders
        of record. Our common stock is listed for trading on the over-the-counter
        bulletin board under the symbol &#8220;ESWB.OB.&#8221; Nevertheless, there has been no
        established public trading market for the common stock since our inception.
        As a
        result changing our corporate name to ZIOPHARM Oncology, Inc., we expect
        that
        our ticker symbol will change to be consistent with our new corporate
        name.</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">&#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>Recent
        Sales of Unregistered Securities</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <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">The
          following summarizes all sales of unregistered securities by ZIOPHARM since
          inception in September 2003. </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
          September 25, 2003, in connection with ZIOPHARM&#8217;s incorporation, ZIOPHARM issued
          500,000 shares of common stock for aggregate consideration of $500,000.
          On
          October 7, 2003, ZIOPHARM issued 12,500 shares of common stock to a consultant
          in exchange for certain consulting services. On March 14, 2004, ZIOPHARM
          issued
          an additional 4,500,000 shares of common stock in exchange for aggregate
          consideration of $4,500,000. On August 31, 2004, ZIOPHARM issued 500,000
          shares
          of common stock to the University of Texas M.D. Anderson Cancer Center
          pursuant
          to the terms of the license agreement dated August 24, 2004.</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 ZIOPHARM&#8217;s license agreements with the University of Texas M. D.
          Anderson Cancer Center and DEKK-TEC, Inc., ZIOPHARM issued warrants to
          such
          parties to acquire an aggregate of 155,375 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">In
          connection with ZIOPHARM&#8217;s December 22, 2004 Option Agreement with SRI, ZIOPHARM
          issued a warrant to purchase 125,000 shares of common stock to Paramount.
          </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 an offering of Series A Convertible Preferred Stock of
          ZIOPHARM
          that was completed on May 30, 2005, ZIOPHARM issued an aggregate of 8,379,564
          shares of such Series A Convertible Preferred Stock in exchange for a purchase
          price per share equal to $2.16. ZIOPHARM issued to the placement agents
          in
          connection with the offering warrants to purchase up to an aggregate of
          837,956
          share of ZIOPHARM&#8217;s Series A Convertible 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 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">Since
          ZIOPHARM&#8217;s inception to the Merger, ZIOPHARM issued to directors, officers,
          employees and consultants options to purchase an aggregate of 1,626,797
          shares
          of common stock at exercise prices ranging from $0.04 to $2.16 per share
          with a
          weighted average exercise price of $0.77 per share. The issuances of these
          options were deemed to be exempt from registration under the Securities
          Act by
          virtue of Rule 701 promulgated under Section 3(b) of the Securities Act
          as
          transactions pursuant to compensation benefits plans and contracts relating
          to
          compensation. </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 id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Except
          as
          noted above, the sales of the securities identified above were made pursuant
          to
          privately negotiated transactions that did not involve a public offering
          of
          securities and, accordingly, ZIOPHARM believes that these transactions
          were
          exempt from the registration requirements of the Securities Act pursuant
          to
          Section 4(2) thereof and rules promulgated thereunder. Each of the
          above-referenced investors in ZIOPHARM&#8217;s stock represented to ZIOPHARM in
          connection with their investment that they were &#8220;accredited investors&#8221; (as
          defined by Rule 501 under the Securities Act) and were acquiring the shares
          for
          investment and not distribution, that they could bear the risks of the
          investment and could hold the securities for an indefinite period of time.
          The
          investors received written disclosures that the securities had not been
          registered under the Securities Act and that any resale must be made pursuant
          to
          a registration or an available exemption from such registration. All of
          the
          foregoing securities are deemed restricted securities for purposes of the
          Securities Act. </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">The
          following summarizes the sales of unregistered securities by EasyWeb, Inc.
          (now
          known as ZIOPHARM, Oncology, Inc.) during the three years prior to and
          including
          the closing 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="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
          connection with the Merger, EasyWeb, Inc. issued an aggregate of 6,967,941
          shares of its common stock to the former holders of ZIOPHARM capital stock,
          and
          other securities having the right to purchase approximately an additional
          1,366,846 shares of EasyWeb&#8217;s common stock, all of which were unregistered. For
          these issuances, EasyWeb relied on the exemption from federal registration
          under
          Section 4(2) of the Securities Act of 1933. EasyWeb relied on this exemption
          based on the fact that there were approximately only 230 (excludes options
          and
          warrants) stockholders of ZIOPHARM who were recipients of such unregistered
          shares in connection with the Merger, all of whom, either alone or through
          a
          purchaser representative, had knowledge and experience in financial and
          business
          matters such that each was capable of evaluating the risks of the investment,
          and had access to information regarding ZIOPHARM, EasyWeb and the Merger
          transaction.</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 id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
          other
          sales of unregistered securities made by EasyWeb during the three-year
          period
          prior to the Merger, please refer to EasyWeb&#8217;s quarterly reports on Form 10-QSB
          filed on November 13, 2002, May 13, 2003, August 14, 2003, October 30,
          2003, May
          10, 2004, August 23, 2004, November 15, 2004, May 13, 2005, and August
          15, 2005
          (amended); and EasyWeb&#8217;s registration statement on Form 10-SB/A filed on
          December 28, 2001.</font></div>
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      </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center">
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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><em>Indemnification
        of Directors and Officers</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">Pursuant
        to our articles of incorporation and bylaws, we may indemnify an officer
        or
        director who is made a party to any proceeding, because of his position as
        such,
        to the fullest extent authorized by Delaware General Corporation Law, as
        the
        same exists or may hereafter be amended. In certain cases, we may advance
        expenses incurred in defending any such proceeding.</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">To
        the
        extent that indemnification for liabilities arising under the Securities
        Act may
        be permitted to directors, officers or persons controlling our company pursuant
        to the foregoing provisions, we have been informed that, in the opinion of
        the
        SEC, such indemnification is against public policy as expressed in the
        Securities Act and is therefore unenforceable. If a claim for indemnification
        against such liabilities (other than the payment by us of expenses incurred
        or
        paid by a director, officer or controlling person of our company in the
        successful defense of any action, suit or proceeding) is asserted by any
        of our
        directors, officers or controlling persons in connection with the securities
        being registered, we will, unless in the opinion of our counsel the matter
        has
        been settled by controlling precedent, submit to a court of appropriate
        jurisdiction the question whether such indemnification by us is against public
        policy as expressed in the Securities Act and will be governed by the final
        adjudication of that issue.</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
        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="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
        disclosed under Item 2.01 above, in connection with the Merger, the Company
        issued an aggregate of 6,967,941 shares of its common stock to the former
        holders of ZIOPHARM capital stock, and other securities having the right
        to
        purchase approximately an additional 1,366,846 shares of our common stock,
        all
        of which were unregistered. For these issuances, the Company relied on the
        exemption from federal registration under Section 4(2) of the Securities
        Act of
        1933. The Company relied on this exemption based on the fact that there were
        approximately 230 stockholders of ZIOPHARM who were recipients of such
        unregistered shares in connection with the Merger, all of whom, either alone
        or
        through a purchaser representative, had knowledge and experience in financial
        and business matters such that each was capable of evaluating the risks of
        the
        investment, and had access to information regarding ZIOPHARM, the Company
        and
        the Merger transaction.</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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
        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="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
        disclosures set forth in Item 2.01 above are hereby incorporated by reference
        into this Item 5.01.</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>Item
        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="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
        disclosures set forth in Item 2.01 regarding the reconstitution of the Company&#8217;s
        board of directors, the resignation of the Company&#8217;s executive officers, and the
        appointment of new executive officers, are hereby incorporated by reference
        into
        this Item 5.02.</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>Item
        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="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
        September 13, 2005, the Company&#8217;s board of directors adopted bylaws applicable
        to the Company. Such bylaws are filed as Exhibit 3.3 to this
        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: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        September 14, 2005, the Company filed a Certificate of Ownership with the
        Secretary of State of the State of Delaware pursuant to which the Company&#8217;s
        wholly-owned subsidiary, ZIOPHARM, Inc., merged with and into the Company
        with
        the Company remaining as the surviving corporation to the merger. In connection
        with this merger, and as set forth in the Certificate of Ownership, the Company
        changed its corporate name to &#8220;ZIOPHARM Oncology, Inc.&#8221; The Certificate of
        Ownership is filed as Exhibit 3.2 to this report.</font></div>
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        a
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        financial information </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">as
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            <tr bgcolor="#ffffff">
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                  and Plan of Merger and Reorganization dated August 3, 2005, by
                  and among
                  EasyWeb, Inc., a Delaware corporation (the registrant), ZIO Acquisition
                  Corp., a Delaware corporation and wholly owned subsidiary of the
                  registrant, and ZIOPHARM, Inc., a Delaware corporation (incorporated
                  by
                  reference to exhibit 10.1 to the registrant&#8217;s current report on Form 8-K
                  filed on August 9, 2005).</font></div>
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              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="62%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="11%">
                <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">3.1</font></div>
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              <td align="left" valign="top" width="62%">
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                  of Merger dated September 13, 2005 relating to the merger of ZIO
                  Acquisition Corp. with and into ZIOPHARM, Inc. </font></div>
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              <td align="left" valign="top" width="11%">&#160;</td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="62%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="11%">
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              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="62%">
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                  of Ownership of ZIOPHARM Oncology, Inc. dated as of September 14,
                  2005.</font></div>
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              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="62%">&#160;</td>
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              <td align="left" valign="top" width="11%">
                <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">3.3</font></div>
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              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="62%">
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                  of ZIOPHARM Oncology, Inc.</font></div>
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              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="62%">&#160;</td>
            </tr>
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              <td align="left" valign="top" width="11%">
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                  financial statements of ZIOPHARM, Inc.</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="11%">&#160;</td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="62%">&#160;</td>
            </tr>
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              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="62%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pro
                forma unaudited combined financial statements.</font>&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="11%">&#160;</td>
              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="62%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="11%">
                <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">99.3</font></div>
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              <td width="2%">&#160;</td>
              <td align="left" valign="top" width="62%">
                <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">Press
                  Release dated&#160;September 15,
                  2005.</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 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>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; 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">
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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">&#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 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">
        <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: Times New Roman">&#160;</font></td>
              <td width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
              <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
              <td colspan="2">
                <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EASYWEB,
                  INC.:</font></div>
                <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(<font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Registrant</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></font></div>
              </td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;<br>&#160;</font></td>
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;<br>&#160;</font></td>
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;<br>&#160;</font></td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date:
                September 19, 2005</font></td>
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:&#160;&#160;</font></td>
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/&#160;Jonathan
                Lewis</font></td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
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              <td align="left">
                <hr style="COLOR: #000000" align="left" noshade size="2" width="80%"><font size="2">Jonathan
                Lewis<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"><em>Chief
                Executive Officer</em></font></font></td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></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">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; 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: 8pt; FONT-FAMILY: Times New Roman">39</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
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      <div align="center">
        <table bgcolor="#ffffff" cellpadding="0" cellspacing="0" width="100%">

            <tr bgcolor="#ffffff">
              <td width="5%">&#160;</td>
              <td width="10%">&#160;</td>
              <td width="85%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><strong><font size="2">EXHIBIT
                  INDEX</font></strong>&#160;</div>
              </td>
            </tr>
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              <td width="5%">&#160;</td>
              <td width="10%">&#160;</td>
              <td width="85%">&#160;</td>
            </tr>
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              <td width="5%">&#160;</td>
              <td width="10%"><font size="2">3.1</font>&#160;</td>
              <td width="85%"><font size="2">Certificate of Merger dated September
                13,
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                ZIOPHARM, Inc.&#160;</font>&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td width="5%">&#160;</td>
              <td width="10%">&#160;</td>
              <td width="85%">&#160;</td>
            </tr>
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              <td width="5%">&#160;</td>
              <td width="10%"><font size="2">3.2</font>&#160;</td>
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                Oncology, Inc. dated as of September 14, 2005.</font>&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td width="5%">&#160;</td>
              <td width="10%">&#160;</td>
              <td width="85%">&#160;</td>
            </tr>
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            </tr>
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              <td width="5%">&#160;</td>
              <td width="10%">&#160;</td>
              <td width="85%">&#160;</td>
            </tr>
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              <td width="85%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font size="2">Audited
                  financial statements of ZIOPHARM, Inc.
                  </font></div>
              </td>
            </tr>
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              <td width="5%">&#160;</td>
              <td width="10%">&#160;</td>
              <td width="85%">&#160;&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td width="5%">&#160;</td>
              <td width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">99.2</font></td>
              <td width="85%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pro
                forma unaudited combined financial statements</font></td>
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              <td width="5%">&#160;</td>
              <td width="10%">&#160;</td>
              <td width="85%">&#160;</td>
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              <td width="85%"><font size="2">Press Release dated&#160;September
                15,
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            </tr>

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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">40</font></div>
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Unassociated Document
UNITED
        STATES
SECURITIES
        AND EXCHANGE COMMISSION
WASHINGTON,
        D.C. 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): September 13, 2005
ZIOPHARM
        Oncology, Inc.
(Exact
        name of registrant as specified in its charter)
Delaware
0-32353
84-1475642
(State
                  or other jurisdiction of
incorporation)
(Commission
                  File Number)
(IRS
                  Employer Identification No.)
1180
        Avenue of the Americas, 19
th
Floor
New
        York, NY 10036
(Address
        of principal executive offices) (Zip Code)
(646)
        214-0700
(Registrant's
        telephone number, including area code)
EasyWeb,
        Inc.
6025
        S. Quebec Street, Suite 135
Englewood,
        Colorado
(Former
        name or former address, if changed since last report)
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:
o
Written communications
        pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material
        pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement
        communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
        240.14d-2(b))
o
Pre-commencement
        communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
        240.13e-4(c))
Item
        2.01. Completion of Acquisition or Disposition of Assets.
Reverse
        Merger Transaction; Acquisition of ZIOPHARM, Inc.
Pursuant
        to an Agreement and Plan of Merger dated August 3, 2005 (the "
Merger
        Agreement
"),
        by
        and among EasyWeb, Inc. (now known as ZIOPHARM Oncology,
        Inc.)(the "
Company
"),
        ZIO
        Acquisition Corp., a Delaware corporation and wholly owned subsidiary of
        the
        Company, and ZIOPHARM, Inc., a Delaware corporation whose business is the
        development and commercialization of drugs for the treatment of cancer
        ("
ZIOPHARM
"),
        ZIO
        Acquisition Corp. merged with and into ZIOPHARM, with ZIOPHARM remaining
        as the
        surviving entity and a wholly owned operating subsidiary of the Company.
        This
        transaction is referred to throughout this report as the "Merger." The
        Merger was effective as of September 13, 2005, upon the filing of a certificate
        of merger with the Delaware Secretary of State.
At
        the
        effective time of the Merger, the legal existence of ZIO Acquisition Corp.
        ceased and all of the 13,908,772 shares of ZIOPHARM capital stock that were
        outstanding immediately prior to the Merger were cancelled, with one share
        of
        ZIOPHARM common stock issued to the Company. Simultaneously, the former holders
        of ZIOPHARM capital stock received an aggregate of 6,967,941 shares of the
        Company's common stock, representing approximately 97.3% of the Company's common
        stock outstanding after the Merger. In addition, all securities convertible
        into
        and exercisable for shares of ZIOPHARM capital stock outstanding immediately
        prior to the Merger were cancelled, and the holders thereof received similar
        securities convertible into an aggregate of 1,366,846 shares of the Company's
        common stock.
Prior
        to
        the Merger, the Company effected a 1-for-40 share combination (i.e., reverse
        stock split) of its capital stock. The share combination was approved by
        Company's stockholders at a special stockholder meeting held on February 28,
        2005. As a result of the share combination, the Company had 189,922 shares
        of
        common stock outstanding immediately prior to the Merger.
The
        Merger represents a change in control of the Company inasmuch as greater
        than
        50% of the issued and outstanding voting stock of Company on a post-Merger
        basis
        is now held by the former holders of ZIOPHARM capital stock. As of the date
        of
        this report, there were 7,157,863 shares of Company capital stock outstanding,
        all of which is common stock.
The
        Merger Agreement was filed as Exhibit 10.1 to the Company's Current Report on
        Form 8-K filed with the Securities and Exchange Commission on August 9, 2005,
        and is incorporated herein by reference. The foregoing description of the
        Merger
        Agreement and the transactions contemplated thereby do not purport to be
        complete and are qualified in their entireties by reference to the Merger
        Agreement.
On
        September 13, 2005, the Company's board of directors approved a transaction
        pursuant to which ZIOPHARM merged with and into the Company, leaving the
        Company
        as the surviving corporation. In connection with this merger, the Company
        relinquished its corporate name and assumed in its place the name "ZIOPHARM
        Oncology, Inc." The merger and name change became effective on September 14,
        2005, upon the filing of a certificate of ownership with the Delaware Secretary
        of State.
Unless
        otherwise provided in this report, all references in this report to
"we,""us,""our company,""our," or the "Company" refer to the combined ZIOPHARM
        Oncology, Inc. entity.
1
Description
        of Business of ZIOPHARM Oncology, Inc.
General
ZIOPHARM
        Oncology, Inc. is a development-stage company that is seeking to develop
        and
        commercialize a diverse, risk-sensitive portfolio of in-licensed cancer drugs
        that address unmet medical needs. The Company's management and advisors are
        focused on licensing proprietary drug candidate families that are related
        to
        cancer therapeutics on the market where the application of new biological
        understanding and the Company's drug development expertise will lead to a lower
        risk for clinical development failure while expediting clinical registration.
        The Company expects to commercialize its products on its own in North America
        but recognizes that promising clinical trial results in cancers with a high
        incidence and prevalence might also be addressed in a commercial partnership
        with another company with the requisite financial resources. Currently, the
        Company is in U.S. Phase I studies for two product candidates known as ZIO-101
        and ZIO-201. The Company currently intends to continue with clinical development
        of ZIO-101 for advanced myeloma and ZIO-201 for advanced sarcoma.
The
        Company's corporate office is located at 1180 Avenue of the Americas, 19th
        Floor, New York, NY 10036, with a telephone number of (646) 214-0700. The
        Company's business and development operations are located in Charlestown,
        Massachusetts.
Cancer
        Overview
Cancer
        is
        a group of diseases characterized by either the runaway growth of cells or
        the
        failure of cells to die normally. Often, cancer cells spread to distant parts
        of
        the body, where they can form new tumors. Cancer can arise in any organ of
        the
        body and, according to the American Cancer Society, strikes one of every
        two
        American men and one of every three American women at some point in their
        lives.
It
        is
        reported that there are more than 100 different varieties of cancer divided
        into
        six major categories. Carcinomas, the most common type of cancer, originate
        in
        tissues that cover a surface or line a cavity of the body. Sarcomas begin
        in
        tissue that connects, supports or surrounds other tissues and organs. Lymphomas
        are cancers of the lymph system, the circulatory system that bathes and cleanses
        the body's cells. Leukemias involve blood-forming tissues and blood cells. As
        their name indicates, brain tumors are cancers that begin in the brain, and
        skin
        cancers, including dangerous melanomas, originate in the skin. Cancers are
        considered metastatic if they spread via the blood or lymphatic system to
        other
        parts of the body to form secondary tumors.
Cancer
        is
        caused by a series of mutations, or alterations, in genes that control cells'
        ability to grow and divide. Some mutations are inherited; others arise from
        environmental factors such as smoking or exposure to chemicals, radiation,
        or
        viruses that damage cells' DNA. The mutations cause cells to divide relentlessly
        or lose their normal ability to die.
The
        cost
        of cancer to the healthcare system is significant. The National Institute
        of
        Health estimates that the overall cost of cancer in 2003 was $189.5 billion.
        This cost includes an estimate of $64.2 billion in direct medical expenses,
        $16.3 billion in indirect morbidity costs, and $109 billion in indirect
        mortality costs.
Cancer
        Treatments
Major
        treatments for cancer include surgery, radiotherapy, and chemotherapy. There
        are
        many different drugs that are used to treat cancer, including cytotoxics
        or
        antineoplastics, hormones, and biologics. There are also many experimental
        treatments under investigation including radiation sensitizers, vaccines,
        gene
        therapy and immunotoxins. The Company believes cancer treatment represents
        a
        significant unmet medical need.
2
Radiotherapy.
Also
          called radiation therapy, radiotherapy is the treatment of cancer and other
          diseases with ionizing radiation. Ionizing radiation deposits energy that
          injures or destroys cells in the area being treated - the target tissue
          - by
          damaging their genetic material, making it impossible for these cells to
          continue growing. Although radiation damages both cancer cells and normal
          cells,
          the latter are able to repair themselves and regain proper function.
          Radiotherapy may be used to treat localized solid tumors, such as cancers
          of the
          skin, tongue, larynx, brain, breast, or uterine cervix. It can also be
          used to
          treat leukemia and lymphoma.
Scientists
        are also looking for ways to increase the effectiveness of radiation therapy.
        Two types of investigational drugs are being studied for their effect on
        cells
        exposed to radiation. Radiosensitizers increase the damage done to tumor
        cells
        by radiation; and radioprotectors protect normal tissues from the effects
        of
        radiation.
Cytotoxics.
Cytotoxics
        are anticancer drugs that destroy cancer cells by stopping them from
        multiplying. Healthy cells can also be harmed with the use of cytotoxics,
        especially those that divide quickly. Harm to healthy cells is what causes
        side
        effects. These cells usually repair themselves after chemotherapy. Chemotherapy
        can be used for different purposes which include curing cancer (when the
        patient
        remains free of evidence of cancer cells), controlling cancer (by preventing
        the
        cancer from spreading), and to relieving symptoms of cancer (such as pain,
        helping patients live more comfortably).
Cytotoxic
        agents act primarily on macromolecular synthesis, repair or activity, which
        affects the production or function of DNA, RNA or protein. Although there
        are
        many cytotoxic agents, there is a considerable amount of overlap in their
        mechanisms of action. As such, the choice of a particular agent or group
        of
        agents is generally not a consequence of a prior prediction of antitumor
        activity by the drug, but instead the result of empirical clinical
        trials.
Supportive
        Care.
The
        treatment of a cancer may include the use of chemotherapy, radiation therapy,
        biologic response modifiers, surgery, or some combination of all of these
        or
        other therapeutic options. All of these treatment options are directed at
        killing or eradicating the cancer that exists in the patient's body.
        Unfortunately, the delivery of many cancer therapies adversely affects the
        body's normal organs. The undesired consequence of harming an organ not involved
        with cancer is referred to as a complication of treatment or a side
        effect.
Side
        effects, or complications, of treatment cause inconvenience, discomfort,
        and
        occasionally, may even be fatal. Additionally and perhaps more importantly,
        side
        effects may also prevent doctors from delivering the prescribed dose of therapy
        at the specific time and schedule of the treatment plan. Therefore, side
        effects
        not only cause discomfort, but may also limit a patient's ability to achieve the
        best outcome from treatment by preventing the delivery of therapy at its
        optimal
        dose and time.
In
        addition to anemia, fatigue, hair-loss, reduction in blood platelets and
        white
        and red blood cells, and bone pain, one of the most common side effects of
        chemotherapy is nausea and vomiting. Several drugs have been developed to
        help
        prevent and control chemotherapy-induced nausea and vomiting, which have
        led to
        improvements in the management of symptoms associated with this cancer
        treatment, allowing for greater accuracy and consistency concerning the
        administration of cancer treatment. Nausea and vomiting induced by chemotherapy
        are treated by drugs such as 5HT3 receptor antagonists, like ondansetron,
        which
        is a selective blocking agent of the hormone serotonin.
3
Product
          Candidates
ZIO-101
General
.
        ZIO-101
        is an organic arsenic compound covered by an issued U.S. patent and applications
        internationally. A form of commercially available inorganic arsenic (arsenic
        trioxide (Trisenox®) or ATO) has been approved for the treatment of acute
        promyelogenous leukemia (APL), a precancerous condition, and has been studied
        for the treatment of various cancers. Nevertheless, ATO has been shown to
        be
        toxic to the heart and liver, limiting its use as an anti-cancer agent.
        Inorganic arsenic has also been shown to cause cancer of the skin and lung
        in
        humans. The toxicity of arsenic generally is correlated to its accumulation
        in
        organs and tissues. The Company's preclinical studies demonstrated that ZIO-101
        (and organic arsenic in general) is considerably less toxic than inorganic
        arsenic, particularly with regard to heart toxicity.
In
        vitro
testing
        of ZIO-101 using the National Cancer Institute's human cancer cell panel
        detected activity against lung, colon, brain, melanoma, ovarian and kidney
        cancer. Moderate activity was detected against breast and prostate
        cancer.
In
        addition to solid tumors,
in
        vitro
testing
        in both the National Cancer Institute's cancer cell panel and
in
        vivo
testing
        in a leukemia animal model demonstrated substantial activity against
        hematological cancers (cancers of the blood and blood-forming tissues) such
        as
        leukemia, lymphoma, myelodysplastic syndromes and multiple myeloma. Leukemia
        is
        a cancer that begins in blood-forming tissue such as the bone marrow and
        causes
        large numbers of blood cells to be produced and enter the bloodstream. Lymphomas
        are cancers that begin in cells of the immune system. Myelodysplastic syndromes,
        also called preleukemia or smoldering leukemia, are diseases in which the
        bone
        marrow does not function normally.
Clinical
        Lead Indications: Multiple Myeloma
.
        Multiple myeloma, a common hematological malignancy, is among a group of
        plasma
        cell cancers associated with the overproduction of monoclonal immunoglobulin
        (M-protein). Primary treatment for multiple myeloma is systemic chemotherapy.
        Approximately 15-20% of patients who have the disease are resistant to
        aggressive primary treatment. Even with prompt institution of systemic
        treatment, the drug-sensitive phase of the disease usually lasts only two
        to
        three years for most patients before resistance appears (although in a small
        patient population sensitivity to systemic therapy can last for five to ten
        years). The median survival of patients with progressive or resistant disease
        is
        three to four years.
The
        standard of care for progressive or resistant multiple myeloma may be in
        transition. Recent clinical trials offer evidence supporting the use of
        thalidomides and proteosome inhibitors, either alone or in combination with
        other agents. Unfortunately, neither treatment is universally effective,
        each
        can be quite toxic, and all patients who receive them will likely develop
        progressive disease. As a result, the Company expects that the medical community
        will continue to embrace new agents that provide incremental benefit to patients
        without undue toxicity. The Company is hopeful that the novel mechanism of
        action of ZIO-101, combined with its anticipated safety profile, will encourage
        its use in the treatment of advanced myeloma and possibly a variety of other
        tumors. Currently, the Company expects that advanced myeloma will be the
        indication for which it is most likely to seek initial regulatory approval
        for
        ZIO-101.
Clinical
        Development Plan for ZIO-101
.
        The
        Company has commenced two phase I clinical trials (hematological and solid
        tumor) at the University of Texas M.D. Anderson Cancer Center using ZIO-101
        in
        refractory disease. Phase I testing is primarily focused on assessing drug
        safety; however, one patient in the solid tumor trial has evidenced a response
        without toxicity (as reported by the investigator). The starting dose in
        both
        phase I trials was about 14 times the labeled dose of inorganic arsenic.
        The
        dose has been escalated to the next level in one trial, and to date has been
        well tolerated.
4
The
          goal
          of the phase I trials are to determine dose-limiting toxicity and maximum
          tolerated dose. In addition, assessments of pharmacokinetic data will be
          obtained along with any indication of efficacy. The Company expects to
          follow
          these phase I trials with a phase I/II trial in advanced myeloma. The Company
          currently anticipates reporting some phase I/II trial results in the first
          half
          of 2006. A second phase II trial in myeloma is under consideration for
          initiation in early 2006. It is expected that a pivotal trial in multiple
          myeloma would begin in early 2007.
The
        solid
        tumor trial is seeking to confirm data collected during
        pre-clinical studies that indicated activity in a variety of solid
        tumors.
        We have elected to conduct a separate phase I clinical trial for solid cancers
        based on our belief that the maximum tolerated dose of ZIO-101 in patients
        with
        solid cancers may be substantially higher than patients with blood cancers.
        While the current focus for product registration is myeloma, these phase
        I study
        results will be instructive for further development plans in solid
        tumors.
ZIO-201
General
.
        ZIO-201, or isophosphoramide mustard (IPM), is a proprietary stabilized
        metabolite of ifosfamide that is also related to cyclophosphamide. A patent
        application for pharmaceutical composition has been filed. Cyclophosphamide
        and
        ifosfamide are alkylating agents. Cyclophosphamide is the most widely used
        alkylating agent in cancer therapy and is used to treat breast cancer and
        non-Hodgkin's lymphoma. Ifosfamide has been shown to be effective in high dose
        by itself, or in combination in treating sarcoma and lymphoma. Although
        ifosfamide-based treatment generally represents the standard of care for
        sarcoma, it is not licensed for this indication by the U.S. Food and Drug
        Administration (FDA).
The
        Company's pre-clinical studies have shown that, in animal and laboratory models,
        IPM evidences activity against leukemia and solid tumors. These studies also
        indicate that ZIO-201 has a better pharmacokinetic and safety profile than
        ifosfamide or cyclophosphamide, offering the possibility of safer and more
        efficacious therapy with ZIO-201.
Ifosfamide
        is metabolized to IPM. In addition to IPM, another metabolite of ifosfamide
        is
        acrolein, which is toxic to the kidneys and bladder. The presence of acrolein
        can mandate extensive in-hospital hydration and the administration of a
        protective agent called Mesna
®
,
        which
        is inconvenient and expensive. Chloroacetaldehyde is another metabolite of
        ifosfamide and is toxic to the central nervous system, causing "fuzzy brain"
        syndrome for which there is currently no protective measure. Similar toxicity
        concerns pertain to high-dose cyclophosphamide, which is widely used in bone
        marrow and blood cell transplantation. Because ZIO-201 is independently
        active—without acrolein or chloroacetaldehyde metabolites—the Company believes
        that the administration of ZIO-201 may avoid the toxicities of ifosfamide
        and cyclophosphamide without compromising efficacy.
In
        addition to anticipated lower toxicity, ZIO-201 may have other advantages
        over
        ifosfamide and cyclophosphamide. ZIO-201 likely cross-links DNA differently
        than
        ifosfamide or cyclophosphamide metabolites, resulting in a different activity
        profile. Moreover, in some instances ZIO-201 appears to show activity in
        ifosfamide- and/or cyclophosphamide-resistant cancer cells.
Potential
        Lead Indications for ZIO-201: Sarcomas
.
        Sarcomas are cancers of the bone, cartilage, fat, muscle, blood vessels,
        or
        other connective or supportive tissue. Soft tissue sarcomas, the expected
        lead
        indication for ZIO-201, are relatively rare; there are 6,000 to 8,000 thousand
        new cases each year in adults in the United States. On the other hand, in
        children, soft tissue sarcomas account for approximately 10% of all childhood
        cancers. There are more than 50 histological or tissue types of soft tissue
        sarcomas. The prognosis for patients with adult soft tissue sarcomas depends
        on
        several factors, including the patient's age, size of the primary tumor,
        histological grade, and stage of the tumor. Factors associated with a poorer
        prognosis include age greater than 60 years, tumors larger than five
        centimeters, and high-grade histology. While small, low-grade tumors are
        usually
        curable by surgery alone, higher-grade or larger sarcomas are associated
        with
        higher local treatment failure rates and increased metastatic potential.
        Ifosfamide-based chemotherapy is a frequent standard of care for the treatment
        of metastatic tumors. It may also used in the adjuvant setting for high-risk
        primary tumors.
5
ZIO-201
          may be a useful agent that, either alone or in combination, can deliver
          therapeutic activity with fewer to no side effects of the type that have
          been
          associated with ifosfamide. In the United States, ifosfamide is regularly
          included in combination regimens for the treatment of sarcomas, testicular
          cancers, head and neck cancer and some types of non-Hodgkin's lymphomas. The
          Company believes that ZIO-201 may be able to replace ifosfamide in any
          or all of
          these combination protocols.
Clinical
        Development Plan for ZIO-201
.
        A phase
        I clinical trial is being conducted at two centers with the objective of
        establishing maximum tolerated dose. The current dose level in this phase
        I
        trial is believed to be comparable to a relatively high dose of ifosfamide.
        The
        drug is being administered without Mesna
®
.
        Furthermore, one patient has evidence of stable disease. The Company intends
        to
        initiate a phase I/II trial in advanced sarcoma and expects early results
        in the
        first half of 2006. The Company is also planning to implement a high
        dose
        phase I study in sarcoma and is exploring a phase II study in pediatric sarcoma.
        These trials would support the design and implementation of a phase III
        registration study in early 2007.
Competition
The
        development and commercialization for new products to treat cancer is highly
        competitive, and there will be considerable competition from major
        pharmaceutical, biotechnology, and specialty cancer companies. Many of our
        competitors have substantially more resources than the Company, including
        both
        financial and technical. In addition, many of these companies have more
        experience than the Company in preclinical and clinical development,
        manufacturing, regulatory, and global commercialization. The Company is also
        competing with academic institutions, governmental agencies and private
        organizations that are conducting research in the field of cancer. Competition
        for highly qualified employees is intense.
There
        are
        a number of companies developing chemotherapies for cancer and in particular
        for
        multiple myeloma and sarcoma. Millennium Pharmaceuticals, Inc. and Celgene
        Corporation have marketed products to treat multiple myeloma, and many other
        product candidates are in clinical trials and preclinical research. There
        are a
        more limited number of competitors developing new approaches to treat sarcoma,
        Ariad Pharmaceuticals principal among them.
License
        Agreements and Intellectual Property
The
        Company's goal is to obtain, maintain and enforce patent protection for our
        products, formulations, processes, methods and other proprietary technologies,
        to preserve our trade secrets, and to operate without infringing the proprietary
        rights of other parties, both in the United States and in other countries.
        Our
        policy is to actively seek the broadest possible intellectual property
        protection for our product candidates through a combination of contractual
        arrangements and patents, both in the United States and abroad.
Patent
        and Technology License Agreement — University of Texas M. D. Anderson Cancer
        Center and the Texas A&M University System
.
        On
        August 24, 2004, the Company entered into a Patent and Technology License
        Agreement with The Board of Regents of the University of Texas System, acting
        on
        behalf of the University of Texas M. D. Anderson Cancer Center and the Texas
        A&M University System (collectively, the "Licensors"). Under this agreement,
        the Company was granted an exclusive, worldwide license to rights (including
        rights to U.S. and foreign patent and patent applications and related
        improvements and know-how) for the manufacture and commercialization of two
        classes of organic arsenicals (water- and lipid-based) for human and animal
        use.
        The class of water-based organic arsenicals includes ZIO-101.
6
In
        October 2004, we received a notice of allowance for U.S. Patent Application
        No.
        10/337969, entitled "S-dimethylarsino-thiosuccinic acid
        S-dimethylarsino-2-thiobenzoic acid S-(simethylarsino) glutathione as treatments
        for cancer." The patent was granted on June 28, 2005. The patent application
        claims both therapeutic uses and pharmaceutical compositions containing a
        novel
        class of organic arsenicals, including ZIO-101, for the treatment of cancer.
As
        partial consideration for the license rights obtained by the Company, we
        paid
        the Licensors an upfront, nonrefundable $125,000 fee and issued 250,487 shares
        of our common stock to University of Texas M. D. Anderson Cancer Center and
        granted it an option to purchase an additional 50,222 shares of our common
        stock
        for approximately $0.002 per share (such share amounts and option exercise
        price
        have been adjusted to reflect to the Merger). The option will vest and become
        exercisable with respect to 50% of its shares upon completion of the dosing
        of
        the last patient for both the blood and solid tumor phase I trials for ZIO-101.
        Another 25% of the shares subject to the option will vest upon enrollment
        of the
        first patient in a multi-center pivotal clinical trial (i.e., a human clinical
        trial intended to provide the substantial evidence of efficacy necessary
        to
        support the filing of an approvable New Drug Application ("NDA") ) for ZIO-101,
        with the remaining 25% vesting upon the filing of an Investigational New
        Drug
        ("IND") for ZIO-101. As additional consideration for the license, the Licensors
        are entitled to receive up to an aggregate of $4.85 million in cash payments,
        payable in varying amounts, upon the achievement of certain milestones,
        including a $100,000 that the Company paid upon the commencement of the phase
        I
        clinical trial for ZIO-101 in May 2005. The Licensors are entitled to receive
        royalty payments from sales of a licensed product (should such a product
        be
        approved for commercial sale), as well and a portion of any fees that we
        may
        receive from a sublicensee. Finally, the license agreement provides that
        the
        Company will enter into two separate sponsored research agreements with the
        Licensors, each of which will require that we make annual payments of $100,000
        for no less than two years. The Company will have the exclusive right to
        all
        intellectual property rights resulting from such research pursuant to the
        terms
        of the agreements.
The
        agreement also contains other provisions customary and common in similar
        agreements within the industry, such the Company's right to sublicense our
        rights under the agreement. Nevertheless, if the Company sublicenses its
        rights
        prior to the commencement of a pivotal clinical trial (i.e., a human clinical
        trial intended to provide the substantial evidence of efficacy necessary
        to
        support the filing of an approvable NDA), the Licensors will generally be
        entitled to receive a share of the payments it receives in exchange for the
        sublicense (subject to certain exceptions).
License
        Agreement with DEKK-TEC, Inc
.
        On
        October 15, 2004, the Company entered into a license agreement with DEKK-TEC,
        Inc., pursuant to which the Company was granted an exclusive, worldwide license
        to the second of our lead product candidates, ZIO-201.
In
        consideration for the Company's license rights, DEKK-TEC is entitled to
        receive cash payments in the aggregate amount of up to $3.90 million,
        which
        are payable in varying amounts upon the occurrence of certain milestone events.
        The majority of these milestone payments will be creditable
        against
        future royalty payments, as referenced below. We also issued DEKK-TEC an
        option
        to purchase up to 27,616 shares of our common stock for approximately $0.02
        per
        share (such share amount and option exercise price have been adjusted to
        reflect
        to the Merger), which option vested with respect to 6,904 post-Merger shares
        upon the execution of the license agreement. The option will vest with respect
        to the remaining shares upon certain milestone events culminating with final
        FDA
        approval of the first NDA submitted by us (or by our sublicensee) for ZIO-201.
        Finally, DEKK-TEC also is entitled to receive royalty payments on the sales
        of
        ZIO-201 should it be approved for commercial sale. The license agreement
        also
        contains other provisions customary and common in similar agreements within
        the
        industry.
7
Option
        Agreement with Southern Research Institute ("SRI")
.
        On
        December 22, 2004, we entered into an Option Agreement with SRI, pursuant
        to
        which we were granted an exclusive option to obtain an exclusive license
        to
        SRI's interest in certain intellectual property, including exclusive rights
        related to certain isophosphoramide mustard analogs. Also on December 22,
        2004,
        we entered into a Research Agreement with SRI pursuant to which we agreed
        to
        spend a sum not to exceed $200,000 between the execution of the agreement
        and
        December 21, 2006, including a $25,000 payment that we made simultaneously
        with
        the execution of the agreement, to fund research and development work by
        SRI in
        the field of isophosphoramide mustard analogs. Under the terms of the option
        agreement, our exclusive right to exercise the option will expire 60 days
        after
        the termination or expiration of the SRI's research and development work in the
        field of isophosphoramide mustard analogs, and the delivery of the certain
        required reports.
Other
        Intellectual Property Rights and Protection
.
        The
        Company depends upon the skills, knowledge and experience of its scientific
        and
        technical personnel, as well as those of its advisors, consultants and other
        contractors, none of which is patentable. To help protect proprietary know-how,
        which is not patentable, and for inventions for which patents may be difficult
        to enforce, the Company currently relies, and in the future rely, on trade
        secret protection and confidentiality agreements to protect our interests.
        To
        this end, the Company generally requires employees, consultants, advisors
        and
        other contractors to enter into confidentiality agreements that prohibit
        the
        disclosure of confidential information and, where applicable, require disclosure
        and assignment to us of the ideas, developments, discoveries and inventions
        important to our business.
Governmental
        Regulation
The
        research, development, testing, manufacture, labeling, promotion, advertising,
        distribution, and marketing, among other things, of our products are extensively
        regulated by governmental authorities in the United States and other countries.
        In the United States, the FDA regulates drugs under the Federal Food, Drug,
        and
        Cosmetic Act, or the "FDCA," and its implementing regulations. Failure to comply
        with the applicable U.S. requirements may subject us to administrative or
        judicial sanctions, such as FDA refusal to approve pending New Drug
        Applications, warning letters, product recalls, product seizures, total or
        partial suspension of production or distribution, injunctions, and/or criminal
        prosecution.
8
Drug
        Approval Process
.
        None of
        our drugs may be marketed in the U.S. until the drug has received FDA approval.
        The steps required before a drug may be marketed in the U.S.
        include:
·
Preclinical
                  laboratory tests, animal studies, and formulation
                  studies;
·
Submission
                  to the FDA of an IND for human clinical testing, which must become
                  effective before human clinical trials may
                  begin;
·
Adequate
                  and well-controlled human clinical trials to establish the safety
                  and
                  efficacy of the drug for each
                  indication;
·
Submission
                  to the FDA of an NDA;
·
Satisfactory
                  completion of an FDA inspection of the manufacturing facility or
                  facilities at which the drug is produced to assess compliance with
                  current
                  good manufacturing practices, or "cGMPs";
                  and
·
FDA
                  review and approval of the NDA.
Preclinical
        tests include laboratory evaluation of product chemistry, toxicity, and
        formulation, as well as animal studies. The conduct of the preclinical tests
        and
        formulation of the compounds for testing must comply with federal regulations
        and requirements. The results of the preclinical tests, together with
        manufacturing information and analytical data, are submitted to the FDA as
        part
        of an IND, which must become effective before human clinical trials may begin.
        An IND will automatically become effective 30 days after receipt by the FDA,
        unless before that time the FDA raises concerns or questions about issues
        such
        as the conduct of the trials as outlined in the IND. In such a case, the
        IND
        sponsor and the FDA must resolve any outstanding FDA concerns or questions
        before clinical trials can proceed. The Company cannot be sure that submission
        of an IND will result in the FDA allowing clinical trials to begin.
Clinical
        trials involve the administration of the investigational drug to human subjects
        under the supervision of qualified investigators. Clinical trials are conducted
        under protocols detailing the objectives of the study, the parameters to
        be used
        in monitoring safety, and the effectiveness criteria to be evaluated. Each
        protocol must be submitted to the FDA as part of the IND.
Clinical
        trials typically are conducted in three sequential phases, but the phases
        may
        overlap. The study protocol and informed consent information for study subjects
        in clinical trials must also be approved by an Institutional Review Board
        for
        each institution where the trials will be conducted. Study subjects must
        sign an
        informed consent form before participating in a clinical trial. Phase I usually
        involves the initial introduction of the investigational drug into people
        to
        evaluate its short-term safety, dosage tolerance, metabolism, pharmacokinetics
        and pharmacologic actions, and, if possible, to gain an early indication
        of its
        effectiveness. Phase II usually involves trials in a limited patient population
        to (i) evaluate dosage tolerance and appropriate dosage; (ii) identify possible
        adverse effects and safety risks; and (iii) evaluate preliminarily the efficacy
        of the drug for specific indications. Phase III trials usually further evaluate
        clinical efficacy and test further for safety by using the drug in its final
        form in an expanded patient population. There can be no assurance that phase
        I,
        phase II, or phase III testing will be completed successfully within any
        specified period of time, if at all. Furthermore, a company or the FDA may
        suspend clinical trials at any time on various grounds, including a finding
        that
        the subjects or patients are being exposed to an unacceptable health
        risk.
The
        FDCA
        permits FDA and the IND sponsor to agree in writing on the design and size
        of
        clinical studies intended to form the primary basis of an effectiveness claim
        in
        an NDA application. This process is known as Special Protocol Assessment.
        These
        agreements may not be changed after the clinical studies begin, except in
        limited circumstances.
9
Assuming
        successful completion of the required clinical testing, the results of the
        preclinical studies and of the clinical studies, together with other detailed
        information, including information on the manufacture and composition of
        the
        drug, are submitted to the FDA in the form of an NDA requesting approval
        to
        market the product for one or more indications. The testing and approval
        process
        requires substantial time, effort, and financial resources. The agencies
        review
        the application and may deem it to be inadequate to support the registration,
        and companies cannot be sure that any approval will be granted on a timely
        basis, if at all. The FDA may also refer the application to the appropriate
        advisory committee, typically a panel of clinicians, for review, evaluation
        and
        a recommendation as to whether the application should be approved. The FDA
        is
        not bound by the recommendations of the advisory committee.
The
        FDA
        has various programs, including fast track, priority review, and accelerated
        approval, that are intended to expedite or simplify the process for reviewing
        drugs, and/or provide for approval on the basis surrogate endpoints. Generally,
        drugs that may be eligible for one or more of these programs are those for
        serious or life-threatening conditions, those with the potential to address
        unmet medical needs, and those that provide meaningful benefit over existing
        treatments. A company cannot be sure that any of its drugs will qualify for
        any
        of these programs, or that, if a drug does qualify, that the review time
        will be
        reduced.
Section
        505(b)(2) of the FDCA allows the FDA to approve a follow-on drug on the basis
        of
        data in the scientific literature or a prior FDA approval of an NDA for a
        related drug. This procedure potentially makes it easier for generic drug
        manufacturers to obtain rapid approval of new forms of drugs based on
        proprietary data of the original drug manufacturer.
Before
        approving an NDA, the FDA usually will inspect the facility or the facilities
        at
        which the drug is manufactured and will not approve the product unless cGMP
        compliance is satisfactory. If the FDA evaluates the NDA and the manufacturing
        facilities as acceptable, the FDA may issue an approval letter, or in some
        cases, an approvable letter followed by an approval letter. Both letters
        usually
        contain a number of conditions that must be met in order to secure final
        approval of the NDA. When and if those conditions have been met to the FDA's
        satisfaction, the FDA will issue an approval letter. The approval letter
        authorizes commercial marketing of the drug for specific indications. As
        a
        condition of NDA approval, the FDA may require post-marketing testing and
        surveillance to monitor the drug's safety or efficacy, or impose other
        conditions.
After
        approval, certain changes to the approved product, such as adding new
        indications, making certain manufacturing changes, or making certain additional
        labeling claims, are subject to further FDA review and approval. Before a
        company can market products for additional indications, it must obtain
        additional approvals from FDA. Obtaining approval for a new indication generally
        requires that additional clinical studies be conducted. A company cannot
        be sure
        that any additional approval for new indications for any product candidate
        will
        be approved on a timely basis, or at all.
Post-Approval
        Requirements
.
        Often
        times, even after a drug has been approved by the FDA for sale, the FDA may
        require that certain post-approval requirements be satisfied, including the
        conduct of additional clinical studies. If such post-approval conditions
        are not
        satisfied, the FDA may withdraw its approval of the drug. In addition, holders
        of an approved NDA are required to: (i) report certain adverse reactions
        to the
        FDA, (ii) comply with certain requirements concerning advertising and
        promotional labeling for their products, and (iii) continue to have quality
        control and manufacturing procedures conform to cGMP after approval. The
        FDA
        periodically inspects the sponsor's records related to safety reporting and/or
        manufacturing facilities; this latter effort includes assessment of compliance
        with cGMP. Accordingly, manufacturers must continue to expend time, money,
        and
        effort in the area of production and quality control to maintain cGMP
        compliance. We intend to use third party manufacturers to produce our products
        in clinical and commercial quantities, and future FDA inspections may identify
        compliance issues at the facilities of our contract manufacturers that may
        disrupt production or distribution, or require substantial resources to correct.
        In addition, discovery of problems with a product after approval may result
        in
        restrictions on a product, manufacturer, or holder of an approved NDA, including
        withdrawal of the product from the market.
10
Employees.
As
        of the
        date of this current report, the Company had 11 employees, all of which are
        full-time employees. The Company intends to hire an additional 3 to 4 employees
        prior to the end of 2005.
Description
        of Property
The
        Company's corporate office is located at 1180 Avenue of the Americas, 19th
        Floor, New York, NY 10036. The New York office space is subject to a five-year
        lease agreement that expires in June 2010. Under the terms of the lease,
        the
        Company leases approximately 2,580 square feet and is required to make monthly
        rental payments of approximately $10,100 until December 31, 2007, with such
        payment increasing to approximately $11,000 thereafter through the remainder
        of
        the term of the lease. The Company's business and development operations are
        located as 197 Eighth Street, Suite 300, Charlestown, Massachusetts 02129.
        The
        Charlestown office space is subject to a five-year lease agreement that expires
        in October 2009. Under the terms of the lease, the Company leases approximately
        2,800 square feet and is required to make monthly rental payments that range
        from $4,200 during the first year of the lease to $4,900 during the last
        year of
        the lease. The Company is presently intending to expand its commercial space
        in
        Charlestown, Massachusetts by approximately 1,000 square feet.
Legal
        Proceedings
The
        Company is not currently involved in any material legal
        proceedings.
Cautionary
        Note Regarding Forward-Looking Statements
This
        report contains certain statements that are "forward-looking statements" under
        Section 27A of the Securities Act and Section 21E of the Securities Exchange
        Act
        of 1934, as amended, and includes, among other things, discussions of our
        business strategies, future operations and capital resources. Words such
        as, but
        not limited to, "may,""likely,""anticipate,""expect" and "believes" indicate
        forward-looking statements.
Forward-looking
        statements are included in the section of this report entitled "Description of
        Business of ZIOPHARM Oncology, Inc." Although we believe that the expectations
        reflected in such forward-looking statements are generally reasonable, we
        cannot
        assure you that such expectations will ultimately prove to be correct.
        Generally, these statements relate to our business plans and strategies,
        projected or anticipated benefits or other consequences of market conditions
        and
        opportunities, business plans or strategies, projections involving anticipated
        sales and revenues, expenses, projected future earnings and other aspects
        of
        operational results. All Phases of our operations are subject to a number
        of
        uncertainties, risks and other influences, most of which are outside our
        control, and any one or combination of which could materially and adversely
        affect the results of our operations, and also, could affect whether any
        such
        forward-looking statements contained herein ultimately prove to be accurate.
        Important factors that could cause actual results to differ materially from
        our
        current expectations are summarized in the section captioned "Risk Factors"
        immediately following.
11
Risk
          Factors
The
        purchase of shares of our common stock is very speculative and involves a
        very
        high degree of risk. An investment in the Company is suitable only for the
        persons who can afford the loss of their entire investment. Accordingly,
        investors should carefully consider the following risk factors, as well as
        other
        information set forth herein, in making an investment decision with respect
        to
        our securities.
We
        currently have no product revenues and will need to raise additional capital
        to
        operate our business
.
        To
        date, we have generated no product revenues. Until and unless we receive
        approval from the U.S. Food and Drug Administration and/or other regulatory
        authorities for our product candidates, we cannot sell our drugs and will
        not
        have product revenues. Currently, our only product candidates are
        ZIO-101(organic arsenic) and ZIO-201 (isophosphoramide mustard), and they
        are
        not approved by the FDA for sale.
We
        will
        need to seek additional sources of financing which may not be available on
        favorable terms, if at all. Currently, we expect that we will have sufficient
        cash to fund our operations into the second quarter of 2006. However, changes
        may occur that would consume our existing capital prior to that time, including
        the progress of our research and development efforts, changes in governmental
        regulation and acquisitions of additional product candidates. If we do not
        succeed in raising additional funds on acceptable terms, we may be unable
        to
        complete planned preclinical and clinical trials or obtain approval of any
        product candidates from the FDA and other regulatory authorities. In addition,
        we could be forced to discontinue product development, reduce or forego sales
        and marketing efforts or forego attractive business opportunities. Any
        additional sources of financing will likely involve the issuance of our equity
        securities, which will have a dilutive effect on our existing
        stockholders.
We
        are not currently profitable and may never become profitable
.
        We have
        a history of losses and expect to incur substantial losses and negative
        operating cash flow for the foreseeable future, and we may never achieve
        or
        maintain profitability. Even if we succeed in developing and commercializing
        one
        or more product candidates, we expect to incur substantial losses for the
        foreseeable future and may never become profitable. We expect also to continue
        to incur significant operating and capital expenditures and anticipate that
        our
        expenses will increase substantially in the foreseeable future as
        we:
·
Continue
                  to undertake preclinical development and clinical trials for product
                  candidates;
·
Scale
                  up the formulation and manufacturing of our product candidates;
·
Seek
                  regulatory approvals for product
                  candidates;
·
Implement
                  additional internal systems and infrastructure;
                  and
·
Hire
                  additional personnel.
We
        also
        expect to experience negative cash flow for the foreseeable future as we
        fund
        our operating losses and capital expenditures. This may result in a negative
        impact on the value of our Common Stock.
12
We
        have a limited operating history upon which to base an investment
        decision
.
        Prior
        to the Merger, ZIOPHARM was a development-stage company that was incorporated
        in
        September 2003. To date, we have not demonstrated an ability to perform the
        functions necessary for the successful commercialization of any product
        candidates. The successful commercialization of any product candidates will
        require us to perform a variety of functions, including:
·
Continuing
                  to undertake preclinical development and clinical
                  trials;
·
Participating
                  in regulatory approval processes;
·
Formulating
                  and manufacturing products; and
·
Conducting
                  sales and marketing activities.
Our
        operations have been limited to organizing and staffing our company, acquiring,
        developing and securing our proprietary product candidates, undertaking
        preclinical trials and clinical trials of our product candidates ZIO-101
        and
        ZIO-201, and manufacturing ZIO-101 and ZIO- 201. These operations provide
        a
        limited basis for you to assess our ability to commercialize our product
        candidates and the advisability of investing in our securities.
We
        may not obtain the necessary U.S. or worldwide regulatory approvals to
        commercialize any product candidate
.
        We may
        not be able to obtain the approvals necessary to commercialize our product
        candidates, ZIO-101 and ZIO-201, or any product candidate that we may acquire
        or
        develop in the future for commercial sale. We will need FDA approval to
        commercialize our product candidates in the U.S. and approvals from regulatory
        authorities in foreign jurisdictions equivalent to the FDA to commercialize
        our
        product candidates in those jurisdictions. In order to obtain FDA approval
        of
        any product candidate, we must submit to the FDA a New Drug Application,
        or
"NDA," demonstrating that the product candidate is safe for humans and effective
        for its intended use. This demonstration requires significant research and
        animal tests, which are referred to as pre-clinical studies, as well as human
        tests, which are referred to as clinical trials. Satisfaction of the FDA's
        regulatory requirements typically takes many years, depending upon the type,
        complexity and novelty of the product candidate, and will require substantial
        resources for research, development and testing. We cannot predict whether
        our
        research, development, and clinical approaches will result in drugs that
        the FDA
        considers safe for humans and effective for their intended uses. The FDA
        has
        substantial discretion in the drug approval process and may require us to
        conduct additional pre-clinical and clinical testing or to perform
        post-marketing studies. The approval process may also be delayed by changes
        in
        government regulation, future legislation or administrative action or changes
        in
        FDA policy that occur prior to or during our regulatory review. Delays in
        obtaining regulatory approvals may:
·
Delay
                  commercialization of, and our ability to derive product revenues
                  from, our
                  product candidates;
·
Impose
                  costly procedures on us; and
·
Diminish
                  any competitive advantages that we may otherwise
                  enjoy.
Even
        if
        we comply with all FDA requests, the FDA may ultimately reject one or more
        of
        our NDAs. We cannot be sure that we will ever obtain regulatory clearance
        for
        our product candidates, ZIO-101 and ZIO-201. Failure to obtain FDA approval
        of
        our product candidates will severely undermine our business by leaving us
        without a saleable product, and therefore without any potential revenue source,
        until another product candidate can be developed. There is no guarantee that
        we
        will ever be able to develop or acquire another product candidate.
13
In
        foreign jurisdictions, we similarly must receive approval from applicable
        regulatory authorities before we can commercialize any drugs. Foreign regulatory
        approval processes generally include all of the risks associated with the
        FDA
        approval procedures described above.
Our
        product candidates are in early stages of clinical trials, and we cannot
        be
        certain when we will be able to file an NDA with the FDA
.
        Our
        product candidates, ZIO-101 and ZIO-201, are in early stages of development
        and
        require extensive clinical testing. In April 2005 we initiated two ZIO-101
        phase
        I clinical trials; one in hematological cancers and the other in solid tumors.
        A
        phase I trial for ZIO-201 in up to 25 patients has been initiated, in which
        10
        patients already have been treated with ZIO-201. Notwithstanding our current
        clinical trial plans for each of our existing product candidates, we may
        not be
        able to commence additional trials or see results from these trials within
        our
        anticipated timelines. As such, we cannot predict with any certainty if or
        when
        we might submit an NDA for regulatory approval of our product candidates
        or
        whether such an NDA will be accepted.
Clinical
        trials are very expensive, time-consuming and difficult to design and
        implement
.
        Human
        clinical trials are very expensive and difficult to design and implement,
        in
        part because they are subject to rigorous regulatory requirements. The clinical
        trial process is also time consuming. We estimate that clinical trials of
        our
        product candidates will take at least several years to complete. Furthermore,
        failure can occur at any stage of the trials, and we could encounter problems
        that cause us to abandon or repeat clinical trials. The commencement and
        completion of clinical trials may be delayed by several factors,
        including:
·
Unforeseen
                  safety issues;
·
Determination
                  of dosing issues;
·
Lack
                  of effectiveness during clinical
                  trials;
·
Slower
                  than expected rates of patient
                  recruitment;
·
Inability
                  to monitor patients adequately during or after treatment;
                  and
·
Inability
                  or unwillingness of medical investigators to follow our clinical
                  protocols.
We
        are
        hopeful that we may be able to obtain "Fast Track" status from the FDA for one
        or more of our product candidates. Fast Track status means that the FDA will
        perform an expedited review of our data upon the completion of clinical trials,
        which will thereby decrease the amount of time it will take a product candidate
        that has achieved such designation to reach the commercial market. However,
        there is no guarantee that any of our product candidates will be granted
        Fast
        Track status by the FDA or that, even if such product candidate is granted
        such
        status, the product candidate's clinical development and regulatory approval
        process will not be delayed or will be successful.
In
        addition, we or the FDA may suspend our clinical trials at any time if it
        appears that we are exposing participants to unacceptable health risks or
        if the
        FDA finds deficiencies in our IND submission or in the conduct of these trials.
        Therefore, we cannot predict with any certainty the schedule for future clinical
        trials.
The
        results of our clinical trials may not support our product candidate
        claims
.
        Even if
        our clinical trials are completed as planned, we cannot be certain that their
        results will support approval of our product candidates. Success in pre-clinical
        testing and early clinical trials does not ensure that later clinical trials
        will be successful, and we cannot be sure that the results of later clinical
        trials will replicate the results of prior clinical trials and pre-clinical
        testing. The clinical trial process may fail to demonstrate that our product
        candidates are safe for humans and effective for indicated uses. This failure
        would cause us to abandon a product candidate and may delay development of
        other
        product candidates. Any delay in, or termination of, our clinical trials
        will
        delay the filing of our NDAs with the FDA and, ultimately, our ability to
        commercialize our product candidates and generate product revenues. In addition,
        our clinical trials involve small patient populations. Because of small sample
        size, the results of these clinical trials may not be indicative of future
        results.
14
Physicians
        and patients may not accept and use our drugs
.
        Even if
        the FDA approves our product candidates, physicians and patients may not
        accept
        and use them. Acceptance and use of our products will depend upon a number
        of
        factors including:
·
Perceptions
                  by members of the health care community, including physicians,
                  regarding
                  the safety and effectiveness of our
                  drugs;
·
Cost-effectiveness
                  of our products relative to competing
                  products;
·
Availability
                  of reimbursement for our products from government or other healthcare
                  payers; and
·
Effectiveness
                  of marketing and distribution efforts by us and our licensees and
                  distributors, if any.
Because
        we expect sales of our current product candidates, if approved, to generate
        substantially all of our product revenues for the foreseeable future, the
        failure of a drug to find market acceptance would harm our business and could
        require us to seek additional financing in order to fund the development
        of
        future product candidates.
Our
        drug-development program materially depends upon third-party researchers
        who are
        outside our control
.
        We
        materially rely upon independent investigators and collaborators, such as
        universities and medical institutions, to conduct our preclinical and clinical
        trials under agreements with us. These collaborators are not our employees
        and
        we cannot control the amount or timing of resources that they devote to our
        programs. These investigators may not assign as great a priority to our programs
        or pursue them as diligently as we would if we were undertaking such programs
        ourselves. If outside collaborators fail to devote sufficient time and resources
        to our drug development programs, or if their performance is substandard,
        the
        approval of our FDA applications, if any, and our introduction of new drugs,
        if
        any, will be delayed. These collaborators may also have relationships with
        other
        commercial entities, some of whom may compete with us. If our collaborators
        assist our competitors to our detriment, our competitive position would be
        harmed.
We
        rely exclusively on third parties to formulate and manufacture our product
        candidates
.
        We do
        not have experience in drug formulation or manufacturing and do not intend
        to
        establish our own manufacturing facilities. We lack the resources and expertise
        to formulate or manufacture our own product candidates. We currently are
        contracting for the commercial scale manufacture of our product candidates.
        We
        intend to contract with one or more manufacturers to manufacture, supply,
        store
        and distribute drug supplies for our clinical trials. If a product candidate
        we
        develop or acquire in the future receives FDA approval, we will rely on one
        or
        more third-party contractors to manufacture our drugs. Our anticipated future
        reliance on a limited number of third-party manufacturers exposes us to the
        following risks:
15
·
We
                  may be unable to identify manufacturers on acceptable terms or
                  at all
                  because the number of potential manufacturers is limited and the
                  FDA must
                  approve any replacement contractor. This approval would require
                  new
                  testing and compliance inspections. In addition, a new manufacturer
                  would
                  have to be educated in, or develop substantially equivalent processes
                  for,
                  production of our products after receipt of FDA approval, if
                  any.
·
Our
                  third-party manufacturers might be unable to formulate and manufacture
                  our
                  drugs in the volume and of the quality required to meet our clinical
                  needs
                  and commercial needs, if any.
·
Our
                  future contract manufacturers may not perform as agreed or may
                  not remain
                  in the contract manufacturing business for the time required to
                  supply our
                  clinical trials or to successfully produce, store and distribute
                  our
                  products.
·
Drug
                  manufacturers are subject to ongoing periodic unannounced inspection
                  by
                  the FDA, the DEA, and corresponding state agencies to ensure strict
                  compliance with good manufacturing practices and other government
                  regulations and corresponding foreign standards. We do not have
                  control
                  over third-party manufacturers' compliance with these regulations and
                  standards.
·
If
                  any third-party manufacturer makes improvements in the manufacturing
                  process for our products, we may not own, or may have to share,
                  the
                  intellectual property rights to the
                  innovation.
Each
        of
        these risks could delay our clinical trials, the approval, if any, of our
        product candidates by the FDA or the commercialization of our product candidates
        or result in higher costs or deprive us of potential product
        revenues.
We
        do
        not have experience selling, marketing or distributing products and no internal
        capability to do so
.
        We
        currently have no marketing, sales or distribution capabilities. If and when
        we
        become reasonably certain that we will be able to commercialize our current
        or
        future products, we anticipate allocating resources to the marketing, sales
        and
        distribution of our proposed products in North America However, we cannot
        assure
        that we will be able to market, sell and distribute our products successfully.
        Our future success also may depend, in part, on our ability to enter into
        and
        maintain collaborative relationships for such capabilities, the collaborator's
        strategic interest in the products under development and such collaborator's
        ability to successfully market and sell any such products. Although we intend
        to
        pursue collaborative arrangements regarding the sale and marketing of our
        products, there can be no assurance that we will be able to establish or
        maintain our own sales operations or affect collaborative arrangements, or
        that
        if we are able to do so, our collaborators will have effective sales forces.
        There can also be no assurance that we will be able to establish or maintain
        relationships with third party collaborators or develop in-house sales and
        distribution capabilities. To the extent that we depend on third parties
        for
        marketing and distribution, any revenues we receive will depend upon the
        efforts
        of such third parties, and there can be no assurance that such efforts will
        be
        successful. In addition, there can also be no assurance that we will be able
        to
        market and sell our products in the United States or overseas.
If
        we
        cannot compete successfully for market share against other drug companies,
        we
        may not achieve sufficient product revenues and our business will
        suffer
.
        The
        market for our product candidates, ZIO-101 and ZIO-201, is characterized
        by
        intense competition and rapid technological advances. If a product candidate
        receives FDA approval, it will compete with a number of existing and future
        drugs and therapies developed, manufactured and marketed by others. Existing
        or
        future competing products may provide greater therapeutic convenience or
        clinical or other benefits for a specific indication than our products, or
        may
        offer comparable performance at a lower cost. If our products fail to capture
        and maintain market share, we may not achieve sufficient product revenues
        and
        our business will suffer.
16
We
        will
        compete against fully integrated pharmaceutical companies and smaller companies
        that are collaborating with larger pharmaceutical companies, academic
        institutions, government agencies and other public and private research
        organizations. Many of these competitors have products already approved or
        in
        development. In addition, many of these competitors, either alone or together
        with their collaborative partners, operate larger research and development
        programs or have substantially greater financial resources than we do, as
        well
        as significantly greater experience in:
·
Developing
                  drugs;
·
Undertaking
                  pre-clinical testing and human clinical
                  trials;
·
Obtaining
                  FDA and other regulatory approvals of
                  drugs;
·
Formulating
                  and manufacturing drugs; and
·
Launching,
                  marketing and selling drugs.
If
        we
        fail to adequately protect or enforce our intellectual property rights or
        secure
        rights to patents of others, the value of our intellectual property rights
        would
        diminish
.
        Our
        success, competitive position and future revenues will depend in part on
        our
        ability and the abilities of our licensors to obtain and maintain patent
        protection for our products, methods, processes and other technologies, to
        preserve our trade secrets, to prevent third parties from infringing on our
        proprietary rights and to operate without infringing the proprietary rights
        of
        third parties.
To
        date,
        we have exclusive rights to certain U.S. and foreign intellectual property.
        We
        anticipate filing additional patent applications both in the U.S. and in
        other
        countries, as appropriate. However, we cannot predict:
·
The
                  degree and range of protection any patents will afford us against
                  competitors, including whether third parties will find ways to
                  invalidate
                  or otherwise circumvent our
                  patents;
·
If
                  and when patents will issue;
·
Whether
                  or not others will obtain patents claiming aspects similar to those
                  covered by our patents and patent applications;
                  or
·
Whether
                  we will need to initiate litigation or administrative proceedings
                  which
                  may be costly whether we win or
                  lose.
Our
        success also depends upon the skills, knowledge and experience of our scientific
        and technical personnel, our consultants and advisors as well as our licensors
        and contractors. To help protect our proprietary know-how and our inventions
        for
        which patents may be unobtainable or difficult to obtain, we rely on trade
        secret protection and confidentiality agreements. To this end, it is our
        policy
        generally to require our employees, consultants, advisors and contractors
        to
        enter into agreements which prohibit the disclosure of confidential information
        and, where applicable, require disclosure and assignment to us of the ideas,
        developments, discoveries and inventions important to our business. These
        agreements may not provide adequate protection for our trade secrets, know-how
        or other proprietary information in the event of any unauthorized use or
        disclosure or the lawful development by others of such information. If any
        of
        our trade secrets, know-how or other proprietary information is disclosed,
        the
        value of our trade secrets, know-how and other proprietary rights would be
        significantly impaired and our business and competitive position would
        suffer.
17
If
        we
        infringe the rights of third parties we could be prevented from selling
        products, forced to pay damages, and defend against litigation
.
        If our
        products, methods, processes or other technologies infringe the proprietary
        rights of other parties, we could incur substantial costs and we may have
        to:
·
Obtain
                  licenses, which may not be available on commercially reasonable
                  terms, if
                  at all;
·
Abandon
                  an infringing drug candidate;
·
Redesign
                  our products or processes to avoid
                  infringement;
·
Stop
                  using the subject matter claimed in the patents held by
                  others;
·
Pay
                  damages; or
·
Defend
                  litigation or administrative proceedings which may be costly whether
                  we
                  win or lose, and which could result in a substantial diversion
                  of our
                  valuable management resources.
Our
        ability to generate product revenues will be diminished if our drugs sell
        for
        inadequate prices or patients are unable to obtain adequate levels of
        reimbursement
.
        Our
        ability to commercialize our drugs, alone or with collaborators, will depend
        in
        part on the extent to which reimbursement will be available from:
·
Government
                  and health administration
                  authorities;
·
Private
                  health maintenance organizations and health insurers;
                  and
·
Other
                  healthcare payers.
Significant
        uncertainty exists as to the reimbursement status of newly approved healthcare
        products. Healthcare payers, including Medicare, are challenging the prices
        charged for medical products and services. Government and other healthcare
        payers increasingly attempt to contain healthcare costs by limiting both
        coverage and the level of reimbursement for drugs. Even if our product
        candidates are approved by the FDA, insurance coverage may not be available,
        and
        reimbursement levels may be inadequate, to cover our drugs. If government
        and
        other healthcare payers do not provide adequate coverage and reimbursement
        levels for our products, once approved, market acceptance of such products
        could
        be reduced.
We
        may not be able to successfully manage our growth
.
        Our
        success will depend upon the expansion of our operations and the effective
        management of our growth, which will place a significant strain on our
        management and on our administrative, operational and financial resources.
        To
        manage this growth, we must expand our facilities, augment our operational,
        financial and management systems and hire and train additional qualified
        personnel. If we are unable to manage our growth effectively, our business
        may
        be harmed.
18
Our
        business will subject us to the risk of liability claims associated with
        the use
        of hazardous materials and chemicals
.
        Our
        contract research and development activities may involve the controlled use
        of
        hazardous materials and chemicals. Although we believe that our safety
        procedures for using, storing, handling and disposing of these materials
        comply
        with federal, state and local laws and regulations, we cannot completely
        eliminate the risk of accidental injury or contamination from these materials.
        In the event of such an accident, we could be held liable for any resulting
        damages and any liability could have a materially adverse effect on our
        business, financial condition and results of operations. In addition, the
        federal, state and local laws and regulations governing the use, manufacture,
        storage, handling and disposal of hazardous or radioactive materials and
        waste
        products may require our contractors to incur substantial compliance costs
        that
        could materially adversely affect our business, financial condition and results
        of operations.
We
        rely on key executive officers and scientific and medical advisors, and their
        knowledge of our business and technical expertise would be difficult to
        replace
.
        We are
        highly dependent on our principal scientific, regulatory and medical advisors.
        We do not have "key person" life insurance policies on any of our officers. The
        loss of the technical knowledge and management and industry expertise of
        any of
        our key personnel could result in delays in product development, loss of
        customers and sales and diversion of management resources, which could adversely
        affect our operating results.
If
        we
        are unable to hire additional qualified personnel, our ability to grow our
        business may be harmed
.
        We will
        need to hire additional qualified personnel with expertise in pre-clinical
        testing, clinical research and testing, government regulation, formulation
        and
        manufacturing, as well as sales and marketing. We compete for qualified
        individuals with numerous biopharmaceutical companies, universities and other
        research institutions. Competition for such individuals is intense, and we
        cannot be certain that our search for such personnel will be successful.
        Attracting and retaining qualified personnel will be critical to our
        success.
We
        may incur substantial liabilities and may be required to limit commercialization
        of our products in response to product-liability lawsuits
.
        The
        testing and marketing of medical products entail an inherent risk of product
        liability. If we cannot successfully defend ourselves against product-liability
        claims, we may incur substantial liabilities or be required to limit
        commercialization of our products. Our inability to obtain sufficient
        product-liability insurance at an acceptable cost to protect against potential
        product liability claims could prevent or inhibit the commercialization of
        pharmaceutical products we develop, alone or with collaborators. We currently
        carry clinical trial insurance and product-liability insurance.
There
        are certain interlocking relationships among us and certain affiliates of
        Paramount, which may present potential conflicts of interest
.
Lindsay
        A. Rosenwald, M.D., who may be deemed to beneficially own approximately 20.13%
        of our common stock, is Chairman and Chief Executive Officer of Paramount
        BioCapital, Inc., an investment banking firm that served as placement agent
        in
        connection with a private placement of ZIOPHARM's Series A Convertible Preferred
        Stock that terminated in May 2005. Paramount also served as a finder in
        connection with the Company's option agreement with Southern Research Institute.
        The Company paid fees and issued securities to Paramount or its designees
        in
        connection with these transactions and Paramount currently has a right of
        first
        refusal to act as the placement agent for the private sale of our securities
        until May 31, 2008. Dr. Michael Weiser and Timothy McInerney, each of whom
        is a
        member of the Company's board of directors, are also full-time
employee
s
of
        Paramount. See "Certain Transactions and Relationships - ZIOPHARM Transactions
        and Relationship."
19
Paramount,
        Dr. Rosenwald, Dr. Weiser, and Mr. McInerney are
        not obligated pursuant to any agreement or understanding with us to
        make
        any additional products or technologies available to us, nor can there be
        any
        assurance that any biomedical or pharmaceutical products or technologies
        identified in the future by such parties will be made available to us. In
        addition, certain of our current officers and directors, as well as officers
        or
        directors that may be hereafter appointed, may from time to time serve as
        officers or directors of other biopharmaceutical or biotechnology companies.
        There can be no assurance that such other companies will not have interests
        in
        conflict with our own.
Because
        we became public by means of a reverse merger, we may not be able to attract
        the
        attention of major brokerage firms
.
Additional
        risks may exist as a result of our becoming a public reporting company through
        a
"reverse merger." Security analysts of major brokerage firms may not provide
        coverage of the Company. B
ecause
        we
        became public through a reverse merger,
there is
        no incentive to brokerage firms to recommend the
purchase
of our
        common stock. No assurance can be given that brokerage firms will want to
        provide analyst coverage of our Company in the future.
We
        are subject to Sarbanes-Oxley and the reporting requirements of federal
        securities laws, which can be expensive
.
        As a
        public reporting company, we are subject to the Sarbanes-Oxley Act of 2002,
        as
        well as the information and reporting requirements of the Securities Exchange
        Act of 1934, as amended, and other federal securities laws. The costs of
        compliance with the Sarbanes-Oxley Act and of preparing and filing annual
        and
        quarterly reports, proxy statements and other information with the SEC, and
        furnishing audited reports to stockholders, will cause our expenses to be
        higher
        than they would be if ZIOPHARM had remained privately held and did not
        consummate the Merger.
Our
        common stock trades only in an illiquid trading market
.
        Trading
        of our common stock is conducted on the over-the-counter bulletin board.
        This
        has an adverse effect on the liquidity of our common stock, not only in terms
        of
        the number of shares that can be bought and sold at a given price, but also
        through delays in the timing of transactions and reduction in security analysts'
        and the media's coverage of our Company and its common stock. This may result in
        lower prices for our common stock than might otherwise be obtained and could
        also result in a larger spread between the bid and asked prices for our common
        stock.
There
        is not now, and there may not ever be an active market for shares of our
        common
        stock
.
        In
        general, there has been very little trading activity in shares of the Company's
        common stock. The small trading volume will likely make it difficult for
        our
        stockholders to sell their shares as and when they choose. Furthermore, small
        trading volumes generally depress market prices. As a result, you may not
        always
        be able to resell shares of our common stock publicly at the time and prices
        that you feel are fair or appropriate.
Because
        it is a "penny stock," you may have difficulty selling shares of our common
        stock
.
Our
        common stock is a "penny stock" and is therefore subject to the requirements of
        Rule 15g-9 under the Securities and Exchange Act of 1934. Under this rule,
        broker-dealers who sell penny stocks must provide purchasers of these stocks
        with a standardized risk- disclosure document prepared by the Securities
        and
        Exchange Commission. Under applicable regulations, our common stock will
        generally remain a "penny stock" until and for such time as its per-share price
        is $5.00 or more (as determined in accordance with SEC regulations), or until
        we
        meet certain net asset or revenue thresholds. These thresholds include the
        possession of net tangible assets (i.e., total assets less intangible assets
        and
        liabilities) in excess of $2,000,000 in the event we have been operating
        for at
        least three years or $5,000,000 in the event we have been operating for fewer
        than three years, and the recognition of average revenues equal to at least
        $6,000,000 for each of the last three years. We do not anticipate meeting
        any of
        the foregoing thresholds in the foreseeable future.
20
The
        penny
        stock rules severely limit the liquidity of securities in the secondary market,
        and many brokers choose not to participate in penny-stock transactions. As
        a
        result, there is generally less trading in penny stocks. If you become a
        holder
        of our common stock, you may not always be able to resell shares of our common
        stock publicly at the time and prices that you feel are fair or
        appropriate.
We
        have never paid dividends and do not intend to do so for the foreseeable
        future
.
        We have
        never paid dividends on our capital stock and we do not anticipate that we
        will
        pay any dividends for the foreseeable future. Accordingly, any return on
        an
        investment in our Company will be realized, if at all, only when you sell
        shares
        of our common stock.
21
Management's
        Discussion and Analysis or Plan of Operation
ZIOPHARM
        Oncology Inc. (the "Company") is a development-stage company that is seeking to
        develop and commercialize a diverse, risk-sensitive portfolio of in-licensed
        cancer drugs that address unmet medical needs. The Company's management and
        advisors are focused on licensing proprietary drug candidate families that
        are
        related to cancer therapeutics on the market where the application of new
        biological understanding and the Company's drug development expertise will lead
        to a lower risk for clinical development failure while expediting clinical
        registration. The Company expects to commercialize its products on its own
        in
        North America but recognizes that promising clinical trial results in cancers
        with a high incidence and prevalence might also be addressed in a commercial
        partnership with another company with the requisite financial resources.
        Currently, the Company is in U.S. phase I studies for two product candidates
        known as ZIO-101 and ZIO-201. The Company currently intends to continue with
        clinical development of ZIO-101 for advanced multiple myeloma and ZIO-201
        for
        advanced sarcoma.
The
        Company's corporate office is located at 1180 Avenue of the Americas, 19th
        Floor, New York, NY 10036 with a telephone number of (646) 214-0700. The
        Company's business and development operations are located in Charlestown,
        Massachusetts.
Plan
        of Operation
Our
        plan
        of operation for the twelve month period commencing on September 13, 2005,
        the
        date of this report, is to continue implementing our business strategy,
        including the clinical development of our two lead product candidates, ZIO-101
        and ZIO-201. We also intend to expand our drug candidate portfolio by seeking
        additional drug candidates through in-licensing arrangements. We expect our
        principal expenditures during the next 12 months to include:
·
Fees
                    and milestone payments required under the license agreements
                    relating to
                    our existing product candidates;
·
Clinical
                  trial expenses, including the costs incurred with respect to the
                  conduct
                  of clinical trials in the United States for ZIO-101 and ZIO-201
                  and
                  preclinical costs associated with back-up candidates ZIO-102 and
                  ZIO-202;
·
Costs
                  related to the scale-up and manufacture of ZIO-101 and ZIO-201;
·
Rent
                  for our facilities; and
·
General
                  corporate and working capital, including general and administrative
                  expenses.
As
        part
        of our plan for additional employees, we anticipate hiring at least 3 to
        4
        additional full-time employees in medical, regulatory and administrative
        support. In addition, we intend to use senior advisors, consultants, clinical
        research organizations and third parties to perform certain aspects of product
        development, manufacturing, clinical and preclinical development, and regulatory
        and quality assurance functions.
At
        our
        current and desired pace of clinical development of our two product candidates,
        over the next 12 months we expect to spend approximately $4.6 million on
        clinical trials (including milestone payments that we expect to be triggered
        under the license agreements relating to our product candidates), approximately
        $3.7 million on manufacturing costs, $215,000 on facilities rent,
        and
        approximately $6.8 million on general corporate and working capital.
22
We
        believe we currently have sufficient capital to fund development and
        commercialization activities of ZIO-101 and ZIO-201 into the second quarter
        of
        2006. Because our business does not generate any cash flow, however, we will
        need to raise additional capital to continue development of the product
        candidates beyond that time. We expect to raise such additional capital by
        either borrowing money or by selling shares of our capital stock. To the
        extent
        additional capital is not available when we need it, we may be forced to
        abandon
        our development and commercialization efforts, which would have a material
        adverse effect on the prospects of our business. Further, our assumptions
        relating the expected costs of development and commercialization and timeframe
        for completion are dependent on numerous factors other than available financing,
        including significant unforeseen delays in the clinical trial and regulatory
        approval process, which could be extremely costly. In addition, our estimates
        assume that we will be able to enroll a sufficient number of patients in
        each
        clinical trial.
Product
        Candidate Development and Clinical Trials
ZIO-101,
        organic arsenic, is being developed presently to treat advanced myeloma.
        As
        follow-on to the ongoing phase I trials, a phase I/II trial in advanced multiple
        myeloma is in the advanced planning stage. With the completion of this trial
        in
        2006, the Company expects to initiate a registration trial in advanced multiple
        myeloma. The Company will continue to explore the use of ZIO-101 in solid
        tumors
        as well as a phase II trial in advanced multiple myeloma using a different
        dosing regimen. Preclinical development will continue with a back-up compound
        designated as ZIO-102. Additional compounds are being synthesized under our
        agreement with the University of Texas M.D. Anderson Cancer Center and the
        Texas
        A&M University System. Technology transfer and scale-up for the commercial
        manufacture of the active pharmaceutical ingredient, its lyophilization,
        and
        final product specification will continue through the period leading to the
        expected registration trial in early 2007.
ZIO-201,
        stabilized isophosphoramide mustard, is being developed presently to treat
        advanced sarcoma. As follow-on to the ongoing phase I trial, a phase I/II
        trial
        or a phase II trial in advanced sarcoma is in the advanced planning stage.
        With
        the completion of this trial in 2006, the Company expects to initiate a
        registration trial in advanced sarcoma in early 2007. The Company will explore
        the potential to test ZIO-201 in pediatric sarcoma in a phase II trial.
        Preclinical development will continue with back-up analogues, one of which
        we
        would expect to be designated ZIO-202. Technology transfer and scale-up for
        the
        commercial manufacture of the active pharmaceutical ingredient, its
        lyophilization, and final product specification will continue through the
        period
        leading to the expected registration trial in early 2007.
Off-Balance
        Sheet Arrangements
The
        Company has no off-balance sheet arrangements.
23
Security
        Ownership of Certain Beneficial Owners and Management
The
        following table summarizes certain information regarding the beneficial
        ownership (as such term is defined in Rule 13d-3 under the Securities Exchange
        Act of 1934) of the Company's outstanding common stock as of September 13, 2005
        (after giving effect to the Merger) by (i) each person known by the Company
        to
        be the beneficial owner of more than 5% of the Company's outstanding common
        stock, (ii) each director of the Company, (iii) each of the Company's named
        executive officers (as defined in Item 402(a)(3) of Regulation S-B under
        the
        Securities Act of 1933), and (iv) all executive officers and directors as
        a
        group. Except as indicated in the footnotes below, the security and stockholders
        listed below possess sole voting and investment power with respect to their
        shares.  Except as otherwise indicated, the address of the security
        and
        stockholders listed below is 1180 Avenue of the Americas, 19
th
Floor,
        New York, NY 10036.
Name
                  and Address of Beneficial Owner
Shares
                  of
Common
                  Stock
Beneficially
                  Owned (#)
(1)
Percentage
                  of
Common
                  Stock
Beneficially
                  Owned (%)
Dr.
                  Jonathan Lewis
(2)
136,868
1.88%
Richard
                  Bagley
(3)
80,428
1.11%
Robert
                  Peter Gale
(4)
8,371
*
Murray
                  Brennan
0
*
James
                  Cannon
0
*
Hon.
                  Wyche Fowler
0
*
Gary
                  Fragin
0
*
Timothy
                  McInerney
(5)
79,972
1.11%
Michael
                  Weiser
(6)
119,011
1.65%
All
                  executive officers and directors
as
                  a group
(7)
424,650
5.71%
Mibars,
                  LLC
365
                  West End Avenue
New
                  York, NY 10024
1,214,456
16.97%
Lindsay
                  A. Rosenwald
(8)
787
                  Seventh Avenue, 48th Floor
New
                  York, NY 10019
1,498,087
(8)
20.13%
Atlas
                  Equity I, Ltd.
181
                  W. Madison, Suite 3600
Chicago,
                  IL 60602
695,797
9.72%
Lester
                  E. Lipschutz
1650
                  Arch Street, 22
nd
Floor
Philadelphia,
                  PA 19103
463,864
(9)
6.48%
*
                Less than 1%
(1)
Beneficial
                  ownership is determined in accordance with SEC rules, beneficial
                  ownership
                  includes any shares as to which the security or stockholder has
                  sole or
                  shared voting power or investment power, and also any shares which
                  the
                  security or stockholder has the right to acquire within 60 days
                  of the
                  date hereof, whether through the exercise or conversion of any
                  stock
                  option, convertible security, warrant or other right. The indication
                  herein that shares are beneficially owned is not an admission on
                  the part
                  of the security or stockholder that he, she or it is a direct or
                  indirect
                  beneficial owner of those shares.
24
(2)
Includes
                  136,868 shares issuable upon the exercise of stock options that
                  are
                  currently exercisable or will become exercisable within the next
                  60
                  days.
(3)
Includes
                  80,428 shares issuable upon the exercise of stock options that
                  are
                  currently exercisable or will become exercisable within the next
                  60
                  days.
(4)
Includes
                  8,371 shares issuable upon the exercise of stock options that are
                  currently exercisable or will become exercisable within the next
                  60
                  days.
(5)
Includes
                  20,767 shares issuable upon the exercise of warrants that are currently
                  exercisable or will become exercisable within the next 60
                  days.
(6)
Includes
                  35,566 shares issuable upon the exercise of warrants that are currently
                  exercisable or will become exercisable within the next 60
                  days.
(7)
Includes
                  282,000 shares issuable upon the exercise of convertible securities
                  that
                  are currently exercisable or will become exercisable within the
                  next 60
                  days.
(8)
Excludes
                  463,864 shares held by certain trusts for the benefit of Dr. Rosenwald
                  and
                  his family for which Dr. Rosenwald disclaims beneficial ownership.
                  Includes 221,011 shares issuable upon the exercise of warrants
                  granted to
                  Dr. Rosenwald and 62,621 shares issuable upon the exercise of warrants
                  granted to Paramount BioCapital Investments, LLC, of which Dr.
                  Rosenwald
                  is the managing member, both such warrants are currently exercisable
                  or
                  will become exercisable within the next 60 days. Also includes
                  737,777
                  shares that Dr. Rosenwald has the right to acquire from existing
                  stockholders under certain circumstances pursuant to the terms
                  of pledge
                  agreements between Dr. Rosenwald and such
                  stockholders.
(9)
Includes
                  463,864 shares held by separate trusts for the benefit of Dr. Rosenwald
                  or
                  his family with respect to which Mr. Lipschutz is either trustee
                  or
                  investment manager and has investment and voting power. Dr. Rosenwald
                  disclaims beneficial ownership of these shares.
25
Management
        and Certain Security Holders
At
        the
        effective time of the Merger, the Company's board of directors was reconstituted
        by the appointment of Jonathan Lewis, Richard Bagley, Murray Brennan, James
        Cannon, Senator Wyche Fowler, Jr., Gary S. Fragin, Timothy McInerney and
        Michael
        Weiser as directors (all of whom were directors of ZIOPHARM immediately prior
        to
        the Merger), and the resignations of David C. Olson and David Floor from
        their
        roles as directors of the Company. The Company's executive management team was
        also reconstituted and David C. Olson resigned from his positions as the
        Company's President, Treasurer and Secretary.
The
        following table sets forth the name and position of each of the Company's
        directors and executive officers after the Merger.
Name
Age
Positions
Jonathan
                  Lewis, M.D., Ph.D.
47
Director
                  & Chief Executive Officer
Richard
                  Bagley
62
Director,
                  President, Chief Operating Officer & Treasurer
Robert
                  Peter Gale, M.D., Ph.D, DSc.
59
Chief
                  Scientific Officer, Head of Research
Murray
                  Brennan, M.D.
65
Director
James
                  Cannon
67
Director
Senator
                  Wyche Fowler, Jr., JD.
64
Director
Gary
                  S. Fragin
59
Director
Timothy
                  McInerney
44
Director
Michael
                  Weiser, M.D., Ph.D.
43
Director
The
        biographies of the directors and executive officers listed above are set
        forth
        below, all of whom began serving the Company in their respective positions
        as of
        the effective time of the Merger:
Jonathan
        Lewis
,
        47, is
        our Chief Executive Officer and a director, and has served as Chief Executive
        Officer and a director of ZIOPHARM since January 2004. From July 1994 until
        June
        2001, Dr. Lewis served as Professor of Surgery and Medicine at Memorial
        Sloan-Kettering Cancer Center and he served as Chief Medical Officer and
        Chairman of the Medical Board at Antigenics, Inc. from June 2000 until November
        2003. He serves as a director on the Board of POPPA (the Police Organization
        Providing Peer Assistance) of the New York Police Department
        (NYPD).
Richard
        Bagley
,
        62,
        serves as our President, Chief Operating Officer and Treasurer and a director
        of
        the Company, and has served
ZIOPHARM
        in those capacities since July 2004. Prior to that, he served as a consultant
        to
        ZIOPHARM while serving as a senior advisor to The University of Texas M.D.
        Anderson Cancer Center. Mr. Bagley served in several capacities at Squibb
        Corporation from 1985-1990, including as President of E. R. Squibb & Sons,
        U.S. in 1988 and 1989. He served as Director, Chief Executive Officer and
        President of ImmuLogic Pharmaceutical Corporation from 1990 to 1994, as
        Director, Chief Executive Officer and Chairman of ProScript, Inc. from 1994
        to
        1998, as Director, President and Chief Executive Officer of AltaRex Corp.
        from
        1998 to May 2003, and thereafter as a part time consultant and advisor in
        life
        sciences until joining ZIOPHARM full time. Mr. Bagley initiated a career
        in
        pharmaceuticals in 1968 with Smith Kline and French Laboratories, leaving
        in
        1985 after serving as President of the consumer products division
.
Robert
        Peter Gale
,
        59, is
        our Chief Scientific Officer and Head of Research and has served ZIOPHARM
        in
        that capacity since January 2004. Dr. Gale is also on the medical staff of
        UCLA
        School of Medicine in the Department of Medicine, Division of Hematology
        and
        Oncology and is Visiting Professor of Hematology at Imperial College of Science,
        Technology and Medicine, Hammersmith Hospital, London. Dr. Gale served as
        Senior
        Vice President for Medical Affairs at Antigenics, Inc. from April 2001 until
        May
        2002 and as a consultant to that company from May 2002 through May
        2004
.
26
Murray
        Brennan
,
        65, is
        a director of the Company and has served as a member of ZIOPHARM's board of
        directors since December 22, 2004. Dr. Brennan has been Chairman of Memorial
        Sloan-Kettering Cancer Center's Department of Surgery since 1985, and is a
        former
Vice
        President of the American College of Surgeons, a position he held from 2004
        to
        2005. Dr. Brennan is also a member of the National Academy of
        Sciences.
He
        served as director of the American Board of Surgery from 1984 to 1990,
Chairman
        of the American College of Surgeons' Commission on Cancer from 1992 to 1994,
        President of the Society of Surgical Oncology from 1995 to 1996, and President
        of the American Surgical Association from 2002 to 2003.
James
        Cannon
,
        67, is
        a director of the Company and has served as a member of ZIOPHARM's board of
        directors since December 22, 2004. Mr. Cannon is
Vice
        Chairman, Chief Financial Officer and a member of the board of directors
        of BBDO
        Worldwide. Mr.
Cannon
        joined BBDO in 1967, was appointed Chief Financial Officer of the agency
        in
        1984, and was elected to its board of directors in 1985. In 1986,
        Mr.
Cannon
        was appointed
Comptroller
and a
        member of the board of directors of Omnicom, a company affiliated with BBDO
        Worldwide, and served in those capacities through May 2002. In 1987, Mr.
        Cannon
        also served as Director of Financial Operations of the Omnicom Group from
        1987
        to 1989, when he rejoined BBDO Worldwide as
Executive
        Vice President and Chief Financial Officer. Mr. Cannon was appointed Vice
        Chairman of BBDO Worldwide in 1990.
Senator
        Wyche Fowler, Jr.
,
        64, is
        a director of the Company and has served as a member of ZIOPHARM's board of
        directors since December 22, 2004. Senator Fowler has been engaged in an
        international business and law practice since May 2001, and has served as
        chairman of the board of the Middle East Institute, a non-profit foundation
        in
        Washington, DC, since September 2001. Senator Fowler served as U.S. Senator
        from
        Georgia from January 1987 to January 1993, and had previously served in the
        U.S.
        House of Representatives from 1977 until his senatorial election. During
        his
        time in the U.S. Senate, Senator Fowler served as a member of the Senate
        Appropriations, Budget, Energy and Agriculture Committees. While in the U.S.
        House of Representatives, he was a member of the House Ways and Means and
        Foreign Affairs Committees, as well as the Select Committee on Intelligence.
        President Clinton appointed Senator Fowler as Ambassador to the Kingdom of
        Saudi
        Arabia in 1996, where he served through 2001. Senator Fowler is a member
        of the
        board of directors of Brandywine Realty Trust, a real estate investment trust
        traded on the New York Stock Exchange
.
Gary
        S. Fragin
,
        59, is
        a director of the Company and has served as a member of ZIOPHARM's board of
        directors since December 22, 2004. Mr. Fragin is currently managing partner
        of
        Osborn Partners, LP and managing partner of Fragin Asset Management, LP,
        positions. Mr. Fragin was the
General
        Partner and Chief Administrative/Operating Officer of Steinhardt Organization,
        prior to which he was a partner,
Director
        of
Trading
and
        member of the Management Committee and Executive Committee at Oppenheimer
        and
        Co.
Timothy
        McInerney
,
        44, is
        a director of the Company and has served on ZIOPHARM's board of directors since
        July 20, 2005. Since 1992, Mr. McInerney has been a Managing Director of
        Paramount BioCapital, Inc. where he oversees the overall distribution of
        Paramount's private equity product. Prior to 1992, Mr. McInerney was a research
        analyst focusing on the biotechnology industry at Ladenburg, Thalman & Co.
        Prior to that, Mr. McInerney held equity sales positions at Bear, Stearns
&
        Co. and Shearson Lehman Brothers, Inc. Mr. McInerney also has worked in sales
        and marketing for Bristol-Myers Squibb
.
27
Michael
        Weiser
,
        43, is
        a director of the Company and has served on ZIOPHARM's board of directors since
        ZIOPHARM's inception. Dr. Weiser is the Director of Research of Paramount
        BioCapital. In addition to serving on the boards of directors of several
        privately-held companies, Dr. Weiser currently serves on the board of directors
        of Manhattan Pharmaceuticals, Inc., VioQuest Pharmaceuticals, Inc., Hana
        BioSciences, Inc. and Chelsea Therapeutics, Inc., all publicly-traded
        biotechnology companies
.
Audit
        Committee
Immediately
        following the Merger, the Company formed an audit committee of the board
        of
        directors. The current members of the audit committee are Mr. James Cannon,
        who
        serves as the committee's Chairman, and Messrs. Fragin and Bagley. The audit
        committee assists the board of directors in fulfilling its responsibilities
        of
        ensuring that management is maintaining an adequate system of internal controls
        such that there is reasonable assurance that assets are safeguarded and that
        financial reports are properly prepared; that there is consistent application
        of
        generally accepted accounting principles; and that there is compliance with
        management's policies and procedures. In performing these functions, the audit
        committee will meet periodically with the independent auditors and management
        to
        review their work and confirm that they are properly discharging their
        respective responsibilities. In addition, the audit committee recommends
        the
        independent auditors for appointment by the board of directors. Prior to
        the
        Merger, the Company did not have an audit committee. Two members of the audit
        committee, Messrs. Cannon and Fragin, are independent, as independence is
        defined in Rule 4200(a)(15) of the Nasdaq listing standards and Rule 10A-3
        under
        the Securities Exchange Act of 1934.
The
        board
        of directors has determined that each of the audit committee members is able
        to
        read and understand fundamental financial statements. In addition, the board
        of
        directors has determined that at least one member of the audit committee,
        Mr.
        James Cannon, is an "audit committee financial expert" as that term is defined
        in Item 401(e)(2) of Regulation S-B promulgated under the Securities and
        Exchange Act of 1934. Mr. Cannon's relevant experience includes his current
        service as the Chief Financial Officer of BBDO Worldwide, a position he has
        held
        for the past 20 years, and his past service as director of financial operations
        of the Omnicom Group.
28
Executive
        Compensation
Summary
        Compensation Table
The
        following table sets forth the cash and non-cash compensation awarded to
        or
        earned by (i) each individual serving as chief executive officer of ZIOPHARM
        during the fiscal year ended December 31, 2004; and (ii) each other individual
        that served as an executive officer of ZIOPHARM at the conclusion of the
        fiscal
        year ended December 31, 2004 and who received in excess of $100,000 in the
        form
        of salary and bonus during such fiscal year (collectively, the "named
        executives").
Annual
                      Compensation
Long-Term
Compensation
Awards
Name
                      and Principal Position
Yea
r
Salary
                      ($)
Bonus
                      ($)
Other
                      Annual
Compensation
                      ($)
Securities
                      Underlying
Options
                      (#)
Dr.
                      Jonathan Lewis,
2004
344,167
500,000
9,099
268,653
Chief
                      Executive Officer
(1)
Richard
                      Bagley,
2004
43,750
75,000
4,057
150,668
President,
                      Chief Operating
Officer
                      and Treasurer
(2)
Dr.
                    Robert Peter
                    Gale,
2004
239,583
150,000
2,543
25,110
Chief
                      Scientific Officer,
Head
                      of Research
(3)
(1)
Dr.
                  Lewis became the Chief Executive Officer of the Company effective
                  as of
                  the Merger. Dr. Lewis received a sign-on bonus of $250,000 paid
                  on
                  February 23, 2004 and a guaranteed bonus of $250,000 that was paid
                  on
                  April 22, 2005.
(2)
Mr.
                  Bagley became the President, Chief Operating Officer and Treasurer
                  of the
                  Company effective as of the Merger. Mr. Bagley received a sign-on
                  bonus of
                  $50,000 on July 15, 2004 and was due $25,000, a portion of his
                  guaranteed
                  bonus, as of December 31, 2004.
(3)
Mr.
                  Gale became the Company's Chief Scientific Officer, Head of Research
                  effective as of the Merger. Mr. Gale received a guaranteed bonus
                  of
                  $150,000 on April 16, 2005.
Stock
        Options
Upon
        the
        Merger, the Company assumed ZIOPHARM's 2003 Stock Option Plan as the Company's
        Stock Option Plan. This plan has 1,252,436 shares authorized for issuance,
        of which 847,469 shares are subject to options currently outstanding. Prior
        to the Merger, the Company had an Incentive Stock Option Plan of EasyWeb,
        Inc.
        under which 175,000 shares of common stock were reserved for issuance. That
        stock option plan was terminated effective as of the Merger.
29
Option
        Grants in Last Fiscal Year
The
        following table sets forth the information concerning individual grants of
        stock
        options to the named executives made during the fiscal year ended December
        31,
        2004 by ZIOPHARM. All share numbers and dollar amounts are set forth on a
        post-Merger basis.
Name
Number
                  of Securities Underlying
Options
Granted
                  (#)
Percent
                  of Total Options
Granted
                  to Employees In
Fiscal
                  Year
Exercise
                  of
Base
                  Price
($/share)
Expiration
Date(s)
Dr.
                  Jonathan Lewis
(1)
25,674
5.2
%
$
0.08
1/8/14
Dr.
                  Jonathan Lewis
(1)
242,979
48.9
%
$
0.08
1/27/14
Richard
                  Bagley
(2)
150,668
30.4
%
$
1.70
7/1/14
Dr.
                  Robert Peter Gale
2,567
0.5
%
$
0.44
1/15/14
Dr.
                Robert Peter Gale
22,543
4.5
%
$
0.44
1/27/14
(1)
The
                  number of securities underlying options is subject to an anti-dilution
                  provision pursuant to which Dr. Lewis is entitled to purchase no
                  less than
                  5% of the Company's common stock until such time as the Company has raised
                  $25 million in financing.
(2)
The
                  number of securities underlying options is subject to an anti-dilution
                  provision pursuant to which Mr. Bagley is entitled to purchase
                  no less
                  than 3% of the Company's common stock until such time as the Company has
                  raised $25 million in financing.
Aggregated
        Option Exercises and Fiscal Year-End Option Values
The
        following table sets forth the total amount of shares acquired by the named
        executives upon exercises of stock options during fiscal year 2004, the
        aggregate dollar value realized upon such exercise, the total number of
        securities underlying unexercised options held at the conclusion of fiscal
        year
        2004 (separately identifying then-exercisable and unexercisable options),
        and
        the aggregate dollar value of in-the-money, unexercised options held at the
        conclusion of fiscal year 2004 (separately identifying then-exercisable and
        unexercisable options). All share numbers and dollar amounts are set forth
        on a
        post-Merger basis.
Name
Shares
                  Acquired
on
                  Exercise (#)
Value
                  Realized ($)
Number
                  of
Unexercised
Securities
Underlying
Options
                  at FY-
End
                  (#)
Exercisable
                  /
Unexercisable
Value
                  of
Unexercised
                  In-
the-Money
Options
                  at FY
-
End
                  ($)
Exercisable
                  /
Unexercisable
(1)
Dr.
                  Jonathan Lewis
0
0
0
                  /
                  268,653
(1)
0
                  /
                  558,798
Richard
                  Bagley
0
0
0
                  /
                  150,668
(2)
0
                  /
                  69,307
Dr.
                  Robert Peter Gale
0
0
0
                  /
                  25,110
(3)
0
                  /
                  43,189
(1)
Value
                  of unexercised in-the-money options on December 31, 2004 is based
                  on a
                  value of ZIOPHARM, Inc. stock equal to $2.16 per share, as determined
                  by
                  the ZIOPHARM, Inc. Board of Directors at such time. As of December
                  31,
                  2004, no trades of the Company's common stock had been conducted on the
                  Over-the-Counter Bulletin Board.
30
Employment
        and Change-in-Control Agreements
On
        December 9, 2004, the Company entered into an employment agreement with David
        C.
        Olson. Under the terms of the agreement, we agreed to pay Mr. Olson a one-time
        fee of $100,000 if and when we completed a merger, acquisition, or related
        transaction. In connection with the Merger, Mr. Olson agreed to reduce this
        amount to the extent that the unconsolidated liabilities of the Company
        immediately following the Merger exceeded $425,000. On December 10, 2004,
        the
        Company entered into a management consulting services agreement with David
        Floor. Under the terms of the agreement, we agreed to pay Mr. Floor a one-time
        fee of $10,000 plus expenses, upon the closing of any transaction leaving
        the
        Company with a positive business direction and available finances. In connection
        with the Merger, we paid Messrs. Olson and Floor $57,500 and $100,000,
        respectively, under the terms of their agreements with us. Each such agreement
        was terminated in its entirety in connection with the Merger.
On
        January 8, 2004, the Company entered into a three-year employment agreement
        with
        Dr. Jonathan Lewis. Under the agreement, Dr. Lewis receives an annual base
        salary of $350,000 and a guaranteed annual bonus of $250,000. In addition,
        Dr.
        Lewis is eligible to receive an annual discretionary bonus of up to 100%
        of his
        base salary, as determined by the Company's board of directors. The Company also
        paid Dr. Lewis a one-time bonus of $250,000 upon execution of his employment
        agreement. Depending upon the events surrounding a possible termination of
        Dr.
        Lewis' employment, he may continue to receive his base salary and, in certain
        circumstances, his guaranteed bonus for one year following such termination.
        In
        addition, the vesting of Dr. Lewis' stock options may accelerate in whole or in
        part upon such termination. Dr. Lewis has agreed not to compete with ZIOPHARM
        during the term of the employment agreement and for a one-year period
        thereafter, provided that we continue to pay his base salary and guaranteed
        bonus for that one-year period.
Pursuant
        to the terms of his employment agreement, the Company has granted Dr. Lewis
        options to purchase up to 410,603 shares of common stock at $0.08 per share
        (adjusted to give effect to the Merger). The options vest in three equal
        annual
        installments, the first of which vested on January 8, 2005, with the remaining
        installments vesting on January 8, 2006 and January 8, 2007. The option is
        subject to anti-dilution protection from the issuance of equity securities
        in
        financing transactions to the extent that Dr. Lewis will maintain potential
        equity ownership of at least 5% of the Company until such time as the Company
        has received $25 million in gross proceeds from such transactions. The options
        are governed by the Company's 2003 Stock Option Plan.
On
        July
        21, 2004, the Company entered into a three-year employment agreement with
        Mr.
        Richard Bagley. Under the agreement, Mr. Bagley receives an annual base salary
        of $250,000 and a guaranteed annual bonus of $50,000. In addition, Mr. Bagley
        is
        eligible to receive an annual discretionary bonus, as determined by the
        Company's board of directors. The Company also paid Mr. Bagley a one-time bonus
        of $50,000 upon execution of his employment agreement. Depending upon the
        events
        surrounding a possible termination of Mr. Bagley's employment, he may continue
        to receive his base salary and, in certain circumstances, his guaranteed
        bonus
        for one year following such termination. In addition, the vesting of Mr.
        Bagley's stock options may accelerate in whole or in part upon such termination.
        Mr. Bagley has agreed not to compete with the Company during the term of
        the
        employment agreement and for a one-year period thereafter, provided that
        we
        continue to pay his base salary for that one-year period.
Pursuant
        to the terms of his employment agreement, the Company granted Mr. Bagley
        options
        to purchase up to 241,282 shares common stock at $1.70 per share (adjusted
        to
        give effect to the Merger). The options vest in three equal annual installments,
        the first of which vested on July 1, 2005, with the remaining installments
        vesting on July 1, 2006 and July 1, 2007. The option is subject to certain
        anti-dilution protections from the issuance of equity securities in financing
        transactions so that Mr. Bagley will maintain potential equity ownership
        of at
        least 3% of the Company until such time as the Company has received $25 million
        in gross proceeds from such transactions. The options are governed by the
        Company's 2003 Stock Option Plan.
31
On
        January 14, 2004, the Company entered into a three-year employment agreement
        with Dr. Robert Peter Gale. Under the agreement, Dr. Gale receives an annual
        base salary of $250,000 and a guaranteed annual bonus of $150,000. In addition,
        Dr. Gale is eligible to receive an annual discretionary bonus, as determined
        by
        the Company's board of directors. Depending upon the events surrounding a
        termination of Dr. Gale's employment, he may continue to receive his base salary
        and, in certain circumstances, his guaranteed bonus for one year following
        such
        termination. In addition, the vesting of Dr. Gale's stock options may accelerate
        in whole or in part upon such termination. Dr. Gale has agreed not to compete
        with the Company during the term of the employment agreement and for one-year
        following the expiration of his employment agreement.
Pursuant
        to the terms of his employment agreement, the Company granted Dr. Gale options
        to purchase up to 25,110 shares of common stock at $0.44 per share, respectively
        (adjusted to give effect to the Merger). The options vest in three equal
        annual
        installments, the first of which vested on January 15, 2005, with the remaining
        installments vesting on January 15, 2006 and January 15, 2007. The options
        are
        governed by the Company's 2003 Stock Option Plan.
Compensation
        of Directors
Prior
        to
        the Merger, our directors received no compensation pursuant to any standard
        arrangement for their services as directors. Nevertheless, during the year
        ended
        December 31, 2004, we issued Mr. David Floor 5,000 shares of our common stock
        (adjusted to reflect to the 1-for-40 share combination effected immediately
        prior to the Merger) in exchange for directors fees.
Effective
        as of the Merger, the Company's Board of Directors schedules monthly telephonic
        board meetings and quarterly in-person meetings held at the Company's principal
        corporate office. Each director receives quarterly compensation of $3,000
        in
        arrears. The non-management members of the Board also receive stock options
        as
        granted from time to time and as recommended by the compensation committee.
32
Certain Transactions and Relationships
Pre-Merger
        Company Transactions and Relationships
Because
        of their management positions, organizational efforts and/or percentage share
        ownership in EasyWeb, Messrs. Olson and Zappa may be deemed to be "promoters" of
        the Company, as those terms are defined in the Securities Act of 1933 and
        the
        applicable Rules and Regulations under the Securities Act of 1933. Because
        of
        the above-described relationships, transactions between and among EasyWeb
        and
        Messrs. Olson and Zappa, such as the sale of our common stock to each of
        them as
        described herein, should not be considered to have occurred at
        arm's-length.
Common
        Stock Transactions
.
During
        July 2005, the Company sold 333,333 shares of its common stock to David Floor
        for $10,000, or $.03 per share.
In
        August
        and December 2004, David Olson loaned us a total of $1,300 for working capital.
        During May 2005, Mr. Olson advanced us an additional $788. The loans carried
        no
        interest rate and were due on demand. On June 28, 2005, we issued Mr. Olson
        69,600 shares of common stock as full repayment of the amounts stated above.
        The
        shares were valued at $.03 per share, or $2,088, based on contemporaneous
        common
        stock sales to unrelated third parties.
On
        May
        13, 2004, the Company issued 400,000 shares of common stock to Summit Financial
        Relations, Inc. ("Summit") valued at $10,000, at $.025 per share as repayment
        for expenses paid on behalf of the Company. The shares were valued based
        on
        contemporaneous sales to unrelated third party investors. David Olson, our
        President, Treasurer and one of our directors is also Summit's President,
        director and sole stockholder. The shares were issued pursuant to the exemption
        from the registration requirements of the Securities Act provided by Section
        4(2) of the Act for transactions by an issuer not involving a public offering.
During
        May 2004, the Company issued 200,000 shares of common stock to Thomas Olson,
        the
        brother of David Olson, in exchange for corporate governance services. The
        shares were valued based on contemporaneous sales to unrelated third party
        investors, at $.025 per share. The Company recorded stock-based compensation
        of
        $5,000 related to the transaction. The shares were issued pursuant to the
        exemption from the registration requirements of the Securities Act provided
        by
        Section 4(2) of the Act for transactions by an issuer not involving a public
        offering.
During
        May 2004, the Company issued 200,000 shares of common stock to David Floor
        in
        exchange for director fees. The shares were valued based on contemporaneous
        sales to unrelated third party investors, at $.025 per share. The Company
        recorded stock-based compensation of $5,000 related to the transaction. The
        shares were issued pursuant to the exemption from the registration requirements
        of the Securities Act provided by Section 4(2) of the Act for transactions
        by an
        issuer not involving a public offering.
At
        December 31, 2004, the Company owed Summit $12,268 for professional fees
        and
        other administrative expenses paid on our behalf. David Olson, our President,
        Treasurer and one of our directors, is also Summit's President, director and
        sole shareholder. During the six months ended June 30, 2005, Summit paid
        an
        additional $1,007 in expenses on our behalf. On February 4, 2005, the Company
        repaid Summit $7,000 and on June 28, 2005 the Company issued Summit 209,180
        shares of common stock as full repayment of all amounts stated above. The
        shares
        issued to Summit were valued at $.03 per share, or $6,275, based on
        contemporaneous common stock sales to unrelated third parties.
33
During
        January 2002, we sold 33,333 and 16,667 shares of our common stock to David
        Olson and Barbara Petrinsky, respectively, at $.03 per share (gross proceeds
        totaling $1,500). At the time of issuance, both Mr. Olson and Ms. Petrinsky
        were
        officers of EasyWeb. In addition to the 50,000 shares sold to Mr. Olson and
        Ms.
        Petrinsky, we sold 500,000 shares of our common stock to unrelated third
        parties
        for gross proceeds totaling $15,000, or $.03 per share. The shares were issued
        pursuant to the exemption from the registration requirements of the Securities
        Act provided by Section 4(2) of the Act for transactions by an issuer not
        involving a public offering.
Office
        Space and Administrative Support
.
Summit
        has contributed the use of office space and administrative support (including
        reception, secretarial and bookkeeping services) to us for the years ended
        December 31, 2004 and 2003. David Olson, our President, Treasurer and one
        of our
        directors, is also the President, director and sole stockholder of
        Summit.
The
        office space and administrative support contributed by Summit has a fair
        market
        value of approximately $500 and $1,000 per month, respectively. We have
        recognized expenses for rent and administrative support based on fair market
        value. Any period in which the amount paid to Summit for office space and
        administrative support was below the fair market value, the remaining balance
        was considered contributed by Summit and recorded as a credit to additional
        paid-in capital in our financial statements. During the years ended December
        31,
        2004 and 2003, we did not pay Summit for office space and we paid Summit
        $173
        and $510, respectively, for administrative support. Accordingly, Summit
        contributed the remaining fair values for the use of the office space and
        administrative support. Contributed office space totaled $6,000 and $6,000,
        and
        contributed administrative support totaled $11,827 and $11,490 for the years
        ended December 31, 2004 and 2003, respectively.
Related
        Party Liabilities
.
In
        August
        and December 2004, Mr. Olson loaned us a total of $1,300 for working capital.
        The loans carried no interest rate and were due on demand.
At
        December 31, 2003, the Company owed Summit $18,111 for professional fees
        and
        other administrative expenses it paid on our behalf. During the year ended
        December 31, 2004, Summit paid expenses totaling $4,187 on our behalf. A
        portion
        of the May 13, 2004 issuance of 400,000 restricted common described above
        under
"Certain Relationships and Related Transactions
-
Common
        Stock Transactions
"
        was
        used to repay Summit for these fees. As of December 31, 2004, we owed Summit
        $12,298.
We
        owed
        Barbara Petrinsky, our former Secretary and Treasurer, $10,000 for the work
        she
        performed over the previous five years to keep our books and records, assist
        in
        all of our filings with regulatory authorities, states and the Internal Revenue
        Service, among others.
All
        of
        the above referenced liabilities were satisfied in their entirety immediately
        follwing the Merger.
Consulting
        Agreement with Summit Financial
.
On
        December 10, 2004, we entered into a consulting services fee agreement whereby
        Summit provides certain services to us including, but not limited to
        consultation related to mergers and acquisitions, reorganizations and
        divestitures. Pursuant to the agreement, Summit has lent us funds and helped
        us
        raise funds at no extra cost. Under the terms of the agreement, we agreed
        to pay
        Summit a one-time fee of $120,000 on the date of closing of any transaction
        that
        leaves us with a positive business directive and available finances,
        non-detrimental to our survival. In connection with the Merger, Summit agreed
        to
        reduce this amount to the extent that the unconsolidated liabilities of the
        Company immediately following the Merger exceeded $425,000. Upon the Merger,
        the
        Company paid $106,697.90 to Summit and terminated the agreement in its entirety.
34
Under
        the
        terms of the Merger Agreement, the consolidated EasyWeb entity will pay our
        identified liabilities that are then due. A portion of such liabilities will
        be
        payable to David Olson under his employment agreement and to Summit under
        its
        consulting services fee agreement. However, Mr. Olson and Summit have agreed
        to
        reduce the amount of the payments to which they are otherwise entitled to
        the
        extent that our unconsolidated liabilities immediately following the Merger
        exceed $425,000.
ZIOPHARM
        Transactions and Relationships
In
        connection with a private placement of its Series A Convertible Preferred
        Stock
        that terminated in May 2005, ZIOPHARM and Paramount BioCapital, Inc.
        ("Paramount") entered into an introduction agreement in January 2005. Upon the
        Merger, we succeeded to ZIOPHARM's rights and obligation under such agreement.
        Pursuant to the introduction agreement, ZIOPHARM agreed to compensate Paramount
        or its designees for their services through the payment of (a) cash commissions
        equal to 7% of the gross proceeds from the offering, and (b) warrants to
        acquire
        an aggregate of 837,956 share of ZIOPHARM's Series A Convertible Preferred Stock
        a per share exercise price of $2.38. Upon the Merger, this warrant was exchanged
        for a warrant to purchase an aggregate of 419,772 shares of our common stock
        at
        a per share exercise price of $4.75. Cash commissions will also be payable
        by us
        if we sell additional of our securities, prior to May 31, 2006, to investors
        introduced to ZIOPHARM by the Paramount. Pursuant to the introduction agreement,
        Paramount has the right of first refusal to act as the placement agent for
        the
        private sale of our securities until May 31, 2008.
In
        connection with ZIOPHARM's December 22, 2004 Option Agreement with Southern
        Research Institute ("SRI"), ZIOPHARM entered into an Finders Agreement dated
        December 23, 2004 with Paramount, pursuant to which ZIOPHARM agreed to
        compensate Paramount for services in connection with the ZIOPHARM's introduction
        to SRI through the payment of (a) a cash fee of $60,000 and (b) a warrant
        to
        purchase 125,000 shares of ZIOPHARM's common stock at a price of $2.38 per
        share. Upon the Merger, this warrant was exchanged for a warrant to purchase
        an
        aggregate of 62,621 shares of our common stock at a per share exercise price
        of
        $4.75.
Lindsay
        A. Rosenwald, M.D., who may be deemed to beneficially own approximately 20.13%
        of our common stock, is Chairman and Chief Executive Officer of Paramount
        and
        its affiliates. Dr. Michael Weiser and Timothy McInerney, each of whom is
        a
        member of ZIOPHARM's Board of Directors, are also full-time
employees
of
        Paramount.
35
Description
        of Securities
Our
        authorized capital stock consists of 280,000,000 shares of common
        stock, $.001 value per share. All shares of common stock have equal
        voting
        rights and are entitled to one vote per share on all matters to be voted
        upon by
        our stockholders. The shares of common stock have no preemptive, subscription,
        conversion or redemption rights and may be issued only as fully-paid and
        non-assessable shares. Cumulative voting in the election of directors is
        not
        permitted. In the event of our liquidation, each holder of our common stock
        is
        entitled to receive a proportionate share of our assets available for
        distribution to stockholders after the payment of liabilities. All shares
        of our
        common stock issued and outstanding are fully-paid and
        non-assessable.
Holders
        of our common stock are entitled to share
pro
        rata
in
        dividends and distributions with respect to the common stock when, as and
        if
        declared by our board of directors out of funds legally available therefor.
        We
        have not paid any dividends on our common stock and intend to retain earnings,
        if any, to finance the development and expansion of our business. Future
        dividend policy is subject to the discretion of our board of directors and
        will
        depend upon a number of factors, including future earnings, capital requirements
        and our financial condition.
The
        transfer agent and registrar for our common stock is American Stock Transfer
        and
        Trust, 6201 15th Avenue, Brooklyn, New York, 11219. As of the date of this
        report, we had 7,157,863 shares of common stock outstanding held by 305 holders
        of record. Our common stock is listed for trading on the over-the-counter
        bulletin board under the symbol "ESWB.OB." Nevertheless, there has been no
        established public trading market for the common stock since our inception.
        As a
        result changing our corporate name to ZIOPHARM Oncology, Inc., we expect
        that
        our ticker symbol will change to be consistent with our new corporate
        name.
Recent
        Sales of Unregistered Securities
The
          following summarizes all sales of unregistered securities by ZIOPHARM since
          inception in September 2003.
On
          September 25, 2003, in connection with ZIOPHARM's incorporation, ZIOPHARM issued
          500,000 shares of common stock for aggregate consideration of $500,000.
          On
          October 7, 2003, ZIOPHARM issued 12,500 shares of common stock to a consultant
          in exchange for certain consulting services. On March 14, 2004, ZIOPHARM
          issued
          an additional 4,500,000 shares of common stock in exchange for aggregate
          consideration of $4,500,000. On August 31, 2004, ZIOPHARM issued 500,000
          shares
          of common stock to the University of Texas M.D. Anderson Cancer Center
          pursuant
          to the terms of the license agreement dated August 24, 2004.
In
          connection with ZIOPHARM's license agreements with the University of Texas M. D.
          Anderson Cancer Center and DEKK-TEC, Inc., ZIOPHARM issued warrants to
          such
          parties to acquire an aggregate of 155,375 shares of common stock.
In
          connection with ZIOPHARM's December 22, 2004 Option Agreement with SRI, ZIOPHARM
          issued a warrant to purchase 125,000 shares of common stock to Paramount.
In
          connection with an offering of Series A Convertible Preferred Stock of
          ZIOPHARM
          that was completed on May 30, 2005, ZIOPHARM issued an aggregate of 8,379,564
          shares of such Series A Convertible Preferred Stock in exchange for a purchase
          price per share equal to $2.16. ZIOPHARM issued to the placement agents
          in
          connection with the offering warrants to purchase up to an aggregate of
          837,956
          share of ZIOPHARM's Series A Convertible Preferred Stock.
Since
          ZIOPHARM's inception to the Merger, ZIOPHARM issued to directors, officers,
          employees and consultants options to purchase an aggregate of 1,626,797
          shares
          of common stock at exercise prices ranging from $0.04 to $2.16 per share
          with a
          weighted average exercise price of $0.77 per share. The issuances of these
          options were deemed to be exempt from registration under the Securities
          Act by
          virtue of Rule 701 promulgated under Section 3(b) of the Securities Act
          as
          transactions pursuant to compensation benefits plans and contracts relating
          to
          compensation.
Except
          as
          noted above, the sales of the securities identified above were made pursuant
          to
          privately negotiated transactions that did not involve a public offering
          of
          securities and, accordingly, ZIOPHARM believes that these transactions
          were
          exempt from the registration requirements of the Securities Act pursuant
          to
          Section 4(2) thereof and rules promulgated thereunder. Each of the
          above-referenced investors in ZIOPHARM's stock represented to ZIOPHARM in
          connection with their investment that they were "accredited investors" (as
          defined by Rule 501 under the Securities Act) and were acquiring the shares
          for
          investment and not distribution, that they could bear the risks of the
          investment and could hold the securities for an indefinite period of time.
          The
          investors received written disclosures that the securities had not been
          registered under the Securities Act and that any resale must be made pursuant
          to
          a registration or an available exemption from such registration. All of
          the
          foregoing securities are deemed restricted securities for purposes of the
          Securities Act.
The
          following summarizes the sales of unregistered securities by EasyWeb, Inc.
          (now
          known as ZIOPHARM, Oncology, Inc.) during the three years prior to and
          including
          the closing of the Merger.
In
          connection with the Merger, EasyWeb, Inc. issued an aggregate of 6,967,941
          shares of its common stock to the former holders of ZIOPHARM capital stock,
          and
          other securities having the right to purchase approximately an additional
          1,366,846 shares of EasyWeb's common stock, all of which were unregistered. For
          these issuances, EasyWeb relied on the exemption from federal registration
          under
          Section 4(2) of the Securities Act of 1933. EasyWeb relied on this exemption
          based on the fact that there were approximately only 230 (excludes options
          and
          warrants) stockholders of ZIOPHARM who were recipients of such unregistered
          shares in connection with the Merger, all of whom, either alone or through
          a
          purchaser representative, had knowledge and experience in financial and
          business
          matters such that each was capable of evaluating the risks of the investment,
          and had access to information regarding ZIOPHARM, EasyWeb and the Merger
          transaction.
For
          other
          sales of unregistered securities made by EasyWeb during the three-year
          period
          prior to the Merger, please refer to EasyWeb's quarterly reports on Form 10-QSB
          filed on November 13, 2002, May 13, 2003, August 14, 2003, October 30,
          2003, May
          10, 2004, August 23, 2004, November 15, 2004, May 13, 2005, and August
          15, 2005
          (amended); and EasyWeb's registration statement on Form 10-SB/A filed on
          December 28, 2001.
36
Indemnification
        of Directors and Officers
Pursuant
        to our articles of incorporation and bylaws, we may indemnify an officer
        or
        director who is made a party to any proceeding, because of his position as
        such,
        to the fullest extent authorized by Delaware General Corporation Law, as
        the
        same exists or may hereafter be amended. In certain cases, we may advance
        expenses incurred in defending any such proceeding.
To
        the
        extent that indemnification for liabilities arising under the Securities
        Act may
        be permitted to directors, officers or persons controlling our company pursuant
        to the foregoing provisions, we have been informed that, in the opinion of
        the
        SEC, such indemnification is against public policy as expressed in the
        Securities Act and is therefore unenforceable. If a claim for indemnification
        against such liabilities (other than the payment by us of expenses incurred
        or
        paid by a director, officer or controlling person of our company in the
        successful defense of any action, suit or proceeding) is asserted by any
        of our
        directors, officers or controlling persons in connection with the securities
        being registered, we will, unless in the opinion of our counsel the matter
        has
        been settled by controlling precedent, submit to a court of appropriate
        jurisdiction the question whether such indemnification by us is against public
        policy as expressed in the Securities Act and will be governed by the final
        adjudication of that issue.
Item
        3.02. Unregistered Sales of Equity Securities.
As
        disclosed under Item 2.01 above, in connection with the Merger, the Company
        issued an aggregate of 6,967,941 shares of its common stock to the former
        holders of ZIOPHARM capital stock, and other securities having the right
        to
        purchase approximately an additional 1,366,846 shares of our common stock,
        all
        of which were unregistered. For these issuances, the Company relied on the
        exemption from federal registration under Section 4(2) of the Securities
        Act of
        1933. The Company relied on this exemption based on the fact that there were
        approximately 230 stockholders of ZIOPHARM who were recipients of such
        unregistered shares in connection with the Merger, all of whom, either alone
        or
        through a purchaser representative, had knowledge and experience in financial
        and business matters such that each was capable of evaluating the risks of
        the
        investment, and had access to information regarding ZIOPHARM, the Company
        and
        the Merger transaction.
37
Item
        5.01. Changes in Control of Registrant.
The
        disclosures set forth in Item 2.01 above are hereby incorporated by reference
        into this Item 5.01.
Item
        5.02. Departure of Directors or Principal Officers; Election of Directors;
        Appointment of Principal Officers.
The
        disclosures set forth in Item 2.01 regarding the reconstitution of the Company's
        board of directors, the resignation of the Company's executive officers, and the
        appointment of new executive officers, are hereby incorporated by reference
        into
        this Item 5.02.
Item
        5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
        Year.
On
        September 13, 2005, the Company's board of directors adopted bylaws applicable
        to the Company. Such bylaws are filed as Exhibit 3.3 to this
        report.
On
        September 14, 2005, the Company filed a Certificate of Ownership with the
        Secretary of State of the State of Delaware pursuant to which the Company's
        wholly-owned subsidiary, ZIOPHARM, Inc., merged with and into the Company
        with
        the Company remaining as the surviving corporation to the merger. In connection
        with this merger, and as set forth in the Certificate of Ownership, the Company
        changed its corporate name to "ZIOPHARM Oncology, Inc." The Certificate of
        Ownership is filed as Exhibit 3.2 to this report.
Item
        9.01. Financial Statements and Exhibits.
(a)
As
        a
        result of its acquisition of ZIOPHARM described in Item 2.01, the registrant
        is
        filing ZIOPHARM's audited financial information as Exhibit 99.1 to this
        report.
(b)
As
        a
        result of its acquisition of ZIOPHARM described in Item 2.01, the registrant
        is
        filing certain
pro
        forma
financial information
as
        Exhibit 99.2 to this report.
(c)
Exhibits.
Exhibit
Description
2.1
Agreement
                  and Plan of Merger and Reorganization dated August 3, 2005, by
                  and among
                  EasyWeb, Inc., a Delaware corporation (the registrant), ZIO Acquisition
                  Corp., a Delaware corporation and wholly owned subsidiary of the
                  registrant, and ZIOPHARM, Inc., a Delaware corporation (incorporated
                  by
                  reference to exhibit 10.1 to the registrant's current report on Form 8-K
                  filed on August 9, 2005).
3.1
Certificate
                  of Merger dated September 13, 2005 relating to the merger of ZIO
                  Acquisition Corp. with and into ZIOPHARM, Inc.
3.2
Certificate
                  of Ownership of ZIOPHARM Oncology, Inc. dated as of September 14,
                  2005.
3.3
Bylaws
                  of ZIOPHARM Oncology, Inc.
99.1
Audited
                  financial statements of ZIOPHARM, Inc.
99.2
Pro
                forma unaudited combined financial statements.
99.3
Press
                  Release dated September 15,
                  2005.
38
SIGNATURE
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.
EASYWEB,
                  INC.:
(
Registrant
)
Date:
                September 19, 2005
By:
/s/ Jonathan
                Lewis
Jonathan
                Lewis
,
Chief
                Executive Officer
39
EXHIBIT
                  INDEX
3.1
Certificate of Merger dated September
                13,
                2005 relating to the merger of ZIO Acquisition Corp. with and into
                ZIOPHARM, Inc.
3.2
Certificate of Ownership of ZIOPHARM
                Oncology, Inc. dated as of September 14, 2005.
3.3
Bylaws of ZIOPHARM Oncology,
                Inc.
99.1
Audited
                  financial statements of ZIOPHARM, Inc.
99.2
Pro
                forma unaudited combined financial statements
99.3
Press Release dated September
                15,
                2005.
40